<PAGE>
As filed with the Securities and Exchange Commission on December 27, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Group Maintenance America Corp.
(Exact name of registrant as specified in its charter)
Texas 1711 76-0535259
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation or Classification Code
organization) Number)
8 Greenway Plaza, Suite 1500 Randolph W. Bryant
Houston, Texas 77046 Senior Vice President, General Counsel
(713) 860-0100 and Secretary
(Address, including zip code and 8 Greenway Plaza, Suite 1500
telephone number, including Houston, Texas 77046
area code, of registrant's (713) 860-0100
principal executive offices) (Name, address, including zip code and
telephone number, including area code,
of agent for service)
----------------
Copies to:
Gary W. Orloff Linda Griggs
Bracewell & Patterson, L.L.P. Morgan, Lewis & Bockius, L.L.P.
711 Louisiana Street, Suite 2900 1800 M St., N.W.
Houston, Texas 77002-2781 Washington, D.C. 20036
Phone: (713) 221-1306 Phone: (202) 467-7000
Telecopier: (713) 221-2166 Telecopier: (202) 467-7176
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective and upon the consummation of the merger (the "Merger") contemplated
by the Agreement and Plan of Merger, as amended, attached as Annex A to the
joint proxy statement/prospectus included in this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company or there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
Calculation of Registration Fee
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<TABLE>
<CAPTION>
Proposed maximum
Title of each class of Proposed maximum aggregate Amount of
securities Amount to be offering price offering registration
to be registered registered per unit price fee
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value ................. 41,780,418(1) $7.60 (2) $317,531,177(2) $83,829(3)
</TABLE>
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(1) The maximum number of shares of common stock, par value $0.001 per share
(the "GroupMAC Common Stock"), of Group Maintenance America Corp.
("GroupMAC") estimated to be issuable upon the consummation of the Merger
based upon (a) 33,424,334 outstanding shares of common stock (the "Building
One Common Stock") of Building One Services Corporation ("Building One")
multiplied by (b) the conversion ratio of 1.25 shares of GroupMAC Common
Stock for each share of Building One Common Stock.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 (c) of the Securities Act of 1933, based on the average of the
high and low prices of the GroupMAC Common Stock on the New York Stock
Exchange.
(3) Pursuant to Rule 457(b) of the Securities Act of 1933, the amount of the
registration fee has been reduced by the $63,812 paid on November 24, 1999
in connection with GroupMAC's filing of a preliminary proxy statement
pursuant to Rule 14a-6 under the Securities Exchange Act of 1934.
Accordingly, a registration fee of $20,017 is payable in connection with
this filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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<PAGE>
[GroupMAC]
[Building One]
, 2000
Dear Shareholder:
We are very pleased to offer this joint proxy statement/prospectus to you.
As you may know from our press releases, both of our boards have unanimously
approved a merger of our companies. We believe this merger will benefit the
shareholders of both companies and we ask for your support in voting for the
proposals at our respective special meetings. This merger of equals will create
a market leader in the forefront of consolidation in the facilities services
industry. The combined company, which will be named , will be the largest
company in the industry, with an experienced management team and a premier
financial investor in Apollo Management, L.P. The merger will allow us to grow
more quickly and achieve greater success than either company could do on its
own.
Each board of directors unanimously recommends that its company's
shareholders vote in favor of the merger. In the merger, Building One
stockholders will be given the right to receive 1.25 shares of GroupMAC common
stock in exchange for each share of Building One common stock that they own.
GroupMAC shareholders may elect to receive in the merger cash for up to 50% of
their shares at $13.50 per share, up to approximately 11 million shares in the
aggregate. If this cash election is fully subscribed, approximately 29% of the
shares of GroupMAC common stock currently outstanding will be canceled in the
merger. If the cash election is oversubscribed, each shareholder's cash
election will be reduced on a pro rata basis.
This is an exciting and important event in each of our companies' histories.
It is also an important decision for you as a shareholder. Therefore, we urge
you to read the attached materials thoroughly. Once you have read these
materials, please take the time to vote on the proposals submitted to
shareholders at your meeting by completing and mailing the appropriate enclosed
proxy card.
You should not send us your stock certificates at this time. You will
receive instructions from an exchange agent regarding the exchange of your
shares or the cash election.
Sincerely, Sincerely,
[SIGNATURE OF J. PATRICK MILLINOR JR. [SIGNATURE OF JOSEPH M. IVEY
APPEARS HERE] APPEARS HERE]
Consider carefully the Risk Factors beginning on page 16 for a discussion of
potential risks involved in the merger and the combined company.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued under this
joint proxy statement/prospectus or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTICE OF SPECIAL MEETING
, 2000
Dear Shareholder:
On , 2000, Group Maintenance America Corp. will hold a special
meeting of shareholders at , , Houston, Texas 77 .
The meeting will begin at 9:30 a.m., local time.
Only shareholders who owned stock at the close of business on ,
2000 may vote at this meeting or any adjournments or postponements that may
take place. At the meeting we propose to:
. consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, as amended, between Group Maintenance America Corp. and
Building One Services Corporation. Pursuant to the merger agreement,
among other things:
(a) Building One will be merged with and into GroupMAC, with GroupMAC as
the surviving legal entity;
(b) GroupMAC shareholders will be given the right to elect to receive in
the merger cash for up to 50% of their shares of GroupMAC common
stock at $13.50 per share, subject to proration;
(c) each share of outstanding Building One common stock will be
converted into and become the right to receive 1.25 shares of
GroupMAC common stock, with cash being paid in lieu of issuing
fractional shares of GroupMAC common stock; and
(d) the articles of incorporation of GroupMAC will be amended to:
(1) change the name of GroupMAC to ;
(2) increase the authorized number of shares of capital stock of
GroupMAC from 150,000,000 to 250,000,000, which shall be divided
into 200,000,000 shares of common stock and 50,000,000 shares of
preferred stock;
(3) phase out its staggered board of directors over the next two
years;
(4) exclude from the term "business combinations" any business
combinations allowed, permitted or required under the terms of
any statement of designation governing any preferred stock of
GroupMAC or pursuant to the Investor's Rights Agreement between
GroupMAC and BOSS II, LLC; and
(5) exclude from the restrictions on the acquisition of certain voting
stock acquisitions of voting stock pursuant to the terms of the
statement of designation for any series of preferred stock or
pursuant to the Investor's Rights Agreement.
. approve the issuance of GroupMAC's 7.25% convertible preferred stock to
BOSS II, LLC, an affiliate of Apollo Management, L.P., in connection with
the merger;
. approve and adopt the Group Maintenance America Corp. 1999 Stock
Performance Incentive Plan;
. approve and adopt the Group Maintenance America Corp. 1999 Stock Awards
Plan; and
. transact such other business as may properly come before the GroupMAC
special meeting or any adjournment or postponement of the GroupMAC
special meeting.
Your board has unanimously approved and recommends that you vote FOR each of
these proposals which are discussed in more detail in the attached joint proxy
statement/prospectus.
<PAGE>
The approximate date of mailing this joint proxy statement/prospectus and
the proxy card is , 2000. I hope you will be able to attend the
meeting, but even if you cannot, please vote your shares by returning the white
proxy card as soon as possible. You should not send in your GroupMAC common
stock certificates until you receive instructions to do so.
By order of the Board of Directors,
/s/ Randolph W. Bryant
Randolph W. Bryant
Senior Vice President, General Counsel
and Secretary
2
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTICE OF SPECIAL MEETING
, 2000
Dear Stockholder:
On , 2000, Building One Services Corporation will hold a special
meeting of stockholders at , . The meeting will
begin at 9:30 a.m., local time.
Only holders of shares of common stock and convertible junior subordinated
debentures at the close of business on , 2000 may vote at this meeting
or any adjournments that may take place. At the meeting we propose to:
. consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, as amended, between Group Maintenance America Corp. and
Building One Services Corporation. Pursuant to the merger agreement,
among other things:
(a) Building One will be merged with and into GroupMAC, with GroupMAC
the surviving legal entity;
(b) each outstanding share of Building One common stock will be
converted into the right to receive 1.25 shares of GroupMAC common
stock, with cash being paid in lieu of issuing fractional shares of
GroupMAC common stock; and
(c) GroupMAC shareholders will be given the right to elect to receive
in the merger cash for up to 50% of their shares of GroupMAC common
stock at $13.50 per share, subject to proration; and
. transact such other business as may properly come before the Building One
special meeting or any adjournment or postponement of the Building One
special meeting.
Your board of directors has unanimously approved and recommends that you
vote FOR this proposal, which is discussed in more detail in the attached joint
proxy statement/prospectus.
The approximate date of mailing this joint proxy statement/prospectus and
proxy card is , 2000. I hope you will be able to attend the meeting,
but even if you cannot, please vote your shares by returning the blue proxy
card as soon as possible. You should not send in your certificates for shares
of Building One common stock until you receive instructions to do so.
By order of the Board of Directors,
[SIGNATURE OF F. TRAYNOR BECK
APPEARS HERE]
F. Traynor Beck
Executive Vice President, General
Counsel and Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 3
Summary of Risk Factors................................................. 9
Comparative Market Price Information.................................... 10
Comparative Market Data................................................. 11
Selected Historical and Unaudited Pro Forma Financial Data.............. 12
RISK FACTORS.............................................................. 16
Risks Relating to the Transaction....................................... 16
Risks Relating to the Combined Company.................................. 17
THE GROUPMAC SPECIAL MEETING.............................................. 22
Date, Time and Place.................................................... 22
Purpose................................................................. 22
GroupMAC Board Recommendation........................................... 22
Record Date, Outstanding Shares and Voting Rights....................... 22
Vote Required; Quorum................................................... 22
Voting of Proxies....................................................... 23
Revocation of Proxies................................................... 23
Solicitation of Proxies; Expenses....................................... 24
THE BUILDING ONE SPECIAL MEETING.......................................... 25
Date, Time and Place.................................................... 25
Purpose................................................................. 25
Building One Board Recommendation....................................... 25
Record Date, Outstanding Shares and Voting Rights....................... 25
Vote Required; Quorum................................................... 25
Voting of Proxies....................................................... 26
Revocation of Proxies................................................... 26
Solicitation of Proxies; Expenses....................................... 26
PROPOSAL 1--THE MERGER.................................................... 28
Background of the Merger................................................ 28
Recommendation of the GroupMAC Board; GroupMAC's Reasons for the
Transaction............................................................ 32
Recommendation of the Building One Board; Building One's Reasons for the
Merger................................................................. 35
Opinion of Financial Advisor to GroupMAC................................ 37
Opinion of Financial Advisor to Building One............................ 47
Interests of GroupMAC Executive Officers and Directors.................. 51
Interests of Building One Executive Officers and Directors.............. 52
Interests of Apollo..................................................... 54
Accounting Treatment of the Merger...................................... 54
Material United States Federal Income Tax Considerations of the Merger.. 54
Listing of GroupMAC Common Stock Issued in Connection with the Merger;
Delisting and Deregistration of Building One Common Stock.............. 59
Resales of GroupMAC Common Stock Issued in Connection with the Merger;
Affiliate Agreements................................................... 59
THE MERGER AGREEMENT...................................................... 60
The Merger.............................................................. 60
Conversion of Building One Securities................................... 60
GroupMAC Common Shareholders' Cash Election............................. 61
Representations and Warranties.......................................... 62
Conduct of Business Pending the Merger.................................. 63
Additional Agreements................................................... 64
Conditions to the Merger................................................ 65
Termination, Amendment and Waiver....................................... 67
Amendment to the Articles of Incorporation.............................. 68
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROPOSAL 2--ISSUANCE OF CONVERTIBLE PREFERRED STOCK...................... 70
Approval of Issuance of Convertible Preferred Stock.................... 70
Description of Convertible Preferred Stock............................. 70
Investor's Rights Agreement............................................ 74
PROPOSAL 3--GROUP MAINTENANCE AMERICA CORP. 1999 STOCK PERFORMANCE
INCENTIVE PLAN.......................................................... 78
1999 Stock Performance Incentive Plan.................................. 78
Vote Required for Approval............................................. 79
PROPOSAL 4--GROUP MAINTENANCE AMERICA CORP. 1999 STOCK AWARDS PLAN....... 80
1999 Stock Awards Plan................................................. 80
Vote Required for Approval............................................. 82
BOARD OF DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE
MERGER.................................................................. 83
COMBINED COMPANY UNAUDITED PRO FORMA FINANCIAL STATEMENTS................ 86
GROUP MAINTENANCE AMERICA CORP. UNAUDITED PRO FORMA FINANCIAL
STATEMENTS.............................................................. 101
BUILDING ONE SERVICES CORPORATION UNAUDITED PRO FORMA FINANCIAL
STATEMENTS.............................................................. 108
SECURITY OWNERSHIP OF GROUPMAC........................................... 116
SECURITY OWNERSHIP OF BUILDING ONE....................................... 117
DESCRIPTION OF GROUPMAC CAPITAL STOCK.................................... 119
General................................................................ 119
Preferred Stock........................................................ 119
Common Stock........................................................... 119
Statutory Business Combination Provision............................... 120
Some Important Provisions of the Articles of Incorporation and Bylaws.. 120
CERTAIN DIFFERENCES IN RIGHTS OF HOLDERS OF GROUPMAC COMMON STOCK AND
BUILDING ONE COMMON STOCK............................................... 122
Mergers and Other Fundamental Transactions............................. 122
Mergers Without Stockholder Approval................................... 122
Appraisal Rights....................................................... 123
Amendments to Articles of Incorporation................................ 123
Special Meetings of Stockholders....................................... 124
Cumulative Voting...................................................... 124
No Preemptive Rights................................................... 124
Stockholder Action by Written Consent.................................. 124
Election of Directors.................................................. 124
Newly-Created Directorships............................................ 125
Removal of Directors................................................... 125
Inspection of Books and Records........................................ 125
FORWARD-LOOKING STATEMENTS............................................... 126
RESALES.................................................................. 126
WHERE YOU CAN FIND MORE INFORMATION...................................... 127
LEGAL MATTERS............................................................ 128
EXPERTS.................................................................. 129
</TABLE>
ANNEXES
<TABLE>
<C> <S> <C>
A. FORM OF AGREEMENT AND PLAN OF MERGER, AS AMENDED.................. A-1
B. FORM OF ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION.... B-1
C. OPINION OF CHASE SECURITIES INC................................... C-1
D. OPINION OF BEAR STEARNS & CO. INC................................. D-1
E. FORM OF STATEMENT OF DESIGNATIONS RELATING TO THE PREFERRED
STOCK............................................................ E-1
F. FORM OF INVESTOR'S RIGHTS AGREEMENT............................... F-1
G. GROUP MAINTENANCE AMERICA CORP. 1999 STOCK PERFORMANCE INCENTIVE
PLAN............................................................. G-1
H. GROUP MAINTENANCE AMERICA CORP. 1999 STOCK AWARDS PLAN............ H-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. Why are the two companies proposing to merge?
A. GroupMAC and Building One are proposing to merge because we believe that
the resulting combination will create a more competitive company with
greater growth potential than either company would have on its own. When
the merger is completed, you will have a stake in a company that will be
the premier provider of facilities services in terms of revenues. We
believe that the merger will position us to take advantage of future growth
opportunities in the facilities services industry through a nationwide
presence. We expect that the combination will enhance our service
capabilities and expertise and expand our client base as well as provide us
with the ability to pursue national accounts and cross-sell our services
more effectively. The combined company will also have significantly
increased market capitalization and public float.
Q. What will a Building One stockholder receive when the merger occurs?
A. For every share of Building One common stock that they own, Building One
stockholders will be given the right to receive 1.25 shares of GroupMAC
common stock.
Q. What will a GroupMAC shareholder receive when the merger occurs?
A. Each GroupMAC shareholder will be given the opportunity in the merger to
elect to receive cash for up to 50% of the shareholder's shares at $13.50
per share, subject to proration, so that no more than approximately 11
million shares are converted into cash. If no election is made by a
GroupMAC shareholder, that shareholder will retain the shareholder's
shares.
Q. Will a vote for the merger by shareholders of both companies be sufficient
to approve the transaction?
A. No. Stockholders and debentureholders of Building One must approve the
merger while shareholders of GroupMAC must approve the merger as well as
the issuance of the convertible preferred stock to BOSS II, LLC, an
affiliate of Apollo Management, L.P. If the issuance of the convertible
preferred stock is not approved, the merger will not occur, even if the
shareholders of both companies have approved the merger. Likewise, the
issuance of the convertible preferred stock and the adoption of the two
proposed stock plans, even if approved by GroupMAC shareholders, will not
occur unless the merger agreement is also approved by the securityholders
of both Building One and GroupMAC and the merger is completed.
Q. When do you expect the merger to be completed?
A. We are working toward completing the merger as quickly as possible. We
expect the merger to occur no later than two business days after all of the
conditions to the merger, including obtaining approval under the Hart-
Scott-Rodino Act, have been satisfied. If necessary or desirable, GroupMAC
and Building One may agree to a later date. We currently expect to complete
the merger by February 28, 2000.
Q. What do I need to do now?
A. Please vote as soon as possible. We urge you to read this joint proxy
statement/prospectus carefully, including its annexes, and to consider how
the transaction affects you as a shareholder. You also may want to review
the documents referenced under "Where You Can Find More Information" on
page .
Q. How do I vote?
A. You should simply indicate on your proxy card how you want to vote, and
sign and mail your proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at your special meeting. If
you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be counted as a vote for the proposals before your special
meeting. If you fail to vote your shares or do not instruct your broker how
to vote any shares held for you in a brokerage account, the effect will be
a vote against the merger.
1
<PAGE>
Q. If my shares are held in a brokerage account, will my broker vote my shares
for me?
A. No. Your broker will not vote your shares for you unless you provide
instructions on how to vote. Therefore, it is important that you follow the
directions provided by your broker regarding how to instruct your broker to
vote your shares.
Q. May I change my vote?
A. Yes. You may change your vote at any time before your proxy is voted at
your special meeting. You may do this in a number of ways. First, you may
send a written notice stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy card to the secretary of GroupMAC, at the address on page 3, if you
are a GroupMAC shareholder, or to the secretary of Building One, at the
address on page 3, if you are a Building One stockholder. Third, you may
attend your special meeting and vote in person. Simply attending your
special meeting, without voting in person, will not revoke your proxy. If
you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote or to vote at your
special meeting.
Q. Should I send in my stock certificates now?
A. No. If you are a Building One stockholder, we will send you written
instructions for exchanging your stock certificates. Likewise, GroupMAC
shareholders will receive written instructions regarding the cash election
and the exchange of their stock certificates.
Q. What are the tax consequences of the transaction to shareholders of each
company?
A. Neither GroupMAC shareholders nor Building One stockholders will recognize
a gain or a loss upon their receipt or retention of shares of GroupMAC
common stock in the transaction. In general, however, GroupMAC shareholders
will recognize taxable gain or loss to the extent they elect and receive
cash in the merger. Building One stockholders will recognize a gain or a
loss to the extent they receive cash in lieu of a fractional share interest
in GroupMAC common stock.
Q. Do shareholders of either company have appraisal rights?
A. No.
Q. Who can help answer my questions?
A. If you are a GroupMAC shareholder and would like additional copies of this
joint proxy statement/prospectus or if you have questions about the
transaction, including how to complete and return your proxy card, you
should contact:
ChaseMellon Shareholder Services, L.L.C.
2323 Bryan Street, Suite 2300
Dallas, Texas 75201
Telephone: (800) 952-6798
or
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attention: Investor Relations
Telephone: (713) 860-0100
If you are a Building One stockholder and would like additional copies of
this joint proxy statement/prospectus or if you have questions about the
transaction, including the procedures for voting your shares, you should
contact:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Telephone: (800) 322-2885
or
Building One Services Corporation
110 Cheshire Lane, Suite 210
Minnetonka, Minnesota 55305
Attention: Investor Relations
Telephone: (612) 249-4900
2
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus. It may not contain all of the information that is
important to you. To better understand the merger of Building One into GroupMAC
and the related transactions and the other proposals, we urge you to read
carefully this entire document and the documents to which we have referred you.
Where appropriate, we have set forth a page reference directing you to a more
complete description of the topic.
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
(713) 860-0100
GroupMAC is a leading nationwide provider of mechanical and electrical
services to commercial/ industrial and residential customers. GroupMAC provides
its commercial/industrial customers with maintenance, repair and replacement
and new installation services for products such as boilers, chillers and
central plants, process piping and control systems, and data cabling. It
provides its residential customers with maintenance, repair and replacement and
new installation services for products such as central air conditioning systems
and furnaces, plumbing fixtures and pipes and water heaters.
Since its formation in 1996, GroupMAC has grown primarily through a
disciplined acquisition process, having acquired 72 companies currently
providing services in 64 cities across 28 states. Pro forma revenues for the
year ended December 31, 1998 were $1,441.5 million. Additionally, GroupMAC has
experienced pro forma growth in revenues for the nine months ended September
30, 1999 as compared to the nine months ended September 30, 1998 of 15%.
Building One Services Corporation
110 Cheshire Lane, Suite 210
Minnetonka, Minnesota 55305
(612) 249-4900
Building One is a leading provider of integrated facilities services in the
United States. Its mechanical and electrical systems installation and
maintenance services and janitorial and maintenance management services are
necessary for the routine maintenance and operation of commercial and
industrial buildings.
Since Building One's initial public offering in November 1997, it has grown
primarily through acquisitions, having acquired 52 businesses. Building One
currently has more than 130 locations that provide facilities services to over
8,800 commercial, industrial and institutional customers in 48 states. Pro
forma revenues for the year ended December 31, 1998 were $1,604.3 million.
Additionally, Building One has experienced pro forma growth in revenues for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998 of 15%.
3
<PAGE>
Matters to be Considered at the Meetings (pages and )
GroupMAC shareholders are being asked to vote on the following matters:
. Proposal 1: to approve and adopt the merger agreement, as amended, which
provides that Building One will be merged with and into GroupMAC,
Building One stockholders will have the right to receive 1.25 shares of
GroupMAC common stock in exchange for each share of Building One common
stock that they own, GroupMAC shareholders will be given the right to
elect to receive in the merger cash for up to 50% of their shares of
GroupMAC common stock at $13.50 per share, subject to proration, and the
articles of incorporation will be amended;
. Proposal 2: to approve the issuance of GroupMAC's convertible preferred
stock to Apollo or its affiliates in connection with the merger;
. Proposal 3: to approve and adopt the Group Maintenance America Corp.
1999 Stock Performance Incentive Plan; and
. Proposal 4: to approve and adopt the Group Maintenance America Corp.
1999 Stock Awards Plan.
Building One holders of shares of common stock and convertible junior
subordinated debentures are being asked to vote only on the following matter:
. Proposal 1: to approve and adopt the merger agreement, as amended, which
provides that Building One will be merged with and into GroupMAC and
that each issued and outstanding share of Building One common stock will
be exchanged for the right to receive 1.25 shares of GroupMAC common
stock.
Votes Required (pages and )
GroupMAC. The holders of two-thirds of the outstanding shares of GroupMAC
common stock must vote in favor of the merger agreement, which includes the
related amendment to the articles of incorporation that changes the corporate
name to , increases the number of shares of authorized capital stock,
phases out the staggered board of directors, excludes from the term "business
combinations" any business combinations allowed, permitted or required under
the terms of any statement of designation governing any preferred stock of
GroupMAC or pursuant to the investor's rights agreement by and between GroupMAC
and BOSS II, LLC, and excludes from the restrictions on the acquisition of
certain voting stock acquisitions of voting stock pursuant to the terms of the
statement of designation for any series of preferred stock or pursuant to the
investor's rights agreement. Pursuant to requirements of the New York Stock
Exchange, so long as a majority of the outstanding shares of GroupMAC common
stock are present in person or by proxy, holders of a majority of the shares of
GroupMAC common stock present at the meeting must vote in favor of the issuance
of the convertible preferred stock. The holders of a majority of the shares of
GroupMAC common stock present at the meeting must vote in favor of the two
proposed stock plans. If, for any reason whatsoever, the merger is not
completed, the amendment to the articles of incorporation, the issuance of the
convertible preferred stock and the adoption of the stock plans will not occur
even if holders of two-thirds of the outstanding shares of GroupMAC common
stock have approved the merger agreement and the requisite majority have
approved the issuance of the convertible preferred stock and the adoption of
the two proposed stock plans.
Building One. Holders of a majority of the outstanding shares of Building
One common stock and of the outstanding convertible junior subordinated
debentures, voting together as a single class, must vote in favor of the merger
agreement. In addition, holders of a majority of the outstanding convertible
junior subordinated debentures, voting separately as a class, must vote in
favor of the merger agreement.
The merger will occur only if the merger is approved by the Building One
stockholders and holders of the convertible junior subordinated debentures and
the GroupMAC shareholders approve the merger and the issuance of the
convertible preferred stock.
4
<PAGE>
What You Will Receive in the Merger (pages and )
GroupMAC. GroupMAC shareholders will be given the right to elect to receive
in the merger cash for up to 50% of their shares at $13.50 per share, subject
to proration if shareholders elect to convert more than approximately 11
million shares in the aggregate.
Building One. Each issued and outstanding share of Building One common stock
will automatically be converted into the right to receive 1.25 shares of
GroupMAC common stock. Building One stockholders will receive cash in lieu of
fractional shares of GroupMAC common stock.
Ownership After the Merger
As a result of the transaction and assuming the maximum number of shares of
GroupMAC common stock are converted into cash in the merger, GroupMAC
shareholders will own approximately 35% of the combined company's voting power,
Building One stockholders will own approximately 42% of the combined company's
voting power, and Apollo will beneficially own 23%, on an as converted basis,
of the combined company's voting power.
Material U.S. Federal Income Tax Consequences (page )
Neither GroupMAC shareholders nor Building One stockholders will recognize a
gain or a loss upon their receipt or retention of shares of GroupMAC common
stock in the transaction. In general, however, GroupMAC shareholders and
Building One stockholders will recognize taxable gain or loss to the extent
they elect and receive cash in the merger. Building One stockholders may
receive cash only in lieu of fractional shares, while GroupMAC shareholders may
elect and receive cash pursuant to the cash election as well as in lieu of
fractional shares. The tax consequences of the transaction to you will depend
on your situation. You should consult your tax advisor for a full understanding
of these tax consequences.
The Board of Directors and Executive Officers
of the Combined Company Following the Merger (page )
Following the completion of the merger, the combined company's board of
directors will be composed of: Andrew Africk, William P. Love, Jr. and Donald
L. Luke (Class I), Vincent Eades, Michael Gross, Joseph M. Ivey, J. Patrick
Millinor, Jr. and Lucian L. Morrison (Class II), and Brooks Newmark, M. Jude
Reyes and John M. Sullivan (Class III). Messrs. Luke, Millinor, Morrison and
Sullivan are designees of GroupMAC, Messrs. Eades, Ivey, Love and Reyes are
designees of Building One, and Messrs. Africk, Gross, and Newmark are designees
of Apollo. Apollo will have the right to designate one additional director, and
Apollo, Building One and GroupMAC have agreed to jointly designate an
independent director. The terms of the Class I directors will expire in 2001.
The terms of the Class II directors will expire in 2002. The terms of the Class
III directors will expire in 2000.
Upon completion of the merger, J. Patrick Millinor, Jr., chief executive
officer of GroupMAC, will become the chairman of the board of the combined
company and Joseph M. Ivey, chief executive officer of Building One, will
become the president and chief executive officer of the combined company.
Apollo Investment
GroupMAC has agreed to issue shares of its convertible preferred stock
having an aggregate share value of approximately $255 million to Apollo
Investment, L.P. or its affiliates in exchange for $150 million in cash and the
Building One convertible junior subordinated debentures. The cash will be used
to fund the cash election right of the GroupMAC shareholders. The convertible
preferred stock will bear a coupon rate of 7.25%, will be payable on a
quarterly basis and will mature in 2012. The convertible preferred stock will
be convertible into GroupMAC common stock at a conversion price of $14.00 per
share, subject to adjustment under certain circumstances.
5
<PAGE>
Reasons for the Merger (page )
We believe that combining our businesses will help position us to become one
of the premier facilities services companies in the United States. The combined
organization will have operations in each of the 100 largest United States
markets and provide strategic growth opportunities that will benefit
shareholders, customers and employees more rapidly than either company could
achieve on its own. Some of the reasons why we endorsed the merger include the
following:
. to create a $3 billion market leader in the facilities services
industry;
. to accelerate the expansion of the companies' geographic coverage to
better service national accounts;
. to provide critical mass in core businesses and in specialized services;
. to broaden the client base; and
. to provide the ability to pursue national accounts and cross-sell our
services more effectively.
Recommendations of the Boards of Directors (page )
GroupMAC. The GroupMAC board of directors, by unanimous vote, approved the
merger, including the related articles of amendment to the articles of
incorporation, the issuance of the convertible preferred stock and the adoption
of the stock plans. GroupMAC's board of directors has determined that these
matters are in the best interests of GroupMAC and its shareholders. The
GroupMAC board of directors unanimously recommends that GroupMAC shareholders
vote FOR the adoption of the merger agreement, thereby also approving and
adopting the articles of amendment, FOR the issuance of the convertible
preferred stock and FOR the adoption of the two proposed stock plans.
Building One. The Building One board of directors, by unanimous vote,
approved the merger, believes the merger is fair and in the best interests of
Building One and Building One stockholders and recommends that Building One
holders of shares of common stock and of convertible junior subordinated
debentures vote FOR the adoption of the merger agreement.
Opinions of Financial Advisors (pages and )
In deciding to approve the transaction, our boards received opinions from
our respective financial advisors. GroupMAC's financial advisor addressed the
fairness of the exchange ratio, the exchange of Building One indebtedness held
by Apollo for GroupMAC convertible preferred stock and the issuance of
additional convertible preferred stock for cash, taken as a whole and
considered collectively, and Building One's financial advisor addressed the
fairness of the merger consideration to Building One stockholders, in each case
from a financial point of view. GroupMAC received an opinion from Chase
Securities Inc., and Building One received an opinion from Bear Stearns & Co.,
Inc. The full texts of these opinions are attached as Annexes C and D to this
document and should be read carefully in their entirety. The opinions of Chase
and Bear Stearns are directed to the boards of GroupMAC and Building One,
respectively, and do not constitute a recommendation to any shareholder with
respect to matters relating to the merger or the related transactions.
Conditions to the Merger (page )
The completion of the merger is subject to a number of conditions that must
be completed or waived before the closing, including:
. approval by the GroupMAC shareholders of the merger, including the
amendment to the articles of incorporation, and the issuance of the
convertible preferred stock;
. approval of the merger by the holders of shares of Building One common
stock and of convertible junior subordinated debentures;
6
<PAGE>
. approval of the listing on the NYSE, subject to official notice of
issuance, of the shares of GroupMAC common stock to be issued in the
merger and upon conversion of the convertible preferred stock;
. the receipt by each company of an opinion from its counsel to the effect
that the merger will be treated for U.S. federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code;
. immediately prior to the effective time of the merger, the receipt of
funding from affiliates of Apollo of cash in the amount of $150 million
and the delivery by those affiliates of the Building One convertible
junior subordinated debentures to GroupMAC as consideration for
GroupMAC's issuance of the convertible preferred stock of GroupMAC;
. the receipt of all material consents, approvals and authorizations from
government entities and other third parties required to effect the
transactions contemplated by the merger;
. the existence of no material breach of the representations, warranties
or covenants under the merger agreement and no default under any
material indebtedness of GroupMAC or Building One; and
. the receipt of financing sufficient to complete the transactions
contemplated by the merger.
The financing is to be provided by an $800 million credit facility. We have
an underwritten commitment from Bank of America and Chase Bank of Texas to
provide the necessary financing. The credit facility will include a number of
covenants that impose restrictions on the combined company. These covenants
will include, among others, limitations on the combined company's ability to
incur additional indebtedness and restrictions on mergers, acquisitions and the
disposition of assets, sale and leaseback transactions, dividends and other
distributions. In addition, the combined company will be required to comply
with financial covenants with respect to minimum fixed charge coverage and
maximum leverage ratios.
Alternative Transactions
The merger agreement generally limits the ability of each of our boards of
directors to solicit or participate in discussions with any third party about
transactions alternative to the merger.
Termination (page )
The merger agreement provides that, prior to the effective time of the
merger, the merger agreement may be terminated by:
. the mutual consent of GroupMAC and Building One by action of their
respective boards of directors;
. GroupMAC or Building One if the merger is not completed before March 31,
2000;
. GroupMAC or Building One if the other party is in material breach of the
merger agreement; or
. the board of directors of GroupMAC or Building One, as the case may be,
if the board of directors of the other company withdraws or adversely
changes its approval or recommendation in favor of the merger, or if
that board of directors recommends an alternative transaction with a
third party.
Termination Fees (page )
If either GroupMAC or Building One terminates the merger agreement as a
result of its respective board of directors determining in good faith, after
receiving a third-party proposal to enter into an alternative transaction, that
the board of directors must terminate the merger agreement in order to avoid
breaching its fiduciary duties to the company's shareholders, then the company
terminating the merger agreement must pay a termination fee of $15 million to
the other company.
7
<PAGE>
GroupMAC or Building One, as the case may be, shall also pay to the other
party the $15 million termination fee as a result of termination of the merger
agreement under the following circumstances:
. either company's board of directors modifies in any adverse manner its
approval or recommendation of the merger agreement;
. either company's board of directors recommends the merger agreement to
its securityholders but the respective company's securityholders fail to
approve the merger agreement and there was an offer, proposal,
announcement or any agreement relating to an alternative transaction
prior to the meeting of the company's securityholders to approve the
merger agreement, and within 12 months after the termination of the
merger agreement that company enters into a definitive agreement with
any third party relating to an alternative transaction; or
. either party fails to make reasonable efforts to comply with regulatory,
judicial or contractual obligations to complete the transactions
contemplated by the merger agreement, or fails to comply with its
agreement in the merger agreement not to solicit alternative
transactions, or fails to recommend to its securityholders the approval
of the merger agreement, and the issuance of the preferred stock, in the
case of GroupMAC, which failure renders the other party's conditions to
completing the merger unsatisfied and which failure is incapable of
being cured prior to March 31, 2000 or, in the case of a regulatory,
judicial or contractual failure, within 30 days.
In the event that GroupMAC or Building One attempts to terminate the merger
agreement in a manner that is not specifically provided for in the merger
agreement, the terminating party must pay a termination fee of $30 million to
the other party.
Interest of Certain Persons in the Transaction (pages and )
Some directors and officers of GroupMAC and Building One have employment
agreements, stock options and/or other agreements that provide them with
interests in the merger that may be different from, or in addition to, the
interests of shareholders of GroupMAC or Building One. In addition, Apollo or
its affiliates are entitled to receive a fee of $2.5 million if the merger is
completed or a fee of $3.75 million if the subscription and exchange agreement,
relating to the exchange of its Building One convertible junior subordinated
debentures for, and cash purchase of, shares of the convertible preferred
stock, is terminated under certain circumstances. These interests of directors,
officers and Apollo or its affiliates may conflict with your interests.
Accounting Treatment (page )
GroupMAC will be the surviving legal entity in the merger. However, for
accounting purposes, Building One is deemed to be the acquiror and,
accordingly, the merger will be accounted for as a "reverse acquisition" by
Building One of GroupMAC under the purchase method of accounting.
Absence of Appraisal Rights (page )
Because GroupMAC common stock is listed on the New York Stock Exchange and
Building One common stock is traded on the Nasdaq, neither holders of GroupMAC
common stock nor holders of Building One common stock have the right to seek
appraisal of, and to be paid, the value of their shares.
8
<PAGE>
SUMMARY OF RISK FACTORS
Risks Relating to the Transaction
. Building One stockholders will not know the market price of the shares
of GroupMAC common stock they will receive in the merger when they vote
on the merger.
. None of the stockholders will know their percentage ownership or
Apollo's percentage ownership in the combined company prior to the
completion of the merger.
. The termination fees required by the merger agreement could make an
alternative transaction more difficult or expensive.
. Upon completion of the merger, Apollo and its affiliates will be able to
exert substantial influence over the election of directors and other
matters submitted to the combined company's shareholders, as well as
over our business operations.
. Apollo's voting rights upon the completion of the merger may discourage
others from seeking to acquire the combined company.
Risks Relating to the Combined Company
. We may not be able to finance future needs or adapt our business plans
to changes because of restrictions placed on us by the terms of our
outstanding indebtedness, the convertible preferred stock and the
investor's rights agreement.
. Any delay or inability to achieve revenue enhancements or to integrate
our businesses or the businesses we acquire in the future could
adversely affect our financial health.
. Our substantial indebtedness could adversely affect our financial health
and make us more vulnerable to adverse economic conditions.
. Downturns in the construction industry could cause our revenues from
installing equipment to decrease.
. Shortages of a skilled labor force may adversely affect our
profitability and our planned internal growth.
. Our profitability may be affected by prolonged bad weather or seasonal
variations.
. We face competition from owner-operated companies, large public
companies and utilities for the services we provide and for the
businesses we may want to acquire.
. Our business may suffer if we do not retain our management and the
management of the businesses we acquire.
. If we cannot use our common stock or raise capital for consideration in
acquisitions, we may not be able to grow our business by acquisitions.
. If our acquisition strategy is not achieved, our growth may be
diminished.
. Many of the shares of our outstanding common stock will become freely-
tradeable in the future, which could cause our stock price to decrease.
. We may experience significant fluctuations in the price per share of our
common stock for a variety of reasons, some of which are outside of our
control.
. If our computer systems or the systems of those with whom we do business
are not year 2000 compliant, our ability to manage our business and our
financial results could be harmed.
9
<PAGE>
COMPARATIVE MARKET PRICE INFORMATION
GroupMAC common stock is listed for trading on the New York Stock Exchange
under the symbol "MAK". Building One common stock is traded on the Nasdaq under
the symbol "BOSS". The following table sets forth the high and low sales prices
per share of GroupMAC common stock and Building One common stock for the
quarterly periods indicated, which correspond to the companies' quarterly
periods for financial reporting purposes.
<TABLE>
<CAPTION>
Building
GroupMAC One
Common Common
Stock Stock
------------ --------------
High Low High Low
---- --- ---- ----
<S> <C> <C> <C> <C>
1998:
First quarter...................... $17 1/8 $14 $25 7/8 $18 3/8
Second quarter..................... 19 5/8 15 1/2 25 15/16 19 3/4
Third quarter...................... 20 5/8 11 1/4 24 1/2 11 1/2
Fourth quarter..................... 14 3/16 10 5/16 22 1/2 7 7/8
1999:
First quarter...................... 15 7/16 9 7/8 21 15 1/2
Second quarter..................... 14 7/16 10 3/4 20 3/8 12 3/8
Third quarter...................... 14 7/16 9 3/4 16 1/8 12 3/16
Fourth quarter.....................
2000:
First quarter (through January ,
2000).............................
</TABLE>
10
<PAGE>
COMPARATIVE MARKET DATA
The following table presents trading information for shares of GroupMAC
common stock and Building One common stock for the week of October 25, 1999
through November 2, 1999, for November 2, 1999 and for , 2000.
November 2, 1999 was the last trading day prior to the public announcement of
the proposed merger, and , 2000 was the last practicable trading day
for which information was available prior to the date of mailing this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
GroupMAC Building One Building One
Common Stock Common Stock Equivalent Per Share
---------------------- ----------------------- -----------------------
High Low Close High Low Close High Low Close
------- ------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average for the week of
October 25 through
November 2, 1999....... $10.062 $9.750 $ 9.875 $11.562 $11.062 $11.188 $12.578 $12.188 $12.344
November 2, 1999........ 10.125 9.875 10.000 11.375 11.125 11.188 12.656 12.344 12.500
, 2000
</TABLE>
We urge you to obtain a current market quotation of GroupMAC common stock
and Building One common stock. Because the exchange ratio is fixed in the
merger agreement, the market value of the shares of GroupMAC common stock that
holders of Building One common stock will have the right to acquire on the date
the merger becomes effective may vary significantly from the market value of
the shares of GroupMAC common stock that holders of Building One common stock
would receive if the merger were completed on the date of this joint proxy
statement/prospectus. Therefore, you should obtain recent market prices of the
GroupMAC and Building One shares prior to voting.
11
<PAGE>
SELECTED HISTORICAL AND UNAUDITED
PRO FORMA FINANCIAL DATA
We are providing the following information to aid you in your analysis of
the financial aspects of the merger and the related transactions. This
information is only a summary, and you should read it in conjunction with our
historical and unaudited pro forma financial statements and related notes that
are incorporated by reference or included in this joint proxy
statement/prospectus. See "Unaudited Pro Forma Financial Statements" and "Where
You Can Find More Information."
Selected Historical Financial Data of GroupMAC
The following table sets forth selected financial data for GroupMAC for the
ten months ended
December 31, 1997, the fiscal year ended December 31, 1998, and the nine-month
periods ended September 30, 1998 and 1999:
<TABLE>
<CAPTION>
As of and
for the As of and As of and for the
Ten Months for the Nine Months Ended
Ended Year Ended September 30,
December 31, December 31, -------------------
1997 1998 1998 1999
------------ ------------ -------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues........................ $138,479 $761,541 $477,944 $1,121,471
Operating income................ 222 52,066 32,319 79,121
Net income...................... (3,642) 25,929 16,737 33,420
Balance Sheet Data:
Total assets.................... 192,687 701,081 514,167 1,001,919
Short-term debt................. 2,769 12,959 7,745 1,408
Long-term debt.................. 169 211,000 108,620 352,650
Shareholders' equity............ 136,653 315,929 259,077 409,825
Per Share Data:
Basic net income................ (0.34) 0.94 0.66 0.91
Diluted net income.............. (0.34) 0.93 0.65 0.90
Book value...................... 6.62 9.53 9.00 10.69
</TABLE>
12
<PAGE>
Selected Historical Financial Data of Building One
The following table sets forth selected financial data for Building One for
each of the fiscal years ended December 31, 1997 and 1998 and for the nine-
month periods ended September 30, 1998 and 1999.
<TABLE>
<CAPTION>
As of and for the As of and for the
Year Ended Nine Months Ended
December 31, September 30,
-------------------- ---------------------
1997 1998 1998 1999
-------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues....................... $ 70,101 $ 809,601 $ 478,595 $1,265,521
Operating income............... (532) 65,184 37,139 88,822
Net income..................... 1,443 47,463 30,291 40,084
Balance Sheet Data:
Total assets................... 539,159 1,043,922 1,002,112 1,212,211
Short-term debt................ 1,553 2,167 3,864 3,106
Long-term debt, excluding
convertible junior
subordinated debentures....... 1,679 3,287 3,094 438,887
Convertible junior subordinated
debentures.................... -- -- -- 103,190
Stockholders' equity........... 529,480 837,537 817,247 397,016
Per Share Data:
Basic net income............... 0.25 1.19 0.79 1.14(1)
Diluted net income............. 0.25 1.16 0.77 1.08(1)
Book value..................... 16.84 18.51 18.51 15.22
</TABLE>
- --------
(1) Building One recorded a pre-tax restructuring and recapitalization charge
of $8,020 during the nine months ended September 30, 1999. This charge
reduced the Building One net income per common share--basic and diluted by
$0.14 and $0.13, respectively.
13
<PAGE>
Summary Combined Company Unaudited Pro Forma Financial Information
The following table sets forth certain unaudited pro forma financial
information giving effect to the merger, accounted for as a reverse acquisition
and a purchase in accordance with generally accepted accounting principles, and
the related transactions, including the refinancing of the companies' revolving
and term loan credit facilities. The information below may not be indicative of
the results that actually would have occurred or that will be obtained in the
future. The summary pro forma financial data have been derived from the
separate company and combined company unaudited pro forma financial statements
and related notes appearing elsewhere in this joint proxy statement/prospectus.
The pro forma combined company financial information has been prepared under
the assumption that the GroupMAC shareholders will elect to receive the maximum
amount of cash in exchange for their shares under the cash election right. See
"Combined Company Unaudited Pro Forma Financial Statements" and the notes
thereto.
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-----------------------------------------------
Separate Company Combined Company
Pro Forma Pro Forma
--------------------- ----------------------
Building Combined
GroupMAC One Adjustments Company
---------- ---------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues..................... $1,441,473 $1,604,336 $ -- $3,045,809
Net income................... 45,418 41,483 4,811 91,712
Net income available to
common shareholders......... 45,418 41,483 (13,837) 73,064
Net income per common share:
Basic...................... 1.18 1.57 1.21
Diluted.................... 1.17 1.47 1.15
<CAPTION>
Nine Months Ended September 30, 1999
-----------------------------------------------
Separate Company Combined Company
Pro Forma Pro Forma
--------------------- ----------------------
Building Combined
GroupMAC One Adjustments Company
---------- ---------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues..................... $1,214,543 $1,363,487 $ -- $2,578,030
Net income................... 35,080 33,140 3,654 71,874
Net income available to
common shareholders......... 35,080 33,140 (10,332) 57,888
Net income per common share:
Basic...................... 0.91 1.26(1) 0.96(1)
Diluted.................... 0.91 1.17(1) 0.91(1)
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1999
------------------------------------------
Separate Company Combined Company
Pro Forma Pro Forma
------------------- ----------------------
Building Combined
GroupMAC One Adjustments Company
-------- ---------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Goodwill and other intangibles,
net............................... $518,003 $ 673,238 $ 40,442 $1,231,683
Total assets....................... 995,423 1,197,689 29,756 2,222,868
Long-term debt..................... 352,994 534,744 (63,390) 824,348
Convertible preferred stock........ -- -- 249,690 249,690
Shareholders' equity............... 409,825 397,016 (147,700) 659,141
</TABLE>
- --------
(1) Building One recorded a pre-tax restructuring and recapitalization charge
of $8,020 during the nine months ended September 30, 1999. This charge
reduced the Building One pro forma net income per common share--basic and
diluted by $0.18 and $0.15, respectively, and the combined company pro
forma net income per common share--basic and diluted by $0.08 and $0.06,
respectively.
14
<PAGE>
Comparative Per Share Data of GroupMAC and Building One
The following table presents comparative per share information for GroupMAC
and Building One on a historical basis and on a pro forma basis assuming that
the merger and related transactions had occurred at January 1, 1998 for
earnings per common share purposes and as of September 30, 1999 for book value
per common share purposes. The table should be read in conjunction with the
financial statements and related notes incorporated by reference and the
separate company and combined company unaudited pro forma financial statements
and related notes included elsewhere in this joint proxy statement/prospectus.
The combined company unaudited pro forma financial information has been
prepared under the assumption that the GroupMAC shareholders will elect to
receive the maximum amount of cash in exchange for their shares under the cash
election right. See "Combined Company Unaudited Pro Forma Financial Statements"
and the notes thereto.
<TABLE>
<CAPTION>
As of and for the Nine
As of and for the Year Months Ended
Ended December 31, 1998 September 30, 1999
------------------------ ------------------------
Historical Pro Forma(1) Historical Pro Forma(1)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
GroupMAC (per common share):
Book value................. $ 9.53 -- $10.69 $10.67
Net income--diluted........ 0.93 $1.17 0.90 0.91
Building One (per common
share):
Book value................. 18.51 -- 15.22 15.06
Net income--diluted........ 1.16 1.47 1.08 1.17
<CAPTION>
As of and for the Nine
As of and for the Year Months Ended
Ended December 31, 1998 September 30, 1999
------------------------ ------------------------
Equivalent Equivalent
Pro Forma Pro Forma Pro Forma Pro Forma
Combined(2) Combined(3) Combined(2) Combined(3)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Pro Forma Combined Company
(per common share):
Net income available to
common shareholders--
diluted................... $ 1.15 $1.44 $ 0.91 $ 1.14
Book value................. -- -- 10.94 13.68
</TABLE>
The above data do not include the effects of dividends on shares of common
stock because the companies have not paid any dividends on their shares since
their incorporation. The combined company does not anticipate paying any
dividends on shares of common stock in the foreseeable future because it
intends to retain any earnings to finance the expansion of its business, to
repay indebtedness and for general corporate purposes. Any payment of future
dividends will be at the discretion of the board of directors of the combined
company and will depend upon, among other things, the combined company's
earnings, financial condition, capital requirements, level of indebtedness and
other relevant factors.
- --------
(1) Pro forma amounts give effect to the acquisitions made by each company
during 1998 and through September 30, 1999 as if the transactions had
occurred as of September 30, 1999 for book value per common share purposes
and on January 1, 1998 for net income per common share purposes.
(2) Combined company pro forma amounts give effect to the merger and related
transactions including the cancellation of shares of GroupMAC common stock
under the cash election right and the refinancing of the companies'
revolving and term loan credit facilities as of September 30, 1999 for book
value per common share purposes and on January 1, 1998 for net income per
common share purposes.
(3) The equivalent pro forma Building One combined per share amounts have been
calculated by multiplying the pro forma combined per share amounts by 1.25.
The 1.25 represents the number of shares of GroupMAC common stock that a
holder of shares of Building One common stock will be entitled to receive
for each share of their Building One common stock.
15
<PAGE>
RISK FACTORS
In evaluating GroupMAC, Building One, their respective businesses, the
merger and the related transactions, you should carefully consider the
following risk factors, as well as the other information included in or
incorporated by reference into this joint proxy statement/prospectus.
Risks Relating to the Transaction
Building One stockholders will not know the market price of the shares of
GroupMAC common stock they will receive in the merger when they vote on the
merger.
As a result of the merger, each share of Building One stock will be
converted into the right to receive 1.25 shares of GroupMAC common stock. The
exchange ratio of 1.25 is fixed. The number of shares of GroupMAC common stock
that Building One stockholders will receive in the merger will not change,
even if the market price of shares of GroupMAC common stock changes. Building
One does not have the right to terminate the merger agreement based upon a
significant decline in the price of GroupMAC common stock. From November 3,
1999 to , 2000, the New York Stock Exchange market price per share of
GroupMAC common stock ranged from $ to $ and closed at $ on January
, 2000. The merger will not be completed until after the shareholder
meetings. Accordingly, when you vote on the merger, you will not know what the
market price of the shares of GroupMAC common stock will be when the merger is
completed.
None of the stockholders will know their percentage ownership or Apollo's
percentage ownership in the combined company prior to the completion of the
merger.
Under the terms of the merger agreement, holders of GroupMAC common stock
have the right to elect to convert each of their shares of GroupMAC common
stock into $13.50 in cash, subject to proration if the holders of shares of
GroupMAC common stock elect to exchange more than approximately 11 million
shares of GroupMAC common stock in the aggregate. Therefore, until GroupMAC
determines how many shares of GroupMAC common stock will be converted into
cash, none of the holders of GroupMAC common stock or Building One common
stock will be able to determine how many shares of GroupMAC common stock will
be outstanding upon the effectiveness of the merger. Until GroupMAC determines
how many shares of GroupMAC common stock will be converted, the holders of
shares of GroupMAC common stock and Building One common stock will be unable
to determine precisely the percentage of shares of GroupMAC common stock they
will own after the merger or the voting power of Apollo after the merger.
The termination fees required by the merger agreement could make an
alternative transaction more difficult or expensive.
GroupMAC or Building One must pay to the other termination fees ranging
from $15 million to $30 million if the merger agreement terminates under
specified circumstances. For example, GroupMAC or Building One must pay the
termination fee if its board of directors withdraws, or adversely modifies,
its approval of the merger, or approves an alternative transaction with
another company. In addition, GroupMAC or Building One must pay the
termination fee if an offer, proposal, announcement or any agreement relating
to an alternative transaction occurs, shareholders do not approve the merger
and within 12 months that company enters into an alternative transaction. The
termination fee could deter either company from entering into an alternative
transaction by making it more difficult or expensive.
Upon completion of the merger, Apollo and its affiliates will be able to
exert substantial influence over the election of directors and matters
submitted to the combined company's shareholders, as well as over our
business operations.
As the holder of the convertible preferred stock, Apollo will have the
right to vote together with the holders of our common stock on all matters
submitted to our shareholders for a vote. The holders of the convertible
preferred stock will be entitled to cast the number of votes that they would
have been entitled to cast if they converted the convertible preferred stock
into shares of the combined company's common stock. Based upon a conversion
price of $14.00 per share and assuming the maximum number of shares of
GroupMAC common stock are exchanged for cash in the merger, the holders of the
convertible preferred stock
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will have the right to cast approximately 18.3 million votes, or votes
equivalent to approximately 23% of the total votes of the combined company
immediately after the merger. In addition, Apollo will have the right to elect
four of our thirteen directors, or if the board has more than 13 directors, 30%
of the board. Apollo and its affiliates may have economic and business
objectives that make their interests different from what might be in the best
interests of our other shareholders.
Under the investor's rights agreement that GroupMAC will enter into at the
time the merger is completed, Apollo will have various rights. So long as
Apollo beneficially owns at least 25% of the shares of the combined company's
common stock underlying the convertible preferred stock that Apollo acquires
upon the completion of the merger, Apollo will have the right to purchase for
cash any shares of common stock or any security that converts into common stock
that the combined company offers in a private placement and the right to
preclude the combined company and its subsidiaries from entering into various
types of transactions or make certain changes in its capital structure or
management without the consent of Apollo. For example, the combined company may
not, without Apollo's consent, acquire a business or assets with an aggregate
value in excess of 2.0% of its total assets, dispose of a business or assets
with an aggregate value in excess of 2.5% of its total assets or create or
acquire an interest in a subsidiary other than a wholly owned subsidiary,
subject to certain exceptions. Apollo will also have the right to approve the
incurrence or refinancing of indebtedness that does not meet a 4 to 1
consolidated leverage ratio and to approve capital expenditures exceeding $10
million individually or 1.75% of budgeted annual revenues in the aggregate.
Apollo has the right to take control of the combined company's board of
directors if there is a material and intentional breach of the terms of the
convertible preferred stock or the investor's rights or subscription and
exchange agreements, there is a payment default under outstanding indebtedness,
or there are certain bankruptcy events, until the noncompliance is cured. Some
events of noncompliance may not be curable.
Apollo's voting rights upon the completion of the merger may discourage others
from seeking to acquire the combined company.
Immediately after the merger is completed, Apollo and its affiliates will
beneficially own approximately 23% of the voting power of the combined company.
As a result of this voting power, others may be discouraged from seeking to
acquire the combined company.
Risks Relating to the Combined Company
We may not be able to finance future needs or adapt our business plans to
changes because of restrictions placed on us by the terms of our indebtedness,
the convertible preferred stock and the investor's rights agreement.
The operating and financial restrictions and covenants in our credit
agreement, the indentures governing our notes and the convertible preferred
stock and the related investor's rights agreement limit or prohibit our ability
to:
. finance future operations or capital needs, including acquisitions;
. respond to changes in our business or competitive activities;
. make acquisitions;
. pay dividends on or repurchase our common stock; or
. engage in other business activities.
Any future financing arrangements may have the same effect. A breach of any
of these restrictions or covenants in the debt instruments could cause a
default under the credit agreement or any of our notes and, in some cases,
acceleration of debt under other instruments that contain cross-default or
cross-acceleration provisions. A significant portion of our indebtedness may
then become immediately due and payable. We are not certain whether we would
have, or would be able to obtain, sufficient funds to make these accelerated
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payments, which could cause a decrease in the market value of our common
stock. A breach of certain restrictions or covenants in the convertible
preferred stock or the related investor's rights agreement allows Apollo to
assume a majority of our company's board of directors until the breach is
cured. Some events of noncompliance may not be curable.
Any delay or inability to achieve revenue enhancements or to integrate our
businesses or the businesses we acquire in the future could adversely affect
our financial health.
We have entered into the merger agreement with the expectation that the
proposed merger will result in long-term strategic benefits, including
increasing our business with national accounts and enhancing service
capabilities and expertise. These anticipated benefits will depend in part on
whether the companies' operations and cultures can be integrated in an
efficient and effective manner. There can be no assurance that this will
occur. The success of the integration process will be significantly influenced
by our ability to attract and retain key management and personnel. There is no
assurance that the foregoing will be accomplished smoothly or successfully.
The integration of our operations following the merger will require the
dedication of management resources, which may distract attention from the day-
to-day operations of the combined company. The inability of management to
successfully integrate the operations of the companies could have a material
adverse effect upon the business, operating results or financial condition of
our combined company.
We have grown, and plan to continue to grow, by acquiring other businesses
in our industry. Our future success is dependent upon our ability to integrate
our past and future acquisitions into one enterprise with a common operating
plan. We must also monitor the performance of our acquired businesses. Many of
these acquired businesses must change their past operating systems such as
accounting, purchasing and marketing. We may not be successful in our efforts
to integrate acquired businesses or monitor their performance. If we are
unable to do so, or if we experience delays or unusual expenses in doing so,
it could have a material adverse effect on our business, financial condition
or results of operations.
Our substantial indebtedness could adversely affect our financial health and
make us more vulnerable to adverse economic conditions.
As of September 30, 1999, assuming we had completed the merger and related
transactions, we had outstanding $824.3 million of consolidated indebtedness,
of which approximately $624.5 million would have been senior indebtedness. We
will require substantial capital to finance our anticipated growth, so we
expect to incur additional debt in the future. However, we will be limited in
the amount we may incur by the terms of the convertible preferred stock and by
our existing and future debt agreements.
Our high level of indebtedness could have important consequences, such as:
. limiting our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service
requirements or other purposes;
. limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make principal payments and fund debt service;
. placing us at a competitive disadvantage compared to our competitors with
less debt;
. increasing our vulnerability to adverse economic and industry conditions;
and
. increasing our vulnerability to interest rate increases because
borrowings under our credit agreement are at variable interest rates.
Each of these factors is to a large extent dependent on economic,
financial, competitive and other factors beyond our control. If we cannot
generate sufficient cash from operations to make scheduled payments on our
debt or to meet our other obligations, we will need to refinance, obtain
additional financing or sell assets. We cannot assure you that our business
will generate cash flow, or that we will be able to obtain funding sufficient
to satisfy our debt service requirements.
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Downturns in the construction industry could cause our revenues from
installing equipment to decrease.
Approximately 48% of our pro forma 1998 revenues involved the installation
of mechanical and electrical systems in newly-constructed residences and
commercial/industrial facilities. The level of new commercial/ industrial
installation services is affected by changes in economic conditions and
interest rates. General downturns in housing starts or new
commercial/industrial construction in the areas in which we operate could have
a material adverse effect on our business, including its financial condition
and results of operations. Our revenues from new installation services in the
residential market are dependent upon the level of housing starts in the areas
in which we operate. The housing industry is cyclical, and our revenues from
new residential installation may be affected by the factors that affect the
housing industry. These factors include changes in employment and income
levels, the availability and cost of financing for new home buyers and general
economic conditions.
Shortages of a skilled labor force may adversely affect our profitability and
our planned internal growth.
Our ability to provide high-quality mechanical and electrical services on a
timely basis requires an adequate supply of skilled technicians. Many companies
in our industry are currently experiencing shortages of qualified technicians.
We cannot assure you that we will be able to maintain an adequate skilled labor
force or that our labor expenses will not increase. A shortage of skilled labor
would require us to curtail our planned internal growth or may require us to
use less-skilled labor which could adversely affect our ability to perform
work.
Although fewer than 15% of our employees are members of unions, many sectors
of the facilities services industry involve unionized employees. Union activity
at our company may be disruptive to our business and may increase our costs. To
the extent any of our union contracts expire or we acquire businesses that are
unionized, we may be required to renegotiate union contracts in an environment
of increasing wage rates. We may not be able to renegotiate union contracts on
terms favorable to us or without experiencing a work stoppage.
Our profitability may be affected by prolonged bad weather or seasonal
variations.
Our business tends to be affected adversely by moderate weather patterns.
Comparatively warm winters and cool summers reduce the demand for our
maintenance, repair and replacement services. Additionally, our new
installation business is affected adversely by extremely cold weather and large
amounts of rain. As a result, we expect our revenues and operating results to
be lower in our first and, to a lesser degree, fourth calendar quarters.
Prolonged weather conditions or seasonal variations may cause unpredictable
fluctuations in operating results.
We face competition from owner-operated companies and large public companies
and utilities for the services we provide and for the businesses we may want
to acquire.
The facilities services industry is very competitive with few barriers to
entry. It is served by small, owner-operated private companies and by larger
companies operating nationwide, including unregulated affiliates of electric
and gas public utilities and heating, ventilating and air conditioning
equipment manufacturers, and by property management companies and real estate
investment trusts which offer facilities services for the properties they own
or manage. Some of the smaller competitors have lower overhead cost structures
and may be able to provide their services at lower rates than we can. Some of
the larger competitors have greater financial resources, name recognition or
other competitive advantages and may be willing to pay higher prices than we
are willing to pay for the same opportunities. Consequently, we may encounter
significant competition in our efforts to achieve our growth objectives.
Our business may suffer if we do not retain our management and the management
of the businesses we acquire.
We depend on our executive officers and senior management and on the senior
management of significant businesses we acquire. Our business could be
adversely affected if these persons do not continue in their roles
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and we are unable to attract and retain qualified replacements. We do not
maintain key-man insurance on our executive officers and senior management.
If we cannot use our common stock or raise capital for consideration in
acquisitions, we may not be able to grow our business by acquisitions.
We have financed capital expenditures and acquisitions primarily through
the issuance of equity securities, secured bank borrowings and internally
generated cash flow. We currently intend to finance future acquisitions by
using shares of our common stock for a significant portion of the
consideration to be paid. If our common stock does not maintain a sufficient
market value, or if potential acquisition candidates are otherwise unwilling
to accept our common stock as part of the consideration for the sale of their
businesses, we may be required to utilize more of our cash resources, if
available, in order to continue our acquisition program. We cannot assure you
that we will be able to raise the additional capital required. If we cannot do
so, our growth through acquisitions may be limited.
If our acquisition strategy is not achieved, our growth may be diminished.
We plan to continue to grow through acquisitions. This strategy requires
that we identify acquisition targets and negotiate and complete acquisitions
without disrupting our existing operations. The strategy may result in the
diversion of our time from operating matters, which may cause the loss of
business and personnel. In addition, certain acquisitions require the approval
of Apollo. We may also experience adverse effects on our earnings resulting
from the possible loss of acquired customer bases, amortization of goodwill
created in purchase transactions and the contingent and latent risks
associated with the past operations and other unanticipated problems arising
in the acquired business. We compete for potential acquisitions based on a
number of factors, including price, terms and conditions, size and ability to
offer cash, stock or other forms of consideration. Our success is dependent
upon our ability to identify, acquire, integrate and manage profitably
acquired businesses. If we cannot do this, our business and growth may be
harmed.
Many of the shares of our outstanding common stock will become freely-
tradeable in the future, which could cause our stock price to decrease.
We issued many of the shares of our outstanding common stock as part of our
acquisition of other businesses. These shares are currently restricted from
resale by contractual lock-up agreements between us and the shareholders and,
in some cases, by federal and state securities laws. The lock-up agreements
controlling these shares generally allow the holder to make limited sales one
year after the acquisition and unlimited sales after two or three years.
Should those shareholders all choose to sell their shares over a short period
of time or should the capital markets perceive that the sale of those shares
is probable, the aggregate effect could cause our stock price to decrease.
As of the date of this joint proxy statement/prospectus, and assuming
completion of the merger, the transactions contemplated in the merger
agreement and that the maximum number of shares of GroupMAC common stock are
converted into cash in the merger, we would have approximately 60 million
shares of common stock outstanding immediately after the merger. Approximately
56,025,658 million of these shares will be freely-tradeable immediately after
the merger. The restricted shares may only be sold upon their registration
under the Securities Act of 1933, pursuant to an available exemption under the
securities laws or in accordance with any lock-up agreement. The contractual
lock-up agreements generally have a complete prohibition on the resale of
common stock for a term of one year from the date of issuance of the common
stock and, during the second, and in some cases third, year from the date of
issuance, resales are limited to a specified percentage of the person's
holdings.
The price of our shares may also be adversely affected by certain
registration rights that we will provide to Apollo. Under the investor's rights
agreement, Apollo has the right to require us to register under the Securities
Act the resale of all shares of common stock acquired by Apollo and all shares
of common stock that they acquire upon conversion of the convertible preferred
stock. Shares of the convertible preferred stock are convertible into shares of
our common stock at an initial conversion price of $14.00 per share plus all
accrued
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and unpaid dividends. Assuming all of the convertible preferred stock is
converted to common stock and that the maximum number of shares of GroupMAC
common stock is converted to cash in the merger, Apollo and its affiliates
have the right to acquire upon conversion approximately 18.3 million shares of
our common stock, or approximately 23% of the common stock outstanding
immediately after the merger. We will adjust the conversion price if, among
other things, we issue shares of our common stock at a price per share below
$14.00 per share within two and one-half years after the date of issuance of
the convertible preferred stock or if, at any time, we issue shares of common
stock at a price per share below the then fair market value of the common
stock. We will not be required to make such an adjustment if the issuance of
shares of our common stock is in connection with existing and certain future
employee benefit plans or acquisitions that are below certain size thresholds
and accretive to earnings, among other circumstances.
Apollo Investment Fund IV, L.P. currently holds a warrant for 977,593
shares of Building One common stock and Apollo Overseas Partners IV, L.P.
holds a warrant for 52,427 shares of Building One common stock. Jonathan J.
Ledecky, the current chairman of the Building One board of directors, holds a
warrant for 1,950,000 shares of Building One common stock, which he acquired
at the time of the Building One initial public offering. The combined company
will assume these warrants at the effective time of the merger. The Apollo
funds and Mr. Ledecky each have the right to require us to register for sale
the shares they acquire upon the exercise of those warrants. If the Apollo
funds and Mr. Ledecky determine to sell their shares at the same time, that
could adversely affect the price of our shares.
We may experience significant fluctuations in the price per share of our
common stock for a variety of reasons, some of which are outside of our
control.
The market price of our common stock may fluctuate significantly from time
to time in response to many factors, some of which are:
. variations in our reported financial results;
. changing conditions in the general economy;
. changing conditions in our industry; and
. sales of substantial amounts of our common stock or the perception that
such sales could occur.
Stock markets generally experience price and volume volatility from time to
time and this may affect the price of our common stock for reasons unrelated
to our business performance.
If our computer systems or the systems of those with whom we do business are
not year 2000 compliant, our ability to manage our business and our financial
results could be harmed.
Many computer systems, including some of those we use, identify dates using
only the last two digits of the year. These systems are unable to distinguish
between dates in the year 2000 and dates in the year 1900. That inability,
referred to as the year 2000 issue, if not addressed, could cause these
systems to fail or provide incorrect information after December 31, 1999 or
when using dates after December 31, 1999. This in turn could have a material
adverse effect on our ability to manage our business. We conducted an
assessment of the magnitude of our year 2000 issue as it relates to computer
systems and determined that we were required to upgrade or replace significant
portions of our software so that our computer systems would be able to
function properly beyond December 31, 1999. However, we cannot assure you that
such systems upgrades and replacements will be completed on time, which could
adversely affect our business, financial condition, results of operations or
prospects. Our year 2000 issue relates not only to our own systems but also to
those of our customers and suppliers. We are communicating with our suppliers,
customers and others with whom we do business to determine the extent of our
vulnerability to the failure of third parties to remediate their own year 2000
issues. Because of the complexity of the year 2000 issue, it is possible that
the efforts of suppliers, customers and others with whom we do business may
not be satisfactorily completed in a timely fashion. The failure of suppliers,
customers or other entities to address the year 2000 issue could adversely
affect our business, financial condition, results of operations or prospects.
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THE GROUPMAC SPECIAL MEETING
Date, Time and Place
The special meeting of GroupMAC shareholders will be held at 9:30 a.m.,
local time, on , 2000, at , , Houston,
Texas 77 . We are sending this joint proxy statement/prospectus to you in
connection with the solicitation of proxies by the GroupMAC board for use at
the GroupMAC special meeting and any adjournments or postponements of the
GroupMAC special meeting.
Purpose
The purpose of the GroupMAC special meeting is to consider and vote on the
proposals to approve the merger, including the articles of amendment to the
articles of incorporation, the issuance of shares of convertible preferred
stock in connection with the merger and the adoption of two new stock plans.
Pursuant to the merger, among other things, (1) Building One would be merged
with and into GroupMAC, with GroupMAC as the surviving corporation, (2) each
GroupMAC shareholder will be given the election to receive in the merger cash
for up to 50% of such holder's shares of GroupMAC common stock at $13.50 per
share, subject to proration if shareholders elect to exchange more than
approximately 11 million shares in the aggregate, and (3) Building One
stockholders will receive 1.25 shares of GroupMAC common stock for each share
of Building One common stock that they own. Cash will be paid in lieu of
issuing fractional shares of GroupMAC common stock. GroupMAC shareholders will
also be asked to approve the issuance of shares of convertible preferred stock
to Apollo's affiliate and the two new stock plans. GroupMAC shareholders also
may be asked to transact other business that may properly come before the
GroupMAC special meeting or any adjournments or postponements of the GroupMAC
special meeting.
GroupMAC Board Recommendation
The GroupMAC board has concluded that the proposals are advisable and in the
best interests of GroupMAC and its shareholders and has unanimously approved
and adopted the proposals. Accordingly, the GroupMAC board unanimously
recommends that all GroupMAC shareholders vote FOR approval of each of the
proposals.
Record Date, Outstanding Shares and Voting Rights
The GroupMAC board has fixed the close of business on , 2000 as
the record date for the GroupMAC special meeting. Only holders of record of
shares of GroupMAC common stock on the record date are entitled to notice of
and to vote at the GroupMAC special meeting. As of the record date, there were
outstanding shares of GroupMAC common stock held by approximately
holders of record. At the GroupMAC special meeting, each share of
GroupMAC common stock will be entitled to one vote on all matters. Votes may be
cast at the GroupMAC special meeting in person or by proxy.
Vote Required; Quorum
Texas law requires that two-thirds of the outstanding shares of GroupMAC
common stock approve the merger, which includes the related amendment to the
articles of incorporation. In addition, NYSE listing policies require prior
shareholder approval of issuances of securities convertible into common stock
that would constitute more than 20% of the outstanding shares of common stock
after the merger. GroupMAC expects to issue to Apollo's affiliates shares of
convertible preferred stock, convertible into approximately % of the shares
of common stock currently outstanding. Under NYSE rules, issuance of the
convertible preferred stock requires the holders of a majority of the shares of
GroupMAC common stock outstanding to cast votes on the share issuance proposal
and that a majority of the votes cast be in favor of the proposal. The holders
of a majority of the shares of GroupMAC common stock present at the meeting
must vote in favor of the two new stock plans.
The presence, in person or by proxy, of the holders of a majority of the
shares of GroupMAC common stock entitled to vote at the GroupMAC special
meeting is necessary to constitute a quorum at the GroupMAC
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special meeting. Shares of GroupMAC common stock represented in person or by
proxy will be counted for the purposes of determining whether a quorum is
present at the GroupMAC special meeting. Shares that abstain from voting on the
proposals will be treated as shares that are present and entitled to vote at
the GroupMAC special meeting for purposes of determining whether a quorum
exists, but will have the same effect as a vote against approval of the
proposals.
If a broker or nominee holding shares of record for a customer indicates
that it does not have discretionary authority to vote as to a particular
matter, those shares, which are referred to as broker non-votes, will be
treated as present and entitled to vote at the GroupMAC special meeting for
purposes of determining whether a quorum exists. Brokers or nominees holding
shares of record for customers who do not have discretionary authority to vote
on a particular proposal will not be entitled to vote on a proposal unless they
receive voting instructions from their customers. Accordingly, broker non-votes
will not be voted in favor of approval of the proposals, meaning that shares
constituting broker non-votes will have the same effect as shares voted against
approval of the proposals.
GroupMAC believes that each of its directors and executive officers intends
to vote his or her shares in favor of approval of the proposals. As of the
record date, GroupMAC's directors and executive officers beneficially owned
approximately of the outstanding shares, representing approximately
% of the total outstanding shares, of GroupMAC common stock.
Voting of Proxies
All shares of GroupMAC common stock that are entitled to vote and are
represented at the GroupMAC special meeting by properly-executed proxies
received prior to or at the meeting, and not revoked, will be voted in
accordance with the instructions indicated on the proxies. If no instructions
are indicated on your properly-executed and returned proxy, such proxy will be
voted FOR approval of the proposals.
If you participate in the GroupMAC Employee Stock Purchase Plan or the
GroupMAC 401(k) Savings Plan, your proxy card represents shares that you hold
in the plan as well as any other shares that are registered in the same name.
The GroupMAC board does not know of any matters other than those described
in the notice of the GroupMAC special meeting that are to come before the
meeting. If any other matters are properly presented at the GroupMAC special
meeting for consideration, including, among other things, consideration of a
motion to adjourn or postpone the meeting to another time and/or place for the
purposes of soliciting additional proxies or allowing additional time for the
satisfaction of conditions to the merger, the persons named in the proxy card
and acting thereunder generally will have discretion to vote on such matters in
accordance with their best judgment.
Revocation of Proxies
You may revoke any proxy given pursuant to this solicitation at any time
before it is voted. Proxies may be revoked by:
. filing with the secretary of GroupMAC, at or before the taking of the
vote at the GroupMAC special meeting, a written notice of revocation
bearing a later date than the revoked proxy;
. duly executing a later-dated proxy relating to the same shares and
delivering it to the secretary of GroupMAC before the taking of the vote
at the GroupMAC special meeting; or
. attending the GroupMAC special meeting and voting in person, although
attendance at the GroupMAC special meeting will not by itself constitute
a revocation of a proxy.
You should send any written notice of revocation or subsequent proxy to
Group Maintenance America Corp., 8 Greenway Plaza, Suite 1500, Houston, Texas
77046, Attention: Secretary, or hand deliver it to the
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secretary of GroupMAC at or before the taking of the vote at the GroupMAC
special meeting. If you have instructed a broker to vote your shares, you must
follow directions received from the broker in order to change your vote or to
vote at the GroupMAC special meeting.
Solicitation of Proxies; Expenses
In connection with the GroupMAC special meeting, proxies are being solicited
by, and on behalf of, the GroupMAC board. GroupMAC will bear the cost of
soliciting proxies from its shareholders. In addition to solicitation by mail,
proxies may be solicited from GroupMAC shareholders by directors, officers and
employees of GroupMAC in person or by telephone, facsimile or other means of
communication. These directors, officers and employees will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses in
connection with the solicitation. In addition, GroupMAC has retained
ChaseMellon Shareholder Services to assist GroupMAC in the solicitation of
proxies from shareholders for the GroupMAC special meeting for a customary fee
plus reimbursement of reasonable out-of-pocket expenses. Arrangements will be
made with brokerage houses, custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares, and
GroupMAC will reimburse them for their reasonable expenses incurred in
forwarding the materials.
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THE BUILDING ONE SPECIAL MEETING
Date, Time and Place
The special meeting of Building One stockholders will be held at 9:30 a.m.,
local time, on , 2000, at , , .
We are sending this joint proxy statement/prospectus to you in connection with
the solicitation of proxies by the Building One board for use at the Building
One special meeting and any adjournments or postponements of the Building One
special meeting.
Purpose
The purpose of the Building One special meeting is to consider and vote on
the proposal to approve and adopt the merger agreement, as amended, between
Building One and GroupMAC. Pursuant to the merger agreement, among other
things, Building One will be merged with and into GroupMAC, with GroupMAC as
the surviving legal entity. Each share of Building One common stock will be
converted into the right to receive 1.25 shares of GroupMAC common stock. Cash
will be paid in lieu of issuing fractional shares of GroupMAC common stock.
Holders of shares of Building One common stock and convertible junior
subordinated debentures also may be asked to transact other business that may
properly come before the Building One special meeting or any adjournments or
postponements of the Building One special meeting.
Building One Board Recommendation
The Building One board has concluded that the merger is advisable and in the
best interests of Building One and its holders of shares of Building One common
stock and convertible junior subordinated debentures and has unanimously
approved and adopted the merger agreement. Accordingly, the Building One board
unanimously recommends that all Building One stockholders and debentureholders
vote FOR approval and adoption of the merger agreement.
Record Date, Outstanding Shares and Voting Rights
The Building One board has fixed the close of business on ,
2000 as the record date for the Building One special meeting. Only holders of
record of shares of Building One common stock and convertible junior
subordinated debentures on the record date are entitled to notice of and to
vote at the Building One special meeting. As of the record date, there were
outstanding shares of Building One common stock held by approximately
holders of record. As of the record date, the convertible junior
subordinated debentures were held by affiliates of Apollo. At the Building One
special meeting, each share of Building One common stock will be entitled to
one vote on all matters. In addition, each holder of convertible junior
subordinated debentures will be entitled to cast one vote for each share of
common stock into which the debentures are convertible. Votes may be cast at
the Building One special meeting in person or by proxy.
Vote Required; Quorum
Under Delaware law and Building One's restated certificate of incorporation,
the approval and adoption of the merger agreement will require the affirmative
vote of the holders of a majority of the shares of Building One common stock
and the convertible junior subordinated debentures, voting together as a single
class, outstanding on the record date. In addition, the affirmative vote of the
holders of a majority of the outstanding convertible junior subordinated
debentures, voting separately as a class, is required. Therefore, a failure to
vote will result in a vote against the merger.
The presence, in person or by proxy, of the holders of a majority of the
shares of Building One common stock and convertible junior subordinated
debentures entitled to vote at the Building One special meeting is necessary to
constitute a quorum at the Building One special meeting. Shares of Building One
common stock and convertible junior subordinated debentures represented in
person or by proxy will be counted for the purposes of determining whether a
quorum is present at the Building One special meeting. Shares of common stock
and convertible junior subordinated debentures that abstain from voting on the
proposals will be treated as present and entitled to vote at the Building One
special meeting for purposes of determining whether a quorum exists, but will
have the same effect as a vote against approval of the merger agreement.
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If a broker or nominee holding shares of record for a customer does not have
discretionary authority to vote as to a particular matter, those shares, which
are referred to as broker non-votes, are treated as present and entitled to
vote at a special meeting for purposes of determining whether a quorum exists.
Brokers or nominees holding shares of Building One common stock of record for
customers will not be entitled to vote on the proposal unless they receive
voting instructions from their customers. Accordingly, broker non-votes will
not be voted in favor of approval of the merger agreement. Shares constituting
broker non-votes will have the same effect as shares voted against approval of
the merger agreement.
Building One believes that each of its directors and executive officers
intends to vote his or her shares in favor of approval of the merger agreement.
As of the record date, Building One's directors and executive officers
beneficially owned approximately of the outstanding shares of Building
One common stock, which represents approximately % of the current voting
power. The convertible junior subordinated debentures owned by Apollo's
affiliates vote on an as converted basis as a single class with the Building
One common stock and represent the right to vote % of the current voting
power of Building One common stock. In addition, holders of a majority of the
outstanding convertible junior subordinated debentures, voting separately as a
class, must vote in favor of the merger.
Voting of Proxies
All shares of Building One common stock and convertible junior subordinated
debentures that are entitled to vote and are represented at the Building One
special meeting by properly-executed proxies received prior to or at the
meeting and not revoked will be voted in accordance with the instructions
indicated on the proxies. If no instructions are indicated on your properly-
executed and returned proxy, the proxy will be voted FOR approval and adoption
of the merger agreement.
The Building One board does not know of any matter other than that described
in the notice of the Building One special meeting that is to come before the
meeting. If any other matters are properly presented at the Building One
special meeting for consideration, including, among other things, consideration
of a motion to adjourn or postpone the meeting to another time and/or place for
the purposes of soliciting additional proxies or allowing additional time for
the satisfaction of conditions to the merger, the persons named in the proxy
card and acting thereunder generally will have discretion to vote on such
matters in accordance with their best judgment.
Revocation of Proxies
You may revoke any proxy given pursuant to this solicitation at any time
before it is voted. Proxies may be revoked by:
. filing with the secretary of Building One, at or before the taking of the
vote at the Building One special meeting, a written notice of revocation
bearing a later date than the revoked proxy;
. duly executing a later-dated proxy relating to the same shares and
delivering it to the secretary of Building One before the taking of the
vote at the Building One special meeting; or
. attending the Building One special meeting and voting in person, although
attendance at the Building One special meeting will not by itself
constitute a revocation of a proxy.
You should send any written notice of revocation or subsequent proxy to
Building One Services Corporation, 110 Cheshire Lane, Suite 210, Minnetonka,
Minnesota 55305, Attention: Secretary, or hand deliver it to the secretary of
Building One at or before the taking of the vote at the Building One special
meeting. If you have instructed a broker to vote your shares, you must follow
directions received from the broker in order to change your vote or to vote at
the Building One special meeting.
Solicitation of Proxies; Expenses
In connection with the Building One special meeting, proxies are being
solicited by, and on behalf of, the Building One board. Building One will bear
the cost of soliciting proxies from its stockholders. In addition to
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solicitation by mail, proxies may be solicited from Building One stockholders
by directors, officers and employees of Building One in person or by telephone,
facsimile or other means of communication. These directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with the solicitation. In
addition, Building One has retained MacKenzie Partners, a proxy solicitation
firm, to assist Building One in the solicitation of proxies from stockholders
for the Building One special meeting for a customary fee plus reimbursement of
reasonable out-of-pocket expenses. Arrangements will be made with brokerage
houses, custodians, nominees and fiduciaries for the forwarding of proxy
solicitation materials to beneficial owners of shares, and Building One will
reimburse them for their reasonable expenses incurred in forwarding the
materials.
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PROPOSAL 1
THE MERGER
Background of the Merger
Building One
When Building One was founded in February 1997, its goal was to identify one
or more fragmented industries that were attractive consolidation opportunities.
In January 1998, Building One decided to focus its consolidation efforts on the
facilities services industry, with a goal of becoming the preeminent single-
source provider of facilities services in the United States. To achieve this
goal, Building One embarked on a focused acquisition strategy. Since January
1998, Building One has acquired 52 businesses in the mechanical, electrical and
janitorial sectors of the facilities services industry. On a pro forma basis
for the year ended December 31, 1998, Building One's revenues were $1,604.3
million, assuming all of the acquisitions completed through September 30, 1999
had been completed as of the beginning of that fiscal year.
To accomplish its goal of becoming the preeminent single-source provider of
facilities services, Building One recognized that it needed to rapidly
establish a significant presence in the 100 largest cities across the United
States. While Building One had established itself as the second largest
electrical contractor in the United States and the largest janitorial services
company in the United States serving the retail sector, its mechanical business
had not yet achieved a similar size. In view of the rapid consolidation of many
segments of the facilities services industry, including the mechanical services
sector, Building One considered from time to time additional strategies to
achieve its objectives, including merger transactions with other large
companies operating in the facilities services industry. Building One had
identified GroupMAC as one of a few industry participants that fit its
objectives, particularly in light of its significant presence in the mechanical
services sector.
GroupMAC
Since its organization in October 1996, GroupMAC has pursued a goal of
creating the leading provider of essential building services to commercial,
industrial and residential customers. It has focused on acquiring firms
specializing in mechanical services (including HVAC, plumbing, process piping,
controls and related systems) and electrical services (electrical, voice and
data and related systems) in the 100 largest U.S. markets, with a view to
developing national delivery capability for these services. GroupMAC has
succeeded in acquiring companies with pro forma revenues for the 12 months
ended December 31, 1998 of $1,441.5 million, 80% of which are revenues from
mechanical services and 20% of which are revenues from electrical services.
GroupMAC has not attempted to acquire any firms in the janitorial segment of
the facilities services industry.
Similar to Building One, GroupMAC has expanded its business primarily
through acquisitions. GroupMAC has used a combination of cash and its common
stock as the consideration for these acquisitions, with the cash being provided
by borrowings under GroupMAC's credit agreement. Beginning in early 1999,
GroupMAC began seeking a strategic relationship that would allow it to
diversify its reliance on the credit markets while at the same time providing
funds that could be used to provide additional liquidity to its shareholders.
In May 1999, GroupMAC retained Chase Securities Inc. as its financial advisor
to assist it in identifying and negotiating with potential investors who could
make a substantial investment in GroupMAC. Management believed that such an
investor could enhance credibility with investors and acquisition targets,
enhance its access to capital for expansion and provide liquidity to existing
shareholders. Building One had previously consummated a recapitalization of its
ownership structure that addressed many of these same issues.
The Transaction
GroupMAC directed Chase to identify potential investors and to assist
GroupMAC in the preparation of a confidential memorandum describing GroupMAC to
distribute to such investors. Following review and discussions with GroupMAC, a
list of potential investors was developed, including Apollo, and GroupMAC asked
Chase to contact these persons to determine their interest in making an
investment in GroupMAC.
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Separately, Bear Stearns, on behalf of Apollo, arranged a meeting with Mr.
Millinor and other members of GroupMAC senior management to discuss investment
opportunities. On May 4, 1999, a meeting occurred at which the possibility of
both an investment by Apollo and a merger with Building One was proposed.
At the regular meeting of the GroupMAC board of directors on May 12, 1999,
Mr. Millinor reported that a number of private capital firms had contacted
GroupMAC to inquire about possible investment opportunities, and that GroupMAC
had retained Chase to assist it in evaluating its options. He also described to
the board the possible benefits of issuing additional equity to a carefully
selected investor and the desired timing of the selection process.
On May 18, 1999 Mr. Millinor and Mr. Ivey met for the first time at
GroupMAC's headquarters in Houston, Texas preliminarily to explore the
possibility of a business combination between GroupMAC and Building One.
On May 27, 1999, GroupMAC and Apollo executed agreements providing for the
confidential treatment of information exchanged between them for the purpose of
evaluating a possible investment by Apollo.
On June 1, 1999, GroupMAC and Building One executed confidentiality
agreements and began to exchange financial and other information relating to
their respective businesses.
Between June 2, 1999 and June 4, 1999, representatives of Chase introduced
Mr. Millinor to representatives of various private equity investment firms that
had expressed an interest in learning more about GroupMAC for the purpose of
making an investment in it. Between June 16, 1999 and June 21, 1999, GroupMAC
made presentations concerning its business to representatives of three of these
firms.
On June 25, 1999, at GroupMAC's headquarters in Houston, Texas,
representatives of both companies and their financial advisors, including
Apollo, made presentations to each other regarding their businesses and
financial performance.
On June 30, 1999, Mr. Millinor and Mr. Ivey and representatives of Apollo
and Chase met in New York to discuss the rationale for, and benefits of, a
combination of Building One and GroupMAC, the difficulties that could be
encountered in effecting such a combination and to establish a framework for
continuing the discussions between the two companies. On the following day,
Building One and Apollo provided Mr. Millinor with a proposal for the
combination of the two companies. The proposal also contemplated a retirement
by GroupMAC of a portion of its shares that would be funded with a cash
investment in GroupMAC by Apollo and additional debt financing.
On July 1, 1999, Chase, at the direction of GroupMAC, responded to Building
One and Apollo about their proposal. Between July 5, 1999 and July 13, 1999,
after consultation with and at the instruction of GroupMAC, negotiations ensued
between Chase and Bear Stearns concerning the terms of the proposal.
On July 8, 1999, the Building One board held a regularly scheduled meeting
at which Mr. Ivey reviewed for the board the preliminary conversations and
contacts that he had had with various industry participants, including
GroupMAC, about possible strategic transactions. At the meeting, the board
discussed the benefits and risks of a business combination with GroupMAC,
including a possible incremental investment by Apollo in GroupMAC. Mr. Ivey
noted that the discussions were very preliminary and that several strategic
issues had not yet been discussed. The Building One board authorized Mr. Ivey
to continue his discussions with GroupMAC.
At the regular meeting of the GroupMAC board of directors on July 14, 1999,
Mr. Millinor updated the board on the progress made by Chase in identifying
potential equity investors in GroupMAC. At this meeting, representatives of
Chase reviewed the private equity market, the process being followed in
obtaining private
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equity, the criteria established by GroupMAC to be used in selecting an
investor, and the results to date. The Chase representatives discussed in
particular the terms of the initial proposal from Building One and Apollo and
the terms of their revised proposal and also outlined the steps that Chase
suggested GroupMAC take going forward.
In mid-July 1999, at GroupMAC's direction, Chase delivered to Bear Stearns
and Apollo a counterproposal. In a conference call later that afternoon, Mr.
Ivey and representatives of Bear Stearns and Apollo discussed GroupMAC's
counterproposal. Building One and its advisors determined that the
counterproposal was reasonable enough to begin preliminary operational due
diligence, including visits by senior management of Building One to GroupMAC
operating companies.
On July 21, 1999, Mr. Ivey and Mr. Millinor spoke by telephone and discussed
some of the strategic issues and corporate governance matters that needed to be
clarified prior to further discussions of financial terms and proceeding with
more detailed due diligence.
On July 29, 1999, a due diligence meeting was held in Houston at which
representatives of both GroupMAC and Building One made more detailed
presentations to the other concerning various business and financial due
diligence matters, focusing on the business and financial aspects of each
company, including, among other things, acquisition strategy, operating
philosophies and processes, employee training and second quarter results. After
the meeting, senior management of Building One met with representatives of
Apollo and Bear Stearns to discuss issues that arose at the presentations.
On August 2, 1999 and August 3, 1999, Messrs. Millinor and Ivey and
representatives of Apollo, Chase and Bear Stearns met in New York to discuss
management and board personnel and other business and strategic issues that
would be critical to the successful integration of the two companies if a
business combination were to occur. At this meeting, the financial aspects of a
potential transaction were discussed. Building One and Apollo responded to
GroupMAC's proposal of mid-July 1999.
On August 6, 1999, the Building One board held a special meeting at which
Mr. Ivey made a presentation to the Building One board relating to the current
status of the discussions with GroupMAC. Mr. Ivey noted that he and other
members of senior management had met several times with the senior management
of GroupMAC. Mr. Ivey presented to the board the strategic merits of a merger
of equals transaction with GroupMAC and outlined the broad terms of a possible
merger transaction. There was extensive discussion concerning various matters,
including management succession, operational issues, labor union issues,
accounting treatment and overlaps between the two companies' businesses. The
board then authorized management to conduct legal and financial due diligence.
After this meeting, Building One's independent accountants,
PricewaterhouseCoopers LLP, were directed to begin financial due diligence on
GroupMAC.
On August 13, 1999, Messrs. Millinor and Ivey discussed a combination of the
companies with a possible conversion ratio where each share of Building One
common stock would be converted into 1.25 shares of GroupMAC common stock,
subject to the results of continuing due diligence by each party, finalizing
the economic and financial terms, obtaining financing and board approvals.
On August 17, 1999, the confidentiality agreement previously executed by
GroupMAC and Building One was amended to provide that until October 1, 1999,
they would negotiate only with each other concerning a possible transaction.
Shortly thereafter, GroupMAC and Building One assembled internal and external
due diligence teams and conducted mutual due diligence and began fuller
conversations concerning the terms of a possible merger. GroupMAC also
discussed with Apollo the terms of its proposed investment in the proposed
combined company.
From August 18, 1999 through September 1, 1999, representatives of GroupMAC
and its counsel conducted detailed due diligence reviews of Building One at its
offices in Minnesota. During that same period, representatives of Building One
and its counsel conducted due diligence reviews of GroupMAC at its offices in
Houston. In addition, representatives of Building One conducted operational due
diligence at various GroupMAC subsidiaries.
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On September 1, 1999, the initial draft of the merger agreement was
distributed to representatives of Building One and Apollo and their respective
counsel.
On September 2, 1999, representatives of GroupMAC and Building One met in
Houston to discuss various issues relating to the proposed transaction,
including the status of due diligence, timing of certain events,
communications, finance and legal matters, and a review of pending
acquisitions.
On September 10, 1999, Messrs. Millinor and Ivey reconfirmed by telephone
their views that any eventual agreement for the combination of the companies
would include each share of Building One common stock being converted into the
right to receive 1.25 shares of GroupMAC common stock. They acknowledged,
however, that any transaction and its exchange ratio would still be subject to
the results of continuing due diligence by each party, finalizing the economic
and financial terms, obtaining financing and board approvals.
On September 13, 1999, Mr. Millinor and Mr. Ivey and representatives of
Apollo met at Apollo's offices in New York to discuss various issues relating
to the potential combination, including the existing contractual restrictions
on resale of both companies' stock, legal and financial structural issues,
compensation and other diligence matters.
From September 15, 1999 through September 17, 1999, representatives of
GroupMAC and its counsel conducted additional due diligence reviews of Building
One at its offices in Minnesota. GroupMAC also conducted visits to eight
Building One operating company sites through October 6, 1999.
On September 16, 1999 and September 20, 1999 preliminary drafts of the
documents relating to Apollo's investment in GroupMAC were exchanged among
Building One and GroupMAC and their respective counsel.
On September 24, 1999, Bank of America delivered its proposal with respect
to a credit facility for the combined company to representatives of Building
One, GroupMAC and Apollo.
On September 30, 1999, representatives of Apollo, Building One and GroupMAC
held a conference call during which structuring and other terms of the
transaction were discussed.
On October 1, 1999, the Building One board held a special meeting at which
Mr. Ivey again updated the board on the discussions with GroupMAC. Management
reviewed with the board a detailed due diligence presentation prepared by
PricewaterhouseCoopers LLC and discussions ensued. In addition, management
described for the board their due diligence visits to various operating
companies of GroupMAC. Representatives of Bear Stearns discussed with the
Building One board their views and preliminary analyses of the financial
aspects of the proposed transaction. The Building One board reviewed and
considered, among other things, the results of the due diligence investigation
conducted to date, the proposed terms of the transaction, the proposed terms
relating to management of the combined company, board representation and
governance of the combined company. Following extensive discussion among the
members of the Building One board, Mr. Ivey, other members of Building One's
senior management and representatives of Bear Stearns, the Building One board
authorized management to negotiate and execute an engagement letter with Bear
Stearns and directed management to negotiate agreements and related
documentation consistent with the proposed terms outlined by Mr. Ivey during
the meeting and authorized continuing due diligence.
At a regular meeting of GroupMAC's board of directors on October 4, 1999,
Mr. Millinor made a presentation discussing the project to find an equity
investor. Representatives of Chase then reviewed their activities since Chase's
engagement, which included helping GroupMAC screen potential investors,
conducting preliminary due diligence, assisting GroupMAC in its review of the
proposals received and its negotiations with Building One and Apollo. Chase
also gave an overview of the proposed transaction and their preliminary
financial analysis of the contemplated transaction. Management then described
for the board the scope of its due diligence investigations and the results of
those investigations to date.
On October 7, 1999, the parties selected Bank of America and Chase to co-
lead a bank syndicate for a proposed $800 million credit facility.
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On October 18 and 19, 1999, Mr. Millinor and Mr. Ivey met in New York with
representatives of Apollo to discuss preliminary terms of the convertible
preferred stock to be issued to Apollo. Later that week, counsel for GroupMAC,
Building One and Apollo engaged in negotiations over the proposed terms of the
agreements pertaining to the merger and Apollo's investment in GroupMAC.
During October, the merger agreement and the documents relating to Apollo's
investment in GroupMAC were negotiated. The agreements were substantially
finalized at the end of the month.
On November 2, 1999, the GroupMAC board held a special meeting to continue
the board's discussions with respect to the proposed merger and Apollo
investment and to consider the merger agreement and the transactions
contemplated thereby, including the proposed terms of the investment by the
Apollo affiliate and the proposed governance of the combined company. Mr.
Millinor and other members of senior management, representatives of Bracewell &
Patterson L.L.P., counsel to GroupMAC, and representatives of Chase made
presentations to the GroupMAC board and discussed with the GroupMAC board their
views and analyses of various aspects of the proposed transaction. Chase
delivered its written opinion that, based upon the matters presented to the
GroupMAC board and as set forth in its opinion, as of such date, the exchange
ratio, the exchange of Building One indebtedness for GroupMAC convertible
preferred stock and the issuance of the convertible preferred stock for cash,
taken as a whole and considered collectively, were fair from a financial point
of view to the shareholders of GroupMAC. After further deliberation, the
GroupMAC board unanimously approved the merger, the merger agreement and the
proposed investment by Apollo and authorized, among other things, the execution
of the merger agreement, the subscription and exchange agreement and related
documentation and the issuance of the convertible preferred stock and
unanimously recommended that GroupMAC shareholders vote to approve the merger
agreement, including the articles of amendment to the articles of
incorporation, and the issuance of convertible preferred stock to Apollo.
On November 2, 1999, the Building One board held a special meeting to
continue the board's discussions with respect to the proposed merger and to
consider the merger agreement and the transactions contemplated thereby,
including the proposed consideration to be issued to Building One stockholders,
the proposed terms of the investment by the Apollo affiliate and the proposed
governance of the combined company. Mr. Ivey and other members of senior
management, representatives of Morgan, Lewis & Bockius LLP, counsel to Building
One, and representatives of Bear Stearns made presentations to the Building One
board and discussed with the Building One board their views and analyses of
various aspects of the proposed transaction. Bear Stearns delivered its oral
opinion (subsequently confirmed in writing) that, based upon the matters
presented to the Building One board and as set forth in its opinion, as of such
date, the exchange ratio was fair from a financial point of view to the
stockholders of Building One. After further deliberation, the Building One
board unanimously approved the merger and the merger agreement and authorized,
among other things, the execution of the merger agreement and related
documentation and unanimously recommended that Building One stockholders vote
to adopt the merger agreement.
Following the approval of both companies' boards of directors, GroupMAC and
Building One entered into the merger agreement on November 2, 1999 and released
a public announcement of the proposed transaction on November 3, 1999.
Recommendation of the GroupMAC Board; GroupMAC's Reasons for the Transaction
For the reasons discussed below and other factors it considered appropriate,
the GroupMAC board concluded that the transaction is advisable and in the best
interests of GroupMAC and its shareholders, unanimously approved and adopted
the merger agreement and unanimously recommends that the GroupMAC shareholders
vote FOR the merger agreement, including the articles of amendment to the
articles of incorporation.
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GroupMAC believes that the merger will:
Create the market leader in the facilities services industry:
The combination of GroupMAC and Building One will result in a company with
approximately $3.4 billion of pro forma revenues for the twelve months ended
September 30, 1999 and pro forma assets of $2.2 billion as of September 30,
1999, making it one of the largest providers of mechanical, electrical and
janitorial services in the industry in terms of revenues.
Build a significantly larger company:
The combined company, with over 27,000 employees, will have operations in
over 250 locations nationwide, providing mechanical, electrical and/or
janitorial services in all of the 100 largest U.S. markets. In addition, the
combined company will be able to provide all three of its services in 43 of the
100 largest markets. The combined company will benefit from enhanced financial
and operational resources, enabling it to compete more effectively within the
major U.S. markets.
Enhance ability to develop national accounts business:
The combined strengths in heating, ventilation and air conditioning,
electrical, process piping, controls, voice and data and other high-tech
applications mean the combined company will be a major participant in the
accelerating trend in upgrading America's buildings and infrastructure and in
the ongoing servicing of these essential systems. This merger multiplies the
range of value-added services the operating companies provide to their
customers, especially regional and national accounts.
Result in complementary mix of mechanical, electrical and janitorial business:
GroupMAC's business mix is 80% mechanical and 20% electrical, while Building
One's mix is 24% mechanical, 62% electrical and 14% janitorial. The mix of the
combined company will be 49% mechanical, 43% electrical and 8% janitorial. The
dependence of each company on a particular segment will therefore be lessened
by the merger. More importantly, the ability to cross-sell these services will
be greatly enhanced.
Enhance service capabilities and expertise:
There is little geographical overlap in the service offerings of the two
companies. Once the merger has closed, many locations that previously offered
one service will have available complementary services to offer in that
location, which will create cross-selling opportunities that did not previously
exist.
Enhance market following:
The combination will result in a company with significantly increased market
capitalization, increased liquidity through an estimated public float of at
least million shares and the ability to attract new sources of debt and
equity investors. The combined company should have cash flows of more than $310
million, based upon pro forma 12 months ended September 30, 1999 earnings
before interest, taxes, depreciation and amortization, or "EBITDA", before
restructuring and recapitalization charges. The combined company will have a
debt to total capitalization ratio on a pro forma basis as of September 30,
1999, with the convertible preferred stock excluded from total debt, of less
than 50 percent, which will translate into greater financial flexibility.
Provide partial liquidity for GroupMAC's shareholder base:
The cash election right offered to GroupMAC's shareholders in the merger
will afford those shareholders an opportunity to realize cash for their shares
at a price substantially in excess of the market value on the date that the
merger was announced.
Provide a means of reducing overhang from shares becoming unrestricted:
By November 1999, contractual restrictions on the disposition of
approximately 8.2 million shares of GroupMAC stock had lapsed. By January 2000,
restrictions on another 8.6 million shares will have lapsed.
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GroupMAC's management believes that, if these shares were to be sold in the
open market, there could be an adverse effect on the quoted prices for GroupMAC
stock. As a result of the cash election right, shares that may otherwise have
been sold in the open market will be removed from the marketplace. With the
supply of shares available for sale reduced, there should be more support for
the price of GroupMAC shares.
Create a relationship with a well-capitalized investor and establish a
potential funding source for future capital requirements:
Apollo Management IV, L.P. is a private investment firm based in New York
and Los Angeles. Since its inception in 1990, Apollo and its affiliated funds
have invested over $10 billion of capital in response to the needs of its
strategic partners in a broad range of businesses. With a solid financial
investor like Apollo, the strategic possibilities for the combined company are
broadened, and its dependence on the vagaries of the equity and debt markets
may be reduced.
Factors considered by the GroupMAC board of directors in recommending the
merger:
In determining that the merger agreement, the merger, including the articles
of amendment to the articles of incorporation, and the issuance of shares of
convertible preferred stock are in the best interests of GroupMAC and its
shareholders, the GroupMAC board considered a number of factors, including the
following:
. the combined company would generate earnings from a greater geographical
diversity than GroupMAC alone;
. the merger would create one of America's largest provider of facilities
services with over 250 operating locations in major cities nationwide,
and with one or more services offered in each of the 100 largest U.S.
markets;
. the combination of the companies will enhance their service capabilities
and expertise and expand their client base;
. the combination of the companies will provide GroupMAC with the ability
to pursue national accounts and to cross-sell its services more
effectively;
. the increasing importance in the consolidating facilities services
industry of financial and operational scale, which the merger will
enhance since the pro forma effect to the merger and related transactions
will be to increase the combined company's equity market capitalization
as of September 30, 1999 from $480 million to approximately $750 million;
. management's belief that the merger will be moderately accretive to the
combined company's earnings per share for 2000;
. the risks associated with integrating the combined companies' operations
and financial reporting and other systems;
. the terms of the merger agreement, including the parties'
representations, warranties and covenants, the conditions to their
respective obligations and the provisions regarding termination fees and
expense reimbursement;
. the tax and accounting treatment of the transaction;
. the likelihood of obtaining regulatory approvals, the possibility that
regulatory authorities may impose conditions to the granting of such
approvals and the time period necessary to obtain required regulatory
approvals for the merger;
. the risks associated with not completing the transaction;
. the impact on employees, employee benefits and employee retention;
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. the terms of the convertible preferred stock and the related investor's
rights agreement, including the effect of defaults thereunder;
. the corporate governance aspects of the convertible preferred stock and
the related investor's rights agreement and the merger agreement,
including the composition of the board of directors, committees and
senior management;
. the opportunity for GroupMAC shareholders to receive cash for a portion
of their shares in the merger, as well as the opportunity to participate
in future value creation potential of the combined company; and
. the oral opinion of Chase delivered and confirmed in writing on November
2, 1999 that the exchange ratio, the exchange of Building One
indebtedness for GroupMAC convertible preferred stock and the issuance of
the convertible preferred stock for cash taken as a whole and considered
collectively were fair from a financial point of view to GroupMAC and its
shareholders. The opinion of Chase and the analyses underlying its
opinion are summarized below and a copy of the written opinion, dated as
of November 2, 1999, setting forth the procedures followed by Chase, is
attached hereto as Annex C. See "--Opinion of Financial Advisor to
GroupMAC."
In the course of its deliberations, the GroupMAC board considered and
reviewed with management and GroupMAC's financial advisors a number of other
factors relevant to the merger, including, but not limited to:
. the current financial market conditions and historical market prices and
trading information with respect to GroupMAC's common stock, Building
One's common stock and the common stock of comparable companies;
. the likelihood of continuing consolidation in the facilities services
industry and increased competition from non-traditional market entrants;
. the availability and feasibility of strategic alternatives, including the
availability and feasibility of alternatives to the merger and the
investment represented by the convertible preferred stock; and
. the reports from GroupMAC's management and senior staff as to the results
of its due diligence investigation of Building One and its business.
The foregoing discussion of the information and factors considered by the
GroupMAC board is not intended to be exhaustive, but is believed to include all
of the material factors considered by the GroupMAC board. In reaching its
decision to approve the merger agreement and to recommend that GroupMAC
shareholders approve the merger agreement, including the amendment to the
articles of incorporation, and the issuance of shares of convertible preferred
stock in connection with the merger, the GroupMAC board did not view any single
factor as determinative and did not find it necessary or practicable to, and
did not, quantify or otherwise attempt to assign specific or relative weights
to the various factors considered in making its determination. In addition,
individual members of the GroupMAC board may have given different weights to
different factors. The GroupMAC board did not attempt to analyze the fairness
of the merger consideration or the issuance of the convertible preferred stock
in isolation from one another or from the considerations as to GroupMAC's
businesses, the strategic merits of the merger or the other considerations
referred to above.
Recommendation of the Building One Board; Building One's Reasons for the Merger
The Building One board carefully considered the terms of the merger and
believes that the merger serves the best interests of Building One and its
stockholders. As a result, the Building One board declared that the merger
agreement was advisable, unanimously approved the merger agreement and
unanimously recommends that the Building One stockholders vote FOR the proposal
to adopt the merger agreement.
The Building One board considered a number of factors, including those
listed below. The Building One board did not consider it practical, and did not
try, to rank or weigh the importance of each factor, and different
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members of the Building One board may have given different weights to different
factors. The Building One board also considered presentations by, and consulted
with, members of Building One's management as well as its financial advisors
and outside and inside legal counsel. The list of factors set forth below is
not exhaustive but is believed to include all of the material factors
considered by Building One's board.
Strategic Factors:
. The combined company would create one of the largest facilities services
businesses in the country, with over $3.4 billion of pro forma revenues
for the 12 months ended September 30, 1999, pro forma EBITDA, before
restructuring and recapitalization charges, of over $310 million for the
12 months ended September 30, 1999, pro forma assets of approximately
$2.2 billion as of September 30, 1999 and 27,000 employees at over 250
locations;
. The companies provide complementary services with relatively little
service overlap. The Building One board took into account that the
combined company would have significantly more companies to integrate,
but concluded that the risks relating to such integration were outweighed
by the strategic benefits of the merger;
. The merger would accelerate geographic coverage, creating service
capabilities in all 50 states and, most notably, expand Building One's
capabilities to provide all three services from five of the 100 largest
United States cities to 43 of the 100 largest cities. The increased
geographic coverage resulting from the merger should better attract and
serve national accounts and immediately increase cross-selling and
service bundling opportunities; and
. The merger would provide expanded growth opportunities for specialized
businesses, such as direct current power, total site solutions, data
cabling, building automation, energy services, aftermarket services,
preventative maintenance and equipment financing.
Financial Factors:
. The financial structure of the merger would create a company with
considerable financial resources. The Building One board considered the
historical ranges of trading prices in shares of Building One common
stock and GroupMAC common stock as compared to the proposed exchange
ratio, and noted that Building One stockholders would be receiving a
premium for their shares of Building One stock. The Building One board
also considered the fact that the merger would be generally tax-free to
Building One's stockholders. In addition, the Building One board
considered the pro forma effect of the merger on the financial condition
and results of the combined company and the value of GroupMAC as compared
with other comparable companies using various methods of valuation;
. The significant increase in market capitalization and public float that
would result from the merger could result in more liquidity of the
combined company's common stock;
. Apollo Management, L.P., the largest single investor in the company with
various governance rights over Building One, has committed to exchange
its affiliate's Building One convertible junior subordinated debentures
for GroupMAC convertible preferred stock and to invest, through its
affiliates, an additional $150 million upon consummation of the merger;
and
. At its meeting on November 2, 1999, the Building One board considered the
financial presentation made to the Building One board and the oral
opinion rendered by Bear Stearns, subsequently confirmed in writing,
that, as of that date, the proposed exchange ratio was fair to Building
One's stockholders from a financial point of view. The opinion of Bear
Stearns and the analyses underlying its opinion are summarized below and
a copy of the written opinion, dated as of November 2, 1999, setting
forth the procedures followed by Bear Stearns, is attached hereto as
Annex D. See "--Opinion of Financial Advisor to Building One."
36
<PAGE>
General Factors:
. The Building One board reviewed the representations, warranties,
covenants and conditions to consummation of the proposed transaction and
the circumstances under which GroupMAC would have the right to terminate
the merger agreement. The Building One board considered the fact that
both Building One and GroupMAC would have the right to terminate the
merger agreement under certain specified circumstances if there was a
superior proposal. The Building One board considered the circumstances in
which a termination fee would be payable in the event that the merger
agreement was terminated. The Building One board also considered the fact
that the merger would be conditioned on the completion of the additional
investment made by affiliates of Apollo.
Opinion of Financial Advisor to GroupMAC
GroupMAC engaged Chase Securities Inc. to render an opinion as to the
fairness, from a financial point of view, of the exchange ratio applicable to
the exchange of shares of Building One common stock for shares of GroupMAC
common stock, referred to hereafter as the "exchange ratio," the Building One
convertible junior subordinated debentures held by Apollo or its affiliates to
be exchanged by GroupMAC for shares of GroupMAC convertible preferred stock,
referred to hereafter as the "debt exchange consideration," and the
consideration to be paid by Apollo or its affiliates for the shares of
convertible preferred stock to be issued by GroupMAC, referred to hereafter as
the "preferred stock purchase consideration," taken as a whole and considered
collectively, to GroupMAC and its shareholders.
On November 2, 1999, in connection with the evaluation of the transactions
by the GroupMAC board of directors, Chase presented and delivered its opinion
to the effect that, as of such date, and subject to the assumptions,
qualifications and limitations set forth in the opinion, the exchange ratio,
the debt exchange consideration and the preferred stock purchase consideration,
taken as a whole and considered collectively, are fair, from a financial point
of view, to GroupMAC and its shareholders.
The full text of Chase's written opinion, which sets forth the assumptions,
matters considered and qualifications and limitations on the review undertaken
by Chase, is attached as Annex C to this joint proxy statement/prospectus and
is incorporated into this document by reference. This summary of Chase's
opinion is qualified in its entirety by reference to the full text of Chase's
opinion. The shareholders of GroupMAC are urged to read carefully Chase's
opinion in its entirety.
Chase's opinion was provided to the GroupMAC board for its information and
is directed only to the fairness, from a financial point of view, of the
exchange ratio, the debt exchange consideration and the preferred stock
purchase consideration, taken as a whole and considered collectively, to
GroupMAC and its shareholders as of such date and no other date. The Chase
opinion:
. does not constitute a recommendation to the GroupMAC board in connection
with the merger;
. does not address the merits of the underlying decision by GroupMAC to
engage in the merger or the price or range of prices at which shares of
GroupMAC common stock or Building One common stock, as the case may be,
may trade subsequent to the announcement or completion of the merger;
. does not express an opinion as to the fairness of the cash consideration
to the holders of GroupMAC common stock who elect to receive such
consideration;
. does not express an opinion about any of the exchange ratio, the debt
exchange consideration or the preferred stock purchase consideration,
considered individually; and
. does not constitute a recommendation to any holder of shares of GroupMAC
common stock as to how that shareholder should vote at the special
meeting.
Although Chase evaluated the fairness, from a financial point of view, of
the exchange ratio, the debt exchange consideration and the preferred stock
purchase consideration, taken as a whole and considered
37
<PAGE>
collectively, to GroupMAC and its shareholders, each of the exchange ratio, the
debt exchange consideration and the preferred stock purchase consideration was
determined by GroupMAC and Building One or BOSS II through arm's-length
negotiations. GroupMAC did not provide specific instructions to, or place any
limitation on, Chase with respect to the procedures to be followed or factors
to be considered by Chase in performing its analyses or providing Chase's
opinion.
In connection with Chase's opinion, Chase, among other things:
. reviewed the merger agreement;
. reviewed the subscription and exchange agreement;
. reviewed the investor's rights agreement;
. reviewed the terms of the convertible preferred stock;
. reviewed certain publicly available business and financial information
that Chase deemed relevant relating to GroupMAC and Building One and the
respective industries in which they operate;
. reviewed certain internal non-public financial and operating data
provided to Chase by or on behalf of the managements of GroupMAC and
Building One relating to such businesses, respectively, before and after
giving effect to the transactions, including information provided by such
managements relating to the capitalization of GroupMAC and certain
forecast information as to the future financial results of such
businesses and information concerning the expected operational and
strategic benefits of the merger;
. discussed with members of GroupMAC's and Building One's senior
managements the foregoing, including GroupMAC's and Building One's
operations, historical financial statements and future prospects, before
and after giving effect to the transactions, and their views of the
operational and strategic benefits and other implications of the merger,
and such other matters as Chase deemed necessary or appropriate;
. compared the financial and operating performance of GroupMAC and Building
One with publicly-available information concerning other companies Chase
deemed to be comparable and reviewed the relevant historical stock prices
and trading volumes of the shares of GroupMAC common stock and the
Building One common stock and certain publicly-traded securities of such
other companies;
. reviewed the financial terms of recent transactions Chase deemed relevant
to Chase's inquiry; and
. performed such other analyses and examinations as Chase deemed necessary
or appropriate.
