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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-13565
GROUP MAINTENANCE AMERICA CORP.
(Exact name of registrant as specified in its charter)
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TEXAS 76-0535259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8 GREENWAY PLAZA, SUITE 1500
HOUSTON, TEXAS 77046
(Address of principal executive offices) (Zip Code)
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(713) 860-0100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common stock, par value $0.001 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of March 17, 1999, (i) there were 35,438,090 shares of common stock, par
value $0.001 per share, of the registrant issued and outstanding and (ii) the
aggregate market value of the common stock held by non-affiliates of the
registrant (based on the closing price per share of the registrant's common
stock reported on the New York Stock Exchange on that date) was $357,911,994.
For purposes of the above statement only, all directors and executive officers
of the registrant are assumed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the registrant's 1999 Annual
Meeting of Shareholders (to be filed within 120 days after the end of the fiscal
year) are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Description of Business..................................... 1
Item 2. Properties.................................................. 7
Item 3. Legal Proceedings........................................... 8
Item 4. Submission of Matters to a Vote of Security Holders......... 8
Item 4A. Executive Officers.......................................... 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 11
Item 6. Selected Financial Data..................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 24
Item 8. Financial Statements and Supplementary Data................. 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 56
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 56
Item 11. Executive Compensation...................................... 56
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 56
Item 13. Certain Relationships and Related Transactions.............. 56
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 57
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Group Maintenance America Corp. ("GroupMAC"), a Texas corporation
incorporated in 1997, is a leading nationwide provider of mechanical and
electrical services. Its operations are conducted through subsidiaries which
provide services to commercial/industrial and residential customers in 56 cities
across 26 states. As used herein, the "Company" refers to GroupMAC and its
subsidiaries.
During 1998, the Company acquired 39 mechanical and electrical contracting
companies with combined annual revenues of approximately $700 million. As a
result of these acquisitions, the portion of the Company's revenues derived from
maintenance, repair and replacement services shifted from 45% of total revenues
at December 31, 1997 to approximately 60% at December 31, 1998. These
acquisitions also resulted in an increase in the portion of the Company's
business derived from commercial/industrial customers as the Company focused its
acquisition program on contractors that could further the implementation of the
Company's national accounts and energy service provider initiatives. The Company
significantly expanded its electrical and cabling business with the acquisition
of eight electrical contractors. At December 31, 1998, the Company comprised 59
operating companies and had $1.08 billion in pro forma 1998 revenues. Since that
date, the Company has acquired three other businesses and currently comprises 62
operating companies in 57 cities in 26 states.
The Company intends to make additional acquisitions across the main
technical disciplines (mechanical and electrical) within the
commercial/industrial and residential markets. The Company's long term objective
is to develop maintenance, repair and replacement capabilities (both
commercial/industrial and residential) in the top 100 markets within the United
States, while offering new installation services across a more limited range of
markets where new construction in the commercial/industrial and/or residential
sectors is expected to out-pace the national average over the long term. Over
time, this objective is expected to shift the revenues of the Company to an
increased percentage of maintenance, repair and replacement revenue.
SEGMENT FINANCIAL INFORMATION
Information concerning the Company's principal business segments is set
forth in Note 16 to the Consolidated Financial Statements of Group Maintenance
America Corp. and Subsidiaries. The following tables summarize (i) revenues,
(ii) operating income and (iii) allocable assets of the business segments of the
Company for the periods indicated (in thousands):
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YEAR ENDED TEN MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 FEBRUARY 28, 1997
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REVENUES
Commercial/Industrial................ $472,451 62.0% $ 23,305 16.8% $ -- --%
Residential.......................... 286,737 37.7 113,927 82.3 81,880 100.0
Other................................ 2,353 0.3 1,247 0.9 -- --
-------- ----- -------- ----- ------- -----
Total Revenues.................. $761,541 100.0% $138,479 100.0% $81,880 100.0%
======== ===== ======== ===== ======= =====
INCOME FROM OPERATIONS
Commercial/Industrial................ $ 33,890 55.4% $ 1,108 9.4% $ -- --%
Residential.......................... 27,168 44.4 10,559 90.0 3,563 100.0
Other................................ 98 0.2 71 0.6 -- --
-------- ----- -------- ----- ------- -----
Segment Operating Earnings...... 61,156 100.0% 11,738 100.0% 3,563 100.0%
===== ===== =====
Unallocated Net Corporate
Expenses(a)........................ (9,090) (11,516)(b) --
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Income From Operations.......... $ 52,066 $ 222 $ 3,563
======== ======== =======
ASSETS
Commercial/Industrial................ $542,998 77.4% $ 65,566 34.0% $ -- --%
Residential.......................... 123,775 17.7 96,237 50.0 27,153 100.0
Other................................ 34,308 4.9 30,884 16.0 -- --
-------- ----- -------- ----- ------- -----
Total Assets.................... $701,081 100.0% $192,687 100.0% $27,153 100.0%
======== ===== ======== ===== ======= =====
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(a) Unallocated net corporate expenses primarily include (i) corporate overhead,
(ii) corporate and operating company management bonuses, and (iii) savings
from national purchase agreements relating to materials and
property/casualty insurance.
(b) Includes a $7.0 million non-recurring, non-cash compensation charge related
to the reverse acquisition of Airtron, Inc.
COMMERCIAL/INDUSTRIAL GROUP
Through its Commercial/Industrial Group, the Company provides mechanical
and electrical contracting services to commercial/industrial customers. The
following table shows the approximate percentages of the revenues of the
Commercial Group's revenue mix for the fiscal year ended December 31, 1998:
<TABLE>
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ELECTRICAL
MECHANICAL AND OTHER TOTAL
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Maintenance, Repair and Replacement..................... 51.4% 13.0% 64.4%
New Installation........................................ 30.5 5.1 35.6
---- ---- -----
Total Commercial/Industrial................... 81.9% 18.1% 100.0%
==== ==== =====
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SERVICES PROVIDED
Mechanical. The Company designs, installs, maintains, repairs and replaces
the heating, ventilating and air conditioning ("HVAC"), control and monitoring
and process piping systems of commercial and industrial facilities such as
manufacturing and processing facilities, power generation facilities, hospitals
and other critical care facilities, colleges and universities, hotels,
commercial office buildings, retail stores, and restaurants, supermarkets, and
convenience stores. The services provided include both maintenance, repair and
replacement ("MRR") services and new installation services for products such as
compressor-bearing HVAC equipment, boilers, chillers, central plants, process
piping and control systems. The MRR work includes preventative maintenance
(periodic checkups, cleaning and filter change-outs), emergency repairs and the
replacement (in conjunction with the retrofitting or remodeling of a commercial
building, or as a result of an emergency request) of HVAC systems and associated
parts, plumbing fixtures, pipes, water feed and sewer lines, water heaters,
softeners, filters and controls. The Commercial/Industrial Group also designs
and installs mechanical, electrical and other systems on behalf of owners or
general contractors in commercial buildings.
Electrical, Voice and Data. The Company installs, maintains and upgrades
the electrical systems of commercial/industrial facilities, including process
controls, lighting, power, lifesafety systems and energy management systems. The
Company also designs, installs, upgrades, maintains and repairs low energy
systems ("LES") including voice and data cabling, high speed data network
infrastructure systems, fiber optics, video, security and sound. LES is the
fastest growing segment of the electrical construction business. Additionally,
through its information technology unit, Total Site Solutions(SM), the Company
provides consulting services, turnkey design and installation work for various
mission critical facilities such as telecommunications facilities, call centers,
network control rooms, mainframe data centers, trading floors, laboratories and
medical facilities, which must remain on line 100% of the time. Total Site
Solutions(SM) also provides broad-based service agreements that include
provision and administration of bundled preventative maintenance and emergency
response services for these facilities.
CUSTOMERS
The Company's commercial/industrial customers include general contractors,
facility owners, facility managers, developers, utilities, energy service
companies, property managers, engineers, consultants, and architects. The
Company expects to perform an increasing amount of services for energy service
companies seeking to bundle their service and commodity product offerings. The
Company was recently selected by PG&E Energy Services as its preferred provider
of commercial HVAC services nationwide. As an unregulated
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subsidiary of the third largest utility in the United States, PG&E Energy
Services has a national presence and is likely to be a significant participant
in the rapidly growing energy services market.
The Company is seeking to expand the services it provides to building
owners and operators through a national accounts marketing effort focusing on
entities that are responsible for operating the mechanical and electrical
systems of buildings located throughout the United States. The Company's
customers include Microsoft, Lincoln Properties, Builders Square, Pep Boys,
Blockbuster and MCI Worldcom. No customer accounts for more than 2% of the
Commercial/Industrial Group's revenues.
RESIDENTIAL GROUP
Through its Residential Group, the Company provides mechanical and other
contracting services to home builders and home owners. The Residential Group
operates through 24 subsidiaries from 39 locations. Although most of the group's
locations perform MRR services, four of the operating companies emphasize new
construction work and represent 66.1% of the group's revenues.
The following table shows the revenue mix of the Residential Group for the
fiscal year ended December 31, 1998:
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New Installation............................................ 66.9%
Maintenance, Repair and Replacement......................... 33.1
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Total Residential................................. 100.0%
=====
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SERVICES
The Residential Group installs HVAC and plumbing systems in homes,
apartment and condominium complexes and small commercial buildings. It also
provides maintenance services for these systems, such as inspections, cleaning,
repair and replacement of HVAC systems and associated parts; repair and
replacement of bathroom fixtures, water filters and water heaters; and cleaning,
repair and replacement of pipes, sewer lines and residential sanitary systems.
In connection with its maintenance, repair and replacement services, the Company
sells a wide range of HVAC, plumbing and other equipment, including complete
HVAC systems and a variety of parts and components.
CUSTOMERS
The Company markets its residential new installation contracting services
to local, regional and national home builders, including U.S. Home Corporation,
Pulte Home Corporation, Centex Corporation, and Beazer Homes Corporation, or to
general contractors working for builders. The Company targets its growth in the
residential new installation market in those areas of the United States that
have growth rates above the national average. Through strong existing
relationships with major national homebuilders, the Company is marketing its
capabilities to provide consistent, reliable installation services on a regional
basis. No customer accounts for more than 4% of the Residential Group's
revenues.
The Company's customers for residential maintenance repair and replacement
services consist primarily of homeowners. The Company advertises its maintenance
services in the yellow pages, on billboards, on television and radio, and
through direct mail. It also relies upon service contracts to attract and retain
customers.
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OPERATIONS
In providing maintenance, repair and replacement services, the Company uses
specialized systems to log service orders, schedule service calls, identify and
ready the necessary parts and equipment, track the work order, provide
information for communication with the service technicians and customers, and
prepare accurate invoices. Service histories and specific product information
are generally accessible to the dispatcher in a database that may be searched by
customer name or address. Maintenance, repair and replacement calls are
initiated when a customer requests emergency repair service or the Company calls
the client to schedule periodic service agreement maintenance. Service
technicians are scheduled for the call or routed to the customer's business or
residence by the dispatcher via a scheduling board or daily work sheet (for non-
emergency service) or through cellular telephone, pager or radio. Service
personnel work out of the Company's service vehicles, which carry an inventory
of equipment, tools, parts and supplies needed to complete the typical variety
of jobs. The technician assigned to a service call travels to the business or
residence, interviews the customer, diagnoses the problem, presents the
solution, obtains agreement from the customer and performs the work.
A portion of the Company's service work is done to satisfy manufacturers'
equipment warranties. For such services, the Company is generally compensated by
the manufacturer responsible for the defective equipment under warranty. The
Company attempts to enter into service contracts whereby the customer pays an
annual or semiannual fee for periodic diagnostic and preventive services. The
customers under service contracts receive specific discounts from standard
prices for repair and replacement services.
Commercial new installation work begins with a design request from the
owner or general contractor. Initial meetings with the parties allow the
contractor to prepare preliminary and then more detailed design specifications,
engineering drawings and cost estimates. Once a project is awarded, it is
conducted in pre-agreed phases and progress billings are rendered to the owner
for payment, less a retainage. Actual field work (ordering of equipment and
materials, fabrication or assembly of certain components, delivery of materials
to the job sites, scheduling of work crews with the necessary skills, and
inspection and quality control) is coordinated in these same phases. The Company
has established a policy to review and approve any new installation project by
an operating unit that exceeds 5% of the projected annual revenue of that unit.
The Company will generally perform work contracted by it using its
personnel who work from one of the Commercial/Industrial Group's 47 locations.
However, the Company may subcontract with other contractors to perform work in
locations where the Company does not have a facility or where the Company's
backlog requires additional resources. The Company generally subcontracts with
members of United Service Alliance when possible. United Service Alliance is a
member organization owned by the Company which provides industry training
programs and national account opportunities to independent service contractors.
Residential service technicians may carry a Customer Assurance Pricing
manual developed by the Company which specifies the labor, equipment and parts
required to fulfill certain tasks and the associated flat rate prices for those
tasks. This manual is custom generated for each company from a database
containing over 15,000 different repair operations and is regularly updated for
price changes. This "flat rate pricing" strategy allows the Company to monitor
margins and labor productivity at the point of sale, while increasing the level
of customer satisfaction by demonstrating greater fairness and objectivity in
pricing. Payment for maintenance, repair and replacement services not covered by
a warranty or service contract is generally requested in cash, check or credit
card at the service location.
SOURCES OF SUPPLY
The raw materials and components used by the Company include HVAC system
components, ductwork, steel sheet metal and copper tubing and piping. These raw
materials and components are generally available from a variety of domestic or
foreign suppliers at competitive prices. Delivery times are typically short for
most raw materials and standard components, but during periods of peak demand,
may extend to a month or more. Chillers for large units typically have the
longest delivery time and generally have lead times of up to three to four
months. The major components of HVAC systems are compressors and chillers that
are manufactured primarily by Trane Air Conditioning Company, Carrier
Corporation, and York Heating and Air Conditioning
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Company. The major suppliers of control systems are Honeywell Inc., Johnson
Controls, Inc. and Andover Control Corporation. The Company is not materially
dependent on any of these outside sources.
EMPLOYEES
As of December 31, 1998, the Company had approximately 9,000 full and
part-time employees, of whom approximately 6,900 are installation/service
technicians. In the course of performing installation work, the Company may
utilize the services of subcontractors. Approximately 1,600 employees (in 13 of
the Company's subsidiaries) are members of unions and work under collective
bargaining agreements. The collective bargaining agreements have expiration
dates between April 1999 and June 2003. The Company believes that its
relationship with its employees is generally satisfactory.
SEASONALITY
The Company's business tends to be affected adversely by moderate weather
patterns. Comparatively warm winters and cool summers reduce the demand for its
maintenance, repair and replacement services. Additionally, its new installation
business is affected adversely by extremely cold weather and large amounts of
rain. As a result, the Company expects that its revenues and operating results
will be lower in the first and, to a lesser degree, fourth calendar quarters.
Prolonged weather conditions or seasonal variations may cause unpredictable
fluctuations in operating results.
BACKLOG
At December 31, 1998, the Company's backlog of work was approximately
$420.7 million. Of the backlog, approximately $382.6 million related to the
Company's commercial/industrial operations and the remaining $38.1 million
related to the Company's residential operations.
COMPETITION
The market for mechanical and electrical services is highly competitive.
The Company believes that the principal competitive factors in the
commercial/industrial and residential services industry are (i) timeliness,
reliability and quality of services provided, (ii) range of services offered,
(iii) market share and visibility and (iv) price. The Company believes its
strategy of creating a leading national provider of comprehensive services
directly addresses these factors. The ability of the Company to employ, train
and retain highly motivated service technicians to provide quality services
should be enhanced by its ability to utilize professionally managed recruiting
and training programs. In addition, the Company expects to offer compensation,
health and savings benefits that are more comprehensive than most offered in the
industry. Competitive pricing is possible through purchasing economies and other
cost saving opportunities that exist across each of the service lines offered
and from productivity improvements.
Most of the Company's competitors are small, owner-operated companies that
typically operate in a single market. Certain of these smaller competitors may
have lower overhead cost structures and may be able to provide their services at
lower rates. Moreover, many homeowners have traditionally relied on individual
persons or small repair service firms with whom they have long-established
relationships for a variety of home repairs. There are currently a limited
number of public companies focused on providing commercial/industrial or
residential services in some of the same service lines provided by the Company.
In addition, there are a number of national retail chains that sell a
variety of plumbing fixtures and equipment and HVAC equipment for residential
use and offer, either directly or through various subcontractors, installation,
warranty and repair services. Other companies or trade groups engage in
franchising their names and marketing programs in some service lines. In the
future, competition may be encountered from, among others, HVAC equipment
manufacturers, the unregulated business segments of regulated gas and electric
utilities or from newly deregulated utilities entering into various
commercial/industrial or residential service areas. Certain of the Company's
competitors and potential competitors have greater financial resources than the
Company to finance acquisition and development opportunities, to pay higher
prices for the same
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opportunities or to develop and support their own commercial/industrial or
residential service operations if they decide to enter the field.
GOVERNMENTAL REGULATION
Many aspects of the Company's operations are subject to various federal,
state and local laws and regulations, including, among others, (1) permitting
and licensing requirements applicable to service technicians in their respective
trades, (2) building, mechanical and electrical codes and zoning ordinances, (3)
laws and regulations relating to consumer protection, including laws and
regulations governing service contracts for residential services, and (4) laws
and regulations relating to worker safety and protection of human health. In
Florida, warranties provided for in the Company's service agreements subject the
Company and such agreements to some aspects of that state's insurance laws and
regulations. Specifically, the Company is required to maintain funds on deposit
with the Florida Office of Insurance Commissioner and Treasurer, the amount of
which is not material to the Company's business. The Company is in compliance
with these deposit requirements.
The Company believes it has all required permits and licenses to conduct
its operations and is in substantial compliance with applicable regulatory
requirements relating to its operations. Failure of the Company to comply with
the applicable regulations could result in substantial fines or revocation of
the Company's operating permits.
A large number of state and local regulations governing the residential
services trades require various permits and licenses to be held by individuals.
In some cases, a required permit or license held by a single individual may be
sufficient to authorize specified activities for all the Company's service
technicians who work in the geographic area covered by the permit or licenses.
ENVIRONMENTAL REGULATION
The Company's operations are subject to numerous federal, state and local
environmental laws and regulations, including those governing the remediation of
contaminated soil and groundwater, vehicle emissions and the use and handling of
refrigerants. These laws and regulations are administered by the United States
Environmental Protection Agency, the Coast Guard, the Department of
Transportation and various state and local governmental agencies. The technical
requirements of these laws and regulations are becoming increasingly complex and
stringent, and meeting these requirements can be expensive. The nature of the
Company's operations and its ownership or operation of property expose it to the
risk of claims with respect to such matters, and there can be no assurance that
material costs or liabilities will not be incurred in connection with such
claims. Federal and state environmental laws include statutes intended to
allocate the cost of remedying contamination among specifically identified
parties. For example, the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA" or "Superfund") can impose strict,
joint and several liability on past and present owners or operators of
facilities at, from or to which a release of hazardous substances has occurred,
on parties who generated hazardous substances that were released at such
facilities and on parties who arranged for the transportation of hazardous
substances to such facilities. A majority of states have adopted "Superfund"
statutes comparable to, and in some cases more stringent than, CERCLA. If the
Company were to be found to be a responsible party under CERCLA or a similar
state statute, the Company could be held liable for all investigative and
remedial costs associated with addressing such contamination, even though the
releases were caused by a prior owner or operator or third party. In addition,
claims alleging personal injury or property damage may be brought against the
Company as a result of alleged exposure to hazardous substances resulting from
the Company's operations.
Prior to entering into the agreements relating to the acquisition of
businesses, the Company evaluated the properties owned or leased by those
businesses and in some cases engaged an independent environmental consulting
firm to conduct or review assessments of environmental conditions at certain of
those properties. No material environmental problems were discovered in these
reviews, and the Company is not otherwise aware of any actual or potential
environmental liabilities that would be material to the Company. There can be no
assurance that all such liabilities have been identified, that such liabilities
will not occur in the future, that a
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party could not assert a material claim against the Company with respect to such
liabilities, or that the Company would be required or able to answer for such
claim.
The Company's operations are subject to the Clean Air Act, Title VI of
which governs air emissions and imposes specific requirements on the use and
handling of substances known or suspected to cause or contribute significantly
to harmful effects on the stratospherical ozone layer, such as
chlorofluorocarbons and certain other refrigerants ("CFCs"). Clean Air Act
regulations require the certification of service technicians involved in the
service or repair of systems, equipment and appliances containing these
refrigerants and also regulate the containment and recycling of these
refrigerants. These requirements have increased the Company's training expenses
and expenditures for containment and recycling equipment. The Clean Air Act is
intended ultimately to eliminate the use of CFCs in the United States and
require alternative refrigerants to be used in replacement HVAC systems. The
implementation of the Clean Air Act restrictions has also increased the cost of
CFCs in recent years and is expected to continue to increase such costs in the
future. As a result, the number of conversions of existing HVAC systems that use
CFCs to systems using alternative refrigerants is expected to increase.
The Company's operations in certain geographic regions are subject to laws
that will, over the next few years, require specified percentages of vehicles in
large vehicle fleets to use "alternative" fuels, such as compressed natural gas
or propane, and meet reduced emissions standards. The Company does not
anticipate that the cost of fleet conversion that may be required under current
laws will be material. Future costs of compliance with these laws will be
dependent upon the number of vehicles purchased in the future for use in the
covered geographic regions, as well as the number and size of future business
acquisitions by the Company in these regions. The Company cannot determine to
what extent its future operations and earnings may be affected by new
regulations or changes in existing regulations relating to vehicle emissions.
Capital expenditures related to environmental matters during the fiscal
year ended December 31, 1998, were not material. The Company does not currently
anticipate any material adverse effect on its business or consolidated financial
position as a result of future compliance with existing environmental laws and
regulations controlling the discharge of materials into the environment. Future
events, however, such as changes in existing laws and regulations or their
interpretation, more vigorous enforcement policies of regulatory agencies or
stricter or different interpretations of existing laws and regulations may
require additional expenditures by the Company which may be material.
ITEM 2. PROPERTIES.
The Company's executive offices are located in leased office space at 8
Greenway Plaza, Suite 1500, Houston, Texas 77046.
The Company operates a fleet of approximately 3,550 owned or leased service
trucks, vans and support vehicles. It believes these vehicles generally are
well-maintained, ordinary wear and tear excepted, and adequate for the Company's
current operations.
The Company has a total of 112 facilities, six of which it owns and 106 of
which are under leases with remaining terms up to 12 years from the date hereof
on terms the Company believes to be commercially reasonable. The aggregate of
the leased or owned space at the Company's facilities is approximately 1.6
million square feet. A majority of the Company's facilities are leased from
certain former shareholders (or entities controlled by certain former
shareholders) of its subsidiaries. None of these leases expire prior to 2000.
The provisions of the leases are on terms the Company believes to be at least as
favorable to the Company as could have been negotiated by the Company with
unaffiliated third parties. The Company believes the owned and leased facilities
are adequate to serve its current level of operations.
The Company believes that it has generally satisfactory title to the
property owned by it, subject to the liens for current taxes, liens incident to
minor encumbrances and easements and restrictions that do not materially detract
from the value of such property or the interests therein or the use of such
property in its business. Additionally, the inventory and accounts receivable of
the Company are subject to a lien under its credit facility.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to various legal proceedings. It is not possible to
predict the outcome of these matters. However, in the opinion of management, the
resolution of these matters will not have a material adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matter to a vote of its security holders
during the fourth quarter of 1998.
ITEM 4A. EXECUTIVE OFFICERS.
The following table sets forth certain information concerning the executive
officers of the Company:
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NAME AGE POSITION
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James P. Norris........................... 60 Chairman of the Board; Director
J. Patrick Millinor, Jr................... 53 Chief Executive Officer; Director
Donald L. Luke............................ 62 President and Chief Operating Officer; Director
William Michael Callahan.................. 53 Executive Vice President -- Training and
Development
Chester J. Jachimiec...................... 44 Executive Vice President -- Acquisitions; Director
Darren B. Miller.......................... 39 Executive Vice President and Chief Financial
Officer
Alfred R. Roach, Jr....................... 54 Executive Vice President -- Commercial/Industrial
Group
Richard S. Rouse.......................... 52 Executive Vice President -- Corporate Development
and Administration
Randolph W. Bryant........................ 48 Senior Vice President, General Counsel and
Secretary
Daniel W. Kipp............................ 39 Senior Vice President and Corporate Controller
Robert Tyler.............................. 49 Senior Vice President -- Residential Group
David L. Henninger........................ 54 President of Van's Comfortemp Air Conditioning,
Inc.; Director
Timothy Johnston.......................... 43 Senior Vice President of Airtron, Inc.; Director
Andrew Jeffrey Kelly...................... 44 Chief Executive Officer of K&N Plumbing, Heating &
Air Conditioning, Inc.; Director
Robert Munson, III........................ 52 President of Trinity Contractors, Inc.; Director
Fredric J. Sigmund........................ 57 President and Chief Executive Officer of MacDonald-
Miller Industries, Inc.; Director
William M. Witz........................... 59 Chief Executive Officer of Continental Electrical
Construction Co.; Director
</TABLE>
JAMES P. NORRIS became a Director and Chairman of the Board of the Company
in June 1997. From 1969 to May 1997, he served as Executive Vice President of
Air Conditioning Contractors of America ("ACCA"), an industry trade association
based in Washington, D.C.
J. PATRICK MILLINOR, JR. is a Director and Chief Executive Officer of the
Company and has served in such capacities with the Company and its predecessor
since October 1996. He also served as President of the Company and its
predecessor from October 1996 to August 1997. From September 1994 to October
1996, Mr. Millinor worked directly for Gordon Cain, a major stockholder in the
Company, assisting in the formation and management of Agennix Incorporated and
Lexicon Genetics, two biotechnology companies. From March 1993 to September
1994, he served as Chief Executive Officer of UltrAir, Inc., a start-up
passenger airline. From October 1992 to March 1993, he served as Chief Financial
Officer of UltrAir, Inc. He currently serves as a director of Agennix
Incorporated and Haelan Health(R) Corporation.
DONALD L. LUKE became a Director and President and Chief Operating Officer
of the Company in August 1997. From November 1996 to July 1997, he served as
Chairman of Arriva Air International, Inc. a start-up commercial air cargo
business, and a partner in McFarland Grossman Capital Ventures, L.C., a
consolidator
8
<PAGE> 11
of fastener distribution companies. From September 1996 to August 1997, he
served as the Chief Executive Officer of CTW, Inc. a privately held acquisitions
and management company, and a consultant to Batteries Batteries, Inc., a
consolidator of specialty battery distribution companies which completed its
initial public offering in April 1996. From 1995 to September 1996, he served as
President, Chief Executive Officer and Director of Batteries Batteries, Inc.
From 1991 to 1995, Mr. Luke served as President and Chief Executive Officer of
Miracle Ear New York City.
WILLIAM MICHAEL CALLAHAN became Executive Vice President -- Training and
Development of the Company in August 1997. From 1989 to July 1997, Mr. Callahan
was a partner in Callahan Roach & Associates, a firm which provided consulting
services to residential HVAC contractors nationwide prior to its acquisition by
the Company. From 1972 to 1989, Mr. Callahan served as President of Capital City
Heating & Cooling, a company he founded. In 1988, Mr. Callahan served as
President of ACCA.
CHESTER J. JACHIMIEC is a Director and Executive Vice
President -- Acquisitions of the Company, having served in such capacities with
the Company 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 the Company since
July 1998 and has been Chief Financial Officer of the Company and its
predecessor since October 1996. He was also a Senior Vice President from October
1996 until July 1998. From 1989 to 1996, Mr. Miller served in several capacities
at Allwaste, Inc., 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.
ALFRED R. ROACH, JR. became Executive Vice
President -- Commercial/Industrial Group of the Company 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.
RICHARD S. ROUSE is Executive Vice President -- Corporate Development and
Administration of the Company, having served in such capacity with the Company
and its predecessor since October 1996. From July 1994 to July 1996, Mr. Rouse
was Vice President and General Manager of Southcoast Services, a privately held
landfill operating company. From 1992 to 1994, he served as Vice President and
General Manager of SWS, an industrial services company.
RANDOLPH W. BRYANT became Senior Vice President, General Counsel and
Secretary of the Company 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 the Company since July
1998 and its Corporate Controller since February 1997. He also served as a Vice
President of the Company from February 1997 through July 1998. From February
1994 until February 1997, Mr. Kipp was a sales executive with American Sterling,
a provider of hazard insurance outsourcing services to the mortgage banking
industry, and from July 1990 until February 1994 he was Vice President and
Controller of Allwaste Recycling, Inc., a glass recycler and powdered glass
processor. Prior to July 1990, he was employed in the audit practice of Arthur
Andersen LLP.
ROBERT TYLER has been Senior Vice President -- Residential Group of the
Company 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.
9
<PAGE> 12
DAVID L. HENNINGER became a Director of the Company in November 1997. He is
President of Van's Comfortemp Air Conditioning, Inc., a subsidiary of the
Company providing HVAC services to residential and light commercial customers in
the Palm Beach-Ft. Lauderdale, Florida, area. He acquired Van's in 1975 and has
served as its President since that time.
TIMOTHY JOHNSTON became a Director of the Company in May 1997 in connection
with the acquisition of Airtron, which installs HVAC systems in new residences.
Mr. Johnston joined Airtron, Inc. in 1988 and has served as its Senior Vice
President since 1995. He has also served as Secretary/Treasurer of Airtron since
1991 and Chief Financial Officer of Airtron since 1988.
ANDREW JEFFREY KELLY became a Director of the Company in November 1997. Mr.
Kelly is Chief Executive Officer of K&N, a subsidiary of the Company providing
plumbing and HVAC services to residential new construction markets in the
Dallas-Ft. Worth and Austin areas. He founded K&N in 1979 and has served as its
Chief Executive Officer since that time.
ROBERT MUNSON, III became a Director of the Company in November 1998. He is
President of Trinity Contractors, Inc, a subsidiary of the Company which
provides mechanical and electrical contracting services to commercial and
industrial customers, primarily in the Dallas-Ft. Worth area. He founded Trinity
in 1981 and has served as its President since that time.
FREDRIC J. SIGMUND became a Director of the Company in November 1997. Mr.
Sigmund is President and Chief Executive Officer of MacDonald-Miller Industries,
Inc., a subsidiary of the Company providing a full range of HVAC services to
commercial and industrial customers in the Pacific Northwest. He became an
employee of MacDonald-Miller in 1967 and has been its President and Chief
Executive Officer since 1986.
WILLIAM M. WITZ became a Director of the Company in March 1999. He is Chief
Executive Officer of Continental Electrical Construction Co., a subsidiary of
the Company that provides electrical contracting services in the Chicago
metropolitan area. Mr. Witz joined Continental Electrical in 1973 and has served
as its Chief Executive Officer since 1976.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since November 1997, the Common Stock of the Company has been listed for
trading on the New York Stock Exchange (the "NYSE") under the symbol "MAK." As
of March 17, 1999, there were 35,438,090 shares of Common Stock outstanding,
held by approximately 640 shareholders of record. The number of record holders
does not necessarily bear any relationship to the number of beneficial owners of
the Common Stock.
SALES PRICES OF COMMON STOCK
The following table sets forth the range of high and low sales prices for
the Common Stock on the NYSE (as reported by National Quotation Bureau, LLC) for
the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year ended December 31, 1997
4th quarter (November 7 to December 31).................. $17 3/16 $13
Year ended December 31, 1998
1st quarter.............................................. $17 1/8 $14
2nd quarter.............................................. 19 5/8 15 1/2
3rd quarter.............................................. 20 5/8 11 1/4
4th quarter.............................................. 14 3/16 10 5/16
</TABLE>
DIVIDENDS
Under applicable corporate law, the Company may pay dividends out of
surplus (as defined under the Texas Business Corporation Act). At December 31,
1998, the Company had surplus of approximately $315.9 million for the payment of
dividends. The Company has not paid a dividend on the Common Stock since its
incorporation and does not anticipate paying any dividends on the Common Stock
in the foreseeable future because it intends to retain any earnings to finance
the expansion of its business, to repay indebtedness and for general corporate
purposes.
Any payment of future dividends will be at the discretion of the Board of
Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other relevant
factors. Additionally, the Company's revolving credit facility prohibits the
payment of dividends without the consent of the lenders, and the Company's
indenture relating to its Senior Subordinated Notes due 2009 (the "Notes")
places restrictions on the ability of the Company to pay dividends. For
additional information concerning the Company's revolving credit facility and
the Notes, see Note 7 to the Consolidated Financial Statements included under
Item 8 of this Annual Report.
SALES OF UNREGISTERED SECURITIES DURING 1998
During the fiscal year ended December 31, 1998, the Company issued
securities that were not registered pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), as follows:
(a) On January 12, 1998, the Company issued 191,900 shares of Common
Stock to the partners of Callahan/Roach & Associates ("Callahan Roach") as
part of the consideration for the purchase of the assets of Callahan Roach.
The Company incurred the obligation to issue these shares of Common Stock
in 1997;
(b) On March 20, 1998, the Company issued 3,750 shares of Common Stock
to the former shareholders of Linford Service Company ("Linford") as part
of a post-closing adjustment to the purchase price for Linford;
11
<PAGE> 14
(c) On April 20, 1998, the Company issued 22,528 shares of Common
Stock to the former shareholder of All Service Electric, Inc. ("All
Service") as part of the post-closing adjustment of the purchase price for
the acquisition of All Service;
(d) On April 20, 1998, the Company issued 38,482 shares of Common
Stock to the former shareholders of Willis Refrigeration, Air Conditioning
& Heating, Inc. ("Willis") as part of the post-closing adjustment of the
purchase price for the acquisition of Willis;
(e) On April 20, 1998, the Company issued 21,555 shares of Common
Stock to the former shareholders of Paul E. Smith Co., Inc. ("PES") as part
of the post-closing adjustment of the purchase price for the acquisition of
PES;
(f) On April 20, 1998, the Company issued 1,422 shares of Common Stock
to the former shareholders of Mechanical Services, Inc. ("MSI") as part of
the post-closing adjustment of the purchase price for the acquisition of
MSI;
(g) On April 20, 1998, the Company issued 12,959 shares of Common
Stock to the former shareholders of Arkansas Mechanical Services, Inc.
("AMS") as part of the post-closing adjustment of the purchase price for
the acquisition of AMS;
(h) On April 20, 1998, the Company issued 3,822 shares of Common Stock
to the former shareholders of Southeast Mechanical Service, Inc.
("Southeast Mechanical") as part of the post-closing adjustment of the
purchase price for the acquisition of Southeast Mechanical;
(i) On April 29, 1998, the Company issued 726 shares of Common Stock
to the former shareholders of Central Carolina Air Conditioning Company
("Central Carolina") as part of the post-closing adjustment of the purchase
price for the acquisition of Central Carolina;
(j) On April 29, 1998, the Company issued 22,149 shares of Common
Stock to the former shareholders of Yale Incorporated ("Yale") as part of
the post-closing adjustment of the purchase price for the acquisition of
Yale;
(k) On May 11, 1998, and June 12, 1998, the Company issued 24,460
shares and 13,108 shares, respectively, of Common Stock to the former
shareholders of Costner Brothers, Inc. ("Costner") as part of the
post-closing adjustment of the purchase price for the acquisition of
Costner;
(l) On November 13, 1998, the Company issued 1,449,980 shares of
Common Stock, warrants to purchase 828,853 shares of Common Stock, and
$16.0 million aggregate principal amount of subordinated notes in
connection with the acquisition of the outstanding capital stock of Trinity
Contractors, Inc.; and
(m) On December 2, 1998, the Company issued 52,032 shares of Common
Stock to the former shareholders of Sibley Services, Inc. ("Sibley") as
part of the post-closing adjustment of the purchase price for the
acquisition of Sibley.
Such sales were completed without registration under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act, no
public offering being involved.
12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA.
Our first acquisition was that of Airtron. For accounting purposes, this
transaction was accounted for as a reverse acquisition, as if Airtron acquired
GroupMAC, because the former shareholders of Airtron owned a majority of our
common stock upon consummation of the acquisition. As such, the Selected Income
Statement and Balance Sheet data set forth below as of and for the three-year
period ended February 28, 1997 have been derived from the audited financial
statements of Airtron. The financial statements of GroupMAC and its
subsidiaries, other than Airtron, are included in the financial statements from
their respective dates of acquisition.
The selected financial data presented below should be read in conjunction
with Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and Item 8, "Financial Statements and Supplementary
Data," included elsewhere herein (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR TEN MONTHS FISCAL YEAR ENDED
ENDED ENDED FEBRUARY 28 OR 29,(B)
DECEMBER 31, DECEMBER 31, ----------------------------
1998(A) 1997(A) 1997 1996 1995
------------ ------------ ------- -------- -------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................... $761,541 $138,479 $81,880 $ 73,765 $72,226
Gross Profit................................ 176,145 36,717 23,374 21,091 21,766
Selling, General and Administrative
Expenses.................................. 118,119 35,862(c) 19,811 17,615 20,282(d)
Goodwill Amortization(e).................... 5,960 633 -- -- --
-------- -------- ------- -------- -------
Income from Operations...................... 52,066 222 3,563 3,476 1,484
Interest Income (Expense), Net.............. (6,188) (1,144) 89 68 76
Other Income, Net........................... 377 112 256 246 140
-------- -------- ------- -------- -------
Income (Loss) Before Income Tax Provision... 46,255 (810) 3,908 3,790 1,700
Income Tax Provision........................ 20,326 2,832 1,572 1,651 911
-------- -------- ------- -------- -------
Net Income (Loss)........................... $ 25,929 $ (3,642) $ 2,336 $ 2,139 $ 789
======== ======== ======= ======== =======
Net Income (Loss) Per Share:
Basic..................................... $ 0.94 $ (0.34)
======== ========
Diluted................................... $ 0.93 $ (0.34)
======== ========
Weighted Average Shares Outstanding:
Basic..................................... 27,544 10,800
======== ========
Diluted................................... 27,948 10,800
======== ========
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
DECEMBER 31, DECEMBER 31, ----------------------------
1998 1997 1997 1996 1995
------------ ------------ ------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.................... $ 2,371 $ 25,681 $ 4,339 $ 1,774 $ 650
Working Capital.............................. 86,441 40,478 6,337 3,285 4,561
Total Assets................................. 701,081 192,687 27,153 28,282 23,528
Total Debt................................... 223,959 2,938 1,290 -- --
Shareholders' Equity......................... 315,929 136,653 5,991 6,373 5,955
</TABLE>
- ---------------
(a) The operations of the acquired businesses (other than Airtron) are included
in the financial data from the effective date of their respective
acquisition.
(b) Concurrent with the initial public offering of GroupMAC's common stock (the
"IPO") we changed our fiscal year end from February 28 to December 31.
(c) Includes $7.0 million of non-recurring, non-cash compensation expenses
related to the reverse acquisition of GroupMAC during the ten months ended
December 31, 1997.
(d) Includes $2.4 million for compensation expense resulting from revaluation
of warrants.
(e) Consists of amortization recorded, as a result of the acquisition of
acquired businesses, over a 40-year period and computed on the basis
described in the notes to consolidated financial statements.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
GroupMAC derives revenues from providing maintenance, repair and
replacement and new installation services for mechanical, electrical and other
systems to commercial/industrial and residential customers. Our combined 1998
revenues, assuming all businesses were acquired on January 1, 1998, consisted of
the following (dollars in thousands):
<TABLE>
<CAPTION>
REVENUES PERCENTAGES
---------- -----------
<S> <C> <C>
Maintenance, repair and replacement......................... $ 636,787 59.2%
New installation............................................ 439,632 40.8
---------- -----
Total............................................. $1,076,419 100.0%
========== =====
</TABLE>
GroupMAC recognizes maintenance, repair and replacement revenues as the
services are performed, except for service contract revenue, which we recognize
ratably over the life of the contract. We generally account for revenues from
fixed price installation and retrofit contracts on a percentage-of-completion
basis, using the cost-to-cost method.
GroupMAC intends to make additional acquisitions in both of the technical
disciplines (mechanical and electrical) within the commercial/industrial and
residential markets. Our long-term objective is to develop maintenance, repair
and replacement capabilities (both residential and commercial/industrial) in the
top 100 markets within the United States, while offering new installation
services across a more limited range of markets where new construction in the
commercial/industrial and/or residential sectors is expected to out-pace the
national average over the long term. Over time, this objective is expected to
shift our revenues to an increased percentage of service revenue.
Cost of services consists primarily of components, parts and supplies
related to our new installation and maintenance, repair and replacement
services, salaries and benefits of service and installation technicians,
subcontracted services, depreciation, fuel and other vehicle expenses and
equipment rentals. Selling, general and administrative expenses consist
primarily of compensation and related benefits for management, administrative
salaries and benefits, advertising, office rent and utilities, communications
and professional fees.
GroupMAC's balanced business mix is reflected to varying degrees in its
gross margins. The combined gross margin for the acquired businesses providing
services to commercial/industrial markets was 20.6% for the twelve months ended
December 31, 1998. Our businesses performing primarily maintenance, repair and
replacement services in the residential markets tend to have higher gross
margins, averaging 32.1% for the combined twelve months ended December 31, 1998.
On average, our residential new installation businesses have lower gross
margins. Such companies' combined gross margin was 23.3% for the twelve months
ended December 31, 1998. Future consolidated gross margins may vary depending
on, among other things, shifts in the business mix as well as the impact of
future acquisitions on the business mix.
GroupMAC has begun to realize savings from (1) greater volume discounts
from suppliers of components, parts and supplies; (2) consolidation of insurance
and bonding programs; (3) other general and administrative expenses such as
training and advertising; and (4) our ability to borrow at lower interest rates
than most, if not all, of our subsidiaries. These savings are offset by costs
related to our corporate management structure, costs associated with being a
public company and integration costs.
The following discussion should be read in conjunction with the historical
consolidated financial statements and related notes and Item 6, "Selected
Financial Data," contained elsewhere herein. The combined data do not represent
combined results of operations presented in accordance with generally accepted
accounting principles, but are only a summation of the revenues, cost of sales
and gross margin of the acquired businesses on a historical basis. The combined
results of operations assume that each of the acquired businesses were combined
at the beginning of each period presented. The combined data also exclude the
effect of pro forma adjustments and may not be comparable to, and may not be
indicative of, our post-combination results of operations because (i) the
acquired businesses were not under common control or
14
<PAGE> 17
management during the periods presented and (ii) the combined data do not
reflect the potential benefits and cost savings GroupMAC expects to realize when
operating as a combined entity.
Effective April 30, 1997, GroupMAC entered into an Agreement and Plan of
Exchange with Airtron (the "Airtron Agreement"), pursuant to which GroupMAC
issued $20.4 million in cash, 14.9 million shares of GroupMAC preferred stock
and 4.7 million shares of GroupMAC common stock to shareholders of Airtron in
exchange for all of the then outstanding shares of Airtron. Although for legal
purposes Airtron was acquired by GroupMAC, for accounting purposes the
transaction was accounted for as a reverse acquisition, as if Airtron acquired
GroupMAC, due to the fact that the former shareholders of Airtron then owned a
majority of the outstanding GroupMAC common stock. In connection with the
purchase of GroupMAC, the company recorded the consideration paid to the
shareholders of GroupMAC as non-recurring compensation expense of $7.0 million
in the accompanying consolidated statements of operations for the ten months
ended December 31, 1997. The consolidated financial statements included
elsewhere herein for the periods prior to the effective date of the acquisition
only include the accounts of Airtron. The consolidated statements of
shareholders' equity have been converted from Airtron's capital structure to
GroupMAC's capital structure to reflect the exchange of shares pursuant to the
Airtron Agreement. During 1997, GroupMAC changed its fiscal year end from
February 28 to December 31.
During 1997, GroupMAC acquired in separate transactions 23 companies (and
together with Airtron, the "Founding Companies") through a combination of cash,
preferred stock, common stock and warrants to purchase shares of common stock of
GroupMAC. During 1998, we acquired 39 additional businesses by offering a
combination of cash, notes payable, junior subordinated notes, common stock,
options to purchase common stock and warrants to purchase common stock.
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
HISTORICAL COMBINED
----------------------------------------------------- -------------------------------------
FISCAL YEAR TEN MONTHS FISCAL YEAR TWELVE MONTHS ENDED
ENDED ENDED ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, FEBRUARY 28, -------------------------------------
1998 1997 1997 1998 1997
---------------- ---------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $761,541 100.0% $138,479 100.0% $81,880 100.0% $1,076,419 100.0% $978,480 100.0%
Cost of Services......... 585,396 76.9 101,762 73.5 58,506 71.5 833,819 77.5 756,770 77.3
-------- ----- -------- ----- ------- ----- ---------- ----- -------- -----
Gross Profit............. 176,145 23.1 36,717 26.5 23,374 28.5 $ 242,600 22.5% $221,710 22.7%
========== ===== ======== =====
Selling, General and
Administrative
Expenses............... 124,079 16.2 36,495 26.3 19,811 24.1
-------- ----- -------- ----- ------- -----
Income from Operations... 52,066 6.9 222 0.2 3,563 4.4
Interest, Net............ (6,188) (0.8) (1,144) (0.8) 89 0.1
Other.................... 377 -- 112 -- 256 0.3
-------- ----- -------- ----- ------- -----
Income (Loss) Before
Income Tax Provision... 46,255 6.1 (810) (0.6) 3,908 4.8
Income Tax Provision..... 20,326 2.7 2,832 2.0 1,572 1.9
-------- ----- -------- ----- ------- -----
Net Income (Loss)........ $ 25,929 3.4% $ (3,642) (2.6)% $ 2,336 2.9%
======== ===== ======== ===== ======= =====
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TEN MONTHS ENDED DECEMBER 31,
1997
Revenues. Revenues increased $623.0 million, or 450.0%, to $761.5 million
for the twelve months ended December 31, 1998 from $138.5 million for the ten
months ended December 31, 1997. The increase in revenues is attributable to the
following:
- $328.7 million relates to 28 commercial/industrial companies acquired
during 1998,
- $54.1 million relates to 11 residential companies acquired during 1998,
15
<PAGE> 18
- $186.7 million relates to 13 companies acquired simultaneous with the
initial public offering of GroupMAC's common stock (the "IPO"), resulting
in twelve months of revenues during 1998 compared to two months of
revenues during 1997,
- $29.3 million relates to the other 10 companies acquired in June and July
of 1997, resulting in twelve months of revenue during 1998 compared to
six or seven months of revenues during 1997, and
- $24.2 million relates to Airtron, resulting in twelve months of revenues
in 1998 compared to ten months of revenues in 1997.
Gross Profit. Gross profit increased $139.4 million, or 379.8%, to $176.1
million for the twelve months ended December 31, 1998 from $36.7 million for the
ten months ended December 31, 1997. The increase in gross profit is attributable
to the following:
- $66.0 million relates to 28 commercial/industrial companies acquired
during 1998,
- $15.2 million relates to 11 residential companies acquired during 1998,
- $37.2 million relates to 13 companies acquired simultaneous with the IPO,
resulting in twelve months of activity during 1998 compared to two months
of activity during 1997,
- $8.9 million relates to the other 10 companies acquired in June and July
of 1997, resulting in twelve months of activity during 1998 compared to
six or seven months of activity during 1997,
- $10.1 million relates to Airtron, resulting in twelve months of activity
in 1998 compared to ten months of activity in 1997, and
- $2.0 million relates to materials purchases savings.
Gross profit margin decreased 3.4% for the twelve months ended December 31,
1998 compared to the ten months ended December 31, 1997 because of GroupMAC's
1998 acquisition emphasis on commercial/industrial businesses, which support the
Company's national accounts initiatives although they typically have lower gross
margins than residential businesses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $87.6 million, or 240.0%, to $124.1 million
for the twelve months ended December 31, 1998 from $36.5 million for the ten
months ended December 31, 1997. The increase in selling, general and
administrative expenses is attributable to the following:
- $37.5 million relates to 28 commercial/industrial companies acquired
during 1998,
- $10.6 million relates to 11 residential companies acquired during 1998,
- $23.5 million relates to 13 companies acquired simultaneous with the IPO,
resulting in twelve months of activity during 1998 compared to two months
of activity during 1997,
- $6.5 million relates to the other 10 companies acquired in June and July
of 1997, resulting in twelve months of activity during 1998 compared to
six or seven months of activity during 1997,
- $4.3 million relates to Airtron, resulting in twelve months of activity
in 1998 compared to ten months of activity in 1997,
- $7.8 million relates to corporate expenses representing the formation of
the corporate management team and infrastructure necessary to execute our
operating and acquisition strategies,
- $5.3 million relates to goodwill amortization associated with the above
described acquisitions, and
- $2.6 million relates to field bonuses.
16
<PAGE> 19
Offsetting the above increases were the following reductions:
- $7.0 million reduction in compensation expense recognized in the prior
year from the reverse acquisition of Airtron, and
- $3.5 million of savings related to our property and casualty insurance
programs.
As a percentage of revenues, selling, general and administrative expenses,
excluding corporate expenses, goodwill amortization and the 1997 non-recurring
compensation expense, decreased to 14.5% for the twelve months ended December
31, 1998 from 18.3% for the ten months ended December 31, 1997. This decrease
was due primarily to achieving lower selling and administrative expense margins
within the 23 companies acquired during 1997 and acquiring a higher mix of
commercial/industrial companies which tend to have lower selling and
administrative expense structures. When including corporate expenses and
goodwill amortization, but excluding the non-recurring, non-cash compensation
expense of $7.0 million, selling, general and administrative expenses as a
percentage of revenue decreased to 16.2% for the twelve months ended December
31, 1998 from 21.1% for the ten months ended December 31, 1997.
Net Interest. Net interest increased $5.0 million during the twelve months
ended December 31, 1998 compared to the ten months ended December 31, 1997 due
to borrowings under our credit facility to fund our aggressive acquisition
program during 1998. See "Liquidity and Capital Resources."
Income Tax Provision. The income tax provision increased $17.5 million, or
625.0%, to $20.3 million for the twelve months ended December 31, 1998 from $2.8
million for the ten months ended December 31, 1997. This increase corresponds
with the pre-tax income increase of $40.1 million between periods after adding
back the $7.0 million of non-recurring, non-cash compensation expense related to
the reverse acquisition of Airtron. The effective tax rate for the twelve months
ended December 31, 1998 was 43.9% compared to 45.8% for the ten months ended
December 31, 1997 after adding back the $7.0 million of non-recurring, non-cash
compensation expense related to the reverse acquisition of Airtron. The decrease
results primarily from income tax planning strategies implemented during 1998.
TEN MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED FEBRUARY 28,
1997
Revenues. Revenues increased $56.6 million, or 69.1%, to $138.5 million for
the ten months ended December 31, 1997 from $81.9 million for the twelve months
ended February 28, 1997. The increase in revenues was attributable to the
acquisitions in June through November 1997, of nine commercial/industrial
companies, 12 residential companies and two companies providing products and
services outside of GroupMAC's two primary operating segments. The increase in
revenues was partially offset as the period ended December 31, 1997 included ten
months while the period ended February 28, 1997 included twelve months.
Gross Profit. Gross profit increased $13.3 million, or 56.8%, to $36.7
million for the ten months ended December 31, 1997 from $23.4 million for the
twelve months ended February 28, 1997. The increase in gross profit was
primarily attributable to the acquisitions in June through November, 1997. Also
contributing to the increase were lower material costs at Airtron. The increase
in gross profit was partially offset as the period ended December 31, 1997
included ten months while the period ended February 28, 1997 included twelve
months. Gross profit margin decreased 2.0% for the ten months ended December 31,
1997 compared to the twelve months ended February 28, 1997 because the gross
profit margins of certain of the businesses acquired were considerably lower
than those achieved at Airtron.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $16.7 million, or 84.3%, to $36.5 million for
the ten months ended December 31, 1997 from $19.8 million for the twelve months
ended February 28, 1997. This increase was primarily attributable to the
aforementioned acquisitions and to the following:
- $7.0 million non-recurring, non-cash compensation charge related to the
reverse acquisition of Airtron in May 1997 and
17
<PAGE> 20
- $4.1 million increase in corporate expenses representing the formation of
the corporate management team and infrastructure necessary to execute our
operating and acquisition strategies.
As a percentage of revenues, selling, general and administrative expenses,
excluding the aforementioned items, decreased to 17.5% for the ten months ended
December 31, 1997 from 24.1% for the twelve months ended February 28, 1997,
respectively, due primarily to prospective reductions in compensation to former
owners to which they agreed. These reductions in salaries are in accordance with
the terms of their employment agreements.
Net Interest. Net interest was an expense of $1.1 million for the ten
months ended December 31, 1997. For the twelve months ended February 28, 1997,
net interest income was $0.1 million. Interest charges increased during the ten
months ended December 31, 1997 due to borrowings under our credit facilities to
fund the cash portion of the acquisition of Airtron and the ten operating
companies acquired in June and July 1997. See "Liquidity and Capital Resources."
Income Tax Provision. The income tax provision increased $1.2 million, or
75.0%, to $2.8 million for the ten months ended December 31, 1997 from $1.6
million for the twelve months ended February 28, 1997 while pre-tax income
decreased $4.7 million. Excluding the effect of the $7.0 million of
non-deductible compensation charge discussed above, the effective tax rate for
the ten months ended December 31, 1997 was 44.2% compared to 40.2% for the
twelve months ended February 28, 1997, resulting primarily from the non-
deductible goodwill amortization of $0.6 million in the ten months ended
December 31, 1997.
COMBINED TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO COMBINED TWELVE
MONTHS ENDED DECEMBER 31, 1997
Revenues. Combined revenues increased $97.9 million, or 10.0%, to $1,076.4
million for the twelve months ended December 31, 1998 from $978.5 million for
the twelve months ended December 31, 1997. The increase in combined revenues was
attributable to the following:
- $58.9 million increase, or 8.2%, relates to companies that provide
commercial/industrial services primarily in the Seattle/Portland, Dallas,
Baltimore, Salt Lake City, and Fort Lauderdale markets partially offset
by economic softening in the Richmond, Virginia market,
- $39.6 million increase, or 15.5%, relates to companies that provide
residential services. Of this increase, $26.1 million relates to
companies that primarily provide new installation services due to an
increase in new home starts in the markets they serve and $13.6 million
relates to companies that primarily provide maintenance, repair and
replacement services due to favorable weather patterns in the markets
they serve, and
- $0.6 million reduction related to two companies providing products and
services outside of those performed by GroupMAC's two primary operating
segments.
Gross Profit. Combined gross profit increased $20.9 million, or 9.4%, to
$242.6 million for the twelve months ended December 31, 1998 from $221.7 million
for the twelve months ended December 31, 1997. The increase in combined gross
profit was primarily attributable to the increase in combined revenues described
above. Gross profit margin decreased to 22.5% for the twelve month period ended
December 31, 1998 compared to 22.7% for the twelve months ended December 31,
1997. The slight net decrease in gross profit margin was primarily the result of
economic softening in the Richmond, Virginia market offset by the following:
- Overall margin improvement at the companies that primarily provide
residential new installation services as these companies have operated
near full capacity to accommodate housing start demand in the geographic
markets they serve,
- A slightly higher mix of higher margin maintenance, repair and
replacement business in the residential sector from the favorable weather
patterns discussed above, and
18
<PAGE> 21
- Materials purchases savings experienced in the current year.
YEAR 2000
Background. The year 2000 issue refers to the inability of certain date
sensitive computer chips, software and systems to recognize a two-digit date
field as belonging to the 21st century. Many computer software programs, as well
as certain hardware and equipment containing date sensitive data, were
structured to utilize a two-digit date field. Accordingly, these programs may
not be able to properly recognize dates in the year 2000 and later, which could
result in significant system and equipment failures. This is a significant issue
for most if not all companies, with far reaching implications, some of which
cannot be anticipated or predicted with any degree of certainty. GroupMAC
recognizes that it must take action to ensure that its operation will not be
adversely impacted by Year 2000 software failures.
GroupMAC's State of Readiness. We have completed an initial systems survey
of each business acquired. That survey revealed that several of our core
business applications possess Year 2000 problems. However, none of these
problems are expected to be material to our individual operating companies or,
in the aggregate, to GroupMAC because the 59 operating companies acquired by
GroupMAC utilize approximately 34 different operating and accounting systems. As
further discussed herein, GroupMAC has not migrated its operating companies to a
common system platform. Accordingly, even if our Year 2000 evaluation fails to
detect or correct an issue at one or more of the operating companies, it would
not have a material impact on the other companies in the consolidated group.
GroupMAC's Year 2000 plan includes the following phases:
Evaluation
GroupMAC retained an outside consulting firm to evaluate more thoroughly
the extent of the problem and to assist us with cost estimates and in preparing
an action plan to address the issues in a timely manner. This phase began in
early July 1998 and included all companies from the initial system survey and
those acquired through the first quarter of 1999. The evaluation phase has been
completed at a cost of approximately $115,000. Additionally, GroupMAC has
engaged an outside consulting firm to evaluate and estimate the impact of Year
2000 problems on potential future acquisitions as part of the due diligence
process. These evaluations have been performed for all acquisitions to date and
are included in the above cost estimates.
Upgrading and Testing
During the evaluation phase, we determined that most systems in use by
GroupMAC could be upgraded to eliminate Year 2000 problems. We estimate that the
cost of bringing the evaluated systems into compliance is between $140,000 and
$195,000. The estimate includes between $110,000 and $160,000 for software
upgrades and between $30,000 and $35,000 for implementation and testing. These
costs are expected to be incurred during the first three quarters of 1999.
GroupMAC will expense substantially all of these costs and will fund them
through cash flow from operations.
Management has implemented tracking mechanisms to ensure upgrades are
completed in a timely manner. Since each individual company has different
systems in use today, the implementation schedule varies for each company and
the Year 2000 plan will be modified as events warrant. All upgrading and testing
is scheduled to be completed by September 1999. It is not anticipated that
management involvement or the use of capital resources in solving Year 2000
problems will have a substantial impact on other information technology
projects.