Chase relied upon and did not assume any responsibility for the verification
of the accuracy and completeness of all of the financial and other information
provided to, discussed with, or reviewed by or for Chase, or publicly
available, for purposes of Chase's opinion. Chase relied upon the assurances of
management of GroupMAC and Building One that they were not aware of any facts
that would make such information inaccurate or misleading in any respect
material to Chase's analyses. Chase neither made nor obtained any independent
evaluations or appraisals of the assets or liabilities of GroupMAC or Building
One, nor did Chase conduct a physical inspection of all of the properties and
facilities of GroupMAC or Building One. Chase assumed that the financial
forecast and projection information provided to or discussed with Chase, as
well as the information concerning the expected operational and strategic
benefits of the merger were reasonably determined on bases reflecting the best
currently available estimates and judgments of the managements of GroupMAC and
Building One as to the future financial performance of GroupMAC and Building
One, as the case may be. Chase further assumed that, in all material respects,
these forecasts and projections will be realized in the amounts and at the
times indicated in such data. Chase expressed no view as to the information or
the assumptions on which they were based. Chase also assumed, and GroupMAC
informed Chase, that the transactions will be accounted for on a purchase basis
and the merger will be tax-free to each of GroupMAC
38
<PAGE>
and Building One and their respective shareholders, except to the extent cash
is received in the merger. Chase relied as to all legal, accounting and tax
matters with respect to the transactions on legal counsel and accountants to
GroupMAC. Chase was not asked to and did not solicit third-party offers to
acquire all or part of the GroupMAC preferred stock to be issued in the
transactions.
For purposes of rendering Chase's opinion, Chase assumed, in all respects
material to Chase's analysis, that the representations and warranties of each
party contained in the merger agreement and the subscription and exchange
agreement were true and correct, that each party would perform all of the
covenants and agreements required to be performed by it under the merger
agreement and the subscription and exchange agreement and that all of the
conditions to the consummation of the transactions would be satisfied without
waiver. Chase also assumed that all material governmental, regulatory or other
consents and approvals would be obtained and that in the course of obtaining
any necessary governmental, regulatory or other consents or approvals, or any
amendments, modifications or waivers to any documents to which either of
GroupMAC or Building One is a party, as contemplated by the merger agreement or
the subscription and exchange agreement, no restrictions would be imposed or
amendments, modifications or waivers made that would have any material adverse
effect on the contemplated benefits to the holders of common stock of the
transactions.
Chase based its opinion on market, economic and other conditions as they
existed on the date of its opinion. The following summarizes the material
analyses performed by Chase and reviewed with the GroupMAC board at its meeting
on November 2, 1999 in connection with Chase's presentation and opinion to the
GroupMAC board on that date.
Transaction Analyses
Historical Exchange Ratio Analysis
Chase reviewed the historical exchange ratios of GroupMAC common stock and
Building One common stock relative to the 1.25x exchange ratio based on closing
prices during the period from November 28, 1997 to October 28, 1999. This
analysis indicated a 30 day average ratio of 1.13, an average ratio of 1.08
since the Building One recapitalization (which was completed on April 30,
1999), a low ratio of 0.62, a high ratio of 1.97 and a ratio as of November 1,
1999 of 1.12.
Pro Forma Contribution Analysis
Chase analyzed the relative contributions of GroupMAC and Building One to
the diluted net income, basic net income and EBITDA of the pro forma combined
entity, assuming that $150 million in GroupMAC common shares were redeemed for
cash, on the one hand, and no GroupMAC common shares were redeemed for cash, on
the other. Chase reviewed the ownership percentages of the GroupMAC and
Building One shareholders, as of November 1, 1999, calculated on a diluted
basis, assuming conversion of convertible preferred stock and excluding the
effects of options and warrants. The ownership percentages include shares
attributable to Apollo from the convertible preferred stock.
39
<PAGE>
Chase also reviewed the common equity and implied enterprise value of the
pro forma combined entity. "Common equity" was calculated using basic shares
outstanding multiplied by the closing price of GroupMAC's common stock on
November 1, 1999. "Implied enterprise value" was calculated as common equity
plus total debt and preferred stock, calculated at face value, less cash. These
analyses indicated the following about the contributions of the two companies
to the pro forma combined entity:
<TABLE>
<CAPTION>
$150 million
Redemption $0 Redemption
--------------------- ---------------------
GroupMAC Building One GroupMAC Building One
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Ownership.......................... 48% 52% 54% 46%
1999 Diluted Net Income
Contribution.................... 46% 54% 49% 51%
2000 Diluted Net Income
Contribution.................... 47% 53% 50% 50%
Common Equity...................... 45% 55% 53% 47%
1999 Basic Net Income
Contribution.................... 43% 57% 47% 53%
2000 Basic Net Income
Contribution.................... 45% 55% 48% 52%
Implied Enterprise Value........... 47% 53% 46% 54%
1999 EBITDA Contribution......... 45% 55% 45% 55%
2000 EBITDA Contribution......... 45% 55% 45% 55%
</TABLE>
Estimates for 1999 are based on the estimates of GroupMAC and Building One
and assume that all acquisitions consummated during 1999 had occurred on
January 1, 1999. Projections for 2000 assume no acquisitions in 2000.
Implied Discounted Cash Flow Contribution Analysis
Chase reviewed the discounted cash flow contributions of GroupMAC and
Building One assuming that $150 million in GroupMAC common shares were redeemed
for cash, on the one hand, and no GroupMAC common shares were redeemed for cash
on the other. For purposes of this analysis, Chase assumed a 5.5x EBITDA exit
multiple and a 13% discount rate. The analysis indicated the following about
the discounted cash flow contributions of the two companies to the pro forma
combined entity:
<TABLE>
<CAPTION>
$150 million
Redemption $0 Redemption
--------------------- ---------------------
GroupMAC Building One GroupMAC Building One
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Ownership.......................... 48% 52% 54% 46%
Implied DCF Equity Value
Contribution..................... 44% 56% 50% 50%
Implied Enterprise Value........... 47% 53% 46% 54%
Implied DCF Enterprise Value
Contribution..................... 44% 56% 44% 56%
</TABLE>
Accretion/Dilution Analysis
Chase analyzed the expected pro forma impact of the merger on projected EPS
for GroupMAC for 2000. The analysis was made for various levels of cash
utilized from proceeds of convertible preferred stock to redeem GroupMAC
shares, ranging from zero to $150 million. The pro forma earnings per share
were calculated using information provided by the managements of GroupMAC and
Building One. Chase analyzed the accretion to GroupMAC as a stand alone entity
both including and excluding projected future acquisitions in 2000. Chase
utilized the Institutional Brokerage Estimate System consensus analyst
estimate, which assumes future acquisitions, as well as GroupMAC management's
estimate, which did not assume future acquisitions. The post-transaction
diluted EPS assumes all $150 million of the proceeds from the convertible
preferred stock are used to redeem GroupMAC shares. This analysis indicated
that the current transactions would be moderately accretive to 2000 estimated
EPS based on the Institutional Brokerage Estimate System figures and GroupMAC
management's figures.
40
<PAGE>
Precedent Transactions Premiums Paid Analysis
Chase reviewed seventy-one transactions that did not involve mergers of
equals in which the consideration paid was 100% stock and noted the following
transaction premiums to closing share prices at one day, one week and one month
prior to the transaction date:
Premium to Closing Share Price
<TABLE>
<CAPTION>
One Day One Week One Month
------- -------- ---------
<S> <C> <C> <C>
High.......................................... 114.3% 139.2% 185.9%
Median........................................ 21.8% 25.1% 29.0%
Mean.......................................... 25.8% 31.3% 35.2%
Low........................................... (11.2%) (14.4%) (15.6%)
</TABLE>
Chase also reviewed nine transactions involving mergers of equals and noted
the following transaction premiums for the same periods:
Premium to Closing Share Price
<TABLE>
<CAPTION>
One Day One Week One Month
------- -------- ---------
<S> <C> <C> <C>
High.......................................... 24.4% 26.0% 27.6%
Median........................................ 2.0% 0.3% 12.2%
Mean.......................................... 3.5% 5.0% 7.6%
Low........................................... (13.9%) (9.8%) (10.6%)
</TABLE>
Chase analyzed the implied transaction value of Building One based upon the
closing price of shares of GroupMAC common stock on November 1, 1999 of $10.00
per share and the exchange ratio. This analysis implied a Building One per
share price of $12.50. The implied share price represented a premium of 11.7%
to Building One's November 1, 1999 closing share price of $11.19, a 10.5%
premium to Building One's 30-day average closing share price and a 0.5% premium
to Building One's 60-day average closing share price.
Chase then compared this to the total consideration to be received by each
GroupMAC shareholder based on such shareholder's election to receive 0% of the
consideration in cash, 29% in cash (the maximum amount of cash received by each
shareholder if all shareholders tender at least 29% of their shares) and 50% in
cash (the maximum amount of shares each shareholder is able to tender). Based
upon this analysis, the implied total value per share of GroupMAC common stock
and the premium to the closing price of shares of GroupMAC common stock on
November 1, 1999, the average closing price for the 30 days from October 4,
1999 to November 1, 1999 and the 60 days from September 2, 1999 to November 1,
1999 are set forth in the table below. Chase calculated the implied total value
per GroupMAC share as the sum of the cash consideration to be received by each
GroupMAC shareholder, if any, and the implied value of each GroupMAC common
share calculated by multiplying the closing price of a share of Building One
common stock on November 1, 1999 by the inverse of the exchange ratio.
<TABLE>
<CAPTION>
Implied Total
Value Per Premium to GroupMAC Closing Share Price
GroupMAC ----------------------------------------------
Cash Election Percentage Common Share November 1, 1999 30 Day Average 60 Day Average
------------------------ ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
0%.................... $ 8.95 (10.5%) (10.7%) (17.9%)
29%................... $10.26 2.6% 2.3% (5.9%)
50%................... $11.23 12.3% 12.0% 2.9%
</TABLE>
41
<PAGE>
Analysis of Preferred Stock
Conversion Premium Analysis
Chase compared the terms of the convertible preferred stock to be issued by
GroupMAC to Apollo or its affiliates pursuant to the subscription and exchange
agreement to recent convertible preferred stock or convertible debt issued by
the following companies: Allied Waste, Building One, Metris Company,
NationsRent, Rare Medium, RCN Corporation, Renters Choice, Stericycle and
United Rentals. For purposes of this comparison, Chase compared the conversion
premium to the average closing price of such companies' shares of common stock
for the one day, one week and one month prior to the announcement of the
issuance of such preferred shares or convertible debt. Chase calculated the
ratio of the conversion premium to averages as follows:
Conversion Premium to Average Closing Price
<TABLE>
<CAPTION>
One Day One Week One Month
Price Price Price
------- -------- ---------
<S> <C> <C> <C>
High........................................... 37.3% 43.3% 50.6%
Median......................................... 19.0% 15.4% 10.0%
Mean........................................... 19.3% 19.3% 16.9%
Low............................................ 6.4% (1.4%) (2.8%)
</TABLE>
By comparison, Chase noted that the conversion premium to the average
closing price of GroupMAC's shares of common stock one day, one week and one
month prior to the announcement of the issuance of the convertible preferred
stock was 40.0%, 42.9% and 39.3%.
Theoretical Valuation of Preferred Stock
Chase performed an analysis of a possible theoretical value of the
convertible preferred stock. Possible theoretical value represents a
quantitative analysis of the security being offered, independent of any
qualitative characteristics. The convertible preferred stock was analyzed using
a binomial model, which separates the debt component value and the equity
component value.
Assuming a 40% volatility for shares of GroupMAC common stock, Chase
analyzed the possible theoretical value of the convertible preferred stock with
a conversion premium of 30%, 35% and 40% and a spread to U.S. government
treasury securities with 10 year maturities of 450 and 550 basis points.
Volatility was derived by calculating the standard deviation of shares of
GroupMAC common stock's daily returns over a given period and then annualizing
such return based on a year with 250 trading days. The results of Chase's
analysis, expressed as a percentage of the convertible preferred stock's face
value, are set forth in the table below.
<TABLE>
<CAPTION>
Conversion Premium 450 bps Spread 550 bps Spread
------------------ -------------- --------------
<S> <C> <C>
30% 110% 107%
35% 108% 104%
40% 106% 102%
</TABLE>
Chase then assumed a 50% volatility for shares of GroupMAC common stock and
analyzed the possible theoretical value of the convertible preferred stock. The
results of this analysis, expressed as a percentage of the convertible
preferred stock's face value, are set forth in the table below.
<TABLE>
<CAPTION>
Conversion Premium 450 bps Spread 550 bps Spread
------------------ -------------- --------------
<S> <C> <C>
30% 115% 111%
35% 113% 109%
40% 111% 107%
</TABLE>
42
<PAGE>
Chase further analyzed the theoretical investment value of the convertible
preferred stock. Investment value is the theoretical value of the convertible
preferred stock without the conversion feature. Chase determined a theoretical
investment value of the convertible preferred stock, expressed as a percentage
of its face value, of 73% and 67% for a 450 and 550 basis point spread over
U.S. treasury securities with 10-year maturities, respectively.
Analysis of GroupMAC
Analysis of GroupMAC Historical Share Prices
Chase analyzed the historical trading performance of shares of GroupMAC
common stock. The following table sets forth the high, mean and low closing
prices of shares of GroupMAC common stock for the period indicated.
Closing Prices of GroupMAC Common Stock
<TABLE>
<CAPTION>
High Mean Low
------ ------ -----
<S> <C> <C> <C>
Since IPO............................................. $20.38 $14.21 $9.50
Last 12 months........................................ 15.44 12.68 9.50
Last 6 months......................................... 14.44 12.54 9.50
Last 3 months......................................... 14.00 11.64 9.50
Last 1 month.......................................... 12.50 10.08 9.50
</TABLE>
By comparison, Chase noted that the closing share price for GroupMAC common
stock was $10.00 on November 1, 1999.
GroupMAC Comparable Company Analysis
Chase calculated the following two financial ratios for a selected group of
companies that it deemed to be similar to GroupMAC. The companies reviewed by
Chase for the GroupMAC comparable companies analysis included ABM Industries;
Integrated Electrical Services; Comfort Systems; Building One; and EMCOR Group.
. Enterprise Value to EBITDA ratio, which is based upon the Enterprise
Value as of November 1, 1999 and EBITDA for the last twelve months ended
June 30, 1999 for Integrated Electrical Services, Comfort Systems,
Building One and EMCOR Group and July 31, 1999 for ABM Industries, based
upon each companies' public filings and estimates for the 1999 fiscal
year based on equity analyst research reports.
. Share price to EPS, or "P/E," ratio, which is based upon the closing
share prices as of November 1, 1999 and the EPS estimates from the
Institutional Brokers Estimate System consensus.
For purposes of Chase's analysis, "Enterprise Value" is the fully diluted
equity value of a company plus its net outstanding debt and preferred stock.
Chase's analysis of these companies determined the relevant ranges for the
comparable companies' multiples as indicated in the following table.
<TABLE>
<CAPTION>
1999E P/E 2000E P/E LTM EBITDA 1999E EBITDA
--------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Median........................ 7.8x 6.4x 5.9x 4.8x
Mean.......................... 8.9x 7.8x 6.0x 5.0x
</TABLE>
Based on its analysis and using estimates of GroupMAC's net income in 1999
and 2000 using the Institutional Brokerage Estimate System consensus analyst
estimate and EBITDA in 1999 based on equity analyst research reports and for
the last twelve months ended June 30, 1999 based on GroupMAC's public filings,
Chase determined an implied equity value of $7.00 to $12.00 per share of
GroupMAC common stock. By comparison, Chase noted the November 1, 1999 closing
share price of GroupMAC common stock of $10.00.
43
<PAGE>
None of the selected companies reviewed for the comparable public companies
analysis was identical to GroupMAC and, accordingly, an analysis of the
foregoing necessarily involved complex considerations and judgments concerning
differences in financial and operational characteristics of the companies
involved and the other factors that could affect the companies compared to
GroupMAC.
Comparable Transaction Analysis
Chase compared the following two financial ratios for GroupMAC to those for
a selected group of transactions that it deemed to be similar to the current
transaction. The transactions reviewed by Chase included the Service
Master/American Residential Services transaction announced on March 23, 1999
and the Lennox/Service Experts transaction announced on October 27, 1999. Chase
reviewed the Lennox/Service Experts transaction based on a closing Lennox
common stock price of $13.25 per share on the day prior to the announcement of
the transaction and a closing common stock price of $10.00 per share on the
announcement date.
. Transaction Value to EBITDA ratio, which is based upon the Transaction
Value when the transaction was announced and EBITDA for the last twelve
months ended December 31, 1998 for American Residential Services and June
30, 1999 for Service Experts, based upon each company's public filings
and forward EBITDA based on equity analyst research reports.
. Equity Value to Net Income, which is based upon the closing share price
of the acquiror when the transaction was announced and Net Income for the
last twelve months ended December 31, 1998 for American Residential
Services and June 30, 1999 for Service Experts, based upon each company's
public filings and estimated earnings per share equity based on analyst
research reports.
Chase's analysis of these comparable transactions determined the relevant
ranges for the comparable transaction multiples as indicated in the following
table.
<TABLE>
<CAPTION>
LTM Forward LTM Forward
EBITDA EBITDA Net Income Net Income
Multiple Multiple Multiple Multiple
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Lennox/Service Experts
(based on Lennox per share price day
of announcement)...................... 4.8x 4.6x 5.6x 6.3x
Lennox/Service Experts
(based on Lennox per share price day
prior to announcement)................ 5.5x 5.2x 7.4x 8.3x
Service Master/American Residential
Services ............................. -- 6.2x -- 15.3x
</TABLE>
Based on its analysis and using estimates of EBITDA and net income for the
last twelve months ended June 30, 1999 based on GroupMAC's public filings and
projected 1999 EBITDA based on equity research reports and projected 1999 net
income based on the Institutional Brokerage Estimate System consensus estimate,
Chase determined an implied equity value of $7.00 to $14.00. By comparison,
Chase noted the November 1, 1999 closing share price of GroupMAC common stock
of $10.00.
None of the selected transactions reviewed in the comparable transaction
analysis was identical to the current transaction and, accordingly, an analysis
of the foregoing necessarily involved complex considerations and judgments
concerning differences in financial and operational characteristics of the
companies involved and other factors that could affect the transactions
compared to the current transaction.
GroupMAC Discounted Cash Flow Analysis
Chase performed a discounted cash flow analysis of GroupMAC based upon
forecast and projection information provided to Chase by the management of
GroupMAC for the years 2000 through 2004 assuming no acquisitions. Utilizing
this information, Chase calculated a range of values based upon the discounted
present value of the sum of the projected stream of unlevered free cash flows
to GroupMAC through the year 2004 and the projected terminal value of GroupMAC
at the year 2004 based upon a range of EBITDA multiples applied to projected
EBITDA in 2004. Chase applied (1) discount rates of 12.0%, 13.0%, 14.0% and
44
<PAGE>
15.0% and (2) 2004 EBITDA exit multiples of 4.5x, 5.5x and 6.5x. Using this
analysis Chase determined an implied per share equity value for GroupMAC
ranging approximately from $9.50 to $18.50, as compared to GroupMAC's November
1, 1999 closing share price of $10.00.
Analysis of Building One
Analysis of Building One Historical Share Prices
Chase analyzed the historical trading performance of shares of Building
One's common stock. The following table sets forth the high, mean and low
closing prices of shares of Building One's common stock for the period
indicated.
Closing Prices of Building One Common Stock
<TABLE>
<CAPTION>
High Mean Low
------ ------ ------
<S> <C> <C> <C>
Since IPO............................................ $25.38 $17.74 $10.00
Last 12 months....................................... 22.50 15.56 10.00
Last 6 months........................................ 15.88 13.37 10.00
Last 3 months........................................ 15.00 12.79 10.00
Last 1 month......................................... 12.63 11.41 10.00
</TABLE>
By comparison, Chase noted that the closing share price of Building One common
stock was $11.19 on November 1, 1999.
Building One Comparable Company Analysis
As with GroupMAC, Chase calculated the following two financial ratios for
Building One to those for a selected group of companies that it deemed to be
similar to Building One. The companies reviewed by Chase for the Building One
comparable companies analysis included ABM Industries; Integrated Electrical
Services; Comfort Systems; GroupMAC; and EMCOR Group.
. Enterprise Value to EBITDA ratio, which is based upon the Enterprise
Value as of November 1, 1999 and EBITDA estimates for the twelve months
ended June 30, 1999 for Integrated Electrical Services, Comfort Systems,
GroupMAC and EMCOR Group and July 31, 1999 for ABM Industries based upon
each companies' public filings and for the 1999 fiscal year based upon
equity analyst research reports.
. Share price to EPS, or "P/E," ratio, which is based upon the closing
share prices as of November 1, 1999 and the EPS estimates from the
Institutional Brokers Estimate System consensus.
For purposes of Chase's analysis, "Enterprise Value" is the fully diluted
equity value of a company plus its net outstanding debt and preferred stock.
Chase's analysis of these companies determined the relevant ranges for the
comparable companies' multiples as indicated in the following table.
<TABLE>
<CAPTION>
1999E P/E 2000E P/E LTM EBITDA 1999E EBITDA
--------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Median........................ 8.2x 6.9x 6.6x 5.3x
Mean.......................... 9.3x 8.1x 6.2x 5.1x
</TABLE>
Based on its analysis and using estimates of Building One's net income in 1999
and 2000 using the Institutional Brokerage Estimate System consensus estimate
and EBITDA in 1999 based on equity analyst research reports and for the last
twelve months ended June 30, 1999 based on Building One's public filings, Chase
determined an implied equity value of $8.00 to $18.00 per share of Building One
common stock. By comparison, Chase noted the November 1, 1999 closing share
price of Building One common stock of $11.19.
45
<PAGE>
None of the selected companies reviewed for the comparable public companies
analysis was identical to Building One and, accordingly, an analysis of the
foregoing necessarily involved complex considerations and judgments concerning
differences in financial and operational characteristics of the companies
involved and the other factors that could affect the companies compared to
Building One.
Comparable Transaction Analysis
Similar to its analysis for GroupMAC, Chase compared the following two
financial ratios for Building One to those for a selected group of transactions
that it deemed to be similar to the current transaction. The transactions
reviewed by Chase included the Service Master/American Residential Services
transaction announced on March 23, 1999 and the Lennox/Service Experts
transaction announced on October 27, 1999. Chase reviewed the Lennox/Service
Experts transaction based on a closing Lennox common stock price of $13.25 per
share on the day prior to the announcement of the transaction and a closing
common stock price of $10.00 per share on the announcement date.
. Transaction Value to EBITDA ratio, which is based upon the Transaction
Value when the transaction was announced and EBITDA for the twelve months
ended December 31, 1998 for American Residential Services and June 30,
1999 for Service Experts based upon each company's public filings and
estimated EBITDA based on equity analyst research reports.
. Equity Value to Net Income, which is based upon the closing share price
of the acquiror when the transaction was announced and Net Income for the
twelve months ended December 31, 1998 for American Residential Services
and June 30, 1999 for Service Experts based upon each company's public
filings and estimated earnings per share based on equity analyst research
reports.
Chase's analysis of these comparable transactions determined the relevant
ranges for the comparable transaction multiples as indicated in the following
table.
<TABLE>
<CAPTION>
LTM Forward LTM Forward
EBITDA EBITDA Net Income Net Income
Multiple Multiple Multiple Multiple
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Lennox/Service Experts
(based on Lennox per share
price day of
announcement)............. 4.8x 4.6x 5.6x 6.3x
Lennox/Service Experts
(based on Lennox per share
price day prior to
announcement)............. 5.5x 5.2x 7.4x 8.3x
Service Master/American
Residential Services ..... -- 6.2x -- 15.3x
</TABLE>
Based on its analysis and using estimates of EBITDA and net income for the
last twelve months ended June 30, 1999 based on Building One's public filings
and projected 1999 EBITDA based on equity analyst research reports and
projected 1999 net income based on the Institutional Brokerage Estimate System
consensus estimate, Chase determined an implied equity value of $8.00 to
$19.00. By comparison, Chase noted the November 1, 1999 closing share price of
Building One common stock of $11.19.
None of the selected transactions reviewed in the comparable transaction
analysis was identical to the current transaction and, accordingly, an analysis
of the foregoing necessarily involved complex considerations and judgments
concerning differences in financial and operational characteristics of the
companies involved and other factors that could affect the transactions
compared to the current transaction.
Building One Discounted Cash Flow Analysis
Similar to its analysis for GroupMAC, Chase performed a discounted cash flow
analysis of Building One based upon forecast and projection information
provided to Chase by the management of Building One for the years 2000 through
2004, assuming no acquisitions. Utilizing this information, Chase calculated a
range of
46
<PAGE>
values based upon the discounted present value of the sum of the projected
stream of unlevered free cash flows to Building One through the year 2004 and
the projected terminal value of Building One at the year 2004 based upon a
range of forward EBITDA multiples applied to projected EBITDA in 2004. Chase
applied (1) discount rates of 12.0%, 13.0%, 14.0% and 15.0% and (2) 2004 EBITDA
exit multiples of 4.5x, 5.5x and 6.5x. Using this analysis Chase determined an
implied per share equity value for Building One ranging from $15.50 to $28.50,
as compared to Building One's November 1, 1999 closing price of $11.19 per
share.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is, therefore, not readily
susceptible to partial analysis or summary description and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the opinion of Chase, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Chase opinion.
Chase did not form an opinion as to whether any individual analysis, considered
in isolation, supported or failed to support the Chase opinion. In arriving at
its opinion, Chase considered the results of all of such analyses and did not
attribute particular weight to any one analysis or factor considered by it. The
analyses performed by Chase, particularly those based on forecasts, are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Chase's analysis of the fairness, from
a financial point of view, to GroupMAC and its shareholders of the exchange
ratio, the debt exchange and the convertible preferred stock purchase
consideration, taken as a whole and considered collectively.
Chase, as part of its financial advisory business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions and valuations for estate, corporate and other purposes. Chase and
its affiliates, in the ordinary course of business, have, from time to time,
provided, and in the future may continue to provide, commercial and investment
banking services to GroupMAC and/or Building One. An affiliate of Chase is a
lender and serves as agent bank under GroupMAC's senior credit facilities. In
the ordinary course of business, Chase or its affiliates may trade in the debt
and equity securities of GroupMAC and/or Building One for its own accounts and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
The terms of the engagement of Chase by GroupMAC are set forth in a letter
agreement, dated May 7, 1999, as amended, between Chase and GroupMAC. Pursuant
to the terms of the engagement letter agreement, a fee of $6 million is payable
to Chase upon the consummation of the merger between GroupMAC and Building One.
In addition, GroupMAC has agreed to reimburse Chase for its reasonable out-of-
pocket expenses, including reasonable fees and disbursements of its counsel and
reasonable travel and other out-of-pocket expenses, and to indemnify Chase
against certain liabilities relating to or arising out of its engagement. To
the extent that such indemnification includes liabilities arising under the
federal securities laws, it may not be enforceable as it may be determined to
be against public policy.
Opinion of Financial Advisor to Building One
On November 2, 1999, Bear Stearns delivered to the board of directors of
Building One Bear Stearns' opinion that, as of the date thereof, and subject to
the assumptions and qualifications set forth therein, the exchange ratio, as
defined in the merger agreement, was fair, from a financial point of view, to
the holders of Building One common stock.
The full text of Bear Stearns' opinion is set forth as Annex D to this joint
proxy statement/prospectus and describes the assumptions made, matters
considered and limits on the review undertaken. Building One stockholders are
urged to read the opinion in its entirety. The summary of Bear Stearns' opinion
set forth in this joint proxy statement/prospectus is qualified in its entirety
by reference to the full text of such opinion.
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<PAGE>
Bear Stearns' opinion is intended for the benefit and use of the board of
directors of Building One, and does not constitute a recommendation of the
merger or a recommendation to any stockholder of Building One as to how any
such stockholder should vote on the merger or any issue relating thereto. Bear
Stearns' opinion does not address Building One's underlying business decision
to effect the merger. It should be understood that, although subsequent
developments may affect the conclusions reached in the opinion, Bear Stearns
has not been requested to and does not have any obligation to, nor does it
intend to, update, revise or reaffirm its opinion.
The exchange ratio pursuant to the merger agreement was determined by arm's-
length negotiations between Building One and GroupMAC and was not based on any
recommendation by Bear Stearns, although Bear Stearns provided advice to
Building One and the board of directors of Building One from time to time with
respect thereto. Except as otherwise noted herein, no limitations were imposed
by Building One or the board of directors of Building One on Bear Stearns with
respect to the investigations made or the procedures followed by Bear Stearns
in rendering its opinion.
As more fully described in its opinion, in the course of Bear Stearns'
analyses for rendering the opinion, among other things, it reviewed various
public filings and other documents, met with certain members of the senior
management of Building One and GroupMAC to discuss each company's respective
businesses, operations and historical and future prospects and conducted such
studies, analyses, inquiries and investigations as it deemed appropriate. As
more fully described in its opinion, in the course of its review Bear Stearns
relied upon and assumed, without independent verification, the accuracy and
completeness of the financial and other information, including, without
limitation, the forecasted financial results and synergy estimates provided to
Bear Stearns. Also as more fully described in its opinion with respect to
forecasted financial results, Bear Stearns assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of senior management as to the expected future performance of
Building One and GroupMAC, respectively. Also as more fully described in its
opinion, Bear Stearns did not assume any responsibility for the independent
verification of any information provided to it, and Bear Stearns further relied
upon the assurances of the senior management of each of Building One and
GroupMAC that they are unaware of any facts that would make any such
information provided to Bear Stearns incomplete or misleading. In arriving at
its opinion, Bear Stearns did not perform any independent appraisal of the
assets and liabilities of Building One and GroupMAC, nor was Bear Stearns
provided with any appraisals. Bear Stearns also assumed that the merger will
constitute a tax-free "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code. Bear Stearns' opinion is necessarily based on
economic, market and other conditions, and the information made available to
Bear Stearns.
In connection with preparing and rendering its opinion, Bear Stearns
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a complete
description of the analyses underlying Bear Stearns' opinion. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible
to summary description. Bear Stearns believes that its analyses must be
considered as a whole, and that selecting portions of its analyses and the
factors considered by it, without considering all such factors and analyses,
could create an incomplete view of the processes underlying Bear Stearns'
opinion. Moreover, the estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by such
analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Accordingly, such
estimates are inherently subject to substantial uncertainties.
In connection with its engagement, Bear Stearns was not authorized to
solicit, and did not solicit, third-party indications of interest with respect
to the acquisition of all or a part of Building One, nor did Bear Stearns
review with Building One or the board of directors of Building One any
potential transactions in lieu of the merger.
Bear Stearns did not express any opinion as to the price or range of prices
at which the shares of common stock of Building One and GroupMAC may trade
subsequent to the announcement of the merger or as to the
48
<PAGE>
price or range of prices at which the shares of common stock of GroupMAC may
trade subsequent to the consummation of the merger.
The following is a summary of the material valuation, financial and
comparative analyses presented by Bear Stearns to the board of directors of
Building One on November 2, 1999 in connection with the Bear Stearns' opinion,
which was rendered on such date. In all cases below, with respect to the
Discounted Cash Flow Analysis, the Relative Contribution Analysis and the
Accretion/Dilution Analysis, Bear Stearns utilized the financial information
referred to above and provided to it by Building One and GroupMAC management.
Implied Transaction Price. Bear Stearns analyzed the transaction price per
share to Building One implied in the merger. Bear Stearns noted that the
current GroupMAC stock price of $10.06 and an exchange ratio of 1.25x implied a
transaction price per share to Building One of $12.58, which was a premium of
12.4% to the Building One stock price of $11.19 per share on November 1, 1999.
Historical Exchange Ratio Analysis. Bear Stearns reviewed the historical
stock prices of Building One and GroupMAC over various time periods. Bear
Stearns divided the stock price of Building One by the stock price of GroupMAC
for the various time periods and compared the resulting ratios with the
exchange ratio. Bear Stearns noted that the 1.25 exchange ratio exceeded the
current trading ratio of 1.11 and the average historical trading ratios for the
last 10 trading days (1.12), the last 30 trading days (1.16), the last 60
trading days (1.11), the last 90 trading days (1.10) and since April 30, 1999,
the day Building One completed its tender offer and recapitalization (1.07).
Discounted Cash Flow Analysis. Bear Stearns performed a discounted cash flow
(DCF) analysis of the combined company and of Building One on a stand-alone
basis for fiscal 2000E through fiscal 2004E. Bear Stearns used discount rates
of 10% to 15%, based on a weighted average cost of capital for other companies
involved in the facilities services industry. In performing its analysis for
Building One on a stand-alone basis, Bear Stearns used terminal value EBITDA
multiples of 4.0x to 6.5x. In performing its analysis for the combined company,
Bear Stearns noted that it used slightly higher terminal value EBITDA multiples
of 4.5x to 7.0x to reflect the potential benefits of an expanded multiple being
accorded to the combined company. Bear Stearns added the present values of the
discounted free cash flows to the present values of the terminal values to
arrive at a range of enterprise values for the combined company and Building
One. Bear Stearns then deducted long-term debt and added cash to the enterprise
values for the combined company and Building One to arrive at a range of equity
values for the combined company and Building One, and then divided such equity
values by the relevant number of outstanding shares to calculate a range of
equity values per share for the combined company and Building One. Based on
such equity values per share, Bear Stearns noted that the combined company
values per share exceeded the Building One stand-alone values per share for the
entire range presented.
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<PAGE>
Relative Contribution Analysis. Bear Stearns reviewed with the board the
relative contribution of each of Building One and GroupMAC to certain estimated
income statement categories of the combined company including revenue, EBITDA,
EBIT and net income for 1999E (pro forma, as if all acquisitions completed to
date in 1999 occurred on January 1, 1999), 2000E and 2001E. Bear Stearns
reviewed these income statement categories with and without the inclusion of
estimated synergies. These relative contributions are summarized in the
following table. The relative contributions of these income statement
categories were then compared, in the case of revenue, EBITDA and EBIT, to the
relative enterprise value (market equity value plus debt less cash) percentages
implied by the exchange ratio. The relative contribution of net income was
compared to the relative equity value percentages implied by the exchange
ratio. Bear Stearns observed that Building One's share of the combined
enterprise value would be 52.9% at the exchange ratio. Bear Stearns also
observed that Building One's share of the combined equity value would be 51.8%
at the exchange ratio. For purposes of this calculation, Bear Stearns assumed
that the new BOSS II investment would be treated as an equity investment
directly in GroupMAC.
<TABLE>
<CAPTION>
Building One GroupMAC
------------ --------
<S> <C> <C>
Revenues
1999PF........................................ 52.7% 47.3%
2000E......................................... 52.7% 47.3%
EBITDA--without synergies
1999PF........................................ 55.3% 44.7%
2000E......................................... 55.3% 44.7%
EBITDA--with synergies
1999PF........................................ 54.2% 43.8%
2000E......................................... 54.2% 43.9%
EBIT--without synergies
1999PF........................................ 55.9% 44.1%
2000E......................................... 55.6% 44.4%
EBIT--with synergies
1999PF........................................ 54.3% 43.4%
2000E......................................... 54.3% 43.4%
Net Income--without synergies
1999PF........................................ 54.8% 45.2%
2000E......................................... 54.7% 45.3%
Net Income--with synergies
1999PF........................................ 52.8% 43.8%
2000E......................................... 53.1% 43.9%
</TABLE>
Accretion/Dilution Analysis. Bear Stearns performed a per share earnings
accretion/dilution analysis for 2000E and 2001E. Bear Stearns combined the
projected operating results of Building One with the corresponding projected
operating results of GroupMAC and factored in projected cost savings and
operating synergies to arrive at the combined company projected net income.
Bear Stearns divided the combined company net income by the pro forma fully
diluted shares outstanding to arrive at a combined company
earnings per share. Bear Stearns compared the combined company earnings per
share for 2000E and 2001E and noted that in both years the merger was accretive
to GroupMAC's earnings per share. Bear Stearns also multiplied the combined
company earnings per share in 2000E and 2001E by the 1.25 exchange ratio and
compared this pro forma adjusted combined company earnings per share for
Building One to projected stand-alone earnings per share for Building One for
2000E and 2001E. Bear Stearns noted that, in both years, the merger was
slightly dilutive to Building One's earnings per share.
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<PAGE>
Other Analyses. Bear Stearns conducted such other analyses as it deemed
necessary, including reviewing historical and updated projected financial and
operating data for both Building One and GroupMAC and selected investment
research reports on Building One and GroupMAC and the facilities services
industry, including reviewing available information regarding the individual
and institutional holders of Building One and GroupMAC common shares.
Pursuant to the terms of its engagement letter, Building One has paid Bear
Stearns a fee of $600,000 with respect to services rendered under its
engagement letter, including the rendering of the opinion, and has agreed to
pay Bear Stearns an additional fee of $4.525 million upon consummation of the
merger. Building One also has agreed to reimburse Bear Stearns for its
reasonable out-of-pocket expenses, and to indemnify Bear Stearns and certain
related persons against certain liabilities, including liabilities under the
federal securities laws, relating to or arising out of its engagement.
Bear Stearns may actively trade the equity securities of Building One and
GroupMAC for its own account and for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Bear Stearns is an internationally recognized investment banking firm and
was selected as financial advisor to the board of directors of Building One in
connection with the merger and asked to provide advice to the board of
directors of Building One in the merger negotiations and render its opinion in
connection with the merger based on Bear Stearns' qualifications, expertise and
reputation in providing advice to companies in merger transactions. As part of
its investment banking business, Bear Stearns is engaged regularly in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bidding, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
Interests of GroupMAC Executive Officers and Directors
Members of GroupMAC's management and the GroupMAC board may be deemed to
have interests in the merger that are different from, or in addition to, the
interests of the GroupMAC shareholders generally. The GroupMAC board was aware
of these interests and considered them, among other matters, in approving the
merger agreement and the transactions contemplated thereby.
Combined Company Board. As of the closing, the board of directors of the
combined company will be composed of four designees of GroupMAC, four designees
of Building One, four designees of Apollo and one independent person jointly
designated by GroupMAC, Building One and Apollo. Messrs. Luke, Millinor,
Morrison and Sullivan are designees of GroupMAC. See "Board of Directors and
Management of the Combined Company Following the Merger."
Combined Company Management. J. Patrick Millinor, Jr. will become chairman
of the board of the combined company. Messrs. Norris, Callahan and Rouse are
expected to leave GroupMAC. GroupMAC expects to enter into severance agreements
with these individuals, but no agreement has been reached with any of them
regarding the severance benefits to be received by them.
Change of Control. Under employment agreements in effect between GroupMAC
and its senior executive officers, the merger will result in a change of
control of GroupMAC. The employment agreements generally provide that, if the
executive's employment is terminated within two years following a change of
control, he will be entitled to the following:
. a lump sum cash payment equal to two times the sum of his base salary
and bonus amount;
. an amount equal to the insurance premiums needed to provide for
continued medical benefits for a period of 18 months; and
. immediate vesting of all stock options held by him.
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<PAGE>
Terminations entitling an executive officer to the foregoing severance
payments and benefits consist of any termination by GroupMAC other than for
cause and termination by the executive officer for good reason. For purposes of
these agreements, good reason consists of a reduction in compensation or
benefits, forced relocation, or a change in title, duties, responsibilities or
status.
If any payment made to an executive officer is subject to any excise tax
under Section 4999 of the Internal Revenue Code, a gross-up payment will be
made to place that person in the same net after-tax position as would have been
the case if no excise tax were imposed.
New Employment Agreements. Messrs. Millinor, Luke, Jachimiec, Miller, Roach
and Kipp have entered into agreements with GroupMAC under which they agreed to
waive the rights arising under their existing employment agreements upon the
occurrence of a change of control as a result of the merger with Building One.
These agreements also set forth the parties' understanding of the principal
terms of their employment with the combined company after the merger. Under
these agreements, the base annual salaries of Messrs. Millinor, Luke,
Jachimiec, Miller, Roach and Kipp will be $425,000, $300,000, $240,000,
$240,000, $240,000 and $175,000, respectively, and they will have bonus
opportunities equal to 120%, 90%, 80%, 80%, 80% and 75% of their base salary,
respectively. Messrs. Millinor, Jachimiec, Miller, Roach and Kipp will be
granted options to purchase 112,000, 81,000, 81,000, 81,000 and 48,000 shares
of GroupMAC stock, which will vest over a four year term and will be
exercisable for 10 years and will also be eligible to participate in the stock
performance plan, if approved by GroupMAC shareholders. Mr. Millinor's terms of
employment would be extended until December 31, 2002, Mr. Luke's term would
extend until July 31, 2000, and the terms of the remaining individuals would
extend until December 31, 2001. The agreements also contain change of control
benefits substantially similar to those contained in their existing agreements.
The agreements also provide that if the employee is terminated without cause or
terminates his employment for good reason, in each case as defined in the
agreements, before the consummation of the merger or within 12 months
thereafter, then the employee will receive an amount equal to the greater of
his severance benefits under the agreement or the amounts owed to him on a
change of control.
Purchase of Options. GroupMAC intends to offer to purchase from certain
individuals, including its executive officers, up to 176,500 stock options
issued by it for a purchase price equal to $10.4225 per option. These options
have an exercise price of $3.0775 per share and were issued to some of the
first employees of GroupMAC. The offer is being made as an alternative to
requiring each option holder to exercise the option and then elect to receive
cash pursuant to the cash election feature of the merger. The funds available
for the cash election feature of the merger will be reduced by the amount of
funds used to purchase options. If the cash election feature is oversubscribed,
the number of options tendered for purchase will be reduced in the same manner
as the shares are reduced for the cash election.
Future Grants of Options and Restricted Stock. After completion of the
merger, the combined company expects to grant, in the ordinary course as a
component of its incentive compensation program and subject to the approval of
its compensation committee, stock options and/or restricted stock to directors,
officers and employees of the combined company. Except as described above with
respect to the new employment agreements, the amounts of future grants are not
known at this time.
Lockups. Like all those whose businesses were acquired by GroupMAC, some of
GroupMAC's officers and directors are subject to contractual restrictions on
transfer of their shares of GroupMAC common stock. Despite these restrictions,
these officers and directors, like all other shareholders whose shares of
GroupMAC common stock are subject to lockups, will be able to elect to receive
cash for up to 50 percent of their GroupMAC common stock under the same terms
as all other GroupMAC common shareholders. A total of shares held by
officers and directors of GroupMAC are subject to these contractual
restrictions.
Interests of Building One Executive Officers and Directors
When considering the recommendation of the Building One board of directors
that holders of Building One shares of common stock and convertible junior
subordinated debentures vote in favor of the merger, you
52
<PAGE>
should be aware that certain employees, including certain executive officers
and certain members of the Building One board of directors, have interests in
the merger that are different from, and may conflict with, the interests of
Building One stockholders generally. The Building One board of directors was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the transactions contemplated thereby.
Combined Company Board. As of the closing, the board of directors of the
combined company will be composed of four designees of GroupMAC, four designees
of Building One, four designees of Apollo and one independent person jointly
designated by GroupMAC, Building One and Apollo. Messrs. Eades, Ivey, Love and
Reyes are designees of Building One. See "Board of Directors and Management of
the Combined Company Following the Merger."
Management of the Combined Company. Joseph Ivey will become the president
and chief executive officer of the combined company. William P. Love, Jr. will
become the president of the electrical group of the combined company, Michael
Sullivan will become the president of the service solutions group and Pat
McMahon will become the president of the industrial group. Messrs. Beck and
Clayton are not expected to stay with the combined company. Building One
expects to enter into severance agreements with these individuals.
New Employment Agreements. Certain of our executive officers will enter into
employment agreements with the combined company upon the completion of the
merger. Mr. Ivey has agreed that upon the completion of the merger he will
enter into an employment agreement under which he agrees to serve as the
president and chief executive officer of the combined company, with an annual
base salary of $425,000 and a bonus opportunity of up to 120% of his base
salary. The term of the employment agreement will be three years and will
generally contain the same benefits, terms and conditions that are in his
existing employment agreement with Building One.
Mr. Love has agreed that upon completion of the merger, he will enter into
an employment agreement under which he agrees to serve as the president of the
Electrical Group of the combined company, with an annual base salary of
$240,000 and a bonus opportunity of up to 80% of his base salary. The term of
the employment agreement will be two years and will generally contain the same
terms and conditions that are in his existing employment agreement with
Building One. In addition, in consideration for a reduction in his base salary
and target bonus, the combined company will make an interest free loan to Mr.
Love in the amount of $650,000. The loan will be forgiven over a four-year
period, provided that Mr. Love remains as an employee with the combined company
during that period. If Mr. Love's employment is terminated by the combined
company with cause or by Mr. Love without good reason prior to the expiration
of the four-year term, the entire principal amount of the loan that has not
already been forgiven will become immediately due and payable.
Mr. Sullivan has agreed that upon completion of the merger, he will enter
into an employment agreement under which he agrees to serve as the president of
the Service Solutions Group of the combined company, with an annual base salary
of $200,000 and a bonus opportunity of up to 75% of his base salary. The term
of the employment agreement will be two years and will generally contain the
same benefits, terms and conditions that are in his existing employment
agreement with Building One. In addition, in consideration for a reduction in
his base salary and target bonus, the combined company will make an interest
free loan to Mr. Sullivan in the amount of $300,000. The loan will be forgiven
over a four-year period, provided that Mr. Sullivan remains as an employee with
the combined company during that period. If Mr. Sullivan's employment is
terminated by the combined company with cause or by Mr. Sullivan without good
reason prior to the expiration of the four-year term, the entire principal
amount of the loan that has not already been forgiven will become immediately
due and payable.
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<PAGE>
Future Grants of Options and Other Stock Based Awards. After completion of
the merger, the combined company expects to grant, in the ordinary course as a
component of its incentive compensation program and subject to the approval of
its compensation committee, stock options and/or restricted stock to directors,
officers and employees of the combined company. The amounts of the grants are
not known at this time.
Options. Messrs. Ivey, Beck, Clayton and Love each have employment
agreements that provide for the acceleration of the vesting of their options
upon a change of control. The merger is a change of control under the terms of
those employment agreements. However, Messrs. Ivey and Love have waived their
contractual rights to the acceleration of the vesting of their options.
Officer and Director Indemnity and Insurance. Subject to applicable law and
a cap on the costs of premiums, for six years after the merger the combined
company will maintain officer and director liability insurance for the officers
and directors of Building One providing the same coverage and amounts
maintained by Building One prior to the merger and will indemnify those
individuals to the fullest extent permitted.
Interests of Apollo
Andrew Africk, Michael Gross and Brooks Newmark, directors on the Building
One board of directors, are affiliated with Apollo Management, L.P. Messrs.
Africk, Gross, Newmark and one other designee of Apollo are to be directors of
the combined company. Affiliates of Apollo will exchange their Building One
convertible junior subordinated debentures and will invest $150 million in the
combined company in exchange for an aggregate shares of convertible
preferred stock. See "Proposal 2--Issuance of Convertible Preferred Stock." In
addition, affiliates of Apollo are entitled to receive a fee of $2.5 million if
the merger is completed or a fee of $3.75 million if the subscription and
exchange agreement, under which affiliates of Apollo are exchanging the
Building One convertible junior subordinated debentures for GroupMAC
convertible preferred stock, is terminated under certain circumstances.
Accounting Treatment of the Merger
The merger will be accounted for as a reverse acquisition using the purchase
method of accounting in accordance with generally accepted accounting
principles. As a reverse acquisition, Building One will be deemed to be the
acquiring company for financial reporting purposes. Under this method of
accounting, the purchase price will be allocated to assets and liabilities of
GroupMAC based on their estimated fair values. The income or loss of the
combined company will not include the income or loss of GroupMAC prior to
completion of the merger. See "Combined Company Unaudited Pro Forma Financial
Statements."
Material United States Federal Income Tax Considerations of the Merger
The following discussion is a summary description of the material U.S.
federal income tax consequences of the merger. The discussion below is for
general information only and does not purport to deal with all aspects of U.S.
federal income taxation that may affect particular shareholders in light of
their individual circumstances or to shareholders who are subject to special
rules under the Internal Revenue Code, including: insurance companies; dealers
in securities or currencies; financial institutions; tax-exempt organizations;
foreign holders; persons whose functional currency is not the U.S. dollar;
persons who hold their shares as part of a hedge, straddle, synthetic security,
conversion transaction or other integrated investment; and persons who acquired
their shares pursuant to the exercise of employee stock options or rights or
otherwise as compensation. The discussion is limited to shareholders who have
held their shares as "capital assets," which generally include property held
for investment, within the meaning of Section 1221 of the Internal Revenue
Code. The discussion does not address state, local or foreign taxes that might
apply to GroupMAC or Building One shareholders.
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Consummation of the merger is conditioned upon GroupMAC's receipt of an
opinion of Bracewell & Patterson, L.L.P. and Building One's receipt of an
opinion of Morgan, Lewis & Bockius LLP, each dated as of the effective time of
the merger, to the effect that the merger will qualify for U.S. federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. The discussion below assumes that the merger will be
treated in accordance with the opinions of Bracewell & Patterson and Morgan,
Lewis & Bockius. The discussion below is, and the opinions of Bracewell &
Patterson and Morgan, Lewis & Bockius will be, based upon current provisions of
the Internal Revenue Code, currently applicable U.S. Treasury regulations
promulgated thereunder, and judicial and administrative decisions and rulings,
all of which are subject to change. The opinions of Bracewell & Patterson and
Morgan, Lewis & Bockius will be based on the facts, representations and
assumptions set forth or referred to in the opinions, including representations
contained in certificates executed by our officers. The opinions are not
binding on the IRS or the courts, and there can be no assurance that the IRS or
the courts will not take a contrary view. No ruling from the IRS has been or
will be requested as to the tax-free treatment of the transaction. Future
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth below, and any changes or
interpretations could be retroactive and consequently affect the tax
consequences to our shareholders.
Holders of our common stock are urged to consult their tax advisors to
determine the particular tax consequences of the merger, including the
applicability and effect of any state, local or foreign tax laws, and of
changes in any applicable tax laws.
Consequences of the Merger to Holders of Building One Common Stock
The tax consequences to a holder of Building One common stock who receives
GroupMAC common stock in exchange for all of the stockholder's shares of
Building One common stock pursuant to the merger are as follows:
. no gain or loss will be recognized by the stockholder, except to the
extent the stockholder receives cash in lieu of a fractional share
interest in GroupMAC common stock;
. the stockholder's aggregate tax basis in the GroupMAC common stock
received will equal the stockholder's aggregate tax basis in the shares
of Building One common stock exchanged therefor, reduced by any amount
allocable to a fractional share interest of GroupMAC common stock for
which cash is received; and
. the holding period of GroupMAC common stock received will include the
holding period of the shares of Building One common stock exchanged
therefor.
Fractional Shares of GroupMAC Common Stock. No fractional shares of GroupMAC
common stock will be issued in the merger. Based upon the current ruling
position of the IRS, a holder of Building One common stock who receives cash in
lieu of a fractional share will be treated as having received the fractional
share pursuant to the merger and then as having exchanged the fractional share
for cash in a redemption by GroupMAC subject to Section 302 of the Internal
Revenue Code. The deemed redemption will be treated as a sale of the fractional
share, provided that the deemed redemption is not "essentially equivalent to a
dividend" or the deemed redemption is "substantially disproportionate" with
respect to such stockholder.
Whether the deemed redemption by GroupMAC of the fractional shares for cash
is "essentially equivalent to a dividend" with respect to a holder of Building
One common stock will depend upon the stockholder's particular circumstances.
However, the deemed redemption must, under any circumstance, result in a
"meaningful reduction" in such holder's percentage ownership of GroupMAC common
stock. In determining whether the deemed redemption by GroupMAC results in a
meaningful reduction in a Building One stockholder's percentage ownership of
GroupMAC common stock, and therefore, does not have the effect of a
distribution of a dividend, a Building One stockholder should compare his or
her share interest in GroupMAC, including interests owned actually,
hypothetically and constructively, immediately before the deemed
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redemption, to his or her share interest after the deemed redemption. The IRS
has ruled that a minority stockholder in a publicly-held corporation whose
relative stock interest in the corporation is minimal and who exercises no
"control" over corporate affairs will generally be treated as having had a
meaningful reduction in his or her stock after a redemption transaction if his
or her percentage stock ownership in the corporation has been reduced to any
extent, taking into account the stockholder's actual and constructive ownership
before and after the redemption.
The deemed redemption by GroupMAC will be "substantially disproportionate"
and, therefore, will not have the effect of a distribution of a dividend with
respect to a Building One stockholder who owns less than 50% of the voting
power of the outstanding GroupMAC common stock if the percentage of GroupMAC
common stock owned actually and constructively by such stockholder immediately
after the deemed redemption by GroupMAC is less than 80% of the percentage of
the outstanding stock of GroupMAC that such Building One stockholder owned
actually and constructively immediately before the deemed redemption by
GroupMAC.
If the deemed redemption by GroupMAC of a fractional share for cash is not
"essentially equivalent to a dividend" or is "substantially disproportionate,"
a holder of Building One common stock generally will recognize capital gain or
loss in an amount equal to the excess of the amount of cash received for the
fractional share over the stockholder's adjusted tax basis in the fractional
share. Any capital gain or loss will be long-term capital gain or loss if the
Building One common stock exchanged was held for more than 12 months. Holders
of Building One common stock should consult their tax advisors for a full
understanding of the tax consequences to them of the receipt of cash in lieu of
a fractional share of GroupMAC common stock.
Consequences of the Merger to Building One
The merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. Accordingly, Building One will not
recognize gain or loss as a result of the merger. It is possible, however, that
Building One could be treated as having discharge of indebtedness income if and
to the extent that the amount of Building One's indebtedness to Apollo's
affiliates exceeds the fair market value of the GroupMAC shares of convertible
preferred stock issued in exchange for the indebtedness.
Consequences of the Merger to GroupMAC Shareholders
No gain or loss will be recognized by GroupMAC shareholders who do not elect
to receive cash in the merger in exchange for their shares.
An exchange of GroupMAC common stock for cash by a GroupMAC shareholder who
elects to receive cash will be a taxable transaction for U.S. federal income
tax purposes. The U.S. federal income tax consequences of such exchange to a
GroupMAC shareholder may vary depending upon the shareholder's particular facts
and circumstances. Under Section 302 of the Internal Revenue Code, an exchange
of shares by a GroupMAC shareholder for cash will be treated as a "sale or
exchange" of such shares for federal income tax purposes (rather than as a
deemed distribution by GroupMAC with respect to shares continued to be held (or
deemed to be held) by the GroupMAC shareholder who elects to exchange shares
for cash) if the receipt of cash upon such exchange is "substantially
disproportionate" with respect to the GroupMAC shareholder or is "not
essentially equivalent to a dividend" with respect to the GroupMAC shareholder.
These tests are explained more fully below.
If either the "substantially disproportionate" or "not essentially
equivalent to a dividend" test is satisfied, and the exchange of shares for
cash is therefore treated as a "sale or exchange" of such shares for federal
income tax purposes, the GroupMAC shareholder will recognize capital gain or
loss equal to the difference between the amount of cash received by the
GroupMAC shareholder and the GroupMAC shareholder's adjusted tax basis in the
shares sold. Such capital gain or loss will generally be long-term capital gain
or loss if the GroupMAC shareholder held the shares converted to cash for more
than 12 months. Under current law, any such gain or loss recognized by
individuals, trusts or estates will be subject to a maximum 20% tax rate.
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If neither the "substantially disproportionate" nor "not essentially
equivalent to a dividend" test is satisfied, then, to the extent of GroupMAC's
current and accumulated earnings and profits, the GroupMAC shareholder who
elects to exchange shares for cash will be treated as having received a
dividend taxable as ordinary income in an amount equal to the entire amount of
cash received by the GroupMAC shareholder (without reduction for the adjusted
tax basis of the shares sold), no loss will be recognized, and (subject to
reduction as described below for corporate GroupMAC shareholders eligible for
the dividends received deduction) the GroupMAC shareholder's adjusted tax basis
in the shares exchanged for cash will be added to such GroupMAC shareholder's
adjusted tax basis in its remaining shares, if any. No assurance can be given
that either the "substantially disproportionate" or "not essentially equivalent
to a dividend" test will be satisfied as to any particular GroupMAC
shareholder, and thus no assurance can be given that any particular GroupMAC
shareholder will not be treated as having received a dividend taxable as
ordinary income. If the exchange of shares by a GroupMAC shareholder is not
treated as a sale or exchange for federal income tax purposes, any cash
received for shares in excess of the current and accumulated earnings and
profits of GroupMAC will be treated, first, as a nontaxable return of capital
to the extent of the GroupMAC shareholder's adjusted tax basis in its shares,
and thereafter, as taxable capital gain, to the extent the cash received
exceeds such basis. It is possible that the cash received for shares will be
treated as "boot" received in the merger. If so, the "substantially
disproportionate" test would be applied using the percentage of shares on a
post-merger basis and dividend treatment would be applied to the extent of gain
realized on the receipt of cash, to the extent of a GroupMAC shareholder's
ratable share of undistributed earnings and profits, which may include Building
One's earnings and profits as well as those of GroupMAC.
Constructive Ownership of Stock. In determining whether either the
"substantially disproportionate" or "not essentially equivalent to a dividend"
test is satisfied, a GroupMAC shareholder must take into account not only the
shares that the GroupMAC shareholder actually owns, but also shares that the
GroupMAC shareholder constructively owns by reason of the attribution rules in
Section 318 of the Internal Revenue Code. Under Section 318 of the Internal
Revenue Code, a GroupMAC shareholder may be treated as owning (i) shares that
are actually owned, and in some cases constructively owned, by certain related
individuals or entities in which the GroupMAC shareholder owns an interest, or,
in the case of GroupMAC shareholders that are entities, by certain individuals
or entities that own an interest in the GroupMAC shareholder; and (ii) shares
which the GroupMAC shareholder has the right to acquire by exercise of an
option or a conversion right contained in another instrument held by the
GroupMAC shareholder. Each GroupMAC shareholder should be aware that, because
proration may occur, even if 50% of the shares actually and constructively
owned by a GroupMAC shareholder are tendered for cash, fewer than 50% of all
such shares may be purchased by GroupMAC. Thus, proration may affect whether a
sale by a GroupMAC shareholder will meet either the "substantially
disproportionate" or "not essentially equivalent to a dividend" test.
The "Substantially Disproportionate" and "Not Essentially Equivalent to a
Dividend" Tests. One of the following tests must be satisfied in order for the
exchange of shares for cash to be treated as a sale or exchange for federal
income tax purposes.
Substantially Disproportionate Test. The receipt of cash by a GroupMAC
shareholder will be "substantially disproportionate" if the percentage of the
outstanding shares owned by the GroupMAC shareholder actually and
constructively immediately following the exchange of shares for cash (treating
all of the shares exchanged for cash in the merger as not being outstanding) is
less than 80% of the percentage of the outstanding shares owned by such
GroupMAC shareholder actually and constructively immediately before the
exchange of shares pursuant to the merger (treating all of the shares exchanged
for cash pursuant to the merger as outstanding). GroupMAC shareholders should
consult their own tax advisors with respect to the application of the
"substantially disproportionate" test to their particular situation and
circumstances.
Not Essentially Equivalent to a Dividend Test. Even if the receipt of cash
by a GroupMAC shareholder fails to satisfy the "substantially disproportionate"
test, a GroupMAC shareholder may nevertheless satisfy the "not essentially
equivalent to a dividend" test if the GroupMAC shareholder's exchange of shares
pursuant to the merger results in a "meaningful reduction" in the GroupMAC
shareholder's proportionate interest in
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GroupMAC. Whether the receipt of cash by a GroupMAC shareholder who exchanges
shares pursuant to the merger will be "not essentially equivalent to a
dividend" depends upon the GroupMAC shareholder's particular facts and
circumstances. The IRS has indicated in published Revenue Rulings that even a
small reduction in the proportionate interest of a small minority shareholder
in a publicly-held corporation who exercises no control over corporate affairs
may constitute such a "meaningful reduction." The IRS held, for example, in
Rev. Rul. 76-385, 1976-2 C.B. 92, that a reduction in the percentage ownership
interest of a shareholder in a publicly-held corporation who held a minimal
interest and who exercised no control over the affairs of the corporation from
.0001118% to .0001081% (a reduction of only 3.3% in the shareholder's prior
percentage ownership interest) would constitute a "meaningful reduction."
GroupMAC shareholders expecting to rely on the "not essentially equivalent to a
dividend" test should consult their own tax advisors as to its application to
their particular situation and circumstances.
GroupMAC cannot predict whether or to what extent the cash election right
will be over-subscribed. If the cash election right is over-subscribed,
proration of the exchanges pursuant to the merger will cause GroupMAC to accept
fewer shares than are offered for exchange. Therefore, a GroupMAC shareholder
can be given no assurance that a sufficient number of such GroupMAC
shareholder's shares will be exchanged for cash pursuant to the merger to
ensure that such exchange will be treated as a sale, rather than as a dividend,
for federal income tax purposes pursuant to the rules discussed above.
Corporate GroupMAC Shareholder Dividend Treatment. If an exchange of shares
for cash pursuant to the merger by a corporate GroupMAC shareholder is treated
as a dividend, the corporate GroupMAC shareholder may be entitled to claim a
deduction in an amount equal to 70% of the gross dividend under Section 243 of
the Internal Revenue Code, subject to applicable limitations. Corporate
GroupMAC shareholders should consider the effect of Section 246(c) of the
Internal Revenue Code, which disallows the 70% dividends-received deduction
with respect to any dividend on any share of stock that is held for 45 days or
less during the 90-day period beginning on the date which is 45 days before the
date on which such share becomes ex-dividend with respect to such dividend. For
this purpose, the length of time a taxpayer is deemed to have held stock may be
reduced by periods during which the taxpayer's risk of loss with respect to the
stock is diminished by reason of the existence of certain options or other
hedging transactions. Moreover, under Section 246A of the Internal Revenue
Code, if a corporate GroupMAC shareholder has incurred indebtedness directly
attributable to an investment in shares, the 70% dividends-received deduction
may be reduced by a percentage generally computed based on the amount of such
indebtedness and the GroupMAC shareholder's total adjusted tax basis in the
shares.
In addition, any amount received by a corporate GroupMAC shareholder
pursuant to the merger that is treated as a dividend may constitute an
"extraordinary dividend" under Section 1059 of the Internal Revenue Code. In
such case, a corporate GroupMAC shareholder would be required under Section
1059(a) of the Code to reduce its adjusted tax basis (but not below zero) in
its shares by the non-taxed portion of the extraordinary dividend (i.e., the
portion of the dividend for which a deduction is allowed), and, if such portion
exceeds the GroupMAC shareholder's adjusted tax basis in its shares, to treat
the excess as gain from the sale of such shares in the year in which the
dividend is received. These basis reduction and gain recognition rules would be
applied by taking account only the GroupMAC shareholder's adjusted tax basis in
the shares that were sold, without regard to other shares that the GroupMAC
shareholder may continue to own. Corporate GroupMAC shareholders should consult
their own tax advisors as to the application of Section 1059 of the Internal
Revenue Code to the merger, and to any dividends which may be treated as paid
with respect to shares sold pursuant to the merger.
Consequences of the Merger to GroupMAC
The merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. Accordingly, GroupMAC will not recognize
gain or loss as a result of the merger.
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Backup Withholding
In order to avoid "backup withholding" of federal income tax on payments of
cash (i) to a holder of Building One common stock who exchanges his or her
Building One common stock in the merger and (ii) to a holder of GroupMAC common
stock who elects to receive cash in the merger, a Building One stockholder and
a GroupMAC shareholder must, unless an exception applies under the applicable
law and regulations, provide GroupMAC with the stockholder's correct taxpayer
identification number on a Substitute Form W-9 and certify under penalties of
perjury that the number is correct and that the stockholder is not subject to
backup withholding. If the correct taxpayer identification number and signed
certifications are not provided, a penalty may be imposed on a holder of
Building One common stock or a holder of GroupMAC common stock by the IRS, and
the cash payments received by the holder of Building One common stock in
consideration for shares of Building One common stock in the merger and the
holder of GroupMAC common stock in consideration for shares of GroupMAC common
stock in the merger, may be subject to backup withholding tax at a rate of 31%.
Listing of GroupMAC Common Stock Issued in Connection with the Merger;
Delisting and Deregistration of Building One Common Stock
GroupMAC will apply to list on the NYSE the shares of GroupMAC common stock
to be issued pursuant to the merger and the shares of GroupMAC common stock
issuable upon conversion of the convertible preferred stock. The listing of
such shares on the NYSE is a condition to the completion of the merger. See
"The Merger Agreement--Conditions to the Merger." Upon completion of the
merger, Building One common stock will be delisted from Nasdaq and deregistered
under the Securities Exchange Act of 1934. Following the merger, former
Building One stockholders will be instructed to exchange their outstanding
stock certificates for stock certificates representing shares of GroupMAC
common stock. See "The Merger Agreement--Conversion of Building One
Securities."
Resales of GroupMAC Common Stock Issued in Connection with the Merger;
Affiliate Agreements
GroupMAC common stock issued in connection with the merger will be freely
transferable, except that shares of GroupMAC common stock received by persons
who are deemed to be "affiliates," as such term is defined by Rule 144 under
the Securities Act, of Building One at the effective time of the merger may be
resold by them only in transactions permitted by the resale provisions of Rule
145 under the Securities Act or as otherwise permitted under the Securities
Act. Building One has agreed that it will use its reasonable best efforts to
cause each of its executive officers and directors and any other persons who
may be affiliates to execute a written affiliate agreement providing, among
other things, that such person will not offer, sell, transfer or otherwise
dispose of any of the shares of GroupMAC common stock obtained as a result of
the merger except in compliance with the Securities Act and the rules and
regulations of the SEC thereunder. Each affiliate agreement also will provide
that the affiliate covered by such agreement make representations with regard
to certain tax matters. This joint proxy statement/prospectus may be used by
affiliates in connection with resales of GroupMAC common stock issued in
connection with the merger. See "Resales."
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. A copy of the merger agreement, as amended, is attached as Annex A
and forms a part of this joint proxy statement/prospectus. The summary is
qualified in its entirety by reference to the merger agreement. We urge all of
our shareholders to read the merger agreement in its entirety for a more
complete description of the terms and conditions of the merger.
The Merger
The merger agreement, as amended, provides that Building One will be merged
with and into GroupMAC. Upon completion of the merger, GroupMAC will continue
as the surviving legal entity but will change its name to . The merger
will become effective after all of the conditions in the merger agreement are
met, including receipt of shareholder approvals, and after the companies file a
certificate of merger with the Secretary of State of the State of Delaware and
articles of merger with the Secretary of State of the State of Texas.
Conversion of Building One Securities
At the effective time of the merger, each share of Building One common stock
will automatically be converted into the right to receive 1.25 shares of
GroupMAC common stock, with cash being paid in lieu of issuing fractional
shares of GroupMAC common stock.
On the date the merger becomes effective, each outstanding and unexercised
option and warrant to purchase shares of Building One common stock will be
assumed by the combined company and converted, as the case may be, into an
option or warrant to purchase shares of combined company common stock. The
number of shares of combined company common stock that a holder will be
entitled to purchase upon exercise of such new option or warrant will be
determined by multiplying the number of shares of Building One common stock
subject to the original option or warrant by the exchange ratio. The exercise
price for such option or warrant will equal the exercise price under the
original option or warrant divided by the exchange ratio. The new option or
warrant will otherwise have the same terms and conditions in effect immediately
prior to the date the merger becomes effective, except to the extent that such
terms or conditions change in accordance with their terms as a result of the
transactions relating to the merger.
Surrender of Shares of Building One Common Stock. GroupMAC and Building One
have designated ChaseMellon Shareholder Services, L.L.C. to serve as exchange
agent for the exchange of certificates representing Building One common stock
for certificates representing GroupMAC common stock and for the payment of cash
for fractional shares of GroupMAC common stock, if applicable. Promptly after
the effective time of the merger, the exchange agent will mail to each record
holder of Building One common stock, as of the effective time, a letter of
transmittal, instructions for surrendering the certificates formerly
representing shares of Building One common stock for exchange for certificates
representing shares of GroupMAC common stock and payment for fractional shares.
Former stockholders of Building One who surrender their certificates
representing Building One common stock to the exchange agent together with a
duly executed letter of transmittal will receive certificates representing the
number of whole shares of GroupMAC common stock, and cash in lieu of any
fractional shares, and any dividends or distributions to which they are
entitled. The surrendered certificates will be canceled.
Holders of Building One common stock should not send any certificates
representing Building One common stock with the enclosed blue proxy card. If
the merger is consummated, a letter of transmittal will be mailed after the
effective time of the merger to each person who was a holder of outstanding
Building One common stock immediately prior to the effective time. Building One
stockholders should send certificates representing Building One common stock to
the exchange agent only after they receive, and they comply with, the
instructions contained in the letter of transmittal.
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Fractional Shares. No fractional shares of GroupMAC common stock will be
issued in the merger. In lieu of the issuance of fractional shares of GroupMAC
common stock, as soon as practicable after the effective time of the merger,
the exchange agent shall determine the excess of the number of whole shares of
GroupMAC common stock delivered to the exchange agent by the surviving
corporation over the aggregate number of whole shares of GroupMAC common stock
to be distributed to the holders of Building One common stock. As soon after
the effective time of the merger as practicable, the exchange agent, as agent
for the holders of Building One common stock, will sell the excess shares at
the then prevailing prices on the NYSE. Until the net proceeds of the sale of
the excess shares have been distributed to the holders of Building One common
stock, the exchange agent will hold the proceeds in trust for the holders of
Building One common stock entitled to the proceeds. GroupMAC, as the surviving
corporation, will pay all costs in connection with the sale of the excess
shares. The exchange agent shall determine the portion of the proceeds in trust
to which each holder of Building One common stock is entitled to receive by
multiplying the amount of the aggregate proceeds in trust by a fraction, the
numerator of which is the amount of the fractional share interest to which the
respective holder of Building One common stock is entitled, and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of Building One common stock are entitled. However, if the parties to
the merger agreement so agree in writing prior to the effective time of the
merger, then in lieu of the sale of excess shares and the making of the
payments described above, each holder of Building One common stock shall be
paid an amount in cash equal to the product obtained by multiplying the
fractional share interest to which the Building One common stockholder would
otherwise be entitled by the closing price for a share of GroupMAC common stock
on the NYSE on the first business date immediately preceding the effective time
of the merger.
As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Building One common stock in lieu of any
fractional share interest, the exchange agent shall make available such amounts
to the respective holders of Building One common stock.
Failure to Exchange. One year after the effective time of the merger,
GroupMAC can require the exchange agent to deliver to GroupMAC all unclaimed
cash and shares of GroupMAC common stock. Thereafter, Building One stockholders
must look only to GroupMAC for payment of the merger consideration for their
Building One shares. Neither GroupMAC, Building One nor the exchange agent will
be liable to any holder of a Building One stock certificate for shares of
GroupMAC common stock or any cash delivered to a public official under any
applicable abandoned property, escheat or similar law.
No Further Registration of Transfer of Building One Common Stock. After the
effective time of the merger, there will be no further registration of
transfers of shares of Building One common stock on the stock transfer books of
Building One.
Dividends and Distributions. No dividends or other distributions declared or
made after the effective time of the merger on shares of GroupMAC common stock
will be paid to the holder of any unsurrendered certificate formerly
representing shares of Building One common stock until the holder surrenders
such certificate as provided above. Upon surrender of the certificate, GroupMAC
will pay to the holder, without interest, any dividends or distributions with
respect to such shares of GroupMAC common stock that have become payable
between the effective time of the merger and the time of such surrender.
GroupMAC Common Shareholders' Cash Election
In connection with the merger, each GroupMAC shareholder may elect to
receive in the merger cash in exchange for up to 50% of their shares at $13.50
per share, up to approximately 11 million shares in the aggregate, subject to
proration.
Surrender of Shares of GroupMAC Common Stock. GroupMAC and Building One have
designated ChaseMellon Shareholder Services, L.L.C. to serve as exchange agent
for the exchange of certificates representing GroupMAC common stock for cash,
at the election of a GroupMAC shareholder to surrender up to
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50% of the shareholder's shares. An election form and other transmittal
materials shall be mailed at least 30 days prior to the anticipated effective
time of the merger, or on such other date as GroupMAC shall determine, to each
holder of record of shares of GroupMAC common stock on the business day which
is not more than five days prior to the mailing date of the election form. Each
election form shall permit a holder of shares of GroupMAC common stock to make
an unconditional election with respect to such holder's shares to have up to
50% of such shares exchanged for cash in the amount of $13.50 per share. Any
such election shall have been properly made only if the exchange agent shall
have actually received a properly completed election form on or prior to the
third business day preceding the effective time of the merger. Cash elections
will be satisfied up to an aggregate of $150 million. In the event that the
cash election right is over-subscribed by GroupMAC shareholders, the elections
will be satisfied on a pro rata basis. Fractional shares will be rounded to the
nearest whole share.
Upon the later to occur of the effective time of the merger and the final
determination of the cash allocation to be made to GroupMAC shareholders who
elected to receive cash, GroupMAC will deposit the aggregate amount of cash
owed with the exchange agent to be paid to those shareholders whose shares will
be cancelled as a result of their cash election. Upon surrender of a GroupMAC
stock certificate for cancellation to the exchange agent together with a
properly completed election form, the respective GroupMAC shareholder will be
entitled after the effective time of the merger to receive any cash the
shareholder is entitled to receive, as a result of the exercise of the
shareholder's cash election, and a share certificate representing the number of
shares of GroupMAC common stock which were not exchanged for cash and cancelled
in connection with the shareholder's cash election.
Holders of GroupMAC common stock should not send any certificates
representing GroupMAC common stock with the enclosed white proxy card. GroupMAC
shareholders should send certificates representing GroupMAC common stock to the
exchange agent only after they receive, and they comply with, the instructions
contained in the letter of transmittal.
No Further Registration of Transfer of Cancelled GroupMAC Common Stock.
After the cancellation of any GroupMAC common stock, as a result of a GroupMAC
shareholder's election to receive cash in exchange for the shareholder's shares
of common stock, there will be no further registration of transfers of the
cancelled shares of GroupMAC common stock on the stock transfer books of
GroupMAC.
Undistributed Cash. One month after the effective time of the merger,
GroupMAC can require the exchange agent to deliver to GroupMAC all unclaimed
cash held by the exchange agent to satisfy shareholder cash elections.
Thereafter, GroupMAC shareholders whose common shares represent the right upon
exercise of their cash election to receive cash and certificates representing
their remaining GroupMAC shares will look only to GroupMAC as unsecured
creditors, for the cash and certificates, if any, to which they are entitled.
Representations and Warranties
GroupMAC and Building One have each made representations and warranties in
the merger agreement relating to, among other things:
. their organization and qualification to do business;
. their subsidiaries, interests in other companies and their subsidiaries'
organization and qualification to do business of subsidiaries;
. their capital stock and agreements and obligations relating to their
capital stock;
. the execution, delivery and enforceability of the merger agreement and
related matters, the absence of conflicts under the charter, bylaws and
material contracts and obligations, required consents and approvals and
compliance with laws;
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. their documents and financial statements filed with the SEC and the
accuracy of information contained therein;
. the conduct of business in the ordinary course of business and absence of
certain changes, obligations or undisclosed liabilities;
. litigation and regulatory proceedings;
. the accuracy of information contained in this joint proxy
statement/prospectus;
. tax matters;
. change of control provisions;
. employee matters and ERISA;
. licenses and registrations;
. environmental matters;
. regulation;
. their required securityholder vote to approve the merger;
. the opinion of each financial advisor relating to the merger;
. brokers' and finders' fees; and
. labor matters.
Conduct of Business Pending the Merger
We have agreed that, until the effective time of the merger, each of us and
each of our subsidiaries will, subject to certain exceptions:
. conduct its business only in the usual and ordinary course of business
consistent with past practice; and
. preserve intact its present business organization, keep available the
services of its officers and employees and preserve its relationships
with customers, suppliers, employees and others with which it has
business dealings, in each case in all material respects.
We have agreed that each of us and our subsidiaries, without the prior
written consent of the other, will not, subject to certain exceptions:
. amend its charter or bylaws;
. except for issuances of capital stock of its subsidiaries to it or its
subsidiaries, issue, sell or pledge additional shares of capital stock or
securities convertible into capital stock;
. declare or pay any dividend or other distribution except to or from one
of its wholly owned subsidiaries;
. adjust, split, redeem, purchase or otherwise reacquire any shares of its
capital stock;
. incur, assume or prepay any long-term debt or incur or assume any short-
term debt or make any advances to or investments in any other person or
entity, except in the ordinary course of business consistent with past
practice and except for any loans, advances or investments between it and
its wholly owned subsidiary;
. settle or compromise any suit or claim or threatened suit or claim
relating to the transactions contemplated by the merger agreement;
. except for increases consistent with past practice, increase compensation
or fringe benefits payable to its directors, officers or employees;
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. acquire, sell, lease or dispose of any assets or securities which are
material to it and its subsidiaries taken as a whole or enter into any
material commitment or transaction outside of the ordinary course of
business consistent with past practice other than transactions between it
and its wholly owned subsidiary;
. modify, amend or terminate any contract or waive or assign any contract
or other material right or claim or cancel or forgive any material
indebtedness owed to it or its subsidiaries other than in each case in
the ordinary course of business consistent with past practice or which is
not material to the business of it and its subsidiaries taken as a whole;
or
. change any material accounting principles or practices used by it except
as required by the SEC or the Financial Accounting Standards Board.
In addition, Building One has agreed not to make any tax election not
required by law or settle or compromise any tax liability, in either case that
is material to it and its subsidiaries taken as a whole.
Additional Agreements
Shareholders' Meetings. We have agreed to hold meetings of our shareholders
to vote on the merger proposals promptly after the SEC declares effective the
registration statement containing this joint proxy statement/prospectus. The
Building One board of directors has unanimously recommended approval of the
merger agreement and the GroupMAC board of directors has unanimously
recommended approval of the GroupMAC proposals. We have agreed that each of our
boards of directors will not:
. except as discussed below, withdraw or modify in a manner adverse to the
other party, its recommendation of approval;
. recommend any "alternative transaction" (as described below); or
. cause either of us to enter into any agreement related to any alternative
transaction.
However, if a board of directors receives a "superior proposal" (as
described below) and determines in good faith that doing so is required to
prevent the board of directors from breaching its fiduciary duties to its
shareholders, the board of directors may either terminate the merger agreement
and pay the fee described below or inform shareholders that it no longer
recommends approval (a "subsequent determination"). This subsequent
determination may only occur at a time that is after (1) the fifth business day
following notice to the other party, and (2) the other party has a reasonable
opportunity to make adjustments in the terms and conditions of the merger
agreement. Whether or not either of our boards of directors changes its
recommendation subject to our respective termination rights, we have agreed to
submit our respective merger related proposals to our respective shareholders.
An "alternative transaction" means a proposal, intended proposal, signed
agreement or completed action for any of:
. a transaction or series of transactions pursuant to which any third party
acquires or would acquire beneficial ownership of more than 20% of the
outstanding shares of GroupMAC, Building One or any of their
subsidiaries;
. an acquisition or proposed acquisition of, or business combination with
GroupMAC, Building One or any of their subsidiaries; or
. a transaction pursuant to which any third party acquires or would acquire
control of 20% or more of the consolidated assets of GroupMAC, Building
One or any of their subsidiaries.
A "superior proposal" means any proposal made by a third party to enter into
an alternative transaction which the board of directors determines in its good
faith judgment, based on, among other things, the advice of a financial advisor
of nationally recognized reputation, to be more favorable to its shareholders,
in the case of
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Building One, than the merger, and, in the case of GroupMAC, than the merger,
the issuance of GroupMAC's convertible preferred stock, and the receipt of
financing sufficient to complete the merger, taking into account all relevant
factors.
Other. The merger agreement contains other covenants relating to the
preparation and distribution of this joint proxy statement/prospectus, public
announcements, mutual notification of certain matters, access to information,
and cooperation regarding certain filings with governmental and other agencies
and organizations. In addition, the merger agreement contains a general
covenant requiring each of us to use commercially reasonable efforts to close
the merger, including obtaining required regulatory approvals.
No Solicitation of Transactions. We have agreed that neither we nor our
employees, subsidiaries or advisors will, directly or indirectly through
another person:
. solicit, initiate or encourage, or knowingly take any other action
designed to facilitate, any alternative transaction; or
. participate in any discussions regarding any alternative transaction.
However, this prohibition will not apply if at any time prior to receiving
the respective shareholder approval, the GroupMAC board of directors or the
Building One board of directors determines in good faith, after consultation
with outside counsel and financial advisors, that it is required to take such
action to prevent a breach of its fiduciary duties to its shareholders. In that
case, a party may, in response to a superior proposal, furnish information with
respect to it and its subsidiaries to any person pursuant to a customary
confidentiality agreement and participate in negotiations regarding the
proposal. Each party will promptly notify the other party orally and in writing
of any request for information or of any proposal in connection with an
alternative transaction, its material terms and conditions and the identity of
the person making the request or proposal and will keep the other party
reasonably informed of the status and details of the request or proposal on a
current basis.
The merger agreement does not prohibit us from (1) taking and disclosing to
our respective shareholders a position with respect to a tender offer required
by law or (2) making any disclosure to our respective shareholders if, in the
good faith judgment of the board of directors, after receipt of advice from
outside counsel, failure to disclose would result in a reasonable possibility
that the board of directors would breach its fiduciary duties to its
shareholders under applicable law.
Approvals. We have agreed to promptly prepare and file all necessary
documentation to obtain as promptly as practicable all approvals,
authorizations and consents of governmental entities which are necessary or
advisable to consummate the merger including all filings required with the SEC.
Stock Exchange Listing. GroupMAC has agreed to use its best efforts to have
the GroupMAC common stock to be issued pursuant to the merger approved for
listing on the NYSE not later than the effective time of the merger, subject to
official notice of issuance.
Conditions to the Merger
Conditions to Obligations of Each Party to Effect the Merger. Our respective
obligations to effect the merger are subject to the satisfaction or waiver of
certain conditions, including:
. the merger agreement shall have been approved and adopted by the
affirmative vote of the holders of Building One common stock and the
holders of the convertible junior subordinated debentures entitled to
cast at least a majority of the total number of votes entitled to be
cast, voting as a class, and by the affirmative vote of the holders of
the convertible junior subordinated debentures, voting as a single class;
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. the merger agreement shall have been approved and adopted by the
affirmative vote of the holders of GroupMAC common stock entitled to cast
at least two-thirds of the total number of votes entitled to be cast by
holders of GroupMAC common stock;
. any waiting period under the Hart-Scott-Rodino Act shall have expired or
been terminated;
. the registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part shall have become effective and not be the
subject of any stop order;
. no order shall be in effect that prohibits the consummation of the
merger;
. the shares of GroupMAC common stock to be issued pursuant to the merger
and upon conversion of the GroupMAC convertible preferred stock shall
have been approved for listing on the NYSE, subject to official notice of
issuance;
. each company shall have received the opinion of their respective counsel
to the effect that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code;
. Affiliates of Apollo shall have funded, immediately prior to the
effective time of the merger, the cash amount of $150 million to GroupMAC
and shall have delivered to GroupMAC the Building One convertible junior
subordinated debentures as consideration for the issuance of the
convertible preferred stock of GroupMAC;
. financing sufficient to complete the transactions contemplated by the
merger must have been obtained; and
. there shall be no material breach of representations, warranties or
covenants under the merger agreement and there shall exist no default
under any material indebtedness of GroupMAC or Building One.
Conditions to Obligations of Building One to Effect the Merger. Except as
may be waived by Building One, the obligations of Building One to effect the
merger are also subject to the satisfaction of the following conditions:
. GroupMAC shall not have failed to perform or comply in all material
respects with any of the agreements under the merger agreement to be
performed or complied with by it on or before the effective time; and
. the representations and warranties of GroupMAC shall be true and correct
as of the effective time of the merger unless the failure of such
representations and warranties to be so true and correct, individually or
in the aggregate, would not result or would not reasonably be expected to
result in a material adverse effect on GroupMAC.
Conditions to Obligations of GroupMAC to Effect the Merger. Except as may be
waived by GroupMAC, the obligations of GroupMAC to effect the merger are also
subject to the satisfaction of the following conditions:
. Building One shall not have failed to perform or comply in all material
respects with any of the agreements under the merger agreement to be
performed or complied with by it on or before the effective time; and
. the representations and warranties of Building One shall be true and
correct as of the effective time of the merger unless the failure of such
representations and warranties to be so true and correct, individually or
in the aggregate, would not result or would not reasonably be expected to
result in a material adverse effect on Building One.
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Termination, Amendment and Waiver
Termination. The merger agreement provides that, prior to the effective time
of the merger, the merger agreement may be terminated by:
. the mutual consent of GroupMAC and Building One by action of their
respective boards of directors;
. either party if the merger is not consummated before March 31, 2000,
except where the party seeking to terminate the merger agreement has
failed to fulfill any obligation or condition under the merger agreement;
. either party if the consummation of the merger is illegal or if any court
has issued an injunction permanently restraining, enjoining or otherwise
prohibiting the merger;
. either party if the board of directors of the other party (1) withdraws,
materially modifies or fails to recommend or reaffirm its approval or
withdraws or adversely modifies its approval of the merger agreement and,
in the case of GroupMAC, approval of the issuance of the GroupMAC common
stock in the merger and the issuance of the convertible preferred shares,
(2) recommends any "alternative transaction" with a third party or (3)
resolves to take any such actions, any of which is referred to as a
"withdrawal of approval";
. either party if the merger shall fail to receive the requisite vote for
approval and adoption by the securityholders of either Building One or
GroupMAC; or
. either party (1) if the other party breaches any of its representations,
warranties, obligations or agreements contained in the merger agreement,
and that breach is incapable of being cured and renders a condition
incapable of being satisfied prior to March 31, 2000 or (2) if a
condition to that party's obligations to consummate the merger cannot be
satisfied.
Additional Termination Rights; Termination Fee. If in the case of GroupMAC,
prior to the later of the approval of the merger agreement by the shareholders
of GroupMAC and the issuance of the shares of GroupMAC common stock and the
convertible preferred stock in connection with the merger, or, in the case of
Building One, prior to the approval of the merger agreement by Building One's
stockholders and holders of convertible junior subordinated debentures, the
board of directors of either GroupMAC or Building One, as the case may be,
determines in good faith after it has received a superior proposal and after
receiving the advice of outside counsel and financial advisors, that the board
of directors must terminate the merger agreement in order to avoid breaching
its fiduciary duties to its respective shareholders, the respective board of
directors may terminate the merger agreement and pay a termination fee of $15
million to the other company. However, the company's board of directors that is
seeking to terminate the merger agreement may only do so at a time that is
after the fifth business day following the receipt by the other party to the
merger agreement of written notice advising of receipt by the terminating party
of a superior proposal.
GroupMAC or Building One, as the case may be, shall also pay to the other
party a $15 million termination fee if the merger agreement:
. is terminated by the other party as a result of a withdrawal of approval
of the merger by such party;
. could have been, but was not, terminated by the other party as a result
of a withdrawal of approval by such party and is subsequently terminated
by such party because of the failure to obtain such party's necessary
shareholder approvals;
. (1) could not have been terminated by the other party as a result of a
withdrawal of approval by the party but is subsequently terminated by
either party because of the failure to obtain the necessary approval of
the shareholders of the party, (2) prior to the party's shareholders'
meeting, another party proposes an alternative transaction, except that
for such purposes, the applicable percentage in the definition of
"alternative transaction" is deemed fifty percent (50%), involving such
party or any of its subsidiaries, and (3) within 12 months after the
termination of the merger agreement, the party enters into a definitive
agreement with any third party with respect to and consummates an
alternative transaction; or
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. is terminated by the other party as a result of such party's material
breach of its obligations not to solicit alternative transactions, to
prepare and mail a joint proxy statement/prospectus relating to the
merger, convene a meeting of its shareholders, or recommend the merger
proposal to its shareholders.
In the event that GroupMAC or Building One attempts to terminate the merger
agreement in a manner that is not specifically provided for in the merger
agreement, the terminating party shall pay a termination fee of $30 million to
the other party.
Amendment. The merger agreement may be amended by our respective boards of
directors at any time before or after approval of the matters presented in
connection with the merger by the stockholders of Building One or the
shareholders of GroupMAC. The merger agreement may not be amended except by an
instrument in writing signed on behalf of each of us.
Waiver. At any time prior to the effective time of the merger, we may:
. extend the time for the performance of any of the obligations or other
acts of the other party to the merger agreement;
. waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement; and
. waive compliance with any of the agreements or conditions contained in
the merger agreement.
Extensions and waivers must be in writing and signed by the party granting
the extension or waiver.
Amendment to the Articles of Incorporation
The articles of amendment to the articles of incorporation change the name
of the combined company to because .
GroupMAC also is amending its articles of incorporation to increase the
authorized number of shares of capital stock of GroupMAC from 150,000,000 to
250,000,000, which shall be divided into 200,000,000 shares of common stock and
50,000,000 shares of preferred stock, in order to have enough shares of common
stock to exchange GroupMAC common stock for Building One stockholders' Building
One common stock in the merger, to ensure that there will be enough shares to
issue upon the exercise of options in connection with GroupMAC's stock plans
and to allow the combined company's acquisition program to continue for the
foreseeable future.
The articles of amendment also phase out the combined company's staggered
board. Currently, GroupMAC's articles of incorporation provide for a classified
board of directors; that is, one-third of the directors are elected annually,
each for a three-year term. GroupMAC and many other corporations adopted a
classified board structure in response to widespread concern over the use of
abusive techniques by corporate "raiders" and others who engaged in hostile and
non-negotiated attempts to acquire corporations to the disadvantage of
shareholders. Because classified directors serve extended terms, a classified
board can operate to prevent the acquisition of control of a company in a short
period of time. This may have the effect of discouraging interested parties
from pursuing control of a company, whether through a proxy contest for the
election of directors or the acquisition of large blocks of stock.
Additionally, some members of the investment community have begun to perceive
classified boards as a mechanism to entrench directors improperly.
Because of the significant investment by Apollo in GroupMAC and the large
stock holdings of former owners of businesses acquired by GroupMAC, GroupMAC
believes that the anti-takeover effects of a classified board do not provide a
significant benefit and whatever benefit provided is outweighed by the negative
perception of classified boards in the investment community. Accordingly, the
GroupMAC board believes that all of the combined company's directors should be
elected annually.
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The board amendment would phase out the current division of GroupMAC's board
of directors. The board currently is divided into three classes, with one class
elected each year for a three-year term. The amendment would provide instead
for the annual election of directors commencing with the class of directors
standing for election at the annual meeting of shareholders scheduled to be
held in 2000. To ensure the smooth transition to the new system, the board
amendment would not shorten the terms of directors elected or appointed prior
to the amendment becoming effective. The new procedure would apply, however, to
each director as his term expires. As a result of the board amendment, the
individuals who will be the combined company's Class III directors when the
merger is completed (Brooks Newmark, M. Jude Reyes and John M. Sullivan) would
stand for election at the next annual meeting of shareholders, scheduled for
2000, for a one-year term. At the following annual meeting of shareholders,
scheduled for 2001, the Class III directors, together with the Class I
directors when the merger is completed (Andrew Africk, William P. Love and
Donald L. Luke) would stand for election for a one year term. Beginning with
the third succeeding annual meeting of shareholders, scheduled for 2002, the
classification of the board would terminate and all directors would stand for
election for a one-year term.
The "business combinations" provision of the articles of incorporation and
the provisions governing certain acquisitions of voting stock are being amended
to allow the performance by the combined company of its future obligations
under the terms of the convertible preferred stock and under the investor's
rights agreement with BOSS II, LLC. The amendments ensure that any actions
taken to fulfill the terms and conditions of the convertible preferred stock
and the investor's rights agreement will not violate these provisions.
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PROPOSAL 2
ISSUANCE OF
CONVERTIBLE PREFERRED STOCK
Approval of Issuance of Convertible Preferred Stock
For the reasons discussed under the caption "The Merger--Recommendation of
the GroupMAC Board; GroupMAC's Reasons for the Transaction," the GroupMAC board
concluded that the issuance of the convertible preferred stock as part of the
overall transaction with Building One and Apollo is advisable and in the best
interests of GroupMAC and its shareholders, unanimously approved and adopted
the issuance of convertible preferred stock and unanimously recommends that the
GroupMAC shareholders vote FOR the issuance of shares of GroupMAC convertible
preferred stock in connection with the merger.
Description of Convertible Preferred Stock
The following summary of the terms of the convertible preferred stock is
qualified in its entirety by, and should be read in conjunction with, the
statement of designations. A copy of the statement of designations establishing
the terms of the convertible preferred stock to be filed with the Secretary of
State of the State of Texas is included in this joint proxy
statement/prospectus as Annex E. GroupMAC and BOSS II, LLC, an affiliate of
Apollo Management IV, L.P., the initial holder of the convertible preferred
stock, have also agreed to enter into an investor's rights agreement as of the
date of the issuance of the convertible preferred stock that will further
define the rights and obligations of GroupMAC and BOSS II, LLC and its
affiliates, the terms of which are described below.
Conversion Rights.
Each share of convertible preferred stock is convertible into a number of
shares of common stock determined by dividing:
. the $1,000 liquidation preference of the convertible preferred stock,
plus the amount of all accrued or accumulated and unpaid dividends as
of the date the holder of the shares of convertible preferred stock
elects to convert; by
. the conversion price of $14.00, subject to adjustment.
Initially, the shares of convertible preferred stock will be
convertible into approximately shares of common stock.
The price per share of common stock into which the convertible preferred
stock is convertible is generally subject to adjustment as follows:
. during the first 2 1/2 years after issuance, any issuances of common
stock, including any issuance of any option, warrant or security
convertible into GroupMAC common stock, without consideration or for
consideration that is less than the greater of the applicable
conversion price and the per share fair market value of the common
stock;
. after the first 2 1/2 years, issuances of common stock, including any
issuance of any option, warrant or security convertible into GroupMAC
common stock, without consideration or for consideration that is less
than the per share fair market value of the common stock;
. repurchases of common stock by GroupMAC at prices exceeding the fair
market value of the common stock;
. the issuance of common stock as a dividend or distribution on the
common stock;
. a subdivision, split or combination of the common stock; or
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. a capital reorganization of GroupMAC, a reclassification of the capital
stock of GroupMAC or a consolidation or merger of GroupMAC with or into
another corporation.
The conversion price does not get adjusted under certain circumstances,
however, including issuances of stock under existing and certain future
employee benefits plans and in connection with acquisitions that are below a
certain size and accretive.
Dividends and Liquidation Preference.
The convertible preferred stock bears a preferred cumulative dividend at
the rate of 7.25% per year. For the first three years, dividends on the
convertible preferred stock may be paid in cash or accumulated at the option
of GroupMAC. Thereafter, dividends will be paid in cash. The dividends will be
payable quarterly on March 31, June 30, September 30 and December 31 of each
year commencing March 31, 2000.
The convertible preferred stock is also entitled to share in any dividends
GroupMAC may declare on its common stock. In the event GroupMAC declares a
dividend on its common stock, the holders of the convertible preferred stock
will have the option to:
. receive an amount equal to the amount of the dividend the holder would
have received had the convertible preferred stock been converted into
common stock as of the date immediately prior to the record date of
such common stock dividend; or
. reduce the conversion price of the convertible preferred stock by the
per share amount of such common stock dividend.
In the event a change of control, as defined under "Redemption" below,
occurs prior to the fifth anniversary of the original issuance date of the
convertible preferred stock, the holders of the convertible preferred stock
shall be entitled to receive, out of funds legally available, all accrued or
accumulated and unpaid dividends as of the date of the occurrence of the
change of control together with the lesser of:
. all dividends that would accrue from the date of the change of control
through the fifth anniversary of the original issuance date of the
convertible preferred stock; and
. all dividends that would accrue from the date of the change of control
through the date that is 2 1/2 years from the date of the change of
control.
All such dividends will be paid in cash, provided that a holder who
converts shares of convertible preferred stock into common stock may, in some
circumstances, receive these accelerated dividends in the form of any
combination of cash or shares of common stock, valued at the fair market value
as of the date of the change of control.
Each share of convertible preferred stock has a liquidation preference in
an amount equal to the greater of:
. $1,000 plus all accrued or accumulated and unpaid dividends; and
. the amount the holder of such share would have received if such holder
had converted such share into shares of common stock immediately prior
to such liquidation.
In the event of a liquidation of GroupMAC, no distribution may be made to the
holders of common stock and any other class or series of capital stock of
GroupMAC ranking junior to the convertible preferred stock until the holders
of the convertible preferred stock have received the liquidation preference.
Redemption.
The convertible preferred stock is subject to mandatory and optional
redemption. On the twelfth anniversary of the date of the original issuance of
the convertible preferred stock, GroupMAC will be required to redeem all
shares of convertible preferred stock then outstanding, at a redemption price
per share equal to the liquidation amount as of such date.
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At the option of GroupMAC, at any time after the fifth anniversary of the
original issuance date of the convertible preferred stock, GroupMAC may redeem
all, but not less than all, of the then outstanding shares of convertible
preferred stock at a redemption price per share as set forth below:
. 103% of the liquidation amount as of such date, if the redemption
occurs on or after the fifth anniversary of the original issuance date
of the convertible preferred stock and prior to the sixth anniversary
of the original issuance date of the convertible preferred stock;
. 102% of the liquidation amount as of such date, if the redemption
occurs on or after the sixth anniversary of the original issuance date
of the convertible preferred stock and prior to the eighth anniversary
of the original issuance date of the convertible preferred stock; or
. 101% of the liquidation amount as of such date, if the redemption
occurs on or after the eighth anniversary of the original issuance date
of the convertible preferred stock and prior to the twelfth anniversary
of the original issuance date of the convertible preferred stock.
The holders of a majority of the convertible preferred stock may notify
GroupMAC if they expect that a change of control will occur. Within three
business days following the receipt by GroupMAC of that notice, GroupMAC is
obligated to notify each holder of convertible preferred stock and for a 15-day
period following notice by GroupMAC, each holder of convertible preferred stock
may elect to have any or all of such holder's shares redeemed by providing an
irrevocable notice of such election to the combined company. Payment of the
redemption price must occur on the later of 15 days following receipt by
GroupMAC of notice from the holder and the date of the change of control. No
redemption will be effected prior to the consummation of the change of control.
If no change of control has been completed within 180 days following the date
of notice from the holder, then the notice shall be deemed null and void. In
addition, GroupMAC is obligated to notify holders promptly of the actual
occurrence of the change of control, in which event each holder may elect to
have any or all of such holder's shares redeemed, out of funds legally
available therefor, by providing an irrevocable notice to GroupMAC of such
election at any time prior to the 90th day following GroupMAC's notice of the
occurrence of a change of control. The redemption price for convertible
preferred stock redeemed in connection with a change of control is 101% of the
liquidation amount.
GroupMAC is prohibited from engaging in a sale of GroupMAC assets, a merger
or a consolidation unless it has sufficient funds to perform its redemption
obligations or, if GroupMAC is not the surviving entity, proper and adequate
provision is made to ensure the surviving or continuing corporation expressly
assumes GroupMAC's redemption obligations and has sufficient funds to do so.
The occurrence of any of the following events, after the date of the merger,
constitutes a change of control under the terms of the convertible preferred
stock:
. the sale of all or substantially all of the assets of GroupMAC or a
merger in which GroupMAC shareholders wind up owning less than a majority
of the voting securities of the surviving or resulting entity;
. the adoption of a plan of liquidation by GroupMAC;
. the acquisition by a person or group other than Apollo or certain of its
affiliates of securities of GroupMAC entitled to cast a majority of the
votes entitled to be cast by the holders of GroupMAC's outstanding voting
securities;
. the acquisition by any person or group of 30% or more of the voting
securities of GroupMAC, and Apollo and its affiliates beneficially own a
lesser percentage of GroupMAC's outstanding voting securities than such
person or group; or
. the individuals who are members of the board of directors as of the
original issuance date of the convertible preferred stock, or directors
elected with the approval of such individuals, not including directors
elected by the holders of the convertible preferred stock, no longer
constitute a majority of the board of directors.
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Voting Rights.
The holders of the convertible preferred stock are entitled to vote on all
matters presented to the holders of the common stock. Each share of convertible
preferred stock entitles the holder thereof to cast the number of votes such
holder would have been entitled to cast had such holder converted such share of
convertible preferred stock into shares of common stock as of the record date
for determining eligibility for such vote. As of the original issuance date of
the convertible preferred stock, the holders of convertible preferred stock
will be entitled to an aggregate of votes associated with the
shares of convertible preferred stock, representing approximately %
of the voting power of GroupMAC's outstanding securities.
In addition, so long as any shares of convertible preferred stock are
outstanding, neither GroupMAC nor any of its subsidiaries may take any of the
following actions without the consent of the holders of at least a majority of
the then outstanding shares of convertible preferred stock:
. authorize or issue any series of capital stock, or securities convertible
into or exchangeable for capital stock, that is equal in priority with,
senior to or is mandatorily redeemable prior to the convertible preferred
stock or which in any manner materially adversely affects the rights,
preferences or remedies of the holders of the convertible preferred stock
or authorize or issue new shares of convertible preferred stock;
. alter or change the terms of the convertible preferred stock or amend,
alter or repeal the articles of incorporation or bylaws of GroupMAC in a
manner that would adversely affect the rights, preferences and privileges
of the holders of the convertible preferred stock;
. declare or pay any dividend on or make any payment on account of the
purchase, redemption, retirement or other acquisition of, any shares of
any capital stock of GroupMAC ranking junior to the convertible preferred
stock, or any warrants or options to purchase any capital stock of
GroupMAC, except that GroupMAC may declare or pay any dividend on or
repurchase its common stock if the amount, when combined with the sum of
all other dividends declared or paid on, plus all amounts paid in the
repurchase of, the common stock in the preceding 12-month period, does
not exceed 5% of the aggregate fair market value of the common stock at
the time of the declaration or payment of the dividend or commitment to
repurchase;
. agree, or permit any subsidiary to agree, to any provision in any
agreement that would by its terms impose any restriction on the ability
of GroupMAC to honor the exercise of any rights of the holders of the
convertible preferred stock; or
. enter into any transaction with certain of its affiliates unless such
transaction is in the ordinary course of business and on fair and
reasonable terms that are no less favorable to GroupMAC than it would
obtain in a comparable arm's-length transaction.
Representation on the Board of Directors.
Pursuant to the statement of designations and the investor's rights
agreement, Apollo and certain of its affiliates have the right to elect
directors to the board as follows:
. for so long as Apollo and certain of its affiliates hold in the aggregate
convertible preferred stock, common stock or any security representing
the right to receive common stock, collectively referred to as "common
stock equivalents," equal to at least 50% of the common stock equivalents
represented by its initial investment in convertible preferred stock,
Apollo will be entitled to elect the greater of at least three directors
or the number of directors that represents 30% of the board, rounded up
to the nearest whole director;
. for so long as Apollo and certain of its affiliates hold in the aggregate
common stock equivalents equal to at least 25% of the common stock
equivalents represented by its initial investment in convertible
preferred stock, Apollo will be entitled to elect the number of directors
that represents 22% of the board, rounded up to the nearest whole
director; and
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. for so long as Apollo and certain of its affiliates hold in the aggregate
common stock equivalents equal to at least 12.5% of the common stock
equivalents represented by its initial investment in convertible
preferred stock, Apollo shall be entitled to elect the number of
directors that represents 15% of the board, rounded up to the nearest
whole director.
The holders of the convertible preferred stock are entitled to proportionate
representation on every committee of the board, except the holders of the
convertible preferred stock shall be entitled to designate two of the five
members of the executive committee and one of the three members of the
acquisitions committee.
Additionally, holders of a majority of convertible preferred stock shall
have the special right to elect a majority of the board of directors upon the
occurrence of any of the following until the default is remedied:
. GroupMAC fails to pay the dividends or distributions required to be paid
on the convertible preferred stock within 10 days after notice of such
failure has been delivered by any holder of the convertible preferred
stock to GroupMAC;
. GroupMAC fails to pay the full redemption price when due;
. Any breach by GroupMAC of its obligations to obtain the approval of the
holders of the convertible preferred stock as required by the statement
of designations;
. Any material and intentional breach by GroupMAC of any of the terms and
conditions of the investor's rights agreement or the subscription and
exchange agreement;
. The occurrence of any payment default or any other default giving rise to
a right of acceleration, under any indebtedness of GroupMAC that has an
aggregate principal amount outstanding of greater than $10 million, after
giving effect to any notice or cure period;
. GroupMAC or any of its material subsidiaries voluntarily commences
certain bankruptcy-related proceedings; or
. Any involuntary proceeding is commenced with respect to GroupMAC or any
of its material subsidiaries and such proceedings remain unstayed for a
period of 60 consecutive days.
Investor's Rights Agreement
GroupMAC and BOSS II, LLC have also agreed to enter into an investor's
rights agreement upon the consummation of the merger that will further define
the rights and obligations with respect to the convertible preferred stock of
GroupMAC and the holders of the convertible preferred stock. A copy of the form
of investor's rights agreement is included in this joint proxy
statement/prospectus as Annex F.
Preemptive Rights.
For so long as Apollo and certain of its affiliates hold common stock
equivalents representing at least 25% of the shares of common stock issuable
upon conversion of the convertible preferred stock initially acquired by
Apollo, Apollo or its affiliates will have the first right to purchase all of
any future issuance by GroupMAC of common stock or any other equity security of
GroupMAC, any debt security which by its terms is convertible into or
exchangeable for any equity security or has any equity participation right, any
security that is a combination of debt or equity or any option, warrant or
other right to subscribe for or purchase, any such equity or debt security, in
each case other than:
. shares of common stock issuable upon exercise of any warrants or options
of GroupMAC outstanding upon the consummation of the merger or issued
under GroupMAC's incentive plans approved by the board;
. shares of common stock issued pursuant to the conversion of the
convertible preferred stock;
. shares of common stock issued as consideration pursuant to any
acquisition of any business;
. shares of convertible preferred stock issued as dividends to BOSS II,
LLC;
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. shares issued pursuant to earn-out arrangements in definitive, binding
agreements in existence on the date of issuance of the convertible
preferred stock relating to acquisitions by GroupMAC; and
. securities issued in an underwritten public offering that is registered
under the Securities Act.
If Apollo chooses not to purchase the offered securities and GroupMAC sells
all of the offered securities to a third party on the same terms, Apollo will
have the right to purchase a proportionate amount of such offered securities.
Further, any offered securities not purchased must again be re-offered to
Apollo before being sold to a third party.
Representation on the Board of Directors.
The investor's rights agreement provides Apollo and its affiliates with the
right to designate three members of the board of directors, but no less than
30%, for so long as it owns in the aggregate common stock equivalents
representing 50% or more of the outstanding common stock. This right to
designate directors decreases in number as Apollo's ownership of common stock
equivalents decreases.
The investor's rights agreement provides that, for so long as Apollo or its
affiliates own in the aggregate common stock equivalents representing 5% or
more of the outstanding common stock, Apollo will be entitled to designate one
member to the board of directors; however, this provision does not entitle
Apollo to designate another director in addition to the rights described in the
statement of designations or the investor's rights agreement.
From the date of the issuance of the preferred stock until the twelfth
anniversary date thereafter, Apollo will have a special right, in addition to
the rights described in the statement of designations, to designate a number of
individuals that, when combined with the directors they are entitled to elect
under other provisions of the investor's rights agreement, will constitute a
majority of the board of directors of GroupMAC, but the special right exists
only upon the occurrence of any of the following:
. any material and intentional breach by GroupMAC of any of the terms and
conditions of the investor's rights agreement or the subscription and
exchange agreement;
. any payment default or any other default giving rise to a right of
acceleration, under any indebtedness of GroupMAC that has an aggregate
principal amount outstanding of greater than $10 million, after giving
effect to any notice or cure period;
. GroupMAC or any of its material subsidiaries voluntarily commences
certain bankruptcy-related proceedings; or
. any involuntary proceeding is commenced with respect to GroupMAC or any
of its material subsidiaries and such proceedings remain unstayed for a
period of 60 consecutive days.
Registration Rights.
GroupMAC will agree to register for resale under the Securities Act the
shares of common stock issuable upon the conversion of the convertible
preferred stock with an aggregate fair market value of at least $25,000,000
upon the request of holders of at least 20% of the common stock issued upon
conversion of the convertible preferred stock. In addition, if GroupMAC
registers its own securities it will be required to use its best efforts to
register the common stock issued upon conversion of the convertible preferred
stock upon the request of any holders. These registration rights are
transferrable.
Certain Consent Rights of Apollo.
Until the maturity date of the convertible preferred stock and for so long
as Apollo and certain of its affiliates hold in the aggregate convertible
preferred stock representing 25% of Apollo's original investment or if the
convertible preferred stock has been converted into shares of common stock
after the receipt by the holders of notice of GroupMAC's intention to redeem
the convertible preferred stock pursuant to the statement
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of designations, then for two years from the date of conversion, as long as
Apollo and its affiliates hold in the aggregate common stock equivalents equal
to 25% of the common stock underlying Apollo's original investment, GroupMAC
may not, and may not permit any subsidiary to, take, agree or commit to take
any of the following actions without the prior written consent of Apollo:
. except under limited circumstances described in the investor's rights
agreement, merge, consolidate or amalgamate with any person or entity, or
sell all or substantially all of the assets of GroupMAC or such
subsidiary;
. enter into any transaction with certain of its affiliates unless such
transaction is in the ordinary course of business and on fair and
reasonable terms that are no less favorable to GroupMAC and its
subsidiaries than it would obtain in a comparable arm's-length
transaction;
. engage in any business other than the facilities services industry;
. effect, approve or authorize any liquidation or any recapitalization,
other than any liquidation or recapitalization of any wholly owned
subsidiary;
. amend, supplement or waive any of the terms or conditions of any
agreement between GroupMAC and a shareholder of GroupMAC with respect to
the retention by the shareholder of shares of GroupMAC's capital stock
unless such amendment, waiver or restatement pertains to an agreement
with a non-employee of GroupMAC and involves less than 10,000 shares of
common stock, adjusted for stock splits, stock dividends and similar
events after the date of the consummation of the merger;
. acquire or dispose of businesses or assets, whether by merger,
consolidation, share exchange or otherwise, where acquisitions would
exceed 2.0% of GroupMAC's total assets and dispositions would exceed 2.5%
of GroupMAC's total assets;
. hire or fire, or make certain amendments to the employment terms of the
chairman of the board or the chief executive officer of GroupMAC or the
top two executive officers of GroupMAC, if different;
. incur or refinance any indebtedness, as defined in the investor's rights
agreement, except (a) indebtedness under the credit agreement, as defined
in the investor's rights agreement, so long as GroupMAC maintains a
consolidated leverage ratio of less than 4.0 to 1.0; (b) other
indebtedness so long as the indebtedness does not exceed 2.5% of the
total assets of GroupMAC; or (c) indebtedness incurred to repurchase or
redeem the convertible preferred stock;
. make any single capital expenditure exceeding $10 million or make
aggregate capital expenditures in any year exceeding 1.75% of the
aggregate budgeted consolidated net revenues for such fiscal year;
. except under limited circumstances, create or acquire any interest in
subsidiaries other than wholly-owned subsidiaries; or
. adopt or amend certain equity-linked compensation or benefit plans or
make individual bonus payments exceeding $250,000.
Until the maturity date of the convertible preferred stock, if the holders
have converted their shares of convertible preferred stock into common stock
after receipt of notice of GroupMAC's intention to redeem the convertible
preferred stock and two years has elapsed since the date of such conversion,
for so long as Apollo and certain of its affiliates hold in the aggregate at
least 10% of the outstanding common stock, GroupMAC may not, and may not permit
any subsidiary to, take, agree or commit to take any of the following actions
without the prior written consent of Apollo:
. except under limited circumstances described in the investor's rights
agreement, merge, consolidate or amalgamate with any person or entity, or
sell all or substantially all of the assets of GroupMAC or such
subsidiary;
. enter into any transaction with certain of its affiliates unless such
transaction is in the ordinary course of business and on fair and
reasonable terms that are no less favorable to GroupMAC and its
subsidiaries than it would obtain in a comparable arm's-length
transaction;
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. effect, approve or authorize any liquidation or any recapitalization,
other than any liquidation or recapitalization of any wholly-owned
subsidiary; or
. hire or fire, or make certain amendments to the employment terms of the
chairman of the board or the chief executive officer of GroupMAC or the
top two executive officers of GroupMAC, if different.
The Company's Special Redemption Option.