Independent of its Year 2000 activities discussed in the previous
paragraph, GroupMAC continues to develop a common information system throughout
the organization for its overall information needs that will be free of any Year
2000 limitations. While GroupMAC as a whole is not dependent on the
implementation of the common system to remedy its Year 2000 problem, one of the
acquired businesses requires a completely new system to solve its Year 2000
issues. This company (with annual revenues of approximately $8.0 million) is
expected to be one of the first to be implemented on the common system platform
discussed herein.
19
<PAGE> 22
GroupMAC expects to implement the common information system at the affected
company during the third quarter of 1999. General rollout of the common
information system will follow promptly thereafter.
We are evaluating the effect of the Year 2000 problem on our most
significant customers and suppliers, and thus indirectly on GroupMAC. This
evaluation includes an ongoing process of contacting customers and suppliers
whose systems have, or may have, an effect on the way GroupMAC conducts
business. We are attempting to inventory and assess the Year 2000 readiness and
compatibility of our material customers and suppliers through the completion of
survey questionnaires. GroupMAC is currently reviewing survey questionnaires
received to date and we expect to complete the analysis of our customers' and
suppliers' systems by September 1999. GroupMAC does not have control of these
suppliers and customers. While we will work diligently to coordinate with our
suppliers and customers, there can be no assurance they will complete their
efforts prior to January 1, 2000. There are no individual customers who will
have a material impact on our revenues should they fail to complete their Year
2000 efforts. Additionally, GroupMAC has alternative vendors that can be relied
on should a current vendor fail in its Year 2000 preparations.
Embedded Technology. GroupMAC has focused its assessments to date on its
information technology systems. These assessments indicate that, due to the
nature of our operations, the non-information technology systems (i.e. embedded
technology such as microcontrollers) do not represent a significant area of risk
relative to Year 2000 readiness. GroupMAC's operations do not include capital
intensive equipment with embedded microcontrollers.
Risks. While GroupMAC does not anticipate any difficulties achieving the
upgrading and testing schedule described above, there is a risk that one or more
of our companies will not meet the current schedule. If this occurs, the
affected company may have to install a system similar to that being utilized at
one of the other operating companies until the problem is remedied. Management
believes that, if necessary, this could be accomplished without meaningful
business interruption and/or significant cost to GroupMAC. Also, there is an
unlikely scenario where any of our larger national suppliers would have Year
2000 related constraints causing GroupMAC to shift product orders to other
readily available suppliers.
Contingency Plan. GroupMAC has not implemented a Year 2000 contingency
plan. As explained above, we have initiated action to identify and resolve Year
2000 problems. GroupMAC intends to develop and implement a contingency plan in
the event that our present course of action to solve the Year 2000 problem
should fall behind schedule.
Summary. The following table summarizes the status and historical/estimated
completion dates of the various stages of GroupMAC's Year 2000 plan:
<TABLE>
<CAPTION>
HISTORICAL
OR ESTIMATED
PHASE OF PROJECT STATUS COMPLETION DATE
- ---------------- ------ ---------------
<S> <C> <C>
Initial System Survey.................................... Complete February 1999
Evaluation............................................... Complete February 1999
Upgrade & Testing........................................ In Process September 1999
Customer/Supplier Evaluation............................. In Process September 1999
Contingency Plan......................................... If Necessary November 1999
</TABLE>
SEASONALITY AND CYCLICALITY
The HVAC industry is subject to seasonal variations. Specifically, the
demand for new installations is generally lower during the winter months due to
reduced construction activities during inclement weather and less use of air
conditioning during the colder months. Demand for HVAC services is generally
higher in the second and third quarters. Accordingly, GroupMAC expects its
revenues and operating results generally will be lower in the first and, to a
lesser degree, fourth quarters. Historically, the construction industry has been
highly cyclical. As a result, our volume of business may be adversely affected
by declines in new installation projects in various geographic regions of the
United States.
20
<PAGE> 23
A substantial portion of our business involves installation of mechanical
and electrical systems in newly constructed residences and commercial/industrial
facilities. Our revenues from new installation services in the residential
market is dependent upon the level of housing starts in the areas in which we
operate. The housing industry is cyclical, and our revenues from residential new
installation will be affected by the factors that affect the housing industry.
These factors include changes in employment and income levels, the availability
and cost of financing for new home buyers and general economic conditions. The
level of new commercial/industrial installation services is also affected by
changes in economic conditions and interest rates. General downturns in housing
starts or new commercial/industrial construction in the areas in which we
operate could have a material adverse effect on our business, including its
financial condition and results of operations.
INFLATION
Inflation did not have a significant effect on the results of operations
for the year ended December 31, 1998, the ten months ended December 31, 1997 or
the year ended February 28, 1997.
LIQUIDITY AND CAPITAL RESOURCES
During November and December 1997, GroupMAC completed the IPO involving the
sale of 8.3 million shares of common stock at a price to the public of $14.00
per share. The net proceeds from the IPO (after deducting underwriting discounts
and commissions and offering expenses) were approximately $103.6 million. Of
this amount, $29.8 million was used to pay the cash portion of the closing
consideration relating to the acquisitions of 14 businesses, $42.6 million to
repay corporate indebtedness and debt assumed in connection with the Founding
Companies, $19.3 million to retire all of the then outstanding preferred stock
and $11.9 million for general corporate purposes including working capital and
final consideration settlements related to previous acquisitions.
Historically, GroupMAC has financed its operations and growth with
internally generated working capital and borrowings from commercial banks or
other lenders. These borrowings are generally secured by the accounts receivable
and inventory of GroupMAC.
On December 11, 1997, GroupMAC entered into a three year agreement with
Texas Commerce Bank National Association (now Chase Bank of Texas, National
Association), as Agent, and four other banks to provide a revolving credit
facility (the "Credit Agreement") with an initial borrowing capacity of up to
$75 million. On June 12, 1998, we amended and restated the Credit Agreement to
increase our borrowing capacity from $75 million to $125 million. On October 15,
1998, GroupMAC amended and restated the Credit Agreement to increase our
borrowing capacity from $125 million to $230 million. Debt under the Credit
Agreement bears interest at variable rates. Under the Credit Agreement, GroupMAC
is required to maintain (1) a minimum Fixed Charge Coverage Ratio; (2) a maximum
ratio of total indebtedness for borrowed money to capitalization (as defined in
the Credit Agreement); (3) a maximum ratio of senior debt to pro forma earnings
before interest, taxes, depreciation and amortization; (4) a maximum amount of
total indebtedness to EBITDA; (5) a minimum amount of Consolidated Net Worth (as
defined in the Credit Agreement) and (6) a maximum amount of Capital
Expenditures in relation to Consolidated Net Worth. At December 31, 1998, we
were in compliance with those covenants. The Credit Agreement matures on October
13, 2001. To date, neither the terms of the Credit Agreement and the indenture
pursuant to which the Notes referred to below were issued, nor the debt
represented thereby, have materially restricted our ability to finance future
operations or capital needs or to respond to changes in our business or
competitive activity.
In January 1999, GroupMAC completed a private placement offering (the
"Offering") of $130 million of unsecured senior subordinated notes (the "Notes")
bearing interest at 9.75% and maturing in January 2009. The net proceeds of the
Offering were used to repay indebtedness incurred under the Credit Agreement.
Under a registration rights agreement executed as part of the Offering, the
Company will file a registration statement within 90 days after the issue date
of the Notes enabling holders of the Notes to exchange the privately placed
Notes for publicly registered notes with identical terms. The Company is
required to use all reasonable efforts to cause the registration statement to
become effective within 150 days after the issue date of the Notes and to
consummate the exchange offer within 180 days after the issue date of
21
<PAGE> 24
the Notes. If the Company cannot effect an exchange offer within the time
periods listed above and in other certain circumstances, management will use all
reasonable efforts to file a shelf registration statement for the resale of the
Notes. If the Company is unable to comply with these obligations under the
registration rights agreement, the interest rate on the Notes will increase
under certain circumstances.
The Notes are guaranteed by all of the Company's current and future U.S.
subsidiaries other than "Unrestricted Subsidiaries" (as defined in the indenture
governing the Notes). As of the closing of the Offering, there are no
"Unrestricted Subsidiaries." These guarantees are full, unconditional and joint
and several.
The Company entered into an agreement to lock in the ten year U.S. Treasury
rate used to price the offering of the Notes. The Company locked in $100 million
at 5.5212%, which management believes is an attractive long-term base rate. This
agreement expired on January 31, 1999, and was settled on that date based upon
the ten year Treasury yield of 4.648%, resulting in an additional pre-tax
financing cost of approximately $6.9 million. In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 80, Accounting for Futures
Contracts, this agreement qualifies as a hedge and was recognized as deferred
financing costs.
The Company's largest need for capital in the past has been to fund
acquisitions. Historically, the Company has generally paid for its acquisitions
with cash and common stock in approximately equal amounts. The Company intends
to continue to use its common stock as a component of the consideration that it
pays for businesses to be acquired as long as the acquisition is immediately
accretive to its earnings. As the price of the Company's common stock has
declined, the Company has reduced the price it is willing to pay for
acquisitions and in some cases anticipates increasing the cash component of the
purchase price. If the price of the Company's common stock continues at its
present level or declines further, then the Company believes that the number of
companies willing to be acquired at an accretive price may be reduced, which
could adversely impact the growth of the Company. Furthermore, if the Company
pays a greater proportion of the consideration of future acquisitions in cash,
then it will exhaust its available credit faster than would otherwise be the
case and would increase its ratio of debt to total capitalization.
GroupMAC's primary requirements for capital (other than those related to
acquisitions) consist of purchasing vehicles, inventory and supplies used in the
operation of the business. During the year ended December 31, 1998 and the ten
months ended December 31, 1997, capital expenditures aggregated $9.3 million and
$2.0 million, respectively. GroupMAC anticipates that its cash flow from
operations and existing credit facilities will provide cash in excess of our
normal working capital needs, debt service requirements and planned capital
expenditures for property and equipment.
For the year ended December 31, 1998, the ten months ended December 31,
1997 and the year ended February 28, 1997, we generated $0.9 million, $4.4
million and $3.7 million in cash from operating activities, respectively. For
the year ended December 31, 1998, net income, depreciation, amortization,
deferred taxes and non-cash compensation generated $43.5 million and changes in
asset and liability accounts utilized a net $42.6 million. For the ten months
ended December 31, 1997, net loss, depreciation, amortization, deferred taxes
and non-cash compensation generated $7.5 million and changes in asset and
liability accounts utilized a net $3.1 million. For the year ended February 28,
1997, net income, depreciation, amortization and deferred taxes generated $4.9
million, and changes in asset and liability accounts utilized a net $1.2
million.
For the year ended December 31, 1998, GroupMAC used $189.2 million in
investing activities. These activities principally consisted of $178.5 million
for acquisitions and $9.3 million for capital expenditures. For the ten months
ended December 31, 1997, we used $37.9 million in investing activities. These
activities principally consisted of $35.8 million for acquisitions and $2.0
million for capital expenditures. The cash impact of investing activities for
the year ended February 28, 1997 was not significant.
For the year ended December 31, 1998, GroupMAC generated $165.0 million in
cash from its financing activities. These activities principally consisted of
proceeds from long-term debt of $884.5 million and payments of long-term debt of
$719.5 million. For the ten months ended December 31, 1997, GroupMAC generated
$54.9 million in cash from its financing activities. These activities
principally consisted of issuance of common stock for $109.7 million and
proceeds from long-term debt of $32.5 million less distributions to
22
<PAGE> 25
shareholders of $20.4 million, payments of long-term debt of $47.7 million and
retirement of preferred stock of $19.3 million. The cash impact of financing
activities for the year ended February 28, 1997 was not significant.
Since the IPO, GroupMAC registered fourteen million shares of common stock
under the Securities Act of 1933, as amended, for its use in connection with
future acquisitions. After their issuance, those registered shares generally are
freely tradable by persons not affiliated with GroupMAC unless we contractually
restrict the resale, which we generally do. Substantially all of the shares of
common stock issued in connection with the acquisition of the Founding Companies
were not registered under the Securities Act and were also subject to
contractual restrictions on transfer. However, the holders of these shares are
permitted to transfer a limited amount of these shares during 1999.
During the first quarter of 1999, GroupMAC completed the acquisition of
three commercial/industrial platform companies that will be accounted for as
purchases. The combined annual revenues of these acquired companies were
approximately $165.5 million. Total consideration paid included cash payments of
$35.6 million, $1.6 million of junior subordinated notes, 2.1 million shares of
common stock and total debt assumed of $13.8 million. GroupMAC financed the cash
portion of the purchase price using; (1) cash borrowed under the Credit
Agreement and (2) internally generated funds. As of March 26, 1999, the funds
available through the Credit Agreement totaled $73.5 million, subject to the
maintenance of financial ratios and covenants.
GroupMAC intends to aggressively pursue acquisition opportunities.
Management believes that funds provided by operations, together with funds
available under the Credit Agreement and other sources, will be adequate to meet
our anticipated requirements for acquisitions. Estimates as to working capital
needs and other expenditures may be materially affected if the foregoing sources
are not available or do not otherwise provide sufficient funds to meet our
obligations.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively in fiscal 1999. The impact of this new standard is not expected to
have a significant effect on our financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective in fiscal 1999. The statement requires
capitalized costs related to start-up activities to be expensed as a cumulative
effect of a change in accounting principle when the statement is adopted. The
adoption of this new standard will not have a significant effect on GroupMAC's
financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes new accounting and reporting standards requiring that all
derivative instruments (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. This statement is effective for all fiscal years beginning after
June 15, 1999. Under present operations, this statement will have no impact on
our financial position or results of operations.
23
<PAGE> 26
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This document includes forward-looking statements. Forward-looking
statements can be identified by the use of future tense or other forward-looking
terms such as "may," "intend," "will," "expect," "anticipate," "plan,"
"management believes," "estimate," "continue," "should," "strategy," or
"position," or the negatives of those terms or other variations on 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. The Company has based these
forward-looking statements on management's current expectations and projections
about future events. Although the Company believes that its expectations and
projections are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. These forward-looking statements are subject to
risks, uncertainties and assumptions about the Company including among other
things:
- the Company's reliance on acquisitions for growth,
- its plan to use common stock as consideration for future acquisitions,
and the effect of a decline in the stock price on that plan,
- the Company's ability to integrate acquired businesses,
- the reliance on commercial and residential new construction industries,
- anticipated trends and conditions in the Company's industry, including
future consolidation,
- the effect of moderate weather patterns on the demand for the Company's
services, and
- the Company's ability to compete in local markets.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The table below provides information about GroupMAC's market sensitive
financial instruments and constitutes a "forward-looking statement." Our major
market risk exposure is changing interest rates. All items described are
non-trading and are stated in U.S. dollars (in thousands).
<TABLE>
<CAPTION>
FAIR VALUE
AT DECEMBER 31,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1998
-------- -------- -------- -------- -------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt...... $ 12,959 $ -- $ -- $ -- $ 16,000 $-- $ 28,959 $ 28,959
Average rate....... 7.12% -- -- -- 6.00% -- 6.50%
Credit Agreement..... $ -- $ -- $195,000 $ -- $ -- $-- $195,000 $195,000
Average rate....... -- -- (a) -- -- -- (a)
</TABLE>
- ---------------
(a) The Credit Agreement borrowings bear interest at a rate per annum, at the
Company's option, of either (1) the Alternate Base Rate or (2) the
Eurodollar Rate. The Alternate Base Rate is equal to the greater of the
Federal Funds Effective Rate plus 0.5% or the Prime Rate plus a Margin
depending on the ratio of indebtedness for borrowed money to EBITDA (with
all capitalized terms as defined in the Credit Agreement). The Eurodollar
Rate is the rate defined in the Credit Agreement plus a Margin depending on
the ratio of indebtedness for borrowed money to EBITDA. At December 31,
1998, the weighted average interest rate in effect for the Credit Agreement
borrowings was 7.075%.
24
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
Independent Auditors' Report................................ 26
Consolidated Balance Sheets................................. 27
Consolidated Statements of Operations....................... 28
Consolidated Statements of Shareholders' Equity............. 29
Consolidated Statements of Cash Flows....................... 30
Notes to Consolidated Financial Statements.................. 31
SEPARATE FINANCIAL STATEMENTS OF GROUP MAINTENANCE AMERICA
CORP. FROM INCEPTION THROUGH DATE OF REVERSE ACQUISITION
Independent Auditors' Report................................ 47
Balance Sheets.............................................. 48
Statements of Operations.................................... 49
Statements of Shareholders' Equity(Deficit)................. 50
Statements of Cash Flows.................................... 51
Notes to Financial Statements............................... 52
</TABLE>
25
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Group Maintenance America Corp.:
We have audited the accompanying consolidated balance sheets of Group
Maintenance America Corp. and Subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1998, the ten months ended December 31,
1997 and the year ended February 28, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Group
Maintenance America Corp. and Subsidiaries as of December 31, 1998 and 1997 and
the results of their operations and their cash flows for the year ended December
31, 1998, the ten months ended December 31, 1997 and the year ended February 28,
1997, in conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 23, 1999
26
<PAGE> 29
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 2,371 $ 25,681
Accounts receivable, net of allowance for doubtful
accounts of $5,355 and $1,825, respectively............ 187,251 45,516
Inventories............................................... 17,843 8,834
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 26,533 3,116
Prepaid expenses and other current assets................. 6,134 1,013
Deferred tax assets....................................... 7,579 1,647
Refundable income taxes................................... 3,341 --
-------- --------
Total current assets.............................. 251,052 85,807
Property and Equipment, net................................. 39,192 11,312
Goodwill, net of accumulated amortization of $6,593 and
$633, respectively........................................ 398,714 84,533
Deferred Tax Assets......................................... -- 4,739
Refundable Income Taxes..................................... -- 4,529
Other Long-Term Assets...................................... 12,123 1,767
-------- --------
Total assets...................................... $701,081 $192,687
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings and current maturities of long-term
debt................................................... $ 12,959 $ 2,769
Accounts payable and accrued expenses..................... 99,205 28,519
Due to related parties.................................... 14,961 3,358
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 27,830 4,737
Deferred service contract revenue......................... 4,429 3,305
Income taxes payable...................................... 2,028 31
Other current liabilities................................. 3,199 2,610
-------- --------
Total current liabilities......................... 164,611 45,329
Revolving Credit Facility................................... 195,000 169
Junior Subordinated Notes................................... 16,000 --
Deferred Tax Liabilities.................................... 733 --
Due to Related Parties...................................... -- 9,745
Other Long-Term Liabilities................................. 8,808 791
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $1.00 par value; 50,000 shares
authorized; none issued and outstanding................ -- --
Common stock, $0.001 par value; 100,000 shares authorized;
33,154 and 20,629 shares issued and outstanding,
respectively........................................... 33 21
Additional paid-in capital................................ 322,478 169,143
Retained deficit.......................................... (6,582) (32,511)
-------- --------
Total shareholders' equity........................ 315,929 136,653
-------- --------
Total liabilities and shareholders' equity........ $701,081 $192,687
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
27
<PAGE> 30
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues................................................ $761,541 $138,479 $81,880
Cost of Services........................................ 585,396 101,762 58,506
-------- -------- -------
Gross Profit....................................... 176,145 36,717 23,374
Selling, General and Administrative Expenses............ 117,951 28,643 19,811
Amortization of Goodwill................................ 5,960 633 --
Compensation Expense From Reverse Acquisition and
Issuance of Management Shares and Stock Options....... 168 7,219 --
-------- -------- -------
Income from operations............................. 52,066 222 3,563
Other Income (Expense):
Interest expense...................................... (6,595) (1,542) (82)
Interest income....................................... 407 398 171
Other................................................. 377 112 256
-------- -------- -------
Income (loss) before income tax provision..... 46,255 (810) 3,908
Income Tax Provision.................................... 20,326 2,832 1,572
-------- -------- -------
Net Income (Loss)....................................... $ 25,929 $ (3,642) $ 2,336
======== ======== =======
Basic Earnings (Loss) Per Share:
Earnings (Loss) Per Share............................. $ 0.94 $ (0.34) $ 0.45
======== ======== =======
Weighted Average Shares Outstanding................... 27,544 10,800 5,172
======== ======== =======
Diluted Earnings (Loss) Per Share:
Earnings (Loss) Per Share............................. $ 0.93 $ (0.34) $ 0.45
======== ======== =======
Weighted Average Shares Outstanding................... 27,948 10,800 5,172
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 31
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
--------------- PAID-IN EARNINGS TREASURY SUBSCRIPTIONS SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) STOCK RECEIVABLE EQUITY
------ ------ ---------- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 29, 1996.............. 5,692 $ 6 $ 2,701 $ 3,667 $ -- $ -- $ 6,374
Purchases of stock.................... -- -- -- -- (2,112) -- (2,112)
Repurchase of warrants................ -- -- -- (600) -- -- (600)
Cancellation of treasury stock........ (1,040) (1) (55) (2,056) 2,112 -- --
Distributions to shareholders......... -- -- -- (7) -- -- (7)
Net income............................ -- -- -- 2,336 -- -- 2,336
------ --- -------- -------- ------- ------- --------
BALANCE, February 28, 1997.............. 4,652 5 2,646 3,340 -- -- 5,991
Purchases of acquired companies....... 5,612 6 58,781 -- -- (6,153) 52,634
Public offering, net of offering
costs............................... 8,340 8 103,543 -- -- -- 103,551
Compensation expense from issuance of
management shares and stock
options............................. 5 -- 241 -- -- -- 241
Preferred stock issued to Airtron
shareholders in reverse
acquisition......................... -- -- -- (14,873) -- -- (14,873)
Distribution to Airtron shareholders
in reverse acquisition.............. -- -- -- (17,336) -- -- (17,336)
Shares issued under subscription
agreement........................... 2,000 2 -- -- -- 6,153 6,155
Exercise of stock options............. 20 -- 61 -- -- -- 61
Common stock to be issued in
acquisitions........................ -- -- 3,871 -- -- -- 3,871
Net loss.............................. -- -- -- (3,642) -- -- (3,642)
------ --- -------- -------- ------- ------- --------
BALANCE, December 31, 1997.............. 20,629 21 169,143 (32,511) -- -- 136,653
Purchases of acquired companies....... 12,455 12 148,762 -- -- -- 148,774
Debenture conversion.................. 68 -- 820 -- -- -- 820
Compensation expense from issuance of
management shares and stock
options............................. -- -- 168 -- -- -- 168
Exercise of stock options............. 2 -- 10 -- -- -- 10
Common stock to be issued in
acquisitions........................ -- -- 3,575 -- -- -- 3,575
Net income............................ -- -- -- 25,929 -- -- 25,929
------ --- -------- -------- ------- ------- --------
BALANCE, December 31, 1998.............. 33,154 $33 $322,478 $ (6,582) $ -- $ -- $315,929
====== === ======== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 32
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)..................................... $ 25,929 $ (3,642) $ 2,336
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 13,863 1,413 208
Gain from sale of property and equipment........... (26) (32) (224)
Deferred income taxes.............................. 3,499 2,482 2,336
Non-cash compensation expense...................... 168 7,219 --
Changes in operating assets and liabilities, net of
effect of acquisitions accounted for as
purchases:
(Increase) decrease in --
Accounts receivable........................... (27,316) (2,849) (402)
Inventories................................... (1,718) (656) 332
Costs and estimated earnings in excess of
billings on uncompleted contracts........... (6,950) 503 23
Prepaid expenses and other current assets..... (3,404) 46 (8)
Refundable income taxes....................... 1,319 1,665 (3,235)
Other long-term assets........................ (780) (299) --
Increase (decrease) in --
Accounts payable.............................. 3,614 (918) (77)
Accrued expenses.............................. (2,918) (4,598) 2,534
Due to related parties........................ (5,469) (732) --
Billings in excess of costs and estimated
earnings on uncompleted contracts........... 3,885 1,572 (86)
Deferred service contract revenue............. (502) 94 6
Income taxes payable.......................... 519 1,586 (296)
Other current liabilities..................... (2,282) 1,442 --
Compensation and benefits payable............. -- (8) 255
Other long-term liabilities................... (580) 120 --
--------- -------- -------
Net cash provided by operating activities... 851 4,408 3,702
--------- -------- -------
Cash Flows From Investing Activities:
Cash paid for acquisitions, net of cash acquired of
$13,176 and $5,263, respectively................... (178,542) (35,767) --
Deferred acquisition costs............................ (1,573) (246) --
Purchases of property and equipment................... (9,292) (2,017) (182)
Proceeds from sale of property and equipment.......... 199 83 296
Proceeds from note receivable......................... -- -- 156
--------- -------- -------
Net cash provided by (used in) investing
activities............................... (189,208) (37,947) 270
--------- -------- -------
Cash Flows From Financing Activities:
Purchase of common stock.............................. -- -- (787)
Retirement of preferred stock......................... -- (19,277) --
Repurchase of warrants................................ -- -- (539)
Proceeds from long-term debt.......................... 884,515 32,500 --
Payments of long-term debt............................ (719,478) (47,742) (35)
Payments of other long-term obligations............... -- -- (39)
Issuance of common stock.............................. -- 109,706 --
Exercise of stock options............................. 10 61 --
Distributions to shareholders prior to initial public
offering........................................... -- (20,367) (7)
--------- -------- -------
Net cash provided by (used in) financing
activities............................... 165,047 54,881 (1,407)
--------- -------- -------
Net Increase (Decrease) In Cash and Cash Equivalents.... (23,310) 21,342 2,565
Cash and Cash Equivalents, beginning of period.......... 25,681 4,339 1,774
--------- -------- -------
Cash and Cash Equivalents, end of period................ $ 2,371 $ 25,681 $ 4,339
========= ======== =======
Supplemental Disclosures of Cash Flow Information:
Interest Paid......................................... $ 5,163 $ 1,470 $ --
Income Taxes Paid..................................... $ 16,869 $ -- $ 2,586
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 33
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Group Maintenance America Corp. ("GroupMAC") was incorporated as a Texas
corporation to build a national company providing mechanical and electrical
services in the commercial, industrial and residential markets.
Effective April 30, 1997, GroupMAC entered into an Agreement and Plan of
Exchange (the "Airtron Agreement") with Airtron, Inc. ("Airtron") and certain of
its shareholders, pursuant to which $20.4 million in cash, 14.9 million shares
of GroupMAC preferred stock and 4.7 million shares of GroupMAC common stock were
issued to shareholders of Airtron in exchange for all of the then outstanding
shares of Airtron. Although for legal purposes Airtron was acquired by GroupMAC,
for accounting purposes the transaction was accounted for as a reverse
acquisition, as if Airtron acquired GroupMAC, due to the fact that the former
shareholders of Airtron then owned a majority of GroupMAC common stock. In
connection with the purchase of GroupMAC, the consideration paid to the
shareholders of GroupMAC was recorded as non-recurring compensation expense of
$7.0 million in the accompanying consolidated statements of operations for the
ten months ended December 31, 1997. The consolidated financial statements
presented herein for the periods prior to the effective date of the acquisition
only include the accounts of Airtron. The consolidated statements of
shareholders' equity have been converted from Airtron's capital structure to
GroupMAC's capital structure to reflect the exchange of shares pursuant to the
Airtron Agreement. The cash and redeemable preferred stock paid to the Airtron
shareholders, net of existing liabilities to former shareholders, have been
treated as a distribution to the Airtron shareholders. The consolidated group of
companies are collectively referred to herein as GroupMAC and Subsidiaries or
the "Company." All significant intercompany balances have been eliminated.
Concurrent with the initial public offering of GroupMAC's common stock (the
"IPO"), the Company changed its fiscal year end from February 28 to December 31.
Airtron was incorporated in 1970 as a Delaware corporation. Airtron
installs and services brand name heating and air conditioning equipment for
residential and commercial customers located in Ohio, Indiana, Kansas, Kentucky,
Florida and Texas.
In June and July 1997, the Company acquired, in separate transactions, 10
additional companies through a combination of cash, preferred stock, common
stock and warrants to purchase shares of common stock. During the fourth quarter
of 1997, the Company acquired, concurrently with the IPO, 13 additional
companies through a combination of cash and common stock. During 1998, the
Company acquired, in separate transactions, 39 additional businesses through a
combination of cash, notes payable, junior subordinated debt, common stock,
options to purchase common stock and warrants to purchase common stock. The
Company accounted for these acquisitions as purchase business combinations, with
the results of operations included in the Company's consolidated financial
statements from the effective date of acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues from work orders are recognized as services are performed.
Revenues from service and maintenance contracts are recognized over the life of
contracts. Revenues from construction contracts are recognized on a percentage
of completion basis using the cost-to-cost method. Provisions for estimated
losses
31
<PAGE> 34
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated
profitability may result in revisions to costs and revenues and are recognized
in the period in which the revisions are determined.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Inventories
Inventories consist primarily of purchased materials and supplies. The
inventory is valued at the lower of cost or market, with cost determined on a
first-in, first-out ("FIFO") basis.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
principally using the straight-line method over the useful lives of the assets.