If GroupMAC requests that Apollo consent to a merger or consolidation of
GroupMAC and Apollo does not consent to the proposed transaction, then GroupMAC
may consummate the proposed transaction without the consent of Apollo, provided
GroupMAC purchases from Apollo all of the shares of convertible preferred stock
and the shares of common stock it received upon conversion of the convertible
preferred stock. The purchase price for the convertible preferred stock and
shares of common stock received upon its conversion is an amount that provides
to Apollo a 25% annual rate of return compounded quarterly on the original cost
of the shares of convertible preferred stock, such return to be calculated from
the date of the consummation of the merger through the date of consummation of
the proposed transaction. Apollo and its affiliates will agree to vote their
shares of capital stock in favor of any proposed transaction as to which
GroupMAC has determined to purchase the shares as described above.
Standstill.
Prior to the second anniversary of the merger, Apollo will agree not to
purchase additional shares of common stock, other than by conversion of the
convertible preferred stock, by exercise of its 1,030,000 warrants to purchase
common stock or pursuant to the rights of first offer arising under the
investor's rights agreement, if after the purchase, Apollo and its affiliates
would own in the aggregate more than 30% of the outstanding voting securities
of GroupMAC on such date.
Voting Agreement.
Apollo and certain of its affiliates will also agree to vote all shares of
capital stock of GroupMAC in favor of the slate of directors recommended by the
board of directors to GroupMAC's shareholders at the annual shareholders'
meetings to be held in 2000 and 2001. In addition, Apollo and its affiliates
will agree not to enter into any agreement or arrangement that confers on any
other person or entity, other than an affiliate of Apollo, the right to vote
shares of the convertible preferred stock or the common stock received upon
exercise of the convertible preferred stock owned by Apollo or its affiliates.
Indemnification.
GroupMAC has agreed to indemnify Apollo and its affiliates for breaches by
GroupMAC of agreements between the parties.
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PROPOSAL 3
GROUP MAINTENANCE AMERICA CORP.
1999 STOCK PERFORMANCE INCENTIVE PLAN
1999 Stock Performance Incentive Plan
In January 2000, the board of directors of GroupMAC approved the GroupMAC
1999 Stock Performance Incentive Plan, the "incentive plan," for submission to
the shareholders of GroupMAC. A copy of the form of the incentive plan is
included in this joint proxy statement/prospectus as Annex G. The incentive
plan is substantially similar to the Building One Services Corporation 1999
Stock Performance Incentive Plan, which provides for the issuance of up to
1,500,000 shares of Building One common stock. Building One's incentive plan
will be assumed by GroupMAC in the merger. The incentive plan is intended to
provide officers and key employees with a strong incentive to work towards
increasing the per share price of GroupMAC common stock and to promote a closer
identity of interest between such persons and GroupMAC's shareholders. The
maximum number of shares of common stock that may be awarded under the
incentive plan may not exceed 1,200,000 shares.
Administration. The incentive plan will be administered by the compensation
committee of the board of directors. The compensation committee will have the
power to determine which officers and key employees will receive an award, the
time or times when such award will be made, the number of shares of common
stock to be awarded and whether to condition the award upon the achievement of
certain performance objectives in addition to the increase in value of the
common stock. No individual may receive an award of more than 250,000 shares of
common stock in any one calendar year.
Performance Awards. The incentive plan will permit grants of performance
awards which shall be paid in common stock. The compensation committee has the
authority to award up to a maximum of 1,200,000 shares of common stock upon the
attainment of the following common stock price levels (which levels must be
maintained for a period of at least 20 out of 30 consecutive trading days):
<TABLE>
<CAPTION>
Stock Cumulative Number of Shares
Price that may be Awarded
----- ---------------------------
<S> <C>
$32.00 240,000
$44.00 640,000
$56.00 1,200,000
</TABLE>
The compensation committee may, in its discretion, condition the award of
shares of common stock on the achievement of performance objectives along with
the price levels set forth above. The compensation committee will have the
authority to make adjustments in the stock price targets and number of shares
set forth above in the event of certain events or transactions affecting
GroupMAC's capital structure. In addition, in the event of a change in control
of GroupMAC, as defined in the incentive plan, other than the proposed merger,
the compensation committee may grant any or all of the 1,200,000 shares without
regard to achievement of the stock price targets. For awards intended to
qualify as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code, performance objectives (in addition to the
achievement of the stock price levels set forth above) shall be based solely on
(1) annual return on capital, (2) annual earnings or earnings per share, (3)
annual cash flow provided by operations, and (4) strategic business criteria,
consisting of one or more objectives based on meeting specific revenue, market
penetration, geographic business expansion goals, cost targets, and goals
relating to acquisitions or divestitures.
The incentive plan may be amended, altered, suspended, discontinued or
terminated by the board of directors of GroupMAC without shareholder approval
unless such approval is required by law or regulation or under the rules of any
stock exchange or automated quotation system on which the GroupMAC common stock
is then listed or quoted. Thus, shareholder approvals will not necessarily be
required for amendments which might increase the cost of the plan or broaden
eligibility. Shareholder approval will not be deemed to be
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required under laws or regulations that condition favorable tax treatment on
such approval, although the board of directors of GroupMAC may, in its
discretion, seek shareholder approval in any circumstance in which it deems
such approval advisable.
No awards have been granted under the incentive plan. Awards that may in the
future be received by or allocated to GroupMAC's chief executive officer, the
four most highly compensated executive officers, or other groups of persons
cannot be determined at this time.
Federal Income Tax Considerations. For federal income tax purposes, awards
of shares will generally be taxable to the employee when received based on the
fair market value of the shares at such time, and GroupMAC will generally be
entitled to a corresponding tax deduction. However, GroupMAC's deduction may be
limited by operation of Section 162(m) of the Internal Revenue Code, which
generally disallows a public company's tax deduction for compensation to the
chief executive officer and the four other most highly compensated executive
officers in excess of $1 million. Compensation that qualifies as "performance-
based compensation" is excluded from the $1 million maximum deductibility and
therefore remains fully deductible by the company that pays it. Awards of
shares of common stock under the incentive plan may not in all cases qualify as
"performance-based compensation."
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares of common
stock present in person or represented by proxies at the meeting and entitled
to vote is required to approve the adoption of the incentive plan. If the
merger is not completed for any reason, the incentive plan will not be adopted
by GroupMAC.
The GroupMAC board unanimously recommends that the GroupMAC shareholders
vote FOR the approval of the 1999 Stock Performance Incentive Plan.
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PROPOSAL 4
GROUP MAINTENANCE AMERICA CORP.
1999 STOCK AWARDS PLAN
1999 Stock Awards Plan
In January 2000, the board of directors of GroupMAC approved the GroupMAC
1999 Stock Awards Plan, the "awards plan". A copy of the form of the awards
plan is included in this joint proxy statement/prospectus as Annex H. The
awards plan is intended to provide employees, directors and consultants with an
opportunity to acquire a proprietary interest in GroupMAC and additional
incentive and reward opportunities based on the profitable growth of GroupMAC
and to aid GroupMAC in attracting and retaining outstanding personnel. The
awards plan will provide for the granting of options (either incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code, or
options that do not constitute incentive stock options ("nonqualified stock
options")), restricted stock awards, stock appreciation rights, performance
awards, and phantom stock awards, or any combination thereof. The maximum
number of shares of common stock that may be issued under the awards plan may
not exceed 2,500,000 shares.
Administration. The awards plan will be administered by the compensation
committee of the board of directors. The compensation committee will have the
power to determine which employees, directors and consultants will receive an
award, the time or times when such award will be made, the type of the award
and the number of shares of common stock to be issued under the award or the
value of the award. Only persons who at the time of the award are employees,
directors or consultants of GroupMAC or any of its subsidiaries will be
eligible to receive awards under the awards plan.
Options. The awards plan will provide for two types of options: incentive
stock options and nonqualified stock options. The compensation committee will
designate the employees, directors and consultants to receive the options, the
number of shares subject to the options, and the terms and conditions of each
option granted under the awards plan. No person may be awarded an option in any
calendar year to purchase more than 500,000 shares of common stock. The term of
any option granted under the awards plan shall be determined by the
compensation committee; provided, however, that the term of any incentive stock
option cannot exceed ten years from the date of the grant and any incentive
stock option granted to an employee who possesses more than 10% of the total
combined voting power of all classes of shares of GroupMAC or of its subsidiary
within the meaning of Section 422(b)(6) of the Code must not be exercisable
after the expiration of ten years from the date of grant. The exercise price
per share of common stock of options granted under the awards plan cannot be
less than the fair market value of a share of common stock on the date such
option is granted, subject to adjustments. Further, the exercise price of any
incentive stock option granted to an employee who possesses more than 10% of
the total combined voting power of all classes of shares of GroupMAC or of its
subsidiaries within the meaning of Section 422(b)(6) of the Code must be at
least 110% of the fair market value of the share at the time such option is
granted. The exercise price of options granted under the awards plan will be
paid in full in a manner prescribed by the compensation committee. The awards
plan permits the compensation committee to grant "reload options", which are
the automatic grant of additional options to an optionee if he or she exercises
all or part of the original option within ten years from the date of grant.
Restricted Stock Awards. Pursuant to a restricted stock award, common stock
will be issued or delivered to the employee, director or consultant at any time
the award is made without any cash payment to GroupMAC, except to the extent
otherwise provided by the compensation committee or required by law; provided,
however, that such shares will be subject to certain restrictions on the
disposition thereof and certain obligations to forfeit such shares to GroupMAC
as may be determined in the discretion of the compensation committee. The
restrictions on disposition may lapse based upon (a) GroupMAC's attainment of
specific performance targets established by the compensation committee that are
based on (1) the price of a share of common stock, (2) GroupMAC's earnings per
share, (3) GroupMAC's revenue, (4) the revenue of a business unit of GroupMAC
designated by the compensation committee, (5) the return on shareholders'
equity achieved by GroupMAC, or
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(6) GroupMAC's pre-tax cash flow from operations, (b) the grantee's tenure with
GroupMAC, or (c) a combination of both factors. GroupMAC will retain custody of
the common stock issued pursuant to a restricted stock award until the
disposition restrictions lapse. A grantee may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of such shares until the expiration
of the restriction period. However, upon the issuance to the grantee of common
stock pursuant to a restricted share award, except for the foregoing
restrictions, such grantee will have all the rights of a stockholder of
GroupMAC with respect to such shares, including the right to vote such shares
and to receive all dividends and other distributions paid with respect to such
shares. No person may be awarded more than 500,000 shares of restricted stock
in any calendar year.
Stock Appreciation Rights. A stock appreciation right permits the holder
thereof to receive an amount, in cash, common stock, or a combination thereof,
equal to the number of stock appreciation rights exercised by the holder
multiplied by the excess of the fair market value of common stock on the
exercise date over the stock appreciation rights' exercise price, which shall
be at least equal to the fair market value of the common stock at the date of
grant. A stock appreciation right may be exercised in whole or in such
installments and at such time as determined by the compensation committee. No
person may be awarded more than 500,000 stock appreciation rights in any
calendar year.
Performance and Phantom Stock Awards. The awards plan will permit grants of
performance awards and phantom stock awards, which may be paid in cash, common
stock, or a combination thereof as determined by the compensation committee.
Performance awards granted under the awards plan will have a maximum value
established by the compensation committee at the time of the grant. No person
may be granted a performance award in any calendar year where the value of such
award exceeds the fair market value of 500,000 shares of common stock. A
grantee's receipt of such amount will be contingent upon satisfaction by
GroupMAC, or any subsidiary, division or department thereof, of future
performance conditions established by the compensation committee prior to the
beginning of the performance period. Such performance awards, however, are
subject to later revisions as the compensation committee deems appropriate to
reflect significant unforeseen events or changes. A performance award will
terminate if the grantee is no longer employed by GroupMAC, a director ceases
to serve on the board of directors or a consultant ceases performing services
for GroupMAC during the applicable performance period, except as otherwise
provided by the compensation committee at the time of grant. Phantom stock
awards granted under the awards plan are awards of common stock or rights to
receive amounts equal to the fair market value of common stock over a specific
period of time. No person may be granted a phantom stock award in any calendar
year for more than 500,000 shares of common stock. Such awards vest over a
period of time or upon the occurrence of a specific event(s), including,
without limitation, a change of control, established by the compensation
committee, without payment of any amounts by the holder thereof, except to the
extent required by law, or satisfaction of any performance criteria or
objectives. A phantom stock award will terminate if the grantee is no longer
employed by GroupMAC, a director ceases to serve on the board of directors or a
consultant ceases performing services for GroupMAC during the applicable
vesting period or, if applicable, the occurrence of a specific event(s), except
as otherwise provided by the compensation committee at the time of grant. In
determining the value of performance awards or phantom stock awards, the
compensation committee must take into account the employee's, consultant's or
director's responsibility level, performance, potential, other awards under the
awards plan and other such consideration as it deems appropriate. Such payment
may be made in a lump sum or in installments as prescribed by the compensation
committee. Any payment made in common stock will be based upon the fair market
value of the common stock on the payment date.
Federal Income Tax Considerations. Upon the exercise of a nonqualified stock
option, the optionee will recognize ordinary taxable income on the amount that
the fair market value of the common stock purchased exceeds the price paid for
such common stock under the option. GroupMAC shall be able to deduct the same
amount for federal income tax purposes. The exercise of an incentive stock
option has no tax consequence to an optionee or GroupMAC. At the time the
restrictions lapse on a restricted stock award, the holder of such award will
recognize ordinary taxable income in an amount equal to the fair market value
of the shares of common stock on which the restrictions lapse. The amount of
ordinary taxable income recognized by such
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holder of a restricted stock award is deductible by GroupMAC. Upon the exercise
of a stock appreciation right, the holder of such right must include in
ordinary taxable income the amount of cash or the fair market value of the
shares of common stock received. The amount of ordinary taxable income
recognized by such holder of the stock appreciation right is deductible by
GroupMAC. A holder of a performance award and phantom stock award will include
in his or her ordinary taxable income the fair market value of the shares of
common stock related to such award when the holder's rights in such award first
becomes transferable or is no longer subject to a substantial risk of
forfeiture. The amount of ordinary taxable income recognized by the holder of
such an award is deductible by GroupMAC.
Section 162(m). Code Section 162(m) generally disallows a public company's
tax deduction for compensation to the chief executive officer and the four
other most highly compensated executive officers in excess of $1.0 million in
any calendar year. Compensation that qualifies as "performance-based
compensation" is excluded from the $1.0 million deductibility cap, and
therefore remains fully deductible by the company that pays it. Assuming the
awards plan is approved by the shareholders of GroupMAC, GroupMAC believes that
options granted with an exercise price at least equal to 100% of the fair
market value of the underlying common stock at the date of grant, and other
awards, the settlement of which is conditioned upon achievement of performance
goals (based on criteria described above), will qualify as "performance-based
compensation," although other awards under the awards plan may not so qualify.
No awards have been granted under the awards plan. Awards that may in the
future be received by or allocated to GroupMAC's chief executive officer, the
four most highly compensated executive officers, or other groups of persons
cannot be determined at this time.
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares of common
stock present in person or represented by proxies at the meeting and entitled
to vote is required to approve the adoption of the awards plan. If the merger
is not completed for any reason, the awards plan will not be adopted by
GroupMAC.
The GroupMAC board unanimously recommends that the GroupMAC shareholders
vote FOR the approval of the 1999 Stock Awards Plan.
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BOARD OF DIRECTORS AND MANAGEMENT OF
THE COMBINED COMPANY FOLLOWING THE MERGER
Following the completion of the merger, the combined company's board will
consist of Andrew Africk, William P. Love, Jr. and Donald L. Luke (Class I),
Michael Gross, Vincent Eades, Joseph M. Ivey, J. Patrick Millinor, Jr. and
Lucian L. Morrison (Class II), and Brooks Newmark, M. Jude Reyes and John M.
Sullivan (Class III). Messrs. Luke, Millinor, Morrison and Sullivan are
designees of GroupMAC, Messrs. Eades, Ivey, Love and Reyes are designees of
Building One, and Messrs. Africk, Gross and Newmark are designees of Apollo.
Apollo will have the right to designate two additional directors, and Apollo,
Building One and GroupMAC have agreed to jointly designate another director.
The terms of the Class I directors will expire in 2001. The terms of the Class
II directors will expire in 2002. The terms of the Class III directors will
expire in 2000. If the merger and the issuance of the convertible preferred
stock are not approved, the articles of amendment will not be filed and the
board of GroupMAC will continue its current composition. The biographies of the
foregoing directors, as well as the executive officers of the combined company,
follow.
<TABLE>
<CAPTION>
Name Age Position
------------------------ --- --------------------------------------------
<C> <C> <S>
J. Patrick Millinor, Jr. 53 Chairman of the Board and Director
President and Chief Executive Officer and
Joseph M. Ivey 40 Director
Donald L. Luke 62 Chief Operating Officer and Director
William P. Love, Jr. 39 President of electrical group and Director
Patrick L. McMahon President of industrial group
Alfred R. Roach, Jr. 54 President of mechanical group
Michael Sullivan 51 President of service solutions group
Robert Tyler 49 President of residential group
Chester J. Jachimiec 44 Executive Vice President--Acquisitions
Executive Vice President and Chief Financial
Darren B. Miller 40 Officer
Randolph W. Bryant 48 Senior Vice President, General Counsel and
Secretary
Daniel W. Kipp 40 Senior Vice President, Treasurer and Chief
Information Officer
Steven C. Ronilo 49 Senior Vice President--Human Resources
Andrew Africk 33 Director
Vincent W. Eades 38 Director
Michael Gross 38 Director
Lucian L. Morrison 62 Director
Brooks Newmark 41 Director
M. Jude Reyes 42 Director
John M. Sullivan 63 Director
</TABLE>
J. Patrick Millinor, Jr. has been a director of GroupMAC since 1997. Mr.
Millinor has been chief executive officer of GroupMAC since April 1997 and also
served as president of GroupMAC from April 1997 until June 1997. From October
1996 through April 1997, he served as chief executive officer of GroupMAC's
predecessor. From September 1994 to October 1996, Mr. Millinor worked directly
for Gordon Cain, a major shareholder of GroupMAC, assisting in the formation
and management of Agennix Incorporated and Lexicon Genetics, two biotechnology
companies. From March 1993 to September 1994, he served as chief executive
officer of UltrAir, Inc., a start-up passenger airline, and from October 1992
to March 1993, he served as its chief financial officer. He currently serves as
a director of Agennix Incorporated and Haelan Health(R) Corporation.
Joseph M. Ivey has served as the president and chief executive officer of
Building One since February 25, 1999 and has been a director of Building One
since October 8, 1998. From September 2, 1998 to February 25, 1999, Mr. Ivey
served as the president of the Building One Mechanical Group. Mr. Ivey has also
served, since October 1990, as the chairman and chief executive officer of Ivey
Mechanical Company, Inc., a mechanical services company that Building One
acquired on September 2, 1998. Mr. Ivey also serves as a director of 1st M&F
Corp. Mr. Ivey is a graduate of, and serves as a trustee of, Freed-Hardeman
University.
83
<PAGE>
Donald L. Luke has been a director and the chief operating officer of
GroupMAC since August 1997. From November 1996 to July 1997 he was chairman of
Arriva Air International, Inc., a start-up commercial air cargo business. From
September 1996 to August 1997, he served as chief executive officer of CTW,
Inc., a privately held acquisitions and management company, and a consultant to
Batteries Batteries, Inc., a consolidator of specialty battery distribution
companies that completed its initial public offering in April 1996. From 1995
to September 1996, he served as president, chief executive officer and director
of Batteries Batteries, Inc. From 1991 to 1995, Mr. Luke served as president
and chief executive officer of Miracle Ear New York City.
William P. Love, Jr. currently serves as the president of the Building One
Electrical and Mechanical Group and has been a director of Building One since
March 11, 1998. From September 1980 to March 11, 1998, Mr. Love served as the
president and chief executive officer of SKC Electric, Inc., an electrical
installation and maintenance services company that Mr. Love founded and that
has been a wholly owned subsidiary of Building One since it was acquired on
March 11, 1998. Mr. Love is the director designee of the initial companies in
the Building One electrical group pursuant to the agreements between Building
One and each company within the founding group.
Patrick L. McMahon has served as executive vice president and chief
operating officer of the industrial business unit of Building One's mechanical
and electrical group since July 1999. Previously, Mr. McMahon served as
president and chief operating officer of Professional Services Group, a
subsidiary of Air & Water Technologies since April 1995. From July 1994 to
March 1995, he served as vice president of National Sales of International
Technology, Inc., and from May 1971 to June 1994 Mr. McMahon served in various
capacities at Brown & Root including vice president of business development and
vice president of operations and engineering.
Alfred R. Roach, Jr. became executive vice president--commercial/industrial
group of GroupMAC in January 1998 and previously served as executive vice
president--marketing, sales and product support from August 1997 until January
1998. From 1989 to July 1997, Mr. Roach was a partner in Callahan Roach &
Associates. From 1986 to 1989, he served as president and general counsel of
Service America Corporation, an HVAC franchise company. From 1970 to 1986, Mr.
Roach engaged in the private practice of law.
Michael Sullivan has served as the president of the Building One Service
Solutions Group since November 1998. From 1980 to 1998, Mr. Sullivan served as
the president and chief executive officer of Sullivan Service Company, a
contract management firm that Mr. Sullivan founded and that has been a wholly
owned subsidiary of Building One since it was acquired on April 27, 1998 from
United Service Solutions. In 1980, Mr. Sullivan founded SPC Contract
Management, which specializes in outsourcing cleaning services for the
specialty retailer, and was acquired by Building One on April 27, 1998 from
United Service Solutions. From 1975 to 1980 he served as the president of
Coastal Building Maintenance, a contract cleaning company.
Robert Tyler has been senior vice president--residential group of GroupMAC
since June 1998. From February 1994 until June 1998, he was vice president
sales, for Amana Heating and Air Conditioning, a manufacturer of HVAC
equipment. He previously served as national sales manager for Friedrich Air
Conditioning, a manufacturer of HVAC equipment, from January 1990 until
February 1994.
Chester J. Jachimiec is a director and executive vice president--
acquisitions of GroupMAC, having served in such capacities with GroupMAC and
its predecessor since October 1996. From February 1994 to October 1996, Mr.
Jachimiec served as the director of acquisitions & investments for Tenneco
Energy. From 1990 to 1994, he was an investor in or consultant to various
private ventures engaged in natural gas gathering, processing and exploration
as well as computer software development. Prior to 1990, Mr. Jachimiec
practiced securities law and public accounting with several professional firms.
Darren B. Miller has been an executive vice president of GroupMAC since July
1998 and has been chief financial officer of GroupMAC and its predecessor since
October 1996. He was also a senior vice president from October 1996 until July
1998. From 1989 to 1996, Mr. Miller served in several capacities at Allwaste,
Inc., a consolidator of industrial service companies, including vice
president--treasurer and controller from 1995 to 1996. Prior to 1989, he was
employed in the audit practice of Arthur Andersen LLP.
84
<PAGE>
Randolph W. Bryant became senior vice president, general counsel and
secretary of GroupMAC upon its formation in 1997. From December 1996 to April
1997, Mr. Bryant served as associate general counsel of El Paso Natural Gas
Company. From 1984 to 1996, he was an attorney with Tenneco Inc. and Tenneco
Energy Inc., last serving as associate general counsel.
Daniel W. Kipp has been a senior vice president of GroupMAC since July 1998
and its corporate controller since February 1997. He also served as a vice
president of GroupMAC from February 1997 through July 1998. From February 1994
until February 1997, Mr. Kipp was a sales executive with American Sterling, a
provider of hazard insurance outsourcing services to the mortgage banking
industry, and from July 1990 until February 1994 he was vice president and
controller of Allwaste Recycling, Inc., a glass recycler and powdered glass
processor. Prior to July 1990, he was employed in the audit practice of Arthur
Andersen LLP.
Steven C. Ronilo has been senior vice president--human resources of GroupMAC
since May 1999. From 1997 to 1998 he was Vice President of Human Resources for
Amerra Health Services, and from 1990 to 1997 he was Senior Vice President of
Human Resources and Education for Regency Health Services, Inc.
Andrew Africk has served as a director of Building One since April 30, 1999.
Mr. Africk has been a principal of Apollo Advisors, L.P. for more than five
years, which, together with its affiliates, acts as the managing general
partner of several private securities investment funds, and of Lion Advisors,
L.P., a financial advisor to, and representative of institutional investors
with respect to, securities investments. Mr. Africk is also a director of
Continental Graphics Holdings, Inc. Mr. Africk is a director designee of Boss
Investment LLC pursuant to an agreement between Building One and Boss
Investment.
Vincent W. Eades has been a director of Building One since November 25,
1997. Since May 20, 1998, Mr. Eades has served as the chairman and chief
executive officer of Powerride Motorsports, Inc., a company seeking to
consolidate the motorcycle and leisure sports dealership industry. Between May
1995 and May 20, 1998, he served as the senior vice president of sales and
marketing for Starbucks Coffee Co., Inc. From November 1985 through May 1995,
Mr. Eades was employed by Hallmark Cards, Inc., most recently as a general
manager. Additionally, he serves as a director of USA Floral Products, Inc. and
UniCapital Corporation.
Michael Gross has served as a director of Building One since April 30, 1999.
Mr. Gross is one of the founding principals of Apollo Advisors, L.P. and of
Lion Advisors, L.P. Mr. Gross is also a director of Allied Waste Industries,
Inc., Breuners Home Furnishings, Inc., Converse, Inc., Florsheim Group, Inc.,
United Rentals, Inc. and Saks Incorporated. Mr. Gross is a director designee of
Boss Investment LLC pursuant to an agreement between Building One and Boss
Investment.
Lucian L. Morrison has been a director of GroupMAC since 1997. Mr. Morrison
has been engaged as a trustee and consultant with respect to trust, estate,
probate and qualified plan matters since 1992. From 1990 through 1992, he
served as chief fiduciary officer of Northern Trust Bank of Texas, and from
1979 until 1990 he served as chief executive officer of Heritage Trust Company.
Brooks Newmark has served as a director of Building One since April 30,
1999. Mr. Newmark is a principal of Apollo Advisors, L.P. Mr. Newmark has been
associated with Apollo for more than five years and is Vice President of Apollo
Management (U.K.) L.L.C. Mr. Newmark is a director designee of Boss Investment
LLC pursuant to an agreement between Building One and Boss Investment.
M. Jude Reyes has been a director of Building One since November 25, 1997.
Mr. Reyes has served as the chairman and president of Premium Distributors of
Virginia, L.L.C., a beverage distributor, since 1992. Between 1989 and 1992, he
served as the president and chairman of Harbor Distributing Company in Los
Angeles, California. He is also a director and investor in three other beverage
distributors and two wholesale food service distributors.
John M. Sullivan has been a director of GroupMAC since 1997. Mr. Sullivan
has been president of Beta Consulting, Inc., a financial and tax consulting
firm, since 1994. From 1992 through 1994, he was the international tax director
of General Motors Corporation. Prior to 1992, Mr. Sullivan was a tax partner
with Arthur Andersen LLP. He currently serves as a director of Atlantic Coast
Airlines Holdings, Inc.
85
<PAGE>
COMBINED COMPANY
UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
On November 3, 1999, GroupMAC and Building One announced the signing of a
definitive agreement to merge the two companies. Under the terms of the merger,
each outstanding share of Building One common stock will be converted into the
right to receive 1.25 shares of GroupMAC common stock. As part of the merger,
GroupMAC shareholders may elect to receive cash for up to 50% of their shares
at $13.50 per share, subject to proration in the event that holders of more
than approximately 11 million shares elect to receive cash. If this cash
election is fully subscribed, up to approximately 11 million shares of GroupMAC
common stock, or approximately 29% of the shares currently outstanding, will be
cancelled in the merger.
Concurrent with the closing of the merger, affiliates of Apollo Management,
L.P. ("Apollo") will exchange $105 million of Building One convertible junior
subordinated debentures, the "Building One convertible debt", and $150 million
of cash for approximately $255 million of GroupMAC convertible preferred stock,
the "preferred stock". The cash proceeds from the investment will be used to
fund the cash election right described above.
The preferred stock will mature in 2012 and will bear a dividend yield
coupon rate of 7.25% payable quarterly in cash. GroupMAC can defer payment of
dividends during the first three years without penalty. The preferred stock
will be convertible into shares of GroupMAC common stock at a conversion price
of $14.00 per common share. See the description of the preferred stock
contained elsewhere herein.
The merger is subject to the approval of both companies' shareholders,
concurrent completion of the Apollo investment, regulatory approval and other
customary closing conditions, and is expected to close in the first quarter of
2000.
GroupMAC received an underwritten commitment letter from Bank of America,
N.A. and Chase Bank of Texas, N.A., as co-lead arrangers and co-book managers,
to provide a total of $800 million in financing. It is expected that Building
One's $200 million of senior subordinated debt will be assumed by GroupMAC and
remain outstanding, and that GroupMAC will refinance its senior subordinated
notes.
The name of the combined company will be announced on or before the closing.
For purposes of the discussions below, the combined entity is referred to as
"combined company".
GroupMAC will be the surviving legal entity in the merger. However, for
accounting purposes, Building One is deemed to be the acquiror and,
accordingly, the merger will be accounted for as a "reverse acquisition" of
GroupMAC under the purchase method of accounting. Under this method of
accounting, the combined company's historical results for periods prior to the
merger will be the same as Building One's historical results. On the date of
the merger, the assets and liabilities of GroupMAC will be recorded at their
estimated fair values.
The following combined company unaudited pro forma financial statements
utilize the unaudited pro forma financial statements of GroupMAC and Building
One as of September 30, 1999 and for the nine months ended September 30, 1999
and for the year ended December 31, 1998, which give effect to the acquisitions
made by each company during 1998 and 1999 including amounts owed in connection
with those acquisitions. The combined company unaudited pro forma financial
statements give effect to the transactions highlighted above as if the
transactions had occurred on September 30, 1999 for purposes of the combined
company unaudited pro forma balance sheet, and on January 1, 1998 for purposes
of the combined company unaudited pro forma statements of operations. The
unaudited pro forma financial statements for GroupMAC and Building One are
derived from the separate pro forma financial statements of each company set
forth immediately following these combined company unaudited pro forma
financial statements.
86
<PAGE>
The pro forma adjustments are based on preliminary estimates and certain
assumptions that GroupMAC and Building One believe are reasonable under the
circumstances. The preliminary allocation of the purchase price to assets and
liabilities of GroupMAC reflects the assumption that assets and liabilities are
carried at historical amounts which approximate fair market value. The actual
allocation of the purchase price may differ from that reflected in the
unaudited pro forma financial statements after a more extensive review of the
fair market values of the assets and liabilities has been completed.
Management cannot fully quantify the cost savings and synergies associated
with the combined company. It is anticipated that any such savings will be
partially offset by the cost of additional corporate infrastructure to support
the combined operation accordingly, no pro forma adjustments related to these
cost savings and synergies have been included in the pro forma combined
financial information of the combined company.
The following combined company pro forma financial statements are based on
assumptions and include adjustments as explained in the notes thereto. The
combined company unaudited pro forma financial statements are not necessarily
indicative of the actual financial results that would have occurred if the
transactions described above had been effective on and as of the dates
indicated and may not be indicative of operations in future periods or as of
future dates. The combined company unaudited pro forma financial statements
should be read in conjunction with the notes thereto and the following
documents included or incorporated by reference herein:
. the historical audited consolidated financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of GroupMAC on Form 10-K/A and Building One
on Form 10-K as of December 31, 1998 and for the year then ended;
. the quarterly reports on Form 10-Q of GroupMAC and Building One for the
quarter ended September 30, 1999; and
. the separate company unaudited pro forma financial statements and notes
thereto of GroupMAC and Building One set forth immediately following the
combined company unaudited pro forma financial statements.
See "Where You Can Find More Information."
87
<PAGE>
COMBINED COMPANY
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Building
GroupMAC One
Pro Forma Pro Forma
ASSETS --------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents....... $ -- $ --
Accounts
receivable, net
of allowance...... 317,344 362,147
Inventories....... 20,635 8,213
Costs and
estimated
earnings in
excess of
billings on
uncompleted
contracts......... 50,299 49,875
Prepaid expenses
and other current
assets............ 8,167 11,590
Deferred tax
asset............. 9,750 4,424
Refundable income
taxes............. -- 3,405
-------- ----------
Total current
assets.......... 406,195 439,654
-------- ----------
PROPERTY AND
EQUIPMENT, net..... 55,913 57,358
GOODWILL AND OTHER
INTANGIBLES, net... 518,003 673,238
DEFERRED DEBT ISSUE
COSTS, net......... 13,568 21,055
OTHER LONG-TERM
ASSETS............. 1,744 6,384
-------- ----------
Total assets.... $995,423 $1,197,689
======== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
---------------
CURRENT
LIABILITIES:
Accounts
payable........... $ 92,510 $ 92,036
Accrued
compensation...... 42,981 41,669
Accrued
liabilities....... 27,934 46,409
Billings in
excess of costs
and estimated
earnings on
uncompleted
contracts......... 47,997 81,109
Deferred service
revenue........... 5,022 --
Income taxes
payable........... 8,844 --
Other current
liabilities....... 2,746 --
-------- ----------
Total current
liabilities..... 228,034 261,223
REVOLVING CREDIT
FACILITY........... 218,844 111,499
TERM CREDIT
FACILITY........... -- 124,375
SENIOR SUBORDINATED
NOTES, net of
unamortized
discount........... 130,000 195,680
JUNIOR SUBORDINATED
NOTES.............. 4,150 --
CONVERTIBLE JUNIOR
SUBORDINATED
DEBENTURES......... -- 103,190
DEFERRED TAX
LIABILITY.......... 1,486 2,243
OTHER LONG-TERM
LIABILITIES........ 3,084 2,463
MANDATORILY
REDEEMABLE,
CONVERTIBLE
PREFERRED STOCK.... -- --
SHAREHOLDERS'
EQUITY
Common stock...... 38 26
Additional paid-
in capital........ 382,949 310,216
Retained
earnings.......... 26,838 87,339
Accumulated other
comprehensive
loss.............. -- (565)
-------- ----------
Total
shareholders'
equity.......... 409,825 397,016
-------- ----------
Total
liabilities and
shareholders'
equity.......... $995,423 $1,197,689
======== ==========
<CAPTION>
Merger Transaction
------------------------------------------------------------------------------------------------------------
Apollo Investment Record Goodwill on Merger
----------------------- -----------------------------------------------------------------------------------
Write-off
Put of GroupMAC Pro Forma
Preferred Pref Stock/ Cancellation Merger GroupMAC SR credit line Eliminate Reverse Combined
Stock Conv Deb of GroupMAC Costs Sub Notes, costs, net GroupMAC Acquisition Company
Investment Exchange Common net of tax net of tax of tax Equity of GroupMAC Prior to
(a) (b) Stock (c) (d) (e) (f) (g) (h) Refinancing
ASSETS ---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents....... $146,500 $ -- $ (146,500) $ -- $ -- $ -- $ -- $ -- $ --
Accounts
receivable, net
of allowance...... -- -- -- -- -- -- -- -- 679,491
Inventories....... -- -- -- -- -- -- -- -- 28,848
Costs and
estimated
earnings in
excess of
billings on
uncompleted
contracts......... -- -- -- -- -- -- -- -- 100,174
Prepaid expenses
and other current
assets............ -- -- -- -- -- -- -- -- 19,757
Deferred tax
asset............. -- -- -- -- -- -- -- -- 14,174
Refundable income
taxes............. -- -- -- -- 1,153 1,296 -- -- 5,854
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
Total current
assets.......... 146,500 -- (146,500) -- 1,153 1,296 -- -- 848,298
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
PROPERTY AND
EQUIPMENT, net..... -- -- -- -- -- -- -- -- 113,271
GOODWILL AND OTHER
INTANGIBLES, net... -- -- -- 16,328 7,043 2,027 (259,825) 274,869 1,231,683
DEFERRED DEBT ISSUE
COSTS, net......... -- (4,485) -- -- (10,246) (3,323) -- -- 16,569
OTHER LONG-TERM
ASSETS............. -- -- -- -- -- -- -- -- 8,128
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
Total assets.... $146,500 $ (4,485) $ (146,500) $16,328 $ (2,050) $ -- $ (259,825) $274,869 $2,217,949
========== =========== ============ ========== ============= =========== ========== =========== ===========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS'
EQUITY
---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT
LIABILITIES:
Accounts
payable........... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 184,546
Accrued
compensation...... -- -- -- -- -- -- -- -- 84,650
Accrued
liabilities....... -- -- -- -- -- -- -- -- 74,343
Billings in
excess of costs
and estimated
earnings on
uncompleted
contracts......... -- -- -- -- -- -- -- -- 129,106
Deferred service
revenue........... -- -- -- -- -- -- -- -- 5,022
Income taxes
payable........... -- (1,749) -- (3,745) (3,350) -- -- -- --
Other current
liabilities....... -- -- -- -- -- -- -- -- 2,746
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
Total current
liabilities..... -- (1,749) -- (3,745) (3,350) -- -- -- 480,413
REVOLVING CREDIT
FACILITY........... -- -- 3,500 24,800 131,300 -- -- -- 489,943
TERM CREDIT
FACILITY........... -- -- -- -- -- -- -- -- 124,375
SENIOR SUBORDINATED
NOTES, net of
unamortized
discount........... -- -- -- -- (130,000) -- -- -- 195,680
JUNIOR SUBORDINATED
NOTES.............. -- -- -- -- -- -- -- -- 4,150
CONVERTIBLE JUNIOR
SUBORDINATED
DEBENTURES......... -- (103,190) -- -- -- -- -- -- --
DEFERRED TAX
LIABILITY.......... -- -- -- -- -- -- -- -- 3,729
OTHER LONG-TERM
LIABILITIES........ -- -- -- -- -- -- -- -- 5,547
MANDATORILY
REDEEMABLE,
CONVERTIBLE
PREFERRED STOCK.... 146,500 103,190 -- -- -- -- -- -- 249,690
SHAREHOLDERS'
EQUITY
Common stock...... -- -- (11) -- -- -- (27) 34 60
Additional paid-
in capital........ -- -- (149,989) -- -- -- (232,960) 274,835 585,051
Retained
earnings.......... -- (2,736) -- (4,727) -- -- (26,838) -- 79,876
Accumulated other
comprehensive
loss.............. -- -- -- -- -- -- -- -- (565)
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
Total
shareholders'
equity.......... -- (2,736) (150,000) (4,727) -- -- (259,825) 274,869 664,422
---------- ----------- ------------ ---------- ------------- ----------- ---------- ----------- -----------
Total
liabilities and
shareholders'
equity.......... $146,500 $ (4,485) $ (146,500) $16,328 $ (2,050) $ -- $(259,825) $274,869 $2,217,949
========== =========== ============ ========== ============= =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
88
<PAGE>
COMBINED COMPANY
UNAUDITED PRO FORMA BALANCE SHEET (Continued)
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Refinancing
-----------------------------------------
Pro Forma Write-off
Combined Company Refinance existing Building One credit Pro Forma
Prior to revolver balances line costs, net of tax Combined
ASSETS Refinancing (i) (j) Company
------ ---------------- ------------------ ---------------------- ----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents............ $ -- $ -- $ -- $ --
Accounts receivable,
net of allowance....... 679,491 -- -- 679,491
Inventories............ 28,848 -- -- 28,848
Costs and estimated
earnings in excess of
billings on
uncompleted
contracts.............. 100,174 -- -- 100,174
Prepaid expenses and
other current assets... 19,757 -- -- 19,757
Deferred tax asset..... 14,174 -- -- 14,174
Refundable income
taxes.................. 5,854 -- 3,377 9,231
---------- -------- ------- ----------
Total current
assets............... 848,298 -- 3,377 851,675
---------- -------- ------- ----------
PROPERTY AND EQUIPMENT,
net..................... 113,271 -- -- 113,271
GOODWILL AND OTHER
INTANGIBLES, net........ 1,231,683 -- -- 1,231,683
DEFERRED DEBT ISSUE
COSTS, net.............. 16,569 10,200 (8,658) 18,111
OTHER LONG-TERM ASSETS.. 8,128 -- -- 8,128
---------- -------- ------- ----------
Total assets......... $2,217,949 $ 10,200 $(5,281) $2,222,868
========== ======== ======= ==========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable....... $ 184,546 $ -- $ -- $ 184,546
Accrued compensation... 84,650 -- -- 84,650
Accrued liabilities.... 74,343 -- -- 74,343
Billings in excess of
costs and estimated
earnings on
uncompleted
contracts.............. 129,106 -- -- 129,106
Deferred service
revenue................ 5,022 -- -- 5,022
Income taxes payable... -- -- -- --
Other current
liabilities............ 2,746 -- -- 2,746
---------- -------- ------- ----------
Total current
liabilities.......... 480,413 -- -- 480,413
REVOLVING CREDIT
FACILITY................ 489,943 (489,943) -- --
NEW CREDIT FACILITY--
Revolver................ -- 324,518 -- 324,518
NEW CREDIT FACILITY--
Delayed Draw Term A..... -- 130,000 -- 130,000
NEW CREDIT FACILITY--
Term B.................. -- 170,000 -- 170,000
TERM CREDIT FACILITY.... 124,375 (124,375) -- --
SENIOR SUBORDINATED
NOTES, net of
unamortized discount.... 195,680 -- -- 195,680
JUNIOR SUBORDINATED
NOTES................... 4,150 -- -- 4,150
CONVERTIBLE JUNIOR
SUBORDINATED
DEBENTURES.............. -- -- -- --
DEFERRED TAX LIABILITY.. 3,729 -- -- 3,729
OTHER LONG-TERM
LIABILITIES............. 5,547 -- -- 5,547
MANDATORILY REDEEMABLE,
CONVERTIBLE PREFERRED
STOCK................... 249,690 -- -- 249,690
SHAREHOLDERS' EQUITY
Common stock........... 60 -- -- 60
Additional paid-in
capital................ 585,051 -- -- 585,051
Retained earnings...... 79,876 -- (5,281) 74,595
Accumulated other
comprehensive loss..... (565) -- -- (565)
---------- -------- ------- ----------
Total shareholders'
equity............... 664,422 -- (5,281) 659,141
---------- -------- ------- ----------
Total liabilities and
shareholders'
equity............... $2,217,949 $ 10,200 $(5,281) $2,222,868
========== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
89
<PAGE>
COMBINED COMPANY
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Combined
Building Pro Forma Company Pro Forma Pro Forma
GroupMAC One Merger Prior to Refinancing Combined
Pro Forma Pro Forma Adjustments Refinancing Adjustments Company
---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $1,441,473 $1,604,336 $ -- $3,045,809 $ -- $3,045,809
COST OF SERVICES........ 1,126,288 1,276,135 -- 2,402,423 -- 2,402,423
---------- ---------- -------- ---------- ------- ----------
Gross profit........... 315,185 328,201 -- 643,386 -- 643,386
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 190,990 182,983 -- 373,973 -- 373,973
AMORTIZATION OF
GOODWILL............... 13,346 17,679 552 (a) 31,577 -- 31,577
---------- ---------- -------- ---------- ------- ----------
Income from
operations.......... 110,849 127,539 (552) 237,836 -- 237,836
OTHER INCOME (EXPENSE):
Interest expense....... (31,633) (51,062) 10,770 (b) (71,925) (1,934)(g) (73,859)
Interest income........ -- -- -- -- -- --
Other.................. 1,415 3,777 -- 5,192 -- 5,192
---------- ---------- -------- ---------- ------- ----------
Income before income
tax provision....... 80,631 80,254 10,218 171,103 (1,934) 169,169
INCOME TAX PROVISION.... 35,213 38,771 4,233 (c) 78,217 (760)(h) 77,457
---------- ---------- -------- ---------- ------- ----------
NET INCOME.............. $ 45,418 $ 41,483 $ 5,985 $ 92,886 $(1,174) $ 91,712
Preferred dividends..... -- -- (18,356)(d) (18,356) -- (18,356)
Amortization of deferred
issue costs on
mandatorily redeemable,
convertible preferred
stock.................. -- -- (292)(e) (292) -- (292)
---------- ---------- -------- ---------- ------- ----------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS.... $ 45,418 $ 41,483 $(12,663) $ 74,238 $(1,174) $ 73,064
========== ========== ======== ========== ======= ==========
NET INCOME PER SHARE--
BASIC.................. $ 1.18 $ 1.57 $ 1.23 (f) $ 1.21 (i)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES--BASIC.......... 38,412 26,357 60,247 (f) 60,247 (i)
========== ========== ========== ==========
NET INCOME PER SHARE--
DILUTED................ $ 1.17 $ 1.47 $ 1.17 (f) $ 1.15 (i)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES--DILUTED........ 38,968 31,538 79,632 (f) 79,632 (i)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
90
<PAGE>
COMBINED COMPANY
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Combined
Building Pro Forma Company Pro Forma Pro Forma
GroupMAC One Merger Prior to Refinancing Combined
Pro Forma Pro Forma Adjustments Refinancing Adjustments Company
---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $1,214,543 $1,363,487 $ -- $2,578,030 $ -- $2,578,030
COST OF SERVICES........ 966,173 1,085,207 -- 2,051,380 -- 2,051,380
---------- ---------- ------- ---------- ------ ----------
Gross profit........... 248,370 278,280 -- 526,650 -- 526,650
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 152,942 157,331 -- 310,273 -- 310,273
RESTRUCTURING AND
RECAPITALIZATION
CHARGES................ -- 8,020 -- 8,020 -- 8,020
AMORTIZATION OF
GOODWILL............... 10,009 13,259 415 (a) 23,683 -- 23,683
---------- ---------- ------- ---------- ------ ----------
Income from
operations.......... 85,419 99,670 (415) 184,674 -- 184,674
OTHER INCOME (EXPENSE):
Interest expense....... (23,725) (38,297) 8,078 (b) (53,944) (1,450)(g) (55,394)
Interest income........ -- -- -- -- -- --
Other.................. 444 511 -- 955 -- 955
---------- ---------- ------- ---------- ------ ----------
Income before income
tax provision....... 62,138 61,884 7,663 131,685 (1,450) 130,235
INCOME TAX PROVISION.... 27,058 28,744 3,119 (c) 58,921 (560)(h) 58,361
---------- ---------- ------- ---------- ------ ----------
NET INCOME.............. $ 35,080 $ 33,140 $ 4,544 $ 72,764 $ (890) $ 71,874
Preferred dividends..... -- -- (13,767)(d) (13,767) -- (13,767)
Amortization of deferred
issue costs on
mandatorily redeemable,
convertible preferred
stock.................. -- -- (219)(e) (219) -- (219)
---------- ---------- ------- ---------- ------ ----------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS.... $ 35,080 $ 33,140 $(9,442) $ 58,778 $ (890) $ 57,888
========== ========== ======= ========== ====== ==========
NET INCOME PER SHARE--
BASIC.................. $ 0.91 $ 1.26 $ 0.98 (f) $ 0.96 (i)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES--BASIC.......... 38,412 26,357 60,247 (f) 60,247 (i)
========== ========== ========== ==========
NET INCOME PER SHARE--
DILUTED................ $ 0.91 $ 1.17 $ 0.92 (f) $ 0.91 (i)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES--DILUTED........ 38,737 31,538 79,401 (f) 79,401 (i)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
91
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The following summarizes the unaudited pro forma balance sheet adjustments
(in thousands except per share amounts):
a) Records the shares of preferred stock to be issued to Apollo in exchange
for $150,000 in cash, net of estimated issuance costs of approximately
$3,500.
b) Records the shares of preferred stock to be issued to Apollo in exchange
for the Building One convertible debt in the amount of $103,190
(including in-kind accrued interest of $3,190 through September 30,
1999). It is anticipated that the Building One convertible debt will have
a balance of approximately $105,000 as of the closing of the
transactions. Also records the write-off of $4,485 of unamortized
deferred debt issue costs associated with the Building One convertible
debt and the associated tax benefit of $1,749 at a 39% effective tax rate
directly to the combined company's retained earnings. This net of tax
charge of $2,736 will be reflected in the historical statement of
operations of the combined company upon consummation of the transactions.
See Note 3.
c) Records the maximum number of shares of GroupMAC common stock to be
canceled in the cash election right with the cash proceeds of the
preferred stock issuance discussed in Note 1a above as follows:
<TABLE>
<S> <C>
Estimated net proceeds from the issuance of shares of preferred
stock........................................................... $146,500
Borrowings under the GroupMAC credit agreement to replenish
issuance costs deducted from the proceeds....................... 3,500
--------
Maximum cash available to cancel shares in the cash election
right........................................................... $150,000
Cash election price per share.................................... $ 13.50
--------
Maximum number of shares available for cancellation in the cash
election right.................................................. 11,111
========
</TABLE>
d) Records the estimated cash merger costs of GroupMAC and Building One
along with the related tax benefit as follows:
<TABLE>
<CAPTION>
Building
GroupMAC One
-------- --------
<S> <C> <C>
Estimated nondeductible brokerage, legal, accounting
and other professional fees........................... $ 8,765 $ 6,435
Estimated deductible severance costs................... 1,850 6,000
Estimated deductible office closing costs and other
exit activities costs................................. -- 1,750
------- -------
Total estimated merger costs........................... $10,615 $14,185
======= =======
Tax benefit on deductible costs at 39%................. $ 722 $ 3,023
======= =======
</TABLE>
In connection therewith, the net of tax amount of $4,727 related to
Building One severance and reserves for the closing of duplicate office
space has been recorded directly to combined company retained earnings.
This net of tax charge of $4,727 will be reflected in the historical
statement of operations of the combined company upon consummation of the
transactions. See Note 3.
e) Records the anticipated refinancing of GroupMAC's $130,000 Senior
Subordinated Notes at 101% due to change of control provisions in the
associated indenture. Also records the call premium of $1,300, the
elimination of $10,246 in related deferred debt issue costs and the
associated tax benefits of $4,503 at a 39% effective tax rate.
f) Represents the elimination of GroupMAC's unamortized deferred debt issue
costs of $3,323 related to its existing revolving credit facility and the
associated tax benefit of $1,296 at a 39% effective tax rate.
g) Records the elimination of GroupMAC's pro forma shareholders' equity as
of September 30, 1999 after adjusting for the maximum number of shares of
GroupMAC common stock to be cancelled in the cash election merger
discussed in Note 1c above.
92
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
1. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS--(Continued)
h) Records the effects of the reverse acquisition of GroupMAC by Building
One, including the entries to adjust the par value of common stock of
Building One to reflect the capital structure of GroupMAC, the legal
surviving corporation in the merger, as follows:
<TABLE>
<CAPTION>
Common Options/
Stock Warrants
-------- --------
<S> <C> <C>
GroupMAC number of shares, options and warrants
outstanding at September 30, 1999...................... 38,411 4,916
Maximum shares available for cancellation in the cash
election right......................................... (11,111) --
-------- --------
GroupMAC number of shares outstanding after the cash
election right......................................... 27,300 4,916
Reciprocal of the exchange ratio utilized to convert
Building One shares to GroupMAC shares (1.00/1.25)..... 0.80 0.80
-------- --------
Building One equivalent shares.......................... 21,840 3,933
Building One five day share price average with 11/03/99
as the midpoint/Black-Scholes option valuation......... $ 11.325 $ 7.00
-------- --------
Fair value of GroupMAC shares, options and warrants..... $247,338 $ 27,531
======== ========
Total value of shares, options and warrants on the
reverse acquisition.................................... $274,869
Estimated Building One merger costs..................... 6,435
--------
Total purchase consideration............................ $281,304
========
</TABLE>
The preliminary adjustments to revalue the assets and liabilities of
GroupMAC to fair value and allocate the excess purchase consideration
over the fair value of net assets are as follows:
<TABLE>
<S> <C>
Book value of GroupMAC's net assets............................... $240,862
Other intangible assets........................................... 10,000
Goodwill.......................................................... 30,442
--------
$281,304
========
</TABLE>
The book value of GroupMAC's net assets has been adjusted for the
cancellation of shares of GroupMAC common stock in the cash election
right, the elimination of deferred financing costs, and the accrual of
merger costs and severance costs resulting from the merger.
The pro forma financial information includes management's best estimate of
restructuring costs that could result from the merger. In addition, the
total consideration has been allocated to the assets and liabilities of
GroupMAC based on the assumption that assets and liabilities are carried
at historical amounts which approximate fair market value. The other
intangible assets primarily relate to workforce and customer lists. The
purchase price allocation is subject to change in the fair value of
GroupMAC's net assets on the effective date of the merger. These items
will not be known until the effective date of the merger. Management does
not believe the final purchase price allocation will differ materially
from the preliminary purchase price allocation.
i) Represents the refinancing of the GroupMAC and Building One existing
revolving and term credit facilities with the $800,000 of committed
financing from Bank of America, N.A. and Chase Bank of Texas, N.A. (as co-
lead arrangers and co-book managers). Also records estimated deferred debt
issue costs of $10,200 related to this refinancing.
j) Represents the elimination of Building One's unamortized deferred debt
issue costs of $8,658 related to its existing revolving and term credit
facility and the associated tax benefit of $3,377 at a 39% effective tax
rate directly to the combined company's retained earnings. This net of tax
charge of $5,281 will be reflected in the historical statement of
operations of the combined company upon consummation of the transactions.
See Note 3.
93
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
2. UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
The following summarizes the unaudited pro forma statements of operations
adjustments (in thousands except per share amounts):
a) Reflects the adjustment necessary to reflect the amortization of goodwill
and other intangible assets generated from the balance sheet adjustments
discussed in Note 1 above. The goodwill is amortized over a 40-year
estimated life and the other intangible assets are amortized over a
weighted average estimated life of 15 years.
b) Represents the adjustment necessary to reflect the net decrease in
interest expense related to exchanging Building One convertible debt for
preferred stock discussed in Note 1b, the financing of issuance costs for
the cancellation of shares of GroupMAC common stock discussed in Note 1c,
the financing of each company's merger costs discussed in Note 1d and the
refinancing of GroupMAC's $130,000 Senior Subordinated Notes at 101% due
to change in control provisions in the associated indenture discussed in
Note 1e. A summary of the pro forma debt outstanding of the separate
companies and the combined company and a summary of the pro forma interest
expense (including amounts recognized in the historical financial
statements and the separate company unaudited pro forma financial
statements) are set forth in Note 5.
c) Reflects the incremental provision for federal and state income taxes
related to the reduction in interest expense discussed in Note 2b.
d) Represents the annual and nine-month dividend yield on the $253,190 face
amount of the preferred stock discussed in Notes 1a and 1b above at a
7.25% coupon rate.
e) Represents the annual and nine-month amortization of the estimated
preferred stock issuance costs of $3,500 discussed in Note 1a over the
twelve-year term of the preferred stock.
94
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
2. UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS--(Continued)
f) The calculation of the combined weighted average shares outstanding and
basic and diluted earnings per share before refinancing adjustments is as
follows:
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Weighted Average Shares Outstanding:
Basic:
Weighted average shares outstanding--GroupMAC.. 38,412 38,412
Weighted average shares outstanding--Building
One........................................... 26,357 26,357
------- --------
Weighted average shares outstanding--Combined.. 64,769 64,769
Maximum shares available for cancellation in
the cash election right discussed in Note 1c.. (11,111) (11,111)
Incremental shares from conversion of Building
One shares to GroupMAC shares at a 1.25 to
1.00 ratio.................................... 6,589 6,589
------- --------
Weighted average shares outstanding--Basic..... 60,247 60,247
======= ========
Diluted:
Weighted average shares outstanding--GroupMAC.. 38,968 38,737
Weighted average shares outstanding--Building
One........................................... 31,538 31,538
------- --------
Weighted average shares outstanding--Combined.. 70,506 70,275
Maximum shares available for cancellation in
the cash election right discussed in Note 1c.. (11,111) (11,111)
Incremental shares from conversion of Building
One shares to GroupMAC shares at a 1.25 to
1.00 ratio.................................... 6,589 6,589
Elimination of dilutive effect of $103,190 face
amount of Building One convertible debt
exchanged for preferred stock discussed
in Note 1b.................................... (4,586) (4,586)
Dilutive effect of $253,190 face amount of
preferred stock at a $14.00 conversion price
issued discussed in Note 1a and 1b............ 18,085 18,085
Incremental shares from conversion of Building
One contingently issuable shares, options and
warrants to GroupMAC shares at a 1.25 to 1.00
ratio......................................... 149 149
------- --------
Weighted average shares outstanding--Diluted... 79,632 79,401
======= ========
Earnings Per Share:
Basic Before Refinancing:
Net income available to common shareholders.... $74,238 $ 58,778
Basic weighted average shares outstanding...... 60,247 60,247
------- --------
Basic earnings per share....................... $ 1.23 $ 0.98
======= ========
Diluted Before Refinancing:
Net income available to common shareholders.... $74,238 $ 58,778
Plus preferred stock dividends................. 18,356 13,767
Plus amortization of deferred preferred stock
issuance costs................................ 292 219
------- --------
Net income on an if-converted basis............ $92,886 $ 72,764
Diluted weighted average shares outstanding.... 79,632 79,401
------- --------
Diluted earnings per share..................... $ 1.17 $ 0.92
======= ========
</TABLE>
95
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
2. UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS--(Continued)
g) Represents the adjustment necessary to reflect the net increase in
interest expense related to the refinancing of the GroupMAC and Building
One existing revolving and term credit facilities along with the financing
of the estimated deferred debt issue costs of $10,200 related to this
refinancing. A summary of the pro forma debt outstanding before and after
the refinancing and a summary of the pro forma interest expense after the
refinancing (including amounts recognized in the historical financial
statements and the separate company unaudited pro forma financial
statements) are set forth in Note 5. The impact of a 1/8% change on the
effective interest rate applicable to the debt of the combined company
which is subject to changes in interest rates would be $781 for the year
ended December 31, 1998 and $585 for the nine months ended September 30,
1999.
h) Represents the reduction of the provision for federal and state income
taxes related to the refinancing activities discussed in Note 2g.
i) The calculation of the combined basic and diluted earnings per share after
refinancing adjustments is as follows:
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Earnings Per Share:
Basic After Refinancing:
Net income available to common shareholders... $73,064 $57,888
Basic weighted average shares from Note 2f.... 60,247 60,247
------- -------
Basic earnings per share...................... $ 1.21 $ 0.96
======= =======
Diluted After Refinancing:
Net income available to common shareholders... $73,064 $57,888
Plus preferred stock dividends................ 18,356 13,767
Plus amortization of deferred preferred stock
issuance costs............................... 292 219
------- -------
Net income on an if-converted basis........... 91,712 71,874
Diluted weighted average shares from Note 2f.. 79,632 79,401
------- -------
Diluted earnings per share.................... $ 1.15 $ 0.91
======= =======
</TABLE>
3. SUMMARY OF NON RECURRING COSTS ASSOCIATED WITH THE TRANSACTIONS (in
thousands)
The accompanying unaudited pro forma statements of operations do not reflect
the following costs and expenses that the combined company will record at the
time of closing related to: (i) existing Building One financing arrangements to
be extinguished; and (ii) severance and office closing costs and other exit
activities costs, as a part of the transactions highlighted in Note 1.
96
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
3. SUMMARY OF NON RECURRING COSTS ASSOCIATED WITH THE TRANSACTIONS (in
thousands)--(Continued)
For pro forma financial statement purposes, these costs and expenses, net of
tax effect, have been shown as a direct reduction to the combined company's
retained earnings. However, these costs and expenses will be reflected in the
historical statements of operations of the combined company upon consummation
of the transactions and will be classified as follows:
<TABLE>
<S> <C>
Selling, General and Administrative Expenses:
Severance costs................................................... $6,000
Office closing costs and other exit activities costs.............. 1,750
------
Total charge.................................................... 7,750
Tax benefit at 39%................................................ 3,023
------
Net of tax impact............................................... $4,727
======
Extraordinary Items:
Deferred debt issue costs on Building One convertible debt........ $4,485
Deferred debt issue costs on Building One existing revolving and
term credit facility............................................. 8,658
------
13,143
Tax benefit at 39%................................................ 5,126
------
Net of tax impact................................................. $8,017
======
</TABLE>
4. RANGE OF POTENTIAL RESULTS UNDER CASH ELECTION RIGHT (in thousands, except
per share amounts)
The accompanying unaudited pro forma financial statements have been prepared
under the assumption that the GroupMAC shareholders will elect to receive the
maximum amount of cash in exchange for their shares. Under this scenario, 100%
of the $150,000 of gross proceeds from the preferred stock issuance will be
used for the cash election right, resulting in the cancellation of 11,111
shares of GroupMAC stock as discussed in Note 1c above. However, it is possible
that less than 100% of these proceeds will be required to fund the cash
election right, in which case the remaining funds could be used to either
reduce outstanding borrowings under GroupMAC's credit agreement or repurchase
shares of GroupMAC common stock on the open market. Any repurchase of shares of
GroupMAC common stock on the open market is not expected to have a material
difference on the accompanying pro forma financial information. The following
summarizes the financial impact resulting from only 50%, or $75,000, of the
gross proceeds of the preferred stock issuance required to be used for the cash
election right, with the remaining funds used to reduce outstanding borrowings
under GroupMAC's credit agreement (in each case, after consideration of the
refinancing transactions discussed in Note 1i and 1j):
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Balance Sheet:
Proceeds used to cancel shares in cash election right.......... $ 75,000
Cash election price per share.................................. $ 13.50
----------
Shares to be canceled in cash election right................... 5,556
==========
Goodwill....................................................... $1,207,023
Total assets .................................................. 2,198,208
Long-term debt................................................. 749,348
Total shareholders' equity..................................... 709,481
</TABLE>
97
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
4. RANGE OF POTENTIAL RESULTS UNDER CASH ELECTION RIGHT (in thousands, except
per share amounts)--(Continued)
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Statements of Operations:
Operating income................................ $238,461 $185,143
Interest expense................................ (68,609) (51,457)
Net income...................................... 95,523 74,760
Net income available to common shareholders..... 76,875 60,774
Net income per share--basic..................... $ 1.17 $ 0.92
Weighted average shares--basic.................. 65,803 65,803
Net income per share--diluted................... $ 1.12 $ 0.88
Weighted average shares--diluted................ 85,188 84,957
</TABLE>
98
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
5. PRO FORMA INTEREST EXPENSE--PRO FORMA COMBINED COMPANY PRIOR TO REFINANCING
(in thousands)
<TABLE>
<CAPTION>
Merger Adjustments
-------------------------------------------- Pro Forma
GroupMAC Preferred Put Combined
Pro Building One Stock Conv Pref GroupMAC Company
Forma Pro Forma Issuance Stock/Debenture Merger Sr Sub Prior to Interest
Balances Balances Costs Exchange Costs Notes Refinancing Rate
-------- ------------ --------- --------------- ------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Senior
Debt:
Pro Forma
September 30,
1999 Existing
Credit
Agreements--
GroupMAC.......... $218,844 $ -- $3,500 $ -- $10,615 $ 131,300 $364,259 6.88%(i)
Pro Forma
September 30,
1999 Existing
Revolving Credit
Facility--
Building One...... -- 111,499 -- -- 14,185 -- 125,684 7.73%(ii)
Pro Forma
September 30,
1999 Existing
Term Credit
Facility--
Building One...... -- 124,375 -- -- -- -- 124,375 7.73%(ii)
Commitment fees
under Credit
Facility
Agreements........ -- -- -- -- -- -- --
Letter of Credit
fees under Credit
Facility
Agreements........ -- -- -- -- -- -- --
Amortization of
deferred debt
issue costs under
Credit Facility
Agreements........ -- -- -- -- -- -- --
-------- -------- ------ ---------- ------- ---------- --------
Total long-term
senior
debt/interest
expense......... $218,844 $235,874 $3,500 $ -- $24,800 $ 131,300 $614,318 8.04%
======== ======== ====== ========== ======= ========== ======== ======
Long-Term Senior
Subordinated Debt:
Pro Forma
September 30,
1999 senior
subordinated
notes--GroupMAC... $130,000 $ -- $ -- $ -- $ -- $ (130,000) $ --
Pro Forma
September 30,
1999 senior
subordinated
notes--Building
One............... -- 200,000 -- -- -- -- 200,000 10.50%(vi)
Unamortized
balance of
discount on
Building One
senior
subordinated
notes............. -- (4,320) -- -- -- -- (4,320)
Amortization of
deferred debt
issue costs and
discount.......... -- -- -- -- -- -- --
-------- -------- ------ ---------- ------- ---------- --------
Total long-term
senior
subordinated
debt/interest
expense......... $130,000 $195,680 $ -- $ -- $ -- $ (130,000) $195,680 11.38%
======== ======== ====== ========== ======= ========== ======== ======
Long-Term Junior
Subordinated Debt:
Pro Forma
September 30,
1999 long-term
junior
subordinated
note.............. $ 1,650 $ -- $ -- $ -- $ -- $ -- $ 1,650 6.00%(viii)
Pro Forma
September 30,
1999 long-term
junior
subordinated
note.............. $ 2,500 -- -- -- -- 2,500 7.50%(viii)
-------- -------- ------ ---------- ------- ---------- --------
$ 4,150 $ -- $ -- $ -- $ -- $ -- $ 4,150 6.92%
======== ======== ====== ========== ======= ========== ======== ======
Long-Term
Convertible Junior
Subordinated Debt:
Pro Forma
September 30,
1999 long-term
convertible
junior
subordinated
debentures........ $ -- $103,190 $ -- $ (103,190) $ -- $ -- $ --
-------- -------- ------ ---------- ------- ---------- --------
$ -- $103,190 $ -- $ (103,190) $ -- $ -- $ --
======== ======== ====== ========== ======= ========== ========
Total debt/interest
expense............ $352,994 $534,744 $3,500 $ (103,190) $24,800 $ 1,300 $814,148 8.83%
======== ======== ====== ========== ======= ========== ======== ======
<CAPTION>
Pro Forma Combined Company
Prior to Refinancing
-------------------------------
Interest Expense
-------------------------------
Nine
Twelve Months Ended
Months Ended September 30,
December 31, 1998 1999
----------------- -------------
<S> <C> <C> <C>
Long-Term Senior
Debt:
Pro Forma
September 30,
1999 Existing
Credit
Agreements--
GroupMAC.......... $25,059 $18,794
Pro Forma
September 30,
1999 Existing
Revolving Credit
Facility--
Building One...... 9,717 7,288
Pro Forma
September 30,
1999 Existing
Term Credit
Facility--
Building One...... 9,615 7,211
Commitment fees
under Credit
Facility
Agreements........ 1,330(iii) 998
Letter of Credit
fees under Credit
Facility
Agreements........ 48(iv) 36
Amortization of
deferred debt
issue costs under
Credit Facility
Agreements........ 3,593(v) 2,695
----------------- -------------
Total long-term
senior
debt/interest
expense......... $49,362 $37,022
================= =============
Long-Term Senior
Subordinated Debt:
Pro Forma
September 30,
1999 senior
subordinated
notes--GroupMAC... $ -- $ --
Pro Forma
September 30,
1999 senior
subordinated
notes--Building
One............... 21,000 15,750
Unamortized
balance of
discount on
Building One
senior
subordinated
notes.............
Amortization of
deferred debt
issue costs and
discount.......... 1,276(vii) 957
----------------- -------------
Total long-term
senior
subordinated
debt/interest
expense......... $22,276 $16,707
================= =============
Long-Term Junior
Subordinated Debt:
Pro Forma
September 30,
1999 long-term
junior
subordinated
note.............. $ 99 $ 74
Pro Forma
September 30,
1999 long-term
junior
subordinated
note.............. 188 141
----------------- -------------
$ 287 $ 215
================= =============
Long-Term
Convertible Junior
Subordinated Debt:
Pro Forma
September 30,
1999 long-term
convertible
junior
subordinated
debentures........ $ -- $ --
----------------- -------------
$ -- $ --
================= =============
Total debt/interest
expense............ $71,925 $53,944
================= =============
</TABLE>
- ----
(i) Represents the interest rate on the existing GroupMAC credit facility as
reported in Note 5 to the separate company pro forma financial
statements.
(ii) Represents the interest rate on the existing Building One credit facility
as reported in Note 5 to the separate company pro forma financial
statements.
(iii) Represents the combined pro forma amounts of the commitment fees under
both the Building One and GroupMAC credit facilities based on the
borrowing levels of each company as reported in Note 5 of their
respective separate company pro forma financial statements.
(iv) Represents fees related to letter of credit commitments under the
existing GroupMAC credit facility as reported in Note 5 to the separate
company pro forma financial statements.
(v) Represents the combined pro forma amortization of deferred debt issue
costs related to the establishment of the existing credit facilities of
both GroupMAC and Building One over the existing lives of these
facilities as reported in Note 5 of their respective pro forma financial
statements.
(vi) Represents the coupon rate of interest on the Building One senior
subordinated notes as reported in the separate company pro forma interest
calculation.
(vii) Represents the pro forma amortization of the deferred debt issue costs
and the discount recorded at issuance of the existing Building One
senior subordinated notes over the ten-year life of this debt.
(viii) Represents the contractual rates on the existing issuances of junior
subordinated debt of GroupMAC as reported in Note 5 to the separate
company pro forma financial statements.
99
<PAGE>
COMBINED COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
5. PRO FORMA INTEREST EXPENSE--PRO FORMA COMBINED COMPANY (in thousands)
<TABLE>
<CAPTION>
Refinancing
Adjustments Pro Forma Combined Company
------------------- --------------------------------
Interest Expense
--------------------------------
Pro Forma
Combined Refinance New Nine
Company Existing Facility Pro Forma Twelve Months Months Ended
Prior to Revolver Fees & Combined Interest Ended September 30,
Refinancing Balances Costs Company Rate December 31, 1998 1999
----------- --------- -------- --------- -------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-Term Senior Debt:
Pro Forma September
30, 1999 Existing
Credit Agreements--
GroupMAC............... $364,259 $(364,259) $ -- $ -- $ -- $ --
Pro Forma September
30, 1999 Existing
Revolving Credit
Facility--Building
One.................... 125,684 (125,684) -- -- -- --
Pro Forma September
30, 1999 Existing Term
Credit Facility--
Building One........... 124,375 (124,375) -- -- -- --
Refinance with New
Facility--Revolver..... -- 314,318 10,200 324,518 7.50%(i) 24,339 18,254
Refinance with New
Facility--Delayed Draw
Term Loan A............ -- 130,000 -- 130,000 8.00%(ii) 10,400 7,800
Refinance with New
Facility--Term Loan
B...................... -- 170,000 -- 170,000 8.00%(iii) 13,600 10,200
Commitment fees under
Credit Facility
Agreements............. -- -- -- -- 877(iv) 658
Letter of Credit fees
under Credit Facility
Agreements............. -- -- -- -- 64(v) 48
Amortization of
deferred debt issue
costs under Credit
Facility Agreements.... -- -- -- -- 2,016(vi) 1,512
-------- --------- ------- -------- ------- -------
Total long-term
senior debt/interest
expense.............. $614,318 $ -- $10,200 $624,518 8.21% $51,296 $38,472
======== ========= ======= ======== ====== ======= =======
Long-Term Senior
Subordinated Debt:
Pro Forma September
30, 1999 senior
subordinated notes--
Building One........... $200,000 $ -- $ -- $200,000 10.50%(vii) $21,000 $15,750
Unamortized balance of
discount on Building
One senior
subordinated notes..... (4,320) -- -- (4,320)
Amortization of
deferred debt issue
costs and discount..... -- -- -- -- 1,276(viii) 957
-------- --------- ------- -------- ------- -------
Total long-term
senior subordinated
debt/interest
expense.............. $195,680 $ -- $ -- $195,680 11.38% $22,276 $16,707
======== ========= ======= ======== ====== ======= =======
Long-Term Junior
Subordinated Debt:
Pro Forma September
30, 1999 long-term
junior subordinated
note................... $ 1,650 $ -- $ -- $ 1,650 6.00%(ix) $ 99 $ 74
Pro Forma September
30, 1999 long-term
junior subordinated
note................... 2,500 -- 2,500 7.50%(ix) 188 141
-------- --------- ------- -------- ------- -------
$ 4,150 $ -- $ -- $ 4,150 6.92% $ 287 $ 215
======== ========= ======= ======== ====== ======= =======
Total debt/interest
expense................. $814,148 $ -- $10,200 $824,348 8.96% $73,859 $55,394
======== ========= ======= ======== ====== ======= =======
</TABLE>
- ----
(i) Represents interest rate on the new revolving credit facility calculated
as base rate of 5.5% plus applicable margin of 2.0%.
(ii) Represents interest rate on the new delayed draw term loan A credit
facility calculated as base rate of 5.5% plus applicable margin of 2.5%.
(iii) Represents interest rate on the new term loan B credit facility
calculated as base rate of 5.5% plus applicable margin of 2.5%.
(iv) Represents commitment fees under the new credit facilities based on a
rate of 0.5% on the amount available under the new credit facilities
after reflecting pro forma borrowings.
(v) Represents letter of credit fees on pro forma borrowings of $3,190 under
letter of credit agreements at an annual rate of 2.0%.
(vi) Represents amortization over the terms of the respective credit
facilities of deferred debt issuance costs relating to establish of these
new credit facilities.
(vii) Represents the coupon rate of interest on the Building One senior
subordinated notes as reported in Note 5 to the separate company pro
forma financial statements.
(viii) Represents the pro forma amortization of the deferred debt issue costs
and the discount recorded at issuance of the existing Building One
senior subordinated notes over the ten-year life of this debt.
(ix) Represents the contractual rates on the existing issuances of junior
subordinated debt of GroupMAC as reported in Note 5 to the separate
company pro forma financial statements.
100
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements utilize the
historical financial statements of GroupMAC as of September 30, 1999 and for
the nine months ended September 30, 1999, and for the year ended December 31,
1998 and give effect to (i) the pre-acquisition financial information of 39
companies acquired during 1998 (the "1998 Acquisition Companies") and (ii) the
pre-acquisition financial information of 13 companies acquired during 1999 (the
"1999 Acquisition Companies").
All of the acquisitions were accounted for under the purchase method of
accounting. These unaudited pro forma combined financial statements are based
on the historical financial statements of the acquired companies and estimates
and assumptions set forth below and in the notes to the unaudited pro forma
financial statements.
The unaudited pro forma balance sheet represents the historical consolidated
balance sheet of GroupMAC as adjusted for the refinancing transactions
highlighted in Note 3 below as if such transactions occurred on September 30,
1999. The accompanying unaudited pro forma statements of operations of GroupMAC
combine the historical statements of operations of GroupMAC and the statements
of operations of the acquired entities as if such acquisitions had occurred on
January 1, 1998.
GroupMAC has analyzed the savings that it expects to realize from reductions
in salaries and certain benefits to the owners of the acquired companies. To
the extent the owners of the acquired entities have agreed prospectively to
reductions in salary, bonuses and benefits, these reductions have been
reflected in the unaudited pro forma combined statements of operations.
The pro forma adjustments are based on available information and certain
assumptions that management deems appropriate and may be revised as additional
information becomes available. The pro forma financial data do not purport to
represent what GroupMAC's financial position or results of operations would
actually have been if such transactions had in fact occurred on those dates and
are not necessarily representative of GroupMAC's financial position or results
of operations for any future period. Since the acquisitions have not
historically been under common control or management, historical pro forma
results may not be indicative of or comparable to future performance. The
unaudited pro forma financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in
GroupMAC's annual report on Form 10-K/A for the fiscal year ended December 31,
1998 and the unaudited consolidated condensed financial statements and notes
thereto included in GroupMAC's quarterly report on Form 10-Q for the quarter
ended September 30, 1999. See "Where You Can Find More Information."
101
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
GroupMAC Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 6,496 $(6,496)(a) $ --
Accounts receivable, net of allowance.... 317,344 -- 317,344
Inventories.............................. 20,635 -- 20,635
Costs and estimated earnings in excess of
billings on uncompleted contracts....... 50,299 -- 50,299
Prepaid expenses and other current
assets.................................. 8,167 -- 8,167
Deferred tax asset....................... 9,750 -- 9,750
---------- ------- --------
Total current assets.................... 412,691 (6,496) 406,195
PROPERTY AND EQUIPMENT, net............... 55,913 -- 55,913
GOODWILL, net............................. 518,003 -- 518,003
DEFERRED DEBT ISSUE COSTS................. 13,568 -- 13,568
OTHER LONG-TERM ASSETS.................... 1,744 -- 1,744
---------- ------- --------
Total assets............................ $1,001,919 $(6,496) $995,423
========== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current
maturities of long-term debt............ $ 1,408 $(1,408)(b) $ --
Accounts payable......................... 92,510 -- 92,510
Accrued compensation..................... 42,981 -- 42,981
Accrued liabilities...................... 27,934 -- 27,934
Due to related parties................... 5,432 (5,432)(c) --
Billings in excess of costs and estimated
earnings on uncompleted contracts....... 47,997 -- 47,997
Deferred service revenue................. 5,022 -- 5,022
Income taxes payable..................... 8,844 -- 8,844
Other current liabilities................ 2,746 -- 2,746
---------- ------- --------
Total current liabilities............... 234,874 (6,840) 228,034
REVOLVING CREDIT FACILITY................. 218,500 344 (a-c) 218,844
SENIOR SUBORDINATED NOTES................. 130,000 -- 130,000
JUNIOR SUBORDINATED NOTES................. 4,150 -- 4,150
DEFERRED TAX LIABILITY.................... 1,486 -- 1,486
OTHER LONG-TERM LIABILITIES............... 3,084 -- 3,084
SHAREHOLDERS' EQUITY
Common stock............................. 38 -- 38
Additional paid-in capital............... 382,949 -- 382,949
Retained earnings........................ 26,838 -- 26,838
---------- ------- --------
Total shareholders' equity.............. 409,825 -- 409,825
---------- ------- --------
Total liabilities and shareholders'
equity................................. $1,001,919 $(6,496) $995,423
========== ======= ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
102
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
1998 1999
Acquisition Acquisition Pro Forma
GroupMAC Companies Companies Adjustments Pro Forma
-------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES................ $761,541 $314,878 $365,054 $ -- $1,441,473
COST OF SERVICES........ 585,396 248,518 292,374 -- 1,126,288
-------- -------- -------- -------- ----------
Gross profit.......... 176,145 66,360 72,680 -- 315,185
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 118,119 43,934 40,155 (11,218)(a) 190,990
AMORTIZATION OF
GOODWILL............... 5,960 -- -- 7,386(b) 13,346
-------- -------- -------- -------- ----------
Income from
operations........... 52,066 22,426 32,525 3,832 110,849
OTHER INCOME (EXPENSE):
Interest expense...... (6,595) (749) (1,583) (22,706)(c) (31,633)
Interest income....... 407 271 299 (977)(d) --
Other................. 377 496 542 -- 1,415
-------- -------- -------- -------- ----------
Income before income
tax provision........ 46,255 22,444 31,783 (19,851) 80,631
INCOME TAX PROVISION.... 20,326 1,124 5,099 8,664(e) 35,213
-------- -------- -------- -------- ----------
NET INCOME.............. $ 25,929 $ 21,320 $ 26,684 $(28,515) $ 45,418
======== ======== ======== ======== ==========
NET INCOME PER SHARE--
BASIC.................. $ 0.94 $ 1.18
======== ==========
WEIGHTED AVERAGE
SHARES--BASIC.......... 27,544 38,412(f)
======== ==========
NET INCOME PER SHARE--
DILUTED................ $ 0.93 $ 1.17
======== ==========
WEIGHTED AVERAGE
SHARES--DILUTED........ 27,948 38,968(f)
======== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
103
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
1999
GroupMAC and Acquisition Pro Forma
Subsidiaries Companies Adjustments Pro Forma
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES................. $1,121,471 $93,072 $ -- $1,214,543
COST OF SERVICES......... 890,287 75,886 -- 966,173
---------- ------- ------- ----------
Gross profit........... 231,184 17,186 -- 248,370
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES................ 142,829 10,823 (710)(a) 152,942
AMORTIZATION OF
GOODWILL................ 9,234 -- 775 (b) 10,009
---------- ------- ------- ----------
Income from
operations............ 79,121 6,363 (65) 85,419
OTHER INCOME (EXPENSE):
Interest expense....... (20,777) (152) (2,796)(c) (23,725)
Interest income........ 314 106 (420)(d) --
Other.................. 529 (85) -- 444
---------- ------- ------- ----------
Income before income
tax provision........ 59,187 6,232 (3,281) 62,138
INCOME TAX PROVISION..... 25,767 615 676 (e) 27,058
---------- ------- ------- ----------
NET INCOME............... $ 33,420 $ 5,617 $(3,957) $ 35,080
========== ======= ======= ==========
NET INCOME PER SHARE--
BASIC................... $ 0.91 $ 0.91
========== ==========
WEIGHTED AVERAGE SHARES--
BASIC................... 36,646 38,412 (f)
========== ==========
NET INCOME PER SHARE--
DILUTED................. $ 0.90 $ 0.91
========== ==========
WEIGHTED AVERAGE SHARES--
DILUTED................. 36,980 38,737 (f)
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
104
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. BACKGROUND
The respective results of operations for the 1998 Acquisition Companies from
January 1, 1998 to the dates of the acquisitions were combined with the actual
results of operations of GroupMAC and the 1999 Acquisition Companies for the
twelve months ended December 31, 1998 to determine the pro forma results of
operations for the twelve months ended December 31, 1998.
The respective results of operations for the 1999 Acquisition Companies from
January 1, 1999 to the dates of acquisition were combined with the actual
results of operations of GroupMAC for the nine months ended September 30, 1999
to determine the pro forma results of operations for the nine months ended
September 30, 1999.
2. ACQUISITIONS
The results of operations of the acquired businesses are included in the
actual results of operations of GroupMAC from the date of acquisition, and the
historical balance sheet at September 30, 1999 includes all acquisitions
completed by GroupMAC to date. All of the acquisitions are accounted for as
purchases. The cash consideration associated with the acquisition of the 1999
Acquisition Companies was provided by borrowings under an amended and restated
credit agreement (the "Credit Agreement").
Several former owners of the acquired companies have the ability to receive
additional amounts of purchase price, payable in cash and common stock in 1999
through 2001, contingent upon the occurrence of future events. GroupMAC will
record such contingent consideration as additional purchase price when earned.
GroupMAC currently estimates the unearned contingent consideration under these
agreements to approximate $6.0 million in cash and shares of common stock as of
September 30, 1999.
3. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The following summarizes unaudited pro forma combined balance sheet
adjustments:
a) Records the utilization of cash on hand at September 30, 1999 to reduce
borrowings in connection with acquisitions under the Credit Agreement.
b) Records the refinancing of debt assumed and outstanding at September 30,
1999 in connection with acquisitions completed prior to that date
through borrowings under the Credit Agreement.
c) Records the funding of amounts due to related parties at September 30,
1999 in connection with acquisitions completed prior to that date
through borrowings under the Credit Agreement.
4. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
The following summarizes unaudited pro forma combined statement of
operations adjustments:
a) Reflects the prospective reduction in salaries, bonuses and benefits to
the owners of the acquired companies to which they have agreed. These
reductions in salaries, bonuses and benefits are in accordance with the
terms of the employment agreements. Such employment agreements are
primarily for three years, contain restrictions related to competition
and provide severance for termination of employment in certain
circumstances.
b) Reflects the amortization of goodwill to be recorded as a result of the
acquisitions over a 40-year estimated life.
105
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
c) Represents the adjustment necessary to reflect interest expense related
to borrowings under the Credit Agreement to fund the cash portion of the
purchase price and the assumption of debt related to the 1998 and 1999
Acquisition Companies, interest related to Senior Subordinated Notes
used to retire amounts outstanding under the Credit Agreement, and
interest related to the junior subordinated debt. A summary of the
historical and pro forma debt outstanding and a summary of the pro forma
interest expense (including amounts recognized in the historical
financial statements) assuming the acquisitions occurred on January 1,
1998, follows in Note 5.
d) Reflects the reduction to historical interest income related to existing
and acquired cash, all of which is assumed to be used for the
acquisition of the 1998 and 1999 Acquisition Companies.
e) Reflects the incremental provision for federal and state income taxes
relating to the compensation differential and other pro forma
adjustments discussed in this Note 4 as well as income taxes on
S Corporation earnings.
f) Weighted average shares outstanding include the following (in
thousands):
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Shares issued and outstanding at September 30,
1999.......................................... 38,344 38,344
Shares to be issued for companies acquired
prior to September 30, 1999................... 68 68
------ ------
Weighted average shares outstanding--basic..... 38,412 38,412
Incremental effect of options and warrants on
shares outstanding............................ 556 325
------ ------
Weighted average shares outstanding--diluted... 38,968 38,737
====== ======
</TABLE>
106
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
5. PRO FORMA INTEREST EXPENSE (in thousands)
<TABLE>
<CAPTION>
Interest Expense
------------------------------
September 30, Twelve Months Nine Months
1999 Ended Ended
September 30, Pro Forma Pro Forma Interest December 31, September 30,
1999 Balances Adjustments Balances Rate 1998 1999
------------- ----------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Senior Debt:
Historical September
30, 1999 short-term
debt.................. $ 1,408 $(1,408) $ -- $ -- $ --
-------- ------- -------- ------- -------
Total short-term
senior debt/interest
expense............. $ 1,408 $(1,408) $ --(i) $ -- $ --
======== ======= ======== ======= =======
Long-Term Senior Debt:
Historical September
30, 1999 Credit
Agreement............. $218,500 $(1,064) $217,436 6.88%(iii) $14,959 $11,219
Refinance short-term
debt.................. -- 1,408 1,408 6.88%(iii) 97 73
Letter of Credit Fees
under the Credit
Agreement............. -- -- -- 48 36
Commitment Fees under
the Credit
Agreement............. -- -- -- 762(vi) 572
Amortization of
related deferred debt
issue costs........... -- -- -- 1,704(vii) 1,278
-------- ------- -------- ------- -------
Total long-term
senior debt/interest
expense............. $218,500 $ 344 $218,844(i),(ii) 8.03% $17,570 $13,178
======== ======= ======== ====== ======= =======
Long-Term Senior
Subordinated Debt:
Historical September
30, 1999 Senior
Subordinated Notes.... $130,000 $ -- $130,000 9.75%(iv) $12,675 $ 9,506
Amortization of
related deferred debt
issue costs........... -- -- -- 1,101(viii) 826
-------- ------- -------- ------- -------
Total long-term
senior subordinated
debt/interest
expense............. $130,000 $ -- $130,000 10.60% $13,776 $10,332
======== ======= ======== ====== ======= =======
Long-Term Junior
Subordinated Debt:
Historical September
30, 1999 long-term
debt.................. $ 1,650 $ -- $ 1,650 6.00%(v) $ 99 $ 74
Historical September
30, 1999 long-term
debt.................. 2,500 -- 2,500 7.50%(v) 188 141
-------- ------- -------- ------- -------
Total long-term
junior subordinated
debt/interest
expense............. $ 4,150 $ -- $ 4,150 6.92% $ 287 $ 215
======== ======= ======== ====== ======= =======
Total debt/interest
expense................ $354,058 $(1,064) $352,994 8.96% $31,633 $23,725
======== ======= ======== ====== ======= =======
</TABLE>
- --------
(i) Represents total senior indebtedness.
(ii) Represents total guarantor senior indebtedness.
(iii) Represents the current borrowing rates under the Credit Agreement.
(iv) Represents the coupon interest rate for the Senior Subordinated Notes.
(v) Represents the respective contractual interest rates for these issues of
junior subordinated debt.
(vi) Represents commitment fees on unused capacity on the Credit Agreement at
an annual rate of 0.375%.
(vii) Represents amortization of deferred debt issue costs over the remaining
life of the Credit Agreement.
(viii) Represents amortization of deferred debt issue costs over the ten-year
life of the related Senior Subordinated Notes.
107
<PAGE>
BUILDING ONE SERVICES CORPORATION
UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
The following unaudited pro forma financial statements utilize the
historical financial statements of Building One as of September 30, 1999 and
for the nine months ended September 30, 1999, and for the year ended December
31, 1998 and give effect to (i) the tender offer that occurred in February
1999, including the financing of the tender offer, (ii) the pre-acquisition
financial information of 26 companies acquired during 1998 which were accounted
for under the purchase method of accounting (the "1998 Acquisition Companies"),
and (iii) the pre-acquisition financial information of 17 companies acquired
during 1999 which were accounted for under the purchase method of accounting
(the "1999 Acquisition Companies").
These unaudited pro forma combined financial statements are based on the
historical financial statements of the acquired companies and estimates and
assumptions set forth below and in the notes to the unaudited pro forma
financial statements.
The unaudited pro forma balance sheet represents the historical consolidated
balance sheet of Building One as adjusted for the refinancing transactions
highlighted in Note 3 below as if such transactions occurred on September 30,
1999. The accompanying unaudited pro forma statements of operations give effect
to the tender offer that occurred in February 1999, including the refinancing
of the tender offer, and combines the historical statements of operations of
Building One and the statements of operations of the acquired entities as if
all such transactions had occurred on January 1, 1998.
Building One has analyzed the savings that it expects to realize from
reductions in salaries and certain benefits to the owners of the acquired
companies. To the extent the owners of the acquired entities have agreed
prospectively to reductions in salary, bonuses and benefits, these reductions
have been reflected in the unaudited pro forma combined statements of
operations.
The pro forma adjustments are based on available information and certain
assumptions that management deems appropriate and may be revised as additional
information becomes available. The pro forma financial data do not purport to
represent what Building One's financial position or results of operations would
actually have been if such transactions had in fact occurred on those dates and
are not necessarily representative of Building One's financial position or
results of operations for any future period. Since the acquisitions have not
historically been under common control or management, historical pro forma
results may not be indicative of or comparable to future performance. The
unaudited pro forma financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in
Building One's annual report on Form 10-K for the fiscal year ended December
31, 1998 and the unaudited consolidated condensed financial statements and
notes thereto included in Building One's quarterly report on Form 10-Q for the
quarter ended September 30, 1999. See "Where You Can Find More Information".
108
<PAGE>
BUILDING ONE SERVICES CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Building Pro Forma
ASSETS One Adjustments Pro Forma
------ ---------- ----------- ----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 14,522 $(14,522)(a) $ --
Accounts receivable, net of
allowance........................... 362,147 -- 362,147
Inventories.......................... 8,213 -- 8,213
Costs and estimated earnings in
excess of billings on uncompleted
contracts........................... 49,875 -- 49,875
Prepaid expenses and other current
assets.............................. 11,590 -- 11,590
Deferred tax asset................... 4,424 -- 4,424
Refundable income taxes.............. 3,405 -- 3,405
---------- -------- ----------
Total current assets............... 454,176 (14,522) 439,654
---------- -------- ----------
PROPERTY AND EQUIPMENT, net............ 57,358 -- 57,358
GOODWILL, net.......................... 673,238 -- 673,238
DEFERRED DEBT ISSUE COSTS, net......... 21,055 -- 21,055
OTHER LONG-TERM ASSETS................. 6,384 -- 6,384
---------- -------- ----------
Total assets....................... $1,212,211 $(14,522) $1,197,689
========== ======== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings and current
maturities of long-term debt........ $ 3,106 $ (3,106)(b) $ --
Accounts payable..................... 92,036 -- 92,036
Accrued compensation................. 41,669 -- 41,669
Accrued liabilities.................. 46,409 -- 46,409
Due to related parties............... 4,083 (4,083)(c) --
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................... 81,109 -- 81,109
Other current liabilities............ -- -- --
---------- -------- ----------
Total current liabilities.......... 268,412 (7,189) 261,223
REVOLVING CREDIT FACILITY.............. 116,500 (5,001)(a-c) 111,499
TERM CREDIT FACILITY................... 124,375 -- 124,375
SENIOR SUBORDINATED NOTES, net of
unamortized discount.................. 195,680 -- 195,680
CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES............................ 103,190 -- 103,190
LONG TERM DEBT......................... 2,332 (2,332)(b) --
DEFERRED TAX LIABILITY................. 2,243 -- 2,243
OTHER LONG-TERM LIABILITIES............ 2,463 -- 2,463
STOCKHOLDERS' EQUITY
Common stock......................... 26 -- 26
Additional paid-in capital........... 310,216 -- 310,216
Retained earnings.................... 87,339 -- 87,339
Accumulated other comprehensive
loss................................ (565) -- (565)
---------- -------- ----------
Total stockholders' equity......... 397,016 -- 397,016
---------- -------- ----------
Total liabilities and stockholders'
equity............................ $1,212,211 $(14,522) $1,197,689
========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
109
<PAGE>
BUILDING ONE SERVICES CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(in thousands, except per share data )
<TABLE>
<CAPTION>
1998 1999
Building Acquisition Acquisition Pro Forma
One Companies Companies Adjustments Pro Forma
-------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES................ $809,601 $502,663 $292,072 $ -- $1,604,336
COST OF SERVICES........ 636,225 411,042 228,868 -- 1,276,135
-------- -------- -------- -------- ----------
Gross profit.......... 173,376 91,621 63,204 -- 328,201
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 100,539 71,137 50,853 (39,546)(a) 182,983
AMORTIZATION OF GOODWILL
....................... 7,653 234 -- 9,792 (b) 17,679
-------- -------- -------- -------- ----------
Income from
operations........... 65,184 20,250 12,351 29,754 127,539
OTHER INCOME (EXPENSE):
Interest expense...... (1,054) (1,835) (942) (47,231)(c) (51,062)
Interest income....... 19,373 1,852 480 (21,705)(d) --
Other................. 80 1,455 292 1,950 (e) 3,777
-------- -------- -------- -------- ----------
Income before income
tax provision...... 83,583 21,722 12,181 (37,232) 80,254
INCOME TAX PROVISION.... 36,120 6,550 1,547 (5,446)(f) 38,771
-------- -------- -------- -------- ----------
NET INCOME.............. $ 47,463 $ 15,172 $ 10,634 $(31,786) $ 41,483
======== ======== ======== ======== ==========
NET INCOME PER SHARE--
BASIC.................. $ 1.19 $ 1.57 (g)
======== ==========
WEIGHTED AVERAGE
SHARES--BASIC.......... 39,908 26,357 (g)
======== ==========
NET INCOME PER SHARE--
DILUTED................ $ 1.16 $ 1.47 (g)
======== ==========
WEIGHTED AVERAGE
SHARES--DILUTED........ 40,928 31,538 (g)
======== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
110
<PAGE>
BUILDING ONE SERVICES CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
1999
Building Acquisition Pro Forma
One Companies Adjustments Pro Forma
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES ................ $1,265,521 $97,966 $ -- $1,363,487
COST OF SERVICES ........ 1,011,305 73,902 -- 1,085,207
---------- ------- ------- ----------
Gross profit .......... 254,216 24,064 -- 278,280
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES................ 145,863 22,147 (10,679)(a) 157,331
RESTRUCTURING &
RECAPITALIZATION
CHARGES................. 8,020 -- -- 8,020
AMORTIZATION OF
GOODWILL................ 11,511 -- 1,748 (b) 13,259
---------- ------- ------- ----------
Income from
operations............ 88,822 1,917 8,931 99,670
OTHER INCOME (EXPENSE):
Interest expense....... (21,279) (183) (16,835)(c) (38,297)
Interest income........ 4,674 213 (4,887)(d) --
Other.................. 128 252 131 (e) 511
---------- ------- ------- ----------
Income before income
tax provision....... 72,345 2,199 (12,660) 61,884
INCOME TAX PROVISION..... 32,261 1,378 (4,895)(f) 28,744
---------- ------- ------- ----------
NET INCOME .............. $ 40,084 $ 821 $(7,765) $ 33,140
========== ======= ======= ==========
NET INCOME PER SHARE--
BASIC................... $ 1.14 $ 1.26 (g)
========== ==========
WEIGHTED AVERAGE SHARES--
BASIC................... 35,311 26,357 (g)
========== ==========
NET INCOME PER SHARE--
DILUTED................. $ 1.08 $ 1.17 (g)
========== ==========
WEIGHTED AVERAGE SHARES--
DILUTED.................. 38,900 31,538 (g)
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
111
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. BACKGROUND
The respective results of operations for the 1998 Acquisition Companies from
January 1, 1998 to the dates of the acquisitions were combined with the actual
results of operations of Building One and the 1999 Acquisition Companies for
the twelve months ended December 31, 1998 and the nine months ended
September 30, 1999 to determine the pro forma results of operations for the
twelve months ended December 31, 1998.
The respective results of operations for the 1999 Acquisition Companies from
January 1, 1999 to the dates of acquisition were combined with the actual
results of operations of Building One for the nine months ended September 30,
1999 to determine the pro forma results of operations for the nine months ended
September 30, 1999.
2. ACQUISITIONS
The results of operations of the acquired businesses are included in the
actual results of operations of Building One from the date of acquisition, and
the historical balance sheet at September 30, 1999 includes the acquisitions
completed by Building One to date. With the exception of the 3 companies
acquired during 1998 which were accounted for under the pooling-of-interests
method of accounting (the "1998 Pooled Companies"), all acquisitions are
accounted for as purchases. The cash consideration associated with the
acquisition of the 1999 Acquisition Companies was provided by borrowings under
a revolving credit facility.
Several former owners of the acquired companies have the ability to receive
additional amounts of purchase price, payable in cash and common stock in 1999
through 2001, contingent upon the occurrence of future events. Building One
will record such contingent consideration as additional purchase price when
earned. Building One currently estimates the unearned contingent consideration
under these agreements to approximate $85.0 million in cash and shares of
common stock as of September 30, 1999.
3. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The following summarizes unaudited pro forma combined balance sheet
adjustments:
a) Records the utilization of cash on hand at September 30, 1999 to
reduce borrowings in connection with acquisitions under the revolving
credit facility.
b) Records the refinancing of debt assumed and outstanding at September
30, 1999 in connection with acquisitions completed prior to that date
through borrowings under the revolving credit facility.
c) Records the funding of amounts due to related parties at September
30, 1999 in connection with acquisitions completed prior to that date
through borrowings under the revolving credit facility.
4. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
The following summarizes unaudited pro forma combined statement of
operations adjustments:
a) Reflects the prospective reduction in salaries, bonuses and benefits
to the owners of the acquired companies to which they have agreed. These
reductions in salaries, bonuses and benefits are in accordance with the
terms of the employment agreements. Such employment agreements are
primarily for three years, contain restrictions related to competition and
provide severance for termination of employment in certain circumstances.
Also reflects the reduction in one-time non-recurring acquisition costs
related to the 1998 Pooled Companies. These costs consist of legal,
accounting and broker fees.
b) Reflects the amortization of goodwill to be recorded as a result of
the acquisitions over a 40-year estimated life.
112
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
c) Represents the adjustment necessary to reflect interest expense
related to borrowings under the revolving and term credit facility, senior
subordinated notes and convertible junior subordinated debentures to
finance the tender offer and to fund the cash portion of the purchase price
and the assumption of debt related to the 1999 Acquisition Companies. A
summary of the historical and pro forma debt outstanding and a summary of
the pro forma interest expense (including amounts recognized in the
historical financial statements) assuming the acquisitions occurred on
January 1, 1998, follows in Note 5.
d) Reflects the reduction to historical interest income related to
existing and acquired cash, all of which is assumed to be used for the
acquisition of the 1998 and 1999 Acquisition Companies.
e) Reflects the elimination of minority interest associated with the
acquisition of the remaining 50% interest of a company that was originally
50% owned by Building One.
f) Reflects the incremental provision for federal and state income taxes
relating to the compensation differential and other pro forma adjustments
discussed in this Note 4 as well as income taxes on S Corporation earnings.
113
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
g) The calculation of the weighted average shares outstanding and the
basic and diluted earnings per share include the following (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Weighted Average Shares Outstanding:
Weighted average shares outstanding--basic.. 26,357 26,357
Incremental effect of conversion of
convertible junior subordinated
debentures................................. 4,586 4,586
Incremental effect of contingently issuable
shares..................................... 443 443
Incremental effect of options and warrants
on shares outstanding...................... 152 152
-------- --------
Weighted average shares outstanding--
diluted.................................... 31,538 31,538
======== ========
Net of Tax Interest Effect for Convertible
Junior Subordinated Debentures:
Principal of convertible junior subordinated
debentures................................. $103,190 $103,190
Annual interest at 7.5%..................... 7,739 7,739
Percentage of year.......................... 100% 75%
-------- --------
Interest at coupon rate..................... $ 7,739 $ 5,804
Amortization of deferred issue costs........ 356 267
-------- --------
Interest on convertible junior subordinated
debentures................................. 8,095 6,071
One minus tax rate.......................... 61% 61%
-------- --------
Net of tax interest cost.................... $ 4,938 $ 3,703
======== ========
Basic Earnings Per Share:
Net income.................................. $ 41,483 $ 33,140
Basic weighted average shares outstanding... 26,357 26,357
-------- --------
Basic earnings per share.................... $ 1.57 $ 1.26
======== ========
Diluted Earnings Per Share:
Net Income.................................. $ 41,483 $ 33,140
Interest expense on convertible junior
subordinated debentures, net of tax........ 4,938 3,703
-------- --------
Net income on an if-converted basis......... $ 46,421 $ 36,843
Diluted weighted average shares
outstanding................................ 31,538 31,538
-------- --------
Diluted earnings per share.................. $ 1.47 $ 1.17
======== ========
</TABLE>
114
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued)
5. UNAUDITED PRO FORMA INTEREST EXPENSE (in thousands)
<TABLE>
<CAPTION>
Interest Expense
-------------------------------
September 30, Twelve Months Nine Months
1999 Pro Ended Ended
September 30, Pro Forma Forma Interest December 31, September 30,
1999 Balances Adjustments Balances Rate 1998 1999
------------- ----------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Short -Term Senior Debt:
Historical September
30, 1999 short-term
debt.................. $ 3,106 $ (3,106) $ -- $ -- $ --
-------- -------- -------- ------- -------
Total short-term
senior debt/interest
expense............. $ 3,106 $ (3,106) $ -- $ -- $ --
======== ======== ======== ======= =======
Long-Term Senior Debt:
Historical September
30, 1999 revolving
credit facility....... $116,500 $ (8,107) $108,393 7.73%(i) $ 8,379 $ 6,284
Historical September
30, 1999 term credit
facility.............. 124,375 -- 124,375 7.73%(i) 9,614 7,211
Historical September
30, 1999 other long-
term debt............. 2,332 (2,332) -- -- --
Refinance short-term
debt.................. -- 3,106 3,106 7.73%(i) 240 180
Commitment fees........ -- -- -- 568 (iv) 426
Amortization of
deferred debt issue
costs................. -- -- -- 1,889 (v) 1,417
-------- -------- -------- ------- -------
Total long-term
senior debt/interest
expense............. $243,207 $ (7,333) $235,874 8.77% $20,690 $15,518
======== ======== ======== ====== ======= =======
Long-Term Senior
Subordinated Debt:
Historical September
30, 1999 senior
subordinated notes.... $200,000 $ -- $200,000 10.50%(ii) $21,000 $15,750
Discount/amortization
on issuance of senior
subordinated notes.... (4,320) -- (4,320) 451 (vi) 338
Amortization of
related deferred debt
issue costs........... -- -- -- 825 (vii) 619
-------- -------- -------- ------- -------
Total long-term
senior subordinated
debt/interest
expense............. $195,680 $ -- $195,680 11.38% $22,276 $16,707
======== ======== ======== ====== ======= =======
Long-Term Convertible
Junior Subordinated
Debt:
Historical September
30, 1999 convertible
junior subordinated
debentures............ $103,190 $ -- $103,190 7.50%(iii) $ 7,739 $ 5,804
Amortization of
related deferred debt
issue costs........... -- -- -- 357 (viii) 268
-------- -------- -------- ------- -------
Total long-term
convertible junior
subordinated
debt/interest
expense............. $103,190 $ -- $103,190 7.85% $ 8,096 $ 6,072
======== ======== ======== ====== ======= =======
Total debt/interest
expense................ $545,183 $(10,439) $534,744 9.55% $51,062 $38,297
======== ======== ======== ====== ======= =======
</TABLE>
- --------
(i) Represents the current borrowing rates under the Building One credit
facility.
(ii) Represents the coupon interest rate for the senior subordinated notes.
(iii) Represents the coupon interest rate for the convertible junior
subordinated debentures.
(iv) Represents commitment fees on unused capacity on the Building One credit
facility at an annual rate of 0.5%.
(v) Represents amortization of deferred debt issue costs over the remaining
life of the Building One credit facility.
(vi) The senior subordinated notes were issued at 97.746%, or a discount of
$4,508, which is being amortized to interest expense over the ten-year
life of these notes.
(vii) Represents amortization of deferred debt issue costs over the ten-year
life of these senior subordinated notes.
(viii) Represents amortization of deferred debt issue costs over the thirteen-
year life of these convertible junior subordinated debentures.
115
<PAGE>
SECURITY OWNERSHIP OF GROUPMAC
The following table sets forth certain information known by GroupMAC
regarding the beneficial ownership of GroupMAC common stock as of September 30,
1999 by (1) each director of GroupMAC, (2) the chairman and each of the four
other most highly compensated executive officers of GroupMAC for the fiscal
year ended December 31, 1998, (3) each holder of 5% or more of the outstanding
GroupMAC common stock and (4) all directors and executive officers of GroupMAC
as a group. Unless otherwise indicated, each of the following persons may be
deemed to have sole voting and dispositive power with respect to such shares.
Information set forth in the table with respect to beneficial ownership of
common stock has been provided by such holders. Unless otherwise indicated,
each holder's address is c/o GroupMAC at its principal executive offices.
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Outstanding
Beneficial Common
Name and Title of Beneficial Owner Ownership Stock
---------------------------------- ---------- -----------
<S> <C> <C>
Ronald D. Bryant, President of Masters(1).......... 418,512(2) 1.1%
David L. Henninger, Director....................... 112,802(3) *
Chester J. Jachimiec, Director and Executive Vice
President--Acquisitions........................... 209,965(4) *
Timothy Johnston, Senior Vice President of Airtron,
Inc.(5)........................................... 41,489(6) *
Donald L. Luke, Director and Chief Operating
Officer........................................... 42,857(7) *
J. Patrick Millinor, Jr., Director and Chief
Executive Officer................................. 309,298(8) *
Lucian L. Morrison, Director....................... 8,500(9) *
Robert Munson, III, Director....................... 556,437(10) 1.5%
James P. Norris, Director and Chairman of the
Board............................................. 49,666(11) *
Fredric J. Sigmund, Director....................... 207,600(12) *
John M. Sullivan, Director......................... 28,750(9) *
James D. Weaver, Director.......................... 88,500(9) *
William M. Witz, Director.......................... 202,522 *
Gordon Cain........................................ 2,417,950 6.3%
All executive officers and directors as a group
(21 persons)...................................... 3,106,782(13) 8.1%
</TABLE>
- --------
* Less than one percent.
(1) Mr. Bryant resigned as a director of GroupMAC effective March 22, 1999.
(2) Includes 1,706 shares subject to options that are presently exercisable.
(3) Includes 55,001 shares held by Mr. Henninger's spouse and 300 shares
subject to options that are presently exercisable.
(4) Includes 59 shares beneficially owned by Mr. Jachimiec through the
GroupMAC 401(k) Savings Plan, 78,306 shares subject to options that are
presently exercisable, and 32,000 shares that are held by him as trustee
of two trusts for the benefit of his children.
(5) Mr. Johnston resigned as a director of GroupMAC effective August 11,
1999.
(6) Includes 49 shares beneficially owned by Mr. Johnston through the
Airtron, Inc. Savings and Profit Sharing Plan.
(7) Includes 211 shares beneficially owned by Mr. Luke through the GroupMAC
401(k) Savings Plan and 41,646 shares subject to options that are
presently exercisable.
(8) Includes 248 shares beneficially owned by Mr. Millinor through the
GroupMAC 401(k) Savings Plan, 86,105 shares subject to options that are
presently exercisable, and 200 shares held by Mr. Millinor's children.
(9) Includes 2,000 shares subject to options that are presently exercisable.
(10) Includes 129,399 shares held by Mr. Munson as trustee of a trust for the
benefit of his family.
(11) Includes 48,166 shares subject to options that are presently exercisable.
(12) Includes 33,760 shares beneficially owned by Mr. Sigmund through the
GroupMAC 401(k) Savings Plan.
(13) Includes 35,009 shares beneficially owned through the GroupMAC 401(k)
Savings Plan, 527,680 shares subject to options that are presently
exercisable, and 514,000 shares subject to warrants that are presently
exercisable.
116
<PAGE>
SECURITY OWNERSHIP OF BUILDING ONE
The following table sets forth certain information known by Building One
regarding the beneficial ownership of shares of Building One common stock as of
November 15, 1999 by (1) each director of Building One, (2) the chairman and
each of the four other most highly compensated executive officers of Building
One for the fiscal year ended December 31, 1998, (3) each holder of 5% or more
of the outstanding Building One common stock and (4) all directors and
executive officers of Building One as a group. Unless otherwise indicated, each
of the following persons may be deemed to have sole voting and dispositive
power with respect to such shares. Information set forth in the table with
respect to beneficial ownership of common stock has been provided by such
holders. Unless otherwise indicated, each holder's address is c/o Building One
at its principal executive offices.
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Outstanding
Beneficial Common
Name and Title of Beneficial Owner Ownership Stock
---------------------------------- ---------- -----------
<S> <C> <C>
Directors and Executive Officers:
Andrew Africk, Director............................. 10,000(1) *
F. Traynor Beck, Executive Vice President, General
Counsel and Secretary.............................. 166,729(2) *
Mary K. Bush, Director.............................. 10,605(3) *
Timothy C. Clayton, Executive Vice President, Chief
Financial Officer and Treasurer.................... 258,000(4) *
Vincent W. Eades, Director.......................... 22,527(3) *
Michael Gross, Director............................. 10,000(1) *
Joseph M. Ivey, Director and Chief Executive
Officer............................................ 704,985(5) 2.7%
Jonathan J. Ledecky, Chairman of the Board.......... 2,986,059(6) 11.4%
William P. Love, Jr., Director and President--
Building One Electrical and Mechanical Group....... 212,991(7) *
Brooks Newmark, Director............................ 10,000(1) *
M. Jude Reyes, Director............................. 20,738(8) *
David Ledecky, Former Executive Vice President and
Chief Administrative Officer....................... --(9) --
All current directors and executive officers as a
group (12 persons)............................... 4,412,263(4) 16.9%
Holders of 5% or more of the Common Stock:
Apollo Investment Fund IV, L.P...................... 5,643,553(10) 17.6%
</TABLE>
- --------
* Less than one percent
(1) This figure reflects shares which may be acquired upon the exercise of
options that are exercisable or that will become exercisable within 60
days. Beneficial ownership is disclaimed as to the shares of common stock
beneficially owned by Apollo Investment Fund, IV, L.P. The director is a
principal of Apollo Advisors, L.P., an affiliate of Apollo Investment Fund
IV, L.P. See note (10) below.
(2) This figure reflects shares which may be acquired upon the exercise of
options that are exercisable.
(3) This figure represents shares which may be acquired upon the exercise of
options that are exercisable or that will become exercisable within 60
days.
(4) This figure includes 250,000 shares which may be acquired upon the
exercise of options that are exercisable.
(5) This figure includes 81,598 shares held in the Joseph M. Ivey, Jr. Annuity
Trust, of which Mr. Ivey is the trustee, 125,000 shares which may be
acquired upon the exercise of options that are exercisable and 178,547
shares held by Ivey National Corporation (the principal stockholder of
which is Mr. Ivey's father), of which Mr. Ivey disclaims beneficial
ownership beyond his pecuniary interest.
(6) This figure includes 2,500 shares that may be acquired upon the exercise
of options which are exercisable within 60 days and 1,950,000 shares
underlying a warrant issued to Jonathan J. Ledecky in connection with
Building One's initial public offering. Building One has agreed that, at
Jonathan J. Ledecky's
117
<PAGE>
request, it will file a registration statement under the Securities Act of
1933, as amended, for an offering of the shares underlying the warrant
during a ten-year period beginning on November 25, 1997. In addition,
Building One has agreed to give Jonathan J. Ledecky the right to request
that it include the shares underlying the warrant on a registration
statement filed by Building One during a twelve-year period beginning on
November 25, 1997.
(7) This figure includes 72,465 shares owned by Mr. Love's wife and 1,200
shares owned by trusts established for the benefit of his children. Mr.
Love serves as one of four trustees of the SKC Electric, Inc. Profit
Sharing Plan. The number of shares shown as beneficially owned by Mr.
Love excludes shares that may be deemed to be beneficially owned by that
plan.
(8) This figure includes 12,632 shares which may be acquired upon the
exercise of options that are exercisable or that will become exercisable
within 60 days.
(9) On April 30, 1999, David Ledecky was terminated without cause as an
Executive Vice President and Chief Administrative Officer and resigned
from the board of directors.