Leasehold improvements are amortized over the shorter of the remaining lease
term or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property or equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the
fair value of net assets acquired and is amortized on a straight-line basis over
a period of 40 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows compared to
the carrying value of goodwill. The Company will reassess the recoverability of
goodwill if estimated future operating cash flows are not achieved.
Deferred Financing Costs
Deferred financing costs related to the Company's revolving credit
agreement and senior subordinated note offering completed subsequent to December
31, 1998 (see Note 7) are included in other noncurrent assets and amortized to
interest expense over the scheduled maturity of the debt.
Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, encourages but does not require companies to
record compensation expense for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations. Accordingly, compensation expense for stock options is
measured as the excess, if any, of the quoted market price of GroupMAC's common
stock at the date of the grant over the amount an employee must pay to acquire
the common stock.
32
<PAGE> 35
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Warranty Costs
The Company generally warrants all of its work for a period of one year
from the date of installation. A provision for estimated warranty costs is made
at the time a product is sold or service is rendered.
Income Taxes
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Earnings Per Share
Weighted average shares outstanding for each of the periods presented were
as follows (in thousands):
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Shares issued in the acquisition of Airtron...... 4,652 4,652 5,172
Shares issued, excluding acquisitions and the
IPO............................................ 3,637 3,628 --
Shares issued for 1997 acquisitions.............. 4,733 1,259 --
Shares issued for 1998 acquisitions.............. 6,182 -- --
Shares issued in the IPO......................... 8,340 1,261 --
------ ------ -----
Weighted average shares outstanding -- Basic... 27,544 10,800 5,172
------ ------ -----
Incremental effect of options and warrants
outstanding.................................... 404 -- --
------ ------ -----
Weighted average shares
outstanding -- Diluted...................... 27,948 10,800 5,172
====== ====== =====
</TABLE>
Basic earnings per share have been calculated by dividing net income (loss)
by the weighted average number of common shares outstanding. Diluted earnings
per share are computed by dividing net income by the weighted average number of
common shares outstanding plus potentially dilutive common shares.
Because the Company reported a net loss for the ten months ended December
31, 1997, the potentially dilutive common shares (including warrants and stock
options discussed in Note 9) had an anti-dilutive effect on earnings per share.
As of December 31, 1998, options to purchase 0.4 million shares of common stock
and warrants to purchase 1.3 million shares of common stock were not included in
the calculation of diluted earnings per share because the options' or warrants'
exercise price was greater than the average market price of the common shares.
Reclassifications
Certain amounts recorded in the year ended February 28, 1997 and the ten
months ended December 31, 1997 have been reclassified to conform with the
current year presentation.
3. BUSINESS COMBINATIONS
During 1997, the Company acquired 23 companies for approximately $44.2
million in cash, 4.5 million shares of common stock, 4.4 million shares of
redeemable preferred stock (which were retired in connection
33
<PAGE> 36
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the IPO), options to acquire 0.1 million shares of common stock and
warrants to purchase 0.5 million shares of common stock. Of the total recorded
consideration, approximately $3.2 million of cash and 0.5 million shares of
common stock were due to former owners at December 31, 1997. During 1998, a
reduction of approximately $1.0 million in cash and 0.1 million shares of common
stock was recorded to reflect final settlements on certain 1997 acquisitions. In
addition, payments of approximately $1.9 million in cash and 0.4 million shares
of common stock were made to former shareholders on certain 1997 acquisitions.
During 1998, the Company completed the acquisition of 39 platform and five
tuck-in companies for approximately $194.8 million in cash, $4.0 million of
notes payable, $16.0 million of junior subordinated debt, 12.1 million shares of
common stock, options to purchase 0.3 million shares of common stock and
warrants to purchase 0.8 million shares of common stock. Of the total
consideration, approximately $7.2 million of cash was due to former owners at
December 31, 1998.
In conjunction with the above mentioned acquisitions, the Company assumed
$26.2 million and $16.1 million of debt for acquisitions completed in 1998 and
1997, respectively.
For the above mentioned acquisitions, the common stock, options and
warrants were valued at estimated fair value at the time of the respective
acquisition and the preferred stock was valued at its redemption value of $1 per
share. For certain 1998 acquisitions, allocation of purchase price to the assets
acquired and liabilities assumed has been initially assigned and recorded based
on preliminary estimates of fair value and may be revised as additional
information becomes available. Such additional information includes appraisals
on property, contingent liabilities of the acquired business, and working
capital settlements related to the acquisition consideration and the net assets
acquired. However, the Company does not expect any significant adjustments to
the purchase price allocations or amount of goodwill at December 31, 1998.
Several former owners of businesses acquired by the Company have the
ability to receive additional amounts of purchase price, payable in cash and
common stock contingent upon the occurrence of future events. The Company
records such contingent consideration as additional purchase price when earned.
During 1997, approximately $0.3 million in cash and 22,500 shares of common
stock were earned and due to former owners related to these contingent payments.
These amounts were paid in 1998. During 1998, approximately $5.2 million of cash
and 0.3 million shares of common stock were earned related to these contingent
payments, of which approximately $3.3 million of cash and 0.3 million shares of
common stock were due to former owners as of December 31, 1998. Additional cash
and common stock may become payable in 1999 through 2001 contingent upon future
events.
The unaudited pro forma data presented below consists of the combined
income statement data for GroupMAC and its subsidiaries as if the acquisitions
were effective on the first day of the period being reported (in thousands,
except for per share amounts).
<TABLE>
<CAPTION>
PRO FORMA DATA (UNAUDITED)
---------------------------
TWELVE MONTHS ENDED
DECEMBER 31,
---------------------------
1998 1997
------------- -----------
<S> <C> <C>
Revenues.................................................... $1,076,419 $978,480
Net income.................................................. $ 33,201 $ 27,372
Net income per share:
Basic..................................................... $ 0.99 $ 0.82
Diluted................................................... $ 0.98 $ 0.81
</TABLE>
Pro forma adjustments reflected in the amounts above include compensation
differentials, adjustment for goodwill amortization over a period of 40 years,
elimination of historical interest income and historical interest expense on
long-term debt which was repaid with the proceeds of the IPO or otherwise
retired, additional
34
<PAGE> 37
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest expense on funds borrowed for certain 1998 acquisitions, and adjustment
to the federal and state income tax provisions based on pro forma operating
results. Net income per share assumes all shares issued for the acquisitions
were outstanding for the periods presented.
4. DETAIL OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
Accounts payable, trade..................................... $59,067 $13,804
Accrued payroll costs and benefits.......................... 29,736 11,167
Warranties.................................................. 2,502 1,297
Other accrued expenses...................................... 7,900 2,251
------- -------
$99,205 $28,519
======= =======
</TABLE>
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The summary of the status of uncompleted contracts is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Costs incurred.............................................. $ 618,547 $ 85,101
Estimated earnings recognized............................... 129,912 27,268
--------- ---------
748,459 112,369
Less billings on contracts.................................. (749,756) (113,990)
--------- ---------
$ (1,297) $ (1,621)
========= =========
</TABLE>
These costs and estimated earnings on uncompleted contracts are included in
the accompanying consolidated balance sheets under the following captions (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- -------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 26,533 $ 3,116
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (27,830) (4,737)
-------- -------
$ (1,297) $(1,621)
======== =======
</TABLE>
35
<PAGE> 38
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY AND EQUIPMENT
The principal categories and estimated useful lives of property and
equipment were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED USEFUL ------------------
LIVES 1998 1997
---------------- -------- -------
<S> <C> <C> <C>
Land.............................................. -- $ 1,144 $ 218
Buildings and improvements........................ 20-30 years 6,128 677
Service and other vehicles........................ 4-7 years 17,643 5,385
Machinery and equipment........................... 5-10 years 9,491 2,873
Office equipment, furniture and fixtures.......... 5-10 years 10,842 3,761
Leasehold improvements............................ -- 4,334 1,220
-------- -------
49,582 14,134
Less accumulated depreciation..................... (10,390) (2,822)
-------- -------
$ 39,192 $11,312
======== =======
</TABLE>
7. SHORT- AND LONG-TERM DEBT
Short- and long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
-------- -------
<S> <C> <C>
Bank revolving credit agreement (7.1% at December 31,
1998)..................................................... $195,000 $ --
Junior subordinated notes payable to former shareholders of
an acquired business at 6%, due November 2003............. 16,000 --
Notes payable to former shareholders of acquired businesses
at 6%, due January 1999 and May 1998, respectively........ 4,399 2,466
Note payable to a bank at 8%, due January 1999.............. 8,000 --
Equipment installment loans payable to banks and other
lenders, interest varying from 2.9% to 10%, secured by
certain equipment, due in monthly and quarterly
installments.............................................. 495 228
Other notes payable to former shareholders at interest rates
ranging from 4.8% to 8.25%, due in monthly installments... 65 244
-------- -------
Total short- and long-term debt................... 223,959 2,938
Less short-term borrowings and current maturities........... (12,959) (2,769)
-------- -------
$211,000 $ 169
======== =======
</TABLE>
On May 2, 1997, the Company entered into a credit agreement (the "Original
Credit Agreement") with a total commitment of $35 million. The Original Credit
Agreement consisted of three portions: (i) a revolving credit agreement
providing up to $3 million for use as working capital, (ii) a $12 million
advancing acquisition line of credit to finance acquisitions, and (iii) a $20
million term loan to finance the acquisition of Airtron. Borrowings under the
Original Credit Agreement totaled $32.5 million to fund the cash portion of the
purchase prices related to Airtron and the businesses acquired in June and July
1997. The Original Credit Agreement was repaid from the proceeds of the IPO and
terminated in December 1997.
On December 11, 1997, the Company entered into a three-year revolving
credit agreement with an initial borrowing capacity of $75 million. On June 12,
1998, the Company amended and restated this facility (the "Credit Agreement") to
increase its borrowing capacity from $75 million to $125 million. On October 15,
1998, the Company amended and restated the Credit Agreement to increase its
borrowing capacity from
36
<PAGE> 39
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$125 million to $230 million. Borrowings under the Credit Agreement are
guaranteed by the Company's domestic subsidiaries, including future domestic
subsidiaries. The obligations of the Company under the Credit Agreement and the
obligations under the guarantees are secured by a first priority lien on the
accounts receivable and inventory of the domestic subsidiaries, and by a pledge
of stock of its domestic subsidiaries.
Borrowings under the Credit Agreement bear interest at a rate per annum, at
the Company's option, of either (1) the Alternate Base Rate or (2) the
Eurodollar Rate. The Alternate Base Rate is equal to the greater of the Federal
Funds Effective Rate plus 0.5% or the Prime Rate plus a Margin depending on the
ratio of indebtedness for borrowed money to EBITDA (with all capitalized terms
as defined in the Credit Agreement). The Eurodollar Rate is the rate defined in
the Credit Agreement plus a Margin depending on the ratio of indebtedness for
borrowed money to EBITDA. The Company is subject to commitment fees payable
quarterly in arrears and administration fees payable annually to the Agent until
such time as the Credit Agreement is terminated. The commitment fees range from
0.25% to 0.375% per annum with respect to the unused commitments under the
Credit Agreement depending on the ratio of indebtedness for borrowed money to
EBITDA. In addition, the Company paid various underwriting and arrangement fees
and closing costs associated with the origination and syndication of the Credit
Agreement. The unamortized portion of these expenses is included as deferred
financing costs in the accompanying consolidated balance sheets and amounted to
approximately $2.4 million and $0.7 million at December 31, 1998 and 1997,
respectively.
Under the Credit Agreement, the Company is required to maintain certain
financial covenants and tests, including: (1) a minimum Fixed Charge Coverage
Ratio; (2) a maximum ratio of total indebtedness for borrowed money to
capitalization (as defined in the Credit Agreement); (3) a maximum ratio of
senior debt to pro forma earnings before interest, taxes, depreciation and
amortization; (4) a maximum ratio of total indebtedness to EBITDA; (5) a minimum
amount of Consolidated Net Worth (as defined in the Credit Agreement) and (6) a
maximum amount of Capital Expenditures in relation to Consolidated Net Worth.
The Credit Agreement places limitations upon the amount of letters of credit
which may be drawn, investments which may be permitted, and liens which may be
granted to secure other debt. The Company may not pay any dividends or redeem,
retire or guarantee the value of shares of any class of stock in the Company
without prior approval from the lending banks, other than the purchase of
outstanding shares of the Company's stock within defined limits. At December 31,
1998, the Company was in compliance with these covenants. The Credit Agreement
matures on October 13, 2001.
In connection with the acquisition of Trinity Contractors, Inc.
("Trinity"), the Company paid cash and issued $16.0 million of subordinated
notes (the "Trinity Notes"), common stock and warrants to purchase common stock
(the "Trinity Warrants"). Unless prepaid in whole or part at any time by the
Company, the balance of the Trinity Notes was due in November 2003. Holders of
the Trinity Notes have a one-time option to require the Company to repurchase
the Trinity Notes (the "Put Option") in the event the Company issues $50,000,000
or more in principal amount of debt that is either (1) registered under the
Securities Act and sold to the public or (2) sold to qualified institutional
buyers. Subsequent to December 31, 1998 and in connection with the private
placement offering discussed below, the Put Option was exercised by
substantially all the holders of the Trinity Notes, such notes were repaid by
the Company and the related Trinity Warrants were surrendered.
The aggregate maturities of debt as of December 31, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999...................................................... $ 12,959
2000...................................................... --
2001...................................................... 195,000
2002...................................................... --
2003...................................................... 16,000
--------
$223,959
========
</TABLE>
37
<PAGE> 40
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1999, the Company completed a private placement offering (the
"Offering") of $130 million of unsecured senior subordinated notes (the "Notes")
bearing interest at 9.75% and maturing in January 2009. The net proceeds of the
offering were used to repay indebtedness incurred under the Credit Agreement.
Under a registration rights agreement executed as part of the Offering, the
Company will file a registration statement within 90 days after the issue date
of the Notes enabling holders of the Notes to exchange the privately placed
Notes for publicly registered notes with identical terms. The Company is
required to use all reasonable efforts to cause the registration statement to
become effective within 150 days after the issue date of the Notes and to
consummate the exchange offer within 180 days after the issue date of the Notes.
If the Company cannot effect an exchange offer within the time periods listed
above and in other certain circumstances, management will use all reasonable
efforts to file a shelf registration statement for the resale of the Notes. If
the Company is unable to comply with these obligations under the registration
rights agreement, the interest rate on the Notes will increase under certain
circumstances.
The Notes are guaranteed by all of the Company's current and future U.S.
subsidiaries other than "Unrestricted Subsidiaries" (as defined in the indenture
governing the Notes). As of the closing of the Offering, there were no
"Unrestricted Subsidiaries." These guarantees are full, unconditional and joint
and several. Accordingly, no separate financial statements of the guarantor
subsidiaries are presented because management believes this information is not
material to users of its financial statements.
The Notes pay interest semi-annually commencing July 15, 1999 and are
redeemable at the option of the Company at any time on or after January 15,
2004. Additionally, the Notes' indenture has restrictive covenants or
limitations on the payment of dividends, the distribution or redemption of
capital stock as well as limitations on the incurrence of debt and on the sale
of assets.
The Company entered into an agreement to lock in the ten year U.S. Treasury
rate used to price the offering of the Notes. The Company locked in $100 million
at 5.5212%, which management believes is an attractive long-term base rate. This
agreement expired on January 31, 1999, and was settled on that date based upon
the ten year Treasury yield of 4.648%, resulting in an additional pre-tax
financing cost of approximately $6.9 million. In accordance with SFAS No. 80,
Accounting for Futures Contracts, this agreement qualifies as a hedge and was
recognized as deferred financing costs.
8. DUE TO RELATED PARTIES
Under the Airtron Agreement, part of the cash purchase price payable to
former shareholders of Airtron relates to the tax benefits which have been or
will be received by the Company related to the exercise of previously
outstanding warrants and distributions under deferred compensation arrangements.
The Company recognized liabilities of $9.7 million at the date of acquisition as
an estimate of these amounts. This amount is paid to the former shareholders of
Airtron as the tax benefit is realized by the Company either through receipt of
net operating loss carryback claims or utilization of current deductions and net
operating loss carryforwards to reduce estimated tax payments. The $9.7 million
liability and the related refundable income taxes and deferred tax assets were
reflected as long-term in the December 31, 1997 balance sheet as such tax
benefits were not expected to be realized during 1998. During 1998, the Company
was able to realize certain tax benefits under the Airtron Agreement and
correspondingly paid $5.3 million of the original liability to the former
shareholders. As of December 31, 1998, the $4.4 million remaining liability and
the related refundable income taxes and deferred tax assets are reflected as
current assets and liabilities in the December 31, 1998 consolidated balance
sheet as all remaining tax benefits are expected to be realized during 1999.
38
<PAGE> 41
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. STOCK-BASED PLANS
GroupMAC has implemented the following stock-based programs for its
employees and others:
Stock Awards Plan -- In August 1997, GroupMAC adopted the Group Maintenance
America Corp. 1997 Stock Awards Plan which provides GroupMAC the latitude to
grant a variety of awards, such as stock options, stock appreciation rights
("SARs"), restricted stock, performance awards and phantom stock awards, to
officers, directors, key employees and other persons working for GroupMAC and
its subsidiaries. The plan requires that options and SARs be granted at not less
than the fair market value of a share of common stock on the grant date. The
plan also requires that no stock option granted shall vest in less than six
months after the grant date. GroupMAC may issue not more than 9% of the number
of total shares outstanding (determined on a quarterly basis) under the plan,
which will terminate on June 30, 2007. At December 31, 1998, options to purchase
3.0 million shares at an average exercise price of $12.86 were outstanding under
this plan.
Stock Option Plan -- In August 1997, GroupMAC adopted the Group Maintenance
America Corp. 1997 Stock Option Plan under which GroupMAC may grant options to
employees who are not eligible for awards under the Stock Awards Plan. The plan
requires that options be granted at not less than fair market value of a share
of common stock on the grant date. The plan also requires that no stock option
granted shall vest in less than six months after the grant date. GroupMAC may
issue not more that 3% of the number of shares outstanding (determined on a
quarterly basis) under this plan, which will terminate on June 30, 2007. At
December 31, 1998, options to purchase 0.7 million shares at an average exercise
price of $13.98 were outstanding under this plan.
Founder Options -- Between October 1996 and August 1997, the Company
granted to directors, senior management and other employees options to purchase
an aggregate of 388,800 shares of common stock at an exercise price of $3.08.
These options vest and expire over various periods.
During 1998, the Company issued options to purchase approximately 1.6
million shares of common stock at a weighted average exercise price of $14.32.
These options vest at a rate of 25% per year and expire at various dates during
2003.
Additionally, the Company issued options to purchase 0.3 million and 0.1
million shares of common stock in connection with acquisitions at a weighted
average exercise price of $4.09 and $11.89 in 1998 and 1997, respectively. These
options were valued at $3.4 million and $1.2 million in 1998 and 1997,
respectively, and are included in the purchase price of the acquired company.
Substantially all of these options are immediately exercisable.
As consideration for a company acquired in November 1998, the Company
issued 829,000 warrants to purchase shares of common stock at $19.30 per share.
As indicated in Note 7, substantially all of these warrants were surrendered
subsequent to year end and accordingly no value was included for these warrants
in the purchase price of the acquired company. In connection with the purchase
of one company in July 1997, the Company issued warrants to purchase 514,000
shares of common stock at $17.50 per share. These warrants were valued at $1.0
million and are included in the purchase price of the acquired company.
39
<PAGE> 42
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of stock option and warrant activity (in
thousands, except for exercise price):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE NUMBER OF
EXERCISE OPTIONS AND
PRICE WARRANTS
-------- -----------
<S> <C> <C>
Granted..................................................... $3.08 292
-----
Balance at December 31, 1996................................ 3.08 292
Granted..................................................... 3.08 69
-----
Balance at April 30, 1997, date of Airtron Agreement........ 3.08 361
Granted..................................................... 14.33 2,611
Exercised................................................... 3.08 (20)
Surrendered................................................. 3.08 (25)
-----
Balance at December 31, 1997................................ 13.07 2,927
Granted..................................................... 14.56 2,701
Exercised................................................... 5.77 (2)
Surrendered................................................. 14.54 (165)
-----
Balance at December 31, 1998................................ 13.77 5,461
=====
</TABLE>
A summary of outstanding and exercisable options and warrants as of
December 31, 1998 follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED NUMBER OF WEIGHTED EXERCISE NUMBER OF
RANGE OF AVERAGE OUTSTANDING AVERAGE PRICE OF EXERCISABLE
OPTION AND OPTION AND OPTIONS AND REMAINING EXERCISABLE OPTIONS AND
WARRANT WARRANT WARRANTS CONTRACTUAL OPTIONS AND WARRANTS
PRICES PRICES (THOUSANDS) LIFE (YEARS) WARRANTS (THOUSANDS)
- ---------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 3.08 to $ 5.00 $ 3.57 713 5.8 $ 3.69 576
$ 5.01 to $10.00 $ 6.54 38 2.8 $ 6.39 25
$10.01 to $15.00 $13.60 2,890 4.2 $14.00 456
$15.01 to $19.30 $18.14 1,820 6.2 $18.61 1,343
----- -----
5,461 2,400
===== =====
</TABLE>
The Company applies Accounting Principle Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its stock options (other than
options issued in connection with acquisitions). Accordingly, compensation cost
has been recognized only for the options that have an exercise price less than
the fair market value of the underlying stock at the date of grant. A
compensation charge of approximately $0.2 million is reflected in the
consolidated statements of operations and shareholders' equity for the fiscal
year ended December 31, 1998 and the ten months ended December 31, 1997 related
to the issuance of management shares and stock options at prices below the fair
market value at the date of issue or grant.
40
<PAGE> 43
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma data is calculated as if compensation expense for
the Company's stock option plans were determined based on the fair value at the
grant date for awards under these plans consistent with the methodology
prescribed under SFAS No. 123, Accounting for Stock-Based Compensation (in
thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net income (loss)......................... $25,929 $23,173 $(3,642) $(3,983)
Net income (loss) per share:
Basic................................... $ 0.94 $ 0.84 $ (0.34) $ (0.37)
Diluted................................. $ 0.93 $ 0.83 $ (0.34) $ (0.37)
</TABLE>
The pro forma compensation cost may not be representative of that to be
expected in future years because options vest over several years and additional
awards may be made each year.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
TEN MONTHS ENDED
DECEMBER 31, 1997
---------------------------
YEAR ENDED SUBSEQUENT TO PRIOR TO
DECEMBER 31, THE AIRTRON THE AIRTRON
1998 AGREEMENT AGREEMENT
------------ ------------- -----------
<S> <C> <C> <C>
Dividend yield................................... -- -- --
Expected volatility.............................. 48.0% 33.0% 0%
Risk-free interest rate.......................... 4.70% 5.83% 6.26%
Expected lives................................... 5.0 years 6.6 years 10 years
Fair value of options at grant date.............. $7.445 $5.425 $1.425
</TABLE>
The Company had outstanding 60,000 warrants to purchase common stock for
$1.00 per share at February 29, 1996. In August 1996, 15,000 of these warrants
were purchased from a former shareholder for $0.5 million, resulting in a
reduction in retained earnings for the original recorded value of the warrants
of $0.6 million with the offset recorded as other income. At February 28, 1997,
45,000 warrants were outstanding. In connection with the Airtron Agreement these
warrants were exchanged for cash and preferred and common shares of GroupMAC.
Airtron had deferred compensation arrangements for certain members of its
management and its board of directors. The Company reflected the assets and
liabilities associated with these arrangements as distributions in the
accompanying consolidated financial statements.
10. SHAREHOLDERS' EQUITY
On October 24, 1996, the Company entered into a stock subscription
agreement with an individual providing for the sale of up to 2.6 million shares
of common stock at a purchase price of $3.08 per share. At December 31, 1997,
the Company had sold all of the 2.6 million shares.
During November and December 1997, the Company completed the IPO involving
the sale of 8.3 million shares of common stock at a price to the public of
$14.00 per share. The net proceeds from the IPO (after deducting underwriting
discounts and commissions and offering expenses) were approximately $103.6
million. Of this amount, $29.8 million was used to pay the cash portion of the
closing consideration relating to certain acquired businesses, $42.6 million to
repay corporate indebtedness and debt assumed in connection with the acquisition
of businesses, $19.3 million to retire all of the then outstanding preferred
stock and $11.9 million
41
<PAGE> 44
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for general corporate purposes including working capital, final consideration
settlements related to acquired businesses and future acquisitions. In March
1998, the Company issued $0.8 million of subordinated convertible debentures to
fund a portion of the consideration of one acquisition. These debentures were
converted to 68,000 shares of common stock during 1998.
11. INCOME TAXES
Income tax expense (benefit) consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR TEN MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal....................................... $13,553 $ -- $(1,020)
State......................................... 3,274 489 385
------- ------ -------
16,827 489 (635)
Deferred:
Federal and state............................. 3,499 2,343 2,207
------- ------ -------
$20,326 $2,832 $ 1,572
======= ====== =======
</TABLE>
Total income tax expense differs from the amounts computed by applying the
U.S. federal statutory income tax rate to income (loss) before income tax
provision as a result of the following (in thousands):
<TABLE>
<CAPTION>
YEAR TEN MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Income (loss) before income tax provision....... $46,255 $ (810) $3,908
Applicable U.S federal statutory rate........... 35.0% 34.0% 34.0%
------- ------ ------
Tax provision (benefit) at statutory rate....... 16,189 (275) 1,329
Increase (decrease) resulting from:
State income taxes, net of federal benefit.... 2,128 323 254
Compensation expense from reverse acquisition
and issuance of management shares and stock
options.................................... 59 2,455 --
Non-deductible goodwill amortization.......... 1,975 199 --
Other......................................... (25) 130 (11)
------- ------ ------
$20,326 $2,832 $1,572
======= ====== ======
</TABLE>
42
<PAGE> 45
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred income tax assets and liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ -------
<S> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts........................... $2,088 $ 713
Inventories............................................... 300 279
Accrued expenses.......................................... 5,101 2,489
Deferred revenue.......................................... 1,510 348
Compensation and benefits................................. 280 3,736
Net operating loss carryforward........................... 497 1,231
Other..................................................... 259 183
------ -------
Total deferred income tax assets.................. 10,035 8,979
------ -------
Deferred income tax liabilities:
Depreciation.............................................. (951) (585)
Completed contract accounting for tax purposes............ (1,899) (1,836)
Other..................................................... (339) (172)
------ -------
Total deferred income tax liabilities............. (3,189) (2,593)
------ -------
Net deferred income tax assets.................... $6,846 $ 6,386
====== =======
</TABLE>
These deferred income tax assets and liabilities are included in the
accompanying consolidated balance sheets under the following captions (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1997
------ ------
<S> <C> <C>
Deferred tax assets -- current.............................. $7,579 $1,647
Deferred tax assets -- long-term............................ -- 4,739
Deferred tax liabilities -- long-term....................... (733) --
------ ------
$6,846 $6,386
====== ======
</TABLE>
Management believes it is more likely than not that the Company will
realize the benefits of the net deferred tax assets. Accordingly, no valuation
allowance has been recorded as of December 31, 1998 or December 31, 1997.
12. LEASES
Operating leases for certain facilities and transportation equipment expire
at various dates through 2011. Certain leases contain renewal options.
Approximate minimum future rental payments as of December 31, 1998 are as
follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $11,172
2000........................................................ 10,059
2001........................................................ 8,901
2002........................................................ 7,843
2003........................................................ 4,358
Thereafter.................................................. 19,685
-------
$62,018
=======
</TABLE>
43
<PAGE> 46
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total rental expense for the year ended December 31, 1998, the ten months
ended December 31, 1997 and the year ended February 28, 1997 was approximately
$13.5 million, $2.3 million and $1.7 million, respectively (including $4.3
million, $1.2 million and $0.6 million, respectively, to related parties).
13. EMPLOYEE BENEFIT PLANS
Several of GroupMAC's subsidiaries maintain defined contribution employee
retirement plans, which are open to certain employees after various lengths of
service. Employee contributions and employer matching contributions occur at
different rates and the matched portions of the funds vest over a period of
years. Company contributions to these plans totaled approximately $4.8 million,
$0.4 million and $0.2 million for the year ended December 31, 1998, the ten
months ended December 31, 1997 and the year ended February 28, 1997,
respectively.
Certain of GroupMAC's subsidiaries make contributions to union-administered
benefit funds that cover the majority of these companies' union employees. For
the year ended December 31, 1998 and the ten months ended December 31, 1997, the
participant costs charged to operations were approximately $8.8 million and $0.6
million, respectively. Governmental regulations require that, in the event of
plan termination or employer withdrawal, an employer may be liable for a portion
of the plan's unfunded vested benefits, if any. The Company is not aware of any
liabilities resulting from unfunded vested benefits related to union
administered benefit plans. The Company does not anticipate withdrawal from the
plans, nor is the Company aware of any expected plan terminations.
14. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions. It is not possible to
predict the outcome of these matters; however, in the opinion of management, the
resolution of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
15. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents
and short- and long-term debt. The Company believes that the carrying values of
these instruments on the accompanying consolidated balance sheets approximate
their fair value.