(10) This figure reflects (1) beneficial ownership by Apollo Investment Fund
IV, L.P. of $94.9 million of convertible junior subordinated debentures,
which are currently convertible into 4,378,754 shares of common stock,
and Apollo Overseas Partners IV, L.P. of $5.1 million of the convertible
junior subordinated debentures, which are currently convertible into
234,799 shares of common stock and (2) 977,573 shares underlying a
warrant owned by Apollo Investment Fund IV, L.P. and 52,427 shares
underlying a warrant owned by Apollo Overseas Partners IV, L.P. Holders
of the warrants have the right to request that Building One include the
shares underlying the warrant on a registration statement filed by
Building One with the SEC during a twelve-year period beginning on
November 25, 1997. The address for Apollo Investment Fund IV, L.P. and
Apollo Overseas Partners IV, L.P. is c/o Apollo Management, L.P., 1301
Avenue of the Americas, 38th Floor, New York, NY 10019.
118
<PAGE>
DESCRIPTION OF GROUPMAC CAPITAL STOCK
The following is a summary of the material terms of GroupMAC's capital
stock. The summary does not purport to be complete or to contain all the
information that may be important to you, and is qualified in its entirety by
reference to GroupMAC's articles of incorporation and bylaws. Therefore, you
should read carefully the more detailed provisions of GroupMAC's articles of
incorporation and bylaws, copies of which are filed as exhibits to the
registration statement of which this joint proxy statement/prospectus is a
part.
General
Under GroupMAC's articles of incorporation, it has authority to issue 150
million shares of capital stock, consisting of 50 million shares of preferred
stock, par value $0.001 per share, and 100 million shares of common stock, par
value $0.001 per share. As of November 30, 1999, there were outstanding
38,344,681 shares of common stock and no shares of preferred stock.
Preferred Stock
The articles of incorporation authorize the issuance of preferred stock in
one or more series having designations, rights and preferences determined from
time to time by GroupMAC's board of directors. Accordingly, subject to
applicable stock exchange rules, GroupMAC's board of directors currently is
empowered, without approval of holders of common stock, to issue preferred
stock with dividends, liquidation, conversion, voting or other rights that
could adversely affect the voting power or other rights of the holders of the
common stock. In the event of issuance, the preferred stock could be used as a
method of discouraging, delaying or preventing a change in control of GroupMAC.
Although GroupMAC has no present intention to issue any shares of preferred
stock other than the convertible preferred stock, it could do so at any time in
the future with the concurrence of Apollo.
Common Stock
Voting Rights. Holders of common stock are entitled to one vote for each
share on all matters on which shareholders generally are entitled to vote,
including elections of directors. GroupMAC's board of directors is classified
into three classes of four or five directors each, with the term of each class
expiring on a staggered basis. The classification of the board will be phased
out after the transaction. The classification of GroupMAC's board of directors
may make it more difficult to change the composition of the board of directors.
This may discourage or make more difficult an attempt by a person or group to
obtain control of GroupMAC. The articles of incorporation do not provide for
cumulative voting for the election of directors.
Dividends. Subject to the preferential rights of any outstanding shares of
preferred stock that may be created by GroupMAC's board of directors under the
articles of incorporation, dividends may be paid to holders of common stock as
may be declared by GroupMAC's board of directors out of funds legally available
for that purpose. The declaration and payment of dividends on common stock will
be restricted by the terms of the convertible preferred stock and the new
credit agreement and could be restricted by the terms of any preferred stock
issued or any loan agreements or other contracts into which we may enter. Under
the Texas Business Corporation Act, dividends may be paid by GroupMAC out of
"surplus" (as defined under Article 1.02 of the Texas Business Corporation Act)
or, if there is no surplus, out of net profits for the fiscal year in which the
dividends are declared and/or the preceding fiscal year. However, GroupMAC does
not intend to pay dividends at the present time.
Liquidation. In the event of the dissolution or winding up of GroupMAC,
after payment or provision for payment of GroupMAC's debts and other
liabilities and any other series or class of GroupMAC's stock issued in the
future that ranks senior as to liquidation rights to the common stock, the
holders of common stock will be entitled to receive pro rata all remaining
assets.
Miscellaneous. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
119
<PAGE>
The common stock is listed on the New York Stock Exchange under the symbol
"MAK."
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, L.L.C.
Statutory Business Combination Provision
GroupMAC is subject to Article 13 of the Texas Business Corporation Act
which, with limited exceptions, prohibits a Texas corporation from engaging in
a "business combination" (as defined in Article 13 of the Texas Business
Corporation Act) with any shareholder who is a beneficial owner of 20% or more
of the corporation's outstanding stock for a period of three years after such
shareholder's acquisition of a 20% ownership. However, this type of transaction
is permitted if (1) the board of directors of the corporation approves the
transaction or the shareholder's acquisition of shares prior to the acquisition
or (2) two-thirds of the unaffiliated shareholders of the corporation approve
the transaction at a shareholder's meeting. Shares that are issuable, but have
not yet been issued, pursuant to options, conversion or exchange rights or
other agreements are not considered outstanding for purposes of Article 13 of
the Texas Business Corporation Act.
Some Important Provisions of the Articles of Incorporation and Bylaws
The articles of incorporation currently contain a "fair price" provision,
which generally requires that certain mergers, business combinations and
similar transactions constituting a "business combination" with an "interested
shareholder" be approved by the holders of at least 80% of GroupMAC's voting
stock. An "interested shareholder" is generally the beneficial owner of at
least 10% of GroupMAC's voting stock. However, this type of transaction is
permitted if (1) the transaction is approved by at least 80% of the "continuing
directors" of GroupMAC, who constitute a majority of the entire board or (2)
certain "fair price" and procedural requirements are satisfied.
The articles of incorporation define "business combination" as:
. any merger or consolidation involving GroupMAC or a subsidiary of
GroupMAC;
. any sale, lease, exchange, transfer or other disposition in one
transaction or a series of transactions, including without limitation a
mortgage or any other security device, of all or any substantial part of
the assets either of GroupMAC or of a subsidiary of GroupMAC to or with
any interested shareholder;
. the issuance, sale, exchange, transfer or other disposition by GroupMAC
or a subsidiary of GroupMAC of any securities of GroupMAC or any
subsidiary of GroupMAC to or with any interested shareholder;
. any recapitalization or reclassification of GroupMAC's securities
(including without limitation, any reverse stock split) or other
transaction that would have the effect of increasing the voting power of
an interested shareholder;
. any liquidation, spinoff, splitoff, splitup or dissolution of GroupMAC
proposed by or on behalf of an interested shareholder; or
. any agreement, contract or other arrangement providing for any of the
transactions described in the definition of business combination.
"Continuing director" is defined to mean a director who either was a member
of GroupMAC's board of directors prior to the time such interested shareholder
became an interested shareholder or who subsequently became a director of
GroupMAC and whose election, or nomination for election by GroupMAC's
shareholders, was approved by a vote of at least 80% of the continuing
directors then on GroupMAC's board of directors, either by a specific vote or
by approval of the proxy statement issued by GroupMAC on behalf of GroupMAC's
board of directors in which such person is named as nominee for director,
without an objection to such nomination; provided, however, that in no event
shall a director be considered a "continuing director" if such director is an
interested shareholder and the business combination to be voted upon is with
such
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interested shareholder or is one in which such interested shareholder otherwise
has an interest except proportionately as a shareholder of GroupMAC.
In accordance with GroupMAC's bylaws, a shareholder of GroupMAC may nominate
persons for election to GroupMAC's board of directors if the shareholder
submits such nomination, together with certain related information required by
GroupMAC's bylaws, in writing to the Secretary of GroupMAC not less than 120
days nor more than 150 days prior to the anniversary date of the mailing of
GroupMAC's proxy statement for the previous annual meeting of shareholders.
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CERTAIN DIFFERENCES IN RIGHTS OF HOLDERS OF
GROUPMAC COMMON STOCK AND BUILDING ONE COMMON STOCK
The following is a summary of the material differences between the rights of
holders of GroupMAC common stock and the rights of holders of Building One
common stock. GroupMAC is organized under the laws of the State of Texas and
Building One is organized under the laws of the State of Delaware, resulting in
differences between the respective state laws and various provisions of their
respective certificate or articles of incorporation and bylaws. Upon completion
of the merger, holders of Building One common stock will become shareholders of
GroupMAC, at which time their rights will be governed by Texas law, the
GroupMAC articles of incorporation and the GroupMAC bylaws.
This summary is not intended to be an exhaustive or detailed description of
the provisions discussed. The summary is qualified in its entirety by reference
to the Texas Business Corporation Act, the General Corporation Law of the State
of Delaware and the respective charters and bylaws of GroupMAC and Building
One.
Mergers and Other Fundamental Transactions
Texas law generally requires that a merger, consolidation, sale of all or
substantially all of the assets or dissolution of a corporation be approved by
the holders of at least two-thirds of the outstanding shares entitled to vote,
unless the corporation's articles of incorporation provide otherwise. The
articles of incorporation of GroupMAC contain no such provision and, thus, such
actions require approval by the affirmative vote of holders of at least two-
thirds of the outstanding shares entitled to vote thereon. Under Delaware law,
all such transactions generally must be approved by the holders of at least a
majority of all outstanding shares entitled to vote, unless the certificate of
incorporation requires approval by a greater number of shares (the Building One
restated certificate of incorporation does not require a greater number, but
provides that the holders of a majority of the outstanding principal amount of
Building One's outstanding convertible junior subordinated debentures must
consent in advance to amendment or repeal of the restated certificate of
incorporation whether by merger or otherwise if such action would have an
adverse effect on the holders of those debentures).
Mergers Without Stockholder Approval
Under Article 5.03 of the Texas Business Corporation Act, unless the
articles of incorporation otherwise require (the GroupMAC articles of
incorporation do not require otherwise), action by the shareholders of a
corporation on a plan of merger will not be required if:
. the corporation is the sole surviving corporation in the merger;
. the articles of incorporation of the corporation following the merger
will not differ from its articles of incorporation before the merger;
. each shareholder of the corporation prior to the merger will hold the
same number of shares, with identical designations, preferences,
limitations and relative rights, immediately after the merger as it held
prior to the merger;
. the voting power of the number of voting shares outstanding immediately
after the merger, plus the voting power of the number of voting shares
issuable as a result of the merger, will not exceed by more than 20% the
voting power of the number of voting shares of the corporation
outstanding immediately before the merger;
. the number of participating shares outstanding immediately after the
merger, plus the number of participating shares issued as a result of the
merger, will not exceed by more than 20% the total number of
participating shares of the corporation outstanding immediately before
the merger; and
. the board of directors of the corporation adopts a resolution approving
the plan of merger.
Additionally, no vote of shareholders is required for the merger of a Texas
corporation with a corporation in which it holds at least 90% of the
outstanding shares of each class and series of such corporation.
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Unless the certificate of incorporation otherwise provides (the Building One
restated certificate of incorporation does not provide otherwise), Delaware law
permits a corporation to consummate a merger in which a corporation is the
surviving corporation without approval of the stockholders of the surviving
corporation (and such stockholders do not have the right to dissent from the
merger and exercise appraisal rights) if:
. the merger does not result in an amendment to the certificate of
incorporation of the corporation;
. each share of stock of the corporation outstanding immediately prior to
the merger is to be an identical outstanding or treasury share of the
surviving corporation after the merger; and
. either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such stock are to be
issued or delivered under the plan of merger, or the authorized unissued
shares or the treasury shares of common stock of the surviving
corporation to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities or
obligations to be issued under such plan do not exceed 20% of the shares
of common stock of the corporation outstanding immediately prior to the
merger.
Additionally, when certain conditions are met, no vote of stockholders is
required for the merger of a Delaware corporation with a corporation in which
it holds at least 90% of the outstanding shares of each class of such
corporation of which class there are outstanding shares entitled to vote on a
merger.
Appraisal Rights
Article 5.11 of the Texas Business Corporation Act provides for appraisal
rights in the case of a plan of merger or exchange or a sale of all or
substantially all of the corporation's assets where shareholder approval is
required. No appraisal rights are available for a plan of merger or plan of
exchange if (1) the shares of the corporation held by the shareholder are
listed on a national securities exchange or held of record by at least 2,000
holders and (2) the shareholder is not required to accept any consideration
other than (a) shares of a corporation that will be listed on a national
securities exchange or will be held of record by at least 2,000 holders and (b)
cash in lieu of fractional shares.
Section 262 of the General Corporation Law of the State of Delaware provides
for appraisal rights only in the case of a statutory merger or consolidation of
the corporation where the petitioning stockholder does not consent to the
transaction. No appraisal rights are available where the corporation is to be
the surviving corporation and a vote of its stockholders is not required under
Section 251(f) or (g) of the General Corporation Law of the State of Delaware.
There also are no appraisal rights, unless otherwise provided in a
corporation's certificate of incorporation (the Building One restated
certificate of incorporation does not provide otherwise), for shares of stock
listed on a national securities exchange or held by more than 2,000 holders of
record, unless such stockholders would be required to accept anything other
than:
. shares of stock of the surviving corporation;
. shares of another corporation listed on a national securities exchange or
held by at least 2,000 holders of record;
. cash in lieu of fractional shares of such stock; or
. any combination thereof.
Unless otherwise provided in the certificate of incorporation (Building
One's restated certificate of incorporation does not provide otherwise), under
Delaware law stockholders are not entitled to appraisal rights upon a sale of
all or substantially all of the assets of the corporation not made in the usual
and regular course of its business, as they are under Texas law.
Amendments to Articles of Incorporation
Article 4.02 of the Texas Business Corporation Act provides that an
amendment to a corporation's articles of incorporation must be approved by the
board of directors and by the affirmative vote of holders of at least
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two-thirds of the outstanding shares entitled to vote, unless the corporation's
articles of incorporation provide otherwise. The articles of incorporation of
GroupMAC contain no such provision and, thus, the requirements of Article 4.02
of the Texas Business Corporation Act control. Section 242 of the General
Corporation Law of the State of Delaware provides that an amendment to a
corporation's certificate of incorporation must be approved by the board of
directors and by the affirmative vote of the holders of at least a majority of
the outstanding stock entitled to vote and by a majority of the outstanding
stock of each class entitled to vote thereon as a class.
Special Meetings of Stockholders
The GroupMAC bylaws provide that a special meeting of the stockholders may
be called by the president of GroupMAC, the GroupMAC board of directors, the
holders of at least 50% of the shares outstanding and entitled to vote at such
meeting or such other persons as may be authorized by the GroupMAC articles of
incorporation. The Building One bylaws provide that a special meeting of the
stockholders may be called by the president and shall be called by the
president or the secretary at the written request of a majority of the
directors of Building One, or at the written request of stockholders owning a
majority of the entire capital stock of Building One issued and outstanding and
entitled to vote.
Cumulative Voting
Holders of GroupMAC common stock and holders of Building One common stock
have no right to vote cumulatively in the election of directors.
No Preemptive Rights
No holder of any class of capital stock of GroupMAC or Building One has a
preemptive right to subscribe to any or all additional issues of the stock of
GroupMAC or Building One, except that Apollo has the right to buy up to 50% of
any shares of Building One common stock issued in a private placement.
Shareholder Action by Written Consent
Article 9.10 of the Texas Business Corporation Act provides that
shareholders may act without a meeting only by the unanimous written consent of
all of the shareholders, unless the articles of incorporation otherwise
provide. The GroupMAC articles of incorporation do not provide otherwise. Under
Section 228 of the General Corporation Law of the State of Delaware,
stockholders may, unless otherwise provided in the certificate of incorporation
(the Building One restated certificate of incorporation provides otherwise),
act without a meeting by written consent of holders of outstanding stock
representing the number of shares necessary to take such action at a meeting at
which all shares entitled to vote were present and voted. The Building One
restated certificate of incorporation requires action by unanimous written
consent of both the stockholders and the holders of the convertible junior
subordinated debentures entitled to vote on the matter.
Election of Directors
Under the terms of the convertible preferred stock to be issued to Apollo,
Apollo will have the right to elect three directors or directors representing
30% of the membership of GroupMAC's board of directors, whichever is greater.
The initial directors designated by Apollo to become members of GroupMAC's
board are Andrew Africk, Michael Gross and Brooks Newmark who will be appointed
to the board prior to the effective time of the merger. There is no other
special class of shareholders with the right to appoint directors to the
GroupMAC board.
Building One's restated certificate of incorporation provides that the
holders of the convertible junior subordinated debentures have the right to
elect three directors to Building One's board of directors, or, if the board
consists of more than ten persons, the holders of those debentures will be
entitled to elect no less than 30% of the total number of directors on the
board.
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Newly-Created Directorships
Under Article 2.34 of the Texas Business Corporation Act and the GroupMAC
bylaws, newly-created directorships resulting from any increase in the number
of directors may be filled by the affirmative vote of a majority of the
directors then in office for a term of office continuing only until the next
election of one or more directors by the shareholders entitled to vote thereon,
provided that the board of directors may not fill more than two such
directorships during the period between any two successive annual meetings of
shareholders. Alternatively, such newly-created directorships may be filled by
election at an annual or special meeting of the shareholders called for that
purpose.
Section 223 of the General Corporation Law of the State of Delaware provides
that vacancies and newly-created directorships may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director, unless otherwise provided in the certificate of
incorporation or bylaws of the corporation (Building One's restated certificate
of incorporation and bylaws do not provide otherwise) or the certificate of
incorporation directs that a particular class is to elect such director, in
which case a majority of the other directors elected by such class, or a sole
remaining director so elected, shall fill such vacancy (Building One's restated
certificate of incorporation provides that any vacancy in the directorships to
be filled by the holders of the convertible junior subordinated debentures
shall be filled by the holders of those debentures voting as a separate class).
Removal of Directors
Under Article 2.32 of the Texas Business Corporation Act, directors of a
corporation are elected to serve until the next annual meeting of shareholders,
and until their successors shall have been elected and qualified, and any
director or the entire board of directors may be removed in accordance with
provisions of the corporation's articles of incorporation or bylaws. The
GroupMAC bylaws contain no provisions in this regard, but the articles of
incorporation provide that no director may be removed except for cause.
Under Section 141 of the General Corporation Law of the State of Delaware,
any director or the entire board of directors may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors, except (1) unless the certificate of incorporation
otherwise provides, in the case of a corporation having a classified board,
stockholders may effect such removal only for cause and (2) in the case of a
corporation having cumulative voting, if less than the entire board is to be
removed, no director may be removed without cause if the votes cast against
such director's removal would be sufficient to elect such director if then
cumulatively voted at an election of the entire board of directors. Because the
Building One board of directors currently is not classified and the Building
One restated certificate of incorporation does not provide for cumulative
voting, neither clause of the previous sentence would apply to any attempted
removal of a Building One director. Under the General Corporation Law of the
State of Delaware, whenever the holders of any class or series are entitled to
elect one or more directors by the certificate of incorporation, the provisions
regarding removal apply, in respect to the removal without cause of a director
or directors so elected, to the vote of the holders of the outstanding shares
of that class or series and not to the vote of the outstanding shares as a
whole.
Inspection of Books and Records
The Texas Business Corporation Act provides that a person who has been a
shareholder of a corporation for at least six months or is the holder of at
least 5% of the outstanding shares of a corporation, may for any proper purpose
upon written demand, inspect the books and records of the corporation and make
extracts therefrom.
The General Corporation Law of the State of Delaware provides that any
record owner of shares of a corporation may, for any proper purpose upon
written demand, examine and copy the books and records of the corporation.
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FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents incorporated by
reference in this joint proxy statement/prospectus contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to risks and uncertainties and are based
on the beliefs and assumptions of our respective managements, based on
information currently available to our respective managements. Forward-looking
statements can be identified by the use of the future tense or other forward-
looking words such as "believe," "expect," "anticipate," "intend," "plan,"
"estimate," "should," "may," "will," "objective," "projection," "forecast,"
"management believes," "continue," "strategy," "position" or the negative of
those terms or other variations of them or by comparable terminology. In
particular, statements, express or implied, concerning future operating results
or the ability to generate sales, income or cash flow are forward-looking
statements. Forward-looking statements include the information concerning
possible or assumed future results of operations of our companies set forth
under:
. "Summary--Selected Historical and Unaudited Pro Forma Financial Data,"
"The Merger--Background of the Transaction," "--Recommendation of the
GroupMAC Board; GroupMAC's Reasons for the Merger," "--Recommendation of
the Building One Board; Building One's Reasons for the Merger," "--
Opinion of Financial Advisor to GroupMAC" and "--Opinion of Financial
Advisor to Building One," and "Combined Company Unaudited Pro Forma
Financial Statements"; and
. "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our respective Annual Reports on
Form 10-K and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our respective Quarterly Reports
on Form 10-Q, in each case incorporated by reference into this joint
proxy statement/prospectus.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of our companies may differ materially from those expressed in these forward-
looking statements. Many of the factors that will determine these results and
values are beyond our ability to control or predict. These statements are
necessarily based upon various assumptions involving judgments with respect to
the future including, among others,
. the ability to achieve synergies and revenue growth,
. national, regional and local economic, competitive and regulatory
conditions and developments,
. technological developments,
. capital market conditions,
. inflation rates,
. interest rates,
. weather conditions,
. the timing and success of business development efforts, and
. other uncertainties,
all of which are difficult to predict and many of which are beyond our control.
Shareholders are cautioned not to put undue reliance on any forward-looking
statements.
Shareholders should understand that the foregoing important factors, in
addition to those discussed elsewhere in this joint proxy statement/prospectus
or in the documents which are incorporated by reference into this joint proxy
statement/prospectus, could affect the future results of the combined company
and could cause results to differ materially from those expressed in such
forward-looking statements.
RESALES
This joint proxy statement/prospectus, as may be supplemented or amended, as
required, may be used by , and in connection
with any sales by them of shares of GroupMAC common stock acquired in the
merger. Such shares may be sold in transactions on the NYSE and the over-the-
counter market and in negotiated transactions. Currently, none of such
individuals plans to dispose of any such shares.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). Our current
SEC filings are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference rooms located at:
. 450 Fifth Street, N.W.
Washington, D.C. 20549
. Seven World Trade Center
New York, New York 10048; and
. Northwest Atrium Center
500 West Madison Street
Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges.
Because GroupMAC's common stock is listed on the New York Stock Exchange,
GroupMAC's reports, proxy statements and other information can be reviewed and
copied at the office of that exchange at 20 Broad Street, New York, New York
10005.
GroupMAC filed a registration statement, which term includes all amendments
thereto, on Form S-4 to register with the SEC the GroupMAC common stock to be
issued to Building One stockholders in the merger. This joint proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of GroupMAC in addition to being our joint proxy statement for the
special meetings. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this joint proxy statement/prospectus, and information
that we file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until the termination of the offering:
<TABLE>
<CAPTION>
GroupMAC SEC Filings (File No. 1-
13565) Period
- --------------------------------- --------------------------------
<S> <C>
Annual Report on Form 10-K, as amended Year ended December 31, 1998
by Form 10-K/A
Quarterly Report Quarter ended March 31, 1999
Quarterly Report Quarter ended June 30, 1999
Quarterly Report Quarter ended September 30, 1999
Current Report on Form 8-K Filed May 22, 1998
Current Report on Form 8-K Filed June 26, 1998
Current Report on Form 8-K/A Filed July 20, 1998(1)
Current Report on Form 8-K Filed September 15, 1998
Current Report on Form 8-K/A Filed September 21, 1998
Current Report on Form 8-K Filed October 28, 1998
Current Report on Form 8-K Filed November 4, 1998
Current Report on Form 8-K Filed November 25, 1998
Current Report on Form 8-K/A Filed December 22, 1998(1)
Current Report on Form 8-K Filed January 5, 1999
</TABLE>
- --------
(1) Two reports were filed on these dates and both reports are incorporated by
reference.
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<TABLE>
<CAPTION>
GroupMAC SEC Filings (File
No. 1-13565) Period
- -------------------------- --------------------------------------------------
<S> <C>
Current Report on Form 8-K/A Filed January 19, 1999
Current Report on Form 8-K Filed January 19, 1999
Current Report on Form 8-K Filed April 16, 1999
Current Report on Form 8-K Filed May 10, 1999
Current Report on Form 8-K Filed June 14, 1999
Current Report on Form 8-K Filed November 5, 1999
Current Report on Form 8-K Filed November 24, 1999
Registration Statement on
Form 8-A Filed November 4, 1997
<CAPTION>
Building One SEC Filings
(File No. 0-23421) Period
- ------------------------ --------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1998
Quarterly Report Quarter ended March 31, 1999
Quarterly Report Quarter ended June 30, 1999
Quarterly Report Quarter ended September 30, 1999
Current Report on Form 8-K/A Filed on May 13, 1998
Current Report on Form 8-K Filed on June 5, 1998
Current Report on Form 8-K Filed on February 10, 1999
Current Report on Form 8-K Filed on February 18, 1999
Current Report on Form 8-K Filed on March 23, 1999
Current Report on Form 8-K Filed on April 9, 1999
Current Report on Form 8-K Filed on June 28, 1999 as amended on June 29, 1999
Current Report on Form 8-K Filed on July 15, 1999
Current Report on Form 8-K Filed on August 9, 1999
Current Report on Form 8-K Filed November 5, 1999
Current Report on Form 8-K Filed November 24, 1999
Registration Statement on
Form 8-A Filed November 25, 1997
</TABLE>
The information concerning GroupMAC contained or incorporated by reference
in this document has been provided by GroupMAC, and the information concerning
Building One contained or incorporated by reference in this document has been
provided by Building One.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the merger, the
amendment to the articles of incorporation, and the issuance of the convertible
preferred stock, as applicable. We have not authorized anyone to provide you
with information that is different from what is contained in this joint proxy
statement/prospectus. You should not assume that the information contained in
this joint proxy statement/prospectus is accurate as of any date other than the
date on the cover, and neither the mailing of the joint proxy statement/
prospectus to shareholders nor the issuance of GroupMAC common stock pursuant
to the merger shall create any implication to the contrary.
LEGAL MATTERS
Bracewell & Patterson, L.L.P., counsel to GroupMAC, has passed and will pass
on the material federal income tax consequences of the merger to the
shareholders of GroupMAC. Morgan, Lewis & Bockius LLP, counsel to Building One,
has passed and will pass on the material federal income tax consequences of the
merger to the stockholders of Building One.
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EXPERTS
The audited historical financial statements incorporated by reference in
this joint proxy statement/ prospectus have been audited by various independent
accountants. The companies and periods covered by these audits are indicated in
the individual accountants' independent auditors' reports. Such financial
statements have been so included in reliance on the reports of the various
independent accountants given on the authority of such firms as experts in
auditing and accounting.
Representatives of KPMG LLP are expected to be present at the GroupMAC
special meeting. Representatives of PricewaterhouseCoopers LLP are expected to
be present at the Building One special meeting. In each case, such
representatives will have an opportunity to make statements if they desire to
do so, and such representatives are expected to be available to respond to
appropriate questions.
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ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of November 2, 1999,
as amended,
by and between
Group Maintenance America Corp.
and
Building One Services Corporation
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page (s)
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ARTICLE I
The Merger
Section 1.1 The Merger............................................ A-1
Section 1.2 Closing............................................... A-1
Section 1.3 Effects of the Merger................................. A-2
Section 1.4 Articles of Incorporation and Bylaws.................. A-2
Section 1.5 Directors............................................. A-2
Section 1.6 Officers.............................................. A-2
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock........................... A-2
Section 2.2 Effect of Merger on Delaware Common Stock............. A-3
Section 2.3 Exchange of Delaware Company Stock Certificates....... A-4
Section 2.4 Texas Company Eligible Shares......................... A-6
Section 2.5 Manner of Conversion of Texas Company Eligible Shares
into Cash;
Limitations Thereon................................... A-6
Section 2.6 Surrender of Texas Company Stock Certificates and
Payment.............................................. A-8
ARTICLE III
Representations and Warranties of the Delaware Company
Section 3.1 Due Incorporation, Etc................................ A-9
Section 3.2 Qualification as Foreign Entities..................... A-9
Section 3.3 Capital Stock......................................... A-10
Section 3.4 Capitalization of the Delaware Company Subsidiaries... A-10
Section 3.5 Ownership of Equity Interests......................... A-10
Section 3.6 Corporate Power and Authority......................... A-10
Section 3.7 No Conflicts or Consents.............................. A-11
Section 3.8 SEC Reports and Financial Statements.................. A-11
Information in Disclosure Documents and Registration
Section 3.9 Statement............................................ A-12
Section 3.10 Litigation............................................ A-12
Section 3.11 No Material Adverse Change............................ A-13
Section 3.12 Taxes................................................. A-13
Section 3.13 Vote Required......................................... A-14
Section 3.14 Opinion of Financial Advisor.......................... A-14
Section 3.15 Change in Control Provisions.......................... A-14
Section 3.16 Undisclosed Material Liabilities...................... A-14
Section 3.17 Employee Benefit Plans................................ A-14
Section 3.18 Licenses and Registration............................. A-16
Section 3.19 Compliance with Laws.................................. A-16
Section 3.20 Environmental Matters................................. A-16
Section 3.21 Labor Matters......................................... A-17
Section 3.22 State Takeover Statutes............................... A-17
Section 3.23 Ownership of Texas Company Common Stock............... A-17
Section 3.24 General............................................... A-17
</TABLE>
A-i
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<TABLE>
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Page (s)
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<C> <S> <C>
ARTICLE IV
Representations and Warranties of the Texas Company
Section 4.1 Due Incorporation, Etc................................ A-18
Section 4.2 Qualification as Foreign Entities..................... A-18
Section 4.3 Capital Stock......................................... A-18
Section 4.4 Preferred Stock Agreement............................. A-19
Section 4.5 Capitalization of the Texas Company Subsidiaries...... A-19
Section 4.6 Ownership of Equity Interests......................... A-19
Section 4.7 Corporate Power and Authority......................... A-19
Section 4.8 No Conflicts or Consents.............................. A-19
Section 4.9 SEC Reports and Financial Statements.................. A-20
Section 4.10 Information in Disclosure Documents and Registration
Statement............................................ A-20
Section 4.11 Litigation............................................ A-21
Section 4.12 No Material Adverse Change............................ A-21
Section 4.13 Taxes................................................. A-21
Section 4.14 Vote Required......................................... A-22
Section 4.15 Opinion of Financial Advisor.......................... A-22
Section 4.16 Change in Control Provisions.......................... A-22
Section 4.17 Undisclosed Material Liabilities...................... A-22
Section 4.18 Employee Benefit Plans................................ A-22
Section 4.19 Licenses and Registration............................. A-23
Section 4.20 Compliance with Laws.................................. A-23
Section 4.21 Environmental Matters................................. A-24
Section 4.22 State Takeover Statutes............................... A-24
Section 4.23 Labor Matters......................................... A-24
Section 4.24 General............................................... A-25
ARTICLE V
Covenants
Section 5.1 Conduct of Business of the Delaware Company........... A-25
Section 5.2 Conduct of Business of the Texas Company.............. A-27
Section 5.3 Commercially Reasonable Best Efforts.................. A-29
Section 5.4 Letter of the Delaware Company's Accountants.......... A-30
Section 5.5 Letter of the Texas Company's Accountants............. A-31
Section 5.6 Access to Information................................. A-31
Section 5.7 Stock Exchange Listing................................ A-31
Section 5.8 Employee Benefit Plans................................ A-31
Section 5.9 Insurance and Indemnity............................... A-34
Section 5.10 Fees and Expenses..................................... A-34
Section 5.11 Brokers or Finders.................................... A-35
Section 5.12 No Solicitation....................................... A-35
Section 5.13 Texas Company and Delaware Company Shareholder
Meetings............................................. A-37
Section 5.14 Rule 145.............................................. A-39
Section 5.15 Board Membership and Officers......................... A-39
Section 5.16 Takeover Statute...................................... A-39
Section 5.17 Tax Matters........................................... A-40
Section 5.18 Notification of Certain Matters....................... A-40
Section 5.19 Transition Planning................................... A-40
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
Page (s)
--------
<C> <S> <C>
ARTICLE VI
Conditions
Section 6.1 Conditions to Each Party's Obligation To Effect the
Merger............................................... A-40
Section 6.2 Conditions of Obligations of the Delaware Company..... A-41
Section 6.3 Conditions of Obligations of the Texas Company........ A-41
ARTICLE VII
Termination
Section 7.1 Termination........................................... A-42
Section 7.2 Effect of Termination................................. A-43
Section 7.3 Terms of Payment...................................... A-44
Section 7.4 Termination for Costs and Expenses.................... A-44
ARTICLE VIII
Miscellaneous
Section 8.1 Survival of Representations, Warranties and
Agreements........................................... A-44
Section 8.2 Amendment............................................. A-45
Section 8.3 Extension; Waiver..................................... A-45
Section 8.4 Notices............................................... A-45
Section 8.5 Interpretation........................................ A-45
Section 8.6 Counterparts.......................................... A-46
Section 8.7 Entire Agreement; No Third Party Beneficiaries........ A-46
Section 8.8 GOVERNING LAW......................................... A-46
Section 8.9 Specific Performance.................................. A-46
Section 8.10 Publicity............................................. A-46
Section 8.11 Assignment............................................ A-46
Section 8.12 Validity.............................................. A-46
Section 8.13 Taxes................................................. A-46
</TABLE>
A-iii
<PAGE>
SCHEDULE OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Page
- ------------ ----
<S> <C>
162(m) Bonus Plan.......................................................... A-33
Aggregate Elected Cash Share Number........................................ A-7
Agreement.................................................................. A-1
Alternative Transaction.................................................... A-36
business day............................................................... A-1
Cash Share Election........................................................ A-7
Closing.................................................................... A-1
COBRA...................................................................... A-14
Code....................................................................... A-1
Common Stock Trust......................................................... A-5
Confidentiality Agreement.................................................. A-31
Contracts.................................................................. A-11
Current Employees.......................................................... A-34
Debentures................................................................. A-10
Delaware Company Common Stock.............................................. A-2
Delaware Company Per Share Stock Amount.................................... A-2
Delaware Company........................................................... A-1
Delaware Company Stock Certificate......................................... A-3
Delaware Company Stock Certificates........................................ A-3
Delaware Company Excluded Shares........................................... A-3
Delaware Company Superior Proposal......................................... A-38
Delaware Company Option Plans.............................................. A-10
Delaware Company Plan...................................................... A-15
Delaware Company Junior Indenture.......................................... A-12
Delaware Company ERISA Affiliate........................................... A-14
Delaware Company Returns................................................... A-13
Delaware Company SEC Documents............................................. A-11
Delaware Company Qualified Plans........................................... A-33
Delaware Company Stockholders' Meeting..................................... A-38
Delaware Company Determination Notice...................................... A-38
Delaware Company Disclosure Schedule....................................... A-18
Delaware Company Proxy Statement........................................... A-12
Delaware Company Contracts................................................. A-11
Delaware Company Options................................................... A-10
Delaware Company Warrants.................................................. A-10
Delaware Company Acquisition Agreement..................................... A-38
Delaware Company Balance Sheet............................................. A-13
Delaware Company Environmental Permits..................................... A-16
Delaware Company Material Permits.......................................... A-16
Delaware Company Subsequent Determination.................................. A-38
Delaware Company Multiemployer Plan........................................ A-15
Delaware Company Subsidiary................................................ A-10
Delaware Designees......................................................... A-39
DGCL....................................................................... A-1
Directors Option Plan...................................................... A-32
Effective Time............................................................. A-1
Elected Cash Share......................................................... A-7
</TABLE>
A-iv
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page
- ------------ ----
<S> <C>
Election Deadline.......................................................... A-7
Election Form Record Date.................................................. A-6
Election Form.............................................................. A-6
Employee Benefit Plans..................................................... A-33
Employee Stock Purchase Plan............................................... A-33
Environmental Law.......................................................... A-16
Equity Rights.............................................................. A-10
ERISA...................................................................... A-14
Excess Shares.............................................................. A-5
Exchange Act............................................................... A-11
Exchange Agent............................................................. A-4
Exchange Fund.............................................................. A-4
Executive Committee........................................................ A-39
GAAP....................................................................... A-11
Governmental Entity........................................................ A-11
Group...................................................................... A-13
Hazardous Materials........................................................ A-16
Hazardous Materials Contamination.......................................... A-16
HSR Act.................................................................... A-11
Investor Designees......................................................... A-39
Investor Rights Agreement.................................................. A-14
Joint Designee............................................................. A-39
Law........................................................................ A-11
Liens...................................................................... A-10
Mailing Date............................................................... A-6
material................................................................... A-17
material adverse effect.................................................... A-17
Material Delaware Company Contracts........................................ A-27
Material Texas Company Contracts........................................... A-29
Merger..................................................................... A-1
Merger Consideration....................................................... A-4
New Financing.............................................................. A-29
New Investor............................................................... A-41
NYSE....................................................................... A-5
Option Payment Amount...................................................... A-8
Option Share Reduction Amount.............................................. A-8
Option Waivers............................................................. A-32
Parties.................................................................... A-1
Party...................................................................... A-1
Payment Fund............................................................... A-8
PBGC....................................................................... A-13
Per Share Cash Amount...................................................... A-6
Person..................................................................... A-3
Pre-Surrender Dividends.................................................... A-4
Preferred Stock Agreement.................................................. A-19
Proration Factor........................................................... A-7
Release.................................................................... A-17
Requisite Delaware Holder Approvals........................................ A-14
Requisite Texas Holder Approvals........................................... A-22
Returns.................................................................... A-13
</TABLE>
A-v
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page
- ------------ ----
<S> <C>
S-4........................................................................ A-12
SAS........................................................................ A-31
SEC........................................................................ A-11
Securities Act............................................................. A-11
Stock Performance Plan..................................................... A-33
Subsidiary................................................................. A-3
Surviving Corporation...................................................... A-1
Surviving Corporation Common Stock......................................... A-3
Taxes...................................................................... A-13
TBCA....................................................................... A-1
Termination Date........................................................... A-42
Termination Fee............................................................ A-43
Texas Company Returns...................................................... A-21
Texas Company Subsidiary................................................... A-19
Texas Company Option Plans................................................. A-19
Texas Company ERISA Affiliate.............................................. A-22
Texas Company SEC Documents................................................ A-20
Texas Company Proxy Statement.............................................. A-20
Texas Company Balance Sheet................................................ A-21
Texas Company Contracts.................................................... A-20
Texas Company Multiemployer Plan........................................... A-23
Texas Company Acquisition Agreement........................................ A-37
Texas Company Subsequent Determination..................................... A-37
Texas Company Determination Notice......................................... A-37
Texas Company Superior Proposal............................................ A-37
Texas Company Disclosure Schedule.......................................... A-25
Texas Company Environmental Permits........................................ A-24
Texas Company Plan......................................................... A-23
Texas Company Stock Certificate............................................ A-6
Texas Company Material Permits............................................. A-23
Texas Company Options...................................................... A-19
Texas Company Shareholders' Meeting........................................ A-37
Texas Company Eligible Share............................................... A-3
Texas Company Common Stock................................................. A-2
Texas Company.............................................................. A-1
Texas Company Preferred Stock.............................................. A-41
Texas Designees............................................................ A-39
Third Party................................................................ A-36
Total Eligible Options..................................................... A-34
Total Eligible Share Number................................................ A-8
</TABLE>
A-vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of November 2, 1999 (this
"Agreement"), is by and between Group Maintenance America Corp., a Texas
corporation (the "Texas Company"), and Building One Services Corporation, a
Delaware corporation (the "Delaware Company"). As used in this Agreement, the
term "Party" shall refer to the Texas Company or the Delaware Company,
individually, and the term "Parties" shall refer to the Texas Company and the
Delaware Company, collectively.
WHEREAS, the respective Boards of Directors of the Texas Company and the
Delaware Company have determined that the combination of the Delaware Company
and the Texas Company in a "merger of equals" transaction would be advisable
and beneficial to their respective corporations and equity holders, and that
such transaction is consistent with and in furtherance of such entities'
respective long-term business strategies; and
WHEREAS, for federal income tax purposes, the Merger (as hereinafter
defined) and the exchange of the debentures issued pursuant to the Delaware
Company Junior Indenture (as hereinafter defined) for Texas Company Preferred
Stock (as hereinafter defined) pursuant to the Preferred Stock Agreement (as
hereinafter defined) are intended to qualify as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, each of
the Parties agrees as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. At the Effective Time (as hereinafter defined) and
upon the terms and subject to the conditions set forth in this Agreement and
the General Corporation Law of the State of Delaware (the "DGCL") and the Texas
Business Corporation Act (the "TBCA"), the Delaware Company shall be merged
with and into the Texas Company and the separate corporate existence of the
Delaware Company shall thereupon cease, with the Texas Company being the
surviving corporation (the "Surviving Corporation") of the merger (the
"Merger") and continuing its existence under the laws of the State of Texas. As
promptly as practicable after the satisfaction or waiver of the conditions set
forth in Article VI hereof and the consummation of the Closing referred to in
Section 1.2 hereof, the Delaware Company and the Texas Company shall cause to
be filed (i) with the Secretary of State of the State of Delaware a properly
executed certificate of merger consistent with the terms of this Agreement and
the DGCL, and (ii) with the Secretary of State of the State of Texas properly
executed articles of merger consistent with the terms of this Agreement and the
TBCA. The Merger shall become effective at such time as the articles of merger
are duly filed with the Secretary of State of the State of Texas and the
certificate of merger is duly filed with the Secretary of State of the State of
Delaware, or at such subsequent date or time as the Parties shall agree and
specify in the certificate of merger and articles of merger (the time the
Merger becomes effective being hereinafter referred to as the "Effective
Time").
Section 1.2 Closing. Unless this Agreement is terminated and the
transactions contemplated herein abandoned pursuant to Section 7.1, and
assuming the satisfaction or waiver of the conditions set forth in Article VI,
the closing of the Merger (the "Closing") shall take place (i) no sooner than
the first business day after December 31, 1999, and no later than second
business day thereafter following the satisfaction or waiver of the conditions
set forth in Article VI (other than the conditions to be satisfied or waived at
the Closing), at the offices of Bracewell & Patterson, L.L.P., 2900 South
Tower, Pennzoil Place, Houston, Texas, or (ii) on such other date or at such
other place as agreed to in writing by the Parties. For purposes of this
Agreement, the term "business day" shall mean any calendar day other than
Saturday, Sunday or any day that nationally chartered financial institutions
are legally required to close in either Houston, Texas, or New York, New York.
A-1
<PAGE>
Section 1.3 Effects of the Merger. At the Effective Time, the Merger will
have the effects set forth in the DGCL and the TBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of the Delaware
Company and the Texas Company shall continue with, or vest in, as the case may
be, the Surviving Corporation, and all debts, liabilities and duties of the
Delaware Company and the Texas Company shall continue with, or become, as the
case may be, the debts, liabilities and duties of the Surviving Corporation.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to continue in, vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of the Delaware Company as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of such
constituent corporations, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of the Delaware
Company or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties, privileges, franchises or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
Section 1.4 Articles of Incorporation and Bylaws. The articles of
incorporation of the Texas Company shall be amended and restated in the Merger
to read in their entirety as set forth on Exhibit 1.4(a) hereof, and, as so
amended and restated, shall be the articles of incorporation of the Surviving
Corporation following the Effective Time, until duly amended in accordance with
the TBCA. The bylaws of the Texas Company shall be the bylaws of the Surviving
Corporation after the Effective Time, until duly amended in accordance with the
TBCA.
Section 1.5 Directors. The directors of the Surviving Corporation at the
Effective Time shall be determined in accordance with Section 5.15, and such
directors shall hold office from the Effective Time in accordance with the
articles of incorporation and bylaws of the Surviving Corporation until his or
her successor is duly elected or appointed and qualified.
Section 1.6 Officers. The officers of the Surviving Corporation at the
Effective Time shall be determined in accordance with Section 5.15, and such
officers shall hold office from the Effective Time in accordance with the
articles of incorporation and bylaws of the Surviving Corporation and until his
or her successor is duly appointed and qualified.
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock. At the Effective Time, as a result
of the Merger and without any action on the part of the holder of any capital
stock of the Delaware Company or the Texas Company:
(i) Subject to Sections 2.2(d) and 2.3(e), each share of common stock,
par value $.001 per share, of the Delaware Company (the "Delaware Company
Common Stock") that is issued and outstanding immediately prior to the
Effective Time, other than Delaware Company Excluded Shares (as hereinafter
defined), shall be converted into the right to receive 1.25 fully paid,
validly issued and nonassessable shares of Surviving Corporation Common
Stock (as hereinafter defined) (the "Delaware Company Per Share Stock
Amount").
(ii) Each share of common stock, par value $.001 per share, of the Texas
Company (the "Texas Company Common Stock") that is issued and outstanding
immediately prior to the Effective Time, other than Texas Company Eligible
Shares (as hereinafter defined), shall remain issued and outstanding.
(iii) Each share of Texas Company Preferred Stock that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding.
A-2
<PAGE>
(iv) Each share of Texas Company Common Stock that is issued and
outstanding immediately prior to the Effective Time and which under the
terms of Sections 2.4, 2.5 and 2.6 is to be converted into the right to
receive cash (a "Texas Company Eligible Share") shall, without any action
by the holder thereof, be converted into the right to receive the Per Share
Cash Amount (as hereinafter defined).
Section 2.2 Effect of Merger on Delaware Common Stock. (a) Each share of
Delaware Company Common Stock so converted pursuant to the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
no longer be outstanding and shall be canceled and shall cease to exist, and
each holder of a certificate which, prior to the Effective Time, evidenced any
such share (individually, a "Delaware Company Stock Certificate" and
collectively, the "Delaware Company Stock Certificates") shall thereafter cease
to have any rights with respect to such certificates or the shares formerly
represented thereby, except, upon the surrender of the Delaware Company Stock
Certificate in accordance with Section 2.3, the right to receive from the
Surviving Corporation (i) the number of whole shares of common stock, $.001 par
value per share, of the Surviving Corporation (the "Surviving Corporation
Common Stock") equal to the product of (A) the Delaware Company Per Share Stock
Amount, multiplied by (B) the number of shares of Delaware Company Common Stock
formerly evidenced by such Delaware Company Stock Certificate, (ii) the amount
of cash payable pursuant to Section 2.3(e) in lieu of any fractional shares
issuable pursuant to Section 2.1(i), and (iii) the amount of any Pre-Surrender
Dividends payable pursuant to Section 2.3(c).
(b) At the Effective Time, all shares of capital stock of the Delaware
Company that are owned by the Delaware Company or the Texas Company or any of
their respective wholly owned Subsidiaries (as hereinafter defined)
(collectively, "Delaware Company Excluded Shares"), shall be canceled and will
cease to exist and no capital stock or other consideration will be delivered in
exchange therefor. As used in this Agreement, "Subsidiary" means, with respect
to any specified corporation, partnership, individual, association,
organization or other entity or group ("Person"), any corporation or other
entity or organization, whether incorporated or unincorporated, of which (i)
such Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interest in such partnership), or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person, by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries. References
to a wholly owned Subsidiary of an entity include a Subsidiary, all of the
common equity of which is owned directly or through "wholly owned" Subsidiaries
by such entity.
(c) The stock transfer books of the Delaware Company shall be closed at the
Effective Time and no transfer of any Delaware Company Common Stock will
thereafter be recorded on any of such stock transfer books. In the event of a
transfer of ownership of Delaware Company Common Stock that is not registered
in the transfer records of the Delaware Company at the Effective Time, a
certificate or certificates representing the number of whole shares of
Surviving Corporation Common Stock issuable in respect of such shares of
Delaware Company Common Stock shall be issued to the transferee together with a
cash payment in lieu of fractional shares, if any, in accordance with Section
2.3(e) hereof, and a cash payment in the amount of Pre-Surrender Dividends, if
any, in accordance with Section 2.3(c) hereof, if the Delaware Company Stock
Certificate therefor is presented to the Exchange Agent (as hereinafter
defined), accompanied by all documents required to evidence and effect such
transfer, together with evidence that any applicable stock transfer taxes have
been paid and the payment of any required transfer taxes. Until surrendered as
contemplated by Section 2.3, each Delaware Company Stock Certificate will be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the relevant Merger Consideration (as hereinafter
defined) and the other amounts, if any, payable to such holder pursuant to this
Article II.
(d) In the event that between the date of this Agreement and the Effective
Time the outstanding shares of Delaware Company Common Stock or Texas Company
Common Stock (except pursuant to this Agreement and only upon the consent of
each of the Parties) are changed into a different number of shares or a
different class,
A-3
<PAGE>
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Delaware
Company Per Share Stock Amount and the amount of cash payable in respect of
fractional shares pursuant to Section 2.3(e) or payable pursuant to Section
2.3(c) will be appropriately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
Section 2.3 Exchange of Delaware Company Stock Certificates.
(a) Subject to the terms and conditions hereof, the Texas Company and the
Delaware Company shall jointly appoint ChaseMellon Shareholder Services,
L.L.C., as exchange agent to effect the exchange of the Delaware Company Common
Stock for the Surviving Corporation Common Stock in accordance with the
provisions of this Article II (the "Exchange Agent"). After the Effective Time,
the Surviving Corporation will irrevocably deposit, or will cause to be so
deposited, with the Exchange Agent for the benefit of the holders of Delaware
Company Stock Certificates (other than holders of those Delaware Company Stock
Certificates representing Delaware Company Excluded Shares), the certificates
evidencing the shares of the Surviving Corporation Common Stock payable or
issuable pursuant to Section 2.1 upon the due surrender of Delaware Company
Stock Certificates (such certificates evidencing shares of the Surviving
Corporation Common Stock, together with any cash or other dividends or
distributions declared or made, and any other cash or other property paid, with
respect thereto, being hereinafter collectively referred to as the "Exchange
Fund"). The Surviving Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the transactions contemplated
in this Article II. Subject to Sections 2.3(e), (f), (g) and (h), the Exchange
Agent will deliver to holders of Delaware Company Stock Certificates (other
than those representing Delaware Company Excluded Shares) in accordance with
Section 2.3(b) the Merger Consideration and any other amounts payable to such
holders pursuant to this Article II. The Exchange Fund will not be used for any
other purpose. All interest, dividends or other income earned on cash deposits
in the Exchange Fund shall be for the account of the Surviving Corporation.
(b) Immediately after the Effective Time, the Surviving Corporation shall
cause the Exchange Agent to mail to each holder of record of shares of Delaware
Company Common Stock that were converted pursuant to Section 2.1 (i) a letter
of transmittal (which will be in such form and have such provisions as the
Delaware Company and the Texas Company may reasonably specify prior to the
Effective Time) and (ii) instructions for use in effecting the surrender of the
Delaware Company Stock Certificate in exchange for certificates representing
shares of Surviving Corporation Common Stock. Upon surrender of a Delaware
Company Stock Certificate for cancellation to the Exchange Agent, together with
a properly completed and duly executed letter of transmittal, the holder of
such Delaware Company Stock Certificate will be entitled, after the Effective
Time, to receive in exchange therefor (y) a certificate representing that
number of whole shares of Surviving Corporation Common Stock, pursuant to the
provisions of this Article II, and (z) cash in lieu of fractional shares of
Surviving Corporation Common Stock to which such holder is entitled pursuant to
Section 2.3(e) (the shares of Surviving Corporation Common Stock and cash
described in clauses (y) and (z) above being collectively referred to herein as
the "Merger Consideration") and any other amounts, if any, payable to such
holder pursuant to this Article II, and the Delaware Company Stock Certificate
so surrendered will forthwith be canceled.
(c) No dividends or other distributions declared or made, or any other cash
or other property paid, after the Effective Time with respect to shares of
Surviving Corporation Common Stock with a record date after the Effective Time
(such dividends or distributions being referred to collectively herein as the
"Pre-Surrender Dividends") will be paid to the holder of any unsurrendered
Delaware Company Stock Certificate with respect to the shares of Surviving
Corporation Common Stock that such holder is entitled to receive upon the
surrender thereof in accordance with this Section 2.3. Subject to the effect of
applicable laws, following surrender of any such Delaware Company Stock
Certificate, there will be paid to the record holder of the certificates
representing whole shares of Surviving Corporation Common Stock issued in
exchange therefor, without interest, (i) the amount of the Pre-Surrender
Dividends theretofore paid or issued with respect to such whole shares of
Surviving Corporation Common Stock, and (ii) at the appropriate payment date,
the amount of
A-4
<PAGE>
Pre-Surrender Dividends with a payment date subsequent to surrender payable
with respect to such whole shares of Surviving Corporation Common Stock.
(d) The Merger Consideration paid or delivered as provided above, together
with any Pre-Surrender Dividends, will be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Delaware Company Common
Stock and there will be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Delaware Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Delaware Company Stock Certificates are presented to
the Surviving Corporation for any reason, they will be canceled and exchanged
as provided in this Article II.
(e) No fractional shares of and no certificate or scrip representing
fractional shares of Surviving Corporation Common Stock will be issued upon the
surrender for exchange of Delaware Company Stock Certificates. In lieu of the
issuance of any fractional shares of Surviving Corporation Common Stock
pursuant to Section 2.1(i), as promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (i) the number of whole
shares of Surviving Corporation Common Stock delivered to the Exchange Agent by
the Surviving Corporation pursuant to this Article II over (ii) the aggregate
number of whole shares of the Surviving Corporation Common Stock to be issued
to holders of Delaware Company Stock Certificates pursuant to this Article II
(such excess being herein called the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Delaware Company Stock Certificates, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange ("NYSE"), all in the manner
provided in this Section.
The sale of the Excess Shares by the Exchange Agent shall be executed on the
NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. The Exchange Agent shall use all
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment,
is practicable consistent with obtaining the best execution of such sales in
light of prevailing market conditions. Until the net proceeds of such sale or
sales have been distributed to the holders of Delaware Company Stock
Certificates, the Exchange Agent will hold such proceeds in trust for the
holders of Delaware Company Stock Certificates entitled to receive shares of
Surviving Corporation Common Stock under this Article II (the "Common Stock
Trust"). The Surviving Corporation shall pay all commissions, transfer taxes
and other out-of-pocket transaction costs, including the expenses and
compensation, of the Exchange Agent incurred in connection with such sale of
the Excess Shares. The Exchange Agent shall determine the portion of the Common
Stock Trust to which each holder of a Delaware Company Stock Certificate
entitled to receive Surviving Corporation Common Stock under this Article II
shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds compromising the Common Stock Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such holder of a
Delaware Company Stock Certificate would otherwise be entitled (after taking
into account all Delaware Company Stock Certificates then held by such holder)
and the denominator of which is the aggregate amount of fractional share
interest to which all holders of Delaware Company Stock Certificates would
otherwise be entitled.
Notwithstanding the previous provisions of this Section 2.3(e), if the
Parties shall so agree in writing prior to the Effective Time, then in lieu of
the sale of Excess Shares and the making of the payments contemplated above,
each holder of a Delaware Company Stock Certificate shall be paid an amount in
cash equal to the product obtained by multiplying the fractional share interest
to which such holder (after taking into account all Delaware Company Stock
Certificates then held by such holder) would otherwise be entitled by the
closing price for a share of Texas Company Common Stock on the NYSE Composite
Transactions tape on the first business day immediately preceding the Effective
Time, and, in such case, all references herein to the cash proceeds of the sale
of the Excess Shares and similar references shall be deemed to mean and refer
to the payments calculated as set forth in this sentence.
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As soon as practicable after the determination of the amounts of cash, if
any, to be paid to holders of Delaware Company Stock Certificates in lieu of
any fractional share interests, the Exchange Agent shall make available such
amounts to such holders of Delaware Company Stock Certificates, subject to and
in accordance with this Article II.
(f) The Surviving Corporation shall not be liable to any holder of shares
of Delaware Company Common Stock for any shares of Surviving Corporation
Common Stock (or dividends or distributions with respect thereto) or cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) Any portion of the Exchange Fund or the Common Stock Trust that remains
undistributed to the holders of Delaware Company Stock Certificates for one
year after the Effective Time will be delivered to the Surviving Corporation,
upon demand, and any holders of Delaware Company Stock Certificates who have
not theretofore complied with this Article II will thereafter look only to the
Surviving Corporation for the Merger Consideration and any unpaid Pre-
Surrender Dividends to which they are entitled pursuant to this Article II.
(h) The Surviving Corporation or the Exchange Agent will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Delaware Company Stock Certificates such amounts as
the Surviving Corporation or the Exchange Agent are required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by the Surviving Corporation or the Exchange Agent, such withheld
amounts will be treated for all purposes of this Agreement as having been paid
to the holder of the Delaware Company Stock Certificates in respect of which
such deduction and withholding was made by the Surviving Corporation or the
Exchange Agent. Notwithstanding the foregoing, no amount shall be withheld
from any payment made hereunder to a holder of Delaware Company Stock
Certificates who provides the Exchange Agent with a properly completed
Internal Revenue Service Form W-9 or Substitute Form W-9, or who otherwise
provides the Exchange Agent with appropriate evidence that such Person is
exempt from federal income tax back-up withholding.
Section 2.4 Texas Company Eligible Shares. (a) Each holder of a certificate
which prior to the Effective Time evidenced any Texas Company Eligible Share
(a "Texas Company Stock Certificate") shall thereafter cease to have any
rights with respect to such certificate or the shares formerly represented
thereby, except, upon the surrender of the Texas Company Stock Certificate in
accordance with Section 2.5, the right to receive from the Surviving
Corporation an amount equal to the product of (i) $13.50 (the "Per Share Cash
Amount") multiplied by (ii) the number of Texas Company Eligible Shares
formerly evidenced by such Texas Company Stock Certificate.
(b) In the event that between the date of this Agreement and the Effective
Time the outstanding shares of Texas Company Common Stock (except pursuant to
the this Agreement and only upon the consent of each of the Parties) are
changed into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Per Share Cash Amount and the Total
Eligible Share Number will be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares.
Section 2.5 Manner of Conversion of Texas Company Eligible Shares into
Cash; Limitations Thereon.
(a) Election Procedures. An election form and other appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates formerly evidencing
shares of Texas Company Eligible Shares shall pass, only upon proper delivery
of such certificates to the Exchange Agent, in such form as the Texas Company
shall designate ("Election Form")) shall be mailed at least thirty days prior
to the anticipated Effective Time or on such other date as the Texas Company
shall determine ("Mailing Date") to each holder of record of shares of Texas
Company Common Stock on the business day which is not more than five days
prior to the Mailing Date ("Election Form Record Date"). Each
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Election Form shall permit a holder of shares of Texas Company Common Stock (or
the beneficial owner through appropriate and customary documentation and
instructions) to make an unconditional election ("Cash Share Election"),
subject to the allocation procedures set forth below, with respect to such
holder's (or beneficial owner's) shares of Texas Company Common Stock, to have
up to 50% of such shares become Texas Company Eligible Shares (each, an
"Elected Cash Share").
No shares of Texas Company Common Stock with respect to which the holder (or
the beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before 5:00
p.m., Houston, Texas time, on or before the business day which is three
business days prior to the Effective Time (or such other time and date as Texas
Company designates) (the "Election Deadline") shall be deemed to be an Elected
Cash Share and each such holder (or beneficial owner, as the case may be) shall
be deemed not to have made a Cash Share Election with respect to such share.
Any shares of Texas Company Common Stock with respect to which the holder
thereof (or the beneficial owner, as the case may be) has indicated in an
effective, properly completed Election Form submitted to the Exchange Agent on
or before the Election Deadline an election to have such shares become an
Elected Cash Share but which cannot become an Elected Cash Share because of the
50% limitation set forth above shall also not be deemed to be an Elected Cash
Share and such holder (or beneficial owner, as the case may be) shall be deemed
not to have made a Cash Share Election with respect to such shares.
The Texas Company shall use its commercially reasonable efforts to make
available one or more Election Forms as may be reasonably requested by any
Person who becomes a holder (or beneficial owner) of shares of Texas Company
Common Stock between the Election Form Record Date and the close of business on
the business day prior to the Election Deadline, and shall provide to the
Exchange Agent all information reasonably necessary for it to perform as
specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form on or prior to
the Election Deadline. An Election Form shall be deemed properly completed only
if accompanied by one or more Texas Company Stock Certificates (or customary
affidavits and indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates) representing all
Elected Cash Shares held by the holder or beneficial owner of such shares,
together with duly executed transmittal materials included in the Election
Form. Any Election Form may be revoked or changed by the Person submitting such
Election Form at any time prior to the Election Deadline. In the event an
Election Form is revoked prior to the Election Deadline and no subsequent
Election Form is delivered to the Exchange Agent prior to the Election
Deadline, the Elected Cash Shares represented by such Election Form shall not
be deemed to be Elected Cash Shares and the holder (or beneficial owner)
thereof shall not be deemed to have made a Cash Share Election with respect
thereto. Subject to the terms of this Agreement and of the Election Form, the
Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good faith
decisions of the Exchange Agent regarding such matters shall be binding and
conclusive. Neither the Texas Company nor the Exchange Agent shall be under any
obligation to notify any Person of any defect in an Election Form.
(b) As soon as practicable after the Election Deadline, and in any event
prior to the Effective Time, the Texas Company shall cause the Exchange Agent
to effect the allocation among the holders (or beneficial owners) of Elected
Cash Shares those shares which shall become Texas Company Eligible Shares as of
the Effective Time as follows:
(i) Elected Cash Shares More Than Total Eligible Share Number. If the
aggregate number of Elected Cash Shares reflected in Election Forms
properly completed and timely delivered to the Exchange Agent and not
revoked (the "Aggregate Elected Cash Share Number"), as determined by the
Exchange Agent, is more than the Total Eligible Share Number (as
hereinafter defined), then:
(1) A proration factor (the "Proration Factor") shall be determined
by the Exchange Agent and shall be a fraction, (1) the numerator of
which is the Total Eligible Share Number and (2) the denominator of
which is the Aggregate Elected Cash Share Number;
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(2) The number of Elected Cash Shares covered by each Cash Share
Election which shall become Texas Company Eligible Shares as of the
Effective Time shall be determined by the Exchange Agent by multiplying
the Proration Factor by the total number of Elected Cash Shares covered
by such Cash Share Election and rounding any fractional share to the
nearest whole share (with .5 of a share or less rounded down); and
(3) All Elected Cash Shares other than those which become Texas
Company Eligible Shares in accordance with Clause (2) above shall not
become Texas Company Eligible Shares and no other outstanding shares of
Texas Company Common Stock shall become Texas Company Eligible Shares;
or
(ii) Elected Cash Shares Equal to or Less Than Total Eligible Share
Number. If the Aggregate Elected Cash Share Number is equal to or less than
the Total Eligible Share Number (as determined by the Exchange Agent), then
each Elected Cash Share shall become a Texas Company Eligible Share as of
the Effective Time and no other outstanding shares of Texas Company Common
Stock shall become Texas Company Eligible Shares.
(c) For purposes of this Agreement, the term "Total Eligible Share Number"
means the number determined as follows:
(i) First, determine the total dollar amount paid by the Texas Company
with respect to options pursuant to Section 5.8(c) (the "Option Payment
Amount");
(ii) Second, divide the Option Payment Amount by 13.50 (the result being
referred to as the "Option Share Reduction Amount"); and
(iii) Third, subtract the Option Share Reduction Amount from 11,111,111,
and round the result downward to the nearest whole number.
Notwithstanding anything in this Agreement to the contrary, the maximum number
of Texas Company Eligible Shares shall be the Total Eligible Share Number (i)
plus any additional shares of Texas Company Common Stock that become Texas
Company Eligible Shares as a result of rounding to the nearest whole share and
(ii) minus any shares of Texas Company Common Stock that do not become Texas
Company Eligible Shares, in either case as a result of rounding to the nearest
whole share pursuant to Section 2.5(b).
Section 2.6 Surrender of Texas Company Stock Certificates and Payment.
(a) Upon the latest to occur of the Effective Time and the completion of the
allocation procedures set forth in Section 2.5, the Surviving Corporation will
deposit, or will cause to be so deposited, with the Exchange Agent for the
benefit of the holders (or beneficial owners) of Texas Company Eligible Shares,
the cash amount owed with respect to the Texas Company Eligible Shares as
determined by the Escrow Agent and agreed to by the Texas Company and the
Delaware Company (the "Payment Fund"). Subject to Sections 2.5, the Exchange
Agent will deliver the Per Share Cash Amount with respect to each of the Texas
Company Eligible Shares in accordance with this Section 2.6. All interest,
dividends or other income earned on cash deposits in the Payment Fund shall be
for the account of the Surviving Corporation.
(b) Upon surrender of a Texas Company Stock Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with a properly completed and duly executed
Election Form, the holder of such Texas Company Stock Certificate will be
entitled, after the Effective Time, to receive (x) any cash payable in respect
of the Texas Company Eligible Shares formerly represented by any such Texas
Company Stock Certificate and (y) a certificate or certificates representing
that number of shares of Surviving Corporation Common Stock , if any,
represented by such Texas Company Stock Certificate which are not Texas Company
Eligible Shares, and the Texas Company Stock Certificate so surrendered will
forthwith be canceled. In the event of a transfer of ownership of Texas Company
Common Stock that is not registered in the transfer records of the Texas
Company, any cash and the certificates representing the proper number of shares
of Surviving Corporation Common Stock may be paid or
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delivered to a transferee if the relevant Texas Company Stock Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer, together with evidence that any applicable
stock transfer taxes have been paid and the payment of any required transfer
taxes.
(c) From and after the Effective Time, there will be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
Texas Company Eligible Shares which were outstanding immediately prior to the
Effective Time.
(d) The Surviving Corporation will not be liable to any holder (or
beneficial owner) of Texas Company Eligible Shares for any shares of Surviving
Corporation Common Stock or cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Any portion of the Payment Fund that remains undistributed to the former
holders (or beneficial owners) of Texas Company Eligible Shares for one month
after the Effective Time will be delivered to the Surviving Corporation, upon
demand, and any holders (or beneficial owners) of Texas Company Stock
Certificates who have not theretofore complied with this Article II will
thereafter look only to the Surviving Corporation, as unsecured creditors, for
the cash and certificates, if any, to which they are entitled pursuant to this
Article II.
(f) The Surviving Corporation or the Exchange Agent will be entitled to
deduct and withhold from the amounts otherwise payable pursuant to this
Agreement to any holder (or beneficial owner) of Texas Company Eligible Shares
such amounts as the Surviving Corporation or the Exchange Agent are required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Corporation or the Exchange Agent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder (or beneficial owner) of the Texas Company Eligible
Shares in respect of which such deduction and withholding was made by the
Surviving Corporation or the Exchange Agent. Notwithstanding the foregoing, no
amount shall be withheld from any payment made hereunder to a holder (or
beneficial owner) of Texas Company Eligible Shares who provides the Exchange
Agent with a properly completed Internal Revenue Service Form W-9 or Substitute
Form W-9, or who otherwise provides the Exchange Agent with appropriate
evidence that such Person is exempt from federal income tax back-up
withholding.
ARTICLE III
Representations and Warranties of the Delaware Company
The Delaware Company represents and warrants to the Texas Company that,
except as expressly described or permitted in this Agreement or as disclosed to
the Texas Company in the Delaware Company Disclosure Schedule (as hereinafter
defined):
Section 3.1 Due Incorporation, Etc. Each of the Delaware Company and each
Delaware Company Subsidiary (as hereinafter defined) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority would not, individually or in the aggregate, have a material adverse
effect (as hereinafter defined) on the Delaware Company and its Subsidiaries,
taken as a whole.
Section 3.2 Qualification as Foreign Entities. Each of the Delaware Company
and each Delaware Company Subsidiary is duly licensed or qualified to do
business and, if applicable, is in good standing, in each state or other
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it requires it to be so licensed or
qualified, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the Delaware Company.
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Section 3.3 Capital Stock. The authorized capital stock of the Delaware
Company consists solely of 250,000,000 shares of Delaware Company Common Stock
and 11,000,000 shares of preferred stock, par value $.001 per share. As of the
date hereof, 26,098,806 shares of Delaware Company Common Stock are
outstanding, no shares of preferred stock of the Delaware Company are
outstanding, 4,290,102 shares of Delaware Company Common Stock are reserved for
issuance pursuant to the exercise of the Delaware Company Options (as
hereinafter defined), 4,613,556 shares of the Delaware Company Common Stock are
reserved for issuance to the holders of the 7 1/2% Convertible Subordinated Pay
in Kind Debentures Due 2012 issued by the Delaware Company (the "Debentures"),
and 3,250,000 shares of Delaware Company Common Stock are reserved for issuance
pursuant to the exercise of the Warrants originally issued by the Delaware
Company to Friedman Billings & Ramsey & Co. Inc. and Jonathan J. Ledecky
pursuant to the Warrant Agreements dated November 25, 1997 (the "Delaware
Company Warrants"). All of the Delaware Company's issued and outstanding shares
of capital stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.3 of the Delaware Company
Disclosure Schedule and as described in this Section 3.3, the Delaware Company
does not have any outstanding convertible or exchangeable securities,
subscriptions, calls, options, warrants, rights contractual or arising by
operation of law (including, without limitation, rights of first refusal and
preemptive rights), or other agreements or commitments of any character
relating to the issuance, purchase, other acquisition or voting of any shares
of the capital stock of, or other equity or ownership interest in
(collectively, "Equity Rights") the Delaware Company. A true and correct list
of the outstanding options of the Delaware Company (the "Delaware Company
Options") granted pursuant to the plans of the Delaware Company set forth in
Section 3.3 of Delaware Company Disclosure Schedule or otherwise (the plans
described in Section 3.3 of the Delaware Company Disclosure Schedule being
referred to collectively herein as the "Delaware Company Option Plans") and the
purchase prices of the shares of Delaware Company Common Stock issuable upon
the exercise of each Delaware Company Warrant and each Delaware Company Option
has been delivered by the Delaware Company to the Texas Company prior to the
date of this Agreement.
Section 3.4 Capitalization of the Delaware Company Subsidiaries. Set forth
on Schedule 3.4 of the Delaware Company Disclosure Schedule is a true and
correct list of all of the direct and indirect Subsidiaries of the Delaware
Company and the issued and outstanding capital stock of such Subsidiaries as of
the date of this Agreement. All issued and outstanding shares of capital stock
of each of the Subsidiaries of the Delaware Company (a "Delaware Company
Subsidiary") are duly authorized, validly issued, fully paid and nonassessable.
Section 3.5 Ownership of Equity Interests. Except as otherwise set forth in
Section 3.5 of the Delaware Company Disclosure Schedule, the Delaware Company
or one or more of its wholly-owned Subsidiaries owns, of record and
beneficially, all of the issued and outstanding capital stock or other equity
interests of each of the Delaware Company Subsidiaries and all outstanding
Equity Rights with respect to each Delaware Company Subsidiary, free and clear
(except as otherwise contemplated in the Credit Agreement dated April 30, 1999,
among the Delaware Company, various lending institutions, Goldman Sachs Credit
Partners LP, as documentation agent, and others) of all material liens,
security interests, charges, adverse claims, options, preferential rights of
purchase, restrictions or legends of any kind (collectively, "Liens"). Except
as described above or as set forth in Section 3.5 of the Delaware Company
Disclosure Schedule, neither the Delaware Company nor any of the Delaware
Company Subsidiaries owns or holds, directly or indirectly, any capital stock
of, or other equity or other ownership interest in (or any securities, rights
or other interests exchangeable for, convertible into or which otherwise relate
to the acquisition of any capital stock of) any Person or is a partner or joint
venturer in any partnership or joint venture material to the Delaware Company.
Section 3.6 Corporate Power and Authority. The Delaware Company has the
requisite corporate power to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, subject, in the case of this
Agreement, to obtaining the Requisite Delaware Holder Approvals (as hereinafter
defined). The execution and delivery of this Agreement by the Delaware Company
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
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Delaware Company, subject, to obtaining the Requisite Delaware Holder
Approvals. This Agreement has been duly and validly executed and delivered by
the Delaware Company and constitutes the valid and binding agreement of the
Delaware Company, enforceable against the Delaware Company in accordance with
its terms, except as limited by bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights and except as limited by equitable principles.
Section 3.7 No Conflicts or Consents. (a) Except as provided for in Article
I and as required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended and the rules and regulations thereunder (the "HSR Act"), the
Securities Exchange Act of 1934, as amended and the rules and regulations
thereunder (the "Exchange Act"), and the Securities Act of 1933, as amended and
the rules and regulations thereunder (the "Securities Act"), and state
securities or "blue sky" Laws, no notices, reports or other filings are
required to be made by the Delaware Company or any Delaware Company Subsidiary
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Delaware Company from, any domestic governmental
or regulatory authority, agency, commission, court or other entity
("Governmental Entity"), in connection with the execution and delivery of this
Agreement by the Delaware Company and the consummation by the Delaware Company
of the transactions contemplated hereby, the failure to make or obtain any or
all of which would have a material adverse effect on the Delaware Company, or
would prevent, materially delay or materially burden the transactions
contemplated in this Agreement.
(b) The execution and delivery of this Agreement by the Delaware Company
does not, and the consummation by the Delaware Company of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of, or a default under, the certificate of incorporation or bylaws of the
Delaware Company or the comparable governing instruments of any material
Delaware Company Subsidiary, (ii) except with respect to the Investor Rights
Agreement and as set forth on Schedule 3.7 of the Delaware Company Disclosure
Schedule, a breach or violation of, a default under, the acceleration of or the
creation of any Lien on assets (with or without the giving of notice or the
lapse of time) pursuant to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation not otherwise
terminable on 90 days' or less notice ("Contracts") of the Delaware Company or
any of its Subsidiaries (the "Delaware Company Contracts") or any change in the
rights or obligations of any party under any of the Delaware Company Contracts,
or (iii) a violation of any domestic law, rule, ordinance or regulation ("Law")
or judgment, decree, order, award or governmental or non-governmental permit or
license to which the Delaware Company or any of its Subsidiaries is subject,
except in the case of clauses (ii) and (iii) above for such breaches,
violations, defaults, accelerations, Liens or changes that, alone or in the
aggregate, would not have a material adverse effect on the Delaware Company, or
would not prevent, materially delay or materially burden the transactions
contemplated by this Agreement.
Section 3.8 SEC Reports and Financial Statements. Since November 25, 1997,
the Delaware Company has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports and documents required to be filed by it under the
Exchange Act or the Securities Act (as they have been amended since the time of
their filing, collectively, the "Delaware Company SEC Documents"). The Delaware
Company SEC Documents, including without limitation, any financial statements
or schedules included therein, at the time filed, and any forms, reports or
other documents filed by the Delaware Company with the SEC after the date of
this Agreement, (a) did not at the time they were filed, or will not at the
time they are filed, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading and (b) complied or will be prepared in compliance in
all material respects with the applicable requirements of the Exchange Act or
the Securities Act, as the case may be. The financial statements of the
Delaware Company included in the Delaware Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, to normal audit adjustments) and fairly present (subject,
in the case of the unaudited
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statements, to normal audit adjustments) the consolidated financial position of
the Delaware Company and its Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. All liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) required to be reflected, reserved against or otherwise disclosed in
the financial statements of the Delaware Company included in the Delaware
Company SEC Documents filed prior to the date of this Agreement have been
properly reflected, reserved against or otherwise disclosed in such financial
statements in accordance with the rules and regulations of the SEC and GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, to
normal audit adjustments). Except as set forth in the financial statements of
the Delaware Company included in the Delaware Company SEC Documents, the
Delaware Company has not incurred any indebtedness (other than indebtedness
with respect to the payment of interest paid in kind) pursuant to the Indenture
dated April 30, 1999, by and between the Company and U. S. Trust Company
related to the Delaware Company's 7 1/2% Convertible Junior Subordinated
Debentures due 2012 (the "Delaware Company Junior Indenture"). Except as
disclosed in Section 3.8 of the Delaware Company Disclosure Schedule, since
June 30,1999 and prior to the date of this Agreement, no act, omission,
occurrence, event, condition or circumstance has occurred or become known to
the Delaware Company, and no transaction, commitment or agreement has been
entered into by the Delaware Company or any of its Subsidiaries, that should
have been disclosed in the Delaware Company SEC Documents.
Section 3.9 Information in Disclosure Documents and Registration Statement.
(a) None of the information supplied or to be supplied by the Delaware Company
from time to time in writing specifically for inclusion or incorporation by
reference in the registration statement on Form S-4 to be filed with the SEC by
the Texas Company in connection with the issuance of shares of Surviving
Corporation Common Stock in connection with the Merger (the "S-4") will, at the
time it becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) The proxy or information statement relating to the meeting of the
Delaware Company's stockholders to be held to obtain the Requisite Delaware
Holders Approvals (as it may be amended from time to time, the "Delaware
Company Proxy Statement") will not, at the date mailed to the Delaware
Company's stockholders and at the time of the meeting of stockholders to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Delaware Company
Proxy Statement will, when filed with the SEC by the Delaware Company, comply
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder.
(c) Notwithstanding the foregoing, the Delaware Company makes no
representation with respect to statements made in any of the foregoing
documents based on information supplied by the Texas Company specifically for
inclusion therein.
Section 3.10 Litigation. Except as disclosed in the Delaware Company SEC
Documents filed prior to the date of this Agreement, there is as of the date
hereof no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of the Delaware Company, threatened, against the Delaware
Company or any of its Subsidiaries which, individually or in the aggregate,
would have a material adverse effect on the Delaware Company, or a material
adverse effect on the ability of the Delaware Company to consummate the
transactions contemplated by this Agreement. Except as disclosed in the
Delaware Company SEC Documents filed prior to the date of this Agreement,
neither the Delaware Company nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individually or in the
aggregate, would have a material adverse effect on the Delaware Company, or a
material adverse effect on the ability of the Delaware Company to consummate
the transactions contemplated hereby.
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Section 3.11 No Material Adverse Change. Except as disclosed in the Delaware
Company SEC Documents filed prior to the date of this Agreement, since June 30,
1999, the Delaware Company and its Subsidiaries have conducted their respective
businesses in the ordinary and usual course and there has not been any material
adverse change in the assets, business, results of operations or financial
condition of the Delaware Company and its Subsidiaries, taken as a whole.
Section 3.12 Taxes. (a) Except as set forth in the financial statements
(including the notes thereto) included in the Delaware Company SEC Documents,
(i) all Returns material to the Delaware Company and its Subsidiaries, taken as
a whole (the "Delaware Company Returns"), required to be filed with any taxing
authority by, or with respect to, the Delaware Company or any of its
Subsidiaries have been timely filed in accordance with all applicable Laws;
(ii) the Delaware Company and its Subsidiaries have timely paid all Taxes shown
as due and payable on the Delaware Company Returns that have been so filed,
and, as of the time of filing, the Delaware Company Returns correctly reflected
in all material respects the facts regarding the income, business, assets,
operations, activities and the status of the Delaware Company and the Delaware
Company Subsidiaries, other than Taxes that are being contested in good faith
and for which adequate reserves are reflected on the Delaware Company's
Consolidated Balance Sheet as of June 30, 1999 (the "Delaware Company Balance
Sheet"); (iii) the Delaware Company and its Subsidiaries have made provision
for all Taxes (material to the Delaware Company and its Subsidiaries, taken as
a whole) payable by them for which no Delaware Company Return has yet been
filed or for which no Delaware Company Returns are required to be filed; (iv)
the charges, accruals and reserves for Taxes with respect to the Delaware
Company and its Subsidiaries reflected on the Delaware Company Balance Sheet
are adequate under GAAP (applied on a consistent basis during the periods
involved) to cover the Tax liabilities accruing through the date thereof; (v)
there is no action, suit, proceeding, audit or claim now pending against or
with respect to the Delaware Company or any of its Subsidiaries, or, to the
knowledge of the Delaware Company, proposed or threatened, in respect of any
Tax where there is a reasonable possibility of an adverse determination
material to the Delaware Company and its Subsidiaries, taken as a whole; (vi)
there are no Liens on any of the assets of the Delaware Company or any of its
Subsidiaries with respect to Taxes, other than Liens for Taxes not yet due and
payable or for Taxes that the Delaware Company or one or more of its
Subsidiaries is contesting in good faith through appropriate proceedings and
for which appropriate reserves have been established, and (vii) neither the
Delaware Company nor any of its Subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which the
Delaware Company was the common parent.
(b) For purposes of this Agreement, the following definitions shall apply:
(i) The term "Group" means, individually and collectively, (1) the
Delaware Company and (2) any individual, trust, corporation, partnership or
any other entity as to which the Delaware Company is liable for Taxes
incurred by such individual or entity either as a transferee, or pursuant
to Treasury Regulation Section 1.1502-6, or pursuant to any other provision
or federal, territorial, state, local or foreign law or regulations.
(ii) The term "Taxes" means all taxes, however denominated, including
any interest, penalties or other additions to tax that may become payable
in respect thereof, imposed by any federal, territorial, state, local or
foreign governmental or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including, but not limited to,
federal income taxes and state income taxes), real property taxes, payroll
and employee withholding taxes, unemployment withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes,
ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation,
Pension Benefit Guaranty Corporation ("PBGC") premiums and other
governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which any member of the Group is required
to pay, withhold or collect.
(iii) The term "Returns" means all reports, estimates, declarations of
estimated tax, information statements and returns relating to, or required
to be filed in connection with, any Taxes, including information returns or
reports with respect to backup withholding and any other payments to third
parties.
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(c) All material elections made since December 31, 1998, with respect to
Taxes affecting the Delaware Company or any of its Subsidiaries as of the date
of this Agreement are set forth in Section 3.12 of the Delaware Company
Disclosure Schedule.
Section 3.13 Vote Required. The affirmative vote of the holders of a
majority in voting power of the outstanding shares of Delaware Company Common
Stock and the Debentures, voting together as a single class, and the holders of
a majority in voting power of the outstanding principal amount of the
Debentures, voting separately as a class, and the written consent of Boss
Investment pursuant to Section 16(a) of the Investor Rights Agreement dated
March 22, 1999, by and among the Delaware Company and the investors listed
thereon (the "Investor Rights Agreement"), are the only votes of the holders of
any class or series of the Delaware Company's capital stock or any other
securities necessary to adopt this Agreement and approve the transactions
contemplated hereby (the "Requisite Delaware Holder Approvals").
Section 3.14 Opinion of Financial Advisor. The Delaware Company has received
the opinion of Bear, Stearns & Co. Inc., its financial advisor, dated as of the
date of this Agreement, and provided a true, correct and complete copy of such
opinion to the Texas Company.
Section 3.15 Change in Control Provisions. Except as set forth in Section
3.15 of the Delaware Company Disclosure Schedule, neither the Delaware Company
nor any of its Subsidiaries is a party to any Delaware Company Plan or any
material contract, agreement, plan, arrangement or understanding which, by its
terms, would cause any obligation of any of such entities to be created,
triggered or accelerated or would cause any right of any of such entities to be
lost or deferred, in any case as a result of the Delaware Company executing, or
consummating the transactions contemplated by, this Agreement.
Section 3.16 Undisclosed Material Liabilities. The Delaware Company and its
Subsidiaries, taken as a whole, do not have any material liabilities or
obligations (whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due), except (a) as and to the extent
disclosed in Section 3.16 of the Delaware Company Disclosure Schedule; (b) as
and to the extent reflected, disclosed or reserved against in the Delaware
Company SEC Documents filed prior to the date hereof; or (c) for liabilities
and obligations incurred since June 30, 1999 in the ordinary course of business
consistent with past practice.
Section 3.17 Employee Benefit Plans. (a) Except where the failure to be true
would not, individually or in the aggregate, have a material adverse effect on
the Delaware Company, (i) each Delaware Company Plan (as hereinafter defined)
has been operated and administered in accordance with its terms and applicable
Law, including, but not limited to, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and the Code, (ii) each Delaware Company Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified, (iii) except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the Rules and Regulations thereunder ("COBRA"),
no Delaware Company Plan provides death or medical benefits (whether or not
insured), with respect to current or former employees of the Delaware Company
or of any trade or business, whether or not incorporated, which together with
the Delaware Company would be deemed a "single employer" within the meaning of
Section 4001 of ERISA (a "Delaware Company ERISA Affiliate"), beyond their
retirement or other termination of service, (iv) no liability under Title IV of
ERISA has been incurred by the Delaware Company or any Delaware Company ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Delaware Company or any Delaware Company ERISA
Affiliate of incurring any such liability (other than PBGC premiums), (v) all
contributions or other amounts due from the Delaware Company or any Delaware
Company ERISA Affiliate with respect to each Delaware Company Plan have been
paid in full, (vi) neither the Delaware Company nor any Delaware Company ERISA
Affiliate has engaged in a transaction in connection with which the Delaware
Company or any of its Subsidiaries could reasonably be expected to be subject
to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975 or 4976 of the Code, and (vii) there
are no pending or anticipated or, to the best knowledge of Delaware Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any Delaware Company Plan or any trusts related thereto.
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(b) Except as set forth in Section 3.17 of the Delaware Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute payments under Section 280G of the Code or otherwise) becoming due to
any current or former director or any employee of the Delaware Company or any
of its Subsidiaries under any Delaware Company Plan or otherwise or cause any
prior payment made to any current or former director or employee of the
Delaware Company or any of its Subsidiaries to be a parachute payment under
Section 280G of the Code, (ii) materially increase any benefits otherwise
payable under any Delaware Company Plan or (iii) result in any acceleration of
the time of payment or vesting of any such benefits. Except as set forth in
Section 3.17 of the Delaware Company Disclosure Schedule, no payments have been
made or will be made by the Delaware Company or any of its Subsidiaries that
would not be deductible by the Delaware Company or any of its Subsidiaries
under Section 162(m) of the Code. Except as set forth in Section 3.17 of the
Delaware Company Disclosure, no benefits or bonus has accrued or will accrue
under the Consolidation Capital Corporation Section 162(m) Bonus Plan or any
other bonus program for any officer, director, or any senior regional manager
of the Delaware Company on or before the Effective Time.
(c) For purposes of this Agreement, the term "Delaware Company Plan" shall
mean each deferred compensation, bonus or other incentive compensation, stock
purchase, stock option, including, without limitation, any Delaware Company
Option Plan, or other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance or other "welfare" plan, fund or program
(within the meaning of Section 3(1) of ERISA); each profit-sharing, stock bonus
or other "pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed
to by the Delaware Company or by any Delaware Company ERISA Affiliate or to
which the Delaware Company or any Delaware Company ERISA Affiliate is party,
whether written or oral, for the benefit of any employee or former employee of
the Delaware Company or any Delaware Company ERISA Affiliate.
(d) Except where the failure to be true would not, individually or in the
aggregate, have a material adverse effect on the Delaware Company, with respect
to each Delaware Company Multiemployer Plan (as hereinafter defined) (i) no
withdrawal liability has been incurred by the Delaware Company or any Delaware
Company ERISA Affiliate, and the Delaware Company has no reason to believe that
any such liability will be incurred, prior to the Closing Date, (ii) no such
plan is in "reorganization" (within the meaning of Section 4241 of ERISA),
(iii) no notice has been received that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax, or
that the plan is or may become "insolvent" (within the meaning of Section 4241
of ERISA), (iv) no proceedings have been instituted by the Pension Benefit
Guaranty Corporation against the plan, (v) there is no contingent liability for
withdrawal liability by reason of a sale of assets pursuant to Section 4204 of
ERISA, and (vi) except as disclosed in Section 3.17(d) of the Delaware Company
Disclosure Schedule, if the Delaware Company or any Delaware Company ERISA
Affiliate were to have a complete or partial withdrawal under Section 4203 of
ERISA as of the Closing, no obligation to pay withdrawal liability would exist
on the part of the Delaware Company or any ERISA Affiliate. "Delaware Company
Multiemployer Plan" means a multiemployer plan within the meaning of Section
4001(a) (3) of ERISA with respect to which the Delaware Company or any Delaware
Company ERISA Affiliate has an obligation to contribute or has or could have
withdrawal liability under Section 4201 of ERISA.
(e) No Person, except those listed in Section 3.17(e) of the Delaware
Company Disclosure Schedule, is eligible to receive any specified number of
shares of Delaware Company Common Stock under the Stock Performance Plan (as
hereinafter defined), including, without limitation, any allocations or other
rights giving such Person any right to the award or issuance of the Delaware
Company Common Stock whether or not on account of the occurrence of the
transactions contemplated hereby. Waivers of any such rights have been obtained
and copies forwarded to the Texas Company prior to the date of this Agreement.
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Section 3.18 Licenses and Registration. The Delaware Company and its
Subsidiaries have all permits, governmental licenses, registrations, orders,
exemptions and approvals necessary to own (or lease, as applicable) and operate
their properties and to carry on their businesses substantially as presently
conducted (and as presently proposed to be conducted) as required by Law or the
rules and regulations of any Governmental Entity (the "Delaware Company
Material Permits") and all of such Delaware Company Material Permits are valid
and in full force and effect, other than those permits, licenses,
registrations, orders, exemptions and approvals, the absence of which would not
result in a material adverse effect on the Delaware Company.
Section 3.19 Compliance with Laws. The Delaware Company and its Subsidiaries
have complied with all Laws applicable to their businesses, properties (whether
owned or leased), assets and operations (including, without limitation, those
relating to wages and hours, occupational health and safety, record keeping,
customs, antitrust, labor, consumer protection, employee relations, workers'
compensation and securities), except for such non-compliance as would not have
a material adverse effect on the Delaware Company.
Section 3.20 Environmental Matters. (a) With such exceptions as,
individually or in the aggregate, would not have a material adverse effect on
the Delaware Company, (i) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
investigation, action, claim, suit, proceeding or review is pending or, to the
knowledge of the Delaware Company, threatened by any Person against, the
Delaware Company or any of its Subsidiaries, with respect to any applicable
Environmental Law, (ii) the Delaware Company and its Subsidiaries are currently
and have been in compliance with all applicable Environmental Laws, (iii) the
Delaware Company and each of its Subsidiaries have obtained and complied with
the terms and conditions of all permits and other approvals necessary under
applicable Environmental Laws to operate its business and to treat, transport,
store, dispose of and otherwise handle Hazardous Substances ("Delaware Company
Environmental Permits"), (iv) there have been no Releases or threats of
Releases (as that term is defined in applicable Environmental Laws) at, from,
in, on, under, or to any property owned or operated by the Delaware Company or
any of its Subsidiaries except as permitted by applicable Environmental Laws,
(v) the Delaware Company or any of its Subsidiaries have reported to all
appropriate authorities to the extent required by applicable Environmental Laws
all past and present sites owned and operated by the Delaware Company or any of
its Subsidiaries where Hazardous Substances have been treated, stored, disposed
of or otherwise handled, and (vi) there is no on-site or off-site location to
which the Delaware Company or any of its Subsidiaries have transported or
disposed of Hazardous Substances or arranged for the transportation or disposal
of Hazardous Substances.
(b) For purposes of this Agreement, the following terms have the following
meanings:
(i) "Environmental Law" means any law, rule, regulation, or ordinance,
as in effect at the Effective Time, of any Governmental Entity relating to
pollution or protection of the environment, including, without limitation,
any Law relating to emissions, discharges, Releases or threatened Releases
of pollutants, contaminants or Hazardous Materials or wastes into the
ambient air, surface water, ground water or land.
(ii) "Hazardous Materials" means (1) any "hazardous waste" as defined in
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections 6901
et seq.), as amended through the Effective Time, and regulations
promulgated thereunder; (2) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Sections 9601 et seq.), as amended through the Effective
Time, and regulations promulgated thereunder; (3) any "toxic substance" as
defined in the Toxic Substances Control Act (15 U.S.C. Sections 2601 et
seq.), as amended through the Effective Time, and regulations promulgated
thereunder; and (4) petroleum, and any of its derivatives, by-products and
other petroleum-related hydrocarbons.
(iii) "Hazardous Materials Contamination" means contamination of the
soil, groundwater, surface water, air or other elements by Hazardous
Materials that would give rise to liability under applicable Environmental
Law.
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(iv) "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers or other closed receptacles containing any Hazardous Material),
but excludes (1) any release which results in exposure to Persons solely
within a workplace, with respect to a claim which such Persons may assert
against the employer of such Persons, (2) emissions from the engine exhaust
of a motor vehicle, rolling stock, aircraft or vessel, and (3) the normal
application of fertilizer.
Section 3.21 Labor Matters. Neither the Delaware Company nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or seeking to compel
it to bargain with any labor union or labor organization nor is there pending
or, to the knowledge of the Delaware Company, threatened in writing, nor has
there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Delaware Company or any of its
Subsidiaries, except in each case as would not, individually or in the
aggregate, have a material adverse effect on the Delaware Company.
Additionally, except as disclosed in Section 3.21 of the Delaware Company
Disclosure Schedule, (a) neither the Delaware Company nor any of its
Subsidiaries is a party to any collective bargaining agreement, (b) there is no
unfair labor practice complaint against the Delaware Company or any of its
Subsidiaries pending or, to the knowledge of the Delaware Company, threatened
before the National Labor Relations Board that would, if adversely determined
against the Delaware Company or any of its Subsidiaries, have a material
adverse effect on the Delaware Company, (c) there is no labor strike or
organized slow down or stoppage actually pending or, to the knowledge of the
Delaware Company, threatened against the Delaware Company or any of its
Subsidiaries which involves the employees of the Delaware Company or any of its
Subsidiaries and which would have a material adverse effect on the Delaware
Company, (d) no private agreement restricts the Delaware Company or any of its
Subsidiaries from relocating, closing or terminating any of its operations or
facilities, and (e) except for plant closings or layoffs that, individually or
in the aggregate, would not have a material adverse effect on the Delaware
Company, neither the Delaware Company nor any of its Subsidiaries has
implemented any plant closing or layoff of employees that could reasonably be
expected to require notification under the Worker Adjustment Retraining and
Notification Act of 1988, as amended, or any similar state or local Law or
regulation and no such layoffs will be implemented before the Effective Time.
Section 3.22 State Takeover Statutes. No "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (with the exception of
Section 203 of the DGCL) applicable to the Delaware Company is applicable to
the Merger or the other transactions contemplated hereby. The action of the
Board of Directors of the Delaware Company in approving this Agreement (and the
transactions provided for herein) is sufficient to render inapplicable to this
Agreement (and the transactions provided for herein or contemplated hereby) the
restrictions on "business combinations" (as defined in Section 203 of the DGCL)
as set forth in Section 203 of the DGCL.
Section 3.23 Ownership of Texas Company Common Stock. Neither the Delaware
Company nor any Delaware Company Subsidiary, as of the date hereof, owns of
record or beneficially, or is the Beneficial Owner of a number of shares of
Texas Company Common Stock which, in the aggregate, exceeds 1% of the
outstanding shares of Texas Company Common Stock and, without consent of the
Texas Company, which consent shall not be unreasonably withheld, neither the
Delaware Company nor any Delaware Company Subsidiary shall acquire or dispose
of any shares of Texas Company Common Stock until after the Closing Date except
in connection with the transactions contemplated by this Agreement. Beneficial
Owner has the meaning ascribed to such term in Article XIII of the Texas
Company's Articles of Incorporation.
Section 3.24 General. (a) As used above or elsewhere in this Agreement with
respect to the Delaware Company and/or its Subsidiaries, the term "material
adverse effect" means an effect which is both material and adverse with respect
to, and the term "material" means material with respect to, the assets,
business, results of operations or financial condition of the Delaware Company
taken as a whole with its Subsidiaries, and in either case shall be determined
net of, and only after giving the Delaware Company and its Subsidiaries the
benefit of, any insurance, indemnity, reimbursement, contribution, compensation
or other similar right
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which would operate to reduce, offset, compensate or otherwise limit the impact
thereof on the Delaware Company and/or any of its Subsidiaries; provided,
however, that any change or changes in or caused by the prices of products or
services and any change in Law, rule, or regulation or GAAP (applied on a
consistent basis during the periods involved), shall not be deemed to
constitute a material adverse effect or be deemed material.
(b) For purposes of this Agreement, the term "Delaware Company Disclosure
Schedule" means the Delaware Company Disclosure Schedule delivered by the
Delaware Company to the Texas Company prior to the date hereof.
(c) No recourse or liability whatsoever with respect to this Agreement shall
be had against any stockholder, officer, director, employee or agent, as such,
past, present or having such capacity at any time prior to the Effective Time,
of the Delaware Company, any of its Subsidiaries, or any successor thereof,
either directly or through the Delaware Company, any of its Subsidiaries or any
successor thereof, such recourse or liability, if any, being expressly waived
and released by the Texas Company and its Subsidiaries as a condition of, and
as consideration for, the execution of this Agreement and any other documents,
instruments or certificates executed or delivered in connection with this
Agreement or the Merger.
(d) The foregoing representations and warranties of the Delaware Company,
and any liability for breach or violation thereof, shall terminate absolutely
and be of no further force and effect at and as of the Effective Time.
ARTICLE IV
Representations and Warranties of the Texas Company
The Texas Company represents and warrants to the Delaware Company that,
except as expressly described or permitted in this Agreement or as disclosed to
the Delaware Company in the Texas Company Disclosure Schedule (as hereinafter
defined):
Section 4.1 Due Incorporation, Etc. Each of the Texas Company and each Texas
Company Subsidiary (as hereinafter defined) is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, with all requisite power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a material adverse effect (as
hereinafter defined) on the Texas Company and its Subsidiaries, taken as a
whole.
Section 4.2 Qualification as Foreign Entities. Each of the Texas Company and
each Texas Company Subsidiary is duly licensed or qualified to do business and,
if applicable, is in good standing, in each state or other jurisdiction in
which the character of the properties owned or leased by it or the nature of
the business conducted by it requires it to be so licensed or qualified, except
where the failure to be so licensed, qualified or in good standing would not
have a material adverse effect on the Texas Company.
Section 4.3 Capital Stock. As of the date hereof, the authorized capital
stock of the Texas Company consists solely of 100,000,000 shares of the Texas
Company Common Stock and 50,000,000 shares of preferred stock, $.001 par value
per share. As of the date hereof, 38,344,681 shares of Texas Company Common
Stock are outstanding, no shares of the preferred stock of the Texas Company
are outstanding, and 5,033,452 shares of Texas Company Common Stock are
reserved for issuance pursuant to the exercise of Texas Company Options (as
hereinafter defined). All of the Texas Company's issued and outstanding shares
of capital stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 4.3 of the Texas Company
Disclosure Schedule, for the rights contained in the Preferred Stock Agreement
and as set forth
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in this Section 4.3, there are not outstanding any Equity Rights with respect
to the Texas Company. A true and correct list of all of the outstanding options
of the Texas Company (the "Texas Company Options") granted pursuant to the
plans of the Texas Company set forth in Section 4.3 of the Texas Company
Disclosure Schedule or otherwise (the plans described in Section 4.3 of the
Texas Company Disclosure Schedule being referred to collectively herein as the
"Texas Company Option Plans") and the purchase prices of the shares of Texas
Company Common Stock issuable upon the exercise of each Texas Company Option
has been delivered by the Texas Company to the Delaware Company on or prior to
the date of this Agreement.
Section 4.4 Preferred Stock Agreement. The Subscription and Exchange
Agreement between the Texas Company and the New Investor (as hereinafter
defined) (the "Preferred Stock Agreement") has been duly executed and delivered
by the Texas Company.
Section 4.5 Capitalization of the Texas Company Subsidiaries. Set forth on
Schedule 4.5 of the Texas Company Disclosure Schedule is a true and correct
list of all of the direct and indirect Subsidiaries of the Texas Company and
the issued and outstanding capital stock of such Subsidiaries as of the date of
this Agreement. All issued and outstanding shares of capital stock of each of
the Subsidiaries of the Texas Company (a "Texas Company Subsidiary") are duly
authorized, validly issued, fully paid and nonassessable.
Section 4.6 Ownership of Equity Interests. The Texas Company or one or more
of its wholly-owned Subsidiaries owns, of record and beneficially, all of the
issued and outstanding capital stock or other equity interests of each of the
Texas Company Subsidiaries and all outstanding Equity Rights with respect to
each Texas Company Subsidiary, free and clear (except as otherwise contemplated
in the Second Amended and Restated Credit Agreement, dated as of October 15,
1998, among the Texas Company, certain of its Subsidiaries, the banks party
thereto and Chase Bank of Texas, National Association, as Agent for such banks,
as amended by the First Amendment to Second Amended and Restated Credit
Agreement, dated as of May 25, 1999 among the same parties and the documents
related thereto) of all Liens. Except as described above or as set forth in
Section 4.6 of the Texas Company Disclosure Schedule, neither the Texas Company
nor any of the Texas Company Subsidiaries owns or holds, directly or
indirectly, any capital stock of, or other equity or other ownership interest
in (or any securities, rights or other interests exchangeable for, convertible
into or which otherwise relate to the acquisition of any capital stock of), any
Person or is a partner or joint venturer in any partnership or joint venture
material to the Texas Company.
Section 4.7 Corporate Power and Authority. The Texas Company has the
requisite corporate power to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, subject to obtaining the
Requisite Texas Holder Approvals. The execution and delivery of this Agreement
by the Texas Company and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Texas Company, subject, to obtaining the Requisite Texas Holder
Approvals. This Agreement has been duly and validly executed and delivered by
the Texas Company and constitutes the valid and binding agreement of the Texas
Company, enforceable against the Texas Company in accordance with its terms,
except as limited by bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights and except as limited by equitable principles.
Section 4.8 No Conflicts or Consents. (a) Except as provided for in Article
I and as required under the HSR Act, the Exchange Act, the Securities Act, and
state securities or "blue sky" Laws, no notices, reports or other filings are
required to be made by the Texas Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Texas Company from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by the Texas Company and the
consummation by the Texas Company of the transactions contemplated hereby, the
failure to make or obtain any or all of which would have a material adverse
effect on the Texas Company, or would prevent, materially delay or materially
burden the transactions contemplated in this Agreement.
(b) Except as set forth in Section 4.8 of the Texas Company Disclosure
Schedule, the execution and delivery of this Agreement by the Texas Company
does not, and the consummation by the Texas Company of
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the transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, the articles of incorporation or
bylaws of the Texas Company or the comparable governing instruments of any
material Texas Company Subsidiary, (ii) a breach or violation of, or a default
under, the acceleration of or the creation of any lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice
or the lapse of time) pursuant to, any provision of any Contracts of the Texas
Company or any of its Subsidiaries (the "Texas Company Contracts") or any
change in the rights or obligations of any party under any of the Texas Company
Contracts or (iii) any Law or judgment, decree, order, award or governmental or
non-governmental permit or license to which the Texas Company or any of its
Subsidiaries is subject, except, in the case of clause (ii) and (iii) above for
such breaches, violations, defaults, accelerations or changes that, alone or in
the aggregate, would not have a material adverse effect on the Texas Company,
or would not prevent, materially delay or materially burden the transactions
contemplated by this Agreement.
Section 4.9 SEC Reports and Financial Statements. Since January 1, 1997, the
Texas Company has filed with the SEC all forms, reports and documents required
to be filed by it under the Exchange Act or the Securities Act (as they have
been amended since the time of their filing, collectively, the "Texas Company
SEC Documents"). The Texas Company SEC Documents, including without limitation
any financial statements or schedules included therein, at the time filed, and
any forms, reports or other documents filed by the Texas Company with the SEC
after the date of this Agreement, (a) did not at the time they were filed, or
will not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied or
will be prepared in compliance in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be. The
financial statements of the Texas Company included in the Texas Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, to normal audit
adjustments) and fairly present (subject, in the case of the unaudited
statements, to normal audit adjustments) the consolidated financial position of
the Texas Company and its Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. All liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) required to be reflected, reserved against or otherwise disclosed in
the financial statements of the Texas Company included in the Texas Company SEC
Documents filed prior to the date of this Agreement have been properly
reflected, reserved against or otherwise disclosed in such financial statements
in accordance with the rules and regulations of the SEC and GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, to normal audit
adjustments). Except as disclosed in Section 4.9 of the Texas Company
Disclosure Schedule, since June 30, 1999, and prior to the date of this
Agreement, no act, omission, occurrence, event, condition or circumstance has
occurred or become known to the Texas Company, and no transaction, commitment
or agreement has been entered into by the Texas Company or any of its
Subsidiaries, that should have been disclosed in the Texas Company SEC
Documents.
Section 4.10 Information in Disclosure Documents and Registration Statement.
(a) The S-4 will, at the time it becomes effective under the Securities Act and
at the Effective Time, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The proxy or information statement relating to the meeting of the Texas
Company's shareholders to obtain the Requisite Texas Holder Approvals (as it
may be amended from time to time, the "Texas Company Proxy Statement") will
not, at the date mailed to the Texas Company's shareholders and at the time of
the meeting of shareholders to be held in connection with the approval of this
Agreement and the issuance of the Texas Company Common Stock in connection with
the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Texas Company Proxy
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Statement will, when filed with the SEC by the Texas Company, comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
(c) Notwithstanding the foregoing, the Texas Company makes no representation
with respect to statements made in any of the foregoing documents based on
information supplied by the Delaware Company specifically for inclusion
therein.
Section 4.11 Litigation. Except as disclosed in the Texas Company SEC
Documents filed prior to the date of this Agreement, there is as of the date
hereof no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of the Texas Company, threatened, against the Texas Company or
any of its Subsidiaries which, individually or in the aggregate, would have a
material adverse effect on the Texas Company, or a material adverse effect on
the ability of the Texas Company to consummate the transactions contemplated by
this Agreement. Except as disclosed in the Texas Company SEC Documents filed
prior to the date of this Agreement, neither the Texas Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, would have a material adverse effect
on the Texas Company, or a material adverse effect on the ability of the Texas
Company to consummate the transactions contemplated hereby.
Section 4.12 No Material Adverse Change. Except as disclosed in the Texas
Company SEC Documents filed prior to the date of this Agreement, in connection
with the transactions contemplated in this Agreement, and the negotiation,
execution and delivery of the Preferred Stock Agreement or the consummation of
the transactions contemplated thereby, since June 30, 1999, there has not been
any material adverse change in the assets, business, results of operations or
financial condition of the Texas Company and its Subsidiaries, taken as a
whole.
Section 4.13 Taxes. (a) Except as set forth in the financial statements
(including the notes thereto) included in the Texas Company SEC Documents and
in Section 4.13 of the Texas Company Disclosure Schedule, (i) all Returns
material to the Texas Company and its Subsidiaries, taken as a whole (the
"Texas Company Returns"), required to be filed with any taxing authority by, or
with respect to, the Texas Company or any of its Subsidiaries have been timely
filed in accordance with all applicable Laws; (ii) the Texas Company and its
Subsidiaries have timely paid all Taxes shown as due and payable on the Texas
Company Returns that have been so filed, and, as of the time of filing, the
Texas Company Returns correctly reflected in all material respects the facts
regarding the income, business, assets, operations, activities and the status
of the Texas Company and its Subsidiaries, other than Taxes that are being
contested in good faith and for which adequate reserves are reflected on the
Texas Company's Consolidated Balance Sheet dated June 30, 1999 (the "Texas
Company Balance Sheet"); (iii) the Texas Company and its Subsidiaries have made
provision for all Taxes material to the Texas Company and its Subsidiaries,
taken as a whole, payable by them for which no Texas Company Return has yet
been filed or for which no Texas Company Returns are required to be filed; (iv)
the charges, accruals and reserves for Taxes with respect to the Texas Company
and its Subsidiaries reflected on the Texas Company Balance Sheet are adequate
under GAAP (applied on a consistent basis during the periods involved) to cover
the Tax liabilities accruing through the date thereof; (v) there is no action,
suit, proceeding, audit or claim now pending against or with respect to the
Texas Company or any of its Subsidiaries, or, to the knowledge of the Texas
Company, proposed or threatened, in respect of any Tax where there is a
reasonable possibility of an adverse determination material to the Texas
Company and its Subsidiaries, taken as a whole; (vi) there are no Liens on any
of the assets of Texas Company or any of its Subsidiaries with respect to
Taxes, other than Liens for Taxes not yet due and payable or for Taxes that the
Texas Company or one or more of its Subsidiaries is contesting in good faith
through appropriate proceedings and for which appropriate reserves have been
established, and (vii) neither the Texas Company nor any of its Subsidiaries
has been a member of an affiliated, consolidated, combined or unitary group
other than one of which the Texas Company was the common parent.
(b) All material elections made since December 31, 1998, with respect to
Taxes affecting the Texas Company or any of its Subsidiaries as of the date of
this Agreement are set forth in Section 4.13 of the Texas Company Disclosure
Schedule.
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Section 4.14 Vote Required. Assuming that the representations and warranties
in Section 3.23 of this Agreement, and the reps and warranties of BOSS II, LLC
in Section 4.5 of the Subscription and Exchange Agreement are true and correct,
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Texas Company Common Stock entitled to vote with respect to the
approval of this Agreement and the affirmative vote of at least a majority of
the votes cast (provided the votes cast represent a majority in interest of all
securities entitled to vote) with respect to the issuance of the Texas Company
Common Stock in connection with the Merger and (if required by the Shareholder
Approval Policy of the NYSE) the issuance of the Texas Company Preferred Stock
pursuant to the Preferred Stock Agreement are the only votes of the holders of
any class or series of the Texas Company's capital stock or other securities
necessary to approve this Agreement and the transactions contemplated hereby or
the issuance of the Texas Company Common Stock in connection with the Merger or
the issuance of the Texas Company Preferred Stock pursuant to the Preferred
Stock Agreement (the "Requisite Texas Holder Approvals").
Section 4.15 Opinion of Financial Advisor. The Texas Company has received
the opinion of Chase Securities, Inc., its financial advisor, to the effect
that, as of the date hereof, and provided a true, correct and complete copy of
such opinion to the Delaware Company.
Section 4.16 Change in Control Provisions. Except as set forth in Section
4.16 of the Texas Company Disclosure Schedule, neither the Texas Company nor
any of its Subsidiaries is a party to any Texas Company Plan or any material
contract, agreement, plan, arrangement or understanding which, by its terms,
would cause any obligation of any of such entities to be created, triggered or
accelerated or would cause any right of any of such entities to be lost or
deferred, in any case as a result of the Texas Company executing, or
consummating the transactions contemplated by, this Agreement.
Section 4.17 Undisclosed Material Liabilities. The Texas Company and its
Subsidiaries, taken as a whole, do not have any material liabilities or
obligations (whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due), except (a) as and to the extent
disclosed in Section 4.17 of the Texas Company Disclosure Schedule; (b) as and
to the extent reflected, disclosed or reserved against in the Texas Company SEC
Documents filed prior to the date hereof; or (c) for liabilities and
obligations incurred since June 30, 1999 in the ordinary course of business
consistent with past practice.
Section 4.18 Employee Benefit Plans. (a) Except where the failure to be true
would not, individually or in the aggregate, have a material adverse effect on
the Texas Company, (i) each Texas Company Plan (as hereinafter defined) has
been operated and administered in accordance with its terms and applicable Law,
including, but not limited to ERISA and the Code, (ii) each Texas Company Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified, (iii) except as required by COBRA, no Texas Company Plan provides
death or medical benefits (whether or not insured), with respect to current or
former employees of the Texas Company or of any trade or business, whether or
not incorporated, which together with the Texas Company would be deemed a
"single employer" within the meaning of Section 4001 of ERISA (a "Texas Company
ERISA Affiliate"), beyond their retirement or other termination of service,
(iv) no liability under Title IV of ERISA has been incurred by the Texas
Company or any Texas Company ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Texas
Company or any Texas Company ERISA Affiliate of incurring any such liability
(other than PBGC premiums), (v) all contributions or other amounts due from the
Texas Company or any Texas Company ERISA Affiliate with respect to each Texas
Company Plan have been paid in full, (vi) neither the Texas Company nor any
Texas Company ERISA Affiliate has engaged in a transaction in connection with
which the Texas Company or any of its Subsidiaries could reasonably be expected
to be subject to either a civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code,
and (vii) there are no pending or anticipated or, to the best knowledge of
Texas Company, threatened claims (other than routine claims for benefits) by,
on behalf of or against any Texas Company Plan or any trusts related thereto.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment
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compensation, parachute payments under Section 280G of the Code or otherwise)
becoming due to any current or former director or any employee of the Texas
Company or any of its Subsidiaries under any Texas Company Plan or otherwise or
cause any prior payment made to any current or former director or employee of
the Delaware Company or any of its Subsidiaries to be a parachute payment under
Section 280G of the Code, (ii) materially increase any benefits otherwise
payable under any Texas Company Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefits. Except as set forth in Section
4.18(b) of the Texas Company Disclosure Schedule, no payments have been made or
will be made by the Texas Company or any of its Subsidiaries that would not be
deductible by the Texas Company or any of its Subsidiaries under Section 162(m)
of the Code. Except as set forth in Section 4.18(b) of the Texas Company
Disclosure, no benefits or bonus has accrued or will accrue under any other
bonus program for any officer, director, or any senior regional manager of the
Texas Company on or before the Effective Time.
(c) For purposes of this Agreement, the term "Texas Company Plan" shall mean
each deferred compensation, bonus or other incentive compensation, stock
purchase, stock option, including, without limitation, any Texas Company Option
Plan, or other equity compensation plan, program, agreement or arrangement;
each severance or termination pay, medical, surgical, hospitalization, life
insurance or other "welfare" plan, fund or program (within the meaning of
Section 3(1) of ERISA); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee benefit
plan, fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the Texas
Company or by any Texas Company ERISA Affiliate or to which the Texas Company
or any Texas Company ERISA Affiliate is party, whether written or oral, for the
benefit of any employee or former employee of the Texas Company or any Texas
Company ERISA Affiliate.