16. OPERATING SEGMENTS
The Company's reportable segments are strategic business units that offer
products and services to two distinct customer groups. They are managed
separately because each business requires different operating and marketing
strategies.
The Company has two reportable segments: commercial/industrial and
residential markets. The commercial/industrial segment provides maintenance,
repair and replacement services and new installation services in manufacturing
and processing facilities, power generation facilities, hospitals and other
critical care facilities, colleges and universities, hotels, commercial office
buildings and complexes, retail stores and restaurants, supermarkets and
convenience stores. The residential segment provides maintenance, repair and
replacement services and new installation services in single family and low-rise
multifamily housing units.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on income from operations of the respective business units
prior to unallocated corporate expenses.
Other activities include financial data of two operating subsidiaries that
provide products and services outside of those performed by the Company's two
primary operating segments. Unallocated corporate
44
<PAGE> 47
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expenses primarily include (1) corporate overhead, (2) corporate and operating
company management bonuses, and (3) savings from national purchase agreements
relating to materials and property/casualty insurance. Assets, capital
expenditures and depreciation expense for the corporate function are included in
the "Other" column in the presentation below.
Segment information for the year ended December 31, 1998, the ten months
ended December 31, 1997 and the year ended February 28, 1997 was as follows (in
thousands):
<TABLE>
<CAPTION>
COMMERCIAL/
INDUSTRIAL RESIDENTIAL OTHER TOTAL
----------- ----------- ------- --------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Revenues.................................. $472,451 $286,737 $ 2,353 $761,541
Operating costs........................... 434,431 257,917 2,077 694,425
-------- -------- ------- --------
Subtotal.................................. 38,020 28,820 276 67,116
Goodwill amortization..................... 4,130 1,652 178 5,960
-------- -------- ------- --------
Segment operating earnings................ $ 33,890 $ 27,168 $ 98 61,156
======== ======== =======
Unallocated corporate expenses............ (9,090)
--------
Income from operations.................... $ 52,066
========
Assets.................................... $542,998 $123,775 $34,308 $701,081
Capital expenditures...................... 6,157 2,376 759 9,292
Depreciation expense...................... 4,847 2,745 311 7,903
TEN MONTHS ENDED DECEMBER 31, 1997:
Revenues.................................. $ 23,305 $113,927 $ 1,247 $138,479
Operating costs........................... 22,023 103,017 1,068 126,108
-------- -------- ------- --------
Subtotal.................................. 1,282 10,910 179 12,371
Goodwill amortization..................... 174 351 108 633
-------- -------- ------- --------
Segment operating earnings................ $ 1,108 $ 10,559 $ 71 11,738
======== ======== =======
Unallocated corporate expenses............ (11,516)
--------
Income from operations.................... $ 222
========
Assets.................................... $ 65,566 $ 96,237 $30,884 $192,687
Capital expenditures...................... 355 1,376 286 2,017
Depreciation expense...................... 147 575 58 780
YEAR ENDED FEBRUARY 28, 1997:
Revenues.................................. $ -- $ 81,880 $ -- $ 81,880
Operating costs........................... -- 78,317 -- 78,317
-------- -------- ------- --------
Subtotal.................................. -- 3,563 -- 3,563
Goodwill amortization..................... -- -- -- --
-------- -------- ------- --------
Segment operating earnings................ $ -- $ 3,563 $ -- 3,563
======== ======== =======
Unallocated corporate expenses............ --
--------
Income from operations.................... $ 3,563
========
Assets.................................... $ -- $ 27,153 $ -- $ 27,153
Capital expenditures...................... -- 182 -- 182
Depreciation expense...................... -- 208 -- 208
</TABLE>
45
<PAGE> 48
GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maintenance, repair and replacement services represented 53%, 35% and 19%
and new installation services represented 47%, 65% and 81% of total revenues for
the year ended December 31, 1998, the ten months ended December 31, 1997 and the
year ended February 28, 1997, respectively. The heavy emphasis on new
installation services in the earlier two fiscal periods is a result of the
operations of Airtron, which represent a significant portion of revenues during
the ten months ended December 31, 1997 and all of the revenues during the year
ended February 28, 1997.
17. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOURTH THIRD SECOND FIRST
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998
Revenues................................... $283,597 $211,667 $159,185 $107,092
Operating income........................... 19,746 16,297 11,452 4,571
Net income................................. 9,193 8,369 6,095 2,272
Earnings per share:
Basic.................................... $ 0.28 $ 0.30 $ 0.24 $ 0.10
Diluted.................................. $ 0.28 $ 0.30 $ 0.24 $ 0.10
1997(A)
Revenues................................... $ 68,011 $ 39,382 $ 25,419 $ 17,425
Operating income........................... 2,552 2,438 (5,055) (1,060)
Net income................................. 1,158 1,025 (5,998) (484)
Earnings per share(b):
Basic.................................... $ 0.08 $ 0.11 $ (0.70) $ (0.10)
Diluted.................................. $ 0.07 $ 0.11 $ (0.70) $ (0.10)
</TABLE>
- ---------------
(a) Concurrent with the IPO, the Company changed its fiscal year end from
February 28 to December 31 (see Note 1). The accompanying consolidated
statements of operations contain results for the ten month period ended
December 31, 1997; however, the quarterly financial summary above contains
four calendar quarters of information for 1997, as reported on Forms 10-Q.
(b) Because the Company reported a net loss in the first two quarters of 1997,
the potentially dilutive common shares (including warrants and stock options
discussed in Note 9) had an anti-dilutive effect on earnings per share.
Accordingly, diluted earnings per share is the same as basic earnings per
share for each of these periods.
18. SUBSEQUENT EVENTS (UNAUDITED)
During the first quarter of 1999, the Company completed the acquisition of
three platform companies. The combined annual revenues of the companies were
approximately $165.5 million. Total consideration paid included cash payments of
$35.6 million, $1.6 million of junior subordinated notes, 2.1 million shares of
common stock and total debt assumed of $13.8 million. The Company will account
for these acquisitions using the purchase method of accounting.
46
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Group Maintenance America Corp.
We have audited the accompanying balance sheets of Group Maintenance
America Corp. (the Company) as of December 31, 1996 and April 30, 1997, and the
related statements of operations, shareholders' equity (deficit), and cash flows
for the periods from October 21, 1996 (inception) to December 31, 1996 and the
four months ended April 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Group Maintenance America
Corp. as of December 31, 1996 and April 30, 1997 and the results of its
operations and its cash flows for the periods from October 21, 1996 (inception)
to December 31, 1996 and the four months ended April 30, 1997, in conformity
with generally accepted accounting principles.
KPMG LLP
Houston, Texas
July 11, 1997
47
<PAGE> 50
GROUP MAINTENANCE AMERICA CORP.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 30,
1996 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 228,036 $ 516,838
Due from employee......................................... 1,200 6,759
Prepaid expenses.......................................... 2,341 --
----------- -----------
Total current assets.............................. 231,577 523,597
Property and equipment, net................................. 100,996 120,694
Other noncurrent assets..................................... 19,473 1,094,708
----------- -----------
Total assets...................................... $ 352,046 $ 1,738,999
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 137,377 $ 527,869
Accrued expenses.......................................... 6,118 1,478,898
----------- -----------
Total current liabilities......................... 143,495 2,006,767
Long-term debt.............................................. 75,000 75,000
Other long-term liabilities................................. -- 73,424
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.001 par value; 50,000,000 shares
authorized; none issued or outstanding................. -- --
Common stock, $.001 par value; 100,000,000 shares
authorized; 1,211,345 and 1,611,345 shares issued,
respectively........................................... 1,211 1,611
Additional paid-in capital................................ 8,238,857 8,238,457
Retained earnings......................................... (722,517) (2,503,260)
Subscriptions receivable.................................. (7,384,000) (6,153,000)
----------- -----------
Total shareholders' equity (deficit).............. 133,551 (416,192)
----------- -----------
Total liabilities and shareholders' equity........ $ 352,046 $ 1,738,999
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 51
GROUP MAINTENANCE AMERICA CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 21,
1996) FOUR MONTHS
THROUGH ENDED
DECEMBER 31, APRIL 30,
1996 1997
------------ -----------
<S> <C> <C>
Revenues.................................................... $ -- $ --
Cost of services............................................ -- --
--------- -----------
Gross profit...................................... -- --
Selling, general and administrative expenses................ 724,006 1,783,409
--------- -----------
Loss from operations.............................. (724,006) (1,783,409)
--------- -----------
Other income (expense):
Interest expense.......................................... (1,118) (2,000)
Interest income........................................... 2,607 4,666
--------- -----------
Loss before income tax provision.................. (722,517) (1,780,743)
Income tax provision........................................ -- --
--------- -----------
Net loss.................................................... $(722,517) $(1,780,743)
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE> 52
GROUP MAINTENANCE AMERICA CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL SHAREHOLDERS'
NUMBER OF PAID-IN RETAINED SUBSCRIPTIONS EQUITY
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE (DEFICIT)
--------- ------ ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 21, 1996....... -- $ -- $ -- $ -- $ -- $ --
Net loss...................... -- -- -- (722,517) -- (722,517)
Issuance of subscription
agreement.................. -- -- 8,000,000 -- (8,000,000) --
Issuance of common stock...... 791,345 791 32,807 -- -- 33,598
Shares issued under
subscription agreement..... 200,000 200 (200) -- 616,000 616,000
Compensation expense related
to issuance of management
shares..................... 220,000 220 206,250 -- -- 206,470
--------- ------ ---------- ----------- ----------- -----------
Balance, December 31, 1996...... 1,211,345 1,211 8,238,857 (722,517) (7,384,000) 133,551
Net loss...................... -- -- -- (1,780,743) -- (1,780,743)
Shares issued under
subscription agreement..... 400,000 400 (400) -- 1,231,000 1,231,000
--------- ------ ---------- ----------- ----------- -----------
Balance, April 30, 1997......... 1,611,345 $1,611 $8,238,457 $(2,503,260) $(6,153,000) $ (416,192)
========= ====== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 53
GROUP MAINTENANCE AMERICA CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 21, FOUR
1996) MONTHS
THROUGH ENDED
DECEMBER 31, APRIL 30,
1996 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(722,517) $(1,780,743)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 3,343 12,877
Noncash compensation charge............................ 206,250 --
Changes in operating assets and liabilities:
(Increase) decrease in --
Prepaid expenses and other assets................. (3,541) (3,218)
Other noncurrent assets........................... -- (1,567)
Increase (decrease) in --
Accounts payable.................................. 137,377 390,492
Accrued expenses.................................. 6,118 979,562
--------- -----------
Net cash used in operating activities........... (372,970) (402,597)
--------- -----------
Cash flows from investing activities:
Purchases of property and equipment....................... (104,339) (32,575)
--------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock.................... 649,818 1,231,000
Proceeds from borrowings.................................. 75,000 --
Deferred offering costs................................... (19,473) (439,205)
Deferred financing costs.................................. -- (67,821)
--------- -----------
Net cash provided by financing activities....... 705,345 723,974
--------- -----------
Increase in cash and cash equivalents....................... 228,036 288,802
Cash and cash equivalents, beginning of period.............. -- 228,036
--------- -----------
Cash and cash equivalents, end of period.................... $ 228,036 $ 516,838
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 54
GROUP MAINTENANCE AMERICA CORP.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Group Maintenance America Corp. (the Company or GroupMAC Parent) was
incorporated in October 1996 and, therefore, the financial statements reflect
the period since the Company's inception through December 31, 1996 and the four
months ended April 30, 1997. The Company's primary business is to build a
national company providing heating, ventilation and air conditioning (HVAC),
plumbing and electrical services.
Effective April 30, 1997, GroupMAC Parent entered into an Agreement and
Plan of Exchange (the Agreement) with Airtron, Inc. (Airtron), in which
$20,366,951 in cash, 14,873,133 shares of GroupMAC Parent preferred stock and
4,652,140 shares of GroupMAC Parent common stock were issued to shareholders of
Airtron in exchange for 100 percent of the then outstanding shares of Airtron.
In connection with this merger the combined company is referred to as GroupMAC
and Subsidiaries. The Agreement closed on May 2, 1997 with the cash portion
funded by the Company's available credit facility and a capital contribution
from a shareholder pursuant to a stock subscription agreement (see note 6). For
accounting purposes, the transaction was accounted for as a reverse acquisition,
as if Airtron acquired GroupMAC Parent, as the former shareholders of Airtron
then owned a majority of GroupMAC Parent's common stock. Concurrent with this
transaction, the resulting combined entity will be named Group Maintenance
America Corp. and Subsidiaries. The Company is included in the consolidated
financial statements of GroupMAC and Subsidiaries, presented elsewhere herein,
for periods subsequent to the effective date of the acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents. There were no cash payments for interest or income taxes
in 1996 or in the four months ended April 30, 1997.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures of major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property or equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
Income Taxes
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109. Under this
method deferred income taxes are recorded based upon differences between the
financial reporting and tax bases of assets and liabilities and are measured
using
52
<PAGE> 55
GROUP MAINTENANCE AMERICA CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the enacted tax rates and laws that will be in effect when the underlying assets
or liabilities are received or settled.
The Company has recorded a full valuation allowance against all deferred
tax assets due to the uncertainty of ultimate realizability. Accordingly, no
income tax benefit has been recorded for the losses incurred.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Other noncurrent assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 30,
1996 1997
------------ ----------
<S> <C> <C>
Deferred offering costs................................ $13,648 $ 452,853
Deferred financing costs............................... -- 634,463
Other noncurrent assets................................ 5,825 7,392
------- ----------
$19,473 $1,094,708
======= ==========
</TABLE>
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 30,
1996 1997
------------ ----------
<S> <C> <C>
Accrued compensation................................... $ -- $ 767,476
Accrued financing costs................................ -- 566,642
Other accrued expenses................................. 6,118 144,780
------ ----------
$6,118 $1,478,898
====== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
The principal categories and estimated useful lives of property and
equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31, APRIL 30,
USEFUL LIVES 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Office equipment, furniture and fixtures..... 3-7 years $104,339 $136,358
Less accumulated depreciation................ (3,343) (15,664)
-------- --------
$100,996 $120,694
======== ========
</TABLE>
5. LONG-TERM DEBT
CREDIT AGREEMENT
In May 1997, the Company entered into a credit agreement (the Credit
Agreement) with a group of banks providing for secured facilities consisting of
an 18-month revolving credit line of $3 million, a six-year term loan of $20
million used in connection with the acquisition of Airtron (see note 1) and a
term loan facility, available until October 31, 1998, providing for up to $12
million in term loans having a final maturity six years after the date of the
Credit Agreement, to be used in connection with future acquisitions. Loans under
the revolving credit facility are limited to a borrowing base consisting of 70%
of eligible accounts receivable. Interest on outstanding borrowings is payable
in quarterly installments beginning August 31, 1997. A commitment fee of .25% is
payable on the unused portion of the revolving credit line.
The Credit Agreement contains covenants which, among other matters,
restrict or limit the ability of the Company to pay dividends, incur
indebtedness, make capital expenditures and repurchase capital stock. The
53
<PAGE> 56
GROUP MAINTENANCE AMERICA CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company must also maintain a minimum fixed charge coverage ratio (as defined)
and certain other ratios, among other restrictions.
As of June 30, 1997, available borrowing capacity under the Credit
Agreement was $5.4 million.
LONG-TERM DEBT
On October 24, 1996, the Company executed a $75,000 subordinated note with
a Texas limited liability company. The note bears interest at eight percent (8%)
and is payable upon the earlier of (i) the closing of the Company's first public
offering of its common stock or (ii) two years from the date of the note. The
note is subordinate to all indebtedness of the Company to the banks and is
guaranteed by certain officers of the Company.
6. SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
The Company is authorized to issue 100 million shares of common stock,
$.001 par value. There were 1,211,345 and 1,611,345 shares of common stock
issued and outstanding at December 31, 1996 and April 30, 1997, respectively. In
connection with the sale of certain shares of common stock to management, a
nonrecurring, noncash compensation charge of $206,250 was recorded in 1996 to
reflect the difference between the amount paid for the shares and the estimated
fair value of the shares on the date of sale.
On October 24, 1996, the Company entered into a stock subscription
agreement with an individual allowing for the purchase of up to 2.6 million
shares of common stock at a purchase price of $3.08 per share. Under this
agreement, 0.2 million shares were purchased in October 1996, 0.2 million in
January 1997 and 0.2 million in April 1997 and additional shares are required to
be purchased upon written notice from the Company, but in no event later than
October 24, 1998. Subsequent to April 30, 1997, an additional 1.658 million
shares have been purchased under the Subscription Agreement.
PREFERRED STOCK
The Company is authorized to issue up to 50 million shares of preferred
stock, par value $.001 per share, in one or more series. As of December 31, 1996
and April 30, 1997, none were outstanding.
OPTIONS
Under an option agreement dated October 24, 1996, the Company is authorized
to grant stock options with respect to 388,800 shares of the Company's common
stock to directors and senior management.
The following is a summary of stock option activity and number of shares
reserved for outstanding options.
<TABLE>
<CAPTION>
OPTION
PRICE PER NUMBER
SHARE OF SHARES
--------- ---------
<S> <C> <C>
Granted..................................................... $3.08 291,600
-------
Balance at December 31, 1996................................ 291,600
Granted..................................................... $3.08 69,200
-------
Balance at April 30, 1997................................... 360,800
=======
</TABLE>
At April 30, 1997, options representing 28,000 shares were available to be
granted under the option agreement.
54
<PAGE> 57
GROUP MAINTENANCE AMERICA CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company has adopted the disclosure-only provisions of the Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-based
Compensation. Accordingly, no compensation cost has been recognized for the
option agreement as all options have an exercise price equal to or greater than
the fair value of the underlying stock at date of grant. Had compensation cost
for the Company's stock option plan been determined consistent with the
provisions of SFAS No. 123, net loss would have been increased by the following
pro forma amounts:
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 21,
1996) FOUR MONTHS
THROUGH ENDED
DECEMBER 31, APRIL 30,
1996 1997
------------ -----------
<S> <C> <C>
Net loss:
As reported.............................................. $(722,517) $(1,780,743)
Pro forma................................................ $(745,602) $(1,837,870)
</TABLE>
The pro forma compensation cost may not be representative of that to be
expected in future years because options vest over several years and additional
awards may be made each year.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used by the plan for fiscal 1996 and for the four months ending
April 30, 1997: no dividend yield; expected volatility of 0%; risk-free interest
rate of 6.26%; and expected lives of ten years. The weighted average fair value
per share of the options granted during fiscal 1996 and in the four months
ending April 30, 1997 is estimated to be $1.425.
7. INCOME TAXES
There is no Federal income tax provision as losses were incurred and a
valuation allowance has been established against future benefits deriving from
the carryforward of these losses.
8. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements, primarily
for office space, furniture and service equipment. Minimum annual rental
payments under non-cancelable operating leases as of June 30, 1997, were
approximately as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING APRIL 30,
- -----------------------------
<S> <C>
1997........................................................ $46,000
1998........................................................ 600
1999........................................................ 300
</TABLE>
Rental expense under operating leases was $9,032 for the period ended
December 31, 1996 and $49,194 for the four months ending April 30, 1997.
9. EVENT SUBSEQUENT TO INDEPENDENT AUDITORS' REPORT -- STOCK SPLIT
On August 16, 1997, the Company's Board of Directors declared a 1-for-2.5
reverse stock split of the Company's common stock. All share data included in
the consolidated financial statements have been restated to reflect the stock
split.
55
<PAGE> 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing under the caption "Election of Directors" in the
Company's proxy statement for the 1999 Annual Meeting of Shareholders is
incorporated herein by reference. Information regarding executive officers of
the Company is presented in Item 4A of this Form 10-K under the caption
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under the caption "Executive Compensation" in the
Company's proxy statement for the 1999 Annual Meeting of Shareholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information appearing under the caption "Stock Ownership" in the Company's
proxy statement for the 1999 Annual Meeting of Shareholders is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under the caption "Transactions with Management and
Others" in the Company's proxy statement for the 1999 Annual Meeting of
Shareholders is incorporated herein by reference.
56
<PAGE> 59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements
See "Index to Financial Statements of Group Maintenance America Corp. and
Subsidiaries" set forth in Item 8, "Financial Statements and Supplementary
Data."
(2) Financial statement schedules
None
(3) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<C> <S>
2 -- None
3.1* -- Articles of Incorporation of the Company, as amended
(Exhibit 3.1 to Registration Statement No. 333-34067).
3.2 -- By-laws of the Company, as amended.
4.1 -- Indenture dated as of January 22, 1999, between Group
Maintenance America Corp., the subsidiaries named therein
and State Street Bank and Trust Company, as trustee.
4.2 -- First Supplemental Indenture dated March 22, 1999,
between Group Maintenance America Corp., the subsidiaries
named therein and State Street Bank and Trust Company, as
trustee.
9 -- None
10.1*+ -- Group Maintenance America Corp. 1997 Stock Awards Plan
(Exhibit 10.1 to Registration Statement No. 333-34067).
10.2*+ -- Group Maintenance America Corp. 1997 Stock Option Plan
(Exhibit 10.2 to Registration Statement No. 333-34067).
10.3+ -- 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 (Exhibit 10.32 to
Registration Statement No. 333-34067).
10.7+ -- Form of Employment Agreement between Group Maintenance
America Corp. and Ronald D. Bryant.
10.8 -- 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* -- 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 (Exhibit 10.3 to Registration Statement
No. 333-34067).(Confidential information has been omitted
from this document and has been filed separately with the
Commission.)
11 -- None.
</TABLE>
57
<PAGE> 60
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<C> <S>
12 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
13 -- None.
16 -- None.
18 -- None.
21 -- Subsidiaries of Group Maintenance America Corp. as of
December 31, 1998.
22 -- None.
23 -- Consent of KPMG LLP.
24 -- Powers of Attorney
27 -- Financial Data Schedule.
99 -- None.
</TABLE>
- ---------------
* Incorporated by reference from a prior filing as indicated.
+ Management contract or compensatory plan or arrangement.
UNDERTAKING
GroupMAC has not filed with this report copies of certain instruments
defining the rights of holders of long-term debt of GroupMAC and its
subsidiaries. GroupMAC agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.
(b) Reports on Form 8-K:
On October 28, 1998, GroupMAC filed a Current Report on Form 8-K which
disclosed, under Item 2 thereof, the Company's acquisition of Continental
Electrical Construction Co. ("Continental"). This report was amended on
December 22, 1998, to include audited financial statements of Continental
and the pro forma financial statements of the Company reflecting the
acquisition of Continental.
On November 4, 1998, GroupMAC filed a Current Report on Form 8-K which
disclosed, under Item 5 thereof, that the Company had signed a definitive
purchase agreement to purchase all of the capital stock of Trinity
Contractors, Inc. ("Trinity").
On November 25, 1998, GroupMAC filed a Current Report on Form 8-K
which disclosed, under Item 2 thereof, the Company's acquisition of
Trinity. This report was amended on December 22, 1998, to include audited
financial statements of Trinity and the pro forma financial statements of
the Company reflecting the acquisition of Trinity.
On December 22, 1998, GroupMAC filed a Current Report on Form 8-K
which contained, in Item 5 thereof, risk factors that could affect an
investment in the Company's equity securities and Management's Discussion
and Analysis of Financial Condition and Results of Operations, and, under
Item 7 thereof, financial statements of certain businesses acquired by the
Company.
58
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 30th day of
March, 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 Exchange Act of 1934, this
Annual Report on Form 10-K has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES P. NORRIS* Chairman of the Board and March 30, 1999
- --------------------------------------------------- Director
James P. Norris
/s/ J. PATRICK MILLINOR, JR. Chief Executive Officer and March 30, 1999
- --------------------------------------------------- Director
J. Patrick Millinor, Jr.
/s/ DARREN B. MILLER Executive Vice President and March 30, 1999
- --------------------------------------------------- Chief Financial Officer
Darren B. Miller (Principal Financial Officer)
/s/ DANIEL W. KIPP Senior Vice President and March 30, 1999
- --------------------------------------------------- Corporate Controller (Principal
Daniel W. Kipp Accounting Officer)
/s/ DONALD L. LUKE President, Chief Operating March 30, 1999
- --------------------------------------------------- Officer and Director
Donald L. Luke
/s/ DAVID L. HENNINGER* Director March 30, 1999
- ---------------------------------------------------
David L. Henninger
/s/ CHESTER J. JACHIMIEC Director March 30, 1999
- ---------------------------------------------------
Chester J. Jachimiec
/s/ TIMOTHY JOHNSTON* Director March 30, 1999
- ---------------------------------------------------
Timothy Johnston
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ANDREW J. KELLY* Director March 30, 1999
- ---------------------------------------------------
Andrew J. Kelly
/s/ THOMAS B. MCDADE* Director March 30, 1999
- ---------------------------------------------------
Thomas B. McDade
/s/ ROBERT MUNSON, III* Director March 30, 1999
- ---------------------------------------------------
Robert Munson, III
/s/ FREDRIC J. SIGMUND* Director March 30, 1999
- ---------------------------------------------------
Fredric J. Sigmund
/s/ JOHN M. SULLIVAN* Director March 30, 1999
- ---------------------------------------------------
John M. Sullivan
/s/ JAMES D. WEAVER* Director March 30, 1999
- ---------------------------------------------------
James D. Weaver
*By: /s/ RANDOLPH W. BRYANT
---------------------------------------------
Randolph W. Bryant
Attorney-in-fact
</TABLE>
60
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<C> <S>
2 -- None
3.1* -- Articles of Incorporation of the Company, as amended
(Exhibit 3.1 to Registration Statement No. 333-34067).
3.2 -- By-laws of the Company, as amended.
4.1 -- Indenture dated as of January 22, 1999, between Group
Maintenance America Corp., the subsidiaries named therein
and State Street Bank and Trust Company, as trustee.
4.2 -- First Supplemental Indenture dated March 22, 1999,
between Group Maintenance America Corp., the subsidiaries
named therein and State Street Bank and Trust Company, as
Trustee.
9 -- None
10.1*+ -- Group Maintenance America Corp. 1997 Stock Awards Plan
(Exhibit 10.1 to Registration Statement No. 333-34067).
10.2*+ -- Group Maintenance America Corp. 1997 Stock Option Plan
(Exhibit 10.2 to Registration Statement No. 333-34067).
10.3+ -- 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 (Exhibit 10.32 to
Registration Statement No. 333-34067).
10.7+ -- Form of Employment Agreement between Group Maintenance
America Corp. and Ronald D. Bryant.
10.8 -- 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* -- 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 (Exhibit 10.3 to Registration Statement
No. 333-34067).(Confidential information has been omitted
from this document and has been filed separately with the
Commission.)
11 -- None.
12 -- Statement re: Computation of Ratio Earnings to Fixed
Charges.
13 -- None.
16 -- None.
18 -- None.
21 -- Subsidiaries of Group Maintenance America Corp. as of
December 31, 1998.
22 -- None.
23 -- Consent of KPMG LLP.
24 -- Powers of Attorney
27 -- Financial Data Schedule.
99 -- None.
</TABLE>
- ---------------
* Incorporated by reference from a prior filing as indicated.
+ Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
GROUP MAINTENANCE AMERICA CORP.
As amended November 19, 1998
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1. Offices....................................................1
Section 1.1 Principal Office...........................................1
Section 1.2 Registered Office..........................................1
Section 1.3 Other Offices..............................................1
ARTICLE 2. Shareholders Meetings......................................1
Section 2.1 Annual Meeting.............................................1
Section 2.2 Special Meetings...........................................1
Section 2.3 Notices of Meetings and Adjourned Meetings.................2
Section 2.4 Notice of Shareholder Business and Nominations.............2
Section 2.5 Voting Lists...............................................5
Section 2.6 Quorum.....................................................5
Section 2.7 Chairman of Shareholder Meetings...........................5
Section 2.8 Voting.....................................................5
Section 2.9 Voting of Shares by Certain Holders........................6
Section 2.10 Closing of Transfer Records or Fixing of Record Date.......6
Section 2.11 Action by Written Consent..................................8
Section 2.12 Authorization of Proxies...................................8
Section 2.13 Inspectors and Voting Procedures...........................8
ARTICLE 3. Directors..................................................9
Section 3.1 Management.................................................9
Section 3.2 Number and Term............................................9
Section 3.3 Quorum and Manner of Action................................9
Section 3.4 Vacancies..................................................9
Section 3.5 Resignations..............................................10
Section 3.6 Removals..................................................10
Section 3.7 Annual Meetings...........................................10
Section 3.8 Regular Meetings..........................................10
Section 3.9 Special Meetings..........................................10
Section 3.10 Organization of Meetings..................................11
Section 3.11 Place of Meetings.........................................11
Section 3.12 Compensation of Directors.................................11
Section 3.13 Action by Unanimous Written Consent.......................11
Section 3.14 Participation in Meetings by Telephone....................11
Section 3.15 Nominations for Director..................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 4. Committees of the Board...................................12
Section 4.1 Membership and Authorities................................12
Section 4.2 Minutes...................................................12
Section 4.3 Vacancies.................................................12
Section 4.4 Telephone Meetings........................................13
Section 4.5 Action Without Meeting....................................13
ARTICLE 5. Officers..................................................13
Section 5.1 Number and Title..........................................13
Section 5.2 Term of Office; Vacancies.................................13
Section 5.3 Removal of Elected officers...............................14
Section 5.4 Resignations..............................................14
Section 5.5 The Chairman of the Board.................................14
Section 5.6 Chief Executive Officer...................................14
Section 5.7 President.................................................14
Section 5.8 Vice Presidents...........................................15
Section 5.9 Secretary.................................................15
Section 5.10 Assistant Secretaries.....................................15
Section 5.11 Treasurer or Chief Financial Officer......................15
Section 5.12 Assistant Treasurers......................................16
Section 5.13 Subordinate Officers......................................16
Section 5.14 Salaries and Compensation.................................16
ARTICLE 6. Indemnification...........................................16
ARTICLE 7. Capital Stock.............................................17
Section 7.1 Certificates of Stock.....................................17
Section 7.2 Lost Certificates.........................................18
Section 7.3. Dividends. ...............................................18
Section 7.4. Registered Shareholders...................................18
Section 7.5. Transfer of Stock. .......................................19
ARTICLE 8. Miscellaneous Provisions..................................19
Section 8.1. Corporate Seal. ..........................................19
Section 8.2. Fiscal Year...............................................19
Section 8.3. Checks, Drafts, Notes. ...................................19
Section 8.4. Notice and Waiver of Notice...............................19
Section 8.5. Examination of Books and Records..........................20
Section 8.6. Voting Upon Shares Held by the Corporation. ..............20
ARTICLE 9. Amendments................................................20
</TABLE>
<PAGE> 4
BYLAWS
OF
GROUP MAINTENANCE AMERICA CORP.