(d) Except where the failure to be true would not, individually or in the
aggregate, have a material adverse effect on the Texas Company, with respect to
each Texas Company Multiemployer Plan (as hereinafter defined) (i) no
withdrawal liability has been incurred by the Texas Company or any Texas
Company ERISA Affiliate, and the Texas Company has no reason to believe that
any such liability will be incurred, prior to the Closing Date, (ii) no such
plan is in "reorganization" (within the meaning of Section 4241 of ERISA),
(iii) no notice has been received that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax, or
that the plan is or may become "insolvent" (within the meaning of Section 4241
of ERISA), (iv) no proceedings have been instituted by the Pension Benefit
Guaranty Corporation against the plan, (v) there is no contingent liability for
withdrawal liability by reason of a sale of assets pursuant to Section 4204 of
ERISA, and (vi) except as disclosed in Section 4.18(d) of the Texas Company
Disclosure Schedule, if the Texas Company or any Texas Company ERISA Affiliate
were to have a complete or partial withdrawal under Section 4203 of ERISA as of
the Closing, no obligation to pay withdrawal liability would exist on the part
of the Texas Company or any ERISA Affiliate. "Texas Company Multiemployer Plan"
means a multiemployer plan within the meaning of Section 4001(a) (3) of ERISA
with respect to which the Texas Company or any Texas Company ERISA Affiliate
has an obligation to contribute or has or could have withdrawal liability under
Section 4201 of ERISA.
Section 4.19 Licenses and Registration. The Texas Company and its
Subsidiaries have all permits, governmental licenses, registrations, orders,
exemptions and approvals necessary to own (or lease, as applicable) and operate
their properties and to carry on their businesses substantially as presently
conducted (and as presently proposed to be conducted) as required by Law or the
rules and regulations of any Governmental Entity (the "Texas Company Material
Permits") and all of such Texas Company Material Permits are valid and in full
force and effect, other than those permits, licenses, registrations, orders,
exemptions and approvals, the absence of which would not result in a material
adverse effect on the Texas Company.
Section 4.20 Compliance with Laws. The Texas Company and its Subsidiaries
have complied with all Laws applicable to their businesses, properties (whether
owned or leased), assets and operations (including,
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without limitation, those relating to wages and hours, occupational health and
safety, record keeping, customs, antitrust, labor, consumer protection,
employee relations, workers' compensation and securities), except for such non-
compliance as would not have a material adverse effect on the Texas Company.
Section 4.21 Environmental Matters. With such exceptions as, individually or
in the aggregate, would not have a material adverse effect on the Texas
Company, and except as set forth in Section 4.21 of the Texas Company
Disclosure Schedule, (i) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
investigation, action, claim, suit, proceeding or review is pending or, to the
knowledge of the Texas Company, threatened by any Person against, the Texas
Company or any of its Subsidiaries, with respect to any applicable
Environmental Law, (ii) the Texas Company and its Subsidiaries are currently
and have been in compliance with all applicable Environmental Laws, (iii) the
Texas Company and each of its Subsidiaries have obtained and complied with the
terms and conditions of all permits and other approvals necessary under
applicable Environmental Laws to operate its business and to treat, transport,
store, dispose of and otherwise handle Hazardous Substances ("Texas Company
Environmental Permits"), (iv) there have been no Releases or threats of
Releases (as that term is defined in applicable Environmental Laws) at, from,
in, on, under, or to any property owned or operated by the Texas Company or any
of its Subsidiaries except as permitted by applicable Environmental Laws, (v)
the Texas Company and its Subsidiaries have reported to all appropriate
authorities to the extent required by applicable Environmental Laws all past
and present sites owned and operated by the Texas Company or any of its
Subsidiaries where Hazardous Substances have been treated, stored, disposed of
or otherwise handled, and (vi) there is no on-site or off-site location to
which the Texas Company or any of its Subsidiaries have transported or disposed
of Hazardous Substances or arranged for the transportation or disposal of
Hazardous Substances.
Section 4.22 State Takeover Statutes. No "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (with the exception of
Article 13.03 of the TBCA) applicable to the Texas Company is applicable to the
Merger or the other transactions contemplated hereby. The action of the Board
of Directors of the Texas Company in approving this Agreement (and the
transactions provided for herein or contemplated hereby) is sufficient to
render Article 13.03 of the TBCA inapplicable to this Agreement.
Section 4.23 Labor Matters. Neither the Texas Company nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or seeking to compel
it to bargain with any labor union or labor organization nor is there pending
or, to the knowledge of the Texas Company, threatened in writing, nor has there
been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Texas Company or any of its
Subsidiaries, except in each case as would not, individually or in the
aggregate, have a material adverse effect on the Texas Company. Additionally,
except as disclosed in Section 4.23 of the Texas Company Disclosure Schedule,
(a) neither the Texas Company nor any of its Subsidiaries is a party to any
collective bargaining agreement, (b) there is no unfair labor practice
complaint against the Texas Company or any of its Subsidiaries pending or, to
the knowledge of the Texas Company, threatened before the National Labor
Relations Board that would, if adversely determined against the Texas Company
or any of its Subsidiaries, have a material adverse effect on the Texas
Company, (c) there is no labor strike or organized slow down or stoppage
actually pending or, to the knowledge of the Texas Company, threatened against
the Texas Company or any of its Subsidiaries which involves the employees of
the Texas Company or any of its Subsidiaries and which would have a material
adverse effect on the Texas Company, (d) no private agreement restricts the
Texas Company or any of its Subsidiaries from relocating, closing or
terminating any of its operations or facilities, and (e) except for plant
closings or layoffs that, individually or in the aggregate, would not have a
material adverse effect on the Texas Company, neither the Texas Company nor any
of its Subsidiaries has implemented any plant closing or layoff of employees
that could reasonably be expected to require notification under the Worker
Adjustment Retraining and Notification Act of 1988, as amended, or any similar
state or local Law or regulation and no such layoffs will be implemented before
the Effective Time.
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Section 4.24 General. (a) As used above or elsewhere in this Agreement with
respect to the Texas Company and/or its Subsidiaries, the term "material
adverse effect" means an effect which is both material and adverse with respect
to, and the term "material" means material with respect to, the assets,
business, results of operations or financial condition of the Texas Company
taken as a whole with its Subsidiaries, and in either case shall be determined
net of, and only after giving the Texas Company and its Subsidiaries the
benefit of, any insurance, indemnity, reimbursement, contribution, compensation
or other similar right which would operate to reduce, offset, compensate or
otherwise limit the impact thereof on the Texas Company and/or any of its
Subsidiaries; provided, however, that any change or changes in or caused by the
prices of products or services and any change in Law, rule, or regulation or
GAAP (applied on a consistent basis during the periods involved), shall not be
deemed to constitute a material adverse effect or be deemed material.
(b) For purposes of this Agreement, the term "Texas Company Disclosure
Schedule" means the Texas Company Disclosure Schedule delivered by the Texas
Company to the Delaware Company prior to the date hereof.
(c) No recourse or liability whatsoever with respect to this Agreement or
the Merger shall be had against any shareholder, officer, director, employee or
agent, as such, past, present or having such capacity at any time prior to the
Effective Time, of the Texas Company, any of its Subsidiaries, or any successor
thereof, either directly or through the Texas Company, any of its Subsidiaries
or any successor thereof, such recourse or liability, if any, being expressly
waived and released by the Delaware Company and its Subsidiaries as a condition
of, and as consideration for, the execution of this Agreement and any other
documents, instruments or certificates executed or delivered in connection with
this Agreement or the Merger.
(d) The foregoing representations and warranties of the Texas Company, and
any liability for breach or violation thereof, shall terminate absolutely and
be of no further force and effect at and as of the Effective Time.
ARTICLE V
Covenants
Section 5.1 Conduct of Business of the Delaware Company. Except as
contemplated by this Agreement or with the prior written consent of the Texas
Company, which consent shall not be unreasonably withheld or delayed and is
hereby given with respect to actions set forth in Section 5.1 of the Delaware
Company Disclosure Schedule, during the period from the date of this Agreement
to the Effective Time or the date of termination of this Agreement, whichever
first occurs, the Delaware Company will, and will cause each of its
Subsidiaries to, conduct its operations only in the ordinary and usual course
of business consistent with past practice and, consistent therewith, will use
all reasonable efforts, and will cause each of its Subsidiaries to use all
reasonable efforts, to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees,
consultants and any others having business dealings with it, in each case in
all material respects. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement or as set forth in
Section 5.1 of the Delaware Company Disclosure Schedule, the Delaware Company
will not, and will not permit any of its Subsidiaries to, prior to the
Effective Time, or the date of termination of this Agreement, whichever first
occurs, without the prior written consent of the Texas Company, not to be
unreasonably withheld or delayed:
(a) adopt any amendment to its certificate of incorporation or by-laws or
comparable organizational documents;
(b) except for issuances of capital stock of the Delaware Company's
Subsidiaries to the Delaware Company or a wholly owned Subsidiary of the
Delaware Company, issue, reissue, sell or pledge or authorize or propose the
issuance, reissuance, sale or pledge of additional shares of capital stock of
any class, or securities
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convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of shares of Delaware Company Common Stock upon the exercise of stock options,
warrants or vesting of restricted or deferred stock unit awards outstanding on
the date of this Agreement, in each case in accordance with their present
terms;
(c) declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock, except that any wholly owned Subsidiary
of the Delaware Company may pay dividends and make distributions to the
Delaware Company or any of the Delaware Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, other than pursuant to the Delaware Company Plans;
(e) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that the Delaware Company and its Subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent
with past practice, (ii) incur any indebtedness (other than indebtedness with
respect to the payment of interest paid in kind) pursuant to the Delaware
Company Junior Indenture, (iii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person except in the ordinary course of business
consistent with past practice, or (iv) make any loans, advances or capital
contributions to, or investments in, any other Person except in the ordinary
course of business consistent with past practice and except for loans,
advances, capital contributions or investments between any wholly owned
Subsidiary of the Delaware Company and the Delaware Company or another wholly
owned Subsidiary of the Delaware Company;
(f) settle or compromise any suit or claim or threatened suit or claim
relating to the transactions contemplated hereby;
(g) except for (i) increases in salary, wages and benefits of employees of
the Delaware Company or its Subsidiaries (other than executive or corporate
officers of the Delaware Company or presidents of any of its Subsidiaries) in
accordance with past practice, (ii) increases in salary, wages and benefits
granted to employees of the Delaware Company or its Subsidiaries (other than
executive or corporate officers of the Delaware Company or presidents of any of
its Subsidiaries) in conjunction with promotions or other changes in job status
consistent with past practice or required under existing agreements, and (iii)
increases in salary, wages and benefits to employees of the Delaware Company or
its Subsidiaries pursuant to collective bargaining agreements entered into in
the ordinary course of business consistent with past practice, increase the
compensation or fringe benefits payable or to become payable to directors,
officers or employees of the Delaware Company or any of its Subsidiaries, or
pay any benefit not required by any existing plan or arrangement (including the
granting of, or waiver of performance or other vesting criteria under, stock
options, stock appreciation rights, shares of restricted stock or deferred
stock or performance units) or grant any severance or termination pay to
(except pursuant to existing agreements or policies), or enter into any
employment or severance agreement with, any director, officer or other key
employee of the Delaware Company or any of its Subsidiaries or establish,
adopt, enter into, terminate or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, welfare, deferred compensation, employment, termination, severance
or other employee benefit plan, agreement, trust, fund, policy or arrangement
for the benefit or welfare of any directors, officers or current or former
employees, except to the extent such termination or amendment is required by
applicable law; provided, however, that nothing herein will be deemed to
prohibit the payment of benefits as they become payable;
(h) (i) acquire, sell, lease or dispose of any assets that are material to
the Delaware Company and its Subsidiaries, taken as a whole, (ii) enter into
any material commitment or transaction outside the ordinary course of business
consistent with past practice other than transactions between a wholly owned
Subsidiary of the Delaware Company and the Delaware Company or another wholly
owned Subsidiary of the Delaware
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Company, or (iii) enter into any material commitment or transaction either in,
or outside of, the ordinary course of business if such commitment or
transaction involves the payment or receipt by the Delaware Company or any of
its Subsidiaries of more than $50,000,000;
(i) acquire or sell or enter into any letter of intent, material commitment
or other agreement, whether written or oral, to acquire any debt or equity
securities of any Third Party;
(j) (i) modify, amend or terminate any Delaware Company Contract which is,
or should have been, disclosed in the Delaware Company SEC Documents filed
prior to the date hereof or filed with the SEC in connection therewith or any
Delaware Company Contract to which any Delaware Company Subsidiary is a party
and which, the Delaware Company in good faith believes, could involve the
payment or receipt of more than $10,000,000 (collectively, the "Material
Delaware Company Contracts"), (ii) waive, release, relinquish or assign any
Material Delaware Company Contract (including any material insurance policy) or
other material right or claim, or (iii) cancel or forgive any material
indebtedness owed to the Delaware Company or any of its Subsidiaries, other
than in each case in a manner in the ordinary course of business consistent
with past practice or which is not material to the business of the Delaware
Company and its Subsidiaries taken as a whole;
(k) make any tax election not required by Law or settle or compromise any
tax liability, in either case that is material to the Delaware Company and its
Subsidiaries taken as a whole;
(l) change any of the material accounting principles or practices used by it
except as required by the SEC or the Financial Accounting Standards Board;
(m) take any action which the Delaware Company believes when taken would
cause its representations and warranties contained herein to become inaccurate
in any material respect; or
(n) authorize, or commit or agree to take, any of the foregoing actions.
; provided, however, that none of the restrictions set forth in this Section
5.1 are intended to violate any provision of any agreement governing any
indebtedness of the Delaware Company or any of its Subsidiaries.
Section 5.2 Conduct of Business of the Texas Company. Except as contemplated
by this Agreement or with the prior written consent of the Delaware Company,
which consent shall not be unreasonably withheld or delayed and is hereby given
with respect to actions set forth in Section 5.2 of the Texas Company
Disclosure Schedule, any actions necessary or advisable to consummate the
transactions contemplated by the Preferred Stock Agreement or any documents
contemplated therein and any actions necessary to obtain the New Financing (as
hereinafter defined), during the period from the date of this Agreement to the
Effective Time or the date of termination of this Agreement, whichever first
occurs, the Texas Company will, and will cause each of its Subsidiaries to,
conduct its operations only in the ordinary and usual course of business
consistent with past practice and, consistent therewith, will use all
reasonable efforts, and will cause each of its Subsidiaries to use all
reasonable efforts, to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and
any others having business dealings with it, in each case in all material
respects. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, as set forth in Section 5.2 of
the Texas Company Disclosure Schedule, or necessary or advisable to consummate
the transactions contemplated by the Preferred Stock Agreement or any documents
referred to therein or the New Financing, the Texas Company will not, and will
not permit any of its Subsidiaries to, prior to the Effective Time or the date
of termination of this Agreement, whichever first occurs, without the prior
written consent of the Delaware Company, not to be unreasonably withheld or
delayed:
(a) adopt any amendment to its articles of incorporation or by-laws or
comparable organizational documents other than as contemplated by this
Agreement;
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(b) except for issuances of capital stock of the Texas Company's
Subsidiaries to the Texas Company or a wholly owned Subsidiary of the Texas
Company, issue, reissue, sell or pledge or authorize or propose the issuance,
reissuance, sale or pledge of additional shares of capital stock of any class,
or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of shares of Texas Company Common Stock upon the
exercise of stock options or vesting of restricted or deferred stock unit
awards outstanding on the date of this Agreement, in each case in accordance
with their present terms;
(c) declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock, except that any wholly owned Subsidiary
of the Texas Company may pay dividends and make distributions to the Texas
Company or any of the Texas Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, other than pursuant to the Texas Company Plans;
(e) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that the Texas Company and its Subsidiaries may incur,
assume or pre-pay debt in the ordinary course of business consistent with past
practice, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other Person (other than the Texas Company or any of its Subsidiaries)
except in the ordinary course of business consistent with past practice, or
(iii) make any loans, advances or capital contributions to, or investments in,
any other Person except in the ordinary course of business consistent with past
practice and except for loans, advances, capital contributions or investments
between any wholly owned Subsidiary of the Texas Company and the Texas Company
or another wholly owned Subsidiary of the Texas Company;
(f) settle or compromise any suit or claim or threatened suit or claim
relating to the transactions contemplated hereby;
(g) except for (i) increases in salary, wages and benefits of employees of
the Texas Company or its Subsidiaries (other than executive or corporate
officers of the Texas Company or presidents of any of its Subsidiaries) in
accordance with past practice, (ii) increases in salary, wages and benefits
granted to employees of the Texas Company or its Subsidiaries (other than
executive or corporate officers of the Texas Company or presidents of any of
its Subsidiaries) in conjunction with promotions or other changes in job status
consistent with past practice or required under existing agreements and (iii)
increases in salary, wages and benefits to employees of the Texas Company or
its Subsidiaries pursuant to collective bargaining agreements entered into in
the ordinary course of business consistent with past practice, increase the
compensation or fringe benefits payable or to become payable to its directors,
officers or employees (whether from the Texas Company or any of its
Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, the granting of, or waiver of performance or other
vesting criteria under, stock options, stock appreciation rights, shares of
restricted stock or deferred stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or severance agreement with, any director, officer or
other key employee of the Texas Company or any of its Subsidiaries or
establish, adopt, enter into, terminate or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees, except to the extent such termination or amendment is
required by applicable law; provided, however, that nothing herein will be
deemed to prohibit the payment of benefits as they become payable;
(h) (i) acquire, sell, lease or dispose of any assets that are material to
the Texas Company and its Subsidiaries, taken as a whole, (ii) enter into any
material commitment or transaction outside the ordinary
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course of business consistent with past practice other than transactions
between a wholly owned Subsidiary of the Texas Company and the Texas Company or
another wholly owned Subsidiary of the Texas Company; or (iii) enter into any
material commitment or transaction either in, or outside of, the ordinary
course of business if such commitment or transaction involves the payment or
receipt by the Texas Company or any of its Subsidiaries of more than
$50,000,000;
(i) acquire or sell or enter into any letter of intent, material commitment
or other agreement, whether written or oral, to acquire any debt or equity
securities of any Third Party;
(j) (i) modify, amend or terminate any Texas Company Contract which is, or
should have been disclosed in the Texas Company SEC Documents filed prior to
the date hereof or filed with the SEC in connection therewith or any Texas
Company Contract which the Texas Company in good faith believes could involve
the payment or receipt of more than $10,000,000 (collectively, the "Material
Texas Company Contracts"), (ii) waive, release, relinquish or assign any
Material Texas Company Contract (including any material insurance policy) or
other material right or claim, or (iii) cancel or forgive any material
indebtedness owed to the Texas Company or any of its Subsidiaries, other than
in each case in a manner in the ordinary course of business consistent with
past practice or which is not material to the business of the Texas Company and
its Subsidiaries taken as a whole;
(k) make any tax election not required by Law or settle or compromise any
tax liability, in either case that is material to the Texas Company and its
Subsidiaries taken as a whole;
(l) change any of the material accounting principles or practices used by it
except as required by the SEC or the Financial Accounting Standards Board;
(m) take any action which the Texas Company believes when taken would cause
its representations and warranties contained herein to become inaccurate in any
material respect; or
(n) authorize, or commit or agree to take, any of the foregoing actions.
; provided, however, that none of the restrictions set forth in this Section
5.1 are intended to violate any provision of any agreement governing any
indebtedness of the Delaware Company or any of its Subsidiaries. As used
herein, the term "New Financing", shall mean a senior debt facility with terms
reasonably acceptable to the Texas Company and the Delaware Company and
provided by a lender or lenders reasonably acceptable to the Texas Company and
the Delaware Company which shall provide for loans to the Texas Company, if
necessary, in an amount of at least $800,000,000.
Section 5.3 Commercially Reasonable Best Efforts. (a) Subject to the terms
and conditions of this Agreement, all of the Parties hereto will use their
respective commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) the prompt delivery in writing of any and all information
reasonably requested by another Party from time to time for inclusion or
incorporation by reference in the S-4, the Delaware Company Proxy Statement and
the Texas Company Proxy Statement, (ii) the prompt preparation and, subject to
any limitations set forth in the Preferred Stock Agreement, filing with the SEC
of the S-4, the Delaware Company Proxy Statement and the Texas Company Proxy
Statement, (iii) such actions as may be required to have the S-4 declared
effective under the Securities Act and the Delaware Company Proxy Statement and
the Texas Company Proxy Statement cleared by the SEC, in each case as promptly
as practicable, including by consulting with each other as to, and responding
promptly to, any SEC comments with respect thereto, (iv) obtaining, prior to
the Effective Time, all necessary blue sky permits and approvals and taking
such other actions as may be required to be taken under applicable state
securities or blue sky laws in connection with the issuance and delivery of
shares of Texas Company Common Stock contemplated hereby, (v) the making of any
necessary filings, and thereafter make any required submissions, with respect
to this Agreement and the Merger under the HSR Act, or any other applicable
Law, and (vi) obtaining all consents
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required under applicable Law or by contract necessary in connection with the
Merger and the transactions contemplated in this Agreement, the Preferred Stock
Agreement or the documents contemplated therein, and the New Financing. Without
limiting the generality of the foregoing, each of the Delaware Company and the
Texas Company shall promptly comply with any requests for additional
information under the HSR Act, and shall use its commercially reasonable
efforts to obtain termination of the waiting period thereunder as promptly as
practicable. In addition, if at any time prior to the Effective Time any event
or circumstance relating to the Delaware Company or the Texas Company or any of
their respective Subsidiaries, or any of their respective officers or
directors, should be discovered by the Delaware Company or the Texas Company,
as the case may be, and which should be set forth in an amendment or supplement
to the S-4, the Delaware Company Proxy Statement or the Texas Company Proxy
Statement, the discovering Party will promptly inform the other Party of such
event or circumstance.
(b) Each of the Parties will comply in all material respects with all
applicable Laws and with all applicable rules and regulations of any
Governmental Entity in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby.
(c) Each of the Parties shall, in connection with the efforts referenced in
this Section 5.3, (i) cooperate in all respects with each other in connection
with any filing or submission and in connection with any investigation or other
inquiry, including any proceeding initiated by a private party, (ii) promptly
inform the other Parties of any material communication received by such Party
from, or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated hereby, (iii) consult with
each other in advance of any meeting or conference with any such Governmental
Entity or, in connection with any proceeding by a private party, with any other
person, and to the extent permitted by the applicable Governmental Entity or
other person, give the other Parties the opportunity to attend and participate
in such meetings and conferences, and (iv) provide any necessary information
with respect to and provide the other (or its counsel) copies of, all filings
made by such Party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(d) In furtherance and not in limitation of the covenants of the Parties
contained in this Section 5.3, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any applicable Law, or if any statute, rule,
regulation, executive order, decree, injunction or administrative order is
enacted, entered or promulgated or enforced by a Governmental Entity which
would make the Merger or the other transactions contemplated hereby illegal or
otherwise prohibit or materially impair or delay consummation of the
transactions contemplated hereby, each of the Parties shall cooperate in all
respects with each other and use all commercially reasonable efforts to contest
and resist any such action or proceeding, to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement and
to have such statute, rule, regulation, executive order, decree, injunction or
administrative order repealed, rescinded or made inapplicable. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
5.3 shall limit a Party's right to terminate this Agreement pursuant to Section
7.1 so long as such Party has up to then complied in all respects with its
obligations under this Section 5.3.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any applicable Law or if any suit is instituted by
any Governmental Entity or any private party challenging any of the
transactions contemplated hereby as violative of any applicable Law, each of
the Texas Company and the Delaware Company shall use its commercially
reasonable efforts to resolve any such objections or challenge as such
Governmental Entity or private party may have to such transactions under such
Law so as to permit consummation of the transactions contemplated by this
Agreement.
Section 5.4 Letter of the Delaware Company's Accountants. Following receipt
by PricewaterhouseCoopers, the Delaware Company's independent auditors, of an
appropriate request from the
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Texas Company pursuant to Statement on Auditing Standards ("SAS") No. 72, the
Delaware Company will use its reasonable best efforts to cause to be delivered
to the Texas Company a letter of PricewaterhouseCoopers, dated a date within
two business days before the date on which the S-4 will become effective and
addressed to the Texas Company, in form and substance reasonably satisfactory
to the Texas Company, and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements on Form S-4, which letter will be brought down to the Effective
Time.
Section 5.5 Letter of the Texas Company's Accountants. Following receipt by
KPMG Peat Marwick LLP, the Texas Company's independent auditors, of an
appropriate request from the Delaware Company pursuant to SAS No. 72, the Texas
Company will use its reasonable best efforts to cause to be delivered to the
Delaware Company a letter of KPMG Peat Marwick, LLP, dated a date within two
business days before the date on which the S-4 will become effective and
addressed to the Delaware Company, in form and substance reasonably
satisfactory to the Delaware Company, and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements on Form S-4, which letter will be brought down to the
Effective Time.
Section 5.6 Access to Information. Upon reasonable notice, each Party will
(and will cause each of their respective Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, facilities, books, contracts,
commitments and records and other information as reasonably requested by such
requesting Party and, during such period, each of the Delaware Company and the
Texas Company will (and will cause each of their respective Subsidiaries to)
furnish promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of United States federal securities laws or
regulations, and (b) all other information concerning its business, properties
and personnel as such other Party may reasonably request. The Parties will hold
any such information which is nonpublic in confidence in accordance with the
terms of the Confidentiality Agreement, dated June 1, 1999, between the
Delaware Company and the Texas Company, as amended (the "Confidentiality
Agreement"), and in the event of termination of this Agreement for any reason
each Party will promptly comply with the terms of the Confidentiality
Agreement.
Section 5.7 Stock Exchange Listing. The Texas Company will use its best
efforts to (i) obtain, prior to the Effective Time, the approval for listing on
the NYSE, effective upon official notice of issuance, of the shares of
Surviving Corporation Common Stock to be issued in connection with the Merger
pursuant to Article II hereof, the shares of Surviving Corporation Common Stock
which will be issuable upon conversion of the Texas Company Preferred Stock and
the shares of Surviving Corporation Common Stock which will be issuable upon
exercise options, warrants, earn outs and convertible securities of the
Delaware Company, and (ii) cause such Surviving Corporation Common Stock to be
duly registered or qualified under all applicable state securities or blue sky
laws.
Section 5.8 Employee Benefit Plans. (a) Certain Delaware Company Plans. On
or prior to the Effective Time, the Delaware Company and its Board of Directors
(or a committee thereof) and the Texas Company and its Board of Directors (or a
committee thereof) will take all action necessary to implement the provisions
contained in this Section 5.8 in a manner reasonably acceptable to the Texas
Company.
(i) Options and Warrants to Purchase Delaware Common Stock.
(1) Any Delaware Company Options that are unexercisable, but become
exercisable as a result of the transactions contemplated hereby, shall not
become exercisable because of the transactions contemplated hereby and any
discretion or any decision to be made by the Delaware Company or its delegate
with regard to any Delaware Company Options shall be made not to allow any of
such Delaware Company Options to become exercisable on account of the
transactions contemplated hereby. In addition, the Delaware Company shall
either (i) cause each Person who has Delaware Company Options that become
exercisable because of the transactions contemplated hereby to execute a waiver
whereby such person agrees that such options shall not become
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exercisable on account of the transactions contemplated hereby (the "Option
Waivers") or (ii) enter into severance agreements with any person that has not
signed an Option Waiver. Such severance agreements shall provide for severance
payments at the Effective Time in amounts consistent with past practice of the
Delaware Company and not in excess of the amount set forth in Section 5.1(g) of
the Delaware Company Disclosure Schedule and that all of Delaware Company
Options of such person shall terminate and be of no force and effect at the
Effective Time.
(2) At the Effective Time, the Delaware Company's obligations with respect
to each outstanding Delaware Company Option under the Delaware Company Option
Plans and each of the outstanding Delaware Company Warrants shall be assumed by
the Surviving Corporation. Options for which Option Waivers have not been
obtained and are required shall not be assumed by the Surviving Corporation.
The Delaware Company Options and the Delaware Company Warrants so assumed by
the Surviving Corporation shall continue to have, and be subject to, the same
terms and conditions set forth in the Delaware Company Option Plans (as to the
Delaware Company Option) and agreements pursuant to which such Delaware Company
Options and Delaware Company Warrants were issued as in effect immediately
prior to the Effective Time, except that (i) such Delaware Company Options and
Delaware Company Warrant shall be exercisable for that number of whole shares
of Surviving Corporation Common Stock equal to the product of the number of
shares of Delaware Company Common Stock covered by the Delaware Company Options
and the Delaware Company Warrants immediately prior to the Effective Time
multiplied by the Delaware Company Per Share Stock Amount, rounded up to the
nearest whole number of shares of Surviving Corporation Common Stock, and (ii)
the per share exercise price for the shares of Surviving Corporation Common
Stock issuable upon the exercise of such assumed Delaware Company Options or
the Delaware Company Warrants shall be equal to the quotient determined by
dividing the exercise price per share of Delaware Company Common Stock
specified for such Delaware Company Options under the applicable Delaware
Company Option Plans or agreement or Delaware Company Warrants immediately
prior to the Effective Time by the Delaware Company Per Share Stock Amount,
rounding the resulting exercise price down to the nearest whole cent. With
respect to the Delaware Company Options, the date of grant shall be the date on
which the Delaware Company Options were originally granted. Prior to such
assumption of such Delaware Company Options or Delaware Company Warrants by the
Surviving Corporation, the Delaware Company shall make all amendments to the
plans and agreements governing such Delaware Company Options and Delaware
Company Warrants to accomplish the foregoing, which shall be in a form
reasonably acceptable to the Texas Company. The Surviving Corporation shall (i)
reserve for issuance the number of shares of Surviving Corporation Common Stock
that will become issuable upon the exercise of such Delaware Company Options
and the Delaware Company Warrants pursuant to this Section 5.8(a)(i)(2) and
(ii) at the Effective Time, execute a document evidencing the assumption by the
Surviving Corporation of the Delaware Company's obligations with respect
thereto under this 5.8(a)(i)(2). As soon as practicable after the Effective
Time, the Surviving Corporation shall file a registration statement on Form S-8
(or any successor form), or another appropriate form with respect to the shares
of Surviving Corporation Common Stock subject to such Delaware Company Options
and shall use its reasonable commercial efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such Delaware Company Options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, the
Surviving Corporation, to the extent legally permissible, shall administer the
Delaware Company Option Plans assumed pursuant to this Section 5.8(a)(i)(2) in
a manner that complies with Rule 16b-3 promulgated under the Exchange Act.
(ii) Directors Option Plan. All Delaware Company Options issued and
outstanding under the Consolidation Capital Corporation 1997 Non-Employee
Directors' Stock Plan (the "Directors Option Plan") shall be exercisable in
accordance with such plan; provided that, the Delaware Company agrees to amend
the Directors Option Plan prior to the earlier to occur of the Effective Time
or December 31, 1999, to provide that no automatic grants of options under such
plan shall occur. Additionally, the Delaware Company agrees to terminate the
Directors Option Plan effective as of the Effective Time.
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(iii) Stock Performance Plan and All Other Stock-Based Plans.
(1) At the Effective Time, the Delaware Company shall take all steps
necessary to cause any shares of Delaware Company Common Stock granted pursuant
to any Delaware Company Plan, including, without limitation, the Delaware
Company's 1999 Stock Performance Incentive Plan (the "Stock Performance Plan"),
to be converted into shares of Surviving Corporation Common Stock in accordance
with Section 2.1(i) hereof. Except as provided herein or as otherwise agreed to
by the Parties, and to the extent permitted by the applicable plan or
agreement, the provisions in any plan, program or arrangement (other than the
Stock Performance Plan and the Delaware Company Option Plans) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Delaware Company or any of its Subsidiaries will be terminated as of the
Effective Time.
(2) No shares of Delaware Company Stock shall be awarded or issued on or
before the Effective Time on account of the occurrence of the transactions
contemplated hereby pursuant to any Delaware Company Plan, including, without
limitation, the Stock Performance Plan, and any discretion or any decision to
be made by any person, committee or company with regard to the award or issue
of Delaware Company Stock pursuant to any Delaware Company Plan shall not be
made to grant any such award or approve or otherwise authorize such award or
issuance. Prior to the Effective Time and except as set forth in this Section
5.8, the Delaware Company shall cause each person who has a right to have
Delaware Company Stock either awarded or issued prior to the Effective Time
under a Delaware Company Plan whether or not on account of the occurrence of
the transactions contemplated hereby to execute a waiver whereby such person
agrees to release the Delaware Company of its obligation to award or issue
Delaware Company Stock under such Delaware Company Plan. After the Closing, the
Texas Company shall assume the Stock Performance Plan in accordance with its
terms (or adopt a substantially similar plan or utilize an existing Texas
Company plan) with respect to the Persons named in Section 3.17(e) of the
Delaware Company Disclosure Schedule, and the "Stock Price" which must be
attained under Section 3 of the Stock Performance Plan and the number of shares
of Delaware Company Common Stock allocated to such individuals set forth in
Section 3.17(e) of the Delaware Company Disclosure Schedule shall be subject to
appropriate adjustments set forth in Section 5.8(a)(i)(2) above; provided,
however, that if the benefits under such plan have been satisfied with respect
to any Person, then no further obligations shall exist with respect to such
Person.
(iv) Employee Stock Purchase Plan. At a date to be agreed on by the Parties
which must be at least three days before the Closing, the Delaware Company
shall terminate the Consolidation Capital Corporation Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") so that no purchase or sales of
Delaware Company Stock can occur under the Employee Stock Purchase Plan after
such date.
(v) 162(m) Bonus Plan. The Delaware Company shall terminate the
consolidation Capital Corporation Section 162(m) Bonus Plan (the "162(m) Bonus
Plan") prior to the Effective Time.
(vi) Delaware Company Qualified Plans. Prior to the Closing Date, the
Delaware Company and the Texas Company agree to use their best efforts to come
to an agreement with respect to how (i) to maintain the qualified status of
certain Delaware Company Plans which are qualified or intended to be qualified
under Section 401(a) of the Code ("Delaware Company Qualified Plans") from the
date of this Agreement through the Effective Time and (ii) to provide qualified
retirement benefits to the employees of the Surviving Corporation after the
Effective Time. Notwithstanding the above, the Delaware Company agrees to
maintain the qualified status of the Delaware Company Qualified Plans from the
date of this Agreement through the Effective Time.
(b) All Other Employee Benefit Plans of the Delaware Company and of the
Texas Company. Except as otherwise contemplated by this Agreement, the employee
benefit plans (as defined in Section 3(3) of ERISA) and other employee plans,
programs and policies other than salary (collectively, the "Employee Benefit
Plans") of the Delaware Company and its Subsidiaries and the Texas Company and
its Subsidiaries in effect at the date of this Agreement will remain in effect
until otherwise determined after the Effective Time unless otherwise determined
by the Board of Directors of the Surviving Corporation.
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(i) Agreement and Conditions. Without limiting the generality of Section
5.8(b), the Surviving Corporation shall (i) honor (A) in accordance with their
terms all individual employment, severance and termination agreements of the
Delaware Company or any of its Subsidiaries, and (B) without modification all
other employee severance plans, policies, employment and severance agreements
of the Delaware Company or any of its Subsidiaries with respect to their
respective past and present officers, directors, employees and agents that are
in effect as of the Effective Time through the termination date specified in
such document, (ii) waive any limitations regarding pre-existing conditions of
employees of the Delaware Company and its Subsidiaries employed by any of them
as of the Effective Time ("Current Employees") and their eligible dependents
under any welfare or other employee benefit plans of the Surviving Corporation
and its affiliates in which they participate after the Effective Time (except
to the extent that such limitations would have applied under the analogous plan
of the Delaware Company and its Subsidiaries immediately before the Effective
Time), and (iii) for the Employee Benefit Plans applicable to employees of the
Surviving Corporation effective after the Effective Time, recognize all service
with the Delaware Company or any of its Subsidiaries and the Texas Company or
any of its Subsidiaries to the extent service is recognized for any purpose
under similar Delaware Company Plans and similar Texas Company Plans, except to
the extent such treatment would result in duplication of benefits or would
violate applicable Law.
(c) Certain Texas Company Options. With respect to the options listed on
Exhibit 5.8(c), the Delaware Company and the Texas Company agree that,
notwithstanding anything in this Agreement to the contrary, the Texas Company
may, subject to the pre-approval of the Board of Directors of the Texas Company
and effective at the Effective Time, purchase a number of such options equal to
the number of such options requested to be purchased by the holder of such
options in writing up to a maximum of 50% of the options held by such Person
(the "Total Eligible Options"); provided, however, that in the event that the
Elected Cash Shares is more than the Total Eligible Share Number, the number of
options that may be purchased by the Company pursuant to this Section 5.8(c)
shall be subject to the proration procedures set forth in Section 2.5 of this
Agreement as if such option were Elected Cash Shares. The purchase price at
which the Texas Company may repurchase any of such options shall be $13.50 per
share less the exercise price of such option. Any payments paid by the Company
to purchase such options shall be in exchange for the termination and
relinquishment by the holder of such options.
Section 5.9 Insurance and Indemnity. For a period of six years after the
Effective Time, (a) the Surviving Corporation shall, subject to applicable Law,
maintain in effect the current provisions regarding indemnification of officers
and directors contained in the articles of incorporation and bylaws of the
Texas Company and each of its Subsidiaries and of the Delaware Company's
Subsidiaries as in effect immediately prior to the Effective Time and honor any
indemnification agreements of the Delaware Company and its respective
Subsidiaries with directors, officers or employees as in effect immediately
prior to the Effective Time, (b) the Surviving Corporation shall maintain in
effect directors and officers liability insurance having substantially the same
terms and conditions and providing at least the same coverage and amounts as
the directors and officers liability insurance maintained by the Delaware
Company as in effect immediately prior to the Effective Time for all directors
and officers of the Delaware Company and its Subsidiaries who served as such at
any time since November 25, 1997; provided, however, that the Surviving
Corporation shall not be required to pay more than $500,000 per year in
premiums for such coverage and may reduce such coverage to the extent required
so that annual premiums therefor do not exceed such amount, and (c) the
Surviving Corporation shall indemnify the directors and officers of the
Delaware Company to the fullest extent to which the Surviving Corporation is
permitted to indemnify such officers and directors under its articles of
incorporation and bylaws and applicable Law.
Section 5.10 Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the Party incurring such
expenses except (i) as set forth in Section 7.4, and (ii) that the Delaware
Company shall pay 60% of the fees and expenses of Baker Robbins to prepare a
report on the Y2K compliance of the Delaware Company and its Subsidiaries and
the Texas Company shall pay the remaining 40% of such fees and expenses.
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Section 5.11 Brokers or Finders. Each of the Delaware Company and the Texas
Company represents, as to itself, its Subsidiaries and its affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any brokers, or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement except Bear Stearns & Co. Inc., whose fees and expenses will be paid
by the Delaware Company or, if the Effective Time occurs, by the Surviving
Corporation, in accordance with the Delaware Company's agreement with such
firm, a copy of which has been provided to the Texas Company, and Chase
Securities, Inc., whose fees and expenses will be paid by the Texas Company or,
if the Effective Time occurs, by the Surviving Corporation in accordance with
the Texas Company's agreement with such firm, a copy of which has been provided
to the Delaware Company, and each of the Delaware Company and the Texas Company
will indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other brokers, or finders, fees,
commissions or expenses asserted by any Person on the basis of any act or
statement alleged to have been made by such Party or any of its Subsidiaries or
affiliates.
Section 5.12 No Solicitation. (a) From and after the date hereof, the Texas
Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountants or other
representatives retained by it or any of its Subsidiaries to, directly or
indirectly through another Person, solicit, initiate or encourage (including by
way of furnishing information), or take any other action designed to
facilitate, any inquiry, offer, proposal or agreement with respect to an
Alternative Transaction (as hereinafter defined); provided however, that if, at
any time prior to obtaining the Requisite Texas Holder Approvals, the Board of
Directors of the Texas Company determines in good faith, based on advice from
outside counsel and its financial advisors, that providing such information or
participating in such negotiations or discussions is required to prevent the
Board of Directors of the Texas Company from breaching their fiduciary duties
to the Texas Company's shareholders under applicable Law, the Board of
Directors of the Texas Company may, in response to any proposal that has been
determined by it to be a Texas Company Superior Proposal (as hereinafter
defined), that was not solicited by it and that did not otherwise result from a
breach of this Section 5.12(a), and subject to the Texas Company giving the
Delaware Company at least two business days written notice of its intention to
do so, (x) furnish information with respect to the Texas Company and its
Subsidiaries to any Person pursuant to a customary confidentiality agreement
containing terms no less restrictive than the terms of the Confidentiality
Agreement, provided that a copy of all such information is delivered
simultaneously to the Delaware Company, and (y) participate in negotiations
regarding such proposal. The Texas Company shall promptly notify the Delaware
Company orally and in writing of any request for information or of any proposal
in connection with an Alternative Transaction, the material terms and
conditions of such request or proposal (including a copy thereof, if in
writing, and all other documentation and any related correspondence) and the
identity of the person making such request or proposal. The Texas Company will
keep the Delaware Company reasonably informed of the status and details
(including amendments or proposed amendments) of such request or proposal on a
current basis. The Texas Company shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any Third Party conducted heretofore by the Texas Company or
its representatives with respect to the foregoing. Subject to the first
sentence of this Section 5.12(a), the Texas Company (i) agrees not to release
any Third Party (as hereinafter defined) from, or waive any provision of, or
fail to enforce, any standstill agreement or similar agreements to which it is
a party related to, or which could affect, an Alternative Transaction and
agrees that the Delaware Company shall be entitled to enforce the Texas
Company's rights and remedies under and in connection with such agreements and
(ii) acknowledges that the provisions of clause (i) are an important and
integral part of this Agreement. Nothing contained in this Section 5.12 or
Section 5.13 shall prohibit the Texas Company (i) from taking and disclosing to
its shareholders a position contemplated by Rule 14c-9 or Rule 14e-2(a)
promulgated under the Exchange Act, or (ii) from making any disclosure to its
shareholders if, in the good faith judgment of the Board of Directors of the
Texas Company, after receipt of advice from outside counsel and its financial
advisors, such disclosure is required to prevent the Board of Directors of the
Texas Company from breaching their fiduciary duties to the Texas Company's
shareholders under applicable Law. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section
5.12(a) by any director or officer of the
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Texas Company or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative of the Texas Company or
any of its Subsidiaries shall be deemed to be a breach of this Section 5.12(a)
by the Texas Company.
(b) From and after the date hereof, the Delaware Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountants or other representatives retained by it or any
of its Subsidiaries to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of furnishing information), or
take any other action designed to facilitate any inquiry, offer, proposal or
agreement with respect to an Alternative Transaction, or (ii) participate in
any discussions or negotiations regarding any Alternative Transaction;
provided, however, that if, at any time prior to obtaining the Requisite
Delaware Holder Approvals, the Board of Directors of the Delaware Company
determines in good faith, based on advice from outside counsel and its
financial advisors, that providing such information or participating in such
negotiations or discussions is required to prevent the Board of Directors of
the Delaware Company from breaching their fiduciary duties to the Delaware
Company's stockholders under applicable Law, the Board of Directors of the
Delaware Company may, in response to a proposal that has been determined by it
to be a Delaware Company Superior Proposal (as hereinafter defined), that was
not solicited by it and that did not otherwise result from a breach of this
Section 5.12(b), and subject to the Delaware Company giving the Texas Company
at least two business days written notice of its intention to do so, (x)
furnish information with respect to the Delaware Company and its Subsidiaries
to any person pursuant to a customary confidentiality agreement containing
terms no less restrictive than the terms of the Confidentiality Agreement,
provided that a copy of all such information is delivered simultaneously to the
Texas Company, and (y) participate in negotiations regarding such proposal. The
Delaware Company shall promptly notify the Texas Company orally and in writing
of any request for information or of any proposal in connection with an
Alternative Transaction, the material terms and conditions of such request or
proposal (including a copy thereof, if in writing, and all other documentation
any related correspondence) and the identity of the person making such request
or proposal. The Delaware Company will keep the Texas Company reasonably
informed of the status and details (including amendments or proposed
amendments) of such request or proposal on a current basis. The Delaware
Company shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any Third
Party conducted heretofore by the Delaware Company or its representatives with
respect to the foregoing. Subject to the first sentence of this Section
5.12(b), the Delaware Company (i) agrees not to release any Third Party from,
or waive any provision of, or fail to enforce, any standstill agreement or
similar agreements to which it is a Party related to, or which could affect, an
Alternative Transaction and agrees that the Texas Company shall be entitled to
enforce the Delaware Company's rights and remedies under and in connection with
such agreements and (ii) acknowledges that the provisions of clause (i) are an
important and integral part of this Agreement. Nothing contained in this
Section 5.12 or in Section 5.13 shall prohibit the Delaware Company (i) from
taking and disclosing to its stockholders a position contemplated by Rule 14e-9
or Rule 14e-2(a) promulgated under the Exchange Act, or (ii) from making any
disclosure to its stockholders if, in the good faith judgment of the Board of
Directors of the Delaware Company, based on advice from outside counsel and its
financial advisors, such disclosure is required to prevent the Board of
Directors of the Delaware Company from breaching their fiduciary duties to the
Delaware Company's stockholders under applicable Law. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
Section 5.12(b) by any director or officer of the Delaware Company or any of
its Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative of the Delaware Company or any of its
Subsidiaries shall be deemed to be a breach of Section 5.12(b) by the Delaware
Company.
(c) For purposes of this Agreement, "Alternative Transaction" means any of
(i) a transaction or series of transactions pursuant to which any Person (or
group of Persons) other than the Texas Company and its Subsidiaries and other
than the Delaware Company and its Subsidiaries (a "Third Party") acquires or
would acquire, directly or indirectly, beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of more than 20% of the outstanding shares of the
Texas Company or the Delaware Company, as the case may be, whether from the
Texas Company or the Delaware Company or pursuant to a tender offer or
otherwise, (ii) any
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acquisition or proposed acquisition of, or business combination with, the Texas
Company or any of its Subsidiaries or the Delaware Company or any of its
Subsidiaries, as the case may be, by a merger or other business combination
(including any so-called "merger-of-equals" and whether or not the Texas
Company or any of its Subsidiaries or the Delaware Company or any of its
Subsidiaries, as the case may be, is the entity surviving any such merger or
business combination), and (iii) any other transaction pursuant to which any
Third Party acquires or would acquire, directly or indirectly, control of 20%
or more of the consolidated assets (including for this purpose the outstanding
equity securities of Subsidiaries of the Texas Company or the Delaware Company,
as the case may be, and any entity surviving any merger or business combination
including any of them) of the Texas Company or any of its Subsidiaries or the
Delaware Company or any of its Subsidiaries, as the case may be.
Notwithstanding the foregoing, neither the Preferred Stock Agreement nor the
transactions or documents contemplated therein shall constitute an Alternative
Transaction.
Section 5.13 Texas Company and Delaware Company Shareholder Meetings. (a) As
promptly as practicable after the S-4 is declared effective under the
Securities Act, the Texas Company shall duly give notice of, convene and hold a
meeting of its shareholders (the "Texas Company Shareholders' Meeting") in
accordance with the TBCA for the purpose of obtaining the Requisite Texas
Holders Approvals and shall, subject to the provisions of Section 5.13(b)
hereof, through its Board of Directors, recommend to its shareholders the
approval of this Agreement, the issuance of the Texas Company Common Stock in
connection with the Merger and the issuance of the Texas Company Preferred
Stock pursuant to the Preferred Stock Agreement.
(b) Neither the Board of Directors of the Texas Company nor any committee
thereof shall (i) except as expressly permitted by this Section 5.13(b),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or
modify, in a manner adverse to the Delaware Company, the approval or
recommendation of such Board of Directors or such committee thereof of this
Agreement, the issuance of the Texas Company Common Stock in connection with
the Merger or the issuance of the Texas Company Preferred Stock pursuant to the
Preferred Stock Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Alternative Transaction, or (iii) cause the Texas
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Texas Company Acquisition
Agreement") related to any Alternative Transaction. Notwithstanding the
foregoing, in the event that prior to the later of the approval of this
Agreement, of the issuance of the Texas Company Common Stock in connection with
the Merger by the holders of the Texas Company Common Stock and the issuance of
the Texas Company Preferred Stock pursuant to the Preferred Stock Agreement,
the Board of Directors of the Texas Company determines in good faith, after it
has received a Texas Company Superior Proposal and after receipt of advice from
outside counsel and its financial advisors, that doing so is required to
prevent the Board of Directors of the Texas Company from breaching its
fiduciary duties to the Texas Company shareholders under applicable Law, the
Board of Directors of the Texas Company may (subject to this and the following
sentences) inform the Texas Company shareholders that it no longer believes
that such approval is advisable and no longer recommends approval (a "Texas
Company Subsequent Determination") or pay the Termination Fee and terminate
this Agreement, but only at a time that is after the fifth business day
following the Delaware Company's receipt of written notice advising the
Delaware Company that the Board of Directors of the Texas Company has received
a Texas Company Superior Proposal specifying the material terms and conditions
of such the Texas Company Superior Proposal (and including a copy thereof with
all accompanying documentation, if in writing), identifying the Person making
such Texas Company Superior Proposal and stating that it intends to make a
Texas Company Subsequent Determination or to terminate this Agreement (a "Texas
Company Determination Notice"). After providing the Texas Company Determination
Notice, the Texas Company shall cause its financial and legal advisors to
negotiate in good faith with the Delaware Company during such five business
days to make such adjustments to the terms and conditions of this Agreement as
would enable the Texas Company to proceed with the Merger on such adjusted
terms; provided, however, that any such adjustment shall be at the discretion
of the Parties at the time. For purposes of this Agreement, a "Texas Company
Superior Proposal" means any proposal (on its most recent amended or modified
terms, if amended or modified) made by a Third Party to enter into an
Alternative Transaction which
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the Board of Directors of the Texas Company determines in its good faith
judgment (based on, among other things, the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Texas Company's
shareholders than the Merger and the transactions contemplated herein, in the
Preferred Stock Agreement and by the New Financing, taking into account all
relevant factors (including whether, in the good faith judgment of the Board of
Directors of the Texas Company, based on the advice of a financial advisor of
nationally recognized reputation, the Third Party is reasonably able to finance
the transaction, and any proposed changes to this Agreement that may be
proposed by the Delaware Company in response to such Alternative Transaction).
Notwithstanding the foregoing, but subject to its right to terminate pursuant
to Section 7.1(g), the Texas Company agrees that its obligations pursuant to
5.13(a) to give notice of, convene and hold a meeting of its shareholders in
accordance with the TBCA and its articles of incorporation and bylaws shall not
be affected by the withdrawal or modification (other than a withdrawal or
modification in which the Texas Company Board of Directors recommends that its
shareholders not grant the Requisite Texas Holders Approvals) by the Texas
Company Board of Directors, in accordance with this Section 5.13(b), of its
recommendation to the shareholders of the Texas Company to grant the Requisite
Texas Holders Approvals.
(c) As promptly as practicable after the S-4 is declared effective under the
Securities Act, the Delaware Company shall duly give notice of, convene and
hold a meeting of its stockholders and the holders of its Debentures (the
"Delaware Company Stockholders' Meeting") in accordance with the DGCL and its
certificate of incorporation and bylaws for the purpose of obtaining the
Requisite Delaware Holders Approvals and shall, subject to the provisions of
Section 5.13(d) hereof, through its Board of Directors, recommend to its
stockholders and the holders of the Debentures the adoption of this Agreement.
(d) Neither the Board of Directors of the Delaware Company nor any committee
thereof shall (i) except as expressly permitted by this Section 5.13(d),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or
modify, in a manner adverse to the Texas Company, the approval or
recommendation of such Board of Directors or such committee thereof of this
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Alternative Transaction, or (iii) cause the Delaware Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, a "Delaware Company Acquisition Agreement")
related to any Alternative Transaction. Notwithstanding the foregoing, in the
event that prior to obtaining the Requisite Delaware Holders Approvals, the
Board of Directors of the Delaware Company determines in good faith, after it
has received a Delaware Company Superior Proposal and after receipt of advice
from outside counsel and its financial advisors, that doing so is required to
prevent the Board of Directors of the Delaware Company from breaching its
fiduciary duties to the Delaware Company stockholders under applicable Law, the
Board of Directors of the Delaware Company may (subject to this and the
following sentences) inform the Delaware Company stockholders that it no longer
believes that the Merger is advisable and no longer recommends approval (a
"Delaware Company Subsequent Determination") or pay the Termination Fee and
terminate this Agreement, but only at a time that is after the fifth business
day following the Texas Company's receipt of written notice advising the Texas
Company that the Board of Directors of the Delaware Company has received a
Delaware Company Superior Proposal specifying the material terms and conditions
of such Delaware Company Superior Proposal (and including a copy thereof with
all accompanying documentation, if in writing), identifying the Person making
such Delaware Company Superior Proposal and stating that it intends to make a
Delaware Company Subsequent Determination or to terminate this Agreement (a
"Delaware Company Determination Notice"). After providing a Delaware Company
Determination Notice, the Delaware Company shall cause its financial and legal
advisors to negotiate in good faith with the Texas Company during such five
business days to make such adjustments to the terms and conditions of this
Agreement as would enable the Delaware Company to proceed with the Merger on
such adjusted terms; provided however, that any such adjustment shall be at the
discretion of the Parties at the time. For purposes of this Agreement, a
"Delaware Company Superior Proposal" means any proposal (on its most recently
amended or modified terms, if amended or modified) made by a Third Party to
enter into an Alternative Transaction which the Board of Directors of the
Delaware Company determines in its good faith judgment (based on, among other
things, the advice of a financial advisor of nationally recognized reputation)
to be more favorable to the Delaware Company's stockholders than the Merger
taking into account all relevant
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factors (including whether, in the good faith judgment of the Board of
Directors of the Delaware Company, based on the advice of a financial advisor
of nationally recognized reputation, the Third Party is reasonably able to
finance the transaction, and any proposed changes to this Agreement that may be
proposed by the Texas Company in response to such Alternative Transaction).
Notwithstanding the foregoing, but subject to its right to terminate pursuant
to Section 7.1(g), the Delaware Company agrees that its obligations pursuant to
5.13(c) to give notice of, convene and hold a meeting of its stockholders and
the holders of the Debentures in accordance with the DGCL and its certificate
of incorporation and bylaws shall not be affected by the withdrawal or
modification by the Delaware Company Board of Directors, in accordance with
this Section 5.13(d), of its recommendation to the stockholders of the Delaware
Company and the holders of the Debentures to adopt this Agreement.
Section 5.14 Rule 145. The Delaware Company will use its reasonable best
efforts to cause all Persons who, at the time of the meeting of the Delaware
Company's stockholders to adopt this Agreement, may be deemed to be affiliates
of the Delaware Company as that term is used in Rule 145 under the Securities
Act and who will become the beneficial owners of Surviving Corporation Common
Stock pursuant to the Merger to execute "affiliates' letters" in customary form
prior to the Effective Time. Except as otherwise provided in any separate
agreements between the Texas Company and any such affiliates, the Texas Company
will use its reasonable efforts to comply with the provisions of Rule 144(c)
under the Securities Act in order that such affiliates may resell such
Surviving Corporation Common Stock pursuant to Rule 145(d) under the Securities
Act. After the first anniversary of the Closing Date, upon a written request,
the Surviving Corporation will remove any restrictive legends related to Rule
145 on the certificates evidencing Merger Consideration received by Persons who
are affiliates of the Delaware Company immediately before the Effective Time
but who are not affiliates of the Surviving Corporation immediately after the
Effective Time.
Section 5.15 Board Membership and Officers. The Boards of Directors of the
Texas Company shall take such action as may be required to cause the directors
comprising the full Board of Directors of the Surviving Corporation and the
officers of the Surviving Corporation immediately after the Effective Time to
reflect the provisions of this Section 5.15. The initial Board of Directors of
the Surviving Corporation following the Merger shall consist of 13 individuals;
four shall be designees of the Delaware Company which shall be reasonably
acceptable to the other parties hereto (the "Delaware Designees"), four shall
be designees of the Texas Company which shall be reasonably acceptable to the
other parties hereto (the "Texas Designees"), four shall be designees of the
Investor (the "Investor Designees") and one (the "Joint Designee") shall be
chosen jointly by the Delaware Company, the Texas Company and the Investor. At
least two of the Delaware Designees shall not be employed by the Delaware
Company or its Subsidiaries, and at least two of the Texas Designees shall not
be employed by the Texas Company or its Subsidiaries. J. Patrick Millinor shall
serve as Chairman of the Board of the Surviving Corporation immediately
following the Merger and Joseph Ivey shall serve as President and Chief
Executive Officer of the Surviving Corporation. Each shall report to the full
Board of Directors. The executive committee (the "Executive Committee") of the
Board shall consist of five members of the Board, two of whom shall be Ivey and
Millinor. In the event that either of Messrs. Millinor or Ivey ceases to be
employed by the Texas Company or the Delaware Company, respectively,
immediately prior to the Effective Time, then the position with the Surviving
Corporation which would otherwise be held by them shall be filled promptly
after the Effective Time by the Board of Directors of the Surviving
Corporation. Except as set forth in this Section 5.15, all other officers of
the Surviving Corporation shall be selected by the Board of Directors of the
Surviving Corporation after consultation with Messrs. Millinor and Ivey. All
directors and officers so elected shall hold office from the Effective Time in
accordance with the charter documents governing such corporation until his or
her successor is duly elected or appointed and qualified.
Section 5.16 Takeover Statute. If any "fair price", "moratorium", "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, the Delaware
Company, the Texas Company and their respective members of their respective
Boards of Directors shall grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated herein and
otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated herein.
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Section 5.17 Tax Matters. (a) Each of the Parties shall use its best efforts
to cause the Merger to constitute a tax-free "reorganization" under Code
Section 368(a). None of the Parties will knowingly take any action, and none of
the Parties will permit any of its Subsidiaries or Affiliates knowingly to take
any action, that would cause the Merger to fail to qualify as a tax-free
reorganization under Code Section 368(a).
(b) The Delaware Company will deliver a Representation Letter substantially
in the form of Exhibit 5.17(c)-1 executed as of the Closing Date and the Texas
Company will deliver a Representation Letter substantially in the form of
Exhibit 5.17(c)-2 executed as of the Closing Date.
Section 5.18 Notification of Certain Matters. Each of the Delaware Company
and the Texas Company shall give prompt notice to the other of:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate with
respect to such Party and its Subsidiaries, taken as a whole, at any time
from the date hereof to the Effective Time, or (B) directly or indirectly,
any material adverse effect on such Party; and
(ii) any material failure of such Party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
Section 5.19 Transition Planning. J. Patrick Millinor, Jr., and Joseph Ivey,
as Chief Executive Officers of the Texas Company and the Delaware Company,
respectively, jointly shall be responsible for coordinating all aspects of
transition planning and implementation relating to the Merger and the other
transactions contemplated hereby. If either such person ceases to be Chief
Executive Officer of his respective company for any reason, such Person's
successor as Chief Executive Officer shall assume his predecessor's
responsibilities under this Section 5.19. During the period between the date
hereof and the Effective Time, Messrs. Millinor and Ivey jointly shall (i)
examine various alternatives regarding the manner in which to best organize and
manage the businesses of the Texas Company and the Delaware Company after the
Effective Time, and (ii) coordinate policies and strategies with respect to
employees and employee compensation and benefit matters, in all cases subject
to applicable law.
ARTICLE VI
Conditions
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of the Parties to effect the Merger will be subject to
the satisfaction, on or prior to the Effective Time, of the following
conditions:
(a) The Delaware Company shall have obtained the Requisite Delaware
Holders Approvals.
(b) The Texas Company shall have obtained the Requisite Texas Company
Holders Approvals.
(c) Any waiting period under the HSR Act applicable to the Merger shall
have expired or been terminated.
(d) The S-4 shall have become effective under the Securities Act and no
stop order suspending the effectiveness of the Form S-4 shall then be in
effect and no proceeding for that purpose shall have been initiated or, to
the knowledge of the Texas Company or the Delaware Company, threatened.
(e) The Texas Company shall have received all state securities or blue
sky permits and other authorizations necessary to issue the shares of
Surviving Corporation Common Stock pursuant to this Agreement.
(f) No temporary restraining order, preliminary or permanent injunction
or other order shall have been issued by any court of competent
jurisdiction and no other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect (each Party agreeing to use
all reasonable efforts to have any such order reversed or injunction
lifted).
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(g) The shares of Surviving Corporation Common Stock to be issued in
connection with the Merger, the shares of Surviving Corporation Common
Stock which will be issuable upon conversion of the Texas Company Preferred
Stock and the shares of Surviving Corporation Common Stock will be issuable
upon the exercise of the options, warrants and convertible securities of
the Delaware Company shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(h) The Texas Company shall have received the opinion of Bracewell &
Patterson, L.L.P. substantially in the form attached hereto as Exhibit
6.1(h)(i) and the Delaware Company shall have received the opinion of
Morgan, Lewis and Bockius, LLP, substantially in the form attached hereto
as Exhibit 6.1(h)(ii), addressed to the Texas Company and the Delaware
Company, respectively, based upon representation letters substantially in
the forms referenced in Section 5.17 of this Agreement, dated on or about
the date of such opinion and such other facts and representations as
counsel may reasonably deem relevant, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying
under the provisions of Section 368(a) of the Code.
(i) The Texas Company shall have received from an institutional investor
or its affiliated designees (the "New Investor"), pursuant to the Preferred
Stock Agreement, the amount of $150,000,000 and all of the outstanding
Debentures as consideration for the issuance of shares of 7.25% Convertible
Preferred Stock, par value $.001 per share, of the Texas Company (the
"Texas Company Preferred Stock").
(j) The Texas Company shall have obtained the New Financing and funding
thereunder shall be available to the Texas Company.
(k) All material consents, approvals and authorizations from Government
Entities or third parties required to effect, or as a result of, the
Merger, the failure to obtain which would have a material adverse effect on
the Surviving Corporation and its Subsidiaries, taken as a whole, shall
have been obtained.
(l) There shall exist no default under any material indebtedness of
either the Delaware Company or the Texas Company.
Section 6.2 Conditions of Obligations of the Delaware Company. The
obligations of the Delaware Company to effect the Merger are further subject to
satisfaction or waiver of the following conditions:
(a) The representations and warranties of the Texas Company contained in
this Agreement shall be true and correct on the date hereof and (except to
the extent such representations and warranties speak as of a date earlier
than the date hereof) shall also be true and correct on and as of the
Closing Date, except for changes contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date; provided,
however, that for purposes of this Section 6.2(a) only, such
representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be
so true and correct (without regard to materiality qualifiers contained
therein), individually or in the aggregate, results or would reasonably be
expected to result in a material adverse effect on the Texas Company;
(b) the Texas Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or before the Effective Time; and
(c) the Delaware Company shall have received a certificate of an
executive officer of the Texas Company to the effect set forth in
paragraphs (a) and (b) above.
Section 6.3 Conditions of Obligations of the Texas Company. The obligations
of the Texas Company to effect the Merger are further subject to the
satisfaction or waiver of the following conditions:
(a) The representations and warranties of the Delaware Company contained
in this Agreement shall be true and correct on the date hereof and (except
to the extent such representations and warranties speak as of a date
earlier than the date hereof) shall also be true and correct on and as of
the Closing Date, except for changes contemplated by this Agreement, with
the same force and effect as if made on and as
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of the Closing Date; provided, however, that for purposes of this Section
6.3(a) only, such representations and warranties shall be deemed to be true
and correct unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality
qualifiers contained therein), individually or in the aggregate, results or
would reasonably be expected to result in a material adverse effect on the
Delaware Company;
(b) the Delaware Company shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or before the Effective
Time; and
(c) the Texas Company shall have received a certificate of an executive
officer of the Delaware Company to the effect set forth in paragraphs (a)
and (b) above.
ARTICLE VII
Termination
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time whether before or, subject to the terms of this
Agreement, after approval of this Agreement by the stockholders and holders of
the Debentures of the Delaware Company or the shareholders of the Texas
Company, in each case as authorized by the respective Board of Directors of the
Delaware Company or the Texas Company:
(a) by mutual consent of the Texas Company and the Delaware Company;
(b) by either of the Texas Company or the Delaware Company if the Merger
is not consummated before March 31, 2000 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any Party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in,
the failure of any condition to be satisfied;
(c) by either of the Texas Company or the Delaware Company if there
shall be any Law that makes the consummation of the Merger illegal or
otherwise prohibited or if any court of competent jurisdiction has issued
an order, decree, ruling or injunction permanently restraining, enjoining
or otherwise prohibiting the consummation of the Merger, which injunction
has become final and non-appealable;
(d) (i) by the Delaware Company, (A) if the Texas Company shall have
breached in any material respect (without regard to materiality qualifiers
contained therein) any of its representations or warranties contained in
this Agreement or the Texas Company shall have failed to perform in any
material respect any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform (1) is incapable of being
cured by the Texas Company, as the case may be, prior to the Termination
Date and (2) renders any condition under Section 6.1 or 6.2 incapable of
being satisfied prior to the Termination Date, or (B) if a condition under
Section 6.1 or 6.2 to the Delaware Company's obligations hereunder cannot
be satisfied prior to the Termination Date;
(ii) by the Texas Company, (A) if the Delaware Company shall have
breached in any material respect (without regard to materiality qualifiers
contained therein) any of its representations or warranties contained in
this Agreement or shall have failed to perform in any material respect any
of its covenants or other agreements contained in this Agreement, which
breach or failure to perform (1) is incapable of being cured by the
Delaware Company prior to the Termination Date and (2) renders any
condition under Sections 6.1 or 6.3 incapable of being satisfied prior to
the Termination Date, or (B) if a condition under Section 6.1 or 6.3 to the
Texas Company's obligations hereunder cannot be satisfied prior to the
Termination Date;
(e) by either the Delaware Company or the Texas Company if the Board of
Directors of the other (i) shall fail to include in its Proxy Statement its
recommendation without modification or qualification that the stockholders
and Debenture holders of the Delaware Company adopt this Agreement, in the
case of the
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Delaware Company, or that the shareholders of the Texas Company adopt this
Agreement, approve the issuance of the shares of Texas Company Common Stock
in connection with the Merger and approve the issuance of the Texas Company
Preferred Stock pursuant to the Preferred Stock Agreement, in the case of
the Texas Company, (ii) shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement or the Merger, in the case of
the Delaware Company, or shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement or the Merger, the issuance of
the shares of Texas Company Common Stock in connection with the Merger or
the issuance of the Texas Company Preferred Stock pursuant to the Preferred
Stock Agreement, in the case of the Texas Company, (iii) shall fail to
reaffirm such approval or recommendation promptly after such Party's
request, (iv) shall approve or recommend any Alternative Transaction, or
(v) shall resolve to take any of the actions specified in this Section
7.1(e);
(f) by either the Delaware Company or the Texas Company if the Requisite
Delaware Holders Approvals or the Requisite Texas Holders Approvals, as the
case may be, shall fail to have been obtained at a duly held meeting of
such holders of either of such companies, including any adjournments
thereof, or
(g)(i) by the Texas Company in accordance with Section 5.13(b), or (ii)
by the Delaware Company in accordance with Section 5.13(d), provided, that,
in each case, the Party terminating this Agreement pays the Termination Fee
as a condition to the effectiveness of such Party's termination under
Section 7.1(g).
Section 7.2 Effect of Termination. (a) In the event of termination of this
Agreement as provided in Section 7.1 hereof, and subject to the provisions of
Section 8.1 hereof, this Agreement shall forthwith become void and there shall
be no liability on the part of any of the Parties, except (i) as set forth in
this Section 7.2 and in Sections 3.9, 4.10, 5.10 and 5.11 hereof, and (ii)
nothing herein shall relieve any Party from liability for any willful breach
hereof.
(b) The Texas Company shall pay in accordance with Section 7.3 of this
Agreement to the Delaware Company a termination fee of $15,000,000 (the
"Termination Fee") upon the occurrence of any of the following events: (i) the
termination of this Agreement by the Delaware Company pursuant to Section
7.1(e) hereof, (ii) if this Agreement could have been (but was not) terminated
by the Delaware Company pursuant to Section 7.1(e) hereof , upon the
termination of this Agreement by the Texas Company or the Delaware Company
pursuant to Section 7.1(f), because of the failure of the Texas Company to
obtain the Requisite Texas Holders Approvals, (iii) (A) if this Agreement could
not have been terminated by the Delaware Company pursuant to Section 7.1(e)
hereof but is subsequently terminated by the Texas Company or the Delaware
Company pursuant to Section 7.1(f) because of the failure of the Texas Company
to obtain Requisite Texas Holders Approvals, (B) prior to the Texas Company
Shareholders' Meeting there shall have been an offer or proposal for, an
announcement of any intention with respect to (including the filing of a
statement of beneficial ownership on Schedule 13D discussing the possibility of
or reserving the right to engage in), or any agreement with respect to, a
transaction that would constitute an Alternative Transaction (except that for
the purposes of this Section 7.2(b), the applicable percentage in clause (i) of
the definition of "Alternative Transaction" shall be fifty percent (50%))
involving the Texas Company or any of the Texas Company's Subsidiaries, and (C)
within 12 months after the termination of this Agreement, the Texas Company
enters into a definitive agreement with any Third Party with respect to, or
consummates, an Alternative Transaction, (iv) this Agreement is terminated by
the Delaware Company pursuant to Section 7.1(d)(i) as a result of the Texas
Company's material breach of Sections 5.3, 5.12(a), 5.13(a) or 5.13(b) hereof
which, in the case of Section 5.3 only, is not cured within 30 days after
notice thereof to the Texas Company, or (v) this Agreement is terminated by the
Texas Company pursuant to Section 7.1(g). In addition, the Texas Company shall
pay the Delaware Company $30,000,000 as liquidated damages if the Texas Company
shall attempt to terminate this Agreement in a manner that is not provided in
Section 7.1.
(c) The Delaware Company shall pay in accordance with Section 7.3 of this
Agreement to the Texas Company the Termination Fee upon the occurrence of any
of the following events: (i) the termination of this Agreement by the Texas
Company pursuant to Section 7.1(e) hereof, (ii) if this Agreement could have
been
A-43
<PAGE>
(but was not) terminated by the Texas Company pursuant to Section 7.1(e)
hereof, upon the termination of this Agreement by the Texas Company or the
Delaware Company pursuant to Section 7.1(f) because of the failure of the
Delaware Company to obtain the Requisite Delaware Holders Approvals, (iii) (A)
if this Agreement could not have been terminated by the Texas Company pursuant
to Section 7.1(e) hereof but is subsequently terminated by the Texas Company or
the Delaware Company pursuant to Section 7.1(f) because of the failure of the
Delaware Company to obtain the Requisite Delaware Holders Approvals, (B) prior
to the Delaware Company Stockholders' Meeting there shall have been an offer or
proposal for, an announcement of any intention with respect to (including the
filing of a statement of beneficial ownership on Schedule 13D discussing the
possibility of or reserving the right to engage in), or any agreement with
respect to, a transaction that would constitute an Alternative Transaction
(except that for the purposes of this Section 7.2(c), the applicable percentage
in clause (i) of the definition of "Alternative Transaction" shall be fifty
percent (50%)) involving the Delaware Company or any of the Delaware Company's
Subsidiaries, and (C) within 12 months after the termination of this Agreement,
the Delaware Company enters into a definitive agreement with any Third Party
with respect to, or consummates, an Alternative Transaction, (iv) this
Agreement is terminated by the Texas Company pursuant to Section 7.1(d) as a
result of the Delaware Company's material breach of Sections 5.3, 5.12(b),
5.13(c) or 5.13(d) hereof which, in the case of Section 5.3 only, is not cured
within 30 days after notice thereof to the Delaware Company or (v) this
Agreement is terminated by the Delaware Company pursuant to Section 7.1(g). In
addition, the Delaware Company shall pay the Texas Company $30,000,000 as
liquidated damages if the Delaware Company shall attempt to terminate this
Agreement in violation of Section 7.1.
Section 7.3 Terms of Payment. Each terminate fee payable under Sections
7.2(b) and (c) above shall be payable in cash, payable no later than one
business day following the delivery of notice of termination to the other
Party, except that (i) if such fee shall be payable pursuant to clause (iii) of
either of Section 7.2(b) or (c), such fee shall be payable no later than one
business day following the day such Party enters into the definitive agreement
or consummates a transaction referenced in such clause (iii)(C) of either
Section 7.2(b) or (c), (ii) if such fee shall be payable by the Texas Company
pursuant to Section 7.2(b)(ii) or by the Delaware Company pursuant to Section
7.2(c)(ii), such fee shall be payable prior to, and as a condition precedent
to, termination of this Agreement by the Texas Company pursuant to Section
7.1(f) because of the failure of the Texas Company to obtain the Requisite
Texas Holders Approvals or by the Delaware Company pursuant to Section 7.1(f)
because of the failure of the Delaware Company to obtain the Requisite Delaware
Holders Approvals, as the case may be, and (iii) the Termination Fee shall be
paid prior to or contemporaneous with termination of this Agreement pursuant to
Section 7.1(g).
Section 7.4 Termination for Costs and Expenses. The Delaware Company and the
Texas Company agree that the Agreements contained in Sections 7.2(b) and (c)
above are an integral part of the transactions contemplated by this Agreement
and that without these Agreements, they would not enter into this Agreement. In
the event of any dispute as to whether any fee due under such Sections 7.2(b)
and (c) is due and payable, the prevailing Party shall be entitled to receive
from the other Party the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other
legal action, relating to such dispute. Interest shall be paid on the amount of
any unpaid fee at the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
ARTICLE VIII
Miscellaneous
Section 8.1 Survival of Representations, Warranties and Agreements. The
representation, warranties and Agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to
Section 7.1 hereof, as the case may be, except that (a) the covenants,
representations and warranties set forth in Articles I and II and Sections 3.9,
4.9, 5.6, 5.10, 5.11 5.14, 5.15, 5.17 and 7.2 hereof shall survive termination
indefinitely, and (b) nothing contained herein shall limit any covenant or
Agreement of the Parties which by its terms contemplates performance after the
Effective Time.
A-44
<PAGE>
Section 8.2 Amendment. This Agreement may be amended by the Parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders or Debenture holders of the Delaware Company or the
shareholders of the Texas Company; provided, however, no such amendment shall
be made which by Law requires the further approval of such stockholders or
shareholders or Debenture holders, as the case may be, without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties.
Section 8.3 Extension; Waiver. At any time prior to the Effective Time, any
Party may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other Party, (ii)
waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto and (iii) waive compliance with
any of the Agreements or conditions contained herein. Any agreement on the part
of a Party to any such extension or waiver will be valid only if set forth in a
written instrument signed on behalf of such Party. The failure of any Party to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
Section 8.4 Notices. All notices and other communications hereunder will be
in writing and will be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the Parties at the following addresses (or at such other address
for a Party as is specified by like notice):
(a) if to the Texas Company, to
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attn.: Chief Executive Officer
Telecopy: 713-626-4766
with a copy to
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Attn.: John L. Bland
Telecopy: 713-221-1212
and
(b) if to the Delaware Company, to
Building One Services
110 Cheshire Lane, Suite 210
Minnetonka, Minnesota 55305
Attn: Joseph M. Ivey
Telecopy: 612-249-4977
with a copy to
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attn: N. Jeffrey Klauder
Telecopy: 215-963-5299
Section 8.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference will be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
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<PAGE>
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement they will be deemed to be followed by
the words "without limitation." The phrases "the date of this Agreement," "the
date hereof" and terms of similar import, unless the context otherwise
requires, will be deemed to refer to the date set forth in the introductory
paragraph of this Agreement.
Section 8.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
will become effective when two or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
Section 8.7 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement and supersede all
prior Agreements and understandings, both written and oral, between the Parties
with respect to the subject matter hereof and thereof, and (b) other than
Article II, and Sections 3.24(c) and 4.24(c), are not intended to confer upon
any Person other than the Parties hereto and thereto any rights or remedies
hereunder or thereunder.
Section 8.8 GOVERNING LAW. EXCEPT AS SET FORTH IN THIS SECTION 8.8, THIS
AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE, EXECUTED, DELIVERED AND
PERFORMED WHOLLY WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO ANY APPLICABLE
CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THIS AGREEMENT PERTAINS TO THE
INTERNAL AFFAIRS OF A TEXAS CORPORATION, IN WHICH EVENT, AND ONLY WITH RESPECT
TO SUCH EVENT, THE LAWS OF THE STATE OF TEXAS SHALL APPLY.
Section 8.9 Specific Performance. The Parties agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at Law would exist and damages would be difficult to determine,
and that the Parties will be entitled to specific performance of the terms
hereof, in addition to any other remedy at Law or equity.
Section 8.10 Publicity. Except as otherwise required by Law or the
applicable rules of any national securities exchange, for so long as this
Agreement is in effect, neither the Texas Company nor the Delaware Company
will, or will permit any of its Subsidiaries to, issue or cause the publication
of any press release or other public announcement with respect to the
transactions contemplated by this Agreement without having consulted with the
other Party.
Section 8.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any Party (whether by
operation of Law or otherwise) without the prior written consent of the other
Party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
Section 8.12 Validity. The invalidity or unenforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provisions hereof or thereof, which will remain in full force and effect.
Section 8.13 Taxes. Any liability arising out of the New York State Real
Property Gains Tax and any other tax imposed by any domestic or foreign taxing
authority with respect to the property of the Delaware Company or the Texas
Company due with respect to the Merger will be borne by the Surviving
Corporation and expressly will not be a liability of the stockholders of the
Delaware Company or the shareholders of the Texas Company.
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<PAGE>
IN WITNESS WHEREOF, the Texas Company and the Delaware Company have caused
this Agreement to be signed by their respective officers hereunto duly
authorized as of the date first written above.
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
----------------------------------
J. Patrick Millinor, Jr.
Name: ____________________________
Chief Executive Officer
Title: ___________________________
BUILDING ONE SERVICES CORPORATION
By: /s/ Joseph M. Ivey
----------------------------------
Joseph M. Ivey
Name: ____________________________
President and Chief
Executive Officer
Title: ___________________________
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<PAGE>
EXHIBIT 1.4(a)
CERTIFICATE OF INCORPORATION
The parties agree to reflect any relevant terms of the Agreement (including,
without limitation, the terms of Section 5.15) and the Preferred Stock
Agreement in a manner reasonably acceptable to the parties and the Investor (as
defined in the Preferred Stock Agreement). Such amended and restated articles
of incorporation may, to the extent reasonably acceptable to the parties and
the Investor (as defined in the Preferred Stock Agreement), take, in part or
whole, the form of the attached.
See Annex B to the joint proxy statement/prospectus.
A-48
<PAGE>
EXHIBIT 5.17(c)-1
Building One Services Officers Certificate
MLB Draft November 1, 1999
Privileged and Confidential
OFFICERS CERTIFICATE
OF
BUILDING ONE SERVICES CORPORATION
, 1999
Bracewell & Patterson, L.L.P.
2900 South Tower
Pennzoil Place
Houston, Texas
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Ladies and Gentlemen:
In connection with the opinions to be delivered regarding the material
federal income tax consequences of the proposed merger (the "Merger") between
Group Maintenance America Corp., a Texas corporation (the "Texas Company"), and
Building One Services Corporation, a Delaware corporation (the "Delaware
Company"), pursuant to Section 6.1(h) of the Agreement and Plan of Merger (the
"Agreement") dated as of [ ], 1999 between the Texas Company and the
Delaware Company, the undersigned officer of the Delaware Company hereby
certifies and represents as to the Delaware Company that the facts relating to
the Agreement and as described in the Joint Proxy Statement of the Texas
Company and the Delaware Company, dated , 1999 (the "Joint Proxy
Statement") and in the registration statement of the Texas Company dated ,
1999 (the "Registration Statement") are true, correct and complete in all
respects as of the date hereof and will be true, correct and complete in all
respects at the effective time of the Merger and that:
1. The facts relating to the contemplated merger of the Delaware Company
with and into the Texas Company (the "Merger") as described in the Joint
Proxy Statement and in Section 1 of the Agreement are true, accurate and
complete in all material respects insofar as they relate to the Delaware
Company and/or any person related to the Delaware Company.
2. The Merger will be consummated in accordance with the terms of the
Agreement and none of the material conditions to the Delaware Company's
performance of its obligations under the Agreement will be waived or
modified and the exchange of Preferred Stock will be consummated in
accordance with the Subscription and Exchange Agreement dated , 1999
among the Texas Company and BOSS II, LLC.
3. The fair market value of the Texas Company stock and other
consideration received by each Delaware Company shareholder will be
approximately equal to the fair market value of the Delaware Company stock
surrendered in the exchange.
4. The liabilities of the Delaware Company assumed by the Texas Company
and the liabilities to which the transferred assets of the Delaware Company
are subject were not incurred by the Delaware Company in connection with
the Merger.
5. Except as set forth in Sections 7.4 and 5.10 of the Agreement, The
Texas Company, the Delaware Company, and the shareholders of Delaware
Company will pay their respective expenses, if any, incurred in connection
with the transaction.
6. There is no intercorporate indebtedness existing between the Delaware
Company and the Texas Company that was issued, acquired, or will be settled
at a discount.
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<PAGE>
7. The Delaware Company is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
8. The Delaware Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(A) of the
Internal Revenue Code.
9. The fair market value of the assets of the Delaware Company
transferred to the Texas Company will equal or exceed the sum of the
liabilities assumed by the Texas Company plus the amount of liabilities, if
any, to which the transferred assets are subject.
10. The payment of cash in lieu of fractional shares of Texas Company
stock is solely for the purpose of avoiding the expense and inconvenience
to the Texas Company of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the transaction to the Delaware Company shareholders
instead of issuing fractional shares of Texas Company stock will not exceed
one percent of the total consideration that will be issued in the
transaction to the Delaware Company shareholders in exchange for their
shares of Delaware Company stock. The fractional share interests of each
Delaware Company shareholder will be aggregated, and no Delaware Company
shareholder will receive cash in an amount greater to or greater than the
value of one full share of Texas Company stock.
11. None of the compensation received by any shareholder-employees of
the Delaware Company will be separate consideration for, or allocable to,
any of their shares of Delaware Company stock; none of the shares of Texas
Company stock received by any shareholder-employees will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
12. The ratio of exchange of Delaware Company stock for Texas Company
stock was agreed upon as the result of arm's length negotiations between
the respective managements of the Texas Company and the Delaware Company.
13. The Delaware Company and its subsidiaries will not take, and the
Delaware Company is not aware of any plan or intention of Delaware Company
shareholders to take any position on any federal, state, or local income or
franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code unless otherwise required by a
final determination under Section 1313(a)(1) of the Code or by comparable
provisions or state or local income or franchise tax law.
14. Neither the Delaware Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualified for tax free treatment under Section 355 of
the Code (a) in the two years prior to the date of the Agreement or (b) in
a distribution that could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
We understand that Bracewell & Patterson, L.L.P. and Morgan, Lewis & Bockius
LLP will rely on this letter in rendering their respective opinions as to the
material federal income tax consequences of the Merger and we will promptly and
timely inform them if, after signing this letter, we have reason to believe
that any of the facts described in the Agreement, the Joint Proxy Statement or
the Registration Statement or any of the representations made in this letter
are untrue, incorrect or incomplete in any respect.
Truthfully yours,
By:__________________________________
Title:_______________________________
Building One Services
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<PAGE>
EXHIBIT 5.17(c)-2
Group Maintenance America Corp. Officer's Certificate
MLB Draft November 1, 1999
Privileged and Confidential
OFFICER'S CERTIFICATE
OF
GROUP MAINTENANCE AMERICA CORP.
, 1999
Bracewell & Patterson, L.L.P.
2900 South Tower
Pennzoil Place
Houston, Texas
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Ladies and Gentlemen:
In connection with the opinions to be delivered regarding the material
federal income tax consequences of the proposed merger (the "Merger") between
Group Maintenance America Corp., a Texas corporation (the "Texas Company"),
and Building One Services Corporation, a Delaware corporation (the "Delaware
Company"), pursuant to Section 6.1(h) of the Agreement and Plan of Merger (the
"Agreement") dated as of [ ], 1999 between the Texas Company and the
Delaware Company, the undersigned officer of the Texas Company hereby
certifies and represents as to the Texas Company that the facts relating to
the Agreement and as described in the Joint Proxy Statement of the Texas
Company and the Delaware Company, dated , 1999 (the "Joint Proxy
Statement") and in the registration statement of the Texas Company dated
, 1999 (the "Registration Statement") are true, correct and complete in
all respects as of the date hereof and will be true, correct and complete in
all respects at the effective time of the Merger and:
1. The facts relating to the contemplated merger of the Delaware Company
with and into the Texas Company (the "Merger") as described in the Joint
Proxy Statement and in Section 1 of the Agreement are true, accurate and
complete in all material respects insofar as they relate to the Texas
Company and/or any person related to the Texas Company.
2. The Merger will be consummated in accordance with the terms of the
Agreement and none of the material conditions to the Texas Company's
performance of its obligations under the Agreement will be waived or
modified and the exchange of Preferred Stock will be consummated in
accordance with the Subscription and Exchange Agreement dated , 1999
among the Texas Company and BOSS II, LLC.
3. The fair market value of the Texas Company stock and other
consideration received by each Delaware Company shareholder will be
approximately equal to the fair market value of the Delaware Company stock
surrendered in the exchange.
4. Neither the Texas Company, nor any person related to the Texas
Company within the meaning of Treas. Reg. (S)1.368-1(e)(3), taking into
account Treas. Reg. (S)(S)1.368-1(e)(4) and (5), has any plan or intention
to, or will, redeem or otherwise acquire any shares of stock of the Texas
Company issued in connection with the Merger, or has any plan or intention
to cause any other person or entity to acquire any such stock.
5. The Texas Company has no plan or intention to reacquire any of its
stock issued in the transaction.
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<PAGE>
6. The Texas Company has no plan or intention to sell or otherwise
dispose of any of the assets of the Delaware Company acquired in the
transaction, except for dispositions made in the ordinary course of
business or transfers described in section 368(a)(2)(C) of the Internal
Revenue Code.
7. Following the transaction, the Texas Company will continue the
historic business of the Delaware Company or use a significant portion of
the Delaware Company's historic business assets in a business.
8. Except as set forth in Section 7.4 and 5.10 of the Agreement, the
Texas Company, the Delaware Company, and the shareholders of Delaware
Company will pay their respective expenses, if any, incurred in connection
with the transaction.
9. There is no intercorporate indebtedness existing between the Texas
Company and the Delaware Company that was issued, acquired, or will be
settled at a discount.
10. The Texas Company is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
11. The Texas Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(A) of the
Internal Revenue Code.
12. The fair market value of the assets of the Delaware Company
transferred to the Texas Company will equal or exceed the sum of the
liabilities assumed by the Texas Company plus the amount of liabilities, if
any, to which the transferred assets are subject.
13. The payment of cash in lieu of fractional shares of Texas Company
stock is solely for the purpose of avoiding the expense and inconvenience
to the Texas Company of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the transaction to the Delaware Company shareholders
instead of issuing fractional shares of Texas Company stock will not exceed
one percent of the total consideration that will be issued in the
transaction to the Delaware Company shareholders in exchange for their
shares of Delaware Company stock. The fractional share interests of each
Delaware Company shareholder will be aggregated, and no Delaware Company
shareholder will receive cash in an amount greater to or greater than the
value of one full share of Texas Company stock.
14. None of the compensation received by any shareholder-employees of
the Delaware Company will be separate consideration for, or allocable to,
any of their shares of Delaware Company stock; none of the shares of Texas
Company stock received by any shareholder-employees will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
15. The ratio of exchange of Delaware Company stock for Texas Company
stock was agreed upon as the result of arms length negotiations between the
respective managements of the Texas Company and the Delaware Company.
16. The Texas Company and its subsidiaries will not take, and the Texas
Company is not aware of any plan or intention of Texas Company shareholders
to take any position on any federal, state, or local income or franchise
tax return, or take any other tax reporting position, that is inconsistent
with the treatment of the Merger as a reorganization within the meaning of
Section 368(a) of the Code unless otherwise required by a final
determination under Section 1313(a)(1) of the Code or by comparable
provisions or state or local income or franchise tax law.
17. Neither the Texas Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualified for tax-free treatment under Section 355 of
the Code (a) in the two years prior to the date of the Agreement or (b) in
a distribution that could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
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<PAGE>
We understand that Bracewell & Patterson, L.L.P. and Morgan, Lewis & Bockius
LLP will rely on this letter in rendering their respective opinions as to the
material federal income tax consequences of the Merger and we will promptly and
timely inform them if, after signing this letter, we have reason to believe
that any of the facts described in the Agreement, the Joint Proxy Statement or
the Registration Statement or any of the representations made in this letter
are untrue, incorrect or incomplete in any respect.
Truthfully yours,
By:__________________________________
Title:_______________________________
Group Maintenance America Corp.
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<PAGE>
EXHIBIT 5.8(c)
CERTAIN TEXAS COMPANY OPTION HOLDERS
<TABLE>
<CAPTION>
Grant Options Option
Option Holder Date Granted Price
------------- -------- ------- ------
<S> <C> <C> <C>
Art Goetze............................................ 10/24/96 14,000 3.0775
Arthur Goetze......................................... 11/13/97* 832 3.0775
James Patrick Millinor................................ 10/24/96 50,000 3.0775
James Patrick Millinor................................ 11/13/97* 6,605 3.0775
Daniel Kipp........................................... 02/05/97 10,000 3.0775
Daniel Kipp........................................... 04/28/97 3,600 3.0775
James Norris.......................................... 06/01/97 28,000 3.0775
Chester Jachimiec..................................... 10/24/96 46,000 3.0775
Chester Jachimiec..................................... 11/13/97* 4,403 3.0775
Richard Jeffrey....................................... 11/13/97 941 3.0775
Barry Harbour......................................... 12/01/96 10,000 3.0775
Barry Harbour......................................... 11/13/97 12,590 3.0775
Randolph Bryant....................................... 04/28/97 20,000 3.0775
Darren Miller......................................... 10/24/96 28,000 3.0775
Darren Miller......................................... 11/13/97* 2,006 3.0775
Cynthia Schmidt....................................... 12/31/96 1,200 3.0775
Brenda Diane Bandiga.................................. 12/31/96 2,400 3.0775
Russell Bay........................................... 06/01/97 6,800 3.0775
Donald Luke........................................... 08/01/97 14,469 3.0775
Richard Rouse......................................... 10/24/96 40,000 3.0775
Richard Rouse......................................... 11/13/97* 4,256 3.0775
Richard Reiling....................................... 10/24/96 40,000 3.0775
Richard Reiling....................................... 11/13/97* 6,898 3.0775
</TABLE>
- --------
*Grant relates back to 10/24/96
A-54
<PAGE>
EXHIBIT 6.1(h)(i)
Group Maintenance America Corp. Opinion
B&P Draft November 1, 1999
Privileged and Confidential
November [ ], 1999
[ ]
Dear Ladies and Gentlemen:
Pursuant to an Agreement and Plan of Merger dated as of [ ], 1999 (the
"Agreement") between Group Maintenance America Corp., a Texas corporation (the
"Texas Company") and Building One Services Corporation, a Delaware corporation
(the "Delaware Company" and together with the Texas Company, the "Companies"),
the Delaware Company will merge with and into the Texas Company and the
separate corporate existence of the Delaware Company shall thereupon cease,
with the Texas Company being the surviving corporation of the merger (the
"Merger"). Defined terms used herein and not otherwise defined shall have the
meanings ascribed to such term in the Agreement.
We have acted as counsel to the Texas Company in connection with the Merger
and in that connection you have requested our opinion regarding the material
federal income tax consequences of the Merger to holders of shares of the Texas
and Delaware Companies' Common Stock and to the Companies. Our opinion only
addresses the federal income tax consequences of the Merger to holders of
Delaware Company Common Stock that hold their shares as capital assets and does
not address all aspects of federal income taxation that may be important to
such holders in light of their particular circumstances. Further, our opinion
does not address all aspects of federal income taxation that may be applicable
to certain holders subject to special rules, such as: (i) holders who are not
United States persons; (ii) financial institutions; (iii) tax-exempt
organizations; (iv) insurance companies; (v) dealers or brokers in securities;
(vi) holders who held their Delaware Company or Texas Company stock as part of
a hedge, appreciated financial position, straddle, or conversion transaction;
or (vii) holders who acquired their Delaware Company or Texas Company stock
pursuant to the exercise of employee stock options or otherwise as
compensation. In rendering our opinion, we have examined the Agreement, the
Registration Statement, the Joint Proxy Statement, certain factual
representations contained in Officers Certificates of the Delaware Company and
the Texas Company dated , 1999 which have been delivered to us for
purposes of this opinion (the "Officer's Certificates") and such other
documents and corporate records as we have deemed necessary or appropriate for
purposes of this opinion. In addition, we have assumed: (i) the Merger will be
consummated in the manner contemplated in the Registration Statement and the
Joint Proxy Statement and in accordance with the provisions of the Agreement,
(ii) the statements concerning the Merger set forth in the Registration
Statement and the Joint Proxy Statement are accurate and complete, (iii) the
exchange of Preferred Stock will be consummated in accordance with the
Subscription and Exchange Agreement dated , 1999 among the Texas Company
and BOSS II, LLC (the "Exchange Agreement"), (iv) the representations in the
Officer's Certificates dated as of , 1999 and confirmed as of today's date
are accurate and complete, and (v) any representations in the Officer's
Certificates that are qualified by the phrases "to the best knowledge," "has no
knowledge," or similar phrases are, in each case, correct without such
qualification.
Under current law, and on the basis and subject to (i) the accuracy of the
statements and representations contained in the materials referred to above and
the above assumptions and (ii) our considerations of such other matters as we
have deemed necessary, our opinion of the material federal income tax
consequences to holders of Texas and Delaware Company Common Stock and the
Companies is as follows:
(A) the merger of the Delaware Company with and into the Texas Company
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, (the "Code"), and the Texas Company and the Delaware Company will
each be a party to the reorganization within the meaning of Section 368(b)
of the Code;
A-55
<PAGE>
(B) no gain or loss will be recognized for federal income tax purposes
by the Texas Company, the Delaware Company, holders of Texas Company Common
Stock, or holders of Delaware Company Common Stock as a result of the
Merger, except with respect to cash received in lieu of fractional shares
by holders of Delaware Company Common Stock and with respect to cash
received by holders of Texas Company Common Stock as a result of the
exchange of their shares pursuant to the Exchange Agreement.
(C) the aggregate tax basis of shares the Texas Company Common Stock
received by a holder of the Delaware Company Common Stock in the Merger
will be the same as such holder's aggregate tax basis of the Delaware
Company Common Stock surrendered in the Merger, reduced by any such tax
basis allocable to fractional shares of the Texas Company Common Stock for
which cash is received in lieu of such fractional share;
(D) the holding period of Texas Company Common Stock received by former
Delaware Company shareholders in the Merger will include the period during
which such shareholder held the Delaware Company Common Stock exchanged in
the Merger if such shareholder held such Delaware Company Common Stock as a
capital asset; and
(E) a holder of Delaware Company Common Stock who receives cash in lieu
of fractional shares of the Texas Company Common Stock in the Merger will
recognize gain or loss measured by the difference between the amount of
cash received and the portion of such holder's aggregate tax basis
allocable to such fractional share. Any such gain or loss generally will be
capital gain or loss if the Delaware Company Common Stock surrendered in
the Merger was held as a capital asset, and will be long-term capital gain
or loss if such Delaware Company Common Stock has been held for more than
one year as of the date of the closing of the Merger.
You have not requested, and we do not express, an opinion concerning any
other tax consequences of the Merger.
Our opinion expresses our views only as to the U.S. federal income tax laws
in effect as of the date hereof. It represents our best legal judgment as to
the matters addressed in our opinion, but is not binding on the Internal
Revenue Service or the courts. Accordingly, no assurance can be given that our
opinion will be respected by the Internal Revenue Service or, if contested,
would be sustained by a court. Furthermore, the authorities upon which we rely
are subject to change either prospectively or retroactively, and any change in
such authorities or variation or difference in the facts from those on which we
rely and assume as correct, as set forth above, might affect the conclusion
stated. This opinion is expressed as of the date hereof, and we are under no
obligation to supplement or revise our opinion to reflect any changes
(including changes that have retroactive effect) (i) in applicable law, or (ii)
in any information, document, corporate record, covenant, statement,
representation, or assumption stated therein that becomes untrue or incorrect.
Our opinion is not to be used, circulated, quoted or otherwise referred to
for any purpose without our express written permission. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to us in the section captioned [ ] in the Joint Proxy
Statement constituting a part of the Registration Statement. In giving this
consent we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
Bracewell & Patterson, L.L.P.
A-56
<PAGE>
EXHIBIT 6.1(h)(ii)
Building One Services Opinion
MLB Draft November 1, 1999
Privileged and Confidential
October [ ], 1999
[ ]
Dear Ladies and Gentlemen:
Pursuant to an Agreement and Plan of Merger dated as of [ ], 1999 (the
"Agreement") between Group Maintenance America Corp., a Texas corporation (the
"Texas Company") and Building One Services Corporation, a Delaware corporation
(the "Delaware Company" and together with the Texas Company, the "Companies"),
the Delaware Company will merge with and into the Texas Company and the
separate corporate existence of the Delaware Company shall thereupon cease,
with the Texas Company being the surviving corporation of the merger (the
"Merger"). Defined terms used herein and not otherwise defined shall have the
meanings ascribed to such term in the Agreement.
We have acted as counsel to the Delaware Company in connection with the
Merger and in that connection you have requested our opinion regarding the
material federal income tax consequences of the Merger to holders of shares of
the Texas and Delaware Companies' Common Stock and to the Companies. Our
opinion only addresses the federal income tax consequences of the Merger to
holders of Delaware Company Common Stock that hold their shares as capital
assets and does not address all aspects of federal income taxation that may be
important to such holders in light of their particular circumstances. Further,
our opinion does not address all aspects of federal income taxation that may be
applicable to certain holders subject to special rules, such as: (i) holders
who are not United States persons; (ii) financial institutions; (iii) tax-
exempt organizations; (iv) insurance companies; (v) dealers or brokers in
securities; (vi) holders who held their Delaware Company or Texas Company stock
as part of a hedge, appreciated financial position, straddle, or conversion
transaction; or (vii) holders who acquired their Delaware Company or Texas
Company stock pursuant to the exercise of employee stock options or otherwise
as compensation. In rendering our opinion, we have examined the Agreement, the
Registration Statement, the Joint Proxy Statement, certain factual
representations contained in Officer's Certificates of the Delaware Company and
the Texas Company dated , 1999 which have been delivered to us for
purposes of this opinion (the "Officer's Certificates") and such other
documents and corporate records as we have deemed necessary or appropriate for
purposes of this opinion. In addition, we have assumed: (i) the Merger will be
consummated in the manner contemplated in the Registration Statement and the
Joint Proxy Statement and in accordance with the provisions of the Agreement,
(ii) the statements concerning the Merger set forth in the Registration
Statement and the Joint Proxy Statement are accurate and complete, (iii) the
exchange of Preferred Stock will be consummated in accordance with the
Subscription and Exchange Agreement dated , 1999 among the Texas Company
and BOSS II, LLC (the "Exchange Agreement"), (iv) the representations in the
Officer's Certificates dated as of , 1999 and confirmed as of today's date
are accurate and complete, and (v) any representations in the Officer's
Certificates that are qualified by the phrases "to the best knowledge," "has no
knowledge," or similar phrases are, in each case, correct without such
qualification.
Under current law, and on the basis and subject to (i) the accuracy of the
statements and representations contained in the materials referred to above and
the above assumptions and (ii) our considerations of such other matters as we
have deemed necessary, our opinion of the material federal income tax
consequences to holders of Texas and Delaware Company Common Stock and the
Companies is as follows:
(A) the merger of the Delaware Company with and into the Texas Company
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, (the "Code"), and the Texas Company and the Delaware Company will
each be a party to the reorganization within the meaning of Section 368(b)
of the Code;
A-57
<PAGE>
(B) no gain or loss will be recognized for federal income tax purposes
by the Texas Company, the Delaware Company, holders of Texas Company Common
Stock, or holders of Delaware Company Common Stock as a result of the
Merger, except with respect to cash received in lieu of fractional shares
by holders of Delaware Company Common Stock and with respect to cash
received by holders of Texas Company Common Stock as a result of the
exchange of their shares pursuant to the Exchange Agreement.
(C) the aggregate tax basis of shares the Texas Company Common Stock
received by a holder of the Delaware Company Common Stock in the Merger
will be the same as such holder's aggregate tax basis of the Delaware
Company Common Stock surrendered in the Merger, reduced by any such tax
basis allocable to fractional shares of the Texas Company Common Stock for
which cash is received in lieu of such fractional share;
(D) the holding period of Texas Company Common Stock received by former
Delaware Company shareholders in the Merger will include the period during
which such shareholder held the Delaware Company Common Stock exchanged in
the Merger if such shareholder held such Delaware Company Common Stock as a
capital asset; and
(E) a holder of Delaware Company Common Stock who receives cash in lieu
of fractional shares of the Texas Company Common Stock in the Merger will
recognize gain or loss measured by the difference between the amount of
cash received and the portion of such holder's aggregate tax basis
allocable to such fractional share. Any such gain or loss generally will be
capital gain or loss if the Delaware Company Common Stock surrendered in
the Merger was held as a capital asset, and will be long-term capital gain
or loss if such Delaware Company Common Stock has been held for more than
one year as of the date of the closing of the Merger.
You have not requested, and we do not express, an opinion concerning any
other tax consequences of the Merger.
Our opinion expresses our views only as to the U.S. federal income tax laws
in effect as of the date hereof. It represents our best legal judgment as to
the matters addressed in our opinion, but is not binding on the Internal
Revenue Service or the courts. Accordingly, no assurance can be given that our
opinion will be respected by the Internal Revenue Service or, if contested,
would be sustained by a court. Furthermore, the authorities upon which we rely
are subject to change either prospectively or retroactively, and any change in
such authorities or variation or difference in the facts from those on which we
rely and assume as correct, as set forth above, might affect the conclusion
stated. This opinion is expressed as of the date hereof, and we are under no
obligation to supplement or revise our opinion to reflect any changes
(including changes that have retroactive effect) (i) in applicable law, or (ii)
in any information, document, corporate record, covenant, statement,
representation, or assumption stated therein that becomes untrue or incorrect.
Our opinion is not to be used, circulated, quoted or otherwise referred to
for any purpose without our express written permission. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to us in the section captioned [ ] in the Joint Proxy
Statement constituting a part of the Registration Statement. In giving this
consent we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
Morgan, Lewis & Bockius L.L.P.
A-58
<PAGE>
ANNEX B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GROUP MAINTENANCE AMERICA CORP.
ARTICLE I
Group Maintenance America Corp., pursuant to the provisions of Article 4.07
of the Texas Business Corporation Act ("TBCA"), hereby adopts restated articles
of incorporation which accurately copy the articles of incorporation and all
amendments thereto that are in effect to date and as further amended by such
restated articles of incorporation as hereinafter set forth and which contain
no other change in any provision thereof.
ARTICLE II
The articles of incorporation of the corporation are amended by the restated
articles of incorporation as follows:
1.Article I is amended in its entirety to be as follows:
"ARTICLE I
Name
The name of the Corporation is [ ]."
2.The first paragraph of Article IV is amended in its entirety to be as
follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issues is [ ] which shall be
divided into (a) [ ] shares of common stock having a par value of
$.001 per share ("Common Stock") and (b) [ ] shares of preferred
stock having a par value of $.001 per share ("Preferred Stock")."
3.Article VI is amended in its entirety to be as follows:
ARTICLE VI
Registered Office and Agent
The street address of the registered office of the Corporation is 8 Greenway
Plaza, Suite 1500, Houston, Texas 77046. The name of the registered agent of
the Corporation at such address is J. Patrick Millinor, Jr."
3.Article VII is amended in its entirety to be as follows:
"ARTICLE VII
Board of Directors
1. The property, affairs and business of the Corporation shall be managed by
or under the direction of the Corporation's board of directors. Subject to the
rights of the holders of any series of Preferred Stock, the number of directors
constituting the board of directors of the Corporation shall not be less than
nine (9) nor more than eighteen (18). The number of directors constituting the
initial board of directors shall be ten (13). Subject to the rights of the
holders of any series of Preferred Stock, the number of directors shall be
determined from time to time hereafter exclusively pursuant to a resolution
adopted by the affirmative vote of a majority of the entire board of directors.
For purposes of these Restated Articles of Incorporation, the "entire board of
directors" shall mean the number of directors that would be in office if there
were no vacancies nor any
B-1
<PAGE>
unfilled newly created directorships. Directors need not be residents of the
State of Texas or shareholders of the Corporation. Until the third annual
meeting of shareholders following effectiveness of these Restated Articles of
Incorporation under the TBCA, the directors shall be divided into three
classes, consisting initially of four (4), three (3), and three (3) directors
and designated Class I, Class II and Class III, respectively. Each director
elected or appointed prior to the effectiveness of these Restated Articles of
Incorporation under the TBCA shall serve for their full term, such that the
term of each Class I director shall end at the first succeeding annual meeting
of shareholders following effectiveness of these Restated Articles of
Incorporation, the term of each Class II director shall end at the second
succeeding annual meeting of shareholders following effectiveness of these
Restated Articles of Incorporation, and the term of each Class III director
shall end at the third succeeding annual meeting of shareholders following
effectiveness of these Restated Articles of Incorporation. The term of each
director elected after the effectiveness of these Restated Articles of
Incorporation whether at an annual meeting or to fill a vacancy in the board of
directors arising for any reason, including any increase in the size of the
board of directors, shall end at the first annual meeting following his or her
election. Commencing with the third annual meeting of shareholders following
the effectiveness of these Restated Articles of Incorporation, the foregoing
classification of the board of directors shall cease, and all directors shall
be of one class and serve for a term ending at the annual meeting following the
annual meeting at which the director was elected. In no case shall a decrease
in the number of directors shorten the term of any incumbent director. Each
director shall hold office after the annual meeting at which his or her terms
is scheduled to end until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, disqualification or
removal from office in accordance with the TBCA. Any newly created directorship
resulting from an increase in the number of directors may be filled by a
majority of the board of directors then in office, provided that a quorum is
present, and any other vacancy on the board of directors may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director.
2. Notwithstanding anything else contained in these Restated Articles of
Incorporation, whenever holders of any one or more series of Preferred Stock
shall have the right, voting separately by class or series, to elect directors
at any annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions applicable to such class or series established pursuant to
Paragraph 1 of Article IV hereof. Directors so elected shall not be divided
into classes and shall be elected by such holders annually unless expressly
provided otherwise by the terms of such class or series of Preferred Stock and,
during the prescribed terms of office of those directors, the board of
directors shall consist of a number of directors equal to the number of those
directors plus the number of directors determined as provided in Section 1 of
this Article VII.
3. The initial Class I directors shall be [ ], the initial Class II
directors shall be [ ], and the initial Class III directors shall be
[ ].
4. No director of the Corporation shall be removed from office as a director
by vote or other action of the shareholders or otherwise except for cause."
4. Article XII in the prior article is hereby deleted in its entirety.
5. Article XIII is amended in its entirety to be as follows:
"ARTICLE XII
Provisions Applicable to Business Combinations
1. Vote Required for Certain Business Combinations. In addition to any
affirmative vote required by law or these Articles of Incorporation or the
Bylaws of the Corporation, and except as otherwise expressly provided in
Section 2 of this Article XII, a Business Combination (as hereinafter defined)
with, or proposed by or on behalf of, any Interested Shareholder (as
hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of
any Interested Shareholder or any person who thereafter would be an Affiliate
or Associate of such
B-2
<PAGE>
Interested Shareholder, shall require the affirmative vote of not less than
eighty percent (80%) of the votes entitled to be cast by the holders of all of
the then outstanding shares of Voting Stock (as hereinafter defined), voting
together as a single class, and the affirmative vote of not less than a
majority of the votes entitled to be cast by the Voting Stock beneficially
owned by persons other than such Interested Shareholder. Each share of Voting
Stock shall have the number of votes granted to it in, or duly fixed by the
board of directors pursuant to, Article IV of these Articles of Incorporation.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage or separate class vote may be
specified, by law, or in any agreement of the Corporation with any national
securities exchange or otherwise.
2. Exceptions to Higher Vote Requirement. The provisions of Section 3 of
this Article XII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote, if any, as is required by law or by any other provision of these Articles
of Incorporation or the Bylaws of the Corporation, or any agreement with any
national securities exchange, if all of the conditions specified in any of the
following Paragraphs (a), (b) or (c) are met or, in the case of a Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph (a) is met:
(a) The Business Combination shall have been approved either
specifically, or as a transaction which is within a series of related
transactions described with reasonable specificity, by at least an eighty
percent (80%) vote of the Continuing Directors (as hereinafter defined),
who shall at the time constitute at least a majority of the Whole Board (as
hereinafter defined) (whether or not such approval occurs prior to or
subsequent to the acquisition of, or announcement or public disclosure of
the intention to acquire, beneficial ownership of the Voting Stock that
caused the Interested Shareholder to become a Interested Shareholder).
(b) All of the following conditions shall have been met:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received
per share by holders of Common Stock of the Corporation in such
Business Combination shall be at least equal to the higher amount
determined under clauses (A) and (B) below:
(A) (If applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
("Highest Purchase Price") paid by or on behalf of the Interested
Shareholder for any share of Common Stock in connection with the
acquisition by the Interested Shareholder of beneficial ownership of
shares of Common Stock,
(x) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the
"Announcement Date"), or
(y) in the transaction in which it became a Interested
Shareholder,
whichever is higher, in either case, as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to the Common Stock; provided that if the Business
Combination is effected more than 180 days after the last date upon
which such Interested Shareholder paid the Highest Purchase Price,
then the consideration to be received by the shareholders shall be
increased by Interest (as hereinafter defined) with respect to the
period from the date the Interested Shareholder paid the applicable
Highest Purchase Price to the effective date of the Business
Combination ("Adjustment Period").
(B) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date (the "Determination Date") on which
the Interested Shareholder became a Interested Shareholder,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to the
Common Stock.
(ii) The aggregate amount of cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of
consideration other than cash to be received per share
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<PAGE>
by holders of shares of any class or series of outstanding Capital
Stock, other than Common Stock shall be at least equal to the highest
amount determined under clauses (A), (B) and (C) below:
(A) (If applicable) the Highest Purchase Price paid by or on
behalf of the Interested Shareholder for any share of such class or
series of Capital Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of shares of such
class or series of Capital Stock,
(x) within the two-year period immediately prior to the
Announcement Date, or
(y) in the transaction in which it became a Interested
Shareholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock; provided that if
the Business Combination is effected more than 180 days after the
last date upon which such Interested Shareholder paid the Highest
Purchase Price, then the consideration to be received by the
shareholders shall be increased by Interest with respect to the
Adjustment Period.
(B) The Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; and
(C) (If applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Capital Stock
would be entitled, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class
or series of Capital Stock, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation regardless of whether the Business Combination to be
consummated constitutes such an event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on behalf of the Interested
Shareholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock.
If the consideration so paid for shares of any class or series of
Capital Stock varies as to form, the form of consideration for such
class or series of Capital Stock shall be either cash or the form used
to acquire beneficial ownership of the largest number of shares of such
class or series of Capital Stock previously acquired by the Interested
Shareholder.
(iv) After the Determination Date and prior to the consummation of
such Business Combination:
(A) Except as approved by a majority of the Continuing Directors,
there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock;
(B) There shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect
any stock split, stock divided or subdivision of the Common Stock of
the Corporation), except as approved by a majority of the Continuing
Directors;
(C) There shall have been an increase in the annual rate of
dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of common
stock of the Corporation, unless the failure to increase such annual
rate is approved by a majority of the Continuing Directors; and
(D) Neither such Interested Shareholder nor any of its Affiliates
shall have become the beneficial owner of any additional shares of
Capital Stock or securities convertible into Capital Stock except as
part of the transaction that results in such Interested Shareholder
becoming a Interested Shareholder and except in transaction that,
after giving effect thereto, would not result
B-4
<PAGE>
in any increase in the percentage beneficial ownership of the
Interested Shareholder or any of its Affiliates of any class or
series of Capital Stock.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") (or any subsequent
provisions replacing such Exchange Act, rules or regulations) shall be
mailed to all shareholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant
to the Exchange Act or subsequent provisions).
(vi) Such Interested Shareholder shall not have made any major
change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
(vii) The Interested Shareholder and any of its Affiliates shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advantages,
guarantees, pledges or other financial assistance or any tax credits or
other tax advances provided by the Corporation or any Subsidiary,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(a) The Business Combination shall be allowed, permitted or required
under the terms of any Statement of Designation governing any Preferred
Stock of the Corporation.
3. Certain Definitions. The following definitions shall apply with respect
to this Article XII:
(a) The term "Business Combination" shall mean:
(i) Any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (A) any Interested Shareholder or (B) any
other company (whether or not itself a Interested Shareholder) which
is, or after such merger or consolidation would be, an Affiliate or
Associate of a Interested Shareholder which, in any case, involves the
issuance, redemption, cancellation, exchange or conversion of shares,
obligations, evidences of ownership, rights to purchase securities or
other securities (in one transaction or a series of transactions)
having an aggregate Fair Market Value (as hereinafter defined) of more
than twenty percent (20%) of the Total Assets of the Corporation (as
hereinafter defined); or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), including
without limitation any other security device, to or with any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder
of any assets, securities or commitments of the Corporation or any
Subsidiary (as hereinafter defined) having an aggregate Fair Market
Value of more than twenty percent (20%) of the Total Assets of the
Corporation; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder in exchange for
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value of more than twenty percent (20%) of the
Total Assets of the Corporation; or
(iv) the adoption of any plan or proposal for the liquidation,
spinoff, splitoff, splitup or dissolution of the Corporation proposed
by or on behalf of any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
any Interested Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
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shares of any class or series of equity or convertible securities of
the Corporation or any Subsidiary which is beneficially owned (as
hereinafter defined) by an Interested Shareholder or any Affiliate of
any Interested Shareholder by more than one percent, except for
transactions described in subparagraphs (i), (ii) or (iii) of this
Paragraph 3(a) which involve assets, cash, securities or other property
of the Corporation with an aggregate Fair Market Value not in excess of
twenty percent (20%) of the Total Assets of the Corporation; or
(vi) any agreement, contract or other arrangement providing for any
of the transactions described in this definition of Business
Combination.
(b) The term "Capital Stock" shall mean all capital stock of the
Corporation now or hereafter authorized to be issued from time to time by
the Corporation, and the term "Voting Stock" shall mean shares of Capital
Stock which are entitled to vote generally in the election of directors.
(c) The term "Total Assets of the Corporation" means the total assets of
the Corporation, as reflected on the most recent consolidated balance sheet
of the Corporation at the time the shareholders of the Corporation would be
required to approve or adopt the transaction in question.
(d) The term "person" shall mean any individual, firm, company,
corporation, partnership, limited liability company, or other entity and
shall include any "group" comprised of any person (as the term "group" is
defined in Section 13(d)(3) of the Exchange Act).
(e) "Interested Shareholder" means any person (other than the
Corporation or any Subsidiary) who or which is the beneficial owner (as
hereinafter defined), directly or indirectly, of ten percent or more of the
voting power of the outstanding Voting Stock; provided, however, the term
"Interested Shareholder" shall not include any employee stock ownership or
other employee benefit plan of the Corporation or any Subsidiary, or any
trustee of, or fiduciary with respect to, any such plan when acting in such
capacity.
(f) A person shall be a "beneficial owner" of, or shall "beneficially
own" any Capital Stock (i) which such person or any of its Affiliates or
Associates owns, directly or indirectly; (ii) which such person or any of
its Affiliates or Associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or only after the
passage of any period of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding; or (iii) which are owned, directly
or indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is a
Interested Shareholder pursuant to Paragraph (e) of this Section 3, the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph (f) of Section 3, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any arrangement or
understanding, or upon exercise of conversion rights, warrants, or options,
or otherwise.
(g) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on April 1, 1997.
(h) The term "Subsidiary" means any company of which a majority of any
class of Equity Security is beneficially owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition
of Interested Shareholder set forth in Paragraph (e) of this Section 3, the
term "Subsidiary" shall mean only a company of which a majority of each
class of Equity Security is beneficially owned by the Corporation.
(i) The term "Continuing Director" means (i) any member of the board of
directors of the Corporation, while such person is a member of the board of
directors, who is not the Interested Shareholder, an Affiliate or Associate
of the Interested Shareholder or a representative of any such person and
who was a member o the board of directors prior to the Determination Date,
and (ii) any successor of
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a Continuing Director, while such successor is a member of the board of
directors, who is not the Interested Shareholder, an Affiliate or Associate
of the Interested Shareholder or a representative of any such person and
who is recommended or elected to succeed the Continuing Director by a
majority of Continuing Directors.
(j) The term "Fair Market Value" means (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding
the date in question of a share of such stock on the principal United
States securities exchange registered under the Exchange Act on which such
stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during
the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good faith; and
(ii) in the case of property other than stock, the fair market value of
such property on the date in question as determined by a majority of the
Continuing Director in good faith.
(k) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall
include the shares of Common Stock of the Corporation and/or the shares of
any other class or series of Capital Stock retained by the holders of such
shares.
(l) The term "Interest" means interest with respect to the applicable
Highest Purchase Price accrued daily at an annual rate equal to 110% of the
arithmetic average of the weekly per annum market discount rates for 3-
month U.S. Treasury bills during the Adjustment Period, as published by the
Board of Governors of the Federal Reserve System; provided, however, that
in respect of any portion of the Adjustment Period during which the
Corporation cannot determine Interest in the foregoing manner, Interest
shall be deemed to be ten percent (10%); and provided further that any such
amount shall be reduced, but not below zero, by the aggregate of the
regular quarterly cash dividends paid per share of Common Stock during the
Adjustment Period.
(m) The term "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Exchange Act, as in effect on April 1,
1997.
(n) "Whole Board" means the total number of directors which this
Corporation would have if there were no vacancies.
2. A majority of the Whole Board, but only if a majority of the Whole Board
shall then consist of Continuing Directors or, if a majority of the Whole Board
shall not then consist of Continuing Directors, a majority of the then
Continuing Directors, shall have the power and duty to determine, on the basis
of information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article XII, including, without limitation, (i)
whether a person is an Interested Shareholder, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another; (iv) whether the applicable conditions set
forth in Paragraph (b) of Section 2 have been met with respect to any Business
Combination, (v) the Fair Market Value of Stock or other property in accordance
with Paragraph (j) of Section 3 of this Article XII, and (vi) whether the
securities which are the subject of any Business Combination referred to in
Paragraph (a)(i) of Section 3, or the assets, securities or commitments which
are the subject of any Business Combination referred to in Paragraph (a)(ii) of
Section 3, or the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business Combination
referred to in Paragraph (a)(iii) of Section 3 have, in any such case, an
aggregate Fair Market Value of more than twenty percent (20%) of the Total
Assets of the Corporation.
3. A majority of the Whole Board shall have the right to demand, but only if
a majority of the Whole Board shall then consist of Continuing Directors, or,
if a majority of the Whole Board shall not then consist of Continuing
Directors, a majority of the then Continuing Directors shall have the right to
demand, that any person who it is reasonably believed is an Interested
Shareholder (or holds of record shares of Voting Stock
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beneficially owned by any Interested Shareholder) supply the Corporation with
complete information as to (i) the record owner(s) of all shares beneficially
owned by such person who it is reasonably believed is an Interested
Shareholder, (ii) the number of, and class or series of, shares beneficially
owned by such person who it is reasonably believed is an Interested
Shareholder and held of record by each such record owner and the number(s) of
the stock certificate(s) evidencing such shares, and (iii) any other factual
matter relating to the applicability or effect of this Article XII, as may be
reasonably requested of such person, and such person shall furnish such
information within ten (10) days after receipt of such demand.
4. Nothing contained in this Article XII shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
5. Notwithstanding any other provisions of these Articles of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the board of directors and the
holders of any particular class or series of the Voting Stock required by law
or these Articles of Incorporation, to alter, amend or repeal this Article
XII, as an additional requirement for such action, either (i) the Continuing
Directors who shall at the time shall constitute at least a majority of the
Whole Board, shall expressly approve such action by at least an eighty percent
(80%) vote of such Continuing Directors; or (ii) such action shall be adopted
or approved by the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class."
5. Article XIV is amended in its entirety to be as follows:
"ARTICLE XIII.
Certain Acquisitions of Voting Stock by the Corporation
1. The Corporation shall not acquire, directly or indirectly, any Voting
Stock, by the purchase, exchange or otherwise from any Related Person (as
hereinafter defined) or any of its Affiliates or Associates.
2. This article shall not be applicable to any acquisition of Voting Stock
(i) pursuant to a Tender Offer made to all holders of any class of Voting
Stock on the same price, terms and conditions and, if for less than all of the
Voting Stock, subject to pro rata acceptance (except as to holders of fewer
than 100 shares), (ii) in compliance with Rule 10b-18 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in
effect at the date of adoption of this article, (iii) for a total
consideration per share, including payment for legal fees, investment banking
fees, brokerage fees and related costs and expenses of the holder in acquiring
such Voting Stock, not in excess of the Fair Market Value per share,
determined as of the Acquisition Date, or (iv) pursuant to the terms of the
Statement of Designation for any series of Preferred Stock.
3. The term "Acquisition Date" means the date on which the Related Person
became a Related Person.
4. The term "Related Person" means any person (other than the Corporation
or any Subsidiary) who or which is the beneficial owner directly or
indirectly, of five percent or more of the voting power of the then
outstanding Voting Stock.
5. The term "Tender Offer" means any tender offer for, or request or
invitation for tenders of, Voting Stock, within the meaning of Section
14(d)(1) of the Securities Exchange Act of 1934, as amended, as in effect at
the date of adoption of this article, and any purchase or series of purchases
of Voting Stock at or above then prevailing market prices for such Voting
Stock pursuant to which more than five percent of the outstanding Voting Stock
is acquired in any two-year period.
6. Notwithstanding any other provisions of these Articles of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the board of directors
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and the holders of any particular class or series of the Voting Stock required
by law or these Articles of Incorporation, to alter, amend or repeal this
Article XIII, as an additional requirement for such action, either (i) the
Continuing Directors who shall at the time shall constitute at least a majority
of the Whole Board, shall expressly approve such action by at least an eighty
percent (80%) vote of such Continuing Directors; or (ii) such action shall be
adopted or approved by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class."
ARTICLE III
Each such amendment made by the restated articles of incorporation has been
effected in conformity with the provisions of the Texas Business Corporation
Act and such restated articles of incorporation and each such amendment made by
the restated articles of incorporation were duly adopted at a meeting of the
shareholders of the Corporation, duly called, and held on .
ARTICLE IV
The number of shares outstanding was and the number of shares entitled
to vote on the amendments and restated articles of incorporation was ; the
number of shares voted for such restated articles as so amended was ; and
the number of shares that abstained or did not vote at the meeting of the
shareholders regarding such restated articles as so amended was .
ARTICLE V
The articles of incorporation and all amendments and supplements thereto are
hereby superseded by the following restated articles of incorporation which
accurately copy the entire text thereof and as amended as above set forth:
RESTATED ARTICLES OF INCORPORATION
OF
GROUP MAINTENANCE AMERICA CORP
ARTICLE I
Name
The name of the Corporation is [ ].
ARTICLE II
Duration
The period of the duration of the Corporation is perpetual.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to transact any and
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act (the "TBCA").
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ARTICLE IV
Capital Stock
The total number of shares of all classes of stock which the Corporation
shall have authority to issues is [ ] which shall be divided into (a)
[ ] shares of common stock having a par value of $.001 per share
("Common Stock") and (b) [ ] shares of preferred stock having a par
value of $.001 per share ("Preferred Stock").
A description of the different classes of stock of the Corporation and a
statement of the designations, preferences, limitations and relative rights,
including voting rights of the various classes of stock are as follows:
1. Preferred Stock. The shares of Preferred Stock may be divided into and
issued in series. The board of directors shall have the authority to establish
series of unissued shares of Preferred Stock by fixing and determining the
relative rights and preferences of the shares of any series so established, and
to increase or decrease the number of shares within each such series; provided,
however, that the board of directors may not decrease the number of shares
within a series of Preferred Stock to less than the number of shares within
such series that are then issued. The Preferred Stock of each such series shall
have such designations, preferences, limitations or relative rights, including
voting rights, as shall be set forth in the resolution or resolutions
establishing such series adopted by the board of directors, including, but
without limiting the generality of the foregoing, the following:
(a) the distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, such series, which number (except
where otherwise provided by the board of directors in the resolution
establishing such series) may be increased or decreased (but not below the
number of shares of such series then outstanding) from time to time by like
action of the board of directors;
(b) The rights in respect of dividends, if any, of such series of
Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or any
other series of the same or other class or classes of capital stock of the
Corporation and whether such dividends shall be cumulative or
noncumulative;
(c) The right, if any, of the holders of such series of Preferred Stock
to convert the same into, or exchange the same for, shares of any other
class or classes or of any other series of the same or any other class or
classes of capital stock, obligations, indebtedness, rights to purchase
securities or other securities of the Corporation or other entities,
domestic or foreign, or for other property or for any combination of the
foregoing, and the terms and conditions of such conversion or exchange;
(d) Whether or not shares of such series of Preferred Stock shall be
subject to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, shares of such
series of Preferred Stock may be redeemed;
(e) The rights, if any, of the holders of such series of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding-up of
the Corporation or in the event of any merger or consolidation of or sale
of assets by the Corporation;
(f) The terms of any sinking fund or redemption or repurchase or
purchase account, if any, to be provided for shares of such series of
Preferred Stock;
(g) The voting powers, if any, of the holders of any series of Preferred
Stock generally or with respect to any particular matter, which may be less
than, equal to or greater than one vote per share, and which may, without
limiting the generality of the foregoing, include the right, voting as a
series of Preferred Stock as a class, to elect one or more directors of the
Corporation generally or under such specific circumstances and on such
conditions, as shall be provided in the resolution or resolutions of the
board of directors adopted pursuant hereto, including, without limitation,
in the event there shall have been a default in the payment of dividends on
or redemption of any one or more series of Preferred Stock; and
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(h) Such other powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and
restrictions thereof, as the board of directors shall determine.
2. Common Stock.
(i) Subject to the prior and superior rights of the Preferred Stock, and on
the conditions set forth in Section 1 of this Article or in any resolution of
the board of directors providing for the issuance of any series of Preferred
Stock, and not otherwise, such dividends (payable in cash, stock or otherwise)
as may be determined by the board of directors may be declared and paid on the
Common Stock from time to time out of any funds legally available therefor.
(j) Each holder of Common Stock shall be entitled to one vote for each share
held.
3. Cumulative Voting Denied. Shares of the voting stock of the Corporation
shall not be voted cumulatively.
4. Preemptive Rights. Except as may be established by the board of directors
with respect to any series of Preferred Stock, shares of stock of the
Corporation do not carry preemptive rights.
5. Stock Certificates. There shall be set forth on the face or back of each
certificate for shares of stock of the Corporation a statement that each of the
following is set forth in the articles of incorporation of the Corporation on
file in the Office of the Secretary of State of the State of Texas, and that
the Corporation will furnish a copy of each such statement to the record holder
of the certificate without charge on written request to the Corporation at its
principal place of business or registered office: (i) a statement of the
designations, preferences, and relative rights, including voting rights, of
each class or series of the Corporation's capital stock to the extent that they
have been fixed and determined; (ii) a statement of the authority of the board
of directors to fix and determine the designations, preferences, limitations
and relative rights, including voting rights, of any series; and (iii) a
statement of the extent to which the Corporation has by its articles of
incorporation limited or denied the preemptive right of shareholders to acquire
unissued or treasury shares of the Corporation.
6. Reverse Stock Split. At 5:00 p.m. Houston Time on September 26, 1997 (the
"Effective Date"), each share of the Company's Common Stock, par value $.001
per share, issued and outstanding (the "Old Common Stock") shall automatically
and without any action on the part of the holder thereof be reclassified and
changed into two-fifths of a share of the Company's Common Stock, par value
$.001 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a certificate or
certificates, which immediately prior to the Effective Date represented
outstanding shares of Old Common Stock (the "Old Certificates," whether one or
more), shall be entitled to receive, upon surrender of such Old Certificates to
the Company's exchange agent appointed by the Company (the "Exchange Agent")
for cancellation, a certificate or certificates (the "New Certificates,"
whether one or more) representing the number of whole shares of the New Common
Stock into which and for which the shares of the Old Common Stock formerly
represented by such Old Certificates so surrendered are reclassified under the
terms hereof. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates (and, where applicable,
cash in lieu of fractional shares, as provided below) pursuant to the
provisions hereof. No certificates or scrip representing fractional share
interests in New Common Stock will be issued, and no such fractional share
interest will entitle the holder thereof to vote, or to any rights of a
shareholder of the Company. A holder of Old Certificates shall receive, in lieu
of any fraction of a share of New Common Stock to which the holder would
otherwise be entitled, a cash payment equal to the product of such fraction
multiplied by $16.00. If more than one Old Certificate shall be surrendered at
one time for the account of the same shareholder, the number of full shares of
New Common Stock for which New Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented by the Old
Certificates so surrendered. In the event that the Company's Exchange Agent
determines that a holder of Old Certificates has not tendered to all his
certificates for exchange the Exchange Agent shall carry forward any fractional
share until all certificates of that holder have been presented for exchange
such that payment for fractional shares to any one
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person shall not exceed $16.00. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for exchange are
issued, the Old Certificates so surrendered shall be properly endorsed and
otherwise in proper form for transfer, and the person or persons requesting
such exchange shall affix any requisite stock transfer tax stamps to the Old
Certificates so surrendered, or provide funds for their purchase, or establish
to the satisfaction of the Exchange Agent that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the shares of
the New Common Stock into which and for which the shares of Old Common Stock
are reclassified under the terms hereof shall be the same as the amount of
capital represented by the shares of Old Common Stock so reclassified, until
thereafter reduced or increased in accordance with applicable law. The Exchange
Agent shall be the Secretary of the Company or such other agent as the Company
may appoint for such purpose.]
ARTICLE V
Initial Consideration for Issuance of Shares
The Corporation will not commence business until it has received for the
issuance of its shares consideration of a value of at least One Thousand and
No/100 Dollars ($1,000.00), consisting of money, labor done or property
actually received.
ARTICLE VI
Registered Office and Agent
The street address of the registered office of the Corporation is 8 Greenway
Plaza, Suite 1500, Houston, Texas 77046. The name of the registered agent of
the Corporation at such address is J. Patrick Millinor, Jr.
ARTICLE VII
Board of Directors
1. The property, affairs and business of the Corporation shall be managed by
or under the direction of the Corporation's board of directors. Subject to the
rights of the holders of any series of Preferred Stock, the number of directors
constituting the board of directors of the Corporation shall not be less than
nine (9) nor more than eighteen (18). The number of directors constituting the
initial board of directors shall be ten (13). Subject to the rights of the
holders of any series of Preferred Stock, the number of directors shall be
determined from time to time hereafter exclusively pursuant to a resolution
adopted by the affirmative vote of a majority of the entire board of directors.
For purposes of these Restated Articles of Incorporation, the "entire board of
directors" shall mean the number of directors that would be in office if there
were no vacancies nor any unfilled newly created directorships. Directors need
not be residents of the State of Texas or shareholders of the Corporation.
Until the third annual meeting of shareholders following effectiveness of these
Restated Articles of Incorporation under the TBCA, the directors shall be
divided into three classes, consisting initially of four (4), three (3), and
three (3) directors and designated Class I, Class II and Class III,
respectively. Each director elected or appointed prior to the effectiveness of
these Restated Articles of Incorporation under the TBCA shall serve for their
full term, such that the term of each Class I director shall end at the first
succeeding annual meeting of shareholders following effectiveness of these
Restated Articles of Incorporation, the term of each Class II director shall
end at the second succeeding annual meeting of shareholders following
effectiveness of these Restated Articles of Incorporation, and the term of each
Class III director shall end at the third succeeding annual meeting of
shareholders following effectiveness of these Restated Articles of
Incorporation. The term of each director elected after the effectiveness of
these Restated Articles of Incorporation whether at an annual meeting or to
fill a vacancy in the board of directors arising for any reason, including any
increase in the size of the board of directors, shall end at the first annual
meeting following his or her election. Commencing with the third annual meeting
of shareholders following the effectiveness of these Restated
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Articles of Incorporation, the foregoing classification of the board of
directors shall cease, and all directors shall be of one class and serve for a
term ending at the annual meeting following the annual meeting at which the
director was elected. In no case shall a decrease in the number of directors
shorten the term of any incumbent director. Each director shall hold office
after the annual meeting at which his or her terms is scheduled to end until
his or her successor shall be elected and shall qualify, subject, however, to
prior death, resignation, disqualification or removal from office in accordance
with the TBCA. Any newly created directorship resulting from an increase in the
number of directors may be filled by a majority of the board of directors then
in office, provided that a quorum is present, and any other vacancy on the
board of directors may be filled by a majority of the directors then in office,
even if less than a quorum, or by a sole remaining director.
2. Notwithstanding anything else contained in these Restated Articles of
Incorporation, whenever holders of any one or more series of Preferred Stock
shall have the right, voting separately by class or series, to elect directors
at any annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions applicable to such class or series established pursuant to
Paragraph 1 of Article IV hereof. Directors so elected shall not be divided
into classes and shall be elected by such holders annually unless expressly
provided otherwise by the terms of such class or series of Preferred Stock and,
during the prescribed terms of office of those directors, the board of
directors shall consist of a number of directors equal to the number of those
directors plus the number of directors determined as provided in Section 1 of
this Article VII.
3. The initial Class I directors shall be [ ], the initial Class II
directors shall be [ ], and the initial Class III directors shall be
[ ].
4. No director of the Corporation shall be removed from office as a director
by vote or other action of the shareholders or otherwise except for cause.
ARTICLE VIII
Limitation of Director Liability
To the greatest extent permitted by applicable law in effect from time to
time, a director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for an act or omission in the director's
capacity as a director except for liability for: (i) a breach of a director's
duty of loyalty to the Corporation or its shareholders; (ii) an act or omission
not in good faith that constitutes a breach of duty of the director to the
Corporation or that involved intentional misconduct or a knowing violation of
the law; (iii) a transaction from which a director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office; (iv) an act or omission for which the liability
of a director is expressly provided for by statute; or (v) an act related to
any unlawful stock repurchase or unlawful payment of a dividend.
ARTICLE IX
Indemnification
1. Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such action, suit
or proceeding, and any inquiry or investigation that would lead to such action,
suit or proceeding (hereinafter a "proceeding"), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to any employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged
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action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the TBCA, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), against
all judgments, fines, penalties (including excise tax and similar taxes),
settlements, and reasonable expenses actually incurred by such indemnitee in
connection therewith. The right to indemnification conferred in this Article
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that if the TBCA requires, an
advancement of expenses incurred by an indemnitee shall be made only upon
delivery to the Corporation of any undertaking, by or on behalf of such
indemnitee, to repay all amount so advanced if it shall ultimately be
determined by that such indemnitee is not entitled to be indemnified for such
expenses under this Article or otherwise.
2. Insurance. The Corporation may purchase and maintain insurance, at its
expense, on behalf of any indemnitee against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as a
representative of the Corporation, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or loss
under the TBCA.
3. Indemnity of Employees and Agents of the Corporation. The Corporation
may, to the extent authorized from time to time by the board of directors,
grant rights to indemnification and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of the provisions of
this article or as otherwise permitted under the TBCA with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
ARTICLE X
Call of Special Meetings of the Shareholders
Special meetings of the Corporation's shareholders may be called (i) by the
president, the board of directors, or such other person or persons as may be
authorized in the Bylaws or (ii) by the holders of at least fifty percent (50%)
of all the shares entitled to vote at the proposed special meeting.
ARTICLE XI
Amendment of Bylaws
In furtherance and not in limitation of the powers conferred by the laws of
the State of Texas, the board of directors is expressly authorized to alter,
amend or repeal the bylaws of the Corporation or to adopt new bylaws.
ARTICLE XII
Provisions Applicable to Business Combinations
1. Vote Required for Certain Business Combinations. In addition to any
affirmative vote required by law or these Articles of Incorporation or the
Bylaws of the Corporation, and except as otherwise expressly provided in
Section 2 of this Article XII, a Business Combination (as hereinafter defined)
with, or proposed by or on behalf of, any Interested Shareholder (as
hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of
any Interested Shareholder or any person who thereafter would be an Affiliate
or Associate of such Interested Shareholder, shall require the affirmative vote
of not less than eighty percent (80%) of the votes entitled to be cast by the
holders of all of the then outstanding shares of Voting Stock (as hereinafter
defined), voting together as a single class, and the affirmative vote of not
less than a majority of the votes entitled to be
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cast by the Voting Stock beneficially owned by persons other than such
Interested Shareholder. Each share of Voting Stock shall have the number of
votes granted to it in, or duly fixed by the board of directors pursuant to,
Article IV of these Articles of Incorporation. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law, or in any
agreement of the Corporation with any national securities exchange or
otherwise.
2. Exceptions to Higher Vote Requirement. The provisions of Section 3 of
this Article XII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote, if any, as is required by law or by any other provision of these Articles
of Incorporation or the Bylaws of the Corporation, or any agreement with any
national securities exchange, if all of the conditions specified in any of the
following Paragraphs (a), (b) or (c) are met or, in the case of a Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph (a) is met:
(a) The Business Combination shall have been approved either
specifically, or as a transaction which is within a series of related
transactions described with reasonable specificity, by at least an eighty
percent (80%) vote of the Continuing Directors (as hereinafter defined),
who shall at the time constitute at least a majority of the Whole Board (as
hereinafter defined) (whether or not such approval occurs prior to or
subsequent to the acquisition of, or announcement or public disclosure of
the intention to acquire, beneficial ownership of the Voting Stock that
caused the Interested Shareholder to become a Interested Shareholder).
(b) All of the following conditions shall have been met:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received
per share by holders of Common Stock of the Corporation in such
Business Combination shall be at least equal to the higher amount
determined under clauses (A) and (B) below:
(A) (If applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) ("Highest Purchase Price") paid by or on behalf
of the Interested Shareholder for any share of Common Stock in
connection with the acquisition by the Interested Shareholder of
beneficial ownership of shares of Common Stock,
(x) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination
(the "Announcement Date"), or
(y) in the transaction in which it became a Interested
Shareholder,
whichever is higher, in either case, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock; provided that
if the Business Combination is effected more than 180 days after
the last date upon which such Interested Shareholder paid the
Highest Purchase Price, then the consideration to be received by
the shareholders shall be increased by Interest (as hereinafter
defined) with respect to the period from the date the Interested
Shareholder paid the applicable Highest Purchase Price to the
effective date of the Business Combination ("Adjustment
Period").
(B) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date (the "Determination Date") on
which the Interested Shareholder became a Interested
Shareholder, whichever is higher, as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification
with respect to the Common Stock.
(ii) The aggregate amount of cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of
consideration other than cash to be received per share
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by holders of shares of any class or series of outstanding Capital
Stock, other than Common Stock shall be at least equal to the highest
amount determined under clauses (A), (B) and (C) below:
(A) (If applicable) the Highest Purchase Price paid by or on
behalf of the Interested Shareholder for any share of such class or
series of Capital Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of shares of such
class or series of Capital Stock,
(x) within the two-year period immediately prior to the
Announcement Date, or
(y) in the transaction in which it became a Interested
Shareholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock; provided that if
the Business Combination is effected more than 180 days after the
last date upon which such Interested Shareholder paid the Highest
Purchase Price, then the consideration to be received by the
shareholders shall be increased by Interest with respect to the
Adjustment Period.
(B) The Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; and
(C) (If applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Capital Stock
would be entitled, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class
or series of Capital Stock, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation regardless of whether the Business Combination to be
consummated constitutes such an event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on behalf of the Interested
Shareholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock.
If the consideration so paid for shares of any class or series of
Capital Stock varies as to form, the form of consideration for such
class or series of Capital Stock shall be either cash or the form used
to acquire beneficial ownership of the largest number of shares of such
class or series of Capital Stock previously acquired by the Interested
Shareholder.
(iv) After the Determination Date and prior to the consummation of
such Business Combination:
(A) Except as approved by a majority of the Continuing Directors,
there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock;
(B) There shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect
any stock split, stock divided or subdivision of the Common Stock of
the Corporation), except as approved by a majority of the Continuing
Directors;
(C) There shall have been an increase in the annual rate of
dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of common
stock of the Corporation, unless the failure to increase such annual
rate is approved by a majority of the Continuing Directors; and
(D) Neither such Interested Shareholder nor any of its Affiliates
shall have become the beneficial owner of any additional shares of
Capital Stock or securities convertible into Capital Stock except as
part of the transaction that results in such Interested Shareholder
becoming a Interested Shareholder and except in transaction that,
after giving effect thereto, would not result
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in any increase in the percentage beneficial ownership of the
Interested Shareholder or any of its Affiliates of any class or
series of Capital Stock.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") (or any subsequent
provisions replacing such Exchange Act, rules or regulations) shall be
mailed to all shareholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant
to the Exchange Act or subsequent provisions).
(vi) Such Interested Shareholder shall not have made any major
change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
(vii) The Interested Shareholder and any of its Affiliates shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advantages,
guarantees, pledges or other financial assistance or any tax credits or
other tax advances provided by the Corporation or any Subsidiary,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(c) The Business Combination shall be allowed, permitted or required
under the terms of any Statement of Designation governing any Preferred
Stock of the Corporation.
3. Certain Definitions. The following definitions shall apply with respect
to this Article XII:
(a) The term "Business Combination" shall mean:
(i) Any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (A) any Interested Shareholder or (B) any
other company (whether or not itself a Interested Shareholder) which
is, or after such merger or consolidation would be, an Affiliate or
Associate of a Interested Shareholder which, in any case, involves the
issuance, redemption, cancellation, exchange or conversion of shares,
obligations, evidences of ownership, rights to purchase securities or
other securities (in one transaction or a series of transactions)
having an aggregate Fair Market Value (as hereinafter defined) of more
than twenty percent (20%) of the Total Assets of the Corporation (as
hereinafter defined); or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), including
without limitation any other security device, to or with any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder
of any assets, securities or commitments of the Corporation or any
Subsidiary (as hereinafter defined) having an aggregate Fair Market
Value of more than twenty percent (20%) of the Total Assets of the
Corporation; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder in exchange for
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value of more than twenty percent (20%) of the
Total Assets of the Corporation; or
(iv) the adoption of any plan or proposal for the liquidation,
spinoff, splitoff, splitup or dissolution of the Corporation proposed
by or on behalf of any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
any Interested Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
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shares of any class or series of equity or convertible securities of
the Corporation or any Subsidiary which is beneficially owned (as
hereinafter defined) by an Interested Shareholder or any Affiliate of
any Interested Shareholder by more than one percent, except for
transactions described in subparagraphs (i), (ii) or (iii) of this
Paragraph 3(a) which involve assets, cash, securities or other property
of the Corporation with an aggregate Fair Market Value not in excess of
twenty percent (20%) of the Total Assets of the Corporation; or
(vi) any agreement, contract or other arrangement providing for any
of the transactions described in this definition of Business
Combination.
(b) The term "Capital Stock" shall mean all capital stock of the
Corporation now or hereafter authorized to be issued from time to time by
the Corporation, and the term "Voting Stock" shall mean shares of Capital
Stock which are entitled to vote generally in the election of directors.
(c) The term "Total Assets of the Corporation" means the total assets of
the Corporation, as reflected on the most recent consolidated balance sheet
of the Corporation at the time the shareholders of the Corporation would be
required to approve or adopt the transaction in question.
(d) The term "person" shall mean any individual, firm, company,
corporation, partnership, limited liability company, or other entity and
shall include any "group" comprised of any person (as the term "group" is
defined in Section 13(d)(3) of the Exchange Act).
(e) "Interested Shareholder" means any person (other than the
Corporation or any Subsidiary) who or which is the beneficial owner (as
hereinafter defined), directly or indirectly, of ten percent or more of the
voting power of the outstanding Voting Stock; provided, however, the term
"Interested Shareholder" shall not include any employee stock ownership or
other employee benefit plan of the Corporation or any Subsidiary, or any
trustee of, or fiduciary with respect to, any such plan when acting in such
capacity.
(f) A person shall be a "beneficial owner" of, or shall "beneficially
own" any Capital Stock (i) which such person or any of its Affiliates or
Associates owns, directly or indirectly; (ii) which such person or any of
its Affiliates or Associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or only after the
passage of any period of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding; or (iii) which are owned, directly
or indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is a
Interested Shareholder pursuant to Paragraph (e) of this Section 3, the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph (f) of Section 3, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any arrangement or
understanding, or upon exercise of conversion rights, warrants, or options,
or otherwise.
(g) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on April 1, 1997.
(h) The term "Subsidiary" means any company of which a majority of any
class of Equity Security is beneficially owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition
of Interested Shareholder set forth in Paragraph (e) of this Section 3, the
term "Subsidiary" shall mean only a company of which a majority of each
class of Equity Security is beneficially owned by the Corporation.
(i) The term "Continuing Director" means (i) any member of the board of
directors of the Corporation, while such person is a member of the board of
directors, who is not the Interested Shareholder, an Affiliate or Associate
of the Interested Shareholder or a representative of any such person and
who was a member o the board of directors prior to the Determination Date,
and (ii) any successor of
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a Continuing Director, while such successor is a member of the board of
directors, who is not the Interested Shareholder, an Affiliate or Associate
of the Interested Shareholder or a representative of any such person and
who is recommended or elected to succeed the Continuing Director by a
majority of Continuing Directors.
(j) The term "Fair Market Value" means (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding
the date in question of a share of such stock on the principal United
States securities exchange registered under the Exchange Act on which such
stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during
the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good faith; and
(ii) in the case of property other than stock, the fair market value of
such property on the date in question as determined by a majority of the
Continuing Director in good faith.
(k) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall
include the shares of Common Stock of the Corporation and/or the shares of
any other class or series of Capital Stock retained by the holders of such
shares.
(l) The term "Interest" means interest with respect to the applicable
Highest Purchase Price accrued daily at an annual rate equal to 110% of the
arithmetic average of the weekly per annum market discount rates for 3-
month U.S. Treasury bills during the Adjustment Period, as published by the
Board of Governors of the Federal Reserve System; provided, however, that
in respect of any portion of the Adjustment Period during which the
Corporation cannot determine Interest in the foregoing manner, Interest
shall be deemed to be ten percent (10%); and provided further that any such
amount shall be reduced, but not below zero, by the aggregate of the
regular quarterly cash dividends paid per share of Common Stock during the
Adjustment Period.
(m) The term "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Exchange Act, as in effect on April 1,
1997.
(n) "Whole Board" means the total number of directors which this
Corporation would have if there were no vacancies.
2. A majority of the Whole Board, but only if a majority of the Whole Board
shall then consist of Continuing Directors or, if a majority of the Whole Board
shall not then consist of Continuing Directors, a majority of the then
Continuing Directors, shall have the power and duty to determine, on the basis
of information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article XII, including, without limitation, (i)
whether a person is an Interested Shareholder, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another; (iv) whether the applicable conditions set
forth in Paragraph (b) of Section 2 have been met with respect to any Business
Combination, (v) the Fair Market Value of Stock or other property in accordance
with Paragraph (j) of Section 3 of this Article XII, and (vi) whether the
securities which are the subject of any Business Combination referred to in
Paragraph (a)(i) of Section 3, or the assets, securities or commitments which
are the subject of any Business Combination referred to in Paragraph (a)(ii) of
Section 3, or the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business Combination
referred to in Paragraph (a)(iii) of Section 3 have, in any such case, an
aggregate Fair Market Value of more than twenty percent (20%) of the Total
Assets of the Corporation.
3. A majority of the Whole Board shall have the right to demand, but only if
a majority of the Whole Board shall then consist of Continuing Directors, or,
if a majority of the Whole Board shall not then consist of Continuing
Directors, a majority of the then Continuing Directors shall have the right to
demand, that any person who it is reasonably believed is an Interested
Shareholder (or holds of record shares of Voting Stock
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beneficially owned by any Interested Shareholder) supply the Corporation with
complete information as to (i) the record owner(s) of all shares beneficially
owned by such person who it is reasonably believed is an Interested
Shareholder, (ii) the number of, and class or series of, shares beneficially
owned by such person who it is reasonably believed is an Interested
Shareholder and held of record by each such record owner and the number(s) of
the stock certificate(s) evidencing such shares, and (iii) any other factual
matter relating to the applicability or effect of this Article XII, as may be
reasonably requested of such person, and such person shall furnish such
information within ten (10) days after receipt of such demand.
4. Nothing contained in this Article XII shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
5. Notwithstanding any other provisions of these Articles of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the board of directors and the
holders of any particular class or series of the Voting Stock required by law
or these Articles of Incorporation, to alter, amend or repeal this Article
XII, as an additional requirement for such action, either (i) the Continuing
Directors who shall at the time shall constitute at least a majority of the
Whole Board, shall expressly approve such action by at least an eighty percent
(80%) vote of such Continuing Directors; or (ii) such action shall be adopted
or approved by the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class.
ARTICLE XIII.
Certain Acquisitions of Voting Stock by the Corporation
1. The Corporation shall not acquire, directly or indirectly, any Voting
Stock, by the purchase, exchange or otherwise from any Related Person (as
hereinafter defined) or any of its Affiliates or Associates.
2. This article shall not be applicable to any acquisition of Voting Stock
(i) pursuant to a Tender Offer made to all holders of any class of Voting
Stock on the same price, terms and conditions and, if for less than all of the
Voting Stock, subject to pro rata acceptance (except as to holders of fewer
than 100 shares), (ii) in compliance with Rule 10b-18 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in
effect at the date of adoption of this article, (iii) for a total
consideration per share, including payment for legal fees, investment banking
fees, brokerage fees and related costs and expenses of the holder in acquiring
such Voting Stock, not in excess of the Fair Market Value per share,
determined as of the Acquisition Date, or (iv) pursuant to the terms of any
Statement of Designation governing any Preferred Stock of the Corporation.
3. The term "Acquisition Date" means the date on which the Related Person
became a Related Person.
4. The term "Related Person" means any person (other than the Corporation
or any Subsidiary) who or which is the beneficial owner directly or
indirectly, of five percent or more of the voting power of the then
outstanding Voting Stock.
5. The term "Tender Offer" means any tender offer for, or request or
invitation for tenders of, Voting Stock, within the meaning of Section
14(d)(1) of the Securities Exchange Act of 1934, as amended, as in effect at
the date of adoption of this article, and any purchase or series of purchases
of Voting Stock at or above then prevailing market prices for such Voting
Stock pursuant to which more than five percent of the outstanding Voting Stock
is acquired in any two-year period.
6. Notwithstanding any other provisions of these Articles of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the board of directors and the
holders of any particular class or series of the Voting Stock required by law
or these Articles of Incorporation, to alter, amend or repeal this Article
XIII, as an additional requirement for such action, either (i) the Continuing
Directors who shall at the time shall constitute at least a majority of the
Whole Board, shall expressly approve such action by at least an eighty percent
(80%) vote of such Continuing Directors; or (ii) such action shall be adopted
or approved by the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class.
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ANNEX C
[LETTERHEAD OF CHASE APPEARS HERE]
November 2, 1999
Board of Directors
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Members of the Board:
You have informed us that Group Maintenance America Corp. ("Group MAC") and
Building One Services Corporation ("Building One") propose to enter into an
Agreement and Plan of Merger dated as of November 2, 1999 (the "Merger
Agreement") which provides, among other things, for the merger (the "Merger")
of Building One with and into Group MAC pursuant to a transaction in which,
subject to the limitations and conditions set forth in the Merger Agreement,
(i) each outstanding share of the common stock, par value $.001 per share, of
Building One ("Building One Common Stock") will be converted into the right to
receive 1.25 shares (the "Exchange Ratio") of common stock, par value $.001 per
share, of Group MAC ("Group MAC Common Stock") and (ii) the holders of
outstanding shares of Group MAC Common Stock will have, with respect to a
maximum of 50% of such holder's shares of Group MAC Common Stock and subject to
certain proration and allocation provisions, the right to elect to receive in
cash $13.50 per share of Group MAC Common Stock (such $13.50 per share is
referred to herein as the "Cash Consideration") with the aggregate Cash
Consideration not to exceed $150,000,000 less the amount paid to repurchase
certain outstanding options, each as more fully described in the Merger
Agreement. Pursuant to a Subscription and Exchange Agreement dated as of
November 2, 1999 (the "Subscription and Exchange Agreement") between Group MAC
and BOSS II, LLC ("Apollo"), the $100,000,000 of 7 1/2% Convertible Junior
Subordinated Debentures Due 2012 of Building One, plus an amount equal to the
accrued and unpaid interest thereon as of the closing date of the Debt Exchange
(as defined below) (the "Building One Subordinated Debt") will be exchanged
(the "Debt Exchange") in consideration for the issuance of the number of shares
of 7.25% Convertible Preferred Stock of Group MAC equal to the amount of the
Building One Subordinated Debt divided by 1,000 (the "Group MAC Preferred
Stock", such Building One Subordinated Debt that is exchanged in the Debt
Exchange is referred to herein as the "Debt Exchange Consideration"), each as
more fully described in the Subscription and Exchange Agreement. The right of
holders of Group MAC Common Stock to receive the Cash Consideration is subject
to certain proration and allocation provisions as set forth in the Merger
Agreement. You have informed us that the payment of the Cash Consideration will
be financed by the sale and issuance (the "Preferred Stock Sale") to Apollo,
pursuant to the Subscription and Exchange Agreement, of 150,000 shares of the
Group MAC Preferred Stock in consideration for $150,000,000 in cash (such
$150,000,000 in cash received in consideration of the Preferred Stock Sale is
referred to herein as the "Preferred Stock Purchase Consideration"). The Debt
Exchange and the Preferred Stock Sale pursuant to the Subscription and Exchange
Agreement and the consummation of the Merger pursuant to the Merger Agreement
are collectively referred to herein as the "Transactions".
[CHASE SECURITIES INC. IS A MEMBER OF NASD/SIPC,
AND IS A WHOLLY-OWNED SUBSIDIARY OF
THE CHASE MANHATTAN CORPORATION.]
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<PAGE>
November 2, 1999
You have requested that we render our opinion as to the fairness, from a
financial point of view, to Group MAC and its shareholders of the Exchange
Ratio, the Debt Exchange Consideration and the Preferred Stock Purchase
Consideration in the Transactions, taken as a whole and considered
collectively.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed a draft of the Merger Agreement in the form provided to us and
have assumed that the final form of such agreement will not vary in any
regard that is material to our analysis;
(b) reviewed a draft of the Subscription and Exchange Agreement in the form
provided to us and have assumed that the final form of such agreement will
not vary in any regard that is material to our analysis;
(c) reviewed a draft of the Investors Rights Agreement dated as of November 2,
1999 among Group MAC and the investors named therein, in the form provided
to us and have assumed that the final form of such agreement will not vary
in any regard that is material to our analysis;
(d) reviewed a draft of the Terms of the 7.25% Convertible Preferred Stock in
the form provided to us and have assumed that the final form of such
agreement will not vary in any regard that is material to our analysis;
(e) reviewed certain publicly available business and financial information that
we deemed relevant relating to Group MAC and Building One and the
respective industries in which they operate;
(f) reviewed certain internal non-public financial and operating data provided
to us by the managements of Group MAC and Building One relating to Group
MAC and Building One, respectively (before and after giving effect to the
Transactions), including information provided by such managements relating
to the capitalization of Group MAC and certain forecast and projection
information as to future financial results of such businesses and
information concerning the expected business, operational and strategic
benefits of the Merger;
(g) discussed with members of Group MAC's and Building One's senior managements
the foregoing, including Group MAC's and Building One's operations,
historical financial statements and future prospects, before and after
giving effect to the Transactions, and their views of the business,
operational and strategic benefits and other implications of the Merger, as
well as such other matters as we deemed necessary or appropriate;
(h) compared the financial and operating performance of Group MAC and Building
One with publicly available information concerning certain other companies
we deemed comparable and reviewed the relevant historical stock prices and
trading volumes of the Group MAC Common Stock, the Building One Common
Stock and certain publicly traded securities of such other companies;
(i) reviewed the financial terms of certain recent transactions we deemed
relevant to our inquiry; and
(j) made such other analysis and examinations as we have deemed necessary or
appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available, for purposes of this opinion, and have further relied upon the
assurances of managements of Group MAC and Building One that they are not aware
of any facts that will make such information inaccurate or misleading in any
respect material to our analysis. We have neither made nor obtained any
independent evaluations or appraisals of the assets or liabilities of Group MAC
or Building One, nor have we conducted a physical inspection of the properties
and facilities of Group MAC or Building One. We have assumed that the financial
forecast and projection information provided to us by Group MAC and Building
One as well as the information concerning the expected business, operational
and strategic benefits of the Merger have been reasonably determined on bases
reflecting the best currently available estimates and judgments of the
managements of Group MAC and Building One, as the case may be, as to the future
financial performance of Group MAC and Building One (before and after giving
effect to the Transactions), as the case may be. We have further assumed that,
in all material respects, such forecasts and projections will be realized in
the
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November 2, 1999
amounts and times indicated thereby. We express no view as to such forecast,
projection or benefits information or the assumptions on which they were based.
We have also assumed, and you have informed us, that the Transactions will be
accounted for on a purchase basis and the Merger will be tax-free to each of
Group MAC and Building One and their respective shareholders, except to the
extent cash is received in the Merger. We have relied as to all legal,
accounting and tax matters with respect to the Transactions on legal counsel
and accountants to Group MAC. We were not asked to, and we did not, solicit
third party offers to acquire all or part of the Group MAC Preferred Stock to
be issued in the Transactions.
For purposes of rendering our opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement and the Subscription and Exchange Agreement
are true and correct, that each party will perform all of the covenants and
agreements required to be performed by it under the Merger Agreement and the
Subscription and Exchange Agreement and that all conditions to the consummation
of the Transactions will be satisfied without waiver thereof. We have also
assumed that all material governmental, regulatory or other consents and
approvals will be obtained and that in the course of obtaining any necessary
governmental, regulatory or other consents and approvals, or any amendments,
modifications or waivers to any documents to which either of Group MAC or
Building One are party, as contemplated by the Merger Agreement or the
Subscription and Exchange Purchase Agreement, no restrictions will be imposed
or amendments, modifications or waivers made that would have any material
adverse effect on the contemplated benefits to the holders of Common Stock of
the Transactions.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to Group
MAC and its shareholders of the Exchange Ratio, the Debt Exchange Consideration
and the Preferred Stock Purchase Consideration, taken as a whole and considered
collectively, and we express no opinion as to the merits of the underlying
decision by Group MAC to engage in the Transactions. For purposes of this
opinion, we have considered the Merger, the Debt Exchange and the Preferred
Stock Sale collectively as a single transaction and express no opinion as to
the fairness of any of the Exchange Ratio, the Debt Exchange Consideration or
the Preferred Stock Purchase Consideration individually to Group MAC. This
opinion does not constitute a recommendation to any Group MAC shareholder as to
how such shareholder should vote with respect to the Transactions or the
transactions related thereto or as to whether such shareholder should elect to
receive the Cash Consideration. Our opinion necessarily is based upon
conditions as they exist and can be evaluated on the date hereof, and we assume
no responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof. Our opinion as expressed below does not
imply any conclusion as to the likely trading range for the common stock of
Group MAC or Building One following the announcement or consummation of the
Transactions. We express no opinion as to the fairness of the Cash
Consideration to the holders of Group MAC Common Stock who elect to receive
such consideration.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to Group MAC in
connection with the Transactions and will receive a fee for our services,
including for rendering this opinion. In addition, Group MAC has agreed to
indemnify us for certain liabilities arising out of our engagement. As we have
previously advised you, The Chase Manhattan Corporation and its affiliates,
including Chase Securities Inc., in the ordinary course of business, have, from
time to time, provided, and in the future may continue to provide, commercial
and investment banking services to Group MAC and/or Building One. An affiliate
of The Chase Manhattan Corporation is a lender and serves as agent bank under
Group MAC's senior credit facilities. In the ordinary course of business, we or
our affiliates may trade in the debt and equity securities of Group MAC and/or
Building One for our own accounts and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
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November 2, 1999
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the Exchange Ratio, the Debt Exchange Consideration and
Preferred Stock Purchase Consideration, taken as a whole and considered
collectively, are fair, from a financial point of view, to Group MAC and its
shareholders.
This opinion is for the use and benefit of the Board of Directors of Group
MAC in its evaluation of the Transactions and shall not be used for any other
purpose without the prior written consent of Chase Securities Inc.
Very truly yours,
Chase Securities Inc.
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ANNEX D
[LETTERHEAD OF BEAR STEARNS APPEARS HERE]
November 2, 1999
Board of Directors
Building One Services Corporation
110 Cheshire Lane, Suite 210
Minnetonka, MN 55305
Dear Sirs:
We understand that Building One Services Corporation ("Building One") and
Group Maintenance America Corp. ("GroupMac") intend to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which Building One
will be merged with and into GroupMac (the "Merger"). As a result of the
Merger, each share of Common Stock of Building One which is issued and
outstanding at the time of the Merger will be converted into the right to
receive 1.25 shares of GroupMac Common Stock (the "Exchange Ratio") and each
share of GroupMac Common Stock will remain one share of GroupMac Common Stock
or, at the option (the "Cash Option") of each GroupMac shareholder, be
converted into $13.50 in cash (provided that (a) no GroupMac shareholder can
exercise the Cash Option for more than 50% of the total number of GroupMac
shares held by him and (b) not more than an aggregate of 11,111,111 GroupMac
shares shall be convertible into cash pursuant to the Cash Option). You have
provided us a copy of the Agreement in substantially the form to be sent to
the shareholders of Building One.
You have advised us that the Merger will cause a "Change of Control," as
defined in the Indenture (the "Indenture") for Building One's outstanding
7.5% Convertible Subordinated Debentures due 2012 (the "Existing Convert").
As a result, Apollo Management, L.P. and/or its affiliates (collectively,
"Apollo"), which is the holder of the Existing Convert, will be entitled to
receive Special Interest (as defined in the Indenture) of approximately $30
million. You have advised us that Apollo will waive its rights with respect
to the Special Interest and exchange the Existing Convert (including all
accrued but unpaid interest thereon) for shares of newly issued GroupMac
7.25% Convertible Preferred Stock (convertible at $14 per share) (the "New
Convert"). In addition, Apollo will purchase for cash an additional
approximately $150 million of shares of the New Convert, some or all of the
proceeds of which will be used by GroupMac to fund the Cash Option. The
exchange of the Existing Convert for the New Convert, the waiver of the
Special Interest and the purchase for cash of the additional shares of the
New Convert will be evidenced by a Subscription and Exchange Agreement
between GroupMac and BOSS II, LLC, the terms of the Preferred Stock (which
will be incorporated in a document to be filed with the Texas Secretary of
State) and the Investors' Rights Agreement among GroupMac and certain of its
investors (the "Apollo Investment Documents"). You have provided us a copy of
the Apollo Investment Documents in substantially the form to be sent to the
shareholders of Building One.
You have asked us to render our opinion as to whether the Exchange Ratio
is fair, from a financial point of view, to the holders of Building One
Common Stock.
In the course of performing our review and analyses for rendering this
opinion, we have:
1. reviewed the Agreement in the form provided to us;
2. reviewed the Apollo Investment Documents in the form provided to us;
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3. reviewed Building One's Form 10-K for the year ended December 31, 1998;
Prospectus dated March 16, 1999 (and Supplement dated March 17, 1999);
and Form 10-Q for the periods ended March 31 and June 30, 1999;
4. reviewed GroupMac's Form 10-K for the period ended December 31, 1998;
Prospectus dated June 17, 1999; and Form 10-Q for the periods ended
March 31 and June 30, 1999;
5. reviewed certain operating and financial information of Building One and
GroupMac, including preliminary financial results for the quarter ended
September 30, 1999 as well as projections and synergy estimates,
provided to us by the senior management of Building One and GroupMac;
6. reviewed the pro forma financial results and the capitalization of
GroupMac on a consolidated basis;
7. met with certain members of the senior management of Building One and
GroupMac to discuss each company's respective businesses, operations,
historical and projected (including synergy estimates) financial
statements and future prospects;
8. reviewed the historical prices, valuation parameters and trading volumes
of the Common Stock of Building One and GroupMac;
9. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies that we deemed generally
comparable to Building One and GroupMac;
10. performed discounted cash flow analyses based on the projections and
synergy estimates furnished to us for Building One and for GroupMac on
a consolidated basis after the Merger; and
11. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections and synergy estimates provided to us by
Building One and GroupMac. With respect to Building One's and GroupMac's
projected financial results and the synergy estimates, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the senior management of each of Building
One and GroupMac as to the expected future performance of Building One and
GroupMac, respectively. We have not assumed any responsibility for the
independent verification of such information or of the projections and synergy
estimates provided to us, and we have further relied upon the assurances of the
senior management of each of Building One and GroupMac that they are unaware of
any facts that would make the information, projections and synergy estimates
provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of Building One or GroupMac,
nor have we been furnished with any such appraisals. In rendering our opinion,
we have analyzed the Merger as a strategic business combination not involving a
sale of control of Building One, and we have not solicited, nor were we asked
to solicit, third party acquisition interest in Building One. We have assumed
that the Merger will qualify as a tax free "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code. Our opinion is necessarily
based on economic, market and other conditions, and the information made
available to us, as of the date hereof.
We do not express any opinion as to the price or range of prices at which
the shares of Common Stock of Building One and GroupMac may trade subsequent to
the announcement of the Merger or as to the price or range of prices at which
the shares of Common Stock of GroupMac may trade subsequent to the consummation
of the Merger.
We have acted as financial advisor to Building One in connection with the
Merger and will receive a fee for such services. Bear Stearns has been involved
previously with Building One in the role of co-manager in connection with an
offering of senior subordinated notes and currently provides research coverage
on both Building One and GroupMac. In the ordinary course of business, Bear
Stearns may actively trade the equity and debt securities of Building One and
GroupMac for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
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It is understood that this letter is intended for the benefit and use of the
Board of Directors of Building One and does not constitute a recommendation to
the Board of Directors of Building One or any holders of Building One Common
Stock as to how to vote in connection with the Merger. This opinion does not
address Building One's underlying business decision to pursue the Merger. This
letter is not to be used for any other purpose, or reproduced, disseminated,
quoted or referred to at any time, in whole or in part, without our prior
written consent; provided, however, that this letter may be included in its
entirety in any proxy statement to be distributed to the holders of Building
One Common Stock in connection with the Merger or as otherwise required
pursuant to security laws. We have not reviewed any proxy statement or similar
document that may be distributed in connection with the Merger as such
materials have not yet been completed.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
holders of Building One Common Stock.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:/s/ Rick A. Lacher
----------------------------------
Senior Managing Director
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ANNEX E
FORM OF STATEMENT OF DESIGNATIONS
RELATING TO THE PREFERRED STOCK
1. Rights, Preferences and Powers of the Convertible Preferred Stock.
The Convertible Preferred Stock shall have the following rights,
preferences, powers, privileges and restrictions, qualifications, and
limitations.
2. Dividends.
(a) The holders of the outstanding shares of Convertible Preferred Stock
shall be entitled to receive dividends at the Applicable Dividend Rate on the
Accumulated Amount, if, as and when declared by the Board of Directors out of
funds legally available therefor. Such dividends shall be payable in arrears on
each of March 31, June 30, September 30 and December 31 (each, a "Preferred
Dividend Payment Date"), the first such Preferred Dividend Payment Date being
March 31, 2000, except that if any Preferred Dividend Payment Date is not a
Business Day, then the Preferred Dividend Payment Date shall be on the first
immediately succeeding Business Day. Such dividends shall accrue on a daily
basis (computed on the basis of a 360-day year of twelve 30-day months)
commencing on the date of issuance, and shall compound, if not paid in cash
when due, on the next Preferred Dividend Payment Date, regardless of whether
the Board has declared a dividend payment or whether there are any profits,
surplus or other funds of the Corporation legally available for dividends.
(b) During the Initial Dividend Period, dividends accruing during any
quarterly dividend period shall be payable in cash out of funds legally
available therefor at the option of the Company.
(c) During the Second Dividend Period, dividends accruing during any
quarterly dividend period shall be paid in cash, out of funds legally available
therefor.
(d) In the event a Change of Control occurs prior to the fifth anniversary
of the Original Issuance Date, the holders of the outstanding shares of
Convertible Preferred Stock, as of the close of business on the Business Day
immediately preceding the date of consummation of the Change of Control, shall
be entitled to receive, out of funds legally available therefor, all accrued or
accumulated and unpaid dividends as of the date of the consummation of such
Change of Control and the lesser of (i) all dividends that would accrue from
the date of the consummation of such Change of Control through the fifth
anniversary of the Original Issuance Date and (ii) all dividends that would
accrue from the date of the consummation of such Change of Control through the
date that is two and one-half (2 1/2) years from the date of the consummation
of the Change of Control, such dividends to be paid in cash, provided that, any
holder of Convertible Preferred Stock who converts such shares into shares of
Common Stock pursuant to Section 4 hereof after receipt of a notice from the
Corporation pursuant to Section 6 hereof and prior to the date of consummation
of the Change of Control to which such notice relates, may elect to receive the
sum payable pursuant to this paragraph in the form of cash, shares of Common
Stock or any combination thereof, all as specified in such holder's notice of
election to convert. Shares of Common Stock issued pursuant to the foregoing
election shall be valued at the Fair Market Value as of the date of
consummation of the Change of Control. Any holder of Convertible Preferred
Stock who elects to require the Company to redeem the Convertible Preferred
Stock upon a Change of Control in accordance with Section 6 hereof, shall be
entitled to receive an amount equal to the amount of such dividends, in cash,
as part of the amount paid for such redemption under Section 6(a). Payment of
the amount specified in clauses (i) and (ii) in accordance with this Section
shall satisfy in full the obligation of the Corporation to otherwise make such
dividend payments on the scheduled Preferred Dividend Payment Dates.
(e) The dividends payable with respect to the Convertible Preferred Stock on
each Preferred Dividend Payment Date pursuant to Sections 2(a) through (c)
shall be paid to the holders of shares of the Convertible
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Preferred Stock as they appear on the stock records of the Corporation on such
date (the "Preferred Record Date") as shall be fixed by the Board, which
Preferred Record Date shall not be more than 40 days prior to the applicable
Preferred Dividend Payment Date and shall not precede the date upon which the
resolution fixing such Preferred Record Date is adopted.
(f) Except as otherwise provided herein, if at any time the Corporation pays
less than the total amount of dividends then accrued or accumulated with
respect to the Convertible Preferred Stock, such payment shall be distributed
ratably among the holders of the shares of Convertible Preferred Stock based
upon the number of shares of Convertible Preferred Stock then held by each
holder.
(g) In addition to all dividends payable pursuant to Sections 2(a) through
(d), whenever the Corporation shall declare any dividend on its Common Stock
(other than a distribution described in Section 4(e)(5) or a dividend described
in Section 4(e)(11) (a "Common Dividend")), the holders of the outstanding
shares of Convertible Preferred Stock shall have the option, exercisable by the
Requisite Convertible Preferred Shareholders to (i) participate in such
dividends on a ratable basis with such Common Stock, pro rata in accordance
with the number of shares of Common Stock into which such shares of Convertible
Preferred Stock are then convertible (the "Cash Election"), or (ii) reduce the
Conversion Price then in effect by the amount of dividends payable with respect
to one share of Common Stock or, if not payable in cash, by an amount equal to
the Fair Market Value of such dividends. The Corporation shall notify each
holder of Convertible Preferred Stock within two Business Days following the
date on which the Board declares a Common Dividend, which notice shall specify
the amount of such dividend per share of such Common Stock. If the Corporation
shall have received, prior to the 10th day following the date of such notice
from the Corporation (the "Determination Date"), notices from the Requisite
Preferred Shareholders electing the Cash Election, then the holders of record
of Convertible Preferred Stock as of the Determination Date shall be entitled
to receive, out of funds legally available therefor, the Common Dividend in
accordance with clause (i). Any such dividend shall be payable no later than 10
Business Days after the Determination Date. Unless a Cash Election has been
made prior to the Determination Date, the adjustment to the Conversion Price
specified in clause (ii) shall become effective as of the close of the business
on the Determination Date.
3. Liquidation.
Upon a Liquidation, after payment or provision for payment of the debts and
other liabilities of the Corporation and the liquidation preference of any
class or series of capital stock of the Corporation ranking senior to the
Convertible Preferred Stock, the holders of Convertible Preferred Stock shall
be entitled to receive, out of the remaining assets of the Corporation
available for distribution to its shareholders, with respect to each share of
Convertible Preferred Stock, an amount equal to the greater of (i) the
Liquidation Amount of such share and (ii) the amount the holder of such share
would have received if such holder had converted such share of Convertible
Preferred Stock into shares of Common Stock immediately prior to such
Liquidation, before any distribution shall be made to the holders of the Common
Stock or any other class or series of capital stock of the Corporation ranking
junior to the Convertible Preferred Stock. If upon any Liquidation the assets
of the Corporation available for distribution to its shareholders shall be
insufficient to pay the holders of Convertible Preferred Stock the full amount
to which they shall be entitled, the holders of Convertible Preferred Stock
shall share in any distribution of assets pro rata in accordance with the total
amount that each such holder would have received had there been such sufficient
assets.
4. Conversion.
(a) Upon the terms set forth in this Section 4, each holder of shares of
Convertible Preferred Stock shall have the right, at such holder's option, at
any time and from time to time, to convert all or any portion of such shares
into the number of fully paid and nonassessable shares of Common Stock equal to
the quotient obtained by dividing (A) the aggregate Liquidation Amount of the
shares of Convertible Preferred Stock to be converted by (B) the Conversion
Price (as defined below), as last adjusted and then in effect, by surrender of
the
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certificate or certificates representing such shares in accordance with this
Section 4. The initial conversion price per share at which shares of Common
Stock shall be issuable upon conversion of shares of Convertible Preferred
Stock (the "Conversion Price") shall be $14.00, subject to adjustment as set
forth herein.
(b) Any holder of shares of Convertible Preferred Stock electing to convert
all or any portion of the shares in accordance with Section 4(a) above shall
give written notice to the Corporation as specified herein (which notice may be
given by facsimile transmission) that such holder elects to convert the same
and shall state therein the number of shares of Convertible Preferred Stock to
be converted and the name or names in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued. Promptly thereafter,
the holder shall surrender the certificate or certificates representing the
shares of Convertible Preferred Stock to be converted, duly endorsed, at the
office of the Corporation or any transfer agent for such shares, or at such
other place designated by the Corporation, provided that the Corporation shall
at all times maintain an office or agency for such purposes. The Corporation
shall, promptly upon receipt of such notice, issue and deliver to or upon the
order of such holder, against delivery of the certificates representing the
shares of Convertible Preferred Stock that have been converted, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled (in the number(s) and denomination(s) designated by such
holder), and the Corporation shall deliver to such holder a certificate or
certificates for the number of shares of Convertible Preferred Stock that such
holder has not elected to convert. To the extent the holder requests that the
shares of Common Stock to be issued upon conversion shall be issued in the name
of any Person other than the holder of the Convertible Preferred Stock
surrendered for conversion, such holder shall deliver to the Corporation (and
its transfer agent, if applicable) such documents and certificates, including,
if requested, an opinion of counsel to the effect that the transfer thereof
will not constitute a violation of the Securities Act of 1933, as amended, or
state securities laws. The Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on the issuance of Common Stock upon the
conversion of Convertible Preferred Stock or due on the issuance of a new
certificate or certificates for any Convertible Preferred Stock not converted,
other than any tax in respect of any transfer involved in any issuance of
shares of Common Stock in a name other than the name in which the shares of
Convertible Preferred Stock so converted were registered. The conversion right
with respect to any shares of Convertible Preferred Stock shall be deemed to
have been exercised at the earliest date upon which both the notice of
conversion referred to in the first sentence of this paragraph and the
certificates therefor shall have been so delivered (the "Conversion Date") and
the Person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock upon that date.
(c) No fractional shares of Common Stock or scrip shall be issued upon
conversion of shares of Convertible Preferred Stock. The number of full shares
of Common Stock issuable upon conversion of Convertible Preferred Stock shall
be computed on the basis of the aggregate number of shares of such Convertible
Preferred Stock to be converted. Instead of any fractional shares of Common
Stock that would otherwise be issuable upon conversion of any such shares, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the Fair Market Value of one share of
Common Stock and (ii) such fractional interest. The holders of fractional
interests shall not be entitled to any rights as shareholders of the
Corporation in respect of such fractional interests.
(d) The Corporation shall reserve out of its authorized but unissued Common
Stock a sufficient number of shares of Common Stock to permit the conversion of
all of the then-outstanding shares of Convertible Preferred Stock. For the
purposes of this Section 4(d), the full number of shares of Common Stock then
issuable upon the conversion of all then-outstanding shares of Convertible
Preferred Stock shall be computed as if at the time of computation all
outstanding shares of Convertible Preferred Stock were held by a single holder.
The Corporation shall from time to time, in accordance with the laws of the
State of Texas and its articles of incorporation, increase the authorized
amount of its Common Stock if at any time the authorized amount of its Common
Stock remaining unissued shall not be sufficient to permit the conversion of
all shares of Convertible Preferred Stock at the time outstanding. All shares
of Common Stock issued upon conversion of the shares of Convertible Preferred
Stock shall be validly issued, fully paid and nonassessable.
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(e) The Conversion Price shall be subject to adjustment from time to time as
follows:
(1) If the Corporation shall, (A) at any time or from time to time after
the Original Issuance Date through the date that is two and one-half (2
1/2) years after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities, other than Excluded Stock, without
consideration or for a consideration per share less than the greater of (x)
the Conversion Price or (y) the Fair Market Value of the Common Stock, in
effect immediately prior to the issuance of such Common Stock or
securities, or (B) at any time or from time to time after the date that is
two and one-half (2 1/2) years after the Original Issuance Date, issue any
shares of Common Stock, options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable
for Common Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities, other than Excluded Stock, without
consideration or for a consideration per share less than the Fair Market
Value of the Common Stock, in effect immediately prior to the issuance of
such Common Stock or securities, then such Conversion Price, as in effect
immediately prior to each such issuance, shall forthwith be lowered to a
price equal to the price obtained by multiplying:
(A) the Conversion Price at which shares of Convertible Preferred
Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be the number of
shares of Common Stock outstanding on a fully-diluted basis immediately
after such issuance and (y) the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on a fully-diluted basis
immediately prior to the date of such issuance and (2) the number of
additional shares of Common Stock which the aggregate offering price of
the number of shares of Common Stock so offered would purchase at the
greater of the Conversion Price or the Fair Market Value per share of
Common Stock.
(2) If the Corporation shall, at any time or from time to time after the
Original Issuance Date, directly or indirectly, redeem, purchase or
otherwise acquire any shares of Common Stock, options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, for a
consideration per share greater than the Fair Market Value (plus, in the
case of such options, rights, or securities, the additional consideration
required to be paid to the Corporation upon exercise, conversion or
exchange) for shares of Common Stock in effect immediately prior to such
event, then such Conversion Price, as in effect immediately prior to each
such event, shall forthwith be lowered to a price equal to the price
obtained by multiplying:
(A) the Conversion Price at which shares of Convertible Preferred
Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be the Fair Market
Value per share of Common Stock immediately prior to such event and (y)
the numerator shall be the result of dividing:
i) (1) the product of the number of shares of Common Stock
outstanding on a fully-diluted basis and the Fair Market Value per
share of Common Stock, in each case immediately prior to such event,
minus (2) the aggregate consideration paid by the Corporation in
such event (plus, in the case of such options, rights, or
convertible or exchangeable securities, the aggregate additional
consideration to be paid by the Corporation upon exercise,
conversion or exchange), by
ii) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately after such redemption.
(3) For the purposes of any adjustment of the Conversion Price pursuant
to Sections 4(e)(1) or (2) above, the following provisions shall be
applicable:
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(A) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be
the amount of cash paid therefor by the investors without deducting any
discounts, commissions or placement fees payable by the Corporation to
any underwriter or placement agent in connection with the issuance and
sale thereof that are usual and customary for such a transaction.
Notwithstanding anything provided above to the contrary, for purposes
of issuances described in this clause, Fair Market Value for such
issuance shall be deemed to be the lesser of (i) the Closing Price on
the date of the execution of the underwriting, placement, subscription
or purchase agreement executed in connection with such offering or
placement and (ii) the Fair Market Value (as defined herein) determined
as of the date of the execution of the underwriting, placement,
subscription or purchase agreement executed in connection with such
offering or placement.
(B) In the case of the issuance of Common Stock for consideration
consisting in whole or in part other than cash, the value of such non-
cash consideration shall be deemed to be the fair market value thereof
as determined in good faith by the Board or a duly authorized committee
thereof, irrespective of any accounting treatment. Notwithstanding
anything provided above to the contrary, for purposes of issuances
described in this clause, Fair Market Value for such issuance shall be
deemed to be the fair market value as determined in good faith by the
Board or a duly authorized committee thereof, irrespective of any
accounting treatment, as of the date of the approval of such
transaction by the Board or appropriate committee of the Board.
(C) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
options to acquire Excluded Stock:
i) the aggregate maximum number of shares of Common Stock deliverable
upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Sections
4(e)(3)(A) and (B) above), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock
covered thereby;
ii) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a consideration
equal to the consideration received by the Corporation for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in Sections
4(e)(3)(A) and (B) above); and
iii) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights
or conversions of or exchanges for such securities, other than a
change resulting from the antidilution provisions thereof, the
applicable Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made
upon the issuance of such options, rights or securities not
converted prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change;
iv) Upon the expiration of the right to convert, exchange or acquire
Common Stock in accordance with the terms of any securities, the
issuance of which securities had effected an adjustment to the
Conversion Price pursuant to the terms of this Section 4(e), if any
such
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securities shall not have been converted, exercised or exchanged
prior to such expiration, the number of shares of Common Stock
deemed to have been issued and outstanding by reason of the fact
that they were issuable upon conversion, exchange or exercise of any
such security pursuant to Section 4(e)(l) above, shall no longer be
computed as set forth above and the Conversion Price shall forthwith
be readjusted and thereafter be the price at which it would have
been had the adjustment to the Conversion Price made upon the
issuance or sale of any such security been made on the basis of the
issuance only of the number of additional shares of Common Stock
actually issued upon exercise, conversion or exchange thereof and
thereupon only the number of additional shares of Common Stock
actually so issued shall be deemed to have been issued and the only
consideration actually received by the Corporation (computed as set
forth above) shall be deemed to have been received by the
Corporation; and
v) No further adjustment of the Conversion Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or
options or any conversion or exchange of any such securities.
(4) All calculations under this Section will be made to the nearest one-
hundredth of a cent or to the nearest whole share, as the case may be. No
adjustment to the Conversion Price will be required unless such adjustment
would result in an increase or decrease of at least one percent (1%) of the
Conversion Price; provided, however, that any adjustments which by reason
of this clause (4) are not required to be made will be carried forward and
taken into account in a subsequent adjustment, if any.
(5) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then the provisions of Section 4(e)(1) shall not apply and,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the
Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of Convertible
Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(6) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for
such combination, the Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each
share of Convertible Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(7) In the event of any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in
par value or from par value to no par value or from no par value to par
value or as a result of a stock dividend or subdivision, split-up or
combination of shares), or any consolidation or merger of the Corporation
(other than the Merger), each share of Convertible Preferred Stock shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities
or property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion
of such share of Convertible Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
(8) In any case in which the provisions of this Section 4(e) shall
require that an adjustment shall become effective immediately after a
record date of an event, the Corporation may defer until the occurrence of
such event (1) issuing to the holder of any share of Convertible Preferred
Stock converted after such record date and before the occurrence of such
event the shares of capital stock issuable upon such conversion by reason
of the adjustment required by such event in addition to the shares of
capital
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stock issuable upon such conversion before giving effect to such
adjustments, and (2) paying to such holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 4(c) above; provided,
however, that the Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such additional shares
and such cash.
(9) Whenever a Conversion Price shall be adjusted as provided in this
Section 4(e), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its
chief financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such statement to be
sent by first class certified mail, return receipt requested and postage
prepaid, to each holder of Convertible Preferred Stock affected by the
adjustment at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included,
as part of any notice required to be mailed under the provisions of this
Section 4(e) below.
(10) If the Corporation shall propose to take any action of the types
described in clauses (5), (6) or (7) of this Section 4(e), the Corporation
shall give notice to each holder of shares of Convertible Preferred Stock,
in the manner set forth in clause (9) above, which notice shall specify the
record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the date
of such notice) on the Conversion Price and the number, kind or class of
shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of shares of Convertible Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice shall
be given at least 20 days prior to the date so fixed, and in case of all
other action, such notice shall be given at least 30 days prior to the
taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
(11) Without duplication of any other adjustment provided for in this
Section 4, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Corporation other than
shares of Common Stock, provision shall be made so that each holder of
Convertible Preferred Stock shall have the option to (i) receive as part of
such dividend or distribution the number of securities of the Corporation
which such holder would have received had its shares of Convertible
Preferred Stock been converted into shares of Common Stock immediately
prior to the date of such event or (ii) receive upon conversion thereof, in
addition to the shares of Common Stock receivable thereupon, the number of
securities of the Corporation which such holder would have received had its
shares of Convertible Preferred Stock been converted into shares of Common
Stock on the date of such event and had such holder thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by it pursuant to this paragraph during
such period, subject to the sum of all other adjustments called for during
such period under this Section 4 with respect to the rights of such holder
of Convertible Preferred Stock.
(12) If the Corporation issues any securities after the Original Issuance
Date containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Section 4, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Statement and, to the extent inconsistent with any
provision of this Statement, shall be deemed to be substituted therefor.
5. Redemption at Option of the Corporation.
(a) The Corporation shall have the right to redeem, at any time after the
fifth anniversary of the Original Issuance Date, out of funds legally available
for such purpose, all, but not less than all, of the shares of
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Convertible Preferred Stock then outstanding, for an amount per share (the
"Corporation Redemption Price"), which shall be payable in cash, as set forth
below:
(i) 103% of the Liquidation Amount, if such redemption occurs on or after
the fifth anniversary of the Original Issuance Date and before the sixth
anniversary date of the Original Issuance Date;
(ii) 102% of the Liquidation Amount, if such redemption occurs on or after
the sixth anniversary of the Original Issuance Date and before the eighth
anniversary date of the Original Issuance Date; and
(iii) 101% of the Liquidation Amount, if such redemption occurs on or
after the eighth anniversary of the Original Issuance Date but prior to the
Maturity Date.
(b) Not less than 20 nor more than 60 days (such date as fixed by the Board
of Directors of the Corporation is referred to herein as the "Redemption Record
Date") prior to the date fixed for any redemption of shares of the Convertible
Preferred Stock pursuant to this Section 5, a notice specifying the time and
place of the redemption, the redemption price and the number of shares to be
redeemed shall be given by first class mail, postage prepaid, to the holders of
record on the Redemption Record Date of the shares of the Convertible Preferred
Stock to be redeemed at their respective addresses as the same shall appear on
the books of the Corporation, calling upon each holder of record to surrender
to the Corporation on the redemption date at the place designated in the notice
such holder's certificate or certificates representing the number of shares
specified in the notice of redemption. Neither failure to mail such notice, nor
any defect therein or in the mailing hereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether
or not the holder receives the notice. On or after the redemption date, each
holder of shares of Convertible Preferred Stock to be redeemed shall present
and surrender such holder's certificate or certificates for such shares to the
Corporation at the place designated in the redemption notice and thereupon the
Corporation Redemption Price shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled.
(c) If a notice of redemption has been given pursuant to this Section 5 and
if, on or before the redemption date, the funds necessary for such redemption
(including all dividends on the shares of Convertible Preferred Stock to be
redeemed that will accrue to the redemption date) shall have been set aside by
the Corporation, separate and apart from its other funds in trust for the pro
rata benefit of the holders of the shares of Convertible Preferred Stock so
called for redemption, then, notwithstanding that any certificates for such
shares of Convertible Preferred Stock have not been surrendered for
cancellation, on the redemption date dividends shall cease to accrue on the
shares of the Convertible Preferred Stock to be redeemed, and the holders of
such shares shall cease to be shareholders with respect to those shares and
shall have no voting or other rights with respect thereto, except the right to
receive the moneys payable upon such redemption, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares of Convertible Preferred Stock evidenced thereby
shall no longer be outstanding, provided, however, nothing in this Section 5
will limit the right of the holders of shares of Convertible Preferred Stock to
convert such shares after the notice of redemption has been given and prior to
the redemption date in accordance with Section 4. If the holder of any shares
of Convertible Preferred Stock shall not, within one year after the redemption
date, claim the amount deposited for the redemption thereof, such funds shall
be released to the Corporation and held thereby until such holder shall make a
claim therefor.
(d) If a notice of redemption has been given pursuant to this Section 5 and
any holder of shares of Convertible Preferred Stock shall, prior to the close
of business on the Business Day immediately preceding the redemption date, give
written notice to the Corporation pursuant to Section 4 above of the conversion
of any or all of the shares to be redeemed held by the holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation, as required by Section 4 above), then such redemption shall not
become effective as to such shares to be converted and such conversion shall
become effective as provided in Section 4 above, whereupon any funds deposited
by the Corporation for the redemption of such shares shall
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immediately upon such conversion be returned to the Corporation or, if then
held in trust by the Corporation, shall automatically and without further
corporate action or notice be discharged from the trust.
6. Redemption at the Option of the Holders.
(a) Each holder of Convertible Preferred Stock shall have the right to
require the Corporation to redeem, out of funds legally available therefor, any
or all of such holder's shares of Convertible Preferred Stock at the Redemption
Price, plus the amount described in the first sentence of Section 2(d), in
connection with the occurrence of a Change of Control as set forth herein.
(b) The Corporation shall notify the holders of the Convertible Preferred
Stock in writing promptly upon the occurrence of a Change of Control; provided,
however, that any failure by the Corporation to provide such notice shall not
affect the right of the holders of shares of Convertible Preferred Stock to
require a redemption of such shares in connection with such Change of Control.
Such notice shall state the terms and conditions of such Change of Control.
(c) In the event the Requisite Convertible Preferred Shareholders expect
that a Change of Control will occur, the Requisite Convertible Preferred
Shareholders may so notify the Corporation, which notice shall specify the
circumstances constituting the expected Change of Control. Within three
Business Days following the receipt by the Corporation of such notice, the
Corporation shall notify each holder of Convertible Preferred Stock of the
receipt of such notice from the Requisite Convertible Preferred Shareholders.
For a period of 15 days following such notice by the Corporation, each holder
of Convertible Preferred Stock may elect to have any or all of such holder's
shares of Convertible Preferred Stock redeemed under this Section 6(c) by
providing an irrevocable written notice (a "Section 6(c) Redemption Notice") to
the Corporation of such election; provided, however, no redemption shall be
effected prior to the consummation of the Change of Control. The Corporation
shall effect such redemption on the later to occur of (i) 15 days following
receipt by the Corporation of such Section 6(c) Redemption Notice and (ii) the
date of the consummation of such Change of Control (such date on which
redemption is required, the "Redemption Date") and the holders of record of
shares of Convertible Preferred Stock being redeemed in accordance with this
Section 6(c) shall promptly deliver certificates representing the shares being
redeemed to the Corporation or its agents. If a holder has delivered a Section
6(c) Redemption Notice and no Change of Control shall have been consummated
within 180 days from the date of such Section 6(c) Redemption Notice, then such
Section 6(c) Redemption Notice shall be null and void and the holders shall
again be entitled to deliver a new Section 6(c) Redemption Notice in accordance
with the terms of this Section 6(c).
(d) If the Corporation has delivered to the holders of the Convertible
Preferred Stock a notice pursuant to Section 6(b) above that a Change of
Control has occurred, each holder of Convertible Preferred Stock may elect to
have any or all of such holder's shares of Convertible Preferred Stock redeemed
under this Section 6(d) by providing an irrevocable written notice (a "Section
6(d) Redemption Notice") to the Corporation of such election at any time prior
to the 90th day following the date of the Corporation's notice given pursuant
to Section 6(b) (the "Expiration Date"). The Corporation shall effect the
redemption of all shares pursuant to this Section 6(d) on the date which is 15
days after the Expiration Date.
(e) If, on or before any redemption date specified in paragraph (c) or (d)
above, the funds necessary for such redemption (including all dividends on the
shares of Convertible Preferred Stock to be redeemed that will accrue to the
redemption date) shall have been set aside by the Corporation, separate and
apart from its other funds in trust for the pro rata benefit of the holders of
the shares of Convertible Preferred Stock so called for redemption, then,
notwithstanding that any certificates for such shares of Convertible Preferred
Stock have not been surrendered for cancellation, on the redemption date,
dividends shall cease to accrue on the shares of the Convertible Preferred
Stock to be redeemed, and the holders of such shares shall cease to be
shareholders with respect to those shares and shall have no voting or other
rights with respect thereto, except the right to receive the monies payable
upon such redemption, without interest thereon, upon surrender (and
endorsement, if required by the Corporation) of their certificates, and the
shares of Convertible Preferred Stock evidenced
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thereby shall no longer be outstanding. Upon delivery to the Corporation of an
irrevocable notice from a holder of Convertible Preferred Stock pursuant to
paragraph (c) or (d) above, the right of such holder to convert the shares of
Convertible Preferred Stock to be redeemed into shares of Common Stock pursuant
to Section 4 shall cease and terminate. If the holder of any shares of
Convertible Preferred Stock shall not, within one year after the redemption
date, claim the amount deposited for the redemption thereof, such funds shall
be released to the Corporation and held thereby until such holder shall make a
claim therefor. On and after the redemption date pursuant to either Section
6(c) or (d) above (unless default shall be made by the Corporation in the
payment of the applicable Redemption Price, in which event such rights shall be
exercisable until such default is cured), all rights in respect of the shares
of Convertible Preferred Stock to be redeemed, except the right to receive the
Redemption Price, shall cease and terminate, and such shares shall no longer be
deemed to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation.
(f) If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of the
entire Redemption Price required to be paid pursuant to this Section 6, then
the holders of Convertible Preferred Stock shall share ratably in any such
redemption based on the respective number of shares of Convertible Preferred
Stock that each holder thereof holds.
(g) Any communication or notice relating to redemption given pursuant to
this Section 6 shall be sent by first-class certified mail, postage prepaid, to
the holders of record of shares of Convertible Preferred Stock, at their
respective addresses as the same shall appear on the books of the Corporation,
or to the Corporation at the address of its principal, or registered office, as
the case may be.
(h) The Corporation shall not engage in any Sale of the Corporation
transaction unless (i) if the Corporation shall be the surviving or continuing
entity of such transaction, the Corporation shall, after consummation thereof,
have sufficient funds to perform its obligations under this Section 6, and (ii)
if the Corporation shall not be the surviving or continuing entity of such
transaction, proper and adequate provision shall be made, in the definitive
documentation providing for such transaction or otherwise, to ensure that the
surviving or continuing corporation of such transaction shall expressly assume
the Corporation's obligations under this Section 6 and shall have sufficient
funds to perform its obligations under this Section 6.
7. Mandatory Redemption.
On the Maturity Date, the Corporation shall redeem each outstanding share of
Convertible Preferred Stock for the Liquidation Amount of such share at such
time. If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of the
entire Liquidation Amount to which they shall be entitled, the holders of
Convertible Preferred Stock shall share ratably in any such redemption based on
the respective number of shares of Convertible Preferred Stock that each holder
thereof holds.
8. Voting Rights.
(a) Except as otherwise expressly provided herein or required by law and so
long as any shares of the Convertible Preferred Stock are outstanding, each
share of Convertible Preferred Stock shall entitle the holder thereof to notice
of and to vote, in person or by proxy, at any special or annual meeting of
shareholders, on all matters entitled to be voted on by holders of Common Stock
(and any other series or class of Voting Stock also entitled to vote with the
holders of Common Stock), voting together as a single class with all other
shares entitled to vote thereon. With respect to any such vote, each share of
Convertible Preferred Stock shall entitle the holder thereof to cast that
number of votes as is equal to the number of votes that such holder would be
entitled to cast had such holder converted such share of Convertible Preferred
Stock into shares of Common Stock as of the record date for determining the
shareholders of the Corporation entitled to vote on any such matters.
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(b) At any time after the Original Issuance Date, the Corporation shall
not, and shall not permit any Subsidiary to, without first obtaining the
affirmative written consent or approval of the Requisite Convertible Preferred
Shareholders:
(i) in any manner authorize, create, designate, issue, sell or reclassify
any class or series of capital stock of the Corporation (including any
shares of treasury stock) or rights, options, warrants or other securities
convertible into or exercisable or exchangeable for capital stock or any
debt security which by its terms is convertible into or exchangeable for
any equity security or has any other equity feature or any security that is
a combination of debt and equity, which, in each case, as to the payment of
dividends, distribution of assets or Redemptions, including, without
limitation, distributions to be made upon a Liquidation, is pari passu
with, is senior to the Convertible Preferred Stock or is mandatorily
redeemable prior to the Convertible Preferred Stock or which in any manner
materially adversely affects the rights, preferences or remedies of the
holders of the Convertible Preferred Stock;
(ii) in any manner alter or change the terms, designations, powers,
preferences or relative, participating, optional or other special rights,
or the qualifications, limitations or restrictions thereof, of the
Convertible Preferred Stock;
(iii) in any manner authorize, create, issue or sell any additional shares
of Convertible Preferred Stock;
(iv) amend, alter or repeal any of the provisions of (A) the Articles of
Incorporation of the Corporation (as amended or restated) or (B) the By-
laws of the Corporation, if such amendment, alteration or repeal would
alter or change the rights, preferences or privileges of the holders of
such Convertible Preferred Stock so as to adversely affect them.
(v) declare or pay any dividend with respect to, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, retirement or other acquisition of, any shares of
any class of capital stock of the Corporation ranking junior to the
Convertible Preferred Stock, or any warrants or options to purchase any
such capital stock, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
obligations of the Corporation or any Subsidiary (other than a declaration
or payment of a stock dividend payable in shares of Common Stock to the
holders of Common Stock); provided, however, that the Corporation may
declare or pay any dividend on (or repurchase) the Common Stock if such
amount, when combined with the sum of all other dividends declared or paid
on (plus all amounts paid in the repurchase of), the Common Stock in the
preceding twelve-month period, does not exceed 5% of the aggregate Fair
Market Value of the Common Stock at the time of the declaration or payment
of such dividend or commitment to repurchase, as the case may be;
(vi) agree to, or permit any Subsidiary to agree to, any provision in any
agreement that would by its terms impose any restriction on the ability of
the Corporation to honor the exercise of any rights of the holders of the
Convertible Preferred Stock;
(vii) enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property, the rendering of any service
or the payment of any management, advisory or similar fees, with any
Affiliate (other than any transaction between the Corporation and any
wholly-owned Subsidiary or between or among wholly-owned Subsidiaries)
unless such transaction is (a) in the ordinary course of business of the
Corporation and its Subsidiaries, and (b) upon fair and reasonable terms no
less favorable to the Corporation and its Subsidiaries than they would
obtain in a comparable arm's length transaction with a Person which is not
an Affiliate
9. Board of Directors.
(a) The holders of the Convertible Preferred Stock, voting as a separate
class, shall be entitled to elect directors (the "Convertible Preferred
Directors") to the Board as follows:
(i) for so long as Apollo and its Affiliates hold in the aggregate Common
Stock Equivalents representing at least 50% of the number of Conversion
Shares issuable upon conversion of the Convertible
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Preferred Stock issued on the Original Issuance Date, Apollo shall be
entitled to elect the greater of 3 directors or the number of directors
that represents 30% of the Board, rounded up to the nearest whole director;
(ii) for so long as Apollo and its Affiliates hold in the aggregate Common
Stock Equivalents representing at least 25% of the number of Conversion
Shares issuable upon conversion of the Convertible Preferred Stock issued
on the Original Issuance Date, Apollo shall be entitled to elect the number
of directors that represents 22% of the Board, rounded up to the nearest
whole director;
(iii) for so long as Apollo and its Affiliates hold in the aggregate
Common Stock Equivalents representing at least 12 1/2% of the number of
Conversion Shares issuable upon the conversion of the Convertible Preferred
Stock issued on the Original Issuance Date, Apollo shall be entitled to
elect the number of directors that represents 15% of the Board, rounded up
to the nearest whole director.
(b) In the event the number of directors the holders of Convertible
Preferred Stock are entitled to elect decreases in accordance with paragraph
(a) above, then the number of directors the holders of Convertible Preferred
Stock are entitled to elect pursuant to paragraph (a) shall not thereafter be
increased, irrespective of any subsequent acquisition of Common Stock
Equivalents by Apollo and its Affiliates. In determining the number of
directors the holders of the Convertible Preferred Stock shall be entitled to
elect pursuant to paragraph (a) above, Apollo and its Affiliates shall be
deemed to hold each Common Stock Equivalent that is held of record by Apollo or
any of its Affiliates, or as to which Apollo or any of its Affiliates retains
the entire economic interest.
(c) Each committee of the Board shall include directors elected by the
holders of shares of the Convertible Preferred Stock in the same proportion,
rounded up to the nearest whole director, as such directors comprise the Board
and the Corporation shall provide each Convertible Preferred Director with
notice at least 48 hours prior to any meeting of the Board or any committee.
(d) If an Event of Non-Compliance occurs (each, a "Trigger Event"), the
Requisite Convertible Preferred Shareholders (voting as a separate class) shall
have the special right to elect that number of individuals to the Board that
will constitute a majority of the Board. Upon receipt by the Corporation of
written notice of the occurrence of a Trigger Event signed by the Requisite
Convertible Preferred Shareholders, the number of directors constituting the
entire Board shall be increased by a number which, together with the number of
directors which the holders of the Convertible Preferred Stock have elected
pursuant to Section 9(a), shall constitute a majority of the number of
directors constituting the entire Board. Upon receipt by the Corporation of
written consents signed by or on behalf of the Requisite Convertible Preferred
Shareholder designating the persons to fill the vacancy created by any such
increase, the Board shall immediately fill such vacancies with the designees
named in such notice. In lieu of delivery of notice to the Corporation
described in the preceding sentence, at their discretion, the holders of the
Convertible Preferred Stock, voting separately as a single class, may elect
such additional directors at any annual meeting of the shareholders or any
special meeting of the holders of the Convertible Preferred Stock called as
hereinafter provided. At any time during which the power to elect any directors
pursuant to this Section 9(d) has been vested in the holders of Convertible
Preferred Stock, the Secretary of the Corporation, upon written request of any
holder of Convertible Preferred Stock, shall call a meeting of the holders of
the Convertible Preferred Stock for the election of directors as provided
herein. In case any vacancy shall occur among the directors elected by the
holders of the Convertible Preferred Stock pursuant to Section 9(a) or 9(d), a
successor shall be elected by the Convertible Preferred Directors (or by the
holders of the Convertible Preferred Stock, in the event no such director
remains in office). The rights of the holders of the Convertible Preferred
Stock under this Section 9(d) shall continue until such time as there is no
longer a Trigger Event in existence, at which time such special right shall
terminate, subject to revesting upon the occurrence and continuation of any
subsequent Trigger Event which gives rise hereunder. After the expiration of
such Trigger Event, the term of office of the directors elected pursuant to
this Section 9(d) shall automatically expire and the number of directors shall
be reduced accordingly.
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(e) Any transferee of shares of Convertible Preferred Stock shall be
required, as a condition to such transfer, to enter into a written agreement
with the transferor and the Corporation, which agreement shall confer on Apollo
(or such other Person as the Corporation shall approve), for so long as such
shares remain outstanding, sole power and authority to vote such shares of
Convertible Preferred Stock (at any meeting of shareholders or by execution of
a written consent of shareholders), with respect to (i) any election of
directors of the Corporation, including any election of directors pursuant to
Section 9 of this Statement, or (ii) any matter described in Section 8(b)(vi).
A counterpart of any such contract shall be deposited with the Corporation at
its principal place of business or registered office and shall be subject to
examination by shareholders, in accordance with Article 2.30 of the Texas
Business Corporation Act. Upon any transfer in which the transferee does not
agree to such contractual agreement described above, such shares of Convertible
Preferred Stock shall automatically convert into a like number of Series B
Convertible Preferred Stock, which shall be identical in all respects to the
Convertible Preferred Stock, except such Series B Convertible Preferred Stock
shall not be entitled to vote (at any meeting of shareholders or by execution
of a written consent of shareholders) with respect to (i) any election of
directors of the Corporation, including any election of directors pursuant to
Section 9, or (ii) any matter described in Section 8(b)(vi).
10. Definitions.
As used herein, the following terms shall have the following meanings:
"Accumulated Amount" means an amount per share of Convertible Preferred
Stock equal to the Original Cost plus the sum of all dividends accrued but
unpaid as of the most recent Preferred Dividend Payment Date.
"Affiliate " means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person; provided that
Affiliates of Apollo shall exclude any operating companies that would otherwise
be deemed an Affiliate of Apollo, but shall include all investment partnerships
and special purpose entities that are not operating companies, whether existing
as of the date hereof or created hereafter, if the Persons controlling Apollo
have a dominant management role in such entities. For the purpose of the above
definition, the term "control" (including, with correlative meaning, the terms
"controlling", "controlled by", and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Applicable Dividend Rate" means 7.25% per annum; provided however that the
Applicable Dividend Rate shall be 9.25% upon the occurrence of and during the
continuation of any Event of Non-Compliance until cured, except for any Event
of Non-Compliance related solely to:
(i) a breach by the Company of any provisions of the Purchase
Agreement; or
(ii) any breach of Sections 15(a), (iii), (v), (vi), (vii), or (ix)
through (xiii) (in the case of (xiii), only insofar as it relates to the
foregoing clauses) of the Investor Rights Agreement that does not have a
material adverse effect on the Corporation and its Subsidiaries, taken as a
whole.
"Apollo" means Apollo Management IV, L.P.
"Appraisal Procedure" shall mean the following procedure to determine the
fair market value, as to any security, for purposes of the definition of "Fair
Market Value" or the fair market value, as to any other property (in either
case, the "valuation amount"). The valuation amount shall be determined in good
faith jointly by the disinterested members of the Board and the Requisite
Convertible Preferred Shareholders; provided, however, that if such parties are
not able to agree on the valuation amount within a reasonable period of time
(not to exceed twenty (20) days) the valuation amount shall be determined by an
investment banking firm of national recognition, which firm shall be reasonably
acceptable to the disinterested members of the Board and the Requisite
Convertible Preferred Shareholders. If the disinterested members of the Board
and the
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Requisite Convertible Preferred Shareholders are unable to agree upon an
acceptable investment banking firm within ten (10) days after the date either
party proposed that one be selected, the investment banking firm will be
selected by an arbitrator located in New York City, New York, selected by the
American Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the disinterested members of
the Board and the Requisite Convertible Preferred Shareholders, of not more
than six investment banking firms of national standing in the United States,
of which no more than three may be named by the disinterested members of the
Board and no more than three may be named by the Requisite Convertible
Preferred Shareholders. The arbitrator may consider, within the ten-day period
allotted, arguments from the parties regarding which investment banking firm
to choose, but the selection by the arbitrator shall be made in its sole
discretion from the list of six. The disinterested members of the Board and
the Requisite Convertible Preferred Shareholders shall submit to the
investment banking firm their respective determinations of the valuation
amount, and any supporting arguments and other data as they may desire, within
ten (10) days of the appointment of the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Corporation and the Requisite Convertible Preferred
Shareholders and the valuation amount calculated by the investment banking
firm. The determination of the final valuation amount by such investment-
banking firm shall be final and binding upon the parties. The party that
submits the valuation amount that is not used by the investment banking firm
to calculate the final valuation amount shall pay the fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the
valuation amount. If required by any such investment banking firm or
arbitrator, the Corporation shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and contribution
by the Corporation in favor of such investment banking firm or arbitrator and
its officers, directors, partners, employees, agents and Affiliates.
"Board" means the Board of Directors of the Corporation.
"BOSC" means Building One Services Corporation, a Delaware Corporation.
"Business Day" means any day except a Saturday, Sunday or a day on which
banking institutions are legally authorized to close in the City of New York
"Change of Control" means the occurrence, after the date of the
consummation of the Merger, of any of the following events (each a "Change of
Control"):
(i) the Sale of the Corporation,
(ii) the adoption of a plan relating to a Liquidation,
(iii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than Apollo and its Affiliates,
is or becomes the "beneficial owner" (as defined in Rules 13-d-3 and 13d-5
under the Exchange Act), directly or indirectly, of Voting Stock entitled
to cast a majority of the votes entitled to be cast by the holders of the
outstanding Voting Stock of the Corporation,
(iv) (A) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than Apollo and its Affiliates,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of Voting Stock entitled
to cast more than 30% of the votes entitled to be cast by the holders of
the outstanding Voting Stock of the Corporation and (B) Apollo and its
Affiliates beneficially owns, directly or indirectly, Voting Stock entitled
to cast in the aggregate a lesser percentage of the votes entitled to be
cast by the outstanding Voting Stock of the Corporation than such other
person or group, or
(v) the first day on which a majority of the Common Stock Directors are
not Continuing Directors.
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"Closing Price" means with respect to the shares of Common Stock on any day,
(i) the last reported sales price, or in the case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices, in
either case on the NYSE, or (ii) if the shares of Common Stock are not listed
or admitted to trading on the NYSE, the last reported sales price, or in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading, or (iii) if
the shares of Common Stock are not listed on any national securities exchange,
the average of the closing bid and asked prices in the over-the-counter market
as furnished by any NYSE member firm selected from time to time by the
Corporation for that purpose, or (iv) if such prices in the over-the-counter
market are not available, the Fair Market Value.
"Common Stock" means the Common Stock, par value $0.001, of the Corporation.
"Common Stock Directors" means those directors who have not been elected by
the holders of the shares of the Convertible Preferred Stock pursuant to
Section 9.
"Common Stock Equivalent" means one share of Common Stock or the right to
acquire, whether or not immediately exercisable, one share of Common Stock,
whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar events.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom (a) after-tax gains or losses from asset
sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains or losses, (c) the net income
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is by a contract, operation of law or otherwise
prohibited, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a wholly owned Subsidiary of the referent Person
by such Person, and (f) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Continuing Directors" means Common Stock Directors who were directors on
the Original Issuance Date or whose election to the Board, or whose nomination
for election by the shareholders of the Corporation, was approved by a majority
of the Common Stock Directors then still in office who were either directors on
the Original Issuance Date or whose election or nomination for election was
previously so approved.
"Conversion Date" shall have the meaning set forth in Section 4(b).
"Conversion Price" shall have the meaning set forth in Section 4(a).
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock, as adjusted to account for any
stock splits, reverse splits, stock dividends or other similar events.
"Corporation Redemption Price" shall have the meaning set forth in Section
5(a).
"Event of Non-Compliance" means the occurrence of any of the following:
(i) the Corporation fails to pay the dividends or distributions
required pursuant to Section 2 hereof and such failure to pay continues 10
days after notice of such failure has been delivered by any holder of
shares of Convertible Preferred Stock;
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(ii) the Corporation fails to pay the full redemption price when due
under Sections 5, 6 or 7 hereof;
(iii) any breach by the Corporation of Section 8(b) hereof, any other
material breach by the Corporation of any of the terms and conditions
hereof, or any material and intentional breach by the Corporation of any of
the terms and conditions of the Investor Rights Agreement or the Purchase
Agreement;
(iv) there is a payment default, or any other default giving rise to a
right of acceleration, under any Indebtedness of the Corporation that has
an aggregate principal amount outstanding, as of the date of such default
or acceleration, in excess of $10,000,000 (after giving effect to any
notice or cure period relating to such Indebtedness);
(v) the Corporation or any of its material Subsidiaries shall (A)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code or any other federal, state or
foreign bankruptcy, insolvency or similar law, (B) consent to the
institution of, or fail to controvert in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (C) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator
or similar official for any such Person or for any substantial part of its
property or assets, (D) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (E) make a general
assignment for the benefit of creditors, (F) fail generally to pay its
debts as they become due or (G) take any corporate or shareholder action in
furtherance of any of the foregoing; or
(vi) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (A)
relief in respect of the Corporation or any of its material Subsidiaries,
or of any substantial part of their respective property or assets, under
Title 11 of the United States Code or any other federal, state or foreign
bankruptcy, insolvency or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any such Person or
for any substantial part of its property or (C) the winding-up or
liquidation of any such Person, and such proceeding, petition or order
shall continue unstayed and in effect for a period of 60 consecutive days.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Stock" means (i) shares of Common Stock issuable upon exercise of
any warrants or options of the Corporation outstanding on the Original
Issuance Date, (ii) shares of Common Stock issuable upon exercise of any
warrant or option of BOSC assumed by the Corporation in connection with the
Merger, (iii) shares of Common Stock issued pursuant to the conversion of the
Convertible Preferred Stock, (iv) shares of Common Stock issued as
consideration pursuant to any acquisition by the Company or any Subsidiary of
any Person or assets (an "Acquisition") if (x) the total consideration paid in
such Acquisition is (based on total cash consideration, total Indebtedness
assumed by the Company and its Subsidiaries and the Fair Market Value of the
shares of Common Stock issued and other property paid) is less than 2.0% of
the total assets of the Company and its Subsidiaries as of the end of its most
recently completed fiscal quarter and (y) the Consolidated Net Income per
outstanding share of Common Stock for the immediately preceding full twelve
month period giving pro forma effect to such Acquisition, and related
financing, as if such Acquisition were consummated at the beginning of such
period is greater than the actual Consolidated Net Income per outstanding
share of Common Stock for such period, (v) shares of Convertible Preferred
Stock issued as dividends to the holders of Convertible Preferred Stock, (vi)
shares of Common Stock or options issued pursuant to any Company or BOSC
employee incentive or benefit arrangement existing on the date hereof pursuant
to the terms thereof on the date hereof, (vii) shares of Common Stock or
options issued pursuant to Corporation employee incentive or benefit
arrangements adopted after the Original Issuance Date of substantially the
same size and on terms that are no less favorable to the Company than such
plans existing on the date hereof to become effective upon the termination of
such existing plans to replace such existing plans and all outstanding options
thereunder, (viii) shares of Common Stock issued pursuant to obligations to
pay earnouts with respect to the Acquisitions described on Schedule I hereto
in accordance with the agreements relating thereto, (ix) up to 2,500,000
shares of Common Stock under a new employee option plan to be
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instituted by the Corporation at the closing of the Merger, (x) up to 1,200,000
shares of Common Stock issued pursuant to a stock performance incentive plan no
less favorable to the Corporation than the BOSC 1999 Stock Performance
Incentive Plan (whether as an addition to such plan, or as a part of an
expanded plan which incorporates the BOSC plan plus the additional 1,200,000
shares) and (xi) Common Stock issued to the shareholders of BOSC pursuant to
the Merger Agreement.
"Fair Market Value" means, as to any security, the average of the Closing
Prices of such security (i) averaged over a period of 21 days consisting of the
day immediately preceding the day as of which "Fair Market Value" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's
length transactions). If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Fair Market Value" of such security shall be the
fair market value thereof as determined in accordance with the Appraisal
Procedure, using an appropriate valuation method, assuming an arms-length sale
to an independent party. In determining the fair market value of any class or
series of Common Stock, a sale of all of the issued and outstanding Common
Stock of the Corporation will be assumed, without giving regard to the lack of
liquidity of such stock due to any restrictions (contractual or otherwise)
applicable thereto or any discount for minority interests and assuming the
conversion or exchange of all securities then outstanding that are convertible
into or exchangeable for Common Stock and the exercise of all rights and
warrants then outstanding and exercisable to purchase shares of such stock or
securities convertible into or exchangeable for shares of such stock; provided,
however that such assumption will not include those securities, rights and
warrants convertible into Common Stock where the conversion, exchange or
exercise price per share is greater than the fair market value; provided,
further, however, that fair market value shall be determined with regard to the
relative priority of each class or series of Common Stock (if more than one
class or series exists.)
"Indebtedness" of any Person means, without duplication, (a) all obligations
of such Person for borrowed money or with respect to deposits or advances of
any kind, (b) all obligations of such Person evidenced by (or which customarily
would be evidenced by) bonds, debentures, notes or similar instruments, (c) all
reimbursement obligations of such Person with respect to letters of credit and
similar instruments, (d) all obligations of such Person under conditional sale
or other title retention agreements relating to property or assets purchased by
such Person, (e) all obligations of such Person incurred, issued or assumed as
the deferred purchase price of property or services other than accounts payable
incurred and paid on terms customary in the business of such Person, provided
that Indebtedness shall include contingent purchase price obligations and other
earnout obligations of the Corporation and its Subsidiaries incurred in
connection with the acquisition of any business, to the extent that it is more
likely than not that such obligations will be paid (it being understood that
the "deferred purchase price" in connection with any purchase of property or
assets shall include only that portion of the purchase price which shall be
deferred beyond the date on which the purchase is actually consummated), (f)
all obligations secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person under forward sales, futures, options and
other similar hedging arrangements (including interest rate hedging or
protection agreements), (h) all guaranties by such Person of obligations of
others and (i) all capitalized lease obligations of such Person.
"Initial Dividend Period" means the period from and including the Original
Issuance Date through and including the third anniversary of the Original
Issuance Date.
"Investor's Rights Agreement" means the Investor Rights Agreement dated as
of the Original Issuance Date among the Corporation and the Investor.
"Investor" means BOSS II, LLC.
"Lien" means any security interest, lien, pledge, claim, charge, escrow,
encumbrance, option, right of first offer, right of first refusal, preemptive
right, mortgage, indenture, security agreement or other similar
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agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or
the borrowing of money.
"Liquidation" means any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, other than any dissolution,
liquidation or winding up in connection with any reincorporation of the
Corporation in another jurisdiction.
"Liquidation Amount" means, as to each share of Convertible Preferred
Stock, the Original Cost plus all accrued and unpaid dividends and all
accumulated and unpaid dividends, whether or not declared and whether or not
there are profits, surplus or other funds legally available for dividends,
payable with respect to such share of Convertible Preferred Stock.
"Maturity Date" means the 12th anniversary of the Original Issuance Date.
"Merger" means the merger contemplated by the Agreement and Plan of Merger
dated November 2, 1999, by and between Group Maintenance America Corp. and
Building One Services Corporation.
"NASDAQ System" means the National Association of Securities Dealers
Automated Quotation System.
"Original Cost" means $1,000 per share.
"Original Issuance Date" for the Convertible Preferred Stock means the date
of original issuance of the first share of such Convertible Preferred Stock.
"Person" shall be construed broadly and shall include, without limitation,
an individual, a partnership, an investment fund, a limited liability
corporation, a corporation, an association, a joint stock corporation, a
trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
"Preferred Dividend Payment Date" shall have the meaning set forth in
Section 2(a).
"Preferred Record Date" shall have the meaning set forth in Section 2(b).
"Purchase Agreement" means the Securities Purchase Agreement dated as of
November 2, 1999 among the Corporation and the Investor.
"Redemption Date" shall have the meaning set forth in Section 6(c).
"Redemption Price" shall mean 101% of the Liquidation Amount.
"Redemption Record Date" has the meaning set forth in Section 5(b).
"Requisite Convertible Preferred Shareholders" means, as of any date of
determination, the holders of a majority of the outstanding shares of
Convertible Preferred Stock as of such date.
"Sale of the Corporation" shall mean (i) the sale or other disposition,
directly or indirectly, of all or substantially all of the Corporation's
assets in one transaction or a series of transactions or (ii) the merger or
consolidation of the Corporation with or into another Person, in the case of
clause (ii) only, under circumstances in which the holders of Voting Stock
entitled to cast a majority of the votes entitled to be cast by the holders of
the Voting Stock of the Corporation, immediately prior to the merger or
consolidation, own Voting Stock entitled to cast less than a majority of the
votes entitled to be cast by the holders of the Voting Stock of the
Corporation or the surviving or resulting corporation or acquirer, as the case
may be, immediately following such merger or consolidation. A sale (or sales)
of one or more Subsidiaries of the Corporation (whether by way of merger,
consolidation, reorganization or sale of all or substantially all assets or
securities) which constitutes all or substantially all of the consolidated
assets of the Corporation shall be deemed a Sale of the Corporation.
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<PAGE>
"Second Dividend Period" means the period from, but not including, the third
anniversary of the Original Issuance Date through and including the Maturity
Date.
"Statement" means this Statement of designations, rights, preferences,
powers, privileges and restrictions, qualifications, and limitations.
"Subsidiary" means any entity of which a majority of the outstanding Voting
Stock, is owned by the Corporation either directly or indirectly through
Subsidiaries.
"Trigger Event" shall have the meaning set forth in Section 9(d).
"Voting Stock" of a Person means any class or all classes of capital stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
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ANNEX F
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTOR'S RIGHTS AGREEMENT
dated , 2000
among
GROUP MAINTENANCE AMERICA CORP.
and
BOSS II, LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Definitions.................................................. F-1
Section 2. Rights to Subscribe for Securities........................... F-6
Section 3. Board of Directors........................................... F-6
Section 4. Information Rights; Covenants................................ F-8
Section 5. Demand Registration.......................................... F-10
Section 6. Piggyback Registration....................................... F-11
Section 7. S-3 Registrations............................................ F-12
Section 8. Expenses..................................................... F-12
Section 9. Preparation and Filing....................................... F-12
Section 10. Indemnification.............................................. F-14
Section 11. Underwriting Agreement....................................... F-16
Section 12. Information by Holders....................................... F-16
Section 13. Exchange Act Compliance...................................... F-16
Section 14. No Conflict of Rights........................................ F-16
Section 15. Protective Provisions........................................ F-17
Section 16. Standstill................................................... F-19
Section 17. Voting Agreement............................................. F-19
Section 18. Miscellaneous................................................ F-19
</TABLE>
F-i
<PAGE>
INVESTOR'S RIGHTS AGREEMENT dated as of
, 2000, among GROUP MAINTENANCE
AMERICA CORP., a Texas corporation (the
"Company"), and BOSS II, LLC, a Delaware limited
liability company (the "Investor").
The Investor currently holds the Convertible Preferred Stock, which is
initially convertible into shares of Common Stock. The parties hereto
deem it to be in their best interests to set forth their rights and obligations
in connection with public offerings, sales of shares of Common Stock and
certain other matters. Accordingly, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Accountants" has the meaning assigned to such term in Section 4(b)(iii).
"Affiliate" has the meaning assigned to such term in the Subscription
Agreement.
"Board" means the Board of Directors of the Company.
"Business" shall mean the provision of all manner of facilities services to
the owners, lessees or operators of industrial, commercial, institutional and
residential plants, buildings, homes and other facilities and the properties
related thereto (collectively, "Facilities"), including, without limitation (i)
design, engineering, construction, project management, repair, replacement,
maintenance and service, performance contracting, energy management and
aggregation and project financing of all of the mechanical (heating,
ventilation, air conditioning; plumbing and piping; appliance repair; fire
suppression systems) and electrical (internal and external wiring; generators
and UPS systems; voice and data systems; fire and life safety systems;
temperature control, building automation and energy management) systems, (ii)
rigging, millwright and other industrial services, (iii) janitorial, specialty
cleaning and other services for the repair, maintenance and upkeep of
Facilities, including, without limitation, the provision of onsite maintenance
and support personnel and the outsourcing of the Facilities management function
by an owner, lessee or operator of any Facilities.
"Capital Expenditure" means any expenditure by the Company and its
Subsidiaries for the acquisition, construction, or leasing (pursuant to a
capital lease) of fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such period) which
should be capitalized under generally accepted accounting principles on a
consolidated balance sheet of the Company and its Subsidiaries; provided,
however, this definition shall not include any acquisition of a business.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Closing" has the meaning assigned to such term in the Subscription
Agreement.
"Closing Date" has the meaning assigned to such term in the Subscription
Agreement.
"Commission" means the United States Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company.
"Common Stock Equivalent" means one share of Common Stock or the right to
acquire, whether or not immediately exercisable, one share of Common Stock,
whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar event.
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<PAGE>
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) all income taxes of such
Person and Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses), (B) Consolidated Interest Expense and (C) depreciation and
amortization less any out of the ordinary course non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Subsidiaries in accordance with GAAP.
"Consolidated Indebtedness" means with respect to any Person, as of the date
of determination, the aggregate amount of all Indebtedness of such Person and
its Subsidiaries on a consolidated basis included on the face of the balance
sheet of such Person (determined in accordance with GAAP) plus any Indebtedness
included on the face of the balance sheet of any other Person (determined in
accordance with GAAP) as to which such Person and/or any of its Subsidiaries
has created a guarantee or other contingent obligation (to the extent of such
guarantee or other contingent obligation).
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation, (a)
any amortization of debt discount and amortization or write-off of deferred
financing costs (including the amortization of costs relating to interest rate
caps or other similar agreements, but excluding any write-off of debt discount
or deferred financing costs resulting from the Merger or any related
financing), (b) the net costs required by GAAP to be recorded as interest
expense for Interest Swap Obligations, and (c) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid or accrued by such Person and its Subsidiaries during
such period as determined on a consolidated basis in accordance with GAAP,
minus interest income for such period.