ARTICLE 1.
OFFICES
Section 1.1 Principal Office.
The principal office of the Corporation shall be in the City of
Houston, Texas.
Section 1.2 Registered Office.
The registered office of the Corporation required to be maintained in
the State of Texas by the Texas Business Corporation Act (the "TBCA") may be,
but need not be, identical with the Corporation's principal office, and the
address of the registered office may be changed from time to time by the Board
of Directors.
Section 1.3 Other Offices.
The Corporation may also have offices at such other places both within
and without the State of Texas as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE 2.
SHAREHOLDERS MEETINGS
Section 2.1 Annual Meeting.
The annual meeting of the holders of shares of each class or series of
stock as are entitled to notice thereof and to vote at such meeting pursuant to
applicable law and the Corporation's Articles of Incorporation for the purpose
of electing directors and transacting such other proper business as may come
before it shall be held in each year, at such time, on such day and at such
place, within or without the State of Texas, as may be designated by the Board
of Directors.
Section 2.2 Special Meetings.
In addition to such special meetings as are provided by law or the
Corporation's Articles of Incorporation, special meetings of the holders of any
class or series or of all classes or series of the Corporation's stock for any
purpose or purposes, may be called at any time by (i) the Chairman of
<PAGE> 5
the Board, the Chief Executive Officer, the President or the Board of Directors
or (ii) the holders of at least 50% of all the shares entitled to vote at such
special meeting and may be held on such day, at such time and at such place,
within or without the State of Texas, as shall be designated by the person or
persons calling such meeting.
Section 2.3 Notices of Meetings and Adjourned Meetings.
Except as otherwise provided by law or by the Corporation's Articles
of Incorporation, written or printed notice of any meeting of Shareholders (i)
shall be given either by personal delivery or by mail to each Shareholder of
record entitled to vote at such meeting, (ii) shall be in such form as approved
by the Board of Directors, and (iii) shall state the date, place and hour of
the meeting, and, in the case of a special meeting, the purpose for which the
meeting is called. Unless otherwise provided by law or by the Corporation's
Articles of Incorporation, such written notice shall be given not less than ten
nor more than 60 days before the date of the meeting. Except when a Shareholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened, presence in person or by proxy of a
Shareholder shall constitute a waiver of notice of such meeting. Further, a
written waiver of any notice required by law or by these Bylaws, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Except as otherwise provided by law or by
the Corporation's Articles of Incorporation, the business that may be
transacted at any special meeting of the Shareholders shall be limited to and
consist of the purpose or purposes stated in such notice. If a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Shareholder of record entitled to vote at the meeting.
Section 2.4 Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the
Shareholders may be made at an annual meeting of Shareholders (A)
pursuant to the Corporation's notice of meeting, (B) by or at the
direction of the Board of Directors, (C) by any nominating committee
or person appointed by the Board or (D) by any Shareholder who was a
Shareholder of record at the time of giving of notice provided for in
this Section, who is entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section.
(2) For nominations or other business to be properly brought
before an annual meeting by a Shareholder pursuant to Section
2.4(a)(1)(D), the Shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for Shareholder action. To be
timely, a Shareholder's
2
<PAGE> 6
notice shall be delivered to the Secretary at the principal office of
the Corporation not later than the close of business on the 120th day
nor earlier than the close of business on the 150th day prior to the
first anniversary of the mailing date of the preceding year's proxy
statement (the "Mailing Date"); provided, however, that in the event
that the Mailing Date is more than 30 days before or more than 60 days
after the anniversary of the prior year's Mailing Date, notice by the
Shareholder to be timely must be so delivered not earlier than the
close of business on the 90th day prior to such Mailing Date and not
later than the close of business on the later of the 60th day prior to
such Mailing Date or the tenth day following the day on which public
announcement of the date of the Corporation's annual meeting is first
made by the Corporation. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the
giving of a Shareholder's notice as described above. Such
Shareholder's notice shall set forth:
(A) as to each person whom the Shareholder proposes
to nominate for election or reelection as a Director all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of
Directors in an election contest, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee
and to serving as a Director if elected);
(B) as to any other business that the Shareholder
proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any
material interest in such business of such Shareholder and
the beneficial owner, if any, on whose behalf the proposal is
made; and
(C) whose behalf the nomination or proposal is made
(i) the name and address of such Shareholder, as they appear
on the Corporation's books, and of such beneficial owner,
(ii) the class and number of shares of the Corporation which
are owned beneficially and of record by such Shareholder and
such beneficial owner, and (iii) whether the proponent
intends (or is part of a group which intends) to solicit
proxies from other Shareholders in support of such nomination
or proposal.
(3) Notwithstanding anything in the second sentence of
Section 2.4(a)(2) to the contrary, in the event that the number of
Directors to be elected to the Board of Directors is increased and
there is no public announcement by the Corporation naming all of the
nominees for Director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a Shareholder's notice required by
this Section shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by
the Corporation.
3
<PAGE> 7
(b) Special Meetings of Shareholders.
Only such business shall be conducted at a special meeting of
Shareholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of Shareholders at which
Directors are to be elected pursuant to such notice of meeting (a) by or at the
direction of the Board of Directors or (b) provided that the Board of Directors
has determined that Directors shall be elected at such meeting, by any
Shareholder who is a Shareholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Bylaw. In the event
the Corporation calls a special meeting of Shareholders for the purpose of
electing one or more Directors to the Board of Directors, any such Shareholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
Shareholder's notice required by Section 2(a)(2) shall be delivered to the
Secretary at the principal office of the Corporation not earlier than the close
of business on the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special
meeting or the tenth day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new time
period for the giving of a Shareholder's notice as described above.
(c) General.
(1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 2.4 shall be eligible to
serve as Directors and only such business shall be conducted at a
meeting of Shareholders as shall have been brought before the meeting
in accordance with the procedures set forth in this Section 2.4.
Except as otherwise provided by applicable law, the Chairman of the
meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 2.4 and, if any proposed
nomination or business is not in compliance with this Section 2.4, to
declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Section 2.4, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
2.4, a Shareholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.4. Nothing in this
Section 2.4 shall be deemed to affect any rights (i) of Shareholders
to request inclusion of proposals in the Corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange
4
<PAGE> 8
Act; or (ii) of the holders of any series of preferred stock to elect
Directors under specified circumstances.
Section 2.5 Voting Lists.
The officer or agent having charge of the share transfer books for
shares of the Corporation shall make, at least ten days before each meeting of
Shareholders, a complete list of Shareholders entitled to vote at meetings or
any adjournments thereof, arranged in alphabetical order, with the address of
and the number of shares held by each, in accordance with applicable law and
shall make same available prior to and during each Shareholders' meeting for
inspection by the Corporation's Shareholders as required by law. The
Corporation's original share transfer books shall be prima facie evidence as to
who are the Shareholders entitled to examine such list or transfer books or to
vote at any meeting of Shareholders.
Section 2.6 Quorum.
Except as otherwise provided by law or by the Corporation's Articles
of Incorporation, the holders of a majority of the Corporation's shares
entitled to vote at a meeting, represented at the meeting in person or
represented by proxy, without regard to class or series, shall constitute a
quorum at all meetings of the Shareholders for the transaction of business. If,
however, such quorum shall not be present or represented at any meeting of the
Shareholders, the holders of a majority of the shares represented in person or
by proxy at that meeting may adjourn any meeting from time to time without
notice other than announcement at the meeting, except as otherwise required by
these Bylaws, until such time and to such place as may be determined by a vote
of the holders of a majority of the shares represented in person or by proxy at
that meeting. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally called.
Section 2.7 Chairman of Shareholder Meetings.
Each annual and special meeting of Shareholders shall be presided over
by a Chairman, who shall have the exclusive authority to, among other things,
determine (a) whether business and nominations have been properly brought
before such meetings, (b) the order in which business and nominations properly
brought before such meeting shall be considered and (c) the adjournment of
meetings, whether or not a quorum is present. The Chairman of each annual and
special meeting shall be the Chairman of the Board of Directors or such person
as shall be appointed by the Board of Directors. The Secretary, or, in his
absence, any Assistant Secretary or any person appointed by the individual
presiding over the meeting, shall act as Secretary at meetings of the
Shareholders.
Section 2.8 Voting.
Each Shareholder of record, as determined pursuant to Section 2.10,
who is entitled to vote in accordance with the terms of the Corporation's
Articles of Incorporation and in accordance with the provisions of these
Bylaws, shall be entitled to one vote, in person or by proxy, for each share
5
<PAGE> 9
of stock registered in his name on the books of the Corporation. Every
Shareholder entitled to vote at any Shareholders' meeting may authorize another
person or persons to act for him by proxy executed in writing pursuant to
Section 2.12, provided that no proxy shall be valid after 11 months from the
date of its execution, unless the proxy provides for a longer period. A duly
executed proxy shall be revocable unless the proxy form conspicuously states
that the proxy is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A Shareholder's
attendance at any meeting shall not have the effect of revoking a previously
granted proxy unless such Shareholder shall in writing so notify the Secretary
of the meeting prior to the voting of the proxy. Unless otherwise provided by
law, no vote on the election of directors or any question brought before the
meeting need be by ballot unless the chairman of the meeting shall determine
that it shall be by ballot or the holders of a majority of the shares of stock
present in person or by proxy and entitled to participate in such vote shall so
demand. In a vote by ballot, each ballot shall state the number of shares voted
and the name of the Shareholder or proxy voting. Except as otherwise provided
by law, by the Corporation's Articles of Incorporation or these Bylaws, all
elections of directors shall be elected by a plurality of votes cast by the
holders of shares entitled to vote in the election of directors at a meeting of
Shareholders at which a quorum is present. Except as otherwise provided by law
or the Corporation's Articles of Incorporation, all other matters before the
Shareholders shall be decided by the vote of the holders of a majority of the
shares entitled to vote on that matter and represented in person or by proxy at
a meeting of Shareholders at which a quorum is present. In the election of
directors, votes may not be cumulated.
Section 2.9 Voting of Shares by Certain Holders.
Shares standing in the name of another corporation may be voted by an
officer, agent or proxy as designated in the bylaws of such corporation, or in
the absence of such designation, as the board of directors of such corporation
may determine. Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without transfer of such shares into his
name. Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer into his name if authority to do so be contained
in an appropriate order of the Court by which such receiver was appointed. A
Shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares standing in the name of the Corporation or held by it in a fiduciary
capacity shall not be voted, directly or indirectly, at any meeting, and shall
not be counted in determining the total number of outstanding shares at any
given time.
Section 2.10 Closing of Transfer Records or Fixing of Record Date.
(a) Fixing Record Dates for Matters Other than Consents to
Action. The Board of Directors of the Corporation may provide that the
stock transfer books be closed for a stated period not to exceed 60
days for the purpose of determining Shareholders entitled to notice of
or to vote at any meeting of Shareholders or any adjournment thereof,
or
6
<PAGE> 10
Shareholders entitled to receive payment of any distribution or share
dividend, or in order to make a determination of Shareholders for any
other proper purpose (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares). If the
share transfer records are closed as set forth in this Section, the
records shall be closed for at least ten days immediately preceding
the meeting. In lieu of closing the share transfer records, the Board
of Directors may fix in advance a date as the record date for any such
determination of Shareholders, the date to be not more than 60 days,
and in case of a meeting of Shareholders not less than ten days, prior
to the date on which the particular action requiring determination of
Shareholders is to be taken. If the share transfer records are not
closed and no record date is fixed for determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders, or
Shareholders entitled to receive payment of a distribution or share
dividend (other than a distribution involving a purchase or redemption
by the Corporation of any of its own shares), the date on which notice
of the meeting is mailed, or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may
be, shall be the record date for determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of
Shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof except where the
determination has been made by closing the share transfer records and
the stated period of closing has expired.
(b) Fixing Record Dates for Consents to Action. Unless a
record date has previously been determined by the Board of Directors,
whenever action by Shareholders is proposed to be taken by consent in
writing without a meeting of Shareholders, the Board of Directors may
fix a record date for the purpose of determining Shareholders entitled
to consent to that action, which record date shall not proceed, and
shall not be more than ten days after, the date on which the
resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors
and the prior action of the Board of Directors is not otherwise
required by statute, the record date for determining Shareholders
entitled to consent to action in writing without a meeting shall be
the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office, its principal place of business,
or an officer or agent of the Corporation having custody of the books
in which proceedings of meetings of Shareholders are recorded.
Delivery to the Corporation's principal place of business shall be
addressed to the President or the principal executive officer of the
Corporation. If no record date shall have been fixed by the Board of
Directors and prior action of the Board of Directors is required by
statute, the record date for determining Shareholders entitled to
consent to action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts a
resolution taking such prior action.
7
<PAGE> 11
Section 2.11 Action by Written Consent.
Unless otherwise provided by law or the Corporation's Articles of
Incorporation, any action required or permitted to be taken by the Shareholders
of the Corporation may be taken without a meeting, without prior notice and
without a vote, if a consent in writing setting forth the action so taken,
shall have been signed by all of the Shareholders entitled to vote with respect
to the action that is the subject of the consent. Except as provided above, no
action shall be taken by the Shareholders by written consent.
Section 2.12 Authorization of Proxies.
Any Shareholder may vote either in person or by proxy executed in
writing by the Shareholder. A telegram, telex, cablegram, or similar
transmission by the Shareholder, or a photographic, photostatic, facsimile, or
similar reproduction or a writing executed by the Shareholder, shall be treated
as an execution in writing. No proxy will be valid after eleven (11) months
from the date of its execution, unless otherwise provided in the proxy. A proxy
shall be revocable unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest.
Section 2.13 Inspectors and Voting Procedures.
(a) The Corporation may, in advance of any meeting of
Shareholders, appoint one or more inspectors to act at the meeting and
make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting
of Shareholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) If any inspectors are elected, the inspectors shall (i)
ascertain the number of shares outstanding and the voting power of
each share, the number of shares represented at the meeting, the
existence of a quorum, and the authority, validity and effect of
proxies, (ii) count and tabulate all votes, assents and consents, and
determine and announce results, and (iii) do all other acts as may be
proper to conduct elections or votes with fairness to all
Shareholders. The inspectors, if any are elected, may appoint or
retain other persons or entities to assist the inspectors in the
performance of the duties of the inspectors.
8
<PAGE> 12
ARTICLE 3.
DIRECTORS
Section 3.1 Management.
The property, affairs and business of the Corporation shall be managed
by or under the direction of the Board of Directors which may exercise all
powers of the Corporation and do all lawful acts and things as are not by law,
by the Corporation's Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the Shareholders.
Section 3.2 Number and Term.
The number of directors may be fixed from time to time by resolution
of the Board of Directors adopted by the affirmative vote of a majority of the
entire Board of Directors, but shall consist of not less than nine members nor
more than 18 members. Directors need not be Shareholders. No decrease in the
number of directors shall have the effect of shortening the term of office of
any incumbent director.
Section 3.3 Quorum and Manner of Action.
At all meetings of the Board of Directors a majority of the total
number of directors holding office shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law, by the
Corporation's Articles of Incorporation or these Bylaws. If at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given other than by
announcement at such adjourned meeting. Attendance by a director at a meeting
shall constitute a waiver of notice of such meeting except where a director
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 3.4 Vacancies.
Except as otherwise provided by law or the Corporation's Articles of
Incorporation, in the case of any vacancy in the Board of Directors, however
created, the vacancy or vacancies may be filled by majority vote of the
directors remaining on the whole Board of Directors although less than a
quorum, or by a sole remaining director. In the event one or more directors
shall resign, effective at a future date, such vacancy or vacancies shall be
filled by election at an annual or special meeting of Shareholders called for
that purpose, or by a majority of the directors who will remain on the whole
Board of Directors, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors shall be filled by the
9
<PAGE> 13
Board of Directors for a term of office continuing only until the next election
of one or more directors by the Shareholders; 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.
Section 3.5 Resignations.
A director may resign at any time upon written notice of resignation
to the Corporation. Any resignation shall be effective immediately unless a
certain effective date is specified therein, in which event it will be
effective upon such date and acceptance of any resignation shall not be
necessary to make it effective.
Section 3.6 Removals.
Any director or the entire Board of Directors may be removed, only for
cause, and another person or persons may be elected to serve for the remainder
of his or their term, by the holders of a majority of the shares of the
Corporation entitled to vote in the election of directors. In case any vacancy
so created shall not be filled by the Shareholders at such meeting, such
vacancy may be filled by the directors as provided in Section 3.4.
Section 3.7 Annual Meetings.
The annual meeting of the Board of Directors shall be held, if a
quorum be present, immediately following each annual meeting of the
Shareholders at the place such meeting of Shareholders took place, for the
purpose of organization and transaction of any business that might be
transacted at a regular meeting of the Board of Directors, and no notice of
such meeting shall be necessary. If a quorum is not present, such annual
meeting may be held at any other time or place that may be specified in a
notice given in the manner provided in Section 3.9 for special meetings of the
Board of Directors or in a waiver of notice thereof.
Section 3.8 Regular Meetings.
Regular meetings of the Board of Directors may be held without notice
at such places and times as shall be determined from time to time by resolution
of the Board of Directors. Except as otherwise provided by law, any business
may be transacted at any regular meeting of the Board of Directors.
Section 3.9 Special Meetings.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, the Chief Executive Officer, the President, or by any
director. Notice of any special meeting, effective upon delivery in accordance
herewith, shall be given at least two days prior thereto by written notice
delivered personally, or by written notice mailed or sent by facsimile
transmission to each director at his business address. If mailed, the notice
shall be deemed to be delivered three days following its deposit in the United
States mail so addressed, with postage thereon prepaid. If given by
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<PAGE> 14
facsimile transmission, the notice shall be deemed to be delivered when sent
and confirmed electronically. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any special meetings need be
specified in any notice or written waiver of notice unless so required by the
Corporation's Articles of Incorporation or by these Bylaws. Any and all
business may be transacted at a special meeting, unless limited by law, the
Corporation's Articles of Incorporation or by these Bylaws.
Section 3.10 Organization of Meetings.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as such Board of Directors may from time to time
determine, and all matters shall be determined by the vote of a majority of the
directors present at any meeting at which there is a quorum, except as
otherwise provided by the Corporation's Articles of Incorporation, these Bylaws
or by law.
Section 3.11 Place of Meetings.
The Board of Directors may hold its meetings and have one or more
offices, and keep the books of the Corporation, outside the State of Texas, at
any office or offices of the Corporation, or at any other place as it may from
time to time by resolution determine.
Section 3.12 Compensation of Directors.
Directors shall not receive any stated salary for their services as
directors, but by resolution of the Board of Directors a fixed honorarium or
fees and expenses, if any, of attendance may be allowed for attendance at each
meeting. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending such committee meetings.
Section 3.13 Action by Unanimous Written Consent.
Unless otherwise restricted by law, the Corporation's Articles of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee.
Section 3.14 Participation in Meetings by Telephone.
Unless otherwise restricted by the Corporation's Articles of
Incorporation or these Bylaws, members of the Board of Directors or of any
committee thereof may participate in a meeting of such
11
<PAGE> 15
Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting in such manner shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds
that the meeting is not lawfully called or convened.
Section 3.15 Nominations for Director.
Nominations of persons for election to the Board of the corporation at
the Annual Meeting of Stockholders, other than by the Board or a nominating
committee designated by the Board, must be made in compliance with Section
2.4(a)(1)(C).
ARTICLE 4.
COMMITTEES OF THE BOARD
Section 4.1 Membership and Authorities.
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board of Directors, designate one or more directors to
constitute such committees as the Board of Directors may determine, each of
which committees to the extent provided in such resolution or resolutions or in
these Bylaws, shall have and may exercise, subject to the provisions of Article
2.36 of the TBCA, all the powers of the Board of Directors in the management of
the business and affairs of the Corporation, except in those cases where the
authority of the Board of Directors is specifically denied to such committee or
committees by law, the Corporation's Articles of Incorporation or these Bylaws,
and may authorize the seal of the Corporation to be affixed to all papers that
may require such seal. The designation of any committee and the delegation
thereto of authority shall not operate to relieve the Board of Directors, or
any member thereof, of any responsibility imposed upon it or him by law.
Section 4.2 Minutes.
Each committee designated by the Board of Directors shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required.
Section 4.3 Vacancies.
The Board of Directors may designate one or more of its members as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of such committee. If no alternate members have been
appointed, the committee member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting
12
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in the place of any absent or disqualified member. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of,
and to dissolve, any committee.
Section 4.4 Telephone Meetings.
Members of any committee designated by the Board of Directors may
participate in or hold a meeting by use of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
Section 4.4 shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
Section 4.5 Action Without Meeting.
Any action required or permitted to be taken at a meeting of any
committee designated by the Board of Directors may be taken without a meeting
if a consent in writing, setting forth the action so taken, is signed by all
the members of the committee and filed with the minutes of the committee
proceedings. Such consent shall have the same force and effect as a unanimous
vote at a meeting.
ARTICLE 5.
OFFICERS
Section 5.1 Number and Title.
The officers of the Corporation shall be a Chairman of the Board; a
Chief Executive Officer; a President; one or more Executive Vice Presidents,
Senior Vice Presidents and Vice Presidents; a Secretary; a Treasurer; and such
other officers as the Board of Directors may deem to be necessary. Any two or
more offices may be held by the same person. If any two or more offices are
held by the same person, such person shall be entitled to exercise the rights
and duties of each office as set forth hereinafter. If the holder of two or
more corporate offices is required to sign any corporate documents,
instruments, certificates, agreements, or any other documents on the
Corporation's behalf, then the signature of such person in any one of his
capacities shall be sufficient to bind the Corporation.
Section 5.2 Term of Office; Vacancies.
So far as is practicable, all officers shall be elected by the Board
of Directors at the annual meeting of the Board of Directors each year and
shall hold office until the next such meeting of the Board of Directors in the
subsequent year and until their respective successors are elected and qualified
or until their earlier resignation or removal. If any vacancy shall occur in
any office, the
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<PAGE> 17
Board of Directors may elect or appoint a successor to fill such vacancy for
the remainder of the term.
Section 5.3 Removal of Elected Officers.
Any officer may be removed at any time, with or without cause, by
affirmative vote of a majority of the whole Board of Directors, at any regular
meeting or at any special meeting called for such purpose.
Section 5.4 Resignations.
Any officer may resign at any time upon written notice of resignation
to the President, Secretary or Board of Directors of the Corporation. Any
resignation shall be effective immediately unless a date certain is specified
for it to take effect, in which event it shall be effective upon such date, and
acceptance of any resignation shall not be necessary to make it effective,
irrespective of whether the resignation is tendered subject to such acceptance.
Section 5.5 The Chairman of the Board.
The Chairman of the Board, if one shall be elected, shall preside at
all meetings of the Shareholders and Board of Directors, unless otherwise
determined by the Board of Directors. In addition, the Chairman of the Board
shall perform whatever duties and shall exercise all powers that are given to
him by the Board of Directors.
Section 5.6 Chief Executive Officer.
The Chief Executive Officer shall be the most senior executive officer
of the Corporation; shall (in the absence of the Chairman of the Board, if one
be elected) preside at meetings of the Shareholders and Board of Directors;
shall have general and active management of business of the Corporation; shall
implement the general directives, plans and policies formulated by the Board of
Directors; and shall further have such duties, responsibilities and authorities
as may be assigned to him by the Board of Directors. He may sign, with any
other proper officer, certificates for shares of the Corporation and any deeds,
bonds, mortgages, contracts and other documents which the Board of Directors
has authorized to be executed, except where required by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors or these Bylaws, to some other
officer or agent of the corporation. In the absence of the Chief Executive
Officer, his duties shall be performed and his authority may be exercised by
the President of the Corporation.
Section 5.7 President.
The President shall, after the Chief Executive Officer, be the most
senior executive officer of the corporation and shall, subject to the authority
of the Chief Executive Officer, implement the
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<PAGE> 18
general plans and directives of the Board of Directors and perform such other
duties as may be assigned to him by the Board of Directors.
Section 5.8 Vice Presidents.
The several Vice Presidents, including Executive Vice Presidents and
Senior Vice Presidents, shall have such powers and duties as may be assigned to
them by these Bylaws and as may from time to time be assigned to them by the
Board of Directors and may sign, with any other proper officer, certificates
for shares of the Corporation.
Section 5.9 Secretary.
The Secretary, if available, shall attend all meetings of the Board of
Directors and all meetings of the Shareholders and record the proceedings of
the meetings in a book to be kept for that purpose and shall perform like
duties for any committee of the Board of Directors as shall designate him to
serve. He shall give, or cause to be given, notice of all meetings of the
Shareholders and meetings of the Board of Directors and committees thereof and
shall perform such other duties incident to the office of secretary or as may
be prescribed by the Board of Directors or the President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or any Assistant Secretary, or any other person whom the
Board of Directors may designate, shall have authority to affix the same to any
instrument requiring it, and when so affixed it may be attested by his
signature or by the signature of any Assistant Secretary or by the signature of
such other person so affixing such seal.
Section 5.10 Assistant Secretaries.
Each Assistant Secretary shall have the usual powers and duties
pertaining to his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the President or the Secretary. The
Assistant Secretary or such other person as may be designated by the President
shall exercise the powers of the Secretary during that officer's absence or
inability to act.
Section 5.11 Treasurer or Chief Financial Officer.
The Treasurer or Chief Financial Officer shall have the custody of and
be responsible for the corporate funds and securities, shall keep full and
separate accounts of receipts and disbursements in the books belonging to the
Corporation and shall deposit all monies and other valuable effects in the name
and the credit of the Corporation in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer or Chief Financial Officer and of the
financial condition of the Corporation and he shall perform all other duties
incident to the position of Treasurer or Chief Financial Officer, or as may be
prescribed by the Board of Directors or the President. If required
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by the Board of Directors, he shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 5.12 Assistant Treasurers.
Each Assistant Treasurer shall have the usual powers and duties
pertaining to his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the President or the Treasurer. The
Assistant Treasurer or such other person designated by the President shall
exercise the power of the Treasurer during that officer's absence or inability
to act.
Section 5.13 Subordinate Officers.
The Board of Directors may (i) appoint such other subordinate officers
and agents as it shall deem necessary who shall hold their offices for such
terms, have such authority and perform such duties as the Board of Directors
may from time to time determine, or (ii) delegate to any committee or officer
the power to appoint any such subordinate officers or agents.
Section 5.14 Salaries and Compensation.
The salary or other compensation of officers shall be fixed from time
to time by the Board of Directors. The Board of Directors may delegate to any
committee or officer the power to fix from time to time the salary or other
compensation of officers.
ARTICLE 6.
INDEMNIFICATION
(a) 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 an 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
16
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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 Section 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 by that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise.
(b) 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.
(c) 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 7.
CAPITAL STOCK
Section 7.1 Certificates of Stock.
Certificates of stock shall be issued to each Shareholder certifying
the number of shares owned by him in the Corporation and shall be in a form not
inconsistent with the Articles of Incorporation and as approved by the Board of
Directors. The certificates shall be signed by the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Secretary
or an Assistant Secretary, or the Treasurer, Chief Financial Officer or an
Assistant Treasurer and may be sealed with the seal of the Corporation or a
facsimile thereof. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate ceases to hold
such position, such certificate may nevertheless be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, each certificate representing
shares shall conspicuously set forth in full or summarize on the face or back
of the certificate either (i) the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof to the
17
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extent they have been filed and determined and the authority of the Board of
Directors to fix and determine the designations, preferences, limitations and
relative rights of subsequent series, or (ii) a summary thereof; provided that,
except as otherwise provided by statute, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock a statement
that such information is set forth in the Articles of Incorporation on file in
the office of the Secretary of State of the State of Texas, and the Corporation
will furnish without charge to each Shareholder who so requests the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 7.2 Lost Certificates.