"Consolidated Leverage Ratio" means, with respect to any Person, the ratio
of Consolidated Indebtedness of such Person on the date of the transaction
giving rise to the need to calculate the Consolidated Leverage Ratio (the
"Transaction Date") to Consolidated EBITDA of such Person for the four full
fiscal quarters (the "Four Quarter Period") most recently ending on or prior to
the Transaction Date for which quarterly consolidated financial statements of
the Company and its Subsidiaries have been distributed to Investor. In addition
to and without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and "Consolidated Indebtedness" shall be calculated after
giving effect on a pro forma basis, including appropriate adjustments
determined in accordance with Article XI of Regulation S-X promulgated by the
Commission, for the period of such calculation for any asset sales or asset
acquisitions (including, without limitation, any asset acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
asset acquisition) incurring, assuming or otherwise being liable for acquired
Indebtedness and also including any Consolidated EBITDA attributable to the
assets which are the subject of the asset acquisition but excluding the
Consolidated EBITDA attributable to the assets which are the subject of the
asset sale) occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such asset sale or asset acquisition (including the incurrence,
assumption or liability for any such acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom (a) out of the ordinary course after-tax
gains or losses from asset sales or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains or
losses, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Subsidiary of the referent
Person or is merged or
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consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is prohibited by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a wholly owned Subsidiary of the referent Person
by such Person, (f) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets, and (g) after tax charges associated with consummating the
Merger and related financing.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock.
"Convertible Preferred Stock" means the Company's 7.25% convertible
preferred stock, $.001 par value share, governed by the Statement of
Designations.
"Credit Agreement" means the Credit Agreement dated as of , 2000
between the Corporation and , as it may be amended from
time to time, other than amendments to the size of the facility.
"Election Notice" has the meaning assigned to such term in Section 15(c).
"Equity-Linked Plan" shall mean a benefit or compensation plan in which
benefits or awards are denominated or payable in capital stock of the Company,
valued in whole or in part by reference to, or otherwise based on, the value of
such capital stock.
"Event of Non-Compliance" means the occurrence of any of the following:
(i) any material, intentional breach by the Company of this Agreement or
the Subscription Agreement;
(ii) the occurrence of a payment default, or any other default giving
rise to a right of acceleration, under any Indebtedness of the Company that
has an aggregate principal amount outstanding, as of the date of such
default or acceleration, in excess of $10,000,000 (after giving effect to
any notice or cure period relating to such Indebtedness); or
(iii) the Company or any of its material Subsidiaries shall (A)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code or any other federal, state or
foreign bankruptcy, insolvency or similar law, (B) consent to the
institution of, or fail to controvert in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (C) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator
or similar official for any such Person or for any substantial part of its
property or assets, (D) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (E) make a general
assignment for the benefit of creditors, (F) fail generally to pay its
debts as they become due or (G) take any corporate or shareholder action in
furtherance of any of the foregoing; or
(iv) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (A)
relief in respect of the Company or any of its material Subsidiaries, or of
any substantial part of their respective property or assets, under Title 11
of the United States Code or any other federal, state or foreign
bankruptcy, insolvency or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any such Person or
for any substantial part of its property or (C) the winding-up or
liquidation of any such Person, and such proceeding, petition or order
shall continue unstayed and in effect for a period of 60 consecutive days.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder, all as the same shall be
in effect from time to time.
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"Excluded Stock" means (i) shares of Common Stock issuable upon exercise of
any warrants or options of the Company outstanding on the Closing Date or
issued under the Company's incentive plans approved by the Board, (ii) shares
of Common Stock issued pursuant to the conversion of the Convertible Preferred
Stock, (iii) shares of Common Stock issued as consideration pursuant to any
acquisition of any business, (iv) shares of Convertible Preferred Stock issued
as dividends to the Investors, (v) shares issued pursuant to earn out
arrangements in definitive, binding agreements in existence on the date hereof
relating to acquisitions by the Company and (vi) Securities issued in an
underwritten public offering that is registered under the Securities Act.
"Fair Market Value" has the meaning assigned to such term in the Statement
of Designations.
"GAAP" means United States generally accepted accounting principles.
"Indebtedness" has the meaning assigned to such term in the Statement of
Designations.
"Information" has the meaning assigned to such term in Section 9(i).
"Inspectors" has the meaning assigned to such term in Section 9(i).
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investor" means BOSS II, LLC.
"Liquidation" has the meaning assigned to such term in the Statement of
Designations.
"Maturity Date" has the meaning assigned to such term in the Statement of
Designations.
"Merger" has the meaning assigned to such term in the Subscription
Agreement.
"NASDAQ" means the automated quotation system of the NASD.
"Notice of Acceptance" has the meaning assigned to such term in Section
2(b).
"NYSE" means the New York Stock Exchange.
"Offer" has the meaning assigned to such term in Section 2(a).
"Offer Period" has the meaning assigned to such term in Section 2(a).
"Offered Securities" means (A) shares of Common Stock, (B) any other equity
security of the Company, (C) any debt security of the Company which by its
terms is convertible into or exchangeable for any equity security of the
Company or has any equity participation rights, (D) any security of the
Company that is a combination of debt and equity or (E) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any equity
security or any such debt security of the Company, in each case other than
Excluded Stock.
"Other Shares" means at any time those shares of Common Stock that do not
constitute Primary Shares.
"Person" shall be construed broadly and shall include, without limitation,
an individual, a partnership, an investment fund, a limited liability
corporation, a corporation, an association, a joint stock corporation, a
trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
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<PAGE>
"Preferred Directors" has the meaning assigned to such term in Section 3(c).
"Primary Shares" means at any time the authorized but unissued shares of
Common Stock or shares of Common Stock held by the Company in its treasury.
"Proposed Transaction" has the meaning assigned to such term in Section
15(c).
"Purchase Price" has the meaning assigned to such term in Section 15(c).
"Recapitalization" means, with respect to any Person, any transaction, other
than a merger, consolidation, amalgamation or sale of all or substantially all
of the assets of such Person, in which holders of any class of securities of
such Person receive in exchange therefor some other security of such Person or
any other issuer and/or cash, other than the issuance of cash or securities in
accordance with the terms of the securities to be exchanged or Section 8(b)(v)
of the Statement of Designations.
"Records" has the meaning assigned to such term in Section 9(i).
"Refused Securities" has the meaning assigned to such term in Section 2(d).
"Representatives" has the meaning assigned to such term in Section 4(a).
"Restricted Shares" means at any time the shares of Common Stock held by the
Investor.
"Retained Shares" has the meaning assigned to such term in Section 15(c).
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto.
"Securities" means "securities" as defined in Section 2(1) of the Securities
Act and includes capital stock or other equity interests or any options,
warrants or other securities that are directly or indirectly convertible into,
or exercisable or exchangeable for, capital stock or other equity interests.
Whenever a reference herein to Securities is referring to any derivative
Securities, the rights of Investor shall apply to such derivative Securities
and all underlying Securities directly or indirectly issuable upon conversion,
exchange or exercise of such derivative Securities.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Selling Holder" shall have the meaning assigned to such term in Section
9(b).
"Selling Holders' Counsel" shall have the meaning assigned to such term in
Section 9(b).
"Subscription Agreement" means the Subscription and Exchange Agreement dated
as of the date hereof between the Company and the Investor, as the same may be
amended or modified.
"Statement of Designations" means the Statement of Designations setting
forth the preferences, limitations and relative rights of the Convertible
Preferred Stock.
"Subsidiary" has the meaning assigned to such term in the Statement of
Designations.
"Trigger Event" shall have the meaning assigned to such term in Section
3(h).
"Voting Stock" of a Person means any class or all classes of capital stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
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<PAGE>
Section 2. Rights to Subscribe for Securities.
(a) For so long as Investor and its Affiliates hold in the aggregate Common
Stock Equivalents representing at least 25% of the Conversion Shares issuable
upon conversion of the Convertible Preferred Stock acquired by the Investor on
the Closing Date, the Company shall not, prior to the Maturity Date (assuming
full payment and performance by the Company of all of its obligations as of
such date; if the Company has not fully paid and performed all of its
obligations as of such date, the Company's obligations under this section shall
survive until such obligations have been satisfied), issue, sell, or agree to
issue or sell, any Offered Securities for cash unless the Company shall have
first offered to sell the Offered Securities to the Investor, at a price and on
such other terms as shall have been specified by the Company in writing
delivered to the Investor (the "Offer"), which Offer by its terms shall remain
open for a period of 10 business days from the date it is delivered to the
Investor (the "Offer Period").
(b) Notice of the Investor's intention to accept an Offer shall be evidenced
by a writing signed by the Investor and delivered to the Company prior to the
end of the Offer Period (the "Notice of Acceptance"). Within 20 days after
receipt by the Company of such Notice of Acceptance, the Company shall sell and
the Investor shall purchase the Offered Securities in respect of which the
Notice of Acceptance was delivered, upon the terms and conditions of the Offer.
(c) In the event the Company materially amends the terms of the Offer at any
time, the Offer Period shall be extended for a period of not less than 10
business days (or 48 hours if the amendment relates solely to the price of the
Offer or the number of shares to be sold in the Offer).
(d) In the event that the Notice of Acceptance is not given by the Investor,
the Company shall have 90 days from the expiration of the Offer Period to sell
all of such Offered Securities (the "Refused Securities") to any other
Person(s), but only upon financial terms (e.g., price, interest rate, dividend
rate) at least as favorable to the Company in every respect as those set forth
in the Offer, and otherwise on general terms and conditions that are no more
favorable, in the aggregate, to such other Person(s) or less favorable, in the
aggregate, to the Company than those set forth in the Offer, provided, however,
that in the event that the Company sells all such Offered Securities to any
other Person(s), the Investor shall have the right to purchase the
proportionate number of such Offered Securities that represents its then
ownership percentage of the total outstanding Common Stock of the Company,
determined in accordance with Rule 13d-3 under the Exchange Act.
(e) Any Offered Securities not purchased by the Investor or any other
Person(s) in accordance with Sections 2(b) and 2(d) may not be sold or
otherwise disposed of until they are again offered to the Investor under the
procedures specified in this Section 2.
(f) The provisions of this Section 2 shall terminate on the first date on
which the Investor and its Affiliates fail to satisfy the Common Stock
Equivalents ownership requirements set forth in paragraph (a), such termination
to be effective with respect to the first Offer after such date.
Section 3. Board of Directors.
(a) Investor shall be entitled to designate individuals for election to the
Board as follows until the Maturity Date (assuming full payment and performance
by the Company of all of its obligations as of such date; if the Company has
not fully paid and performed all of its obligations as of such date, the
Company's obligations under this section shall survive until such obligations
have been satisfied):
(i) For so long as Investor and its Affiliates hold in the aggregate
Common Stock Equivalents representing at least 50% of the number of
Conversion Shares issuable upon conversion of the Convertible Preferred
Stock issued on the Closing Date, the Investor shall be entitled to
designate a number of individuals for election to the Board equal to the
greater of 3 directors or the number of directors that represents 30% of
the Board, rounded up to the nearest whole director;
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(ii) For so long as Investor and its Affiliates hold in the aggregate
Common Stock Equivalents representing at least 25% of the number of
Conversion Shares issuable upon conversion of the Convertible Preferred
Stock issued on the Closing Date, the Investor shall be entitled to
designate a number of individuals for election to the Board equal to the
number of directors that represents 22% of the Board, rounded up to the
nearest whole director; and
(iii) For so long as Investor and its Affiliates hold in the aggregate
Common Stock Equivalents representing at least 12.5% of the number of
Conversion Shares issuable upon conversion of the Convertible Preferred
Stock issued on the Closing Date, the Investor shall be entitled to
designate a number of individuals for election to the Board equal to the
number of directors that represents 15% of the Board, rounded up to the
nearest whole director.
(b) In the event the number of directors the Investor is entitled to
designate decreases in accordance with paragraph (a) above, then the number of
directors the Investor is entitled to designate pursuant to paragraph (a) shall
not thereafter be increased, irrespective of any subsequent acquisition of
Common Stock Equivalents by the Investor or its Affiliates. In determining the
number of directors the Investor shall be entitled to designate pursuant to
paragraph (a) above, the Investor shall be deemed to hold each Common Stock
Equivalent that is held of record by the Investor or any of its Affiliates, or,
as to which the Investor or any of its Affiliates retains the entire economic
interest.
(c) Except as set forth in (c)(i) and (c)(ii) below, each committee of the
Board shall include directors designated by the Investor pursuant to the
provisions set forth above, (each, a "Preferred Director"), in the same
proportion, rounded up to the nearest whole director, as such representatives
comprise the Board. The Company shall provide each Preferred Director serving
on any committee of the Board with appropriate notice at least 48 hours prior
to any meeting of any committee that such person serves on:
(i) The Executive Committee shall be comprised of five members as
follows: two Preferred Directors designated by the Investor (or, if the
Investor is only entitled to designate one director to the Board, then only
one Preferred Director), the Chairman of the Board of Directors, the Chief
Executive Officer of the Company and one independent director to be
selected by the Board of Directors. The Preferred Directors designated by
the Investor pursuant to this Section 3(c)(i) shall not be removed by
subsequent action of the Board; and
(ii) The Acquisitions Committee shall be comprised of one Preferred
Director designated by the Investor, the Chairman of the Board of Directors
and the Chief Executive Officer. The Preferred Director designated by the
Investor pursuant to this Section 3(c)(ii) shall not be removed by
subsequent action of the Board.
(d) If the persons designated by the Investor as set forth in Section 3(a)
above are not elected to the Board for any reason and the Investor owns at
least 25% of the shares of Common Stock that it owns on the Closing Date
(assuming the conversion of all the Convertible Preferred Stock), then the
Investor shall have the right to designate one representative to serve as an
observer at each meeting of the Board and each committee thereof. The Company
shall provide such observer with copies of all actions taken by written consent
of the Board or any committee thereof, advance notice of such meeting as if
such observer were a director and copies of all materials that are distributed
to the Board (in each case as if such observer was a director), provided,
however, all such information and materials shall be subject to a mutually
agreeable confidentiality agreement. The Company shall reimburse the observer
for all out-of-pocket expenses incurred in connection with attending any
meetings of the Board.
(e) For so long as the Investor owns 5% or more of the Common Stock of the
Company outstanding (assuming the conversion of all the Convertible Preferred
Stock), then the Investor shall be entitled to designate one member to the
Board; provided, however, that the right provided in this Section 3(e) shall
not be in addition to the rights provided in Section 3(a) above.
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(f) The Company shall cause its bylaws to provide, at all times from and
after the Closing Date in which the Investor has the right to designate a
director, that meetings of the Board or any committee thereof may be conducted
by teleconference.
(g) The Company shall deliver a notice to the Investors if an Event of Non-
Compliance shall occur or is reasonably likely to occur. Such notice shall set
forth in reasonable detail a description of the Event of Non-Compliance.
(h) Prior to the earlier of the Maturity Date (assuming full payment and
performance by the Company of all of its obligations as of such date; it being
understood that if the Company has not fully paid and performed all of its
obligations as of such date, the Company's obligations under this Section 3
shall survive until such obligations have been satisfied) and the date on which
Sections 15(a) and 15(b) hereof have ceased to have any effect, if the Investor
concludes, either as a result of a notice delivered by the Company pursuant to
Section 3(g), or otherwise, that an Event of Non-Compliance has occurred or is
reasonably likely to occur, the Investor shall deliver a notice to the Company
to such effect. If an Event of Non-Compliance shall occur and shall be
continuing at the end of the one week period following delivery by the Investor
of the notice referred to in the preceding sentence (each, a "Trigger Event"),
the Investor shall have the special right to designate that number of
individuals to the Board that, when combined with the Preferred Directors, will
constitute a majority of the Board. The Company agrees to take all necessary
and desirable action within its control in connection with and in furtherance
of the execution of such special right. Such special right shall continue until
such time as there is no longer a Trigger Event in existence, at which time
such special right shall terminate, subject to revesting upon the subsequent
occurrence and continuation of any Trigger Event. After designees of the
Investor represent a majority of the Board, the directors of the Company shall
use commercially reasonable efforts promptly to cure the condition that
constituted the Event of Non-Compliance. After the expiration of such Trigger
Event, the term of office of such newly elected directors shall automatically
cease and the number of directors constituting the entire Board shall be
reduced accordingly.
(i) Whenever the Investor shall have the right to designate one or more
directors of the Board pursuant to this Section 3, the Company shall, to the
extent permitted by applicable law (a) increase as required the number of
directors constituting the entire Board, (b) fill the vacancies created by such
expansion with designees who are approved by the Company, which approval will
not be unreasonably withheld and (c) submit the name of each such designee to
the shareholders of the Company (together with a recommendation of his or her
election) at each meeting of the shareholders at which directors are elected
and which is held during the period which the Investor is entitled to designate
one or more directors. The Company shall take such actions as shall be within
its control and reasonably necessary to effectuate the provisions of this
Section 3, including, if required, the calling of a special or annual meeting
of the shareholders of the Company to fill vacancies created by any increase in
the size of the entire Board.
(j) Notwithstanding any provision of this Agreement to the contrary, the
rights of the Investor to designate Board members pursuant to this Section 3
shall in no event be operative at any time when the holders of the Convertible
Preferred Stock shall have rights to elect directors pursuant to the Statement
of Designations.
Section 4. Information Rights; Covenants.
(a) Access to Records.
The Company shall, and shall cause each Subsidiary to, afford to the
Investor, the Affiliates of the Investor and each of their respective officers,
employees, advisors, counsel and other authorized representatives (collectively
with the Affiliates of the Investor, the "Representatives"), during normal
business hours, at their expense, reasonable access, upon reasonable advance
notice, to all of the books, records and properties of the Company and such
Subsidiary and all officers and employees of the Company and such Subsidiary.
The Investor shall use its best efforts to maintain the confidentiality of any
information designated by the Company as confidential or proprietary; provided,
however, that the foregoing shall in no way limit or otherwise restrict
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the ability of the Investor or any of its Representatives to disclose any such
information concerning the Company and each Subsidiary which it may be
required to disclose (i) to its partners or limited partners to the extent
required to satisfy its fiduciary obligations to such Persons, provided such
Persons agree in writing to be bound by the provisions of this Section, or
(ii) otherwise pursuant to or as required by law.
(b) Financial Reports.
The Company shall furnish the Investor with the following:
(i) Monthly Reports. As soon as available, but not later than 30 days
after the end of each fiscal month, a consolidated balance sheet of the
Company as of the end of such period and consolidated statements of income
of the Company for such period and for the period commencing at the end of
the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, and including
comparisons for income statements to the budget or business plan all
prepared in accordance with generally accepted accounting principles
consistently applied (except for the absence of footnotes and year-end
adjustments);
(ii) Quarterly Reports. As soon as available, but not later than 50 days
after the end of each quarterly accounting period, (A) a consolidated
balance sheet of the Company as of the end of such period and consolidated
statements of income and cash flows for such quarterly accounting period
and/or for the period commencing at the end of the previous fiscal year and
ending with the end of such period, setting forth in each case in
comparative form the corresponding figures for the corresponding period of
the preceding fiscal year, and including comparisons to the budget or
business plan for the income statement only, all prepared in accordance
with GAAP consistently applied and (B) a report by management of the
Company in a format consistent with Form 10-Q of the operating and
financial highlights of the Company and its Subsidiaries for such period;
(iii) Annual Audit. As soon as available, but not later than 100 days
after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of
income, cash flows and changes in shareholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by the report of a "Big 5" firm of independent certified public
accountants selected by the Board (the "Accountants"). The Company and its
Subsidiaries shall maintain a system of accounting sufficient to enable its
Accountants to render the report referred to in this Section 4; and
(iv) Miscellaneous. Promptly upon becoming available, the Company shall
provide to the Investor:
(A) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Company or its
Subsidiaries to its investors generally or released to the public and
copies of all regular and periodic reports, if any, filed by the Company
or its Subsidiaries with the Securities and Exchange Commission, any
securities exchange or the NYSE;
(B) notification in writing of any litigation or governmental
proceeding in which it or any of its Subsidiaries is involved and which
could reasonably be expected to, materially and adversely affect the
Company or any of its material Subsidiaries;
(C) notification in writing of the existence of any default under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(D) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants;
(E) upon request, any other routinely collected financial or other
information available to management of the Company or its subsidiaries
(including, without limitation, routinely collected statistical data);
and
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(F) The provisions of this Section 4 shall terminate upon the
earlier to occur of the twelfth anniversary of the Closing Date and the
date on which the Investor shall no longer be entitled to elect any
directors pursuant to Section 3(a) of this Agreement.
Section 5. Demand Registration.
(a) If the Company shall be requested by holders of at least 20% of the
total number of outstanding Restricted Shares (assuming conversion of all
shares of Convertible Preferred Stock) to effect a registration under the
Securities Act of all or a portion of Restricted Shares with an aggregate Fair
Market Value as of the date of such request equal to at least $25,000,000, or,
if the Restricted Shares have an aggregate Fair Market Value of less than
$25,000,000, all of the remaining Restricted Shares, in accordance with this
Section, then the Company shall promptly give written notice of such proposed
registration to all holders of Restricted Shares and shall offer to include in
such proposed registration any Restricted Shares requested to be included in
such proposed registration by such holders who respond in writing to the
Company's notice within 15 days after delivery of such notice (which response
shall specify the number of Restricted Shares proposed to be included in such
registration and the intended method of distribution, which may be pursuant to
a shelf registration). If a registration pursuant to Section 7 hereof is
available, the holders of Restricted Shares shall utilize such registration
instead of making a request pursuant to this Section 5, unless the holders of
Restricted Shares reasonably determine that it is advantageous to such holders
of Restricted Shares to make a request under this Section 5. The Company shall
promptly use its best efforts to effect such registration on an appropriate
form under the Securities Act of the Restricted Shares which the Company has
been so requested to register; provided, however, that the Company shall not be
obligated to effect any registration under the Securities Act except in
accordance with the following provisions:
(i) the Company shall not be obligated to file more than four
registration statements in total pursuant to this Section, subject to
paragraph (c) below;
(ii) the Company shall not be obligated to file any registration
statement during any period in which (A) any other registration statement
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or
any successor forms thereto) pursuant to which Primary Shares are to be or
were sold has been filed and not withdrawn or has been declared effective
within the prior 90 days or (B) the Company has determined in good faith
that the filing of a registration statement would require the disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential, such filing to be delayed until the date which
is 90 days after such request for registration pursuant to this Section
5(a); provided that the Company may only so delay the filing or
effectiveness of a registration statement pursuant to this Section
5(a)(ii)(B) on one occasion during any twelve-month period; and
(iii) with respect to the registration pursuant to this Section, the
Company may include in such registration any Primary Shares or Other
Shares; provided, however, that if the managing underwriter advises the
Company in writing that the inclusion of all Restricted Shares, Primary
Shares and Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of all such
securities, then the number of Restricted Shares, Primary Shares and Other
Shares proposed to be included in such registration shall be included in
the following order:
(A) First, the Restricted Shares, pro rata based upon the number of
Restricted Shares owned by each holder at the time of such
registration;
(B) Second, the Primary Shares; and
(C) Third, the Other Shares.
(b) The holders of Restricted Shares requesting a registration pursuant to
this Section may, in the notice delivered pursuant to paragraph (a) above,
elect that such registration cover an underwritten offering. Upon such
election, such holders shall select one or more nationally recognized firms of
investment banks to act as
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the managing underwriters and shall select any additional investment banks to
be used in connection with such offering, provided that such investment banks
must be reasonably satisfactory to the Company. The Company shall, together
with all holders proposing to sell Restricted Shares in such offering, enter
into a customary underwriting agreement with such underwriters.
(c) A requested registration under this Section may be rescinded by written
notice to the Company by the Persons holding a majority of the Restricted
Shares to be included in such registration with the following consequences:
(i) If such registration statement is rescinded prior to the filing
date, such rescinded registration shall not count as a registration
statement initiated pursuant to this Section for purposes of paragraph (a)
above;
(ii) If such registration statement is rescinded after the filing date
but prior to its effective date, such rescinded registration shall not
count as a registration statement initiated pursuant to this Section for
purposes of paragraph (a) above if the participating holders (x) have
reimbursed the Company for all out-of-pocket expenses incurred by the
Company in connection with such rescinded registration or (y) (1)
reasonably believed that the registration statement contained an untrue
statement of material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading, (2) notified the Company of such fact and requested that the
Company correct such alleged misstatement or omission and (3) the Company
has refused to correct such alleged misstatement or omission; and
(iii) A registration that becomes effective shall not count as a
registration statement initiated pursuant to this Section for purposes of
paragraph (a) above unless the participating holders are able to sell at
least 80% of the Restricted Shares sought to be included in such
registration statement.
Section 6. Piggyback Registration.
If at any time the Company proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms thereto, it
shall promptly give written notice to the holders of Restricted Shares of its
intention to so register the Primary Shares or Other Shares and, upon the
written request, given within 15 days after delivery of any such notice by the
Company, of any holders of Restricted Shares to include in such registration
Restricted Shares held by such holders (which request shall specify the number
of Restricted Shares proposed to be included in such registration), the Company
shall use its best efforts to cause all such Restricted Shares to be included
in such registration on the same terms and conditions as the securities
otherwise being sold in such registration; provided, however, that if the
managing underwriter advises the Company that the inclusion of all Restricted
Shares or Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of the Primary
Shares proposed to be registered by the Company, then the number of Primary
Shares, Restricted Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(a) first, the Primary Shares;
(b) second, Other Shares entitled to registration pursuant to the
Registration Rights Agreements set forth on Annex A;
(c) third, Restricted Shares, pro rata based upon the number of
Restricted Shares owned by each holder at the time of such registration;
and
(d) fourth, the Other Shares (other than those shares of Common Stock
which are not subject to any registration rights agreement), pro rata based
upon the number of shares of Common Stock (based upon Common Stock
Equivalents) owned by each such seller at the time of such registration.
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Section 7. S-3 Registrations.
If at any time (i) the Persons holding at least 20% of the total number of
outstanding Restricted Shares (assuming conversion of all shares of Convertible
Preferred Stock) request that the Company file a registration statement on Form
S-3 or any successor thereto for a public offering of all or a portion of
Restricted Shares with an aggregate Fair Market Value as of the date of such
request equal to at least $25,000,000, or, if the aggregate Restricted Shares
have an aggregate Fair Market Value of less than $25,000,000, all of the
remaining Restricted Shares and (ii) the Company is a registrant entitled to
use Form S-3 or any successor thereto to register such shares, then the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Shares
specified in such notice. Whenever the Company is required by this Section 7 to
use its best efforts to effect the registration of Restricted Shares, each of
the procedures and requirements of Section 5 (including but not limited to the
requirement that the Company notify all holders of Restricted Shares from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 7 within three months after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the holders of Restricted Shares shall have been entitled to
join pursuant to Section 5 or 6 in which there shall have been effectively
registered all Restricted Shares as to which registration shall have been
requested. There is no limitation on the number of registrations pursuant to
this Section 7 that the Company is obligated to effect.
Section 8. Expenses.
The Company shall bear the expense of any registrations effected pursuant to
Sections 5, 6 and 7 including, without limitation, all registration and filing
fees (including all expenses incident to filing with the NYSE), fees and
expenses of complying with securities and blue sky laws, printing expenses, and
fees and expenses of the Company's counsel and accountants, and the fees and
expenses of the Selling Holders' Counsel (as defined below), but excluding any
underwriters' or brokers' discounts or commissions, transfer taxes (to the
extent that such taxes are required by law to be paid by the Selling Holders)
and the fees of any counsel to any Selling Holder, other than the Selling
Holders' Counsel (it being understood that the fees and expenses of any
underwriter and such underwriter's counsel shall be the responsibility of such
underwriter).
Section 9. Preparation and Filing.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Restricted Shares, the Company shall, as expeditiously as practicable:
(a) with respect to a registration under Sections 5, 6 and 7, use its
best efforts to cause a registration statement that registers such
Restricted Shares to become and remain effective for a period of 180 days
or until all of such Restricted Shares have been disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Restricted Shares, a prospectus relating
thereto or any amendments or supplements relating to such a registration
statement or prospectus, to each holder of Restricted Shares, to any
counsel to any seller of Restricted Shares (the "Selling Holder") and to
one counsel selected by the holders of a majority of such Restricted Shares
(the "Selling Holders' Counsel"), copies of all such documents proposed to
be filed (it being understood that such five-business-day period need not
apply to successive drafts of the same document proposed to be filed so
long as such successive drafts are supplied to such counsel in advance of
the proposed filing by a period of time that is customary and reasonable
under the circumstances);
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
for at least the periods set forth in Section 9(a) or until all of such
Restricted Shares have been disposed of (if earlier) and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of such Restricted Shares;
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(d) notify in writing any counsel to any Selling Holder and the Selling
Holders' Counsel promptly (i) of the receipt by the Company of any
notification with respect to any comments by the Commission with respect to
such registration statement or prospectus or any amendment or supplement
thereto or any request by the Commission for the amending or supplementing
thereof or for additional information with respect thereto, (ii) of the
receipt by the Company of any notification with respect to the issuance by
the Commission of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification of such Restricted Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purposes;
(e) use its best efforts to register or qualify such Restricted Shares
under such other securities or blue sky laws of such jurisdictions as any
seller of Restricted Shares reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller of Restricted Shares to consummate the disposition in such
jurisdictions of the Restricted Shares owned by such seller; provided,
however, that the Company will not be required to qualify generally to do
business, subject itself to general taxation or consent to general service
of process in any jurisdiction where it would not otherwise be required so
to do but for this paragraph (e);
(f) furnish to each seller of such Restricted Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as such seller of Restricted Shares may reasonably
request in order to facilitate the public sale or other disposition of such
Restricted Shares;
(g) use its best efforts to cause such Restricted Shares to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the seller or sellers thereof to consummate the
disposition of such Restricted Shares;
(h) notify on a timely basis each seller of such Restricted Shares at
any time when a prospectus relating to such Restricted Shares is required
to be delivered under the Securities Act within the appropriate period
mentioned in paragraph (a) of this Section, of the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(i) make available for inspection by any counsel to any Selling Holder
and the Selling Holders' Counsel or any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such underwriter (collectively,
the "Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information (together with the
Records, the "Information") reasonably requested by any such Inspector in
connection with such registration statement. Any of the Information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to
avoid or correct a misstatement or omission in the registration statement,
(ii) the release of such Information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public. The seller of
Restricted Shares agrees that it will, upon
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learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company,
at the Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential;
(j) in the case of an underwritten offering, use its best efforts to
obtain from its independent certified public accountants "comfort" letters
in customary form and at customary times and covering matters of the type
customarily covered by comfort letters;
(k) in the case of an underwritten offering, use its best efforts to
obtain from its counsel an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may not be the Company) for such Restricted Shares;
(m) issue to any underwriter to which any seller of Restricted Shares
may sell shares in such offering certificates evidencing such Restricted
Shares; provided, however, that the Company shall have the right to approve
any such underwriter with such approval not to be unreasonably withheld;
(n) list such Restricted Shares on any national securities exchange on
which any shares of the Common Stock are listed or on NASDAQ if then
included, or if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Restricted Shares for
inclusion on such national securities exchange or NASDAQ as the holders of
a majority of such Restricted Shares shall request;
(o) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements
(which need not be audited) covering a period of 12 months beginning within
three months after the effective date of the registration statement, which
earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(p) use its best efforts to take all other steps necessary to effect the
registration of such Restricted Shares contemplated hereby.
Section 10. Indemnification.
(a) In connection with any registration of any Restricted Shares under the
Securities Act pursuant to this Agreement, the Company shall indemnify and hold
harmless the seller of such Restricted Shares, its officers and directors, each
underwriter, broker or any other person acting on behalf of such seller and
each other person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, (or actions in respect thereof) to which any of
the foregoing persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the registration statement under
which such Restricted Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Restricted Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such seller, such officer or
director, such underwriter, such broker or such other person acting on behalf
of such seller and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Restricted Shares in reliance upon and in conformity with written
information furnished to
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<PAGE>
the Company through an instrument duly executed by such seller or underwriter
specifically for use in the preparation thereof; provided, further, that with
respect to any preliminary prospectus, the foregoing indemnity shall not inure
to the benefit of (a) any underwriter or, in the case of a registration
statement filed with respect to an offering which is not an underwritten
offering, any Selling Holder, from whom the person asserting any losses,
claims, damages and liabilities and judgments purchased Restricted Shares or
(b) any person controlling such underwriter or Selling Holder, if (i) a copy of
the prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was required by law to have
been delivered by such underwriter or Selling Holder (as applicable), (ii) the
prospectus had not been sent or given by or on behalf of such underwriter or
Selling Holder (as applicable) to such person with or prior to a written
confirmation of the sale of the Restricted Shares to such person, (iii) the
prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment and (iv) such failure
to deliver the prospectus (as so amended and supplemented) was not the result
of noncompliance by the Company with Section 9(f) hereof.
(b) In connection with any registration of Restricted Shares under the
Securities Act pursuant to this Agreement, each seller of Restricted Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the preceding paragraph of this Section) the Company, each
director of the Company, each officer of the Company, each underwriter, broker
or other person acting on behalf of such seller, each person who controls any
of the foregoing persons within the meaning of the Securities Act and each
other seller of Restricted Shares under such registration statement with
respect to any statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Restricted Shares, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company or such underwriter through an instrument
duly executed by such seller specifically for use in connection with the
preparation of such registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document; provided, however, that the
obligation to indemnify will be several, not joint and several, among such
sellers of Restricted Shares, and the maximum amount of liability in respect of
such indemnification shall be in proportion to and limited to, in the case of
each seller of Restricted Shares, an amount equal to the net proceeds actually
received by such seller from the sale of Restricted Shares effected pursuant to
such registration.
(c) The indemnification required by this Section 10 will be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred, subject to prompt refund in the event any
such payments are determined not to have been due and owing hereunder.
(d) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the
latter of the commencement of such action (it being understood that no delay in
delivering or failure to deliver such notice shall relieve the indemnifying
persons from any liability or obligation hereunder unless (and then solely to
the extent that) the indemnifying person is prejudiced by such delay and/or
failure). In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available
to such indemnified party which are additional to or conflict with those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion
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<PAGE>
of the fees and expenses of any counsel retained by the indemnified party which
is reasonably related to the matters covered by the indemnity agreement
provided in this Section.
(e) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities.
(f) If the indemnification provided for in this Section 10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the sellers of Restricted Shares agree that it would
not be just and equitable if contributions pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation which
did not take into account the equitable considerations referred to herein. The
amount paid or payable to an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to above shall be deemed to
include, subject to the limitation set forth in the fourth paragraph of this
Section 10, any legal or other expenses reasonably incurred in connection with
investigating or defending the same. Notwithstanding the foregoing, in no event
shall the amount contributed by a seller of Restricted Shares exceed the
aggregate net offering proceeds received by such seller from the sale of its
Restricted Shares.
Section 11. Underwriting Agreement.
Notwithstanding the provisions of Sections 9 and 10, to the extent that the
Company and the holders selling Restricted Shares in a proposed registration
shall enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections, the
provisions contained in such Sections addressing such issue or issues shall be
superseded with respect to such registration by such other agreement.
Section 12. Information by Holders.
The holders selling Restricted Shares in a proposed registration shall
furnish to the Company such written information regarding such holder and the
distribution proposed by such holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
Section 13. Exchange Act Compliance.
The Company shall comply with all of the reporting requirements of the
Exchange Act and with all other public information reporting requirements of
the Commission which are conditions to the availability of Rule 144 for the
sale of the Common Stock. The Company shall cooperate with the Investor in
supplying such information as may be necessary for such Investor to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
Section 14. No Conflict of Rights.
The Company represents and warrants to the Investors that the registration
rights granted to the Investors hereby do not conflict with any other
registration rights granted by the Company. The Company shall not, after
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the date hereof, grant any registration rights which conflict with the
registration rights granted hereby; provided, however, that such prohibition
shall not apply to the assumption by the Company of any registration right
obligations of Building One Services Corporation.
Section 15. Protective Provisions.
(a) Until the Maturity Date (assuming full payment and performance by the
Company of all of its obligations as of such date, if the Company has not fully
paid and performed all of its obligations as of such date, it being understood
that the Company's obligations under this section shall survive until such
obligations have been satisfied), and so long as (X) if the Convertible
Preferred Stock has been converted into shares of Common Stock after the
receipt by the holders of notice of the Company's intention to redeem the
Convertible Preferred Stock pursuant to the Statement of Designations, then for
two years from the date of such conversion, provided that, the Investor and its
Affiliates hold in the aggregate Common Stock Equivalents representing at least
25% of the Conversion Shares issuable upon conversion of the Convertible
Preferred Stock issued on the Closing Date, or (Y) the Investor and its
Affiliates hold in the aggregate at least 25% of the shares of Convertible
Preferred Stock issued on the Closing Date, the Company shall not, and shall
not permit any Subsidiary, without the prior written consent of the Investor,
to take any of the following actions; provided, however, that nothing in this
Section 15 shall prohibit any transaction between or among the Company and one
or more wholly-owned Subsidiaries or between or among wholly-owned
Subsidiaries:
(i) merge, consolidate or amalgamate with any person or entity, or sell
all or substantially all of the assets of the Company or such Subsidiary
(other than in connection with an acquisition or disposition of any
business or assets for which the consent of the Investor is not required
under clauses (vi) or (vii) below), unless prior to the consummation of
such merger, consolidation, amalgamation or sale, the Company has paid the
amount provided for in Section 15(c) below;
(ii) enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property, the rendering of any service
or the payment of any management, advisory or similar fees, with any
Affiliate unless such transaction is (i) in the ordinary course of business
of the Company and its Subsidiaries, and (ii) upon fair and reasonable
terms no less favorable to the Company and its Subsidiaries than they would
obtain in a comparable arm's length transaction with a Person which is not
an Affiliate;
(iii) engage in any business other than the Business;
(iv) effect, approve or authorize any Liquidation, or any
Recapitalization (other than any Liquidation or Recapitalization of any
wholly-owned Subsidiary);
(v) amend, supplement or waive any of the terms or conditions of any
agreement between the Company and a shareholder of the Company with respect
to the retention by the shareholder of shares of the Company's capital
stock unless such amendment waiver or restatement pertains to an agreement
with a non-employee of the Company and involves less than 10,000 shares of
Common Stock (adjusted for stock splits, stock dividends and similar events
after the date hereof);
(vi) dispose of any business or asset, (whether by merger,
consolidation, sale of stock, share exchange or otherwise) in a single
transaction or a series of related transactions with an aggregate value in
such transaction or series of related transactions (including all assumed
debt, all cash payments, and the fair market value of all securities or
other property issued as consideration) in excess of 2.5% of the total
assets of the Company;
(vii) acquire any business or assets (whether by merger, consolidation,
share exchange or otherwise) in a single transaction or a series of related
transactions with an aggregate value in such transaction or series of
related transactions (including all assumed debt, all cash payments, and
the fair market value of all securities or other property issued as
consideration) in excess of 2.0% of total assets of the Company;
(viii) hire or fire, or amend the employment terms of the Chairman of
the Board or the Chief Executive Officer of the Company (or the top two
executive officers of the Company, if different), other
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than amendments to the benefits to which such executives are entitled
resulting solely from an amendment to any benefit plan or program in which
employees of the Company participate generally;
(ix) through any transaction or series of related transactions incur or
refinance any Indebtedness; except that the Company and any of its
Subsidiaries may incur or refinance any (x) Indebtedness under the Credit
Agreement so long as at the time such Indebtedness is incurred and after
giving effect to the incurrence thereof, the Consolidated Leverage Ratio of
the Company is less than 4.0 to 1.0; (y) any other Indebtedness so long as
at the time such Indebtedness is incurred and after giving effect to the
incurrence thereof, the aggregate outstanding amount of all such
Indebtedness shall not exceed 2 1/2% of the total assets of the Company; or
(z) Indebtedness incurred to repurchase or redeem the Convertible Preferred
Stock;
(x) make any single Capital Expenditure exceeding $10,000,000, or make
aggregate Capital Expenditures for the Company and its Subsidiaries in any
year exceeding 1.75% of the aggregate consolidated net revenues, as
reflected in a budget approved by the Board for such fiscal year;
(xi) create or acquire any interest in any Subsidiary other than a
wholly-owned Subsidiary unless, after giving effect to such acquisition,
the Company's aggregate investment in non-wholly owned Subsidiaries does
not exceed 1% of the Company's consolidated total assets as of the end of
the last fiscal quarter;
(xii) adopt or amend any Equity-Linked Plan or make any bonus payment to
any (i) employee of the Company or (ii) any President of any Subsidiary in
excess of $250,000 (except pursuant to the terms of the arrangements in
effect on the Closing Date); or
(xiii) agree or otherwise commit to take any of the actions set forth
above.
(b) Until the Maturity Date (assuming full payment and performance by the
Company of all of its obligations as of such date, if the Company has not fully
paid and performed all of its obligations as of such date, it being understood
that the Company's obligations under this Section shall survive until such
obligations have been satisfied) in the event the Convertible Preferred Stock
has been converted into shares of Common Stock after the receipt by the holders
of notice of the Company's intention to redeem the Convertible Preferred Stock
pursuant to the Statement of Designations and two years has elapsed since the
date of such conversion, for so long as the Investor and its Affiliates hold in
the aggregate at least 10% of the outstanding Common Stock of the Company, the
Company shall not, and shall not permit any Subsidiary, without the prior
written consent of the Investor to take any of the following actions provided,
however, that nothing in this Section 15 shall prohibit any transaction between
the Company and one or more wholly owned Subsidiaries between or among wholly
owned Subsidiaries:
(i) merge, consolidate or amalgamate with any person or entity, or sell
all or substantially all of the assets of the Company or such Subsidiary
(other than in connection with an acquisition or disposition of any
business or assets for which the consent of the Investor is not required
under clauses 15(a)(vi) or (vii) above, unless prior to the consummation of
such merger, consolidation, amalgamation or sale, the Company has paid the
amount provided for in Section 15(c) below;
(ii) enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property, the rendering of any service
or the payment of any management, advisory or similar fees, with any
Affiliate unless such transaction is (i) in the ordinary course of business
of the Company and its Subsidiaries, and (ii) upon fair and reasonable
terms no less favorable to the Company and its Subsidiaries than they would
obtain in a comparable arm's length transaction with a Person which is not
an Affiliate;
(iii) effect, approve or authorize any Liquidation (other than a
Liquidation or Recapitalization of a wholly-owned Subsidiary);
(iv) hire or fire, or amend the employment terms of the Chairman of the
Board or the Chief Executive Officer of the Company (or the top two
executive officers of the Company, if different), other than amendments to
the benefits to which such executives are entitled resulting solely from an
amendment to any benefit plan or program in which employees of the Company
participate generally; or
F-18
<PAGE>
(v) agree or otherwise commit to take any of the actions set forth
above.
(c) If the Company requests that the Investor consent to a merger,
consolidation or amalgamation described in Section 15(a)(i) or 15(b)(i) (a
"Proposed Transaction") and the Investor fails to consent to such Proposed
Transaction within 15 days after delivery of such request, then the Company may
consummate the Proposed Transaction without the consent of the Investor,
provided the Company purchases from the Investor all of (i) the shares of
Convertible Preferred Stock and (ii) the shares of Common Stock of the Company
received upon conversion thereof, in each case that are held by the Investor as
of the date of the Election Notice (as defined below)((i) and (ii) together the
"Retained Shares"), on the terms specified herein. In the event the Company
elects to exercise the right of repurchase set forth herein, it shall deliver
written notice to the Investor (an "Election Notice") no less than 20 days
prior to the date of consummation of the Proposed Transaction. The purchase
price of the Retained Shares shall be a sum (the "Purchase Price") that would
provide to the Investor a 25% annual rate of return compounded quarterly, on
the Original Cost of the shares of Convertible Preferred Stock represented by
the Retained Shares, such return to be calculated from the Closing Date through
the date of consummation of the Proposed Transaction. The Investor shall and
shall cause all of its Affiliates to vote all their shares of capital stock of
the Company (or to execute one or more written consents) in favor of any
Proposed Transaction as to which it has received an Election Notice. The
closing of the purchase of the Retained Shares pursuant to this Section 15(c)
shall take place on the date of consummation of the Proposed Transaction at
which time the Company shall pay to the Investor the Purchase Price, and the
Investor shall deliver or cause to be delivered to the Company certificates
representing the Retained Shares.
Section 16. Standstill.
Except pursuant to Section 2 hereof, prior to the second anniversary of the
Closing Date, the Investor shall not purchase or agree to purchase or otherwise
acquire beneficial ownership of additional shares of Common Stock, other than
by conversion of the Convertible Preferred Stock in accordance with the terms
of the Statement of Designations or by exercise of its warrants to purchase
shares of common stock of Building One Services Corporation, if after giving
effect to such proposed purchase, the Investor and its Affiliates would own in
the aggregate Common Stock Equivalents equal to greater than 30% of the
outstanding Voting Stock of the Company on such date.
Section 17. Voting Agreement.
The Investor agrees to vote all shares of capital stock held by the Investor
(by proxy or in person) in favor of the slate of directors recommended by the
Board to the shareholders at the annual shareholders' meetings of the Company
to be held in 2000 and 2001 and to cause all other Affiliates of the Investor
to vote their shares of capital stock of the Company in such manner. The
Investor and its Affiliates shall not enter into any agreement or arrangement
that confers on any Person, other than an Affiliate of the Investor, the right
to vote (or execute written consents with respect to) any shares of Convertible
Preferred Stock or Conversion Shares, while such securities are owned by the
Investor or its Affiliates.
Section 18. Miscellaneous.
(a) Restrictive Legends.
(i) Each certificate for Restricted Shares (unless otherwise permitted
by the provisions of Section 18(a) (ii)) shall include a legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON VOTING, TRANSFER AND OTHER
MATTERS AS SET FORTH IN THE INVESTOR'S RIGHTS AGREEMENT DATED AS OF
, 2000;"
F-19
<PAGE>
(ii) Subject to Section 18(a)(iii), any holders of Restricted Shares
registered pursuant to the Securities Act and qualified under applicable
state securities laws may exchange certificates representing such
Restricted Shares on transfer for new certificates that shall not bear the
legend set forth in paragraph (i) of this Section 18(a);
(iii) Compliance with Securities Laws. Upon any proposed transfer of
Restricted Shares, the Company shall register the transfer of such
Restricted Shares on the stock transfer books of the Company if the Company
shall have received (A) to the extent required to ensure compliance with
the Securities Act, an opinion of counsel reasonably satisfactory to the
Company, to the effect that the proposed transfer of Restricted Shares may
be effected without registration under the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and
(C) the agreement of the transferee to comply with the provisions of
Section 16 and 17 of this Agreement. Each certificate evidencing Restricted
Shares transferred as above provided shall bear the legend set forth in
Section 18(a)(i), except that such certificate shall not bear such legend
if neither such legend nor the restrictions on transfer in Section 18(a)
are required in order to ensure compliance with the provisions of the
Securities Act.
(b) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and such invalid, void or
otherwise unenforceable provisions shall be null and void. It is the intent of
the parties, however, that any invalid, void or otherwise unenforceable
provisions be automatically replaced by other provisions which are as similar
as possible in terms to such invalid, void or otherwise unenforceable
provisions but are valid and enforceable to the fullest extent permitted by
law.
(c) Entire Agreement. This Agreement, together with the Subscription
Agreement, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior arrangements or understandings
with respect hereto.
(d) Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Company and the Investor and their respective successors and
permitted assigns; provided, however, that each such person or entity shall, as
a condition to the effectiveness of such assignment, be required to execute a
counterpart to this Agreement whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement with respect to such Restricted Shares, including the provisions of
Section 16 and 17; provided, further, that the Investor shall not be entitled
to assign its rights under Sections 2, 3, 4 or 15 without the consent of the
Company other than to an Affiliate of the Investor.
(e) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart. The failure
of any Investor to execute this Agreement does not make it invalid as against
any other Investor.
(f) Remedies. The Investor shall have all rights and remedies reserved for
such Investor pursuant to this Agreement and the Articles of Incorporation and
the By-laws of the Company, as amended, and all rights and remedies which such
Investor has been granted at any time under any other agreement or contract and
all of the rights which such holder has under any law or equity. Any person
having any rights under any provision of this Agreement will be entitled to
enforce such rights specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law
or equity.
(i) The parties hereto agree that if any parties seek to resolve any
dispute arising under this Agreement pursuant to a legal proceeding, the
prevailing parties to such proceeding shall be entitled to receive
reasonable fees and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with such proceedings.
F-20
<PAGE>
(ii) It is acknowledged that it will be impossible to measure in money
the damages that would be suffered if the parties fail to comply with any
of the obligations herein imposed on them and that in the event of any such
failure, an aggrieved person will be irreparably damaged and will not have
an adequate remedy at law. Any such person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any
of the provisions of this Agreement, none of the parties hereto shall raise
the defense that there is an adequate remedy at law.
(g) Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered
in person, by telecopy, by nationally-recognized overnight courier, or by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be
designated in writing by the addressee to the addressor:
(i) if to the Company, to:
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Phone: (713) 860-0100
Fax: (713) 626-4766
Attention: Chief Executive Officer
with copies to:
Bracewell & Patterson
711 Louisiana, Suite 2900
Houston, Texas 77002
Phone: (713) 223-2900
Fax: (713) 221-1212
Attention: John L. Bland, Esq.
(ii) and, if to the Investor, to:
BOSS II, LLC
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Phone: (212) 515-3201
Fax: (212) 515-3262
Attention: Andrew Africk
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Phone: (212) 408-2400
Fax: (212) 728-5950
Attention: John M. Scott, Esq.
All such notices, requests, consents and other communications shall be deemed
to have been delivered when received, or if received after the close of
business, on the next business day.
(h) Governing Law; Jurisdiction; Venue; Process. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to any choice of law or conflict of law
F-21
<PAGE>
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of New York. Any legal action in a proceeding
brought in accordance with this Section shall be brought in the courts of the
State of New York or of the United States District Court for the Southern
District of New York, and by execution and delivery of this Agreement, the
parties hereby irrevocably accept for themselves and in respect of their
property, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts. The parties hereby irrevocably waive any objection which they
may now or hereafter have to laying of venue of any actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to above and hereby further irrevocably waive and agree, not to plead
or claim in any such court that any such action or proceeding has been brought
in an inconvenient forum. The parties further agree that the mailing by
certified or registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of process against
them, without necessity for service by any other means provided by statute or
rule of court.
(i) Further Assurances. Each party hereto shall do and perform or cause to
be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the
provisions of this Agreement and the consummation of the transactions
contemplated hereby.
(j) Modifications; Amendments; Waivers. The terms and provisions of this
Agreement may not be modified, amended or waived, except pursuant to a writing
signed by the Company and the Investor, provided, however, Sections 10 through
14 may be amended pursuant to a writing signed by the Company and the holders
of a majority of the Restricted Shares.
(k) Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
(l) Waiver. No course of dealing between the Company and the Investor or any
delay in exercising any rights hereunder will operate as a waiver of any rights
of any party to this Agreement. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(m) Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
F-22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
GROUP MAINTENANCE AMERICA CORP.
By:
----------------------------------
Name:
Title:
BOSS II, LLC
By:
----------------------------------
Name:
Title:
F-23
<PAGE>
ANNEX G
GROUP MAINTENANCE AMERICA CORP.
1999 STOCK PERFORMANCE INCENTIVE PLAN
1. Purpose. The purpose of this 1999 Stock Performance Incentive Plan (the
"Plan") of Group Maintenance America Corp., a Texas corporation (the
"Company"), is to advance the interests of the Company and its shareholders by
providing officers and other key employees with a strong incentive to work
towards increasing the Company's stock price, thereby promoting a closer
identity of interests between such persons and the Company's stockholders.
2. Definitions.
(1) "Board" means the Board of Directors of the Company.
(2) "Change in Control" has the meaning ascribed to the definition of
"Change of Control" in the Company's 1999 Stock Awards Plan.
(3) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
(4) "Committee" means the Compensation Committee of the Board.
(5) "Share" means a share of the common stock par value $.001 ("Stock"),
of the Company and such other securities as may be substituted therefor
pursuant to Section 4.
(6) "Stock Price" means, as of any specified date, the mean of the high
and low sales prices of the Stock (i) reported by any interdealer quotation
system on which the Stock is quoted on that date or (ii) if the Stock is
listed on a national stock exchange, reported on the stock exchange
composite tape on that date; or, in either case, if no prices are reported
on that date, on the last preceding date on which such prices of the Stock
are so reported. If the Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder,
its fair market value shall be deemed to be equal to the average between
the reported high and low or closing bid and asked prices of Stock on the
most recent date on which Stock was publicly traded. In the event Stock is
not publicly traded at the time a determination of its value is required to
be made hereunder, the determination of its fair market value shall be made
by the Committee in such manner as it deems appropriate.
3. Stock Awards.
(a) Number of Shares Available for Issuance. The Compensation Committee will
have the authority to award up to a maximum of 1,200,000 Shares based upon
attainment of the following Stock Price levels (which levels must be maintained
for a period of at least 20 out of 30 consecutive trading days):
<TABLE>
<CAPTION>
Cumulative
Number of
Shares
Stock that may
Price be Awarded
----- ----------
<S> <C>
$32.00 240,000
$44.00 640,000
$56.00 1,200,000
</TABLE>
Notwithstanding the foregoing, in the event of a Change in Control of the
Company, all 1,200,000 Shares shall be available for issuance under the Plan
immediately prior to such Change in Control, without regard to satisfaction of
the foregoing Stock Price levels, subject, however, to the Compensation
Committee determining whether and to what extent the Shares shall be issued and
delivered; in making such a determination, the Compensation Committee shall
consider all factors it deems relevant, including, without limitation, the
impact that any issuance and delivery of stock under the Plan would have on the
relevant Change of Control transaction and upon the shareholders of the
Company.
(b) Eligibility for Award. The Committee (or its designee) shall administer
and make all determinations under the Plan, including, without limitation, (i)
the officers and key employees of the Company and its subsidiaries who are
eligible to receive awards of Shares under the Plan, (ii) the number of Shares
to be
G-1
<PAGE>
awarded to any officer or key employee based on such criteria as the Committee
may establish; provided, however, that no individual may receive in any one
calendar year an award of more than 250,000 Shares, (iii) whether to condition
the delivery of Shares on satisfaction of other requirements (in addition to
the achievement of the Stock Price levels set forth above), and (iv) whether to
defer delivery of Shares that otherwise have been earned under the Plan. Except
as provided in Section 5, the Board may perform any function of the Committee
under the Plan, including, without limitation, for the purpose of ensuring that
transactions under the Plan by employees who are then subject to Section 16 of
the Securities Exchange Act of 1934 are exempt under Rule 16b-3 issued
thereunder. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be
deemed to refer to the Board.
4. Adjustments. In the event that the Committee shall determine that any
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Shares or other
securities, stock dividend or other special, large and non-recurring dividend
or distribution (whether in the form of cash, securities or other property),
liquidation, dissolutions, or other similar corporate transaction or event,
affects the Shares such that an adjustment is appropriate in order to fulfill
the intended purpose of the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of Shares
reserved and available for awards under Section 3(a), (ii) the Stock Price
levels set forth in Section 3(a), and (iii) the number and kind of Shares
specified in the annual per-employee limitation under Section 3(b).
5. Performance-Based Awards. The Committee may, in its discretion, condition
the award of Shares under the Plan on the achievement of performance objectives
(in addition to satisfaction of the Stock Price levels set forth in Section
3(a)) in order to qualify such award as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and regulations
thereunder. The performance objectives for an award subject to this Section 5
shall consist of one or more business criteria and a targeted level or levels
of performance with respect to such criteria, as specified by the Committee but
subject to this Section 5. Performance objectives shall be objective and shall
otherwise meet the requirements of Section 162(m)(4)(C) of the Code. Business
criteria used by the Committee in establishing performance objectives for
awards subject to this Section 5 shall be selected from among the following:
(a) Annual return on capital;
(b) Annual earnings or earnings per share;
(c) Annual cash flow provided by operations;
(d) Changes in annual revenues;
(e) Stock Price; and/or
(f) Strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration, geographic business
expansion goals, cost targets, and goals relating to acquisitions or
divestitures.
The levels of performance required with respect to such business criteria
may be expressed in absolute or relative levels. Performance objectives may
differ for such awards to different employees. The Committee shall specify the
weight to be given to each performance objective for purposes of determining
the final amount payable with respect to any such award. The Committee may, in
its discretion, reduce the amount of a payout otherwise to be made in
connection with an award subject to this Section 5, but may not exercise
discretion to increase such amount, and the Committee may consider other
performance criteria in exercising such discretion. All determinations by the
Committee as to the achievement of performance objectives shall be in writing.
The Committee may not delegate any responsibility with respect to an award
subject to this Section 5.
6. General Provisions.
(a) Compliance with Laws and Obligations. The Company shall not be obligated
to issue or deliver Shares in connection with any award or take any other
action under the Plan in a transaction subject to the requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated quotation system
or any other law, regulation or
G-2
<PAGE>
contractual obligation of the Company until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing Shares issued under the Plan will be subject
to such stop-transfer orders and other restrictions as may be applicable under
such laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(b) Limitations on Transferability. Unless otherwise determined by the
Committee, any right to receive Shares under the Plan will not be transferable
by an employee except by will or the laws of descent and distribution or to a
beneficiary in the event of the employee's death, shall not be pledged,
mortgaged, hypothecated or otherwise encumbered, or otherwise subject to the
claims of creditors.
(c) No Right to Continued Employment or Service. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee or other
person the right to be retained in the employ or service of the Company or any
of its subsidiaries, nor shall it interfere in any way with the right of the
Company or any of its subsidiaries to terminate any employee's employment or
other person's service at any time.
(d) Taxes. The Company is authorized to condition the delivery of any Shares
under the Plan upon the employee's making a satisfactory provision to enable
the Company or any subsidiary to satisfy its tax withholding obligation in
connection with such delivery of Shares.
(e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Shares
under the Plan without the consent of the shareholders or employees, except
that any such action shall be subject to the approval of the Company's
shareholders at or before the next annual meeting of shareholders for which the
record date is after such Board action if such shareholder approval is required
by any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted,
and the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to shareholders for approval.
(f) No Rights to Awards; No Shareholder Rights. No employee shall have any
claim to be granted any award under the Plan, and there is no obligation for
uniformity of treatment of employees. No award shall confer on any employee any
of the rights of a stockholder of the Company unless and until Shares are duly
issued or transferred and delivered to the employee in accordance with the
terms of the award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to an employee pursuant to an award,
nothing contained in the Plan or any award shall give any such employee any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver Shares, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt
such other compensatory arrangements as it may deem desirable, including,
without limitation, the granting of stock options other than under the Plan,
and such arrangements that may be either applicable generally or only in
specific cases.
(i) Governing law. The validity, construction and effect of the plan, any
rules and regulations relating to the Plan and awards granted hereunder shall
be determined in accordance with the laws of the State of Texas, without giving
effect to principles of conflicts of laws, and applicable federal law.
(j) Effective Date; Plan Termination. The Plan shall become effective as of
the date of its adoption by the Board and approval of the Company's
stockholders and shall continue in effect until terminated by the Board.
G-3
<PAGE>
ANNEX H
GROUP MAINTENANCE AMERICA CORP.
1999 STOCK AWARDS PLAN
I. PURPOSE
The purpose of the Group Maintenance America Corp. 1999 Stock Awards Plan
(the "Plan") is to provide a means through which Group Maintenance America
Corp., a Texas corporation (the "Company"), and its subsidiaries, may attract
able persons to the Company and to provide a means whereby those employees,
Directors and consultants, upon whom the responsibilities of the successful
administration and management of the Company rest, and whose present and
potential contributions to the welfare of the Company are of importance, can
acquire and maintain stock ownership, thereby strengthening their concern for
the welfare of the Company and their desire to remain in its employ or service.
A further purpose of the Plan is to provide such key employees, Directors and
consultants with additional incentive and reward opportunities designed to
enhance the profitable growth of the Company. Accordingly, the Plan provides
for granting Incentive Stock Options, options which do not constitute Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Performance
Awards, Phantom Stock Awards, or any combination of the foregoing, as is best
suited to the circumstances of the particular employee, Director or consultant,
as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Affiliates" means any "parent corporation" of the Company and any
"subsidiary" of the Company within the meaning of Code Sections 424(e) and
(f), respectively, and any entity which directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common
control with the Company.
(b) "Award" means, individually or collectively, any Option, Restricted
Stock Award, Phantom Stock Award, Performance Award or Stock Appreciation
Right.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence of any of the following
events: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of
an entity other than a previously wholly-owned subsidiary of the Company),
(ii) the Company sells, leases or exchanges all or substantially all of its
assets to any other person or entity (other than a wholly-owned subsidiary
of the Company), (iii) the Company is to be dissolved and liquidated, (iv)
any person or entity, including a "group" as contemplated by Section
13(d)(3) of the 1934 Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power),
or (v) as a result of or in connection with a contested election of
directors, the persons who were directors of the Company before such
election shall cease to constitute a majority of the Board; provided,
however, that the following transactions shall not be a Change of Control
for the purposes of this Plan:
A. the transaction contemplated in that certain Agreement and Plan of
Merger dated as of November 2, 1999 by and between the Company and
Building One Services Corporation;
B. the acquisition by BOSS II, LLC of the Company's convertible
preferred stock pursuant to the Subscription and Exchange Agreement
by and between the Company and BOSS II, LLC dated as of November 2,
1999;
H-1
<PAGE>
C. the acquisition by Apollo Management, L.P. ("Apollo") or one of the
Apollo Affiliates (as defined below) of shares of Stock pursuant to
the exercise of certain rights it has under various agreements with
the Company;
D. the transfer of shares among Apollo or any Apollo Affiliates;
provided however, any transfer or transfers among Apollo or any
Apollo Affiliates which is transacted in combination with another
transaction or series of transactions involving a party or parties
other than Apollo or any Apollo Affiliates where all transactions
combined satisfy any of clauses (i) through (v) above shall be a
Change of Control.
For purposes of this definition, an "Apollo Affiliate" shall mean any entity
which would be an "affiliate" of Apollo as provided in Rule 12b-2 under the
1934 Act.
(e) "Change of Control Value" shall mean (i) the per share price offered
to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price
per share offered to stockholders of the Company in any tender offer or
exchange offer whereby a Change of Control takes place, or (iii) if such
Change of Control occurs other than pursuant to a tender or exchange offer,
the Fair Market Value per share of the shares into which Awards are
exercisable, as determined by the Committee, whichever is applicable. In
the event that the consideration offered to stockholders of the Company
consists of anything other than cash, the Committee shall determine the
fair cash equivalent of the portion of the consideration offered which is
other than cash.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to any section and any regulations
under such section.
(g) "Committee" means the Compensation Committee of the Board which
shall be (i) constituted so as to permit the Plan to comply with Rule 16b-3
and (ii) constituted solely of "outside directors," within the meaning of
section 162(m) of the Code and applicable interpretive authority
thereunder.
(h) "Company" means Group Maintenance America Corp. and any of its
Affiliates.
(i) A "consultant" means an individual who performs services for the
Company or its Affiliates as an independent contractor.
(j) "Director" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law
who is serving on the Board on the date the Plan is adopted by the Board or
is elected to the Board after such date.
(k) An "employee" means any person (including an officer or a Director)
in an employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(l) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any specified date, the mean of the
high and low sales prices of the Stock (i) reported by the any interdealer
quotation system on which the Stock is quoted on that date or (ii) if the
Stock is listed on a national stock exchange, reported on the stock
exchange composite tape on that date; or, in either case, if no prices are
reported on that date, on the last preceding date on which such prices of
the Stock are so reported. If the Stock is traded over the counter at the
time a determination of its fair market value is required to be made
hereunder, its fair market value shall be deemed to be equal to the average
between the reported high and low or closing bid and asked prices of Stock
on the most recent date on which Stock was publicly traded. In the event
Stock is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its fair market value
shall be made by the Committee in such manner as it deems appropriate.
(n) "Holder" means an employee, Director or consultant who has been
granted an Award.
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(o) "Incentive Stock Option" means an option that is designated an
incentive stock option within the meaning of section 422(b) of the Code.
(p) "Nonqualified Stock Option" means an option granted under Paragraph
VII of the Plan to purchase Stock which does not constitute an Incentive
Stock Option.
(q) "Option" means an Award granted under Paragraph VII of the Plan and
includes both Incentive Stock Options to purchase Stock and Nonqualified
Stock Options to purchase Stock.
(r) "Option Agreement" means a written agreement between the Company and
a Holder with respect to an Option.
(s) "Performance Award" means an Award granted under Paragraph X of the
Plan.
(t) "Performance Award Agreement" means a written agreement between the
Company and a Holder with respect to a Performance Award.
(u) "Phantom Stock Award" means an Award granted under Paragraph XI of
the Plan.
(v) "Phantom Stock Award Agreement" means a written agreement between
the Company and a Holder with respect to a Phantom Stock Award.
(w) "Plan" means the Group Maintenance America Corp. 1999 Stock Awards
Plan, as amended from time to time.
(x) "Reload Option" means the grant of a new Option to a Holder who
exercises an Option(s) as provided in Paragraph VII(f) of the Plan.
(y) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(z) "Restricted Stock Award" means an Award granted under Paragraph IX
of the Plan.
(aa) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act,
as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.
(bb) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Stock on the date such right is exercised over the exercise price of such
Stock Appreciation Right.
(cc) "Stock" means the common stock, $0.001 par value of the Company.
(dd) "Stock Appreciation Right" means an Award granted under Paragraph
VIII of the Plan.
(ee) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock
Appreciation Rights.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided that the Plan is approved by the stockholders of the Company within
twelve months thereafter. No further Awards may be granted under the Plan after
the expiration of ten years from the date of its adoption by the Board. The
Plan shall remain in effect until all Awards granted under the Plan have been
satisfied or expired.
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IV. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Committee.
(b) Powers. Subject to the provisions of the Plan, the Committee shall have
sole authority, in its discretion, to determine which employees, Directors and
consultants shall receive an Award, the time or times when such Award shall be
made, whether an Incentive Stock Option, Nonqualified Option or Stock
Appreciation Right shall be granted, the number of shares of Stock which may be
issued under each Option, Stock Appreciation Right or Restricted Stock Award,
and the value of each Performance Award and Phantom Stock Award. In making such
determinations the Committee may take into account the nature of the services
rendered by the respective employees, Directors and consultants, their present
and potential contributions to the Company's success and such other factors as
the Committee in its discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and
the respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the
Plan, and to determine the terms, restrictions and provisions of each Award,
including such terms, restrictions and provisions as shall be requisite in the
judgment of the Committee to cause designated Options to qualify as Incentive
Stock Options, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in any agreement relating to an Award
in the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters referred to in this
Paragraph IV shall be conclusive.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE AWARDS
AND PHANTOM STOCK AWARDS; SHARES SUBJECT TO THE PLAN
(a) Stock Grant and Award Limits. The Committee may from time to time grant
Awards to one or more employees, Directors or consultants determined by it to
be eligible for participation in the Plan in accordance with the provisions of
Paragraph VI. Subject to Paragraph XII, the aggregate number of shares of Stock
that may be issued under the Plan shall not exceed 2,500,000 shares. Shares of
Stock shall be deemed to have been issued under the Plan only to the extent
actually issued and delivered pursuant to an Award. To the extent that an Award
lapses or the rights of its Holder terminate or the Award is paid in cash, any
shares of Stock subject to such Award shall again be available for the grant of
an Award. Separate stock certificates shall be issued by the Company for those
shares acquired pursuant the exercise of an Incentive Stock Option and for
those shares acquired pursuant to the exercise of a Nonqualified Stock Option.
(b) Stock Offered. The stock to be offered pursuant to the grant of an Award
may be authorized but unissued Stock or Stock previously issued and outstanding
and reacquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
employees, Directors or consultants. An Award may be granted on more than one
occasion to the same person, and, subject to the limitations set forth in the
Plan, such Award may include an Incentive Stock Option or a Nonqualified Stock
Option, a Stock Appreciation Right, a Restricted Stock Award, a Performance
Award, a Phantom Stock Award or any combination thereof.
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VII. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant; provided that, the term of an incentive stock
option cannot exceed ten years from the date of grant.
(b) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(c) Special Limitations on Incentive Stock Options. No more than 2,500,000
shares of Stock may be subject to Incentive Stock Options. Incentive Stock
Options may only be granted to employees of the Company and its Affiliates. To
the extent that the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its parent and subsidiary corporations exceeds $100,000, such Incentive
Stock Options shall be treated as Nonqualified Stock Options as determined by
the Committee. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of an optionee's Incentive Stock Options will not
constitute Incentive Stock Options because of such limitation and shall notify
the optionee of such determination as soon as practicable after such
determination. No Incentive Stock Option shall be granted to an individual if,
at the time the Option is granted, such individual owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, unless (i) at the time such Option is granted
the option price is at least 110% of the Fair Market Value of the Stock subject
to the Option and (ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.
(d) Option Agreement. Each Option shall be evidenced by an Option Agreement
in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. No individual may be granted in any calendar
year an Option to purchase more than 500,000 shares of Stock. An Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Stock (plus cash if necessary) having
a Fair Market Value equal to such option price. Payment in full or in part may
also be made by a reduction in the number of shares of Stock issuable upon the
exercise of an Option, based on the Fair Market Value of the shares of Stock on
the date the Option is exercised. Each Option Agreement shall specify the
effect of termination of employment, the cessation of serving on the Board or
the cessation of performing services as a consultant to the Company on the
exercisability of the Option. Moreover, an Option Agreement may provide for a
"cashless exercise" of the Option by establishing procedures whereby the
Holder, by a properly-executed written notice, directs (i) an immediate market
sale or margin loan respecting all or a part of the shares of Stock to which he
is entitled upon exercise pursuant to an extension of credit by the Company to
the Holder of the option price, (ii) the delivery of the shares of Stock from
the Company directly to a brokerage firm and (iii) the delivery of the option
price from the sale or margin loan proceeds from the brokerage firm directly to
the Company. Such Option Agreement may also include, without limitation,
provisions relating to (i) vesting of Options, subject to the provisions hereof
accelerating such vesting on a Change of Control, (ii) tax matters (including
provisions (y) permitting the delivery of additional shares of Stock or the
withholding of shares of Stock from those acquired upon exercise to satisfy
federal or state income tax withholding requirements and (z) dealing with any
other applicable employee wage withholding requirements), and (iii) any other
matters not inconsistent with the terms and provisions of this Plan that the
Committee shall in its sole discretion determine. The terms and conditions of
the respective Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of Stock may be
purchased upon exercise of an Option shall be determined by the Committee, but
(i) such purchase price shall not be less than the Fair Market Value of Stock
subject to an Option on the date the Option is granted and (ii) such purchase
price shall be subject to adjustment as provided herein. The Option or portion
thereof may be exercised by delivery of an
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irrevocable notice of exercise to the Company. The purchase price of the Option
or portion thereof shall be paid in full in the manner prescribed by the
Committee.
(f) Reload Options. The Committee shall have the authority to and, in its
sole discretion may, specify at or after the time of grant of a Nonqualified
Stock Option, that a Holder shall be automatically granted a Reload Option in
the event such Holder exercises all or part of an original option ("Original
Option") within ten years of the date of grant of the Original Option, by means
of, in accordance with Paragraph VII(d) of this Plan, (i) a cashless exercise,
(ii) a reduction in the number of shares of Stock issuable upon such exercise
sufficient to pay the purchase price and the applicable withholding taxes,
based on the Fair Market Value of the shares of Stock on the date the Option is
exercised, or (iii) surrendering to the Company already owned shares of Stock
in full or partial payment of the purchase price under the Original Option and
the applicable withholding taxes. The grant of Reload Options shall be subject
to the availability of shares of Stock under this Plan at the time of exercise
of the Original Option and to the limits provided for in Paragraph V of this
Plan. The Committee shall have the authority to determine the terms of any
Reload Options granted.
(g) Stockholder Rights and Privileges. The Holder shall be entitled to all
the privileges and rights of a stockholder only with respect to such shares of
Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder's name.
(h) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by individuals
employed by corporations who become employees as a result of a merger or
consolidation of the employing corporation with the Company or any subsidiary,
or the acquisition by the Company or a subsidiary of the assets of the
employing corporation, or the acquisition by the Company or a subsidiary of
stock of the employing corporation with the result that such employing
corporation becomes a subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of Stock upon the
exercise of such Stock Appreciation Right. Stock Appreciation Rights may be
granted in connection with the grant of an Option, in which case the Option
Agreement will provide that exercise of Stock Appreciation Rights will result
in the surrender of the right to purchase the shares under the Option as to
which the Stock Appreciation Rights were exercised. Alternatively, Stock
Appreciation Rights may be granted independently of Options in which case each
Award of Stock Appreciation Rights shall be evidenced by a Stock Appreciation
Rights Agreement which shall contain such terms and conditions as may be
approved by the Committee. No individual may be granted in any calendar year
more than 500,000 Stock Appreciation Rights. The Spread with respect to a Stock
Appreciation Right may be payable either in cash, shares of Stock with a Fair
Market Value equal to the Spread or in a combination of cash and shares of
Stock. With respect to Stock Appreciation Rights that are subject to Section 16
of the 1934 Act, however, the Committee shall, except as provided in Paragraph
XII(c), retain sole discretion (i) to determine the form in which payment of
the Stock Appreciation Right will be made (i.e., cash, securities or any
combination thereof) or (ii) to approve an election by a Holder to receive cash
in full or partial settlement of Stock Appreciation Rights. Each Stock
Appreciation Rights Agreement shall specify the effect of termination of
employment, the cessation of serving on the Board or the cessation of
performing services as a consultant to the Company on the exercisability of the
Stock Appreciation Rights.
(b) Other Terms and Conditions. At the time of such Award, the Committee,
may in its sole discretion, prescribe additional terms, conditions or
restrictions relating to Stock Appreciation Rights, including, but not limited
to rules pertaining to termination of employment, the cessation of serving on
the Board or the cessation of performing services as a consultant to the
Company (by retirement, disability, death or otherwise) of a Holder prior to
the expiration of such Stock Appreciation Rights. Such additional terms,
conditions or restrictions shall be set forth in the Stock Appreciation Rights
Agreement made in conjunction with the Award.
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Such Stock Appreciation Rights Agreements may also include, without limitation,
provisions relating to (i) vesting of Awards, subject to the provisions hereof
accelerating vesting on a Change of Control,(ii) tax matters (including
provisions covering applicable wage withholding requirements), and (iii) any
other matters not inconsistent with the terms and provisions of this Plan, that
the Committee shall in its sole discretion determine. The terms and conditions
of the respective Appreciation Rights Agreements need not be identical.
(c) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price (i) shall not be
less than the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is granted (or such greater exercise price as may be
required if such Stock Appreciation Right is granted in connection with an
Incentive Stock Option that must have an exercise price equal to 110% of the
Fair Market Value of the Stock on the date of grant pursuant to Paragraph
VII(c)), and (ii) shall be subject to adjustment as provided in Paragraph XII.
(d) Exercise Period. The term of each Stock Appreciation Right shall be as
specified by the Committee at the date of grant.
(e) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Forfeiture Restrictions to be Established by the Committee. Shares of
Stock that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Holder and an obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances
(the "Forfeiture Restrictions"). The Forfeiture Restrictions shall be
determined by the Committee in its sole discretion, and the Committee may
provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of
targets established by the Committee that are based on (1) the price of a share
of Stock, (2) the Company's earnings per share, (3) the Company's revenue, (4)
the revenue of a business unit of the Company designated by the Committee, (5)
the return on stockholders' equity achieved by the Company, or (6) the
Company's pre-tax cash flow from operations, (ii) the Holder's continued
service or employment with the Company for a specified period of time, or (iii)
a combination of any two or more of the factors listed in clauses (i) and (ii)
of this sentence. Each Restricted Stock Award may have different Forfeiture
Restrictions, in the discretion of the Committee. The Forfeiture Restrictions
applicable to a particular Restricted Stock Award shall not be changed except
as permitted by Paragraph IX(b) or Paragraph XII.
(b) Other Terms and Conditions. No individual may be awarded more than
500,000 shares of Stock that are subject to a Restricted Stock Award in any
calendar year. Stock awarded pursuant to a Restricted Stock Award shall be
represented by a stock certificate registered in the name of the Holder of such
Restricted Stock Award. The Holder shall have the right to receive dividends
with respect to Stock subject to a Restricted Stock Award, to vote Stock
subject thereto and to enjoy all other stockholder rights, except that (i) the
Holder shall not be entitled to delivery of the stock certificate until the
Forfeiture Restrictions shall have expired, (ii) the Company shall retain
custody of the Stock until the Forfeiture Restrictions shall have expired,
(iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of the Stock until the Forfeiture Restrictions shall have
expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement, shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment, the cessation of serving on the
Board or the cessation of performing services as a consultant to the Company
(by retirement, disability, death or otherwise) of a Holder prior to expiration
of the Forfeiture Restrictions. Such additional terms, conditions or
restrictions shall be set forth in a Restricted Stock Agreement made in
conjunction with the Award. Such Restricted Stock Agreement may also include,
without limitation, provisions relating to (i) subject to the provisions hereof
accelerating vesting on a Change of Control, vesting
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of Awards, (ii) tax matters (including provisions (y) covering any applicable
employee wage withholding requirements and (z) prohibiting an election by the
Holder under section 83(b) of the Code), and (iii) any other matters not
inconsistent with the terms and provisions of this Plan that the Committee
shall in its sole discretion determine. The terms and conditions of the
respective Restricted Stock Agreements need not be identical.
(c) Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment for Stock received pursuant to a Restricted Stock
Award, provided that in the absence of such a determination, a Holder shall not
be required to make any payment for Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law.
(d) Agreements. At the time any Award is made under this Paragraph IX, the
Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of the matters as the Committee may determine to be appropriate. The
terms and provisions of the respective Restricted Stock Agreements need not be
identical.
X. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall establish, with respect to and
at the time of each Performance Award, a performance period over which the
performance of the Holder shall be measured.
(b) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such Award, provided that no
individual may be granted a Performance Award in any calendar year where the
value of such award exceeds the Fair Market Value of 500,000 shares of Stock.
(c) Performance Measures. A Performance Award shall be awarded to an
employee, Director or consultant contingent upon future performance of the
employee, Director or consultant, the Company or any subsidiary, division or
department thereof by or in which is he employed or for which he performs
services during the performance period. The Committee shall establish the
performance measures applicable to such performance prior to the beginning of
the performance period but subject to such later revisions as the Committee
shall deem appropriate to reflect significant, unforeseen events or changes.
(d) Awards Criteria. In determining the value of Performance Awards, the
Committee shall take into account an employee's, Director's or consultant's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
(e) Payment. Following the end of the performance period, the Holder of a
Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of a Performance Award may be made in cash, Stock or a
combination thereof, as determined by the Committee. Payment shall be made in a
lump sum or in installments as prescribed by the Committee. Any payment to be
made in Stock shall be based on the Fair Market Value of the Stock on the
payment date. If a payment of cash is to be made on a deferred basis, the
Committee shall establish whether interest shall be credited, the rate thereof
and any other terms and conditions applicable thereto.
(f) Termination of Employment, Cessation of Serving on Board or Termination
of Service. A Performance Award shall terminate if the Holder does not remain
continuously in the employ of the Company or fails to serve on the Board or
fails to perform services for the Company at all times during the applicable
performance period, except as may be determined by the Committee or as may
otherwise be provided in the Award at the time granted.
(g) Agreements. At the time any Award is made under this Paragraph X, the
Company and the Holder shall enter into a Performance Award Agreement setting
forth each of the matters contemplated hereby, and, in
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addition such matters are set forth in Paragraph IX(b) as the Committee may
determine to be appropriate. The terms and provisions of the respective
agreements need not be identical.
XI. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock Awards are rights to receive shares
of Stock (or cash in an amount equal to the Fair Market Value thereof), or
rights to receive an amount equal to any appreciation in the Fair Market Value
of Stock (or portion thereof) over a specified period of time, which vest over
a period of time or upon the occurrence of an event (including without
limitation a Change of Control) as established by the Committee, without
payment of any amounts by the Holder thereof (except to the extent otherwise
required by law) or satisfaction of any performance criteria or objectives.
Each Phantom Stock Award shall have a maximum value established by the
Committee at the time of such Award, provided that no individual may be granted
a Phantom Stock Award in any calendar year for more than 500,000 shares of
Stock.
(b) Award Period. The Committee shall establish, with respect to and at the
time of each Phantom Stock Award, a period over which or the event upon which
the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Phantom Stock Awards, the
Committee shall take into account an employee's, Director's or consultant's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
(d) Payment. Following the end of the vesting period for a Phantom Stock
Award, the Holder of a Phantom Stock Award shall be entitled to receive payment
of an amount, not exceeding the maximum value of the Phantom Stock Award, based
on the then vested value of the Award. Payment of a Phantom Stock Award may be
made in cash, Stock or a combination thereof as determine by the Committee.
Payment shall be made in a lump sum or in installments as prescribed by the
Committee in its sole discretion. Any payment to be made in Stock shall be
based on the Fair Market Value of the Stock on the payment date. Cash dividend
equivalents may be paid during or after the vesting period with respect to a
Phantom Stock Award, as determined by the Committee. If a payment of cash is to
be made on a deferred basis, the Committee shall establish whether interest
shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment, Cessation of Serving on Board or Termination
of Service A Phantom Stock Award shall terminate if the Holder does not remain
continuously in the employ of the Company or fails to serve on the Board or
fails to perform services for the Company at all times during the applicable
vesting period, except as may be otherwise determined by the Committee or as
set forth in the Award at the time of grant.
(f) Agreements. At the time any Award is made under this Paragraph XI, the
Company and the Holder shall enter into a Phantom Stock Award Agreement setting
forth each of the matters contemplated hereby and, in addition such matters as
are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate. The terms and provisions of the respective agreements need not be
identical.
XII. RECAPITALIZATION OR REORGANIZATION
(a) The shares with respect to which Awards may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration
of an Award theretofore granted, the Company shall effect a subdivision or
consolidation by the Company, the number of shares of Stock with respect to
which such Award may thereafter be exercised or satisfied, as applicable, (i)
in the event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
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(b) If the Company recapitalizes or otherwise changes its capital structure,
thereafter upon any exercise or satisfaction, as applicable, of an Award
theretofore granted the Holder shall be entitled to (or entitled to purchase,
if applicable) under such Award, in lieu of the number of shares of Stock then
covered by such Award, the number and class of shares of stock and securities
to which the Holder would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the Holder had
been the holder of record of the number of shares of Stock then covered by such
Award.
(c) Unless all or a portion of a Holder's Awards vest or are exercisable
upon the occurrence of a Change of Control specifically provided under an
Option Agreement, a Performance Award Agreement, a Phantom Stock Award
Agreement, a Restricted Stock Agreement, a Stock Appreciation Rights Agreement
or an Employment Agreement, the Committee, in its discretion, shall determine
upon the occurrence of a Change of Control the exercisability of any Award not
otherwise exercisable, which may vary among Holders and types of Awards. The
Committee, in its discretion, may determine that upon the occurrence of a
Change of Control, each Award other than an Option outstanding hereunder shall
terminate within a specified number of days after notice to the Holder, and
such Holder shall receive, with respect to each share of Stock subject to such
Award, cash in an amount equal to the excess, if any, of the Change of Control
Value over the exercise price. Further, in the event of a Change of Control,
the Committee, in its discretion shall act to effect one or more of the
following alternatives with respect to outstanding Options, which may vary
among individual Holders and which may vary among Options held by any
individual Holder: (1) determine a limited period of time for exercise of such
Option on or before a specified date (before or after such Change of Control)
after which specified date all unexercised Options and all rights of Holders
thereunder shall terminate, (2) require the mandatory surrender to the Company
by selected Holders of some or all of the outstanding Options held by such
Holders (irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date, before or after such Change of Control,
specified by the Committee, in which event the Committee shall thereupon cancel
such Options and the Company shall pay to each Holder an amount of cash per
share equal to the excess, if any, of the Change of Control Value of the shares
subject to such Option over the exercise price(s) under such Options for such
shares, (3) make such adjustments to Options then outstanding as the Committee
deems appropriate to reflect such Change of Control (provided, however, that
the Committee may determine in its sole discretion that no adjustment is
necessary to Options then outstanding) or (4) provide that thereafter upon any
exercise of an Option theretofore granted the Holder shall be entitled to
purchase under such Option, in lieu of the number of shares of Stock then
covered by such Option the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution the Holder has
been the holder of record of the number of shares of Stock then covered by such
Option. The provisions contained in this paragraph shall be inapplicable to an
Award granted within six (6) months before the occurrence of a Change of
Control if the Holder of such Award is subject to the reporting requirements of
Section 16(a) of the 1934 Act. The provisions contained in this paragraph shall
not alter any rights or terminate any rights of the Holder to further payments
pursuant to any other agreement with the Company following a Change of Control.
(d) In the event of changes in the outstanding Stock by reason of
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Award and not otherwise provided for by this Paragraph XII,
any outstanding Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Stock or other consideration subject to such Awards. In the
event of any such change in the outstanding Stock, the aggregate number of
shares available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
(e) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization
or other change in the Company's capital structure or its business, any merger
or consolidation of the Company, any issue of debt or equity securities ahead
of or affecting Stock or the rights thereof, the
H-10
<PAGE>
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(f) Any adjustment provided for in Subparagraphs (a), (b), (c) or (d) above
shall be subject to any required stockholder action.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares of obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
of shares of Stock subject to Awards theretofore granted or the purchase price
per share, if applicable.
XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time
to time; provided that no change in any Award theretofore granted may be made
which would impair the rights of the Holder without the consent of the Holder
(unless such change is required in order to cause the benefits under the Plan
to qualify as performance-based compensation within the meaning of section
162(m) of the Code and applicable interpretive authority thereunder), and
provided, further, that the Board may not, without approval of the
stockholders, amend the Plan:
(a) to increase the maximum number of shares which may be issued on exercise
or surrender of an Award, except as provided in Paragraph XII;
(b) to change the Option price;
(c) to change the class of employees, Directors or consultants eligible to
receive Awards or materially increase the benefits accruing to employees,
Directors or consultants under the Plan;
(d) to extend the maximum period during which Awards may be granted under
the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XIV. MISCELLANEOUS
(a) Right to An Award. Neither the adoption of the Plan by the Company nor
any action of the Board or the Committee shall be deemed to give an employee,
Director or consultant any right to be granted an Award to purchase Stock, a
right to a Stock Appreciation Right, a Restricted Stock Award, a Performance
Award or a Phantom Stock Award or any of the rights hereunder except as may be
evidenced by an Award or by an Option Agreement, Stock Appreciation Rights
Agreement, Restricted Stock Agreement, Performance Award Agreement or Phantom
Stock Award Agreement on behalf of the Company, and then only to the extent and
on the terms and conditions expressly set forth therein. The Plan shall be
unfunded. The Company shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to assure the
payment of any Award.
(b) No Employment or Service Rights Conferred. Nothing contained in the Plan
shall (i) confer upon any employee any right with respect to continuation of
employment or service with the Company or any subsidiary or (ii) interfere in
any way with the right of the Company or any subsidiary to terminate his or her
employment or service at any time.
H-11
<PAGE>
(c) Other Laws; Withholding. The Company shall not be obligated to issue any
Stock pursuant to any Award granted under the Plan at any time when the shares
covered by such Award have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the issuance and sale of such shares. No
fractional shares of Stock shall be delivered, nor shall any cash in lieu of
fractional shares be paid. The Company shall have the right to deduct in
connection with all Awards any taxes required by law to be withheld and to
require any payments required to enable it to satisfy its withholding
obligations.
(d) No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any subsidiary from taking any corporate
action which is deemed by the Company or such subsidiary to be appropriate or
in its best interest, whether or not such action would have an adverse effect
on the Plan or any Award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any subsidiary as a result
of any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the Holder's lifetime only by such
Holder or the Holder's guardian or legal representative.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award made
to a person subject to Section 16 of the 1934 Act meet all of the requirements
of Rule 16b-3. If any provision of the Plan or any such Award would disqualify
the Plan or such Award under, or would otherwise not comply with, Rule 16b-3,
such provision or Award shall be construed or deemed amended to conform to Rule
16b-3.
(g) Section 162(m). If the plan is subject to 162(m) of the Code, it is
intended that the Plan comply fully with and meet all the requirements of
Section 162(m) of the Code so that Options and Stock Appreciation Rights
granted hereunder and, if determined by the Committee, Restricted Stock Awards,
shall constitute "performance-based" compensation within the meaning of such
section. If any provision of the Plan would disqualify the Plan or would not
otherwise permit the Plan to comply with Section 162(m) as so intended, such
provision shall be construed or deemed amended to conform to the requirements
or provisions of Section 162(m); provided that no such construction or
amendment shall have an adverse effect on the economic value to a Holder of any
Award previously granted hereunder.
(h) Governing Law. This Plan shall be construed in accordance with the laws
of the State of Texas.
H-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article 2.02A of the Texas Business Corporation Act (the "TBCA") provides,
in relevant part, as follows:
Subject to the provisions of Sections B and C of this Article, each
corporation shall have power:
(16) to indemnify directors, officers, employees, and agents of the
corporation and to purchase and maintain liability insurance for those
persons.
Article IX of the Articles of Incorporation of Group Maintenance America
Corp. ("GroupMAC") (therein referred to as the "Corporation") provides as
follows:
1. Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, any appeal in such
action, suit or proceeding, and any inquiry or investigation that would
lead to such action, suit or proceeding (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the
legal representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director or
officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to any employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any
other capacity while serving as a director or officer, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by
the TBCA, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all judgments, fines, penalties (including excise tax and
similar taxes), settlements, and reasonable expenses actually incurred by
such indemnitee in connection therewith. The right to indemnification
conferred in this Article shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the TBCA requires, an advancement
of expenses incurred by an indemnitee shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such indemnitee, to
repay all amounts so advanced if it shall ultimately be determined that
such indemnitee is not entitled to be indemnified for such expenses under
this Article or otherwise.
2. Insurance. The Corporation may purchase and maintain insurance, at
its expense, on behalf of any indemnitee against any liability asserted
against him and incurred by him in such a capacity or arising out of his
status as a representative of the Corporation, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the TBCA.
3. Indemnity of Employees and Agents of the Corporation. The Corporation
may, to the extent authorized from time to time by the board of directors,
grant rights to indemnification and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of the
provisions of this Article or as otherwise permitted under the TBCA with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
GroupMAC has entered into employment agreements with its executive officers
pursuant to which GroupMAC generally is obligated to indemnify such officers
to the full extent permitted by the TBCA as described above.
GroupMAC has purchased liability insurance policies covering the directors
and officers of GroupMAC, including, to provide protection where GroupMAC
cannot legally indemnify a director or officer and where a claim arises under
the Employee Retirement Income Security Act of 1974 against a director or
officer based on an alleged breach of fiduciary duty or other wrongful act.
II-1
<PAGE>
Item 21. Exhibits and Financial Statements.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-------- ----------------------
<C> <S>
2.1*** Agreement and Plan of Merger, dated as of November 2, 1999, by and
between Group Maintenance America Corp. and Building One Services
Corporation, together with Exhibits thereto (included as Annex A to
the joint proxy statement/prospectus forming a part of this
Registration Statement and incorporated herein by reference).
3.1* Articles of Incorporation of GroupMAC, as amended.
3.2** Bylaws of GroupMAC, as amended.
4.1**** Indenture dated as of January 22, 1999, among Group Maintenance
America Corp., State Street Bank and Trust Company, as Trustee, and
the Guarantors named therein.
4.2 Indenture dated as of December 31, 1998, between Group Maintenance
America Corp. and State Street Bank and Trust Company, as Trustee
(filed as Exhibit 4.2 to GroupMAC's Registration Statement on Form
S-4 (Registration No. 333-81201)).
5*** Opinion of Bracewell & Patterson, L.L.P. as to the legality of the
Common Stock being offered.
8.1*** Opinion of Bracewell & Patterson, L.L.P. as to certain federal income
tax matters.
8.2*** Opinion of Morgan, Lewis & Bockius LLP as to certain federal income
tax matters.
10.1* Group Maintenance America Corp. 1997 Stock Awards Plan.
10.2* Group Maintenance America Corp. 1997 Stock Option Plan.
10.3** Form of Employment Agreement between Group Maintenance America Corp.
and James P. Norris.
10.4** Form of Employment Agreement between Group Maintenance America Corp.
and J. Patrick Millinor, Jr.
10.5** Form of Employment Agreement between Group Maintenance America Corp.
and Donald L. Luke.
10.6** Form of Employment Agreement between Group Maintenance America Corp.
and
Timothy Johnston.
10.7** Form of Employment Agreement between Group Maintenance America Corp.
and Ronald D. Bryant.
10.8** Second Amended and Restated Credit Agreement among Group Maintenance
America Corp., the Subsidiaries listed as Guarantors, Chase Bank of
Texas, National Association, and the signatory banks, dated as of
October 15, 1998.
10.9**** First Amendment to Second Amended and Restated Credit Agreement.
10.10** Agreement and Plan of Exchange by and among Group Maintenance America
Corp. and the holders of a Majority of the Outstanding Common Stock
of Airtron, Inc., dated April 30, 1997. (Confidential information has
been omitted from this document and has been filed separately with
the Commission.)
10.11*** Subscription and Exchange Agreement between Group Maintenance America
Corp. and BOSS II, LLC, dated November 2, 1999.
10.12*** Form of modification to Group Maintenance America Corp. employment
contract with J. Patrick Millinor, Jr.
10.13*** Form of modification to Group Maintenance America Corp. employment
contract with Donald L. Luke.
10.14*** Form of modification to Group Maintenance America Corp. employment
contract with Chester J. Jachimiec.
10.15*** Form of modification to Group Maintenance America Corp. employment
contract with Darren B. Miller.
10.16*** Form of modification to Group Maintenance America Corp. employment
contract with Alfred R. Roach, Jr.
10.17*** Form of modification to Group Maintenance America Corp. employment
contract with Daniel W. Kipp.
10.18*** Form of modification to Building One Services Corporation employment
contract with Joseph M. Ivey.
10.19*** Form of modification to Building One Services Corporation employment
contract with William P. Love, Jr.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.20*** Form of modification to Building One Services Corporation employment
contract with Michael J. Sullivan.
<CAPTION>
21*** Subsidiaries of GroupMAC.
23.1*** Consent of Bracewell & Patterson, L.L.P. (included in their opinion
filed as Exhibit 5 and
Exhibit 8 hereto).
23.2*** Consent of Morgan, Lewis & Bockius LLP (included in their opinion
filed as Exhibit 8 hereto).
<C> <S>
23.3*** Consent of KPMG LLP.
23.4*** Consents of PricewaterhouseCoopers LLP.
23.5*** Consent of Baird, Kurtz & Dobson.
23.6*** Consents of Grant Thornton LLP.
23.7*** Consent of KPMG LLP.
23.8*** Consent of Barry and Moore, P.C.
23.9*** Consent of Frazier & Deeter, LLC.
23.10*** Consent of Leverich Rasmuson Banyard.
23.11*** Consent of Harbeson, Beckerleg & Fletcher.
23.12*** Consent of Schenck & Associates.
23.13*** Consent of Davenport, Holliday & Spring.
23.14*** Consent of Bunch & Company, LLP.
24*** Powers of attorney.
27** Financial Data Schedule.
99.1*** Form of Group Maintenance America Corp. Proxy Card.
99.2*** Form of Building One Services Corporation Proxy Cards.
99.3*** Consent of Chase Securities Inc. relating to the opinion attached as
Annex C to the joint proxy
statement/prospectus forming a part of this Registration Statement.
99.4*** Consent of Bear Stearns & Co., Inc. relating to the opinion attached
as Annex D to the joint proxy
statement/prospectus forming a part of this Registration Statement.
</TABLE>
- --------
* Filed as an exhibit to the Company's Form S-1 (Registration No. 333-
34067).
** Filed as an exhibit to the Company's Annual Report on Form 10-K/A for the
year ended December 31, 1998.
*** Filed herewith.
**** Filed as an exhibit to the Company's Form S-4 (Registration No. 333-
76713).
(b) Financial Statement Schedules
No financial statement schedules are included herein. All other schedules
for which provision is made in the applicable accounting regulations of the
Commission are not required under the related instructions, are inapplicable,
or the information is included in the consolidated financial statements, and
have therefore been omitted.
(c) Reports, Opinions, and Appraisals
The following reports, opinions and appraisals are included herein.
None.
Item 22. Undertakings.
(a) Regulation S-K, Item 512 Undertakings
(1) The undersigned registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change of such information in the
registration statement;
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) Registration on Form S-4 of Securities Offered for Resale.
(i) The undersigned hereby undertakes as follows: That prior to any
public reoffering of the securities registered hereunder through the
use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form; and
(ii) The registrant undertakes that every prospectus (a) that is
filed pursuant to the paragraph immediately preceding, or (b) that
purports to meet the requirements of section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of new securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Company
of expenses incurred or paid by a director, officer or controlling person
of the Company in the successful defense of
II-4
<PAGE>
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired therein, that was not the subject of and included in the registration
statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Group
Maintenance America Corp. has duly caused this registration statement or
amendment thereto to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on December 27, 1999.
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
-----------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the indicated capacities on December 27, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
James P. Norris* Chairman of the Board; Director
___________________________________________
James P. Norris
/S/ J. Patrick Millinor, Jr. Director and Chief Executive Officer
___________________________________________ (principal executive officer)
J. Patrick Millinor, Jr.
/S/ Darren B. Miller Executive Vice President and Chief
___________________________________________ Financial Officer (principal financial
Darren B. Miller officer)
/S/ Daniel W. Kipp Senior Vice President and Chief Accounting
___________________________________________ Officer (principal accounting officer)
Daniel W. Kipp
Donald L. Luke* Director, President and Chief Operating
___________________________________________ Officer
Donald L. Luke
David L. Henninger* Director
___________________________________________
David L. Henninger
Chester J. Jachimiec* Director
___________________________________________
Chester J. Jachimiec
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Lucian L. Morrison* Director
___________________________________________
Lucian L. Morrison
Robert Munson III* Director
___________________________________________
Robert Munson III
Fredric J. Sigmund* Director
___________________________________________
Fredric J. Sigmund
John M. Sullivan* Director
___________________________________________
John M. Sullivan
James D. Weaver* Director
___________________________________________
James D. Weaver
William M. Witz* Director
___________________________________________
William M. Witz
</TABLE>
/s/ Randolph W. Bryant
*By: ________________________________
Randolph W. Bryant
(Attorney-in-fact for persons
indicated)
II-7
<PAGE>
EXHIBIT 5
December 23, 1999
Group Maintenance America Corp.
Eight Greenway Plaza, Suite 1500
Houston, Texas 77046
Ladies and Gentlemen:
We have acted as counsel to Group Maintenance America Corp., a Texas corporation
(the "Company"), in connection with the preparation and filing of a Registration
Statement on Form S-4 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), relating to the offering of a maximum of
41,780,418 shares (the "Shares") of common stock, $0.001 par value, of the
Company. The Shares are to be issued pursuant to the Agreement and Plan of
Merger, as amended (the "Agreement"), between the Company and Building One
Services Corporation.
We have examined originals or copies certified by officers of the Company of (a)
the Articles of Incorporation, as amended, of the Company, (b) the Bylaws of the
Company, (c) certified copies of certain resolutions adopted by the Board of
Directors of the Company and (d) such other documents and records as we have
deemed necessary and relevant for the purposes hereof. In addition, we have
relied on certificates of officers of the Company and of public officials and
others as to certain matters of fact relating to this opinion and have made such
investigations of law as we have deemed necessary and relevant as a basis
hereof. We have assumed the genuineness of all signatures, the authenticity of
all documents and records submitted to us as copies, the conformity to authentic
original documents and records of all documents and records submitted to us as
copies, and the truthfulness of all statements of fact contained therein.
Based on the foregoing, subject to the limitations, assumptions and
qualifications set forth herein, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. the Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Texas; and
2. the Shares have been duly and validly authorized and, subject to the
Registration Statement becoming effective and compliance with applicable
state securities or Blue Sky laws, when issued in accordance with the
Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as Exhibit 5
to the Registration Statement and to the references to our firm under the
heading "Legal Matters" in the Prospectus included in the Registration
Statement. By giving such consent, we do not admit that we are within
<PAGE>
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
Bracewell & Patterson, L.L.P.
-2-
<PAGE>
EXHIBIT 8.1
December 23, 1999
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Re: Registration Statement on Form S-4
Gentlemen:
We are acting as counsel to Group Maintenance America Corp. ("GroupMAC"), a
Texas corporation, in connection with the proposed merger (the "Merger") of
Building One Services Corporation ("Building One"), a Delaware corporation, with
and into GroupMAC, pursuant to the Agreement and Plan of Merger, dated as of
November 2, 1999, by and between GroupMAC and Building One (the "Merger
Agreement"). You have requested our opinion concerning certain United States
federal income tax consequences of the Merger and the accuracy of the discussion
contained under the caption "Material United States Federal Income Tax
Considerations of the Merger" in the Joint Proxy Statement/Prospectus (the
"Prospectus"), which is included in the Registration Statement on Form S-4 (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission").
In rendering our opinion, we have examined and relied upon the accuracy and
completeness of the facts, information, representations, and covenants contained
in originals or copies, certified or otherwise identified to our satisfaction,
of the Merger Agreement, the Prospectus and all exhibits thereto, the
Registration Statement and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. In our examination of
these documents and in our reliance upon them in issuing this opinion, we have
assumed, with your consent, the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, and
<PAGE>
Group Maintenance America Corp.
December 23, 1999
Page 2
the authenticity of the originals of such documents. We have assumed that each
executed document constitutes the legal, valid, binding and enforceable
agreement of the signatory parties; that all representations and statements set
forth in such documents are and will remain true, accurate and complete in all
material respects; that all of the transactions related to the Merger will be
consummated in accordance with the terms of such documents; and that all
obligations imposed on, or covenants agreed to by, the parties pursuant to any
of such documents have been or will be performed or satisfied in accordance with
their terms in all material respects. We have further assumed that the Merger
will be consummated pursuant to the terms and conditions set forth in the Merger
Agreement without the waiver or modification of any such terms and conditions
and that the Merger qualifies as a statutory merger under applicable state law.
We have not attempted to verify independently any representations and have
assumed that all representations contained in the documents are, and at the time
the Merger becomes effective will be, true, accurate and complete in all
material respects. We have further assumed that you have disclosed to us all of
the documents that are relevant to the transactions that are the subject of this
opinion.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service, and such other authorities as we have considered
relevant all of which are potentially subject to change, possibly with
retroactive effect. A change in any of the authorities upon which our opinion
is based could affect our conclusions.
Based on and subject to the foregoing, we are of the opinion that, although
the discussion set forth in the Registration Statement under the caption
"Material United States Federal Income Tax Considerations of the Merger" does
not purport to discuss all possible United States federal income tax
consequences of the Merger, such discussion constitutes, in all material
respects, a fair and accurate summary of the material United States federal
income tax consequences of the Merger.
Except as set forth above, we express no opinion to any party as to any tax
consequences, whether federal, state, local or foreign, of any transactions or
events contemplated by or referred to in the Merger Agreement or the
Registration Statement. This opinion is expressed as of the date hereof, unless
otherwise expressly stated, and we disclaim any undertaking to advise you of any
subsequent changes of the facts stated, referenced, or assumed herein or any
subsequent changes in applicable law.
<PAGE>
Group Maintenance America Corp.
December 23, 1999
Page 3
This opinion is being provided in connection with the filing of the
Registration Statement. In addition, we consent to the use of our name in the
Prospectus under the heading "Material United States Federal Income Tax
Considerations of the Merger" and to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Commission promulgated thereunder. Except as set
forth above, this opinion is not to be used, circulated, quoted or otherwise
referred to for any purpose without our prior written consent.
Sincerely yours,
Bracewell & Patterson, L.L.P.
<PAGE>
EXHIBIT 8.2
December 27, 1999
Building One Services Corporation
110 Cheshire Lane
Minnetonka, Minnesota 55305
Re: Registration Statement on Form S-4
Gentlemen:
We have acted as counsel to Building One Services Corporation ("Building One"),
a Delaware corporation, in connection with the proposed merger (the "Merger") of
Building One with and into Group Maintenance America Corp. ("GroupMAC"), a Texas
corporation, pursuant to the Agreement and Plan of Merger, dated as of November
2, 1999, by and between GroupMAC and Building One (the "Merger Agreement"). You
have requested our opinion concerning certain United States federal income tax
consequences of the Merger and the accuracy of the discussion contained under
the caption "Material United States Federal Income Tax Considerations of the
Merger" in the Joint Proxy Statement/Prospectus (the "Prospectus") , which is
included in the Registration Statement on Form S-4 (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission").
In rendering our opinion, we have examined and relied upon the accuracy and
completeness of the facts, information, representations, and covenants contained
in originals or copies, certified or otherwise identified to our satisfaction,
of the Merger Agreement, the Prospectus and all exhibits thereto, the
Registration Statement and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. In our examination of
these documents and in our reliance upon them in issuing this opinion, we have
assumed, with your consent, the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all
<PAGE>
Building One Services Corporation
December 27, 1999
Page 2
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such documents. We have assumed that each
executed document constitutes the legal, valid, binding and enforceable
agreement of the signatory parties; that all representations and statements set
forth in such documents are true, accurate and complete in all material respects
as of the date of this opinion and will remain true, accurate and complete in
all material respects at the time the Merger becomes effective; that all of the
transactions related to the Merger will be consummated in accordance with the
terms of such documents; and that all obligations imposed on, or covenants
agreed to by, the parties pursuant to any of such documents have been or will be
performed or satisfied in accordance with their terms in all material respects.
We have further assumed that the Merger will be consummated pursuant to the
terms and conditions set forth in the Merger Agreement without the waiver or
modification of any such terms and conditions and that the Merger qualifies as a
statutory merger under applicable state law. We have not attempted to verify
independently any representations and have assumed that all representations
contained in the documents are, and at the time the Merger becomes effective
will be, true, accurate and complete in all material respects. We have further
assumed that you have disclosed to us all of the documents that are relevant to
the transactions that are the subject of this opinion.
In rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service, and such other authorities as we have considered
necessary and relevant, all of which are potentially subject to change, possibly
with retroactive effect. A change in any of the authorities upon which our
opinion is based could affect our conclusions.
Based on and subject to the foregoing, we are of the opinion that, although the
discussion set forth in the Registration Statement under the caption "Material
United States Federal Income Tax Considerations of the Merger" does not purport
to discuss all possible United States federal income tax consequences of the
Merger, such discussion constitutes, in all material respects, a fair and
accurate summary of the material United States federal income tax consequences
of the Merger.
Except as set forth above, we express no opinion to any party as to any tax
consequences, whether federal, state, local or foreign, of any transactions or
events contemplated by or referred to in the Merger Agreement or the
Registration Statement. This opinion is expressed as of the date hereof, unless
otherwise expressly stated, and we disclaim any undertaking to advise you of any
subsequent changes of the facts stated, referenced, or assumed herein or any
subsequent changes in applicable law.
<PAGE>
Building One Services Corporation
December 27, 1999
Page 3
This opinion is being provided in connection with the filing of the Registration
Statement. In addition, we consent to the use of our name in the Prospectus
under the heading "Material United States Federal Income Tax Considerations of
the Merger" and to the filing of this opinion with the Commission as an exhibit
to the Registration Statement. In giving this consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission promulgated thereunder. Except as set forth
above, this opinion is not to be used, circulated, quoted or otherwise referred
to for any purpose without our prior written consent.
Sincerely yours,
/s/ Morgan, Lewis & Bockius LLP
Morgan, Lewis & Bockius LLP
/mw
<PAGE>
Exhibit 10.11
SUBSCRIPTION AND EXCHANGE AGREEMENT
BETWEEN
GROUP MAINTENANCE AMERICA CORP.
AND
BOSS II, LLC
Dated as of November 2, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I Definitions................................................... 1
ARTICLE II Issuance of Convertible Preferred Stock...................... 4
2.1 Issuance of Convertible Preferred Stock........................ 4
2.2 Closing........................................................ 5
2.3 Company Actions................................................ 5
ARTICLE III Representations and Warranties of the Company............... 5
3.1 Authority...................................................... 5
Authorization of Convertible Preferred Stock and Conversion
3.2 Shares......................................................... 5
3.3 Consents and Approvals; No Violations.......................... 6
3.4 State Takeover Statutes........................................ 6
3.5 Share Retention Agreements..................................... 6
3.6 Merger Agreement............................................... 6
3.7 Financing...................................................... 6
ARTICLE IV Representations and Warranties of Investor................... 7
4.1 Organization................................................... 7
4.2 Authority...................................................... 7
4.3 Consents and Approvals; No Violations.......................... 7
4.4 Ownership of the BOSC Debentures............................... 7
4.5 Ownership of Company Common Stock.............................. 8
4.6 Brokers........................................................ 8
4.7 Investment Representations and Warranties...................... 8
ARTICLE V Covenants..................................................... 9
5.1 Other Actions.................................................. 9
5.2 Advice of Changes; Filings..................................... 9
5.3 Financial Information.......................................... 9
5.4 Merger Agreement Covenants..................................... 10
ARTICLE VI Additional Agreements........................................ 10
6.1 Access to Information.......................................... 10
6.2 Reasonable Efforts; Notification............................... 10
6.3 Fees and Expenses.............................................. 11
6.4 Public Announcements........................................... 11
6.5 NYSE........................................................... 12
6.6 Securities and Exchange Commission............................. 12
6.7 Use of Proceeds................................................ 12
6.8 Merger Agreement............................................... 12
6.9 Confidentiality................................................ 12
ARTICLE VII Conditions.................................................. 13
7.1 Conditions to Each Party's Obligation.......................... 13
7.2 Conditions to the Company's Obligations........................ 13
7.3 Conditions to the Investor's Obligations....................... 14
ARTICLE VIII Termination and Amendment.................................. 15
8.1 Termination.................................................... 15
8.2 Effect of Termination.......................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE IX Miscellaneous................................................ 16
9.1 Amendment...................................................... 16
9.2 Extension; Waiver.............................................. 16
Survival of Representations, Warranties and Agreements,
9.3 Limitation on Liability........................................ 17
9.4 Notices........................................................ 17
9.5 Indemnification................................................ 18
9.6 Interpretation................................................. 19
9.7 Entire Agreement; Third Party Beneficiaries.................... 19
9.8 Governing Law.................................................. 19
9.9 Counterparts................................................... 19
9.10 Assignment..................................................... 19
9.11 Enforcement.................................................... 20
</TABLE>
ii
<PAGE>
Exhibits
<TABLE>
<C> <S>
Exhibit A: Form of Investor's Rights Agreement
Exhibit B: Form of Statement of Designations
Exhibit C: Form of Fee Letter
Exhibit 4.4: Form of Agreement Letter
Exhibit 7.3(d): Form of Opinion of Bracewell & Patterson
Schedules
Schedule 3.3(d): Third Party Consents
Schedule 3.5: Share Retention Agreements
Schedule 5.1(e): Employees
Schedule 7.3(g): BOSC Share Retention Agreement
</TABLE>
iii
<PAGE>
SUBSCRIPTION AND EXCHANGE AGREEMENT
(this "Agreement"), dated as of November
2, 1999, between GROUP MAINTENANCE
AMERICA CORP., a Texas corporation (the
"Company") and BOSS II, LLC, a Delaware
limited liability company (the
"Investor").
WHEREAS, the Company and Building One Services Corporation have entered
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which the Company agrees to fund the conversion of up
to $150,000,000 aggregate share value of its Common Stock (as hereinafter
defined), into cash pursuant to the Merger Agreement, and
WHEREAS, the Company desires to issue to the Investor shares of its
Convertible Preferred Stock (as hereinafter defined) equal to an aggregate
share value of $250,000,000 plus an amount equal to the accrued but unpaid
interest as of the Closing Date on the BOSC Debentures (as hereinafter
defined), in exchange for $150,000,000 in cash and the BOSC Debentures, on the
terms and conditions set forth herein, and
WHEREAS, the Merger and the exchange hereunder of the BOSC Debentures
for Convertible Preferred Stock are intended to qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the Investor and
the Company hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" means, with respect to any specified person, any other
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common ownership or control with,
or is owned or controlled by, such specified person; provided that
Affiliates of the Investor, any designees of the Investor and Apollo shall
exclude operating companies that would otherwise be deemed an Affiliate of
such Persons, and shall include all investment partnerships and special
purpose entities that are not operating companies, whether existing as of
the date hereof or created hereafter, if the Persons controlling Apollo
have the dominant management role in such entities. As used in this
definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a person means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting securities, by contract or otherwise.
"Apollo" means Apollo Management IV, L.P. and its Affiliates.
"Beneficial Owner" means a Person who is determined to be a "beneficial
owner" of, or who "beneficially owns" any capital stock of the Company (i)
which such person or any of its Affiliates or Associates (each as defined
in the Exchange Act) owns, directly or indirectly; (ii) which such Person
or any of its Affiliates or Associates has, directly or indirectly, (A) the
right to acquire (whether such right is exercisable immediately or only
after the passage of any period of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding; or (iii)
which are owned, directly or indirectly, by any other Person with which
such Person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Capital Stock.
"BOSC" means Building One Services Corporation, a Delaware corporation.