The Board of Directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the owner of such certificate, or his legal representative. When authorizing
the issuance of a new certificate, the Board of Directors may in its
discretion, as a condition precedent to the issuance thereof, require the
owner, or his legal representative, to give a bond in such form and substance
with such surety as it may direct, to indemnify the Corporation against any
claim that may be made on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
Section 7.3. Dividends.
Subject to Article 2.38 of the TBCA and the provisions of the
Corporation's Articles of Incorporation, if any, and except as otherwise
provided by law, the directors may declare dividends upon the capital stock of
the Corporation as and when they deem it to be expedient. Such dividends may be
paid in cash, in property or in shares of the Corporation's capital stock.
Before declaring any dividend there may be set apart out of the funds of the
Corporation available for dividends, such sum or sums as the directors from
time to time in their discretion determine to be proper for working capital or
as a reserve fund to meet contingencies or for equalizing dividends, or for
such other purposes as the directors shall determine to be in the best interest
of the Corporation and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 7.4. Registered Shareholders.
Except as expressly provided by law, the Corporation's Articles of
Incorporation or these Bylaws, the Corporation shall be entitled to treat
registered Shareholders as the only holders and owners in fact of the shares
standing in their respective names and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, regardless of whether it shall have express or other
notice thereof.
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Section 7.5. Transfer of Stock.
Transfers of shares of the capital stock of the Corporation shall be
made only on the books of the Corporation by the registered owners thereof, or
by their legal representatives or their duly authorized attorneys. Upon any
such transfers the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock transfer books and
ledgers, by whom they shall be canceled and new certificates shall thereupon be
issued.
ARTICLE 8.
MISCELLANEOUS PROVISIONS
Section 8.1. Corporate Seal.
If one is adopted, the corporate seal shall have inscribed thereon the
name of the Corporation and shall be in such form as may be approved by the
Board of Directors. Such seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced.
Section 8.2. Fiscal Year.
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
Section 8.3. Checks, Drafts, Notes.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation, and in
such manner as shall from time to time be determined by resolution (whether
general or special) of the Board of Directors or may be prescribed by any
officer or officers, or any officer and agent jointly, thereunto duly
authorized by the Board of Directors.
Section 8.4. Notice and Waiver of Notice.
Whenever notice is required to be given to any director or Shareholder
under the provisions of applicable law, the Corporation's Articles of
Incorporation or these Bylaws, such notice shall be in writing and delivered
whether (i) personally, or (ii) by registered or certified mail, or (iii) by
telegram, telecopy, or similar facsimile means (delivered during the
recipient's regular business hours). Such notice shall be sent to such director
or Shareholder at the address or telecopy number as it appears on the records
of the Corporation, unless prior to the sending of such notice he has
designated, in a written request to the Secretary of the Corporation, another
address or telecopy number to which notices are to be sent. Notices shall be
deemed given when received, if sent by telegram, telex, telecopy or similar
facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telex, telecopy or
other facsimile means); and when delivered and receipted for (or upon the date
of attempted delivery
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where delivery is refused), if hand delivered, sent by express courier or
delivery service, or sent by certified or registered mail. Whenever notice is
required to be given under any provision of law, the Corporation's Articles of
Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable
or other form of recorded communication, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business on the ground that the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Corporation's Articles of Incorporation or
these Bylaws.
Section 8.5. Examination of Books and Records.
The Board of Directors shall determine from time to time whether, and
if allowed, when and under what conditions and regulations the accounts and
books of the Corporation (except such as may by statute be specifically opened
to inspection) or any of them shall be open to inspection by the Shareholders,
and the Shareholders' rights in this respect are and shall be restricted and
limited accordingly.
Section 8.6. Voting Upon Shares Held by the Corporation.
Unless otherwise provided by law or by the Board of Directors, the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
or any Vice President, acting on behalf of the Corporation, shall have full
power and authority to attend and to act and to vote at any meeting of
shareholders of any corporation, partnership, venture or limited liability
company in which the Corporation may hold stock or other equity interest and,
at any such meeting, shall possess and may exercise any and all of the rights
and powers incident to the ownership of such equity interest which, as the
owner thereof, the Corporation might have possessed and exercised, if present.
The Board of Directors by resolution from time to time may confer like powers
upon any person or persons.
ARTICLE 9.
AMENDMENTS
Except as expressly provided in the Corporation's Articles of
Incorporation, the directors, by the affirmative vote of a majority of the
entire Board of Directors and without the assent or vote of the Shareholders,
may at any meeting, provided the substance of the proposed amendment shall have
been stated in the notice of the meeting, make, repeal, alter, amend or rescind
any of these Bylaws or to adopt new Bylaws. The Shareholders shall not make,
repeal, alter, amend or rescind any of the provisions of these Bylaws except by
the holders of not less than a majority of the shares of stock of the
Corporation entitled to vote in the election of directors.
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EXHIBIT 4.1
===============================================================================
GROUP MAINTENANCE AMERICA CORP.
as the Company
and
THE SUBSIDIARIES NAMED HEREIN
as Guarantors
to
STATE STREET BANK AND TRUST COMPANY
as Trustee
-----------------------
INDENTURE
Dated as of January 22, 1999
-----------------------
up to $200,000,000
9 3/4% Senior Subordinated Notes due 2009,
Series A
9 3/4% Senior Subordinated Notes due 2009,
Series B
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1)........................................................ 6.9
310(a)(2)........................................................ 6.9
310(a)(3)........................................................ N.A
310(a)(4)........................................................ N.A.
310(a)(5)........................................................ N.A.
310(b)........................................................... 6.8; 6.10
310(c)........................................................... N.A.
311(a)........................................................... 6.13
311(b)........................................................... 6.13
311(c)........................................................... N.A.
312(a)........................................................... 7.1; 7.2
312(b)........................................................... 7.2
312(c)........................................................... 7.2
313(a)........................................................... 7.3
313(b)........................................................... 7.3
313(c)........................................................... 1.6
313(d)........................................................... 7.3
314(a)........................................................... 7.4
314(b)........................................................... N.A.
314(c)(1)........................................................ 1.2
314(c)(2)........................................................ 1.2
314(c)(3)........................................................ N.A.
314(d)........................................................... N.A.
314(e)........................................................... 1.2
314(f)........................................................... N.A.
315(a)........................................................... 6.1
315(b)........................................................... 6.2
315(c)........................................................... 6.1
315(d)........................................................... 6.1
315(e)........................................................... 5.14
316(a)(1)(A)..................................................... 5.12
316(a)(1)(B)..................................................... 5.13
316(a)(2)........................................................ N.A.
316(a)(last sentence)............................................ 1.1*
316(b)........................................................... 5.7; 5.8
316(c)........................................................... 1.4
317(a)(1)........................................................ 5.3
317(a)(2)........................................................ 5.4
317(b)........................................................... 10.3
317(a)........................................................... 1.7
</TABLE>
- --------------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture
N.A. means Not Applicable
* Definition of "Outstanding."
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions and Other Provisions
of General Application
<S> <C> <C>
SECTION 1.1. Definitions....................................................1
SECTION 1.2. Compliance Certificates and Opinions..........................32
SECTION 1.3. Form of Documents Delivered to Trustee........................33
SECTION 1.4. Acts of Holders; Record Dates.................................33
SECTION 1.5. Notices to Trustee, the Company or a Guarantor................36
SECTION 1.6. Notice to Holders; Waiver.....................................37
SECTION 1.7. Conflict with Trust Indenture Act.............................37
SECTION 1.8. Effect of Headings and Table of Contents......................37
SECTION 1.9. Successors and Assigns........................................37
SECTION 1.10. Separability Clause...........................................38
SECTION 1.11. Benefits of Indenture.........................................38
SECTION 1.12. Governing Law.................................................38
SECTION 1.13. Legal Holidays................................................38
ARTICLE II
Security Forms
SECTION 2.1. Forms Generally...............................................38
ARTICLE III
The Securities
SECTION 3.1. Title and Terms...............................................39
SECTION 3.2. Denominations.................................................40
SECTION 3.3. Execution, Authentication, Delivery and Dating................40
SECTION 3.4. Temporary Securities..........................................41
SECTION 3.5. Registration, Registration of Transfer and Exchange...........42
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities..............43
SECTION 3.7. Payment of Interest; Rights Preserved.........................44
SECTION 3.8. Persons Deemed Owners.........................................45
SECTION 3.9. Cancellation..................................................45
</TABLE>
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SECTION 3.10. Computation of Interest.......................................46
SECTION 3.11. CUSIP and CINS Numbers........................................46
SECTION 3.12. Deposits of Monies............................................46
SECTION 3.13. Book-Entry Provisions for Global Securities...................46
SECTION 3.14. Special Transfer Provisions...................................47
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.......................51
SECTION 4.2. Application of Trust Money....................................52
ARTICLE V
Remedies
SECTION 5.1. Events of Default.............................................53
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment............55
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.......................................................56
SECTION 5.4. Trustee May File Proofs of Claim..............................57
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities...58
SECTION 5.6. Application of Money Collected................................58
SECTION 5.7. Limitation on Suits...........................................59
SECTION 5.10. Unconditional Right of Holders to Receive Principal, Premium
and Interest..................................................60
SECTION 5.11. Restoration of Rights and Remedies............................60
SECTION 5.12. Rights and Remedies Cumulative................................60
SECTION 5.13. Delay or Omission Not Waiver..................................60
SECTION 5.14. Control by Holders............................................61
SECTION 5.15. Waiver of Past Defaults.......................................61
SECTION 5.16. Undertaking for Costs.........................................61
SECTION 5.17. Waiver of Stay or Extension Laws..............................62
ARTICLE VI
The Trustee
SECTION 6.1. Certain Duties and Responsibilities...........................62
SECTION 6.2. Notice of Defaults............................................63
SECTION 6.3. Certain Rights of Trustee.....................................64
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SECTION 6.4. Not Responsible for Recitals or Issuance of Securities........65
SECTION 6.5. May Hold Securities...........................................65
SECTION 6.6. Money Held in Trust...........................................66
SECTION 6.7. Compensation and Reimbursement................................66
SECTION 6.8. Conflicting Interests.........................................67
SECTION 6.9. Corporate Trustee Required; Eligibility.......................67
SECTION 6.10. Resignation and Removal; Appointment of Successor.............67
SECTION 6.11. Acceptance of Appointment by Successor........................69
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business...70
SECTION 6.13. Preferential Collection of Claims Against the Company or a
Guarantor.....................................................70
SECTION 6.14. Appointment of Authenticating Agent...........................70
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.....72
SECTION 7.2. Preservation of Information; Communications to Holders........72
SECTION 7.3. Reports by Trustee............................................73
SECTION 7.4. Reports by Company............................................73
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1. Company or Guarantor May Consolidate, Etc. Only on Certain
Terms.........................................................74
SECTION 8.2. Successor Substituted.........................................75
ARTICLE IX
Amendments; Waivers; Supplemental Indentures
SECTION 9.1. Amendments, Waivers and Supplemental Indentures Without
Consent of Holders............................................76
SECTION 9.2. Modifications, Amendments and Supplemental Indentures with
Consent of Holders............................................77
SECTION 9.3. Execution of Supplemental Indentures..........................78
SECTION 9.4. Effect of Supplemental Indentures.............................79
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SECTION 9.5. Conformity with Trust Indenture Act...........................79
SECTION 9.6. Reference in Securities to Supplemental Indentures............79
SECTION 9.7. Waiver of Certain Covenants...................................79
SECTION 9.8. No Liability for Certain Persons..............................80
ARTICLE X
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest....................80
SECTION 10.2. Maintenance of Office or Agency...............................80
SECTION 10.3. Money for Security Payments to be Held in Trust...............81
SECTION 10.4. Existence; Activities.........................................82
SECTION 10.5. Maintenance of Properties.....................................83
SECTION 10.6. Payment of Taxes and Other Claims.............................83
SECTION 10.7. Maintenance of Insurance......................................83
SECTION 10.8. Limitation on Indebtedness....................................84
SECTION 10.9. Limitation on Restricted Payments.............................84
SECTION 10.10. Limitation on Issuance of Preferred Stock of Restricted
Subsidiaries..................................................88
SECTION 10.11. Limitation on Transactions with Affiliates....................88
SECTION 10.12. Limitation on Liens...........................................89
SECTION 10.13. Change of Control.............................................89
SECTION 10.14. Disposition of Proceeds of Asset Sales........................90
SECTION 10.15. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.............................93
SECTION 10.16. Limitation on Issuance of Subordinated Indebtedness...........94
SECTION 10.17. Additional Subsidiary Guarantees..............................94
SECTION 10.18. Limitation on Designations of Unrestricted Subsidiaries.......95
SECTION 10.19. Provision of Financial Information............................96
SECTION 10.20. Statement by Officers as to Default; Compliance Certificates..97
ARTICLE XI
Redemption of Securities
SECTION 11.1. Right of Redemption...........................................97
SECTION 11.2. Applicability of Article......................................97
SECTION 11.3. Election to Redeem; Notice to Trustee.........................97
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SECTION 11.4. Selection by Trustee of Securities To Be Redeemed............98
SECTION 11.5. Notice of Redemption.........................................98
SECTION 11.6. Deposit of Redemption Price..................................99
SECTION 11.7. Securities Payable on Redemption Date........................99
SECTION 11.8. Securities Redeemed in Part.................................100
ARTICLE XII
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option To Effect Defeasance or Covenant
Defeasance..................................................100
SECTION 12.2. Defeasance and Discharge....................................101
SECTION 12.3. Covenant Defeasance.........................................101
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.............102
SECTION 12.5. Deposited Money and U.S. Government Obligations To Be Held
in Trust; Miscellaneous Provisions..........................104
SECTION 12.6. Reinstatement...............................................105
ARTICLE XIII
Guaranty
SECTION 13.1. Guaranty....................................................105
SECTION 13.2. Limitation on Liability.....................................108
SECTION 13.3. Execution and Delivery of Guarantees........................108
SECTION 13.4. Guarantors May Consolidate, Etc., on Certain Terms..........109
SECTION 13.5. Release of Guarantors.......................................109
SECTION 13.6. Successors and Assigns......................................110
SECTION 13.7. No Waiver, etc..............................................110
SECTION 13.8. Modification, etc...........................................110
SECTION 13.9. Subordination of Guarantees.................................111
ARTICLE XIV
Subordination
SECTION 14.1. Securities Subordinate to Senior Indebtedness and Senior to
Subordinated Indebtedness...................................111
SECTION 14.2. Payment Over of Proceeds Upon Dissolution, Etc..............112
SECTION 14.3. No Payment When Designated Senior Indebtedness in Default...112
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SECTION 14.4. Subrogation to Rights of Holders of Senior Indebtedness.....114
SECTION 14.5. Provisions Solely to Define Relative Rights.................114
SECTION 14.6. Trustee to Effectuate Subordination.........................115
SECTION 14.7. No Waiver of Subordination Provisions.......................115
SECTION 14.8. Notice to Trustee...........................................115
SECTION 14.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.......................................................116
SECTION 14.10. Trustee Not Fiduciary for Holders of Senior Indebtedness....116
SECTION 14.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights............................117
SECTION 14.12. Article Applicable to Paying Agents.........................117
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Schedule A The Guarantors
Exhibit A-1 Form of Security
Exhibit A-2 Form of Series B Security
Exhibit B Global Securities Legend
Exhibit C Transfer Letter
Exhibit D Form of Notation on Security Relating to Guaranty
</TABLE>
<PAGE> 10
INDENTURE, dated as of January 22, 1999, among GROUP MAINTENANCE
AMERICA CORP., a corporation duly organized and existing under the laws of the
State of Texas (herein called the "Company"), having its principal office at 8
Greenway Plaza, Suite 1500, Houston, Texas 77046, the Subsidiaries of the
Company named in Schedule A as of the date of issuance (herein called the
"Initial Guarantors") and STATE STREET BANK AND TRUST COMPANY, as trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 9 3/4%
Senior Subordinated Notes due 2009 (the "Securities") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
Each Guarantor desires to make the Guaranty provided herein and has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company, authenticated and delivered hereunder and duly issued by the Company,
and each Guaranty, when executed and delivered hereunder by each Guarantor, the
valid obligations of the Company and each Guarantor, and to make this Indenture
a valid agreement of the Company and each Guarantor, in accordance with their
and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders
of the Securities, as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE> 11
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (whether or not
such is indicated herein);
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case
may be, of this Indenture;
(5) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(6) each reference herein to a rule or form of the Commission
shall mean such rule or form and any rule or form successor thereto,
in each case as amended from time to time.
Whenever this Indenture requires that a particular ratio or
amount be calculated with respect to a specified period after giving effect to
certain transactions or events on a pro forma basis, such calculation shall be
made as if the transactions or events occurred on the first day of such period,
unless otherwise specified.
"Acquired Indebtedness means Indebtedness of a Person (a)
assumed in connection with an Asset Acquisition from such Person or (b)
existing at the time such Person becomes or is merged into a Subsidiary of any
other Person other than Indebtedness incurred in connection with, or in
contemplation of, such Asset Acquisition or such Person becoming a Subsidiary.
"Act," when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" means, with respect to any specified Person, (i) any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) any other
Person that owns, directly or indirectly, 10% or more of such specified
Person's Voting Stock or (iii) any officer or director of (A) any such
specified Person, (B) any Subsidiary of such specified Person or (C) any Person
described in clauses (i) or (ii) above.
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"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company, or shall be
merged with or into the Company or any Restricted Subsidiary of the Company, or
(b) the acquisition by the Company or any Restricted Subsidiary of the Company
of the assets of any Person which constitute all or substantially all of the
assets of such Person, any division or line of business of such Person or,
other than in the ordinary course of business, any other properties or assets
of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition by the
Company or any Restricted Subsidiary of the Company to any Person other than
the Company or a Restricted Subsidiary of the Company, of (a) any Capital Stock
of any Restricted Subsidiary of the Company; (b) all or substantially all of
the properties and assets of any division or line of business of the Company or
any Restricted Subsidiary of the Company; or (c) any other properties or assets
of the Company or any Restricted Subsidiary outside of the ordinary course of
business, other than (i) sales of obsolete, damaged or used equipment or other
equipment or inventory sales in the ordinary course of business, (ii) sales of
assets in one or a series of related transactions for an aggregate
consideration of less than $5,000,000, (iii) sales of accounts receivable for
financing purposes, (iv) the grant in the ordinary course of business of any
non-exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property, (v) any Lien (or foreclosure thereon) securing
Indebtedness to the extent that such Lien is granted in compliance with Section
10.12 and (vi) any Restricted Payment permitted by Section 10.9. For the
purposes of this definition, the term "Asset Sale" shall not include any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions of Article VIII.
"Asset Sale Offer" has the meaning specified in Section 10.14.
"Asset Sale Offer Price" has the meaning specified in Section
10.14.
"Asset Sale Purchase Date" has the meaning specified in Section
10.14.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 6.14 hereof to act on behalf of the Trustee to
authenticate Securities.
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"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from such date
of such determination to the date or dates of each successive scheduled
principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness and (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Board of Directors" means the board of directors of a company
or its equivalent, including managers of a limited liability company, general
partners of a partnership or trustees of a business trust, or any duly
authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of a company to have been duly adopted by
the Board of Directors of such company and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York or the city in which the corporate trust office
of the Trustee is located are authorized or obligated by law or executive order
to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock or equity participations, and any
rights (other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock and, including,
without limitation, with respect to partnerships, limited liability companies
or business trusts, ownership interests (whether general or limited) and any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, such
partnerships, limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease
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<PAGE> 14
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness, maturing not more than one year after such time, issued or
guaranteed by the United States Government or any agency thereof, (b)
commercial paper, maturing not more than one year from the date of issue, or
corporate demand notes, in each case rated at least A-1 by S&P or P-1 by
Moody's, (c) any certificate of deposit (or time deposits represented by such
certificates of deposit) or bankers' acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are issued
or sold by a commercial banking institution that is a member of the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000, (d) any repurchase agreement entered into with any
commercial banking institution of the stature referred to in clause (c) which
(i) is secured by a fully perfected security interest in any obligation of the
type described in any of clauses (a) through (c) and (ii) has a market value at
the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such commercial banking institution thereunder, (e)
investments in short term asset management accounts managed by any bank party
to the New Credit Agreement (or by affiliate of any such bank) which are
invested in indebtedness of any state or municipality of the United States or
of the District of Columbia and which are rated under one of the two highest
ratings then obtainable from S&P or by Moody's or investments of the types
described in clauses (a) through (d) above, and (f) investments in funds
investing primarily in investments of the types described in clauses (a)
through (e) above.
"Cedel" means Cedel Bank, Societe anonyme.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total Voting Stock of the Company; (b) the Company consolidates with, or
merges with or into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is converted into or exchanged for
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<PAGE> 15
cash, securities or other property, other than any such transaction where (i)
the outstanding Voting Stock of the Company is converted into or exchanged for
Voting Stock (other than Redeemable Capital Stock) of the surviving or
transferee corporation and (ii) immediately after such transaction no "person"
or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange
Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
surviving or transferee corporation; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office; or (d) the Company is liquidated or dissolved or adopts a plan of
liquidation."
"Change of Control Offer" has the meaning specified in Section
10.13.
"Change of Control Purchase Date" has the meaning specified in
Section 10.13.
"Change of Control Purchase Price" has the meaning specified in
Section 10.13.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations thereunder.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means the common stock of the Company, par value
$0.001 per share.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of
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<PAGE> 16
this Indenture and thereafter "Company" shall mean such successor Person.
"Company Request or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its Chief Financial Officer, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee or Paying Agent, as
applicable.
"Consolidated Cash Flow Available for Fixed Charges" as of any
date of determination means, with respect to any Person for any period, (i) the
sum of, without duplication, the amounts for such period, taken as a single
accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash
Charges, (c) Consolidated Interest Expense, (d) Consolidated Income Tax Expense
(other than income tax expense (either positive or negative) attributable to
extraordinary gains or losses), (e) one-fourth of Consolidated Rental Payments,
and (f) if any Asset Sale or Asset Acquisition shall have occurred since the
first day of any four-quarter period for which "Consolidated Cash Flow
Available for Fixed Charges" is being calculated (including to the date of
calculation) (A) the amount of any compensation, remuneration or other benefit
paid or provided to any employee, consultant, Affiliate or equity owner of the
entity involved in any such Asset Acquisition to the extent such costs are
eliminated or reduced (or public announcement has been made of the intent to
eliminate or reduce such costs) prior to the date of such calculation and not
replaced and (B) the amount of any reduction in general, administrative or
overhead costs of the entity involved in any such Asset Acquisition, to the
extent such amounts under clauses (A) and (B) would be permitted to be
eliminated in a pro forma income statement prepared in accordance with Rule
11-02 of Regulation S-X, less (ii) the sum of (x) non-cash items increasing
Consolidated Net Income and (y) all cash payments during such period relating
to non-cash charges that were added back in determining Consolidated Cash Flow
Available for Fixed Charges in the most recent Four Quarter Period (as defined
in the definition of "Consolidated Fixed Charge Coverage Ratio").
"Consolidated Fixed Charge Coverage Ratio" as of any date of
determination means, with respect to any Person, the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of such Person for
the four full fiscal quarters, treated as one period, for which financial
information in respect thereof is available immediately preceding the date of
the transaction (the "Transaction Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter
period being referred to
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<PAGE> 17
herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of such Person for the Four Quarter Period. In calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio", (i)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum of, without duplication, the amounts for such period of
(i) Consolidated Interest Expense, (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Redeemable
Capital Stock of such Person and its Restricted Subsidiaries on a consolidated
basis and (iii) one-fourth of Consolidated Rental Payments.
"Consolidated Income Tax Expense" means, with respect to any
Person for any period, the provision for federal, state, local and foreign
income taxes of such Person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person for any period, without duplication, the sum of (i) the interest expense
of such Person and its Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit,
bankers' acceptance financing or similar facilities and (e) all accrued
interest and (ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such
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<PAGE> 18
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for
any period, the consolidated net income (or loss) of such Person and its
Restricted Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (i) all extraordinary gains or losses (net of fees and
expenses relating to the transaction giving rise thereto), (ii) the portion of
net income of such Person and its Restricted Subsidiaries allocable to minority
interests in unconsolidated Persons or to Investments in Unrestricted
Subsidiaries to the extent that cash dividends or distributions have not
actually been received by such Person or one of its Restricted Subsidiaries,
(iii) net income (or loss) of any Person combined with such Person or one of
its Restricted Subsidiaries on a "pooling of interests" basis attributable to
any period prior to the date of combination, (iv) gains or losses in respect of
any Asset Sales by such Person or one of its Restricted Subsidiaries (net of
fees and expenses relating to the transaction giving rise thereto), on an
after-tax basis, (v) the net income of any Restricted Subsidiary of such Person
to the extent that the declaration of dividends or similar distributions by
that Restricted Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders and
(vi) any gain or loss realized as a result of the cumulative effect of a change
in accounting principles.
"Consolidated Non-cash Charges" means, with respect to any
Person for any period, the aggregate depreciation, amortization (including
amortization of goodwill and other intangibles) and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss).
"Consolidated Rental Payments" of any Person means, for any
period, the aggregate rental obligations of such Person and its Restricted
Subsidiaries (not including taxes, insurance, maintenance and similar expenses
that the lessee is obligated to pay under the terms of the relevant leases),
determined on a consolidated basis in accordance with GAAP, payable in respect
of such period (net of income from subleases thereof, not including taxes,
insurance, maintenance and similar expenses that the sublessee is obligated to
pay under the
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<PAGE> 19
terms of such sublease), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such Person and
its Restricted Subsidiaries or in the notes thereto, excluding, however, in any
event, (i) that portion of Consolidated Interest Expense of such Person
representing payments by such Person or any of its Restricted Subsidiaries in
respect of Capitalized Lease Obligations (net of payments to such Person or any
of its Restricted Subsidiaries under subleases qualifying as capitalized lease
subleases to the extent that such payments would be deducted in determining
Consolidated Interest Expense) and (ii) the aggregate amount of amortization of
obligations of such Person and its Restricted Subsidiaries in respect of such
Capitalized Lease Obligations for such period (net of payments to such Person
or any of its Restricted Subsidiaries and subleases qualifying as capitalized
lease subleases to the extent that such payments could be deducted in
determining such amortization amount).
"control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be
administered, which address as of the date of this Indenture is located at
Goodwin Square, 23rd Floor, 225 Asylum Street, Hartford, CT 06103, Attention:
Corporate Trust, Administration.
"corporation" means (except in the definition of "Subsidiary") a
corporation, association, company, joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section 12.3.
"Credit Facility" means one or more debt or commercial paper
facilities with banks or other institutional lenders (including the New Credit
Agreement) providing for revolving credit loans, term loans, receivables or
inventory financing (including through the sale of receivables or inventory to
such lenders or to special purpose, bankruptcy remote entities formed to borrow
from such lenders against such receivables or inventory) or letters of credit,
in each case together with any amendments, supplements, modifications
(including by any extension of the maturity thereof), substitutions,
refinancing or replacements thereof by a lender or syndicate of lenders in one
or more successive transactions (including any such transaction
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<PAGE> 20
that changes the amount available thereunder, replaces such agreement or
document, or provides for other agents or lenders).
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Defeasance" has the meaning specified in Section 12.2.
"Depository" means The Depositary Trust Company, or its
successor.
"Designated Guarantor Senior Indebtedness" means, with respect
to a Guarantor, amounts owing by such Guarantor under the Credit Facility and
guarantees by such Guarantor of Designated Senior Indebtedness.
"Designated Senior Indebtedness" means (i) all Indebtedness
under the New Credit Agreement and (ii) any other issue of Senior Indebtedness
which (a) at the time of the determination is equal to or greater than
$25,000,000 in aggregate principal amount and (b) is specifically designated by
the Company in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Disinterested Member of the Board of Directors of the Company"
means, with respect to any transaction or series of transactions, a member of
the Board of Directors of the Company other than a member who has any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions or who is an Affiliate, officer, director or an employee
of any Person (other than the Company) who has any direct or indirect financial
interest in or with respect to such transaction or series of transactions.
"Distribution Compliance Period" has the meaning set forth in
Section 3.14.
"Equity Offering" means a sale of Common Stock of the Company
net cash proceeds to the Company of at least $25,000,000.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 10.14.
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<PAGE> 21
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" has the meaning specified in the form of
the Security in Exhibit A.
"Expiration Date" shall have the meaning set forth in the
definition of "Offer to Purchase."
"Fair Market Value" means, with respect to any asset, the price
(after taking into account any liabilities relating to such assets) which could
be negotiated in an arm's-length free market transaction between a willing
seller and a willing buyer, neither of which is under pressure or compulsion to
complete the transaction. Fair Market Value shall be determined by the Board of
Directors of the Company in good faith.
"Federal Bankruptcy Code" means Title 11, U.S. Code.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary
which is not organized under the laws of the United States, or any possession
or territory thereof, any State of the United States, or the District of
Columbia.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States of America, which are applicable
at the date of the Indenture.