1
<PAGE>
"BOSC Debentures" means the 7 1/2% Convertible Subordinated Junior
Debentures due 2012 of BOSC, governed by an Indenture dated as of April 30,
1999 by and between BOSC and United States Trust Company of New York.
"BOSC Debentureholders" has the meaning set forth in Section 4.4.
"BOSC Share Retention Agreement" has the meaning set forth in Section
7.3(g).
"business day" means any calendar day that is not a Saturday, Sunday or
day on which nationally chartered banks are required to be closed in New
York, New York.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $.001 par value
per share.
"Common Stock Equivalent" means one share of Common Stock or the right
to acquire, whether or not immediately exercisable, one share of Common
Stock, whether evidenced by an option, warrant, convertible security or
other instrument or agreement, in each case, as adjusted to account for any
stock splits, reverse stock splits, stock dividends or other similar event.
"Company" has the meaning set forth in the recitals to this Agreement.
"Condition Termination Date" has meaning set forth in Section 7.3(g).
"Confidentiality Agreement" has the meaning set forth in Section 6.9.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other contract, agreement,
commitment, instrument, Permit (as hereinafter defined), concession,
franchise or license.
"Conversion Shares" has the meaning set forth in Section 2.1(c).
"Convertible Preferred Stock" means the Company's 7 1/4% convertible
preferred stock, par value $.001 per share, to be issued by the Company to
the Investor pursuant to the terms and conditions of this Agreement and to
be governed by the Statement of Designations.
"Delaware Company Warrants" has the meaning set forth in Section 3.3 of
the Merger Agreement.
"Effective Time" has the meaning set forth in Section 1.1 of the Merger
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, each as amended.
"Expense Reimbursement Event" shall mean that this Agreement shall have
been terminated pursuant to Section 8.1(d)(i),(ii), (iii),(iv), (v) or,
pursuant to Section 8.1(d)(vi) or Section 8.1(g)(iii) if such termination
pursuant to Section 8.1(d)(vi) or Section 8.1(g)(iii) occurs after a breach
by the Company of the Merger Agreement, provided, however, that no Expense
Reimbursement Event shall be deemed to occur pursuant to Section 8.1(d)(v)
unless the shareholders of the Company shall not have approved the
transactions contemplated by the Merger Agreement and the Company shall
have consummated an Alternative Transaction (as defined in the Merger
Agreement) within one year of the termination of this Agreement.
"Fee Letter" has the meaning set forth in Section 7.3(e).
"Financing Letter" has the meaning set forth in Section 3.7.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any national, federal, state, municipal,
local, territorial, foreign or other government or any department,
commission, board, bureau, agency, regulatory authority or instrumentality
thereof, or any court, judicial, administrative, or arbitral body or public
or private tribunal.
2
<PAGE>
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" has the meaning set forth in Section 10 of the Statement
of Designations.
"Indemnified Party" has the meaning set forth in Section 9.5.
"Investor" means BOSS II, LLC, a Delaware limited liability company.
"Investment Amount" has the meaning set forth in Section 2.1(a).
"Investor's Expenses" means all reasonable out-of-pocket expenses
(including reasonable attorneys fees) paid or incurred by or on behalf of
the Investor to a Third Party in connection with the negotiation, execution
and delivery of, the due diligence conducted by the Investor and its agents
and representatives in connection with, and the consummation (to the extent
applicable) of the transactions contemplated by, (i) this Agreement, (ii)
the Merger Agreement, (iii) the Investor's Rights Agreement and each of the
documents and instruments referred to in any of the foregoing, including,
without limitation, the indebtedness to be incurred in connection with the
transactions contemplated by this Agreement and the Merger Agreement.
Notwithstanding anything in this Agreement to the contrary, the maximum
amount of Investor Expenses shall be $3,000,000.
"Investor's Rights Agreement" has the meaning set forth in Section
7.3(e).
"Law" means all provisions of laws, statutes, ordinances, rules, bylaws,
regulations, writs, Permits or Orders of any Governmental Entity.
"Liens" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest of any kind
whatsoever in or on such asset (including the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction), (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital Lease or title retention agreement
relating to such asset and (c) in the case of securities, any purchase
option, right of first refusal, call, appreciation right or similar right
of a third party with respect to such securities.
"material adverse change" has the meaning set forth in Section 9.6.
"Material Adverse Effect" has the meaning set forth in Section 9.6.
"Material Contract" means any Contract that (i) evidences or provides
for any Indebtedness of the Company or any Subsidiary, or any of their
Affiliates, in an amount in excess of $5,000,000, or any encumbrance
securing such Indebtedness, (ii) restricts the Company or any Subsidiary,
or any of their Affiliates, from engaging in any line of business or (iii)
is required to be disclosed by the Company pursuant to the Exchange Act or
the Securities Act (as hereinafter defined).
"Merger" has the meaning set forth in Section 7.2(b).
"Merger Agreement" has the meaning set forth in the recitals to this
Agreement.
"Merger Shares" has the meaning set forth in Section 7.3(g).
"NYSE" has the meaning set forth in Section 6.5.
"Order" means all judgments, injunctions, orders and decrees of all
Governmental Entities in Proceedings (as hereinafter defined) in which the
person in question is a party or by which any of its properties is bound.
"Organizational Documents" means, with respect to any person, each
instrument or other document that (a) defines the existence of such person,
including its certificate of limited partnership or articles or certificate
of incorporation, as filed or recorded with an applicable Governmental
Entity, or (b) governs the internal affairs of such person, including its
partnership agreement or by-laws.
"Outside Date" has the meaning set forth in Section 8.1(b).
3
<PAGE>
"Payment Event" shall mean that this Agreement shall have been
terminated pursuant to Section 8.1(d)(i),(ii), (iii),(iv), (v) or, pursuant
to Section 8.1(d)(vi) or Section 8.1(g)(iii) if such termination pursuant
to Section 8.1(d)(vi) or Section 8.1(g)(iii) occurs after a breach by the
Company of the Merger Agreement, provided, however, that no Payment Event
shall be deemed to occur pursuant Section 8.1(d)(v) unless the shareholders
of the Company shall not have approved the transactions contemplated by the
Merger Agreement and the Company shall have consummated an Alternative
Transaction (as defined in the Merger Agreement) within one year of the
termination of this Agreement.
"Permits" means, collectively, all franchises, approvals, clearances,
permits, licenses, authorizations, registrations, certificates, and
variances obtained from, or agreements with, any Governmental Entity.
"Proceeding" means any claim, demand, suit, action, hearing, grievance,
arbitration, mediation or proceeding in any court or before any
Governmental Entity, whether at law or in equity.
"Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, each as amended.
"Share Retention Agreement" has the meaning set forth in Section 3.5.
"Statement of Designations" means the statement of designations,
preferences, limitations and relative rights of the Convertible Preferred
Stock, in the form set forth in Exhibit B.
"Subsidiary" has the same meaning has the meaning set forth in Section
2.2(b) of the Merger Agreement.
"Termination Fee" has the meaning set forth in Section 6.3(b).
"Third Party" means any person or "group," as described in Rule 13d-5(b)
promulgated under the Exchange Act, other than the Investors or any of
their Affiliates.
"Transaction Documents" means this Agreement, the Fee Letter, the
Investor's Rights Agreement, the Statement of Designations and the Merger
Agreement.
ARTICLE II
Issuance of Convertible Preferred Stock
2.1 Issuance of Convertible Preferred Stock.
(a) At the Closing, the Company shall issue and deliver to the Investor a
certificate or certificates representing the sum of $250,000,000 plus an amount
equal to the accrued and unpaid interest as of the Closing Date on the BOSC
Debentures (the "Investment Amount"), aggregate share value of Convertible
Preferred Stock against receipt by the Company of:
(i) a wire transfer of immediately available funds in the amount of
$150,000,000 to an account designated by the Company at least two business
days prior to the Closing; and
(ii) all of the certificates representing all of the outstanding BOSC
Debentures.
(b) The Convertible Preferred Stock certificates shall be registered in the
names designated by the Investor to the Company at least two business days
prior to the Closing.
(c) The Company has authorized and reserved and covenants to continue to
reserve, free of preemptive rights and other preferential rights, a sufficient
number of shares of Common Stock to satisfy the rights of conversion of the
holders of the Convertible Preferred Stock. Any shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock, and such shares of Common
Stock when issued, are herein referred to as the "Conversion Shares."
4
<PAGE>
(d) The number of shares of Convertible Preferred Stock to be issued
pursuant to the terms and conditions of this Agreement shall be determined by
dividing the number representing the Investment Amount by 1,000.
2.2 Closing.
The closing (the "Closing") hereunder with respect to the issuance and sale
of the Convertible Preferred Stock shall take place at the offices of
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, 24th Floor, New York,
New York (or at the offices of the lenders to the Company or such other place
as the parties may agree) as soon as practicable after December 31, 1999 and
promptly after the satisfaction or waiver of all of the conditions set forth in
Article VII (the date upon which the Closing occurs being referred to as the
"Closing Date") and immediately prior to the consummation of the consummation
of the transactions contemplated under the Merger Agreement.
2.3 Company Actions.
The Company represents and warrants that at meetings duly called and held,
its Board of Directors has (a) taken all necessary steps to render the
restrictions of Article 13.03 of the Texas Business Corporation Act
inapplicable to the transactions contemplated by this Agreement and (b)
resolved to elect not to be subject, to the extent permitted by Law, to any
state takeover law other than Article 13.03 of the Texas Business Corporation
Act that may purport to be applicable to the transactions contemplated by this
Agreement.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to the Investors as of the date hereof
and as of the Closing Date as follows:
3.1 Authority.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and each other Transaction Document and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the other Transaction Documents and the other
agreements, documents and instruments referred to herein and therein have been
duly authorized by all necessary corporate action on the part of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement, any other Transaction Document or any such other
agreement, document or instrument or to consummate the transactions so
contemplated hereby or thereby. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company and each such
document will, upon approval of the Company's shareholders, constitute a valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in equity).
3.2 Authorization of Convertible Preferred Stock and Conversion Shares.
The shares of Convertible Preferred Stock have been duly authorized for
issuance and, when issued and delivered, and consideration recited herein has
been received in accordance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable. The Conversion Shares have been
duly authorized and reserved for issuance, and, when the shares of Convertible
Preferred Stock have been issued by the Company, (i) the Convertible Preferred
Stock will be convertible into Conversion Shares in accordance with the terms
as set forth in the Statement of Designations, and (ii) the Conversion Shares
issuable upon such conversion, when issued and delivered in accordance with the
provisions of the Statement of Designations, will be validly issued, fully paid
and nonassessable.
5
<PAGE>
3.3 Consents and Approvals; No Violations.
Except for Permits as may be required under, and other applicable
requirements of, the Securities Act, the Exchange Act and applicable foreign
and state securities or blue sky laws and the HSR Act, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (a) conflict with
or result in any breach of any provision of the Organizational Documents of the
Company or any of its material Subsidiaries, (b) require the Company to make
any filing with, provide any notice to, or obtain any Permit, authorization,
consent or approval of, any Governmental Entity (except where the failure to
obtain such Permit, authorization, consent or approval or to make such filings
would not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement), (c) result in
the creation or imposition of any Liens upon the properties or assets of the
Company or any Subsidiary, (d) except as set forth on Schedule 3.3(d), result
in a violation or breach of, require any notice to any party pursuant to, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation, acceleration or
right of non-renewal or require any prepayment or offer to purchase any debt)
under, any of the terms, conditions or provisions of any Material Contract to
which the Company or any of its Subsidiaries is a party or by which the
Company's or any of its Subsidiaries' properties or assets may be bound, (e)
violate any Order or Law applicable to the Company or any of its Subsidiaries
or any of their respective properties or assets or (f) result in the loss,
forfeiture, revocation, termination or diminution of any Permit, except in the
case of clauses (b), (c), (d), (e) and (f), for violations, breaches, defaults,
losses, forfeitures, revocations, terminations or diminutions which would not,
individually or in the aggregate, cause a Material Adverse Effect.
3.4 State Takeover Statutes.
No "fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal laws in the
United States (with the exception of Article 13.03 of the TBCA) applicable to
the Company is applicable to this Agreement, the Merger Agreement or the other
transactions contemplated hereby or thereby. The action of the Board of
Directors of the Company in approving this Agreement and the Merger Agreement
(and the transactions provided for herein and therein) is sufficient to render
Article 13.03 of the TBCA inapplicable to this Agreement and the Merger
Agreement.
3.5 Share Retention Agreements.
The Company has received extensions to each share retention agreement from
the shareholders listed in Schedule 3.5, copies of which have been delivered to
the Investor (the "Share Retention Agreements"). Except in connection with the
Merger, no Share Retention Agreement has been amended, waived, supplemented or
restated and each Share Retention Agreement remains in full force and effect,
enforceable in accordance with its terms against the shareholders party
thereto. Except in connection with the Merger, the Company has not amended,
waived, supplemented or restated any contractual restrictions on transfer of
any shares of Common Stock (except pursuant to the Share Retention Agreements)
and all such restrictions are enforceable in accordance with their terms
against the shareholders party thereto.
3.6 Merger Agreement.
The Company and BOSC have entered into the Merger Agreement, a copy of which
has been delivered to the Investor. The Company hereby restates the
representations and warranties of the Company set forth in the Merger Agreement
as if such representations and warranties were set forth herein in their
entirety, and such representations and warranties are incorporated by reference
herein.
3.7 Financing.
The Company has obtained a commitment letter from Bank of America with
respect to $800,000,000 of senior debt financing, a copy of which has been
delivered to the Investor (the "Financing Letter"). There have been no changes,
modifications or waivers with respect to the Financing Letter since the date of
its delivery to the Investor.
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ARTICLE IV
Representations and Warranties of Investor
The Investor represents and warrants to the Company as of the date hereof
and as of the Closing Date as follows:
4.1 Organization.
The Investor is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite power
and authority to carry on its business as now being conducted. The Investor is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualifications or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not be reasonably expected to either
prevent or materially delay its ability to perform its obligations hereunder.
The Investor has made available to the Company complete and correct copies of
its certificate of formation, operating agreement and by-laws, as amended to
the date hereof.
4.2 Authority.
The Investor has the requisite power and authority to execute and deliver
this Agreement and each other Transaction Document to which it is a party, and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the other Transaction Documents and
the other agreements, documents and instruments referred to herein and therein,
in each case to which the Investor is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action on the part of the Investor and no other proceedings on the
part of the Investor are necessary to authorize this Agreement, any other
Transaction Document or any such other agreement, document or instrument or to
consummate the transactions so contemplated hereby or thereby. This Agreement
and the other Transaction Documents and the other agreements, documents and
instruments referred to herein and therein to which the Investor is a party
have been duly executed and delivered by the Investor and each such document
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its respective terms.
4.3 Consents and Approvals; No Violations.
Except for filings, Permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act,
Exchange Act, applicable foreign and state securities or blue sky laws, the HSR
Act, and applicable state takeover laws, neither the execution, delivery or
performance of this Agreement, the other Transaction Documents or other
agreements, documents or instruments referred to herein or therein, by the
Investor, nor the consummation by the Investor of the transactions contemplated
hereby or thereby will (i) conflict with or result in any breach of any
provision of its Organizational Documents, (ii) require any filing with, notice
to, or Permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not reasonably be expected to prevent
or materially delay the consummation of the transactions contemplated by this
Agreement), (iii) result in a violation or breach of, require any notice to any
party pursuant to, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Contract to which the Investor or any of its subsidiaries is a party or
by which any of them or any of their properties or assets may be bound or (iv)
violate any Order or Law applicable to the Investor or any of its properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches
or defaults which could not, individually or in the aggregate, be reasonably
expected to either prevent or materially delay its ability to perform its
obligations hereunder.
4.4 Ownership of the BOSC Debentures.
The lawful owners, of record and beneficially, of the BOSC Debentures are
limited partnerships under common control with the Investor (the "BOSC
Debentureholders"). The BOSC Debentureholders have good
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and marketable title to such debentures, free and clear of any Liens and the
Investor will cause the transfer of the BOSC Debentures as per the Agreement
Letter, in the form attached hereto as Exhibit 4.4, in accordance with the
terms of, and subject to the conditions set forth in, this Agreement.
4.5 Ownership of Company Common Stock.
As of the date hereof, the Investor does not own of record or beneficially,
and is not the Beneficial Owner of a number of shares of Common Stock which, in
the aggregate, exceeds 1% of the outstanding shares of Common Stock on the date
hereof and, without the consent of the Company, the Investor shall not acquire
or dispose of any shares of Common Stock until after the Closing Date except in
connection with the transactions contemplated in Section 2.1 of this Agreement.
4.6 Brokers.
No broker, investment banker, financial advisor, finder or other person is
entitled to any brokerage, investment banker's, financial advisor's, finder's
or other fee or commission for which the Company will be liable in connection
with the execution of this Agreement by the Investor or the performance by the
Investor of its obligations hereunder, except as otherwise set forth in the Fee
Letter.
4.7 Investment Representations and Warranties.
(a) The Investor is acquiring the Convertible Preferred Stock to be acquired
hereunder for its own account, for investment and not with a view to the
distribution thereof, and without any present intention of distributing the
same.
(b) The Investor understands that the Convertible Preferred Stock has not
been, and will not upon issuance be, registered or qualified under the
Securities Act, or any applicable state securities laws, by reason of its
issuance in a transaction exempt from the registration or qualification
requirements of the Securities Act and such laws, that the Convertible
Preferred Stock and any Conversion Shares must be held indefinitely unless a
subsequent disposition thereof is registered or qualified under the Securities
Act and such laws or is exempt from such registration or qualification, and
that the certificates representing the shares of Preferred Stock will carry
appropriate legends with respect to the foregoing.
(c) The Investor will be an "accredited investor" at the Closing within the
meaning of Rule 501(a) promulgated under the Securities Act.
(d) The Investor (i) has been furnished with or has had access to the
information that such Investor has requested from the Company sufficient to
enable the Investor to evaluate the merits and risks of an investment in the
Convertible Preferred Stock, (ii) has had an opportunity to discuss with, and
ask questions of, management of the Company the intended business and financial
affairs of the Company, and (iii) has generally such knowledge and experience
in business and financial matters so as to enable the Investor to understand
and evaluate the risks of and form an investment decision with respect to its
investment in the Convertible Preferred Stock.
(e) The Investor has no need for liquidity in its investment in the
Convertible Preferred Stock and is able to bear the economic risk of its
investment in the Convertible Preferred Stock and the complete loss of all of
such investment.
(f) The Investor understands that there is no public market for the
Convertible Preferred Stock and that the transferability of the Convertible
Preferred Stock is restricted.
(g) The Investor recognizes that an investment in the Company involves
certain risks, and has taken full cognizance of, and understands all of, the
risk factors related to the purchase of the Convertible Preferred Stock.
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ARTICLE V
Covenants
5.1 Other Actions.
(a) The Company shall not, and shall cause each Subsidiary not to, take or
omit to take any action, the taking or omission of which would reasonably be
expected to result in (i) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or inaccurate in any
material respect or (ii) any of the conditions set forth in Article VII not
being satisfied (subject to the Company's right to take actions specifically
permitted by Section 8.1).
(b) Without limiting Section 5.1(a), effective at the Effective Time, the
Company shall file the Statement of Designations with the Secretary of State of
the State of Texas, decrease the size of its board of directors to 13 persons
and cause at least 4 persons designated by the Investors to be added to the
Company's board of directors.
(c) Without limiting Section 5.1(a), the Company shall use its commercially
reasonable best efforts to obtain the requisite funds required for the
consummation of the transactions contemplated hereby and pursuant to the Merger
Agreement; and to pay the related fees and expenses, all on the terms and
conditions set forth in the Financing Letter or on other terms acceptable to
the Investor and the Company.
(d) The Investor shall not take or omit to take any action, the taking or
omission of which would reasonably be expected to result in (i) any of the
representations and warranties, of the Investor set forth in this Agreement
becoming untrue or inaccurate in any material respect or (ii) any of the
conditions set forth in Article 7 not being satisfied (subject to the Investors
right to take actions specifically permitted by Section 8.1).
(e) The Company shall not amend the employment agreement of any of the
individuals listed on Schedule 5.1(e) without the prior written consent of
Investor.
(f) the Company will take such action as is necessary to prevent the
acceleration of the vesting of any Company Stock Options or Warrants except
pursuant to the Merger Agreement and except for the acceleration of vesting of
the options of Persons listed on part 4 of Schedule 4.16 of the Merger
Agreement, which Persons are not marked with an asterisk on such Schedule.
5.2 Advice of Changes; Filings.
From the date hereof until the Closing Date, the Company shall confer with
the Investor on a regular basis as reasonably requested by the Investor, report
on operational matters and promptly advise the Investor orally and, if
requested by the Investor, in writing of any material change with respect to
the Company or any Subsidiary. From the date hereof until the Closing Date, the
Company shall promptly after filing provide to the Investor (or its counsel)
copies of all filings made by the Company or any Subsidiary with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
5.3 Financial Information.
From the date hereof until the Closing Date, the Company shall furnish to
the Investor all documents filed with or submitted to the Commission by the
Company during such period promptly after such filing or submission. From the
date hereof until the Closing Date, the Company shall also furnish to the
Investor as soon as available but in any event within 30 days of each calendar
month, the unaudited consolidated and consolidating balance sheets and income
statements of the Company and its Subsidiaries, showing its financial condition
as of the close of such month and the results of operations during such month
and for then elapsed portion of the Company's fiscal year, in each case,
setting forth, to the extent available, the comparative figures for the
corresponding month in the prior fiscal year, the corresponding elapsed portion
of the prior fiscal year and the budget amount for such month (all to be
prepared in accordance with GAAP consistently applied).
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5.4 Merger Agreement Covenants.
The Company hereby agrees to perform all its obligations set forth in the
Merger Agreement as if such obligations were set forth herein in their entirety
and such obligations are incorporated herein by reference.
ARTICLE VI
Additional Agreements
6.1 Access to Information.
The Company and its Subsidiaries shall afford to the Investor, and to the
Investor's officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours from the
date hereof to the Closing Date to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to the Investor all other information concerning
its business, properties and personnel as the Investor may reasonably request.
6.2 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from Governmental Entities and the making of
all necessary registrations and filings (including filings required by the HSR
Act) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Entity vacated or reversed, (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement and the other Transaction Documents and (v) subject to the execution
of appropriate confidentiality agreements, reasonably cooperating with all
potential sources of financing to the Investor in connection with the
transactions contemplated by this Agreement, and the taking of all reasonable
steps as may be necessary or advisable to consummate one or more financing
transactions with such potential sources of financing, including participating
in "road shows" with respect to the issuance of securities in one or more
private placements or transactions registered under the Securities Act. In
connection with and without limiting the foregoing, the Company and its Board
of Directors shall (i) take all action necessary to ensure that no "fair
price," "moratorium," "control share acquisition" or other similar or
antitakeover statute or similar statute or regulation enacted under applicable
Law is or becomes applicable to this Agreement or any other transactions
contemplated by this Agreement and (ii) if any such statute or regulation
becomes applicable to any transaction contemplated by this Agreement, take all
action reasonably necessary to ensure that the transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement and the transactions contemplated by
this Agreement. Nothing in this Agreement shall be deemed to require the
Investor to dispose of or hold separate any asset or collection of assets.
(b) The Company shall give prompt notice to the Investor of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it,
including its failure to cause a Subsidiary, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it or any Subsidiary under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreement of the parties or the conditions to the obligations of the parties
under this Agreement.
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(c) The Investor shall give prompt notice to the Company of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
6.3 Fees and Expenses.
(a) Except as otherwise provided in this Agreement or as otherwise agreed to
by the parties hereto in writing, all fees and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, whether or not the
transactions contemplated by this Agreement are consummated.
(b) If a Payment Event shall occur at any time, then, within five business
days following such Payment Event, the Company shall pay to the Investor a fee
in an amount equal to $3.75 million (the "Termination Fee") and shall reimburse
the Investor for the Investor's Expenses not previously reimbursed.
(c) If an Expense Reimbursement Event shall occur at any time, then, within
five business days following such Expense Reimbursement Event, the Company
shall reimburse the Investor for the Investor's Expenses not previously
reimbursed.
(d) If the transactions contemplated by this Agreement are consummated, the
Company shall reimburse the Investor for all of the Investor's Expenses, such
reimbursement to occur at the Closing by wire transfer of immediately available
funds.
(e) Notwithstanding anything to the contrary set forth in this Agreement, if
this Agreement shall have been terminated by the Investor for any reason and at
the time of termination this Agreement could have been terminated pursuant to
more than one subsection of Section 8.1 and could not have terminated by the
Company pursuant to Section 8.1, then the Investor shall be entitled to choose
which such subsection this Agreement shall have been terminated pursuant to.
(f) The Company acknowledges that the agreements contained in this Section
6.3 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, the Investor would not enter into this
Agreement. Accordingly, if the Company fails to pay the Termination Fee or the
Investor's Expenses when due and, in order to obtain such payment, the Investor
commences a suit which results in a judgment against the Company for the
Termination Fee and/or the Investor's Expenses, the Company shall pay to the
Investor all reasonable out-of-pocket costs and expenses (including reasonable
attorneys fees and expenses) paid by or on behalf of the Investor to a Third
Party in connection with such suit, together with interest on the amount of the
Termination Fee and the Investor's Expenses that are the subject of such
judgment at the prime rate as set by Chase Manhattan Bank in effect on the date
such payment was required to be made.
(g) In the event that any Termination Fee and related Investor's Expenses
are paid by the Company to the Investor hereunder, the Termination Fee and
related Investor's Expenses shall be the sole and exclusive remedy of the
Investor for claims related to, based on or arising out of this Agreement, the
Merger Agreement, the subject matter hereof or thereof or the transactions
contemplated herein or therein.
6.4 Public Announcements.
The Investor, on the one hand, and the Company, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press
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release or make any such public statement without the prior consent of the
other party, except to the extent required by applicable Law or on the advice
of legal counsel that such press release or public statement is required under
applicable Law or the rules of any national securities exchange.
6.5 NYSE.
The Company shall use its commercially reasonable best efforts to obtain
prior to Closing the approval for listing on the New York Stock Exchange
("NYSE"), effective upon official notice of issuance, of the Conversion Shares
(without any modification of the terms of the Convertible Preferred Stock as
set forth in the Statement of Designations). The Company shall consult and
cooperate with the Investor and its counsel in performing its obligations under
this Section 6.5. The Company and its advisors will not engage in any
substantive discussions or otherwise communicate in writing with the NYSE or
any of its agents or representatives with respect to the transactions
contemplated by the Transaction Documents without the prior written consent of
the Investor. The Investor agrees to cooperate and assist the Company in
connection with the foregoing.
6.6 Securities and Exchange Commission.
The Company and its advisors will not engage in any substantive discussions
or otherwise communicate in writing with the Commission or any of its agents or
representatives with respect to the transactions contemplated by the
Transaction Documents without the prior written consent of the Investor. The
Investor agrees to cooperate and assist the Company in connection with the
foregoing.
6.7 Use of Proceeds.
The Company shall use all the proceeds received from the sale of the
Convertible Preferred Stock pursuant to this Agreement to fund the conversion
of Common Stock into cash and the purchase of options pursuant to the Merger
Agreement, or to the extent that the entirety of the $150,000,000 received
pursuant hereto is not used to effect such conversion, for the repayment of all
or part of any Indebtedness of the Company or any of its Subsidiaries or for
the purchase of shares of Common Stock, so long as the purchase price paid for
such shares is less than the Conversion Price (as defined in the Statement of
Designations), and provided that the Company will not purchase any shares from
any Person that is an officer or employee of the Company, if such purchase
would reduce such Person's ownership of Common Stock Equivalents below 50% of
the level of such Person's ownership as of the date hereof.
6.8 Merger Agreement.
(a) The Company shall not amend, waive or supplement any provision of the
Merger Agreement without the prior written consent of the Investor.
(b) The Company shall promptly deliver to the Investor any notices delivered
by the Company or received by the Company in connection with the Merger
Agreement.
6.9 Confidentiality.
The Parties will hold any such information which is nonpublic in confidence
in accordance with the terms of the Confidentiality Agreement, dated May 27,
1999, and accepted June 1, 1999, between the Company and Apollo Management IV,
L.P., (the "Confidentiality Agreement"), and in the event of termination of
this Agreement for any reason each party will promptly comply with the terms of
the Confidentiality Agreement.
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ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation.
The respective obligations of each party to consummate the transactions
contemplated by Section 2.1 are subject to the prior satisfaction or waiver,
where permissible, of the following conditions:
(a) No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Entity that prohibits or restricts the consummation of the
transactions contemplated by this Agreement or the other Transaction
Documents or makes such consummation illegal (each party agreeing to use
commercially reasonable efforts to have any such prohibition lifted).
(b) The waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated.
(c) The conditions set forth in the Financing Letter shall have been
satisfied or waived and the funding referred to therein shall be available
to the Company on terms and conditions and in such amounts satisfactory to
the Investor and the Company.
(d) The Common Stock (including the Conversion Shares) shall have been
approved for listing on the NYSE.
(e) There shall exist no default under any material indebtedness of
either BOSC or the Company.
7.2 Conditions to the Company's Obligations.
The obligation of the Company to consummate the transactions contemplated by
Section 2.1 are subject to the prior satisfaction or waiver of the following
conditions:
(a) All of the representations and warranties of the Investor set forth
in this Agreement shall be true and correct in all material respects
(except for those representations and warranties that are qualified as to
materiality, which shall be true and correct in all respects and except for
those representations and warranties that speak as of a specific time,
which shall be true and correct as of such time) as of the Closing Date as
though made on and as of such time, and the Investor shall have performed
in all material respects all covenants and agreements (except for the
payment of cash and the delivery of the BOSC Debentures, which shall be
performed in all respects, without regard to materiality) required to be
performed by it under this Agreement at or prior to the Closing Date and
the Company shall have received a certificate signed by an executive
officer of the Investor to the foregoing effect.
(b) All of the conditions to the obligations of the Company and BOSC to
consummate the merger contemplated in the Merger Agreement (the "Merger")
capable of being satisfied prior to the consummation of this Agreement
shall have been satisfied to the Company's reasonable satisfaction, unless
the failure to consummate the Merger is due to a breach by the Company of
the Merger Agreement.
(c) The Company shall have been provided with a certificate from an
officer of the Investor certifying that the conditions precedent to the
Company's obligations set forth in this Section shall have been satisfied.
(d) The Company shall have obtained financing pursuant to the term sheet
attached as an exhibit to the Financing Letter on such other terms
reasonably acceptable to the Company.
(e) Neither the Company nor BOSC shall be required by any Governmental
Entity to divest any material portion of its business in connection with
the consummation of the Merger or as a condition to the effectiveness of
the Merger.
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(f) All notices required to be given prior to the Closing Date with,
and all consents, approvals, authorizations, waivers and amendments
required to be obtained prior to the Closing Date from, any Third Party in
connection with the consummation by the Company and the Investor of the
transactions contemplated by this Agreement have been made and/or obtained,
except in the case of a Third Party other than a Governmental Entity, the
failure to give such notice or obtain such consent, approval,
authorization, waiver or amendment would not be likely to have a Material
Adverse Effect on the Company.
7.3 Conditions to the Investor's Obligations.
The obligations of the Investor to consummate the transactions contemplated
by Section 2.1 are subject to the prior satisfaction or waiver by the Investor
of the following conditions:
(a) All of the representations and warranties of the Company set forth
in this Agreement shall be true and correct as of the Closing Date as
though made on and as of such time except to the extent that the failure to
be true and correct has not had and could not reasonably be expected to
have, in the aggregate, an adverse effect on the Company and its
Subsidiaries, taken as a whole, that a reasonably prudent investor in the
Investor's position would consider material relative to the investment to
be made by the Investor pursuant to this Agreement (except for those
representations and warranties that are qualified as to materiality, which
shall be true and correct in all respects, and except for those
representations and warranties that speak as of a specific time, which
shall be true and correct as of such time), and the Company shall have
performed in all material respects all covenants and agreements (except for
the obligation to deliver the certificates representing the Convertible
Preferred Stock, which shall be performed in all respects, without regard
to materiality) required to be performed by it under this Agreement at or
prior to the Closing Date (it being understood that any such breach may be
cured to the extent permitted by Section 8.1(d)). The Investor shall have
received a certificate signed by an executive officer of the Company to the
foregoing effect.
(b) All of the conditions set forth in the Merger Agreement that are
capable of being satisfied prior to the consummation of this Agreement
shall have been satisfied to the Investor's reasonable satisfaction.
(c) All notices required to be given prior to the Closing Date with, and
all consents, approvals, authorizations, waivers and amendments required to
be obtained prior to the Closing Date from, any Third Party in connection
with the consummation by the Company of the transactions contemplated by
this Agreement have been made and/or obtained, except in the case of a
Third Party other than a Governmental Entity, the failure to give such
notice or obtain such consent, approval, authorization, waiver or amendment
would not be likely to have a Material Adverse Effect on the Investor.
(d) The Investor shall have been provided with an opinion of Bracewell &
Patterson, counsel to the Company, or the general counsel of the Company,
as to the matters set forth in Exhibit 7.3(d).
(e) The Company and the Investor shall have executed the Investor's
Rights Agreement, a form of which is attached hereto as Exhibit A (the
"Investor's Rights Agreement"), and a Fee Letter, a form of which is
attached hereto as Exhibit C (the "Fee Letter"), and the Company shall have
performed all of its obligations required to be performed at or prior to
the Closing pursuant to the Investor's Rights Agreement and the Fee Letter.
(f) The Company shall have filed the Statement of Designations,
substantially in the form of Exhibit B, with the Secretary of State of the
State of Texas.
(g) The holders of BOSC capital stock representing two-thirds of the
shares described on Schedule 7.3(g), each of which have previously executed
an agreement with respect to the retention of such BOSC shareholder's
shares of BOSC capital stock (each, a "BOSC Share Retention Agreement"),
shall have executed an amended BOSC Share Retention Agreement pursuant to
which such shareholder agrees that any shares of Common Stock such
shareholder receives in connection with the Merger (the "Merger
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Shares") shall be subject to the same restrictions on transfer as set forth
in the BOSC Share Retention Agreement; provided, however, that (i)
notwithstanding anything in this Agreement to the contrary, the right of
the Investor not to consummate the transactions contemplated in this
Agreement and to terminate this Agreement because of a failure of the
Company to satisfy the condition set forth in this Section 7.2(g) must be
exercised by the Investor in writing by 11:59 p.m. on the date (the
"Condition Termination Date") that is 14 days after receipt thereby of
written notice from the Company that the Company is ready to file the first
draft of the S-4 (as defined in the Merger Agreement) with the Commission
(it being understood that the Company agrees to withhold filing of the S-4
until the expiration of such 14 day period), and (ii) if the Company does
not receive a written notice from the Investor that it will not consummate
the transactions contemplated in the Agreement and is terminating the
Agreement because the Company has failed to satisfy the condition set forth
in Section 7.2(g) on or prior to the Condition Termination Date, all rights
of the Investor not to consummate the transactions contemplated in the
Agreement and to terminate the Agreement because the condition set forth in
Section 7.2(g) has not been satisfied shall terminate and be of no further
force or effect.
(h) Since June 30, 1999 there shall have been no development, change or
effect that is likely to have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole.
(i) There shall have been no changes (i) with respect to the employment
by the Company of J. Patrick Millinor, Jr., Donald L. Luke, Chester J.
Jachimiec, Darren B. Miller or Alfred R. Roach, Jr. or (ii) with respect to
the employment by the Company or by BOSC of Joseph Ivey, William Love or
Michael Sullivan that are not satisfactory to the Investor.
(j) The Investor shall have been provided with a certificate from an
officer of the Company certifying that the conditions precedent to the
Investor's obligations set forth in this Section have been satisfied.
(k) The Company shall have obtained financing pursuant to the term sheet
attached as an exhibit to the Financing Letter on terms reasonably
acceptable to Investor.
(l) Neither the Company nor BOSC shall be required by any Governmental
Entity to divest any material portion of its business in connection with
the consummation of the Merger or as a condition to the Effectiveness of
the Merger.
ARTICLE VIII
Termination and Amendment
8.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date as
follows:
(a) By mutual written consent of the Investor and the Company.
(b) By either the Investor or the Company if the Closing Date shall not
have occurred on or before March 31, 2000 (the "Outside Date"); provided
that the right to terminate this Agreement under this Section 8.1(b) shall
not be available to any party whose breach of any representation, warranty
or covenant under this Agreement has been the cause of or resulted in the
failure of the Closing Date to occur on or before such date.
(c) By either the Investor or the Company if any Governmental Entity
shall have issued an Order permanently enjoining, restraining or otherwise
prohibiting the issuance of the Convertible Preferred Stock, the
consummation of the transactions contemplated by the Merger Agreement, and
such Order or other action shall have become final and nonappealable.
15
<PAGE>
(d) By the Investor, if (i) any of the representations and warranties of
the Company contained in this Agreement shall fail to be true and correct
in any material respect when made or have become untrue or incorrect except
to the extent that the failure to be true and correct has not had and could
not reasonably be expected to have, in the aggregate, an adverse affect on
the Company and its Subsidiaries, taken as a whole, that a reasonably
prudent investor in the Investor's position would consider material
relative to the transactions to be consummated by the Investor pursuant to
this Agreement, (ii) the Company shall have breached or failed to comply in
any material respect with any of its obligations under this Agreement, and
such breach or failure shall continue unremedied for 15 days after the
Company has received written notice from the Investor of the occurrence of
such breach or failure; provided, however, that in remedying any such
breach or failure the Company shall not have spent any money, incurred any
liabilities or undertaken any obligations which expenditure, incurrence or
undertaking, individually or together with the breach or failure so
remedied, would itself constitute a material breach of or failure to
perform any, representation, warranty or covenant of this Agreement, (iii)
the Company shall have terminated the Merger Agreement pursuant to Section
7.1(g)(i) thereof, (iv) the Company shall have breached or failed to comply
in any material respect with any of its obligations under the Merger
Agreement and such breach or failure results in the termination of the
Merger Agreement, (v) the shareholders of the Company shall not have
approved the transactions contemplated by the Merger Agreement; provided,
however, that the right to terminate this Agreement under this Section
8.1(d)(v) shall not be available to the Investor if the Investor's breach
of any representation, warranty or covenant under this Agreement has been
the cause of the failure of the shareholders to not approve the
transactions contemplated by the Merger Agreement or (vi) if the Company or
BOSC shall have terminated the Merger Agreement.
(e) By the Investor if there shall have occurred any material adverse
change since June 30, 1999.
(f) By the Company if (i) any of the representations and warranties of
the Investor contained in this Agreement shall fail to be true and correct
in any material respect, in each case either as of the date hereof or have
since become, and at the time of termination remain, untrue in any material
respect, (ii) the Investor shall have breached or failed to comply in any
material respect with any of its obligations under this Agreement (other
than as a result of a breach by the Company of any of its obligations under
this Agreement) and such failure to be true and correct, breach or failure
shall continue unremedied for 15 days after the Investor has received
written notice from the Company of the occurrence of such breach or
failure, (iii) BOSC shall have terminated the Merger Agreement.
8.2 Effect of Termination.
In the event of a termination of this Agreement by either the Company or the
Investor as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Investor or
the Company or their respective officers, directors or Affiliates, except that
Section 6.3, Section 6.4, Section 6.8, Section 8.1, this Section 8.2 and
Article IX shall survive any such termination and except that nothing herein
shall relieve any party for liability for any breach hereof.
ARTICLE IX
Miscellaneous
9.1 Amendment.
This Agreement may not be amended except by an instrument in writing signed
on behalf of all of the parties.
9.2 Extension; Waiver.
At any time prior to the Closing Date, the parties hereto, by action taken
or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
16
<PAGE>
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any of the
agreements or conditions applicable to such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those
rights.
9.3 Survival of Representations, Warranties and Agreements, Limitation on
Liability.
The representations, warranties and covenants contained in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
execution and delivery of this Agreement until 30 days after the delivery to
the Investor of the Company's audited financial statements for the twelve
months ending December 31, 2001 and may be relied upon by any permitted
subsequent holder of Convertible Preferred Stock, regardless of any
investigation made by or on behalf of the Investors or any other holder of
Convertible Preferred Stock at any time.
9.4 Notices.
All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, telecopied (which is confirmed), sent
by overnight courier (providing proof of delivery) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to the Investor, to:
BOSS II, LLC
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Attention: Mr. Andrew Africk
Telecopy No.: (212) 515-3262
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Attention: John M. Scott, Esq.
Telecopy No.: (212) 728-5950
and, if to the Company, to:
Group Maintenance America, Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attn: Chief Executive Office
Telecopy No.: (713) 626-4766
with a copy to:
Bracewell & Patterson
711 Louisiana, Suite 2900
Houston, Texas 77002
Attention: John L. Bland, Esq.
Telecopy No.: (713) 221-1212
17
<PAGE>
9.5 Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless the Investor
and its Affiliates, partners, officers, directors, employees, agents and
representatives (each, an "Indemnified Party") against any (i) losses,
liabilities or damages other than those that result from or relate to a
Proceeding by any Third Party (including derivative actions brought through or
in the name of the Company), or (ii) losses, liabilities or damages resulting
from or relating to a Proceeding by any third party (including derivative
actions brought through or in the name of the Company), in the case of clause
(i) and (ii) of this Section 9.5(a), in connection with any breach of the
representations and warranties or the covenants made by the Company in this
Agreement, the Investor's Rights Agreement, or any other document or instrument
entered into by the Investor in connection with the transactions contemplated
hereby or thereby.
Notwithstanding anything in this Section 9.5 to the contrary, no Indemnified
Party shall have any right to collect any consequential or punitive damages
from the Company pursuant to Section 9.5(a)(i) above.
(b) Except as set forth in Section 6.3 of this Agreement, the rights set
forth in this Section 9.5 shall be the sole and exclusive remedy of the
Investor for claims related to, based on or arising out of this Agreement, the
subject matter hereof or the transactions contemplated herein; provided,
however, that if a Termination Fee and related Investor's Expenses are paid by
the Company to the Investor pursuant to Section 6.3 of this Agreement, the
indemnification rights contained in this Section 9.5 shall automatically
terminate and the payment of such Termination Fee and related Investor's
Expenses shall be the sole and exclusive remedy of the Investor for such
claims.
(c) With respect to Section 9.5(a)(ii), the Indemnified Party shall give
prompt notice to the Company of the assertion of any claim, or the commencement
of any suit, action or proceeding in respect of which indemnity may be sought
under this Agreement. Any failure on the part of any Indemnified Party to give
the notice described in this Section 9.5(c) shall relieve the Company of its
obligations under this Section 9.5 only to the extent that the Company has been
prejudiced by the lack of timely and adequate notice (except that the Company
shall not be liable for any expenses incurred by the Indemnified Party during
the period in which the Indemnified Party failed to give such notice).
Thereafter, the Indemnified Party shall deliver to the Company, promptly (and
in any event within 10 days) after the Indemnified Party's receipt thereof,
copies of all notices and documents (including without limitation court papers)
received by the Indemnified Party relating to such claim, action, suit or
proceeding.
(d) With respect to any claim under Section 9.5(a)(ii), the Company shall
have the sole right to assume the defense or settlement of any third-party
claim, suit, action or proceeding in respect of which indemnity may be sought
under this Agreement if it has agreed irrevocably to indemnify the Indemnified
Parties, provided that an Indemnified Party shall at all times have the right,
at such Indemnified Party's option, to participate fully therein, provided,
further, that the Company shall not be entitled to assume the defense or
settlement if any of the Indemnified Parties reasonably determines it has
defenses that are inconsistent with the Company's defenses to such claims. In
the event the Company does not proceed diligently to defend the third-party
claim, suit, action or proceeding within 10 days after receipt of written
notice by an Indemnified Party of such third-party claim, suit, action or
proceeding, the Indemnified Party shall have the right, but not the obligation,
to undertake the defense of any such third-party claim, suit, action or
proceeding and in such event the Company shall have the right to participate at
its own expense.
(e) With respect to any claim under Section 9.5(a)(ii), the Company shall
not be required to indemnify the Indemnified Party with respect to any amounts
paid in settlement of any third-party suit, action, proceeding or investigation
entered into without the written consent of the Company (which consent shall
not be unreasonably withheld or delayed), provided, further, neither the
Company nor any Indemnified Party may enter into any settlement of a third
party Claim if such settlement (i) has any non-cash component that purports to
apply to the other side or (ii) any cash component that is not being paid by
the party entering into such settlement.
(f) The Parties shall cooperate in defending any such third-party suit,
action, proceeding or investigation, and the defending party shall have
reasonable access to the books, records, and personnel in the possession or
18
<PAGE>
control of the Indemnified Party that are pertinent to the defense. The
Indemnified Party may join the Company in any suit, action, claim or proceeding
brought by a third party, as to which any right of indemnity created by this
Agreement would or might apply, for the purpose of enforcing any right of the
indemnity granted to such Indemnified Party pursuant to this Agreement.
9.6 Interpretation.
When a reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Unless the context otherwise
requires, words importing the singular shall include the plural, and vice
versa. Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
person. As used in this Agreement, "Material Adverse Effect" means, when used
in respect of the Company and its Subsidiaries, any effect or condition that,
individually or in the aggregate with any other effect or condition, is
materially adverse to the assets, properties, business, financial condition,
results of operations of the Company and its Subsidiaries, taken as a whole. As
used in this Agreement, "material adverse change" means, when used in respect
of the Company and its Subsidiaries, any change or event that, individually or
in the aggregate with any other change or event, is materially adverse to the
assets, properties, business, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole. As used in this Agreement,
except where expressly indicated otherwise, the phrase "knowledge" with respect
to the Company, means to the actual knowledge, after due inquiry (i.e., the
amount of inquiry that would be undertaken by a reasonably prudent business
person given like facts and circumstances) of each of the Company's directors
and officers. As used in this Agreement, the term "person" shall be interpreted
broadly and shall include any person, individual, corporation, limited
partnership, limited liability company, trust, association or other entity or
business organization of any kind or division thereof.
9.7 Entire Agreement; Third Party Beneficiaries.
This Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York without regard to the conflicts of laws principles
thereof.
9.9 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
9.10 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto (whether by operation of law or
otherwise) without the prior written consent of the other party; provided, that
an Investor may assign its rights, interests and obligations to an Affiliate
without the consent of the Company. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
19
<PAGE>
9.11 Enforcement.
The parties agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of New York or
in a State court located in the City of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto irrevocably and unconditionally (i) consents to submit
such party to the personal jurisdiction of any such Federal or State court if
any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court
other than a Federal court sitting in the state of New York or a New York State
court located in the City of New York and (iv) waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
IN WITNESS WHEREOF, the Investor and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
BOSS II, LLC
By: /s/ Andrew Africk
----------------------------------
Name: Andrew Africk
Title: Manager
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
----------------------------------
Name: J. Patrick Millinor, Jr.
Title: Chief Executive Officer
20
<PAGE>
EXHIBIT 10.12
October 26, 1999
J. Patrick Millinor, Jr.
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998,
by and between J. Patrick Millinor, Jr. ("you") and Group
Maintenance America Corp. ("GroupMAC" or the "Company")
Dear Mr. Millinor:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. Modifications.
A. Position: Your title and position will be Chairman of the Board of
Directors.
B. Base Salary: Your Base Salary will be changed to $425,000 per year.
C. Bonus: A new incentive bonus plan for executive management of
the Company will be established beginning in fiscal
year 2000, and you will participate in such plan. Your
bonus potential under the new plan will be 120% of your
Base Salary. Your bonus potential through December 31,
1999, will be determined under the Company's existing
incentive bonus
<PAGE>
J. Patrick Millinor, Jr.
October 26, 1999
Page 2
plan and your bonus potential thereunder will
remain the same.
D. Stock Options: Under a combination of one or more of the
Company's existing stock option plans, an amended
version of any of such plans or a new stock option
plan, subject to approval of the Board of
Directors of the Company or a committee thereof,
you will be granted options to purchase an
additional 112,000 shares of the common stock of
the Company effective as of a date determined by
the Board of Directors of the Company or a
committee thereof (the "Grant Date"). These
additional options will have the following basic
terms: (1) exercise price equal to the closing
price on the NYSE on the Grant Date, (b) ten (10)
year term, and (c) vesting over 4 (four) years.
E. Stock
Performance Plan: Subject to the approval of the Board of Directors
of the Company or a committee thereof, the Company
intends to adopt a stock performance plan in which
you will participate. Pursuant to such plan, upon
the achievement of certain performance criteria,
the Company will allocate to you a number of
shares of common stock of the Company determined
by the Board of Directors or a committee thereof.
F. Benefits: The employee benefits (other than your
participation in the Company's stock option plan)
described in Section 5 of your Employment
Agreement will remain the same or be enhanced.
G. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement
shall be extended until December 31, 2002. After
the expiration of such initial term, the term of
the Employment Agreement shall be automatically
renewed for additional one year periods unless
terminated in accordance with Section 10 of your
Employment Agreement or unless the Company elects
not to renew the agreement at the end of its then
applicable term.
<PAGE>
J. Patrick Millinor, Jr.
October 26, 1999
Page 3
H. Termination and The terms and conditions of your Employment
Severance: Agreement in Section 10 regarding the right to
terminate your Employment Agreement and the
amounts payable by the Company to you, if any, in
the event of such termination shall remain the
same except as follows:
1. IF
(a) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause before the
consummation of the Proposed
Transaction or you terminate the
Employment Agreement for Good Reason
before the consummation of the
Proposed Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause within twelve
(12) months after the consummation of
the Proposed Transaction, or you
terminate the Employment Agreement
for Good Reason within twelve (12)
months after the consummation of the
Proposed Transaction,
THEN, upon the occurrence of either of the
scenarios described in Parts H.1.(a) and
H.1.(b) above, the amounts owed to you
upon termination shall be the greater of
(A) the amounts owed to you pursuant to
your Employment Agreement in such
circumstances, and (B) the amounts owed to
you upon the occurrence of a Change of
<PAGE>
J. Patrick Millinor, Jr.
October 26, 1999
Page 4
Control under your Employment Agreement as
it exists prior to the date of this letter
and without giving effect to this letter.
2. The definition of the term "Good Reason" shall
be modified to include the failure of the
Company to, within ninety (90) days after the
consummation of the Proposed Transaction,
present to you for your execution a Restated
Employment Agreement containing terms and
conditions that are substantially similar to,
or better than, the terms and conditions
contained in your Employment Agreement, as
amended by this letter agreement. Under the new
Employment Agreement, a non-renewal of your
employment term at December 31, 2002, would
constitute "Good Reason."
I. Covenant
Not to Compete: The terms and conditions of your Employment
Agreement in Section 12 regarding your covenants
not to compete shall remain the same.
J. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall
remain unchanged and in full force and effect.
II. Waiver of Certain Rights in Employment Agreement. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
in connection with each and every aspect of the Proposed Transaction, (ii) the
application of such provisions, including, without limitation, Sections 7, 8, 9
and 10(c), as a result of any aspect of the Proposed Transaction, and (iii) any
and all rights and remedies available to you pursuant to your Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), as a
result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall
<PAGE>
J. Patrick Millinor, Jr.
October 26, 1999
Page 5
remain unchanged and in full force and effect.
III. General.
A. Effective Date. If you execute this letter agreement, unless
terminated pursuant to its terms, the provisions of this letter
agreement (i) contained in Section I. above (except for part H
thereof) shall become effective as of the date of the consummation
of the Proposed Transaction, and (ii) contained in Part H of Section
I above and Sections II and III shall become effective on the date
this letter agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically
terminate without any action on the part of GroupMAC or you, and the
Employment Agreement will remain in full force and effect as if this
letter agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but
not defined in this letter agreement shall have the meaning set
forth in the Employment Agreement. Additionally, the term "you"
refers to the addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and
you that this letter agreement constitute an amendment to the
Employment Agreement effective on the dates set forth in Section
III.A. above. The Company will in the future request that you
execute a restated or amended version of your Employment Agreement
that has been modified to reflect all of the modifications set forth
in this letter agreement, and you hereby agree to execute such
version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you, please sign and date the copy of this letter in the space
provided below and return the copy to us by the close of business on October 28,
1999. If you have any questions, please feel free to call me at 713-860-0125 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Don Luke
--------------------------
Don Luke
President
<PAGE>
J. Patrick Millinor, Jr.
October 26, 1999
Page 6
AGREED to and ACCEPTED this 26th day of October, 1999
/s/ J. Patrick Millinor, Jr.
- --------------------------------
J. Patrick Millinor, Jr.
<PAGE>
EXHIBIT 10.13
October 26, 1999
Donald L. Luke
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998,
by and between Donald L. Luke ("you") and Group Maintenance
America Corp. ("GroupMAC" or the "Company")
Dear Mr. Luke:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. Modifications.
A. Position: Your title and position will be Chief Operating
Officer.
B. Base Salary: Your Base Salary will be changed to $25,000 per month.
C. Bonus: A new incentive bonus plan for executive management
of the Company will be established beginning in fiscal
year 2000, and you will participate in such plan on a
pro rated basis through the last day of the term of
your Employment Agreement. Your bonus potential under
the new plan will be 90% of your aggregate Base Salary
paid during calendar year 2000. The bonus will not be
payable until the date in calendar year 2001 on which
bonuses are paid to other
<PAGE>
Donald L. Luke
October 26, 1999
Page 2
executive officers of the Company. Your bonus
potential through December 31, 1999, will be
determined and paid under the Company's existing
incentive bonus plan and your bonus potential
thereunder will remain the same.
D. Benefits: The employee benefits (other than your participation
in the Company's stock option plan) described in
Section 5 of your Employment Agreement will remain the
same; provided, however, that all of such benefits
shall continue for 540 calendar days following the
termination of your Employment Agreement.
E. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement shall
be July 31, 2000.
F. Termination
and Severance: The terms and conditions of your Employment Agreement
in Section 10 regarding the right to terminate your
Employment Agreement and the amounts payable by the
Company to you, if any, in the event of such a
termination shall remain the same except as follows:
1. IF
(a) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause before the
consummation of the Proposed Transaction or
you terminate the Employment Agreement for
Good Reason before the consummation of the
Proposed Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement, and
<PAGE>
Donald L. Luke
October 26, 1999
Page 3
(ii) the Company terminates the Employment
Agreement without Cause after the
consummation of the Proposed Transaction but
prior to July 31, 2000, or you terminate the
Employment Agreement for Good Reason after
the consummation of the Proposed Transaction
but prior to July 31, 2000.
THEN, upon the occurrence of either of the
scenarios described in Parts F.1.(a) and
F.1.(b) above, the amounts owed to you upon
termination shall be the greater of (A) the
amounts owed to you pursuant to your
Employment Agreement in such circumstances,
and (B) the amounts owed to you upon the
occurrence of a Change of Control under your
Employment Agreement as it exists prior to
the date of this letter and without giving
effect to this letter.
2. The definition of the term "Good Reason" shall be
modified to include the failure of the Company to,
within ninety (90) days after the consummation of
the Proposed Transaction, present to you for your
execution a Restated Employment Agreement
containing terms and conditions that are
substantially similar to, or better than, the terms
and conditions contained in your Employment
Agreement, as amended by this letter agreement.
G. Covenant
Not to Compete: The terms and conditions of your Employment Agreement
in Section 12 regarding your covenants not to compete
shall remain the same.
H. Moving Expenses: Notwithstanding anything in your Employment Agreement
or any document governing employee benefits owed to
you, if (i) your Employment Agreement is not
terminated prior to the expiration of its term, and
(ii) within 360 days following the expiration of such
term you relocate your primary residence to a location
outside the boundaries of the City of Houston,
<PAGE>
Donald L. Luke
October 26, 1999
Page 4
then, upon reasonable documentation, the Company will
reimburse you for up to $10,000 in reasonable,
third-party expenses actually incurred by you as a
result of such relocation.
I. Consulting
Agreement: If your Employment Agreement is not terminated prior
to the expiration of its term, then, effective upon
the termination your Employment Agreement, the Company
shall enter into a Consulting Agreement with you which
shall contain such terms and conditions as are
reasonably satisfactory to you and the Company. The
terms and conditions of such Consulting Agreement
shall include, without limitation, (i) a covenant by
you that during the term of such Consulting Agreement
and in exchange for the consideration received therein
you shall provide the services requested by the
Company thereunder on a when and as needed basis, (ii)
a covenant by the Company that, in exchange for the
provision by you of such consulting services, the
Company shall pay you an amount equal to $20,000 per
month up to a maximum of the result determined by
subtracting the aggregate amount of Base Salary paid
to you under your Employment Agreement during calendar
year 2000 from $360,000, and (iii) a term that, unless
earlier terminated, continues until the maximum
amounts payable pursuant to clause (ii) have been
paid.
J. Existing Options
to Vest: Provided you have not resigned other than for "Good
Reason" nor been terminated for "Cause" prior to
July 31, 2000, all of your unvested options shall
vest on July 31, 2000.
K. No Additional
Options: You will be granted no additional options subsequent
to the date of this letter, but the Company will make
reasonable efforts to allow you a mechanism to
liquidate your options granted pursuant to the Option
Agreement dated August 1, 1997 in conjunction with the
Proposed Transaction.
L. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall remain
unchanged and in full force and effect.
<PAGE>
Donald L. Luke
October 26, 1999
Page 5
II. Waiver of Certain Rights in Employment Agreement. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and
10(c), in connection with each and every aspect of the Proposed Transaction,
(ii) the application of such provisions, including, without limitation, Sections
7, 8, 9 and 10(c), as a result of any aspect of the Proposed Transaction, and
(iii) any and all rights and remedies available to you pursuant to your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
as a result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall remain unchanged and in full force and effect.
III. General.
A. Effective Date. If you execute this letter agreement, unless
terminated pursuant to its terms, the provisions of this letter
agreement (i) contained in Section I. above (except for part F
thereof) shall become effective as of the date of the consummation of
the Proposed Transaction, and (ii) contained in Part F of Section I.
above and Sections II and III shall become effective on the date this
letter agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically
terminate without any action on the part of GroupMAC or you, and the
Employment Agreement will remain in full force and effect as if this
letter agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but
not defined in this letter agreement shall have the meaning set forth
in the Employment Agreement. Additionally, the term "you" refers to
the addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and you
that this letter agreement constitute an amendment to the Employment
Agreement effective on the dates set forth in Section III.A. above.
The Company will in the future request that you execute a restated or
amended version of your Employment Agreement that
<PAGE>
Donald L. Luke
October 26, 1999
Page 6
has been modified to reflect all of the modifications set forth in this
letter agreement, and you hereby agree to execute such version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you, please sign and date the copy of this letter in the space
provided below and return the copy to us by the close of business on October 28,
1999. If you have any questions, please feel free to call me at 713-860-0103 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
----------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
AGREED to and ACCEPTED this 28 day of October, 1999
/s/ Donald L. Luke
- -------------------------------
Donald L. Luke
<PAGE>
EXHIBIT 10.14
October 26, 1999
Chester J. Jachimiec
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998,
by and between Chester J. Jachimiec ("you") and Group Maintenance
America Corp. ("GroupMAC" or the "Company")
Dear Mr. Jachimiec:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. Modifications.
A. Position: Your title and position will be Executive Vice President
- Strategy and Corporate Development.
B. Base Salary: Your Base Salary will be changed to $240,000 per year.
C. Bonus: A new incentive bonus plan for executive management of
the Company will be established beginning in fiscal
year 2000, and you will participate in such plan. Your
bonus potential under the new plan will be 80% of your
Base Salary. Your bonus potential through December 31,
1999, will be determined under the Company's existing
incentive bonus
<PAGE>
Chester J. Jachimiec
October 26, 1999
Page 2
plan and your bonus potential thereunder will
remain the same.
D. Stock Options: Under a combination of one or more of the
Company's existing stock option plans, an amended
version of any of such plans or a new stock option
plan, subject to approval of the Board of
Directors of the Company or a committee thereof,
you will be granted options to purchase an
additional 81,000 shares of the common stock of
the Company effective as of a date determined by
the Board of Directors of the Company or a
committee thereof (the "Grant Date"). These
additional options will have the following basic
terms: (1) exercise price equal to the closing
price on the NYSE on the Grant Date, (b) ten (10)
year term, and (c) vesting over 4 (four) years.
E. Stock
Performance Plan: Subject to the approval of the Board of Directors
of the Company or a committee thereof, the Company
intends to adopt a stock performance plan in which
you will participate. Pursuant to such plan, upon
the achievement of certain performance criteria,
the Company will allocate to you a number of
shares of common stock of the Company determined
by the Board of Directors or a committee thereof.
F. Benefits: The employee benefits (other than your
participation in the Company's stock option plan)
described in Section 5 of your Employment
Agreement will remain the same.
G. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement
shall be extended until December 31, 2001. After
the expiration of such initial term, the term of
the Employment Agreement shall be automatically
renewed for additional one year periods unless
terminated in accordance with Section 10 of your
Employment Agreement or unless the Company elects
not to renew the agreement at the end of its then
applicable term.
<PAGE>
Chester J. Jachimiec
October 26, 1999
Page 3
H. Termination
and Severance: The terms and conditions of your Employment
Agreement in Section 10 regarding the right to
terminate your Employment Agreement and the amounts
payable by the Company to you, if any, in the event
of such a termination shall remain the same except
as follows:
1. IF
(a) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause before the
consummation of the Proposed Transaction or
you terminate the Employment Agreement for
Good Reason before the consummation of the
Proposed Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause within twelve (12)
months after the consummation of the Proposed
Transaction, or you terminate the Employment
Agreement for Good Reason within twelve (12)
months after the consummation of the Proposed
Transaction,
THEN, upon the occurrence of either of the
scenarios described in Parts H.1.(a) and
H.1.(b) above, the amounts owed to you upon
termination shall be the greater of (A) the
amounts owed to you pursuant to your
Employment Agreement in such circumstances,
and (B) the amounts owed to you upon the
occurrence of a Change of
<PAGE>
Chester J. Jachimiec
October 26, 1999
Page 4
Control under your Employment Agreement as it
exists prior to the date of this letter and
without giving effect to this letter.
2. The definition of the term "Good Reason" shall be
modified to include the failure of the Company
to, within ninety (90) days after the
consummation of the Proposed Transaction, present
to you for your execution a Restated Employment
Agreement containing terms and conditions that
are substantially similar to, or better than, the
terms and conditions contained in your Employment
Agreement, as amended by this letter agreement.
Under the new Employment Agreement, a non-renewal
of your employment term at December 31, 2001,
would constitute "Good Reason."
I. Covenant
Not to Compete: The terms and conditions of your Employment
Agreement in Section 12 regarding your covenants not
to compete shall remain the same.
J. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall remain
unchanged and in full force and effect.
II. Waiver of Certain Rights in Employment Agreement. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9, and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
in connection with each and every aspect of the Proposed Transaction, (ii) the
application of such provisions, including, without limitation, Sections 7, 8, 9
and 10(c), as a result of any aspect of the Proposed Transaction, and (iii) any
and all rights and remedies available to you pursuant to your Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), as a
result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall
<PAGE>
Chester J. Jachimiec
October 26, 1999
Page 5
remain unchanged and in full force and effect.
III. General.
A. Effective Date. If you execute this letter agreement, unless terminated
pursuant to its terms, the provisions of this letter agreement (i)
contained in Section I. above (except for part H thereof) shall become
effective as of the date of the consummation of the Proposed
Transaction, and (ii) contained in Part H of Section I above and
Sections II and III shall become effective on the date this letter
agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically terminate
without any action on the part of GroupMAC or you, and the Employment
Agreement will remain in full force and effect as if this letter
agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but not
defined in this letter agreement shall have the meaning set forth in the
Employment Agreement. Additionally, the term "you" refers to the
addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and you
that this letter agreement constitute an amendment to the Employment
Agreement effective on the dates set forth in Section III.A. above. The
Company will in the future request that you execute a restated or
amended version of your Employment Agreement that has been modified to
reflect all of the modifications set forth in this letter agreement, and
you hereby agree to execute such version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you, please sign and date the copy of this letter in the space
provided below and return the copy to us by the close of business on October 28,
1999. If you have any questions, please feel free to call me at 713-860-0103 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
------------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
<PAGE>
Chester J. Jachimiec
October 26, 1999
Page 6
AGREED to and ACCEPTED this 26th day of October, 1999
/s/ Chester J. Jachimiec
- -------------------------
Chester J. Jachimiec
<PAGE>
EXHIBIT 10.15
October 26, 1999
Darren B. Miller
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998,
by and between Darren B. Miller ("you") and Group Maintenance
America Corp. ("GroupMAC" or the "Company")
Dear Mr. Miller:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. Modifications.
A. Position: Your title and position will be Chief Financial Officer.
B. Base Salary: Your Base Salary will be changed to $240,000 per year.
C. Bonus: A new incentive bonus plan for executive management of
the Company will be established beginning in fiscal
year 2000, and you will participate in such plan. Your
bonus potential under the new plan will be 80% of your
Base Salary. Your bonus potential through December 31,
1999, will be determined under the Company's existing
incentive bonus
<PAGE>
Darren B. Miller
October 26, 1999
Page 2
plan and your bonus potential thereunder will
remain the same.
D. Stock Options: Under a combination of one or more of the
Company's existing stock option plans, an amended
version of any of such plans or a new stock option
plan, subject to approval of the Board of
Directors of the Company or a committee thereof,
you will be granted options to purchase an
additional 81,000 shares of the common stock of
the Company effective as of a date determined by
the Board of Directors of the Company or a
committee thereof (the "Grant Date"). These
additional options will have the following basic
terms: (1) exercise price equal to the closing
price on the NYSE on the Grant Date, (b) ten (10)
year term, and (c) vesting over 4 (four) years.
E. Stock
Performance Plan: Subject to the approval of the Board of Directors
of the Company or a committee thereof, the Company
intends to adopt a stock performance plan in which
you will participate. Pursuant to such plan, upon
the achievement of certain performance criteria,
the Company will allocate to you a number of
shares of common stock of the Company determined
by the Board of Directors or a committee thereof.
F. Benefits: The employee benefits (other than your
participation in the Company's stock option plan)
described in Section 5 of your Employment
Agreement will remain the same.
G. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement
shall be extended until December 31, 2001. After
the expiration of such initial term, the term of
the Employment Agreement shall be automatically
renewed for additional one year periods unless
terminated in accordance with Section 10 of your
Employment Agreement or unless the Company elects
not to renew the agreement at the end of its then
applicable term.
<PAGE>
Darren B. Miller
October 26, 1999
Page 3
H. Termination
and Severance: The terms and conditions of your Employment
Agreement in Section 10 regarding the right to
terminate your Employment Agreement and the amounts
payable by the Company to you, if any, in the event
of such a termination shall remain the same except
as follows:
1. IF
(a) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause before the
consummation of the Proposed Transaction or
you terminate the Employment Agreement for
Good Reason before the consummation of the
Proposed Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause within twelve (12)
months after the consummation of the Proposed
Transaction, or you terminate the Employment
Agreement for Good Reason within twelve (12)
months after the consummation of the Proposed
Transaction,
THEN, upon the occurrence of either of the
scenarios described in Parts H.1.(a) and
H.1.(b) above, the amounts owed to you upon
termination shall be the greater of (A) the
amounts owed to you pursuant to your
Employment Agreement in such circumstances,
and (B) the amounts owed to you upon the
occurrence of a Change of
<PAGE>
Darren B. Miller
October 26, 1999
Page 4
Control under your Employment Agreement as it
exists prior to the date of this letter and
without giving effect to this letter.
2. The definition of the term "Good Reason" shall be
modified to include the failure of the Company
to, within ninety (90) days after the
consummation of the Proposed Transaction, present
to you for your execution a Restated Employment
Agreement containing terms and conditions that
are substantially similar to, or better than, the
terms and conditions contained in your Employment
Agreement, as amended by this letter agreement.
Under the new Employment Agreement, a non-renewal
of your employment term at December 31, 2001,
would constitute "Good Reason."
I. Covenant
Not to Compete: The terms and conditions of your Employment
Agreement in Section 12 regarding your covenants not
to compete shall remain the same.
J. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall remain
unchanged and in full force and effect.
II. Waiver of Certain Rights in Employment Agreement. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9, and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
in connection with each and every aspect of the Proposed Transaction, (ii) the
application of such provisions, including, without limitation, Sections 7, 8, 9
and 10(c), as a result of any aspect of the Proposed Transaction, and (iii) any
and all rights and remedies available to you pursuant to your Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), as a
result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall
<PAGE>
Darren B. Miller
October 26, 1999
Page 5
remain unchanged and in full force and effect.
III. General.
A. Effective Date. If you execute this letter agreement, unless terminated
pursuant to its terms, the provisions of this letter agreement (i)
contained in Section I. above (except for part H thereof) shall become
effective as of the date of the consummation of the Proposed
Transaction, and (ii) contained in Part H of Section I above and
Sections II and III shall become effective on the date this letter
agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically terminate
without any action on the part of GroupMAC or you, and the Employment
Agreement will remain in full force and effect as if this letter
agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but not
defined in this letter agreement shall have the meaning set forth in the
Employment Agreement. Additionally, the term "you" refers to the
addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and you
that this letter agreement constitute an amendment to the Employment
Agreement effective on the dates set forth in Section III.A. above. The
Company will in the future request that you execute a restated or
amended version of your Employment Agreement that has been modified to
reflect all of the modifications set forth in this letter agreement, and
you hereby agree to execute such version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you, please sign and date the copy of this letter in the space
provided below and return the copy to us by the close of business on October 28,
1999. If you have any questions, please feel free to call me at 713-860-0103 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
------------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
<PAGE>
Darren B. Miller
October 26, 1999
Page 6
AGREED to and ACCEPTED this 31st day of October, 1999
/s/ Darren B. Miller
- ----------------------
Darren B. Miller
<PAGE>
EXHIBIT 10.16
October 26, 1999
Alfred R. Roach, Jr.
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998, by
and between Alfred R. Roach, Jr. ("you") and Group Maintenance America
Corp. ("GroupMAC" or the "Company")
Dear Mr. Roach:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. MODIFICATIONS.
A. Position: Your title and position will be Executive Vice
President-Mechanical Division
B. Base Salary: Your Base Salary will be changed to $240,000 per
year.
C. Bonus: A new incentive bonus plan for executive management
of the Company will be established beginning in
fiscal year 2000, and you will participate in such
plan. Your bonus potential under the new plan will be
80% of your Base Salary. Your bonus potential through
December 31, 1999, will be determined under the
Company's existing incentive bonus
<PAGE>
Alfred R. Roach, Jr.
October 26, 1999
Page 2
plan and your bonus potential thereunder will remain
the same.
D. Stock Options: Under a combination of one or more of the Company's
existing stock option plans, an amended version of
any of such plans or a new stock option plan, subject
to approval of the Board of Directors of the Company
or a committee thereof, you will be granted options
to purchase an additional 81,000 shares of the common
stock of the Company effective as of a date
determined by the Board of Directors of the Company
or a committee thereof (the "Grant Date"). These
additional options will have the following basic
terms: (1) exercise price equal to the closing price
on the NYSE on the Grant Date, (b) ten (10) year
term, and (c) vesting over 4 (four) years.
E. Stock
Performance Plan: Subject to the approval of the Board of Directors of
the Company or a committee thereof, the Company
intends to adopt a stock performance plan in which
you will participate. Pursuant to such plan, upon the
achievement of certain performance criteria, the
Company will allocate to you a number of shares of
common stock of the Company determined by the Board
of Directors or a committee thereof.
F. Benefits: The employee benefits (other than your participation
in the Company's stock option plan) described in
Section 5 of your Employment Agreement will remain
the same.
G. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement shall
be extended until December 31, 2001. After the
expiration of such initial term, the term of the
Employment Agreement shall be automatically renewed
for additional one year periods unless terminated in
accordance with Section 10 of your Employment
Agreement or unless the Company elects not to renew
the agreement at the end of its then applicable term.
<PAGE>
Alfred R. Roach, Jr.
October 26, 1999
Page 3
H. Termination
and Severance: The terms and conditions of your Employment Agreement
in Section 10 regarding the right to terminate your
Employment Agreement and the amounts payable by the
Company to you, if any, in the event of such a
termination shall remain the same except as follows:
1. IF
(a) (i) you execute this letter agreement,
and
(ii) the Company terminates the
Employment Agreement without Cause
before the consummation of the Proposed
Transaction or you terminate the
Employment Agreement for Good Reason
before the consummation of the Proposed
Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement,
and
(ii) the Company terminates the
Employment Agreement without Cause
within twelve (12) months after the
consummation of the Proposed
Transaction, or you terminate the
Employment Agreement for Good Reason
within twelve (12) months after the
consummation of the Proposed
Transaction,
THEN, upon the occurrence of either of
the scenarios described in Parts
H.1.(a) and H.1.(b) above, the amounts
owed to you upon termination shall be
the greater of (A) the amounts owed to
you pursuant to your Employment
Agreement in such circumstances, and
(B) the amounts owed to you upon the
occurrence of a Change of
<PAGE>
Alfred R. Roach, Jr.
October 26, 1999
Page 4
Control under your Employment
Agreement as it exists prior to the
date of this letter and without
giving effect to this letter.
2. The definition of the term "Good Reason" shall
be modified to include the failure of the
Company to, within ninety (90) days after the
consummation of the Proposed Transaction,
present to you for your execution a Restated
Employment Agreement containing terms and
conditions that are substantially similar to,
or better than, the terms and conditions
contained in your Employment Agreement, as
amended by this letter agreement. Under the new
Employment Agreement, a non-renewal of your
employment term at December 31, 2001, would
constitute "Good Reason."
I. Covenant
Not to Compete: The terms and conditions of your Employment Agreement
in Section 12 regarding your covenants not to compete
shall remain the same.
J. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall remain
unchanged and in full force and effect.
II. WAIVER OF CERTAIN RIGHTS IN EMPLOYMENT AGREEMENT. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
in connection with each and every aspect of the Proposed Transaction, (ii) the
application of such provisions, including, without limitation, Sections 7, 8, 9
and 10(c), as a result of any aspect of the Proposed Transaction, and (iii) any
and all rights and remedies available to you pursuant to your Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), as a
result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall
<PAGE>
Alfred R. Roach, Jr.
October 26, 1999
Page 5
remain unchanged and in full force and effect.
III. GENERAL.
A. Effective Date. If you execute this letter agreement, unless
terminated pursuant to its terms, the provisions of this letter
agreement (i) contained in Section I. above (except for part H
thereof) shall become effective as of the date of the consummation of
the Proposed Transaction, and (ii) contained in Part H of Section I
above and Sections II and III shall become effective on the date this
letter agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically
terminate without any action on the part of GroupMAC or you, and the
Employment Agreement will remain in full force and effect as if this
letter agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but
not defined in this letter agreement shall have the meaning set forth
in the Employment Agreement. Additionally, the term "you" refers to the
addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and you
that this letter agreement constitute an amendment to the Employment
Agreement effective on the dates set forth in Section III.A. above. The
Company will in the future request that you execute a restated or
amended version of your Employment Agreement that has been modified to
reflect all of the modifications set forth in this letter agreement,
and you hereby agree to execute such version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you please sign and date the copy of this letter in the space
provided below, and return the copy to use by the close of business October 28,
1999. If you have any questions, please feel free to call me at 713-860-0103 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
-----------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
<PAGE>
Alfred R. Roach, Jr.
October 26, 1999
Page 6
AGREED to and ACCEPTED this 30 day of October, 1999
/s/ Alfred R. Roach, Jr.
- ----------------------------
Alfred R. Roach, Jr.
<PAGE>
EXHIBIT 10.17
October 26, 1999
Daniel W. Kipp
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
RE: Employment Agreement ("Employment Agreement") dated March 1, 1998,
by and between Daniel W. Kipp ("you") and Group Maintenance
America Corp. ("GroupMAC" or the "Company")
Dear Mr. Kipp:
As you know, the Company is contemplating a merger with Building One Services
Corporation (the "Proposed Transaction"). The Proposed Transaction holds
exciting possibilities for the future of the Company and the Company wants your
to be a part of that future. The purposes of this letter are to indicate to you
that GroupMAC would very much like you to continue your employment with the
Company after the Proposed Transaction is consummated and to request certain
modifications to and waivers of the terms of your existing Employment Agreement.
The requested modifications and waivers are set forth below:
I. Modifications.
A. Position: Your title and position will be Treasurer and CIO.
B. Base Salary: Your Base Salary will be changed to $175,000 per year.
C. Bonus: A new incentive bonus plan for executive management of
the Company will be established beginning in fiscal
year 2000, and you will participate in such plan. Your
bonus potential under the new plan will be 75% of your
Base Salary. Your bonus potential through December 31,
1999, will be determined under the Company's existing
incentive bonus
<PAGE>
Daniel W. Kipp
October 26, 1999
Page 2
plan and your bonus potential thereunder will
remain the same.
D. Stock Options: Under a combination of one or more of the
Company's existing stock option plans, an amended
version of any of such plans or a new stock option
plan, subject to approval of the Board of
Directors of the Company or a committee thereof,
you will be granted options to purchase an
additional 48,000 shares of the common stock of
the Company effective as of a date determined by
the Board of Directors of the Company or a
committee thereof (the "Grant Date"). These
additional options will have the following basic
terms: (1) exercise price equal to the closing
price on the NYSE on the Grant Date, (b) ten (10)
year term, and (c) vesting over 4 (four) years.
E. Stock
Performance Plan: Subject to the approval of the Board of Directors
of the Company or a committee thereof, the Company
intends to adopt a stock performance plan in which
you will participate. Pursuant to such plan, upon
the achievement of certain performance criteria,
the Company will allocate to you a number of
shares of common stock of the Company determined
by the Board of Directors or a committee thereof.
F. Benefits: The employee benefits (other than your
participation in the Company's stock option plan)
described in Section 5 of your Employment
Agreement will remain the same.
G. Term: The initial term of your Employment Agreement set
forth in Section 2 of your Employment Agreement
shall be extended until December 31, 2001. After
the expiration of such initial term, the term of
the Employment Agreement shall be automatically
renewed for additional one year periods unless
terminated in accordance with Section 10 of your
Employment Agreement or unless the Company elects
not to renew the agreement at the end of its then
applicable term.
<PAGE>
Daniel W. Kipp
October 26, 1999
Page 3
H. Termination
and Severance: The terms and conditions of your Employment
Agreement in Section 10 regarding the right to
terminate your Employment Agreement and the amounts
payable by the Company to you, if any, in the event
of such a termination shall remain the same except
as follows:
1. IF
(a) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause before the
consummation of the Proposed Transaction or
you terminate the Employment Agreement for
Good Reason before the consummation of the
Proposed Transaction, and
(iii) the Proposed Transaction is
consummated,
OR
(b) (i) you execute this letter agreement, and
(ii) the Company terminates the Employment
Agreement without Cause within twelve (12)
months after the consummation of the Proposed
Transaction, or you terminate the Employment
Agreement for Good Reason within twelve (12)
months after the consummation of the Proposed
Transaction,
THEN, upon the occurrence of either of the
scenarios described in Parts H.1.(a) and
H.1.(b) above, the amounts owed to you upon
termination shall be the greater of (A) the
amounts owed to you pursuant to your
Employment Agreement in such circumstances,
and (B) the amounts owed to you upon the
occurrence of a Change of
<PAGE>
Daniel W. Kipp
October 26, 1999
Page 4
Control under your Employment Agreement as it
exists prior to the date of this letter and
without giving effect to this letter.
2. The definition of the term "Good Reason" shall be
modified to include the failure of the Company
to, within ninety (90) days after the
consummation of the Proposed Transaction, present
to you for your execution a Restated Employment
Agreement containing terms and conditions that
are substantially similar to, or better than, the
terms and conditions contained in your Employment
Agreement, as amended by this letter agreement.
Under the new Employment Agreement, a non-renewal
of your employment term at December 31, 2001,
would constitute "Good Reason."
I. Covenant
Not to Compete: The terms and conditions of your Employment
Agreement in Section 12 regarding your covenants not
to compete shall remain the same.
J. Other: Except as set forth above, all other terms and
conditions of your Employment Agreement shall remain
unchanged and in full force and effect.
II. Waiver of Certain Rights in Employment Agreement. Certain aspects of the
Proposed Transaction will constitute a "Change of Control" (as such term is
defined in your Employment Agreement) and will afford you certain rights and
remedies pursuant to Sections 7, 8, 9 and 10(c) of your Employment Agreement.
The Company is requesting that you waive your rights under the Employment
Agreement, including, without limitation, Sections 7, 8, 9, and 10(c), in
connection with each aspect of the Proposed Transaction. Accordingly, by
executing this letter, you agree to waive (i) all of the provisions of your
Employment Agreement, including, without limitation, Sections 7, 8, 9 and 10(c),
in connection with each and every aspect of the Proposed Transaction, (ii) the
application of such provisions, including, without limitation, Sections 7, 8, 9
and 10(c), as a result of any aspect of the Proposed Transaction, and (iii) any
and all rights and remedies available to you pursuant to your Employment
Agreement, including, without limitation, Sections 7, 8, 9 and 10(c), as a
result of any aspect of the Proposed Transaction (the waivers described in
clause (i), (ii) and (iii) being collectively referred to as the "Employment
Agreement Waiver"). The Employment Agreement Waiver is a limited waiver that
applies only to the Proposed Transactions and, except as set forth in this
Sections I and II hereof, the Agreement, including Sections 7, 8, 9 and 10(c),
shall
<PAGE>
Daniel W. Kipp
October 26, 1999
Page 5
remain unchanged and in full force and effect.
III. General.
A. Effective Date. If you execute this letter agreement, unless terminated
pursuant to its terms, the provisions of this letter agreement (i)
contained in Section I. above (except for part H thereof) shall become
effective as of the date of the consummation of the Proposed
Transaction, and (ii) contained in Part H of Section I above and
Sections II and III shall become effective on the date this letter
agreement is executed by you.
B. Termination of Letter Agreement. If GroupMAC does not complete the
Proposed Transactions by March 31, 2000, then this letter agreement,
including, without limitation, the Waivers, will automatically terminate
without any action on the part of GroupMAC or you, and the Employment
Agreement will remain in full force and effect as if this letter
agreement had not been executed by you or GroupMAC.
C. Definitions. All capitalized terms used in this letter agreement but not
defined in this letter agreement shall have the meaning set forth in the
Employment Agreement. Additionally, the term "you" refers to the
addressee of this letter agreement.
D. Restated Employment Agreement. It is the intent of the Company and you
that this letter agreement constitute an amendment to the Employment
Agreement effective on the dates set forth in Section III.A. above. The
Company will in the future request that you execute a restated or
amended version of your Employment Agreement that has been modified to
reflect all of the modifications set forth in this letter agreement, and
you hereby agree to execute such version.
If the foregoing modifications of your Employment Agreement and the Waivers are
acceptable to you, please sign and date the copy of this letter in the space
provided below and return the copy to us by the close of business on October 28,
1999. If you have any questions, please feel free to call me at 713-860-0103 or
GroupMAC's general counsel, Randy Bryant, at 713-860-0104.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
------------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
<PAGE>
Daniel W. Kipp
October 26, 1999
Page 6
AGREED to and ACCEPTED this 29th day of October, 1999
/s/ Daniel W. Kipp
- ----------------------
Daniel W. Kipp
<PAGE>
EXHIBIT 10.18
October ___, 1999
Joseph M. Ivey
President & CEO
Building One Services Corporation
110 Cheshire Lane, Suite 210
Minnetonka, MN 55305
Dear Joe,
As you know, Building One Services Corporation ("Building One") is contemplating
a merger (the "Merger") with Group Maintenance America Corp. ("GroupMAC"). The
purposes of this letter are to indicate to you that both Building One and
GroupMAC would like you to continue your employment with the combined company
after the Merger is completed and to set forth the material terms of such
employment. The terms of your employment with the combined company are
described below. It is anticipated that the combined company will request you
to sign an employment agreement to reflect these terms on or prior to completion
of the Merger. These terms will only be effective upon completion of the
Merger. All prior agreements relating to your employment with Building One will
remain in effect until completion of the Merger.
- --------------------------------------------------------------------------------
A. Position Your title and position will be President & CEO.
- --------------------------------------------------------------------------------
B. Base Salary Your Base Salary will be changed to $425,000
per year.
- --------------------------------------------------------------------------------
C. Bonus You will be entitled to participate in a new
incentive bonus plan for fiscal year 2000 and
beyond with the potential to receive up to
120% of your Base Salary. Your bonus through
December 31, 1999 will be determined under
Building One's existing bonus plan.
- --------------------------------------------------------------------------------
D. Covenant Not to Compete Your employment agreement will contain a
covenant by you not to compete with the
combined company. This covenant will apply
while you are an employee of the combined
company and will extend for a minimum of one
year after your termination regardless of the
nature of your termination. The covenant may
extend for a longer period under certain
circumstances to be set forth in your new
employment agreement.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
E. Other Benefits, Terms and Your new employment agreement will have other
Conditions terms and conditions which will afford you
with benefits and other rights that are at
least equal to or better than the benefits and
other rights that you have now.
- --------------------------------------------------------------------------------
F. Term The term of your new employment agreement will
be three years from the date of completion of
the Merger.
- --------------------------------------------------------------------------------
If the Merger is not completed by March 31, 2000, this letter agreement will
automatically terminate without any action on the part of Building One or you.
If you agree with the terms described above, please sign and date this letter in
the space provided below.
Very truly yours,
BUILDING ONE SERVICES CORPORATION
By:_________________________________________
Joseph M. Ivey
President and Chief Executive Officer
ACCEPTED AND AGREED
This ___ day of October, 1999.
______________________________
Joseph M. Ivey
<PAGE>
EXHIBIT 10.19
November 1, 1999
William P. Love, Jr.
9401 Indian Creek Parkway
Suite 450
Overland Park, KS 66210
Dear Bill,
As you know, Building One Services Corporation ("Building One") is contemplating
a merger (the "Merger") with Group Maintenance America Corp. ("GroupMAC"). The
purposes of this letter are to indicate to you that both Building One and
GroupMAC would like you to continue your employment with the combined company
after the Merger is completed and to set forth the material terms of such
employment. The terms of your employment with the combined company are
described below. It is anticipated that the combined company will request you
to sign an employment agreement to reflect these terms on or prior to completion
of the Merger. These terms will only be effective upon completion of the
Merger. All prior agreements relating to your employment with Building One will
remain in effect until completion of the Merger.
A. Position Your title and position will be President of
the Electrical Group.
- ------------------------------------------------------------------------------
B. Base Salary Your Base Salary will be changed to $240,000
per year.
- ------------------------------------------------------------------------------
C. Bonus You will be entitled to participate in a new
incentive bonus plan for fiscal year 2000 and
beyond with the potential to receive up to 80%
of your Base Salary. Your bonus through
December 31, 1999 will be determined under
Building One's existing bonus plan.
- ------------------------------------------------------------------------------
D. Covenant Not to Compete Your employment agreement will contain a
covenant by you not to compete with the
combined company. This covenant will apply
while you are an employee of the combined
company and will extend for a minimum of one
year after your termination regardless of the
nature of your termination. The covenant may
extend for a longer period under certain
circumstances to be set forth in your new
employment agreement.
1
<PAGE>
- ------------------------------------------------------------------------------
E. Interest Free Loan In consideration for your agreeing to a
reduction in salary and bonus, the combined
company will provide you with an interest free
loan in the amount of $ 650,000. The loan
will be due and payable on the fourth
anniversary of the date of completion of the
Merger. However, to the extent that you
remain in the employ of the combined company,
the loan will be forgiven on a pro rata basis
in 48 equal installments. If your employment
is terminated prior to the expiration of the
four-year term and such termination is
initiated by you without good reason or by the
combined company with cause, the entire
principal amount of the loan that has not
already been forgiven will become immediately
due and payable. If your employment with the
combined company is terminated without cause,
the note will be forgiven in full effective on
the date of such termination.
- ------------------------------------------------------------------------------
F. Other Benefits, Terms and
Conditions Your new employment agreement will have other
terms and conditions which will afford you
with benefits and other rights that are at
least equal to or better than the benefits and
other rights that you have now.
- ------------------------------------------------------------------------------
G. Term The term of your new employment agreement will
be two years from the date of completion of
the Merger. However, the base salary and
bonus opportunity amounts will be re-evaluated
by the compensation committee of the Board of
Directors of the combined company within 12
months from the date of the Merger to
determine whether such amounts are
commensurate with your responsibilities.
- ------------------------------------------------------------------------------
In addition, as we discussed, any future evaluations of your compensation
package, including salary and bonus amounts, will not be affected by the
presence of the interest free note referenced in Section E above.
If the Merger is not completed by March 31, 2000, this letter agreement will
automatically terminate without any action on the part of Building One or you.
2
<PAGE>
William P. Love, Jr.
November __, 1999
If you agree with the terms described above, please sign and date this letter in
the space provided below.
Very truly yours,
BUILDING ONE SERVICES CORPORATION
By:____________________________________
Joseph M. Ivey
President and Chief Executive Officer
ACCEPTED AND AGREED
This ___ day of November, 1999.
___________________________
William P. Love, Jr.
3
<PAGE>
EXHIBIT 10.20
October ___, 1999
Michael J. Sullivan
Chairman
Building One Service Solutions, Inc.
151 Bodman Place, #400
Red Bank, NJ 07701
Dear Mike,
As you know, Building One Services Corporation ("Building One") is contemplating
a merger (the "Merger") with Group Maintenance America Corp. ("GroupMAC"). The
purposes of this letter are to indicate to you that both Building One and
GroupMAC would like you to continue your employment with the combined company
after the Merger is completed and to set forth the material terms of such
employment. The terms of your employment with the combined company are
described below. It is anticipated that the combined company will request you
to sign an employment agreement to reflect these terms on or prior to completion
of the Merger. These terms will only be effective upon completion of the
Merger. All prior agreements relating to your employment with Building One will
remain in effect until completion of the Merger.
A. Position Your title and position will be President of
the Service Solutions Group.
- ------------------------------------------------------------------------------
B. Base Salary Your Base Salary will be changed to $200,000
per year.
- ------------------------------------------------------------------------------
C. Bonus You will be entitled to participate in a new
incentive bonus plan for fiscal year 2000 and
beyond with the potential to receive up to 75%
of your Base Salary. Your bonus through
December 31, 1999 will be determined under
Building One's existing bonus plan.
- ------------------------------------------------------------------------------
D. Covenant Not to Compete Your employment agreement will contain a
covenant by you not to compete with the
combined company. This covenant will apply
while you are an employee of the combined
company and will extend for a minimum of one
year after your termination regardless of the
nature of your termination. The covenant may
extend for a longer period under certain
circumstances to be set forth in your new
employment agreement.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
E. Interest Free Loan In consideration for your agreeing to a
reduction in salary and bonus, the combined
company will provide you with an interest free
loan in the amount of $300,000. The loan will
be due and payable on the fourth anniversary
of the date of completion of the Merger.
However, to the extent that you remain in the
employ of the combined company, the loan will
be forgiven on a pro rata basis as follows:
$12,500 per month for the first 12 months of
the term of the loan and $4,166 per month for
the next 36 months of the term of the loan.
If your employment is terminated prior to the
expiration of the four-year term and such
termination is initiated by you without good
reason or by the combined company without
cause, the entire principal amount of the loan
that has not already been forgiven will become
immediately due and payable.
- ------------------------------------------------------------------------------
F. Other Benefits, Terms and
Conditions Your new employment agreement will have other
terms and conditions which will afford you
with benefits and other rights that are at
least equal to or better than the benefits and
other rights that you have now.
- ------------------------------------------------------------------------------
G. Term The term of your new employment agreement will
be two years from the date of completion of
the Merger.
- ------------------------------------------------------------------------------
If the Merger is not completed by March 31, 2000, this letter agreement will
automatically terminate without any action on the part of Building One or you.
<PAGE>
If you agree with the terms described above, please sign and date this letter in
the space provided below.
Very truly yours,
BUILDING ONE SERVICES CORPORATION
By:____________________________________
Joseph M. Ivey
President and Chief Executive Officer
ACCEPTED AND AGREED
This ___ day of October, 1999.
___________________________
Michael J. Sullivan
<PAGE>
EXHIBIT 21
GROUP MAINTENANCE AMERICA CORP.
AND SUBSIDIARIES
ORGANIZATION CHART
AS OF NOVEMBER 30, 1999
Group Maintenance America Corp. (Texas)
A-1 Mechanical of Lansing, Inc. (Michigan)
AA Advance Air, Inc. (Florida)
AA JARL, Inc. (Delaware) (dba Jarrell Plumbing)
Air Conditioning Engineers, Inc. (Michigan)
Air Conditioning, Plumbing & Heating Service Co., Inc. (Colorado)
Aircon Energy Incorporated (California)
Airtron, Inc. (Delaware)
Airtron of Central Florida, Inc. (Florida)
GroupMAC Indiana, L.L.C. (Indiana)*
All Service Electric, Inc. (Florida)
Arkansas Mechanical Services, Inc. (Arkansas)
Atlantic Industrial Constructors, Inc. (Virginia)
Barr Electric Corp. (Illinois)
Callahan Roach Products & Publications, Inc. (Colorado)
Cardinal Contracting Corporation (Indiana)
GroupMAC Indiana, L.L.C. (Indiana)*
Central Air Conditioning Contractors, Inc. (Delaware)
Central Carolina Air Conditioning Company (North Carolina)
Clark Converse Electric Service, Inc. (Ohio)
Colonial Air Conditioning Company (Delaware)
Commercial Air Holding Company (Maryland)
Commercial Air, Power & Cable, Inc. (Maryland)
Continental Electrical Construction Co. (Delaware)
Gregory Electric Corp. (Illinois)
Costner Brothers, Inc. (South Carolina)
Divco, Inc. (Washington)
Dynalink Corporation (Ohio)
Evans Services, Inc. (Alabama)
The Farfield Company (Delaware)
Ferguson Electric Corporation (Delaware)
Gentzler Electrical Contractors, Inc. (Delaware)
Gilbert Mechanical Contractors, Inc. (Minnesota)
Greenway Investment Corp. (Delaware)
GroupMAC Texas L.P. (Texas)+
<PAGE>
Subsidiaries of Group Maintenance America Corp.
Subsidiaries of GroupMAC Holding Corp.
GroupMAC Holding Corp. (Delaware)
A-1 Appliance & Air Conditioning, Inc. (Delaware)
A-ABC Appliance, Inc. (Texas)
A-ABC Services, Inc. (Delaware) (dba A-ABC Appliance, Inc.)
Charlie Crawford, Inc. (Delaware)
Electrical Associates of Dallas, Inc. (Texas)
GroupMAC Texas L.P. (Texas)+
Hallmark Air Conditioning, Inc. (Delaware)
K & N Plumbing, Heating and Air Conditioning, Inc. (Delaware)
Trinity Contractors, Inc. (Delaware)
GroupMAC Management Co. (Delaware)
HPS Plumbing Services, Inc. (California)
Hungerford Mechanical Corporation (Virginia)
J.D. Steward Air Conditioning, Inc. (Colorado)
L.T. Mechanical, Inc. (Delaware)
Laney's, Inc. (Delaware)
Linford Service Co. (California)
MacDonald-Miller Industries, Inc. (Washington)
MacDonald-Miller Co., Inc. (Washington)
MacDonald-Miller of Oregon, Inc. (Delaware)
MacDonald-Miller Service, Inc. (Washington)
GroupMAC Facility Services, Inc. (Delaware)
Masters, Inc. (Maryland)
Mechanical Interiors, Inc. (Delaware)
Mechanical Services of Orlando, Inc. (Florida)
Merritt Island Air & Heat, Inc. (Delaware)
New Construction Air Conditioning, Inc. (Michigan)
Noron, Inc. (Ohio)
Pacific Rim Mechanical Contractors, Inc. (California)
Air Systems, Inc. (California)
Paul E. Smith Co., Inc. (Indiana)
GroupMAC Indiana, L.L.C. (Indiana)*
Phoenix Electric Company (Delaware)
Ray and Claude Goodwin, Inc. (Florida)
Reliable Mechanical, Inc. (Delaware)
Romanoff Electric Corp. (Ohio)
Sequoyah Corporation (Washington)
Sibley Services, Incorporated (Tennessee)
Snyder Mechanical (Nevada)
Southeast Mechanical Service, Inc. (Florida)
Statewide Heating & Air Conditioning, Inc. (Delaware)
Stephen C. Pomeroy, Inc. (Delaware)
2
<PAGE>
Subsidiaries of Group Maintenance America Corp.
Sterling Air Conditioning, Inc. (Delaware)
Sun Plumbing, Inc. (Florida)
Team Mechanical, Inc. (Utah)
Tower Electric Company (Delaware)
United Acquisition Corp. (Iowa) (dba United Service Alliance)
Valley Wide Plumbing and Heating, Inc. (Colorado)
Van's Comfortemp Air Conditioning, Inc. (Florida)
Vantage Mechanical Contractors, Inc. (Maryland)
Vermont Mechanical, Inc. (Delaware)
Wade's Heating and Cooling, Inc. (Florida)
Wiegold & Sons, Inc. (Florida)
Willis Refrigeration, Air Conditioning & Heating, Inc. (Ohio)
Yale Incorporated (Minnesota)
__________
* GroupMAC Indiana L.L.C. is an Indiana limited liability company
jointly owned by Airtron, Inc., Cardinal Contracting Corporation and Paul E.
Smith Co., Inc.
+ GroupMAC Texas L.P. is a Texas limited partnership in which GroupMAC
Holding Corp. is the sole general partner (with a 1% interest) and Greenway
Investment Corp. is the sole limited partner (with a 99% interest).
3
<PAGE>
EXHIBIT 23.3
The Board of Directors
Group Maintenance America Corp.:
We consent to the use of our reports incorporated by reference herein and to
the reference to our firm under the heading "Experts" in this prospectus.
/s/ KPMG LLP
- -----------------------------------
KPMG LLP
Houston, Texas
December 23, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our reports
dated (i) February 12, 1999, except for Note 3, which is as of March 23, 1999,
relating to the consolidated financial statements of Building One Services
Corporation; (ii) February 19, 1998, relating to the combined financial
statements of Service Management USA, Inc. and its affiliates, which appear in
Building One Services Corporation's Annual Report on Form 10-K for the year
ended December 31, 1998. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
December 22, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report
dated February 17, 1998 relating to the financial statements of SKC Electric,
Inc. and Affiliate and Lovecor, Inc., which appears in Building One Services
Corporation's Current Report on Form 8-K/A filed May 13, 1998. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
December 22, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors Riviera Electric Construction Co.
We consent to the use in this Registration Statement on Form S-4 of our report
dated February 18, 1998, with respect to the balance sheets of Riviera Electric
Construction Co. as of December 31, 1997 and 1996, and related statements of
income, stockholders' equity and cashflows for the three years in the period
ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in this Registration Statement on Form S-4.
/s/ Baird, Kurtz & Dobson
Baird, Kurtz & Dobson
Denver, Colorado
December 22, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated February 6, 1998, accompanying the financial
statements of Town & Country Electric Inc. contained in Form S-4 for Group
Maintenance America Corp. We consent to the use of the aforementioned reports
in this Form S-4. We also consent to the reference to us under the heading
"Experts" in this Registration Statement on Form S-4.
/s/ Grant Thornton LLP
Grant Thornton LLP
Appleton, Wisconsin
December 23, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated February 12, 1998, accompanying the financial
statements of Garfield Electric Company contained in the Registration Statement
on Form S-4 for Group Maintenance America Corp. We consent to the use of the
aforementioned reports in the Registration Statement on this Form S-4. We also
consent to the reference to us under the heading "Experts" in this Registration
Statement on Form S-4.
/s/ Grant Thornton LLP
Grant Thornton LLP
Cincinnati, Ohio
December 23, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated February 12, 1998, accompanying the financial
statements of Indecon, Inc. contained in the Registration Statement on Form S-4
for Group Maintenance America Corp. We consent to the use of the aforementioned
reports in the Registration Statement on this Form S-4. We also consent to the
reference to us under the heading "Experts" in this Registration Statement on
Form S-4.
/s/ Grant Thornton LLP
Grant Thornton LLP
Cincinnati, Ohio
December 23, 1999
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors Tri-City Electrical Contractors, Inc.:
We consent to incorporation by reference of our report dated February 16, 1998
with respect to the consolidated balance sheets of Tri-City Electrical
Contractors, Inc. as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1997 and to
reference our firm under the heading "Experts" in the Form S-4 of Group
Maintenance America Corp.
/s/ KPMG LLP
KPMG LLP
Orlando, Florida
December 23, 1999
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 our report dated January 30, 1998, relating to the
financial statements of Wilson Electric Company, Inc., which appears in
Building One Services Corporation's Current Report on Form 8-K/A filed May 13,
1998. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ Barry and Moore, P.C.
Barry and Moore, P.C.
Phoenix, AZ
December 23, 1999
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated February 19, 1998, relating to the
financial statements of Perimeter Maintenance Corporation which appears in
Building One Services Corporation's Form 10-K for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ Frazier & Deeter, LLC
Frazier & Deeter, LLC
Atlanta, Georgia
December 23, 1999
<PAGE>
Exhibit 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated February 20, 1998, relating to the
financial statements of Taylor Electric, Inc., which appears in Building One
Services Corporation's Current Report on Form 8-K filed June 5, 1998. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Leverich Rasmuson Banyard
Leverich Rasmuson Banyard
Salt Lake City, Utah
December 23, 1999
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report dated February 18, 1998,
relating to the financial statements of Regency Electric Company, Inc. and
subsidiaries which appears in the Building One Services Corporation's Current
Report on Form 8-K filed June 28, 1999. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Harbeson, Beckerleg & Fletcher
Harbeson, Beckerleg & Fletcher
Jacksonville, Florida
December 23, 1999
<PAGE>
EXHIBIT 23.12
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated February 17, 1998, relating to the
financial statements of Crest International, LLC which appears in Building One
Services Corporation's Annual Report on Form 10-K for the year ended December
31, 1998. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ Schenck & Associates SC
Schenck & Associates SC
Green Bay, Wisconsin
December 23, 1999
<PAGE>
EXHIBIT 23.13
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report
dated July 24, 1998 relating to the financial statements of Ivey Mechnical
Company, which appears in the Building One Services Corporation's Current
Report on Form 8-K filed August 9, 1999. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Davenport, Holliday and Spring
Davenport, Holliday and Spring
Ridgeland, Mississippi
December 23, 1999
<PAGE>
EXHIBIT 23.14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our reports
dated May 7, 1996 (except for Note 9 which is dated July 13, 1999), May 1, 1997
(except for Note 9 which is dated July 13, 1999), May 1, 1998, (except for Note
9 which dated July 13, 1999) and July 13, 1999 relating to the financial
statements of Welcon Management Company and its subsidiary, Watson Electrical
Construction Co., which appear in Building One Services Corporation's Current
Report on Form 8-K filed July 15, 1999. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Bunch & Company, LLP
Bunch & Company, LLP
Rocky Mount, North Carolina
December 23, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ David L. Henninger
______________________________________
David L. Henninger
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ Chester J. Jachimiec
______________________________________
Chester J. Jachimiec
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ Donald L. Luke
______________________________________
Donald L. Luke
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ Lucian L. Morrison
______________________________________
Lucian L. Morrison
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ Robert Munson III
______________________________________
Robert Munson III
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ James P. Norris
______________________________________
James P. Norris
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ Fredric J. Sigmund
______________________________________
Fredric J. Sigmund
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ John M. Sullivan
______________________________________
John M. Sullivan
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ James D. Weaver
______________________________________
James D. Weaver
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Group Maintenance America Corp., a Texas corporation (the
"Company"), of shares of its Common Stock, $0.001 par value, to be issued by
the Company in connection with the merger of Building One Services Corporation
with and into the Company, the undersigned officer or director of the Company
hereby constitutes and appoints Randolph W. Bryant and Darren B. Miller, and
each of them (with full power to each of them to act alone), the undersigned's
true and lawful attorney-in-fact and agent, for the undersigned and on the
undersigned's behalf and in the undersigned's name, place and stead, in any and
all capacities, to sign, execute and file a registration statement relating to
such securities to be filed with the Securities and Exchange Commission on such
Form as, in the opinion of counsel for the Company, is appropriate, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that the said attorneys-in-fact and agents, or
either of them, may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 22nd day of December, 1999.
/s/ William M. Witz
______________________________________
William M. Witz
<PAGE>
EXHIBIT 99.1
[Form of Front of Proxy Card]
GROUP MAINTENANCE AMERICA CORP.
Proxy for Special Meeting of Shareholders
__________, 2000
This Proxy is Solicited on Behalf of the Board of Directors of
Group Maintenance America Corp.
The undersigned herby appoints J. Patrick Millinor, Jr. and Randolph W.
Bryant, and each of them, proxies for the undersigned, with full power of
substitution, to vote all shares of Group Maintenance America Corp. Common Stock
which the undersigned may be entitled to vote at the Special Meeting of
Shareholders of Group Maintenance America Corp. to be held on _______, __, 2000,
or at any adjournment or postponement thereof, upon the matters set forth on the
reverse side and described in the accompanying Joint Proxy Statement/Prospectus
and upon such other business as may properly come before the meeting or any
adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed. Please mark this proxy as indicated on the reverse side to vote on any
item. If you wish to vote in accordance with the Board of Directors'
recommendations, no boxes need to be checked. Regardless of how you vote, the
proxy must be signed to be valid. If you attend the meeting, you may revoke your
proxy and vote in person.
(Continued on reverse side)
. FOLD AND DETACH HERE .
[Form of Reverse of Proxy Card]
<TABLE>
<CAPTION>
<S> <C>
1. Approval of the Agreement and Plan of Merger, as amended, 2. Approval of the issuance of _______ shares of 7.25%
between Group Maintenance America Corp. and Building One convertible preferred stock to BOSS II, LLC
Services Corporation
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
3. Approval of the Group Maintenance America Corp. 1999 4. Approval of the Group Maintenance America Corp. 1999
Stock Performance Incentive Plan Stock Awards Plan
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
5. In the discretion of the proxies named herein, the proxies
are authorized to vote upon other matters as may properly
come before the meeting.
The signer hereby revokes all proxies heretofore given
by the signer to vote at said meeting or any
adjournments thereof.
Please sign exactly as your name appears on this Proxy.
Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
_________________________________________________________
_________________________________________________________
Signature(s) Date
. FOLD AND DETACH HERE .
</TABLE>
<PAGE>
Exhibit 99.2
DETACH HERE
BUILDING ONE SERVICES CORPORATION
[COMPANY LOGO] PROXY CARD
7 1/2% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
This Proxy is Solicited on Behalf of the Board of Directors for the Special
Meeting of Stockholders on , 2000.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS CARD.
The undersigned hereby appoints Joseph M. Ivey and F. Traynor Beck, and each of
them, proxies, with full power of substitution to appear on behalf of the
undersigned and to vote all of the 7 1/2% convertible junior subordinated
debentures of the undersigned at the Special Meeting of Stockholders to be held
in the [Hall of Flags at the United States Chamber of Commerce located at 1615
H Street, N.W., Washington, DC 20062,] on , 2000 at a.m. local time,
and at any adjournment thereof, upon all subjects that may properly come before
the meeting, including the matters described in the joint proxy
statement/prospectus furnished herewith, subject to any directions indicated on
the reverse side of this card, hereby revoking any and all proxies heretofore
given.
The proxies will vote "FOR" the approval and adoption of the Agreement and Plan
of Merger between Group Maintenance America Corp. and Building One Services
Corporation if the applicable box is not marked, and at their discretion on any
other matter that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
Approval of the adoption of the Agreement and Plan of Merger, dated November 2,
1999, by and between Group Maintenance America Corp. and Building One Services
Corporation pursuant to which (i) Building One will be merged with and into
GroupMAC, with GroupMAC as the surviving legal entity, (ii) each outstanding
share of Building One common stock will be converted into the right to receive
1.25 shares of GroupMAC common stock, with cash being paid in lieu of
fractional shares of GroupMAC common stock, and (iii) GroupMAC shareholders
will be given the right to elect to receive in the merger cash for up to 50% of
their shares of GroupMAC common stock, subject to proration.
FOR AGAINST ABSTAIN
Date:
,
2000
_____________________________________
Signature
_____________________________________
Signature (if jointly held)
Please sign and return this Proxy
Card so that your 7 1/2% convertible
junior subordinated debentures can
be represented at the meeting. If
signing for a corporation or
partnership or as agent, attorney or
fiduciary, indicate the capacity in
which you are signing. If you vote
by ballot, such vote will supersede
this proxy.
[ ] MARK HERE IF YOU PLAN TO ATTEND
THE MEETING
[ ] MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT
PLEASE RETURN THIS CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR
OTHERWISE TO [156 FIFTH AVENUE, PENTHOUSE NO. 3, NEW YORK, NEW YORK 10010], SO
THAT YOUR SHARES CAN BE REPRESENTED AT THE MEETING.
<PAGE>
DETACH HERE
BUILDING ONE SERVICES CORPORATION
[COMPANY LOGO] PROXY CARD
COMMON STOCK
This Proxy is Solicited on Behalf of the Board of Directors for the Special
Meeting of Stockholders on , 2000.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS CARD.
The undersigned hereby appoints Joseph M. Ivey and F. Traynor Beck, and each of
them, proxies, with full power of substitution to appear on behalf of the
undersigned and to vote all of the shares of Common Stock of the undersigned at
the Special Meeting of Stockholders to be held in the [Hall of Flags at the
United States Chamber of Commerce located at 1615 H Street, N.W., Washington,
DC 20062,] on , 2000 at a.m. local time, and at any adjournment thereof,
upon all subjects that may properly come before the meeting, including the
matters described in the joint proxy statement/prospectus furnished herewith,
subject to any directions indicated on the reverse side of this card, hereby
revoking any and all proxies heretofore given.
The proxies will vote "FOR" the approval and adoption of the Agreement and Plan
of Merger between Group Maintenance America Corp. and Building One Services
Corporation if the applicable box is not marked, and at their discretion on any
other matter that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
Approval of the adoption of the Agreement and Plan of Merger, dated November 2,
1999, by and between Group Maintenance America Corp. and Building One Services
Corporation pursuant to which (i) Building One will be merged with and into
GroupMAC, with GroupMAC as the surviving legal entity, (ii) each outstanding
share of Building One common stock will be converted into the right to receive
1.25 shares of GroupMAC common stock, with cash being paid in lieu of
fractional shares of GroupMAC common stock, and (iii) GroupMAC shareholders
will be given the right to elect to receive in the merger cash for up to 50% of
their shares of GroupMAC common stock, subject to proration. FOR AGAINST
ABSTAIN
Date:
,
2000
_____________________________________
Signature
_____________________________________
Signature (if jointly held)
Please sign and return this Proxy
Card so that your shares can be
represented at the meeting. If
signing for a corporation or
partnership or as agent, attorney or
fiduciary, indicate the capacity in
which you are signing. If you vote
by ballot, such vote will supersede
this proxy.
[ ] MARK HERE IF YOU PLAN TO ATTEND
THE MEETING
[ ] MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT
PLEASE RETURN THIS CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR
OTHERWISE TO [156 FIFTH AVENUE, PENTHOUSE NO. 3, NEW YORK, NEW YORK 10010], SO
THAT YOUR SHARES CAN BE REPRESENTED AT THE MEETING.
<PAGE>
Exhibit 99.3
[CHASE LOGO]
Consent of Chase Securities Inc.
We hereby consent to (i) the use of our opinion dated November 2, 1999 to
the Board of Directors of Group Maintenance America Corp. as Annex C to the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Building One Services
Corporation with and into Group Maintenance America Corp., and (ii) the
reference to such opinion in such Joint Proxy Statement/Prospectus under the
captions "SUMMARY," "THE MERGER--Background of the Merger," "--Recommendation
of the GroupMAC Board; GroupMAC's Reasons for the Transaction" and "--Opinion
of Financial Advisor to GroupMAC."
In giving such consent, we do not thereby admit that we come within the
category of person whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities
Exchange Commission promulgated thereunder, nor do we thereby admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
CHASE SECURITIES INC.
By: /s/ Thomas O'Driscoll
----------------------------------
Name: Thomas O'Driscoll
Title: Vice President
Houston, Texas
December 22, 1999
<PAGE>
[LETTERHEAD OF BEAR STEARNS]
EXHIBIT 99.4
CONSENT OF BEAR STEARNS
We hereby consent to the use of our opinion letter dated November 2, 1999, to
the Board of Directors of Building One Services Corporation ("Building One"),
attached as Annex D to Group Maintenance America Corp.'s Joint Proxy
Statement/Prospectus on Form S-4 and to the references to our firm in the S-4
under the headings "Summary," "Proposal 1--The Merger--Background of the
Merger," "Proposal 1--The Merger--Recommendation of the Building One Board;
Building One's Reasons for the Merger" and "Proposal 1--The Merger--Opinion of
Financial Advisor to Building One." In giving such consent, we do not admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder and we do not thereby admit that
we are experts with respect to any part of the Registration Statement under the
meaning of the term "expert" as used in the Securities Act.
By: /s/ Rick A. Lacher
-----------------------------
December 22, 1999