"Global Securities" means one or more Regulation S Global
Securities and 144A Global Securities.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts available to be drawn down under letters of credit of
another Person. The term "guarantee" used as a verb has a corresponding
meaning. The term "guarantor" shall mean any Person providing a guarantee of
any obligation.
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<PAGE> 22
"Guarantor Senior Indebtedness" of a Guarantor means the
principal of, premium, if any, and interest on any Indebtedness of such
Guarantor, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to such Guarantor's Guaranty. Without limiting the generality
of the foregoing, (x) "Guarantor Senior Indebtedness" shall include the
principal of, premium, if any, and interest on all obligations of every nature
of such Guarantor from time to time owed to the lenders under the New Credit
Agreement, including, without limitation, principal of and interest on, and all
fees, indemnities and expenses payable under the New Credit Agreement, and (y)
in the case of amounts owing under the New Credit Agreement and guarantees of
Designated Senior Indebtedness, "Guarantor Senior Indebtedness" shall include
interest accruing thereon subsequent to the occurrence of any Event of Default
specified in clause (7) or (8) of Section 5.1 relating to such Guarantor,
whether or not the claim for such interest is allowed under any applicable
Bankruptcy Code. Notwithstanding the foregoing, "Guarantor Senior Indebtedness"
shall not include (a) Indebtedness evidenced by the Notes or the Guarantees,
(b) Indebtedness that is expressly subordinate or junior in right of payment to
any Indebtedness of such Guarantor, (c) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to such Guarantor, (d) Indebtedness which is
represented by Redeemable Capital Stock, (e) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than any
current liabilities owing under the New Credit Agreement, or the current
portion of any long-term Indebtedness which would constitute Guarantor Senior
Indebtedness but for the operation of this clause (e)), (f) Indebtedness of or
amounts owed by such Guarantor for compensation to employees or for services
rendered to such Guarantor, (g) any liability for federal, state, local or
other taxes owed or owing by such Guarantor, (h) Indebtedness of such Guarantor
to the Company or a Subsidiary of the Company or any other Affiliate of the
Company or any of such Affiliate's Subsidiaries, (i) that portion of any
Indebtedness which is incurred by such Guarantor in violation of this
Indenture, (j) Indebtedness of such Guarantor that by operation of law is
subordinate to any general unsecured obligations of such Guarantor and (k)
amounts owing under leases.
"Guarantor Subordinated Indebtedness" means, with respect to a
Guarantor, indebtedness and other obligations of such Guarantor which are
expressly subordinated in right of payment to such Guarantor's Guaranty.
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<PAGE> 23
"Guarantors" shall mean each Initial Guarantor and each future
Subsidiary that is not designated an Unrestricted Subsidiary in accordance with
Section 10.18 herein.
"Guaranty" means each guaranty of the Securities contained in
Article XIII given by each Guarantor.
"Guaranty Obligations" means, with respect to each Guarantor,
the obligations of such Guarantor under Article XIII.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit, banker's
acceptance or other similar credit transaction, (b) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (c)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding consignments, trade accounts payable arising in the ordinary course
of business, (d) all Capitalized Lease Obligations of such Person, (e) all
Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount
of such obligation being deemed to be the lesser of the Fair Market Value of
such property or asset or the amount of the obligation so secured), (f) all
guarantees of Indebtedness referred to in this definition by such Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all Interest Rate Protection Obligations of such Person, and (i) any
amendment, supplement, modification, deferral, renewal, extension, refinancing
or refunding of any liability of the types referred to in clauses (a) through
(h) above; provided, however, that Indebtedness shall not include (i) any
holdback or escrow of the purchase price of prop-
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<PAGE> 24
erty, services, businesses or assets, (ii) any contingent payment obligations
incurred in connection with the acquisition of assets or businesses, which are
contingent on the performance of the assets or businesses so acquired or (iii)
obligations under performance bonds, performance guarantees, surety bonds,
appeal bonds, security deposits or similar obligations. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant hereto, and if such price is based upon, or measured by, the fair
market value of such Redeemable Capital Stock, such fair market value shall be
approved in good faith by the Board of Directors of the issuer of such
Redeemable Capital Stock.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Guarantors" see introduction to this Indenture.
"Initial Purchasers" means Merrill Lynch, NationsBanc Montgomery
Securities LLC, ABN Amro Incorporated, The Robinson-Humphrey Company, LLC,
Jefferies & Company, Inc. and U.S. Bancorp Libra, a division of U.S. Bancorp
Investments, Inc.
"Initial Securities" means the 9 3/4% Senior Subordinated Notes
due 2009, Series A, of the Company.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Protection Agreement" means, with respect to any
Person, 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 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.
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<PAGE> 25
"Interest Rate Protection Obligations" means the net obligations
of any Person pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), but other than advances to customers in the ordinary
course of business recorded as an account receivable in accordance with GAAP on
the books of the Person making the advance, or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person.
"Issue Date" means the original date of issuance of the Initial
Securities.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim or
other encumbrance upon or with respect to any property of any kind. A Person
shall be deemed to own subject to a Lien any property which such Person has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement (other than a consignment), capital lease or other
title retention agreement.
"Maturity Date" means January 15, 2009.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
net of (i) brokerage commissions and other fees and expenses (including,
without limitation, fees and expenses of legal counsel and investment bankers,
recording fees, transfer fees and appraisers' fees) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary of the Company) owning a beneficial interest in the
assets subject to the Asset
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<PAGE> 26
Sale, (iv) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such Asset
Sale, and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary of the Company, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary of the Company, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"New Credit Agreement" means the Second Amended and Restated
Credit Agreement dated as of October 15, 1998 among the Company, the
Subsidiaries of the Company listed as guarantors therein, Chase Bank of Texas,
National Association, as the Agent, Bank of America Texas, N.A., as co-agent,
Paribas, as syndication agent and ABN AMRO Bank, N.A., as documentation agent,
and the Banks named therein, including any notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended (including any amendment and restatement thereof),
modified, extended, deferred, renewed, refunded, substituted or replaced or
refinanced from time to time, including any agreement extending the maturity
of, refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder or adding Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agents, creditor, lender or group of creditors
or lenders.
"Non-U.S. Person" means a Person that is not a U.S. Person as
such term is defined in Regulation S.
"Notice of Default" means a written notice of the kind specified
in Section 5.2.
"Offer" means a Change of Control Offer or an Asset Sale Offer.
"Offer to Purchase" means an Offer sent by or on behalf of the
Company by first-class mail, postage prepaid, to each Holder of Securities at
its address appearing in the-register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified
in such Offer at the purchase price specified in such Offer (as determined
pursuant to this Indenture). Unless otherwise provided in Section 10.13 or
10.14 or otherwise required by applicable law, the Offer shall specify an
expiration date (the
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<PAGE> 27
"Expiration Date") of the Offer to Purchase, which shall be not less than 20
Business Days nor more than 60 days after the date of such Offer (or such later
date as may be necessary for the Company to comply with the Exchange Act), and
a settlement date (the "Purchase Date") for purchase of Securities to occur no
later than five Business Days after the Expiration Date. The Company shall
notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price"); and the
amount of accrued and unpaid interest to be paid;
(4) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(5) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(6) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(7) that on the Purchase Date the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to
the Offer to Purchase and that interest thereon shall cease to accrue
on and after the Purchase Date;
(8) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being, if
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<PAGE> 28
the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by the Holder thereof or
his attorney duly authorized in writing);
(9) that Holders will be entitled to withdraw all or any portion
of Securities tendered if the Company (or its Paying Agent) receives,
not later than the close of business on the fifth Business Day next
preceding the Expiration Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Security the Holder tendered, the certificate number of the Security
the Holder tendered and a statement that such Holder is withdrawing
all or a portion of his tender;
(10) that (a) if Securities purchasable at an aggregate Purchase
Price less than or equal to the Purchase Amount are duly tendered and
not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Securities and (b) if Securities purchasable at an
aggregate Purchase Price in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Securities on a pro rata basis based on the
Purchase Price therefor or such other method as the Company shall
deem fair and appropriate (subject in each case to applicable rules
of the Depositary and any securities exchange upon which the
Securities may then be listed), with such adjustments as may be
deemed appropriate so that only Securities in denominations of $1,000
principal face amount or integral multiples thereof shall be
purchased; and
(11) that in the case of a Holder whose Security is purchased
only in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions of this Indenture pertaining to the type of Offer to which it
relates.
"Offering Memorandum" means the Offering Memorandum dated
January 19, 1999 pursuant to which the Securities were offered, and any
supplement thereto.
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<PAGE> 29
"Officer's Certificate" means a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the President or a Vice
President, the Chief Financial Officer, the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officer's Certificate given pursuant to
Section 10.20 shall be the principal executive, financial or accounting officer
of the Company.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
in reliance on Rule 144A under the Securities Act.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
(iv) Securities as to which Defeasance has been effected
pursuant to Section 12.2;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as
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<PAGE> 30
of any date, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding (it being understood that
Securities to be acquired by the Company pursuant to an Offer or other offer to
purchase shall not be deemed to be owned by the Company until legal title to
such Securities passes to the Company), except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on behalf
of the Company.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company and the Guarantors evidenced by
up to $130,000,000 principal amount of the Securities and the
Guarantees;
(b) Indebtedness of the Company and Restricted Subsidiaries
under one or more Credit Facilities in an aggregate principal amount
at any one time outstanding not to exceed $300,000,000 less any
amounts permanently repaid in accordance with Section 10.14;
(c) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(d) Indebtedness of the Company or any Restricted Subsidiary of
the Company incurred in respect of bankers' acceptances and letters
of credit in the ordinary course of business, including Indebtedness
evidenced by letters of credit issued in the ordinary course of
business to support the insurance or self-insurance obligations of
the Company or any of its Restricted Subsidiaries (including to
secure workers' compensation and other similar insurance coverages),
in an aggregate amount not to exceed $30,000,000 at any time; but
excluding letters of credit issued in respect of or to secure money
borrowed;
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<PAGE> 31
(e) (i) Interest Rate Protection Obligations of the Company or a
Guarantor covering Indebtedness of the Company or a Guarantor and
(ii) Interest Rate Protection Obligations of any Restricted
Subsidiary covering Permitted Indebtedness or Acquired Indebtedness
of such Restricted Subsidiary; provided that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest
Rate Protection Obligations correspond bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under
Section 10.8 and (y) the notional principal amount of any such
Interest Rate Protection Obligations that exceeds the principal
amount of the Indebtedness to which such Interest Rate Protection
Obligations relate shall not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held by
the Company or another Restricted Subsidiary, except that (i) any
transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to the Company or another Restricted
Subsidiary), (ii) the sale, transfer or other disposition by the
Company or any Restricted Subsidiary of the Company of Capital Stock
of a Restricted Subsidiary which is owed Indebtedness of another
Restricted Subsidiary such that it shall no longer be a Restricted
Subsidiary and (iii) the designation of a Restricted Subsidiary which
is owed Indebtedness of another Restricted Subsidiary as an
Unrestricted Subsidiary shall, in each case, be an incurrence of
Indebtedness by such Restricted Subsidiary subject to the other
provisions of this Indenture;
(g) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to
the payment and performance of the obligations of the Company under
this Indenture and the Notes, except that (i) any transfer of such
Indebtedness by a Restricted Subsidiary (other than to another
Restricted Subsidiary) and (ii) the sale, transfer or other
disposition by the Company or any Restricted Subsidiary of the
Company of Capital Stock of a Restricted Subsidiary which is owed
Indebtedness of the Company such that it shall no longer be a
Restricted Subsidiary and (iii) the designation of a Restricted
Subsidiary which is owed Indebtedness of the Company shall, in each
case, be an incurrence of Indebtedness by the Company, subject to the
other provisions of this Indenture;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the
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ordinary course of business; provided, however, that such
Indebtedness is extinguished within five Business Days of incurrence;
(i) Indebtedness of the Company or any Restricted Subsidiary, in
addition to that described in clauses (a) through (h) of this
definition, in an aggregate principal amount outstanding at any time
not to exceed $20,000,000;
(j) (i) Indebtedness of the Company the proceeds of which are
used solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of the Company or any of its Restricted
Subsidiaries incurred pursuant to the Consolidated Fixed Charge
Coverage Ratio test of the proviso of Section 10.8 or clauses (a),
(c) or (j) of this definition and (ii) Indebtedness of any Restricted
Subsidiary of the Company the proceeds of which are used solely to
refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of such Restricted Subsidiary incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio test of the proviso of
Section 10.8 or clauses (a), (c) or (j) of this definition (in each
case other than the Indebtedness to be refinanced, redeemed or
retired as described under "Use of Proceeds" in the Offering
Memorandum); provided, however, that (x) the principal amount of
Indebtedness incurred pursuant to this clause (j) (or, if such
Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness)
shall not exceed the sum of principal amount of Indebtedness so
refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated purchase, plus the amount of
expenses in connection therewith, and (y) in the case of Indebtedness
incurred by the Company pursuant to this clause (j) to refinance
Subordinated Indebtedness, such Indebtedness (A) has no scheduled
principal payment prior to the 91st day after the Maturity Date, (B)
has an Average Life to Stated Maturity greater than the remaining
Average Life to Stated Maturity of the Securities and (C) is
subordinated to the Securities in the same manner and to the same
extent that the Subordinated Indebtedness being refinanced is
subordinated to the Securities;
(k) Indebtedness arising from agreements of the Company or any
Restricted Subsidiary providing for indemnification, adjustment or
holdback of purchase price or simi-
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lar obligations, in each case, incurred or assumed in connection
with the acquisition or disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any
person acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition; and
(l) Guarantees by the Company or guarantees by a Guarantor of
Indebtedness that was permitted to be incurred under this Indenture.
For purposes of determining compliance with Section 10.8
described in the preceding paragraph, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the clauses of the preceding paragraph, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one such clause, and (B)
the amount of Indebtedness issued at a price that is less than the principal
amount thereof shall be equal to the amount of the liability in respect thereof
determined in conformity with GAAP.
"Permitted Investments" means any of the following: (i)
Investments in the Company or in a Restricted Subsidiary; (ii) Investments in
another Person, if as a result of such Investment (A) such other Person becomes
a Restricted Subsidiary or (B) such other Person is merged or consolidated with
or into, or transfers or conveys all or substantially all of its assets to the
Company or a Restricted Subsidiary; (iii) Investments representing Capital
Stock or obligations issued to, the Company or any of its Restricted
Subsidiaries in settlement of claims against any other Person by reason of a
composition or readjustment of debt or a reorganization of any debtor of the
Company or such Restricted Subsidiary; (iv) Investments in Interest Rate
Protection Agreements on commercially reasonable terms entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business in connection with the operations of the business of the Company or
its Restricted Subsidiaries to hedge against fluctuations in interest rates on
its outstanding Indebtedness; (v) Investments in the Securities; (vi)
Investments in Cash Equivalents; (vii) Investments acquired by the Company or
any Restricted Subsidiary in connection with an Asset Sale permitted under
Section 10.14 to the extent such Investments are non-cash proceeds as permitted
under Section 10.14; (viii) advances to employees or officers of the Company or
any Restricted Subsidiary in the ordinary course of business; (ix) any
Investment to the extent that the consideration therefor is Capital Stock
(other than Redeemable Capital Stock) of the Company; (x) any loans, payments
or other advances made pursuant to any employee benefit plans (including
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plans for the benefit of directors) or employment agreements or other
compensation arrangements, in each case as approved by the Board of Directors
of the Company in its good faith judgment, not to exceed $1,000,000 at any one
time outstanding; and (xi) other Investments not to exceed $25,000,000 at any
time outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the Issue Date;
(b) Liens securing Indebtedness under the New Credit Agreement;
(c) any Lien securing Acquired Indebtedness created prior to
(and not created in connection with, or in contemplation of) the
incurrence of such Indebtedness by the Company or any Restricted
Subsidiary, if such Lien does not attach to any property or assets of
the Company or any Restricted Subsidiary other than the property or
assets subject to the Lien prior to such incurrence; (d) Liens in
favor of the Company or a Restricted Subsidiary;
(e) Liens on and pledges of the Capital Stock of any
Unrestricted Subsidiary securing any Indebtedness of such
Unrestricted Subsidiary;
(f) Liens for taxes, assessments or governmental charges or
claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may
be required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, contracts for utilities,
performance and return-of-money bonds and other similar obligations
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<PAGE> 35
(exclusive of obligations for the payment of borrowed money);
(i) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(k) any interest or title of a lessor under any Capitalized
Lease Obligation or operating lease;
(l) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business, provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or
assets of the Company or any Restricted Subsidiary other than the
property and assets so acquired and (ii) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(m) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(n) Liens securing refinancing Indebtedness permitted under
clause (j) of the definition of "Permitted Indebtedness"; provided
such Liens are not secured by any property or assets of the Company
or any Restricted Subsidiary other than the property or assets
securing such refinanced Indebtedness;
(o) Liens incurred in the ordinary course of business by the
Company or any Restricted Subsidiary with respect to obligations that
do not exceed $5,000,000 at any time outstanding;
(p) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
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<PAGE> 36
(q) Liens securing Interest Rate Protection Obligations which
Interest Rate Protection Obligations relate to Indebtedness that is
secured by Liens otherwise permitted under this Indenture; and
(r) Liens on property or assets of a Foreign Restricted
Subsidiary securing Indebtedness of Foreign Restricted Subsidiaries.
"Person" means any individual, corporation, partnership (general
or limited), limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock," as applied to any Person, means Capital Stock
of any class or series (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
shares of Capital Stock of any other class or series of such Person.
"Private Placement Legend" shall mean the legend initially set
forth on the Securities in the form set forth on Exhibit A-1.
"Purchase Amount" means, with respect to an Offer to Purchase,
the maximum aggregate amount payable by the Company for Securities under the
terms of such Offer to Purchase, if such Offer to Purchase were accepted in
respect of all Securities.
"Purchase Date" shall have the meaning set forth in the
definition of "Offer to Purchase."
"Qualified Equity Interest" in a Person means any interest in
Capital Stock of such Person, other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning
specified in Rule 144A under the Securities Act.
"Record Expiration Date" has the meaning specified in Section
1.4.
"Redeemable Capital Stock" means any class or series of Capital
Stock that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be required to be redeemed prior
to the
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Maturity Date or is redeemable at the option of the holder thereof at any time
prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date; provided that Capital Stock
will not constitute Redeemable Capital Stock solely because the holders thereof
have the right to require the Company to repurchase or redeem such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Notes Registration
Rights Agreement dated as of January 22, 1999 by and among the Company, the
Guarantors and the Initial Purchasers, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 1 or July 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global Security
in registered form representing the aggregate principal amount of Securities
sold in reliance on Regulation S under the Securities Act.
"Replacement Assets" has the meaning specified in Section 10.14.
"Representative" means the agent in respect of the New Credit
Agreement.
"Required Filing Dates" has the meaning specified in Section
10.19.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Office, including, any vice
president, any assistant vice president,
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<PAGE> 38
any assistant secretary, any assistant treasurer, or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning specified in Section 10.9.
"Restricted Security" means a Security that constitutes a
"restricted security" within the meaning of Rule 144(a)(3) under the Securities
Act; provided, however, that the Trustee shall be entitled to request and
conclusively rely on an opinion of counsel with respect to whether any Security
constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that
is not an Unrestricted Subsidiary.
"Revocation" has the meaning set forth in Section 10.18.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Securities" means securities designated in the first paragraph
of the RECITALS OF THE COMPANY.
"Securities Act" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Indebtedness" means the principal of, premium, if any,
and interest on any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities. Without
limiting the generality of the foregoing, (x) "Senior Indebtedness" shall
include the principal of, premium, if any, and interest on all obligations of
every nature of the Company from time to time owed to the lenders under the New
Credit Agreement, including, without limit-
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ation, principal of and interest on, and all fees, indemnities and expenses
payable under the New Credit Agreement and (y) in the case of Designated Senior
Indebtedness, "Senior Indebtedness" shall include interest accruing thereon
subsequent to the occurrence of any Event of Default specified in clause (7) or
(8) under Section 5.1, whether or not the claim for such interest is allowed
under any applicable Bankruptcy Code. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the Securities,
(b) Indebtedness that is expressly subordinate or junior in right of payment to
any Indebtedness of the Company, (c) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to the Company, (d) Indebtedness which is
represented by Redeemable Capital Stock, (e) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than any
current liabilities owing under the New Credit Agreement, or the current
portion of any long-term Indebtedness which would constitute Senior
Indebtedness but for the operation of this clause (e)), (f) Indebtedness of or
amounts owed by the Company for compensation to employees or for services
rendered to the Company, (g) any liability for federal, state, local or other
taxes owed or owing by the Company, (h) Indebtedness of the Company to a
Subsidiary of the Company or any other Affiliate of the Company or any of such
Affiliate's Subsidiaries, (i) that portion of any Indebtedness, which is
incurred by the Company in violation of this Indenture (j) Indebtedness of the
Company that by operation of law is subordinate to any general unsecured
obligations of the Company and (k) amounts owing under leases.
"Significant Subsidiary" of any Person means a Restricted
Subsidiary of such Person which would be a significant subsidiary of such
Person as of such date as determined in accordance with the definition in Rule
1-02(w) of Article I of Regulation S-X promulgated by the Commission and as in
effect on the date of this Indenture.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" means, when used with respect to any Security
or any installment of interest thereon, the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due
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and payable (including as a result of the exercise of any put option contained
in such instrument).
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Securities.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned by such Person, by one or more Subsidiaries of such Person or
by such Person and one or more Subsidiaries thereof and (ii) any other Person
(other than a corporation), including, without limitation, a partnership,
limited liability company, business trust or joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities" means one or more Securities in the
form set forth in Exhibit A-2, including, without limitation, the Exchange
Securities, that do not and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means each Subsidiary of the Company
designated as such pursuant to and in compliance with Section 10.18.
"U.S. Government Obligation" has the meaning specified in
Section 12.4.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
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"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted
Subsidiary of the Company of which 100% of the outstanding Capital Stock is
owned by the Company or another Wholly-Owned Restricted Subsidiary of the
Company or both. For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company or a Guarantor to
the Trustee to take any action under any provision of this Indenture, the
Company or the Guarantor shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officer's Certificate,
if to be given by an officer of the Company or a Guarantor, or an opinion of
Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed
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opinion as to whether or not such covenant or condition has been
complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or a
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or a Guarantor stating that the information with respect to such
factual matters is in the possession of the Company or such Guarantor, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company or a
Guarantor, as applicable. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instru-
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ment or instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.1) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, the
Company or a Guarantor in reliance thereon, whether or not notation of such
action is made upon such Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities; provided that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain
Holders after such record date; pro-
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vided that no such action shall be effective hereunder unless taken on or prior
to the applicable Record Expiration Date by Holders of the requisite principal
amount of Outstanding Securities on such record date. Nothing in this paragraph
shall prevent the Company from setting a new record date for any action for
which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no
action by any Person be cancelled and of no effect), nor shall anything in this
paragraph be construed to render ineffective any action taken pursuant to or in
accordance with any other provision of this Indenture by Holders of the
requisite principal amount of Outstanding Securities on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Record Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 1.6.
The Trustee may but need not set any day as a record date for
the purpose of determining the Holders of Outstanding Securities entitled to
join in the giving or making of (i) any Notice of Default, (ii) any declaration
of acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (v) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Record Expiration Date by Holders of the requisite principal amount of
Outstanding Securities on such record date. Nothing in this paragraph shall be
construed to prevent the Trustee from setting a new record date for any action
(whereupon the record date previously set shall automatically and without any
action by any Person be cancelled and of no effect), nor shall anything in this
paragraph be construed to render ineffective any action taken pursuant to or in
accordance with any other provision of this Indenture by Holders of the
requisite principal amount of Outstanding Securities on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Trustee, at the Company's expense, shall cause notice of such record date, the
matter(s) to be submitted for potential action by Holders and the applicable
Record Expiration Date to be given to the Company in writing and to each Holder
of Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section,
the party hereto that sets such record date may desig-
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<PAGE> 45
nate any day as the "Record Expiration Date" and from time to time may change
the Record Expiration Date to any earlier or later day; provided that no such
change shall be effective unless notice of the proposed new Record Expiration
Date is given to the other party hereto in writing, and to each Holder of
Securities in the manner set forth in Section 1.6, on or before the existing
Record Expiration Date. If a Record Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto that
set such record date shall be deemed to have initially designated the 180th day
after such record date as the Record Expiration Date with respect thereto,
subject to its right to change the Record Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Record Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.5. Notices to Trustee, the Company or a Guarantor.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(i) the Trustee by any Holder or by the Company or a Guarantor
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing and mailed, first class postage
prepaid, to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration,
(ii) the Company or a Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class
postage prepaid, to the Company or such Guarantor addressed to it at
the address of the Company's principal office, for the attention of
the [General Counsel], specified in the first paragraph of this
instrument, or at any other address previously furnished in writing
to the Trustee by the Company and such Guarantor.
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SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
or receive such notice, nor any defect in any such notice, to any particular
Holder shall affect the sufficiency or validity of such notice. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture
Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under the Trust Indenture
Act to be part of and govern this Indenture, such provision of the Trust
Indenture Act shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, such provision shall be deemed to be so modified or excluded, as the
case may be.
SECTION 1.8. Effect of Headings and Table
of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
Without limiting Articles VIII and XIII hereof, all covenants
and agreements in this Indenture by each of the Com-
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pany or the Guarantors shall bind their respective successors and assigns,
whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders of Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws principles thereof.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect (including with respect to the accrual of interest) as if
made on the Interest Payment Date, Redemption Date or Purchase Date, or at the
Stated Maturity.
ARTICLE II
Security Forms
SECTION 2.1. Forms Generally.
The Securities and the Trustee's certificates of authentication
shall be in substantially the forms set forth or referenced in Exhibit A-1 and
Exhibit A-2 annexed hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
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and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or the Depository or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof.
ARTICLE III
The Securities
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000
principal amount, of which $130,000,000 will be issued on the Issue Date,
except for Securities authenticated and delivered upon registration or transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.4, 3.5, 3.6, 9.6 or 11.8 or in connection with an Offer pursuant to Sections
10.13 or 10.14.
The Securities shall be known and designated as the "9 3/4%
Senior Subordinated Notes due 2009" of the Company. Their Stated Maturity for
payment of principal shall be January 15, 2009. Interest on the Securities
shall accrue at the rate of 9 3/4% per annum and shall be payable semi-annually
on each January 15 and July 15, commencing July 15, 1999, to the Holders of
record of Securities at the close of business on the January 1 and July 1,
respectively, immediately preceding such Interest Payment Date. Interest on the
Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issue Date of such Securities.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Trustee in the
Borough of Manhattan, The City of New York or such other office maintained by
the Trustee for such purpose and at any other office or agency maintained by
the Company for such purpose; provided, however, that, at the option of the
Company, payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
The Company may be required to make a Change of Control Offer as
provided in Section 10.13, or an Asset Sale Offer as provided in Section 10.14.
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The Securities shall be redeemable as provided in Article XI and
the Securities.
The Securities shall be subject to Defeasance and/or Covenant
Defeasance as provided in Article XII.
SECTION 3.2. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 principal amount and any integral
multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 hereto. The
Exchange Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-2 hereto.
The terms and provisions contained in the Securities annexed
hereto as Exhibits A-1 and A-2 shall constitute, and are hereby expressly,
made, a part of this Indenture and, to the extent applicable, the Company and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A and
Securities offered and sold in reliance on Regulation S shall be issued
initially in the form of one or more Global Securities, substantially in the
form set forth in Exhibit A-1, deposited with the Trustee, as custodian for the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided and shall bear the legend set forth in Exhibit B. The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
All Securities shall remain in the form of a Global Security,
except as provided herein.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive officer, its President or one of its
Vice Presidents, or its Chief Financial Officer, attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
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Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities; and the Trustee in
accordance with such Company order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 10.2, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations and of a like tenor. Until so
ex-
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changed the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 3.5. Registration, Registration of
Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 10.2 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as the Company may prescribe, the
Company shall provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed the initial "Security Registrar"
for the purpose of registering Securities and transfers of Securities as herein
provided.
Subject to Sections 3.13 and 3.14 of this Indenture, upon
surrender for registration of transfer of any Security at an office or agency
of the Company designated pursuant to Section 10.2 for such purpose, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one more or more new
Securities of any authorized denominations and of a like aggregate principal
amount and tenor.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount and tenor, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may re-
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quire payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Securities, other than exchanges pursuant to Section 3.4, 9.6 or 11.8 or in
accordance with any Change of Control Offer pursuant to Section 10.13 or any
Asset Sale Offer pursuant to Section 10.14, and in any such case not involving
any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 11.4 and ending at the close
of business on the day of such mailing, (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part or (iii) to
register the transfer of any Securities other than Securities having a
principal amount of $1,000 or integral multiples thereof.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute, and upon its request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of, issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
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Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more predecessor securities) is
registered at the close of business on the Regular Record Date for such
interest payment.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 15
days after
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the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given to each Holder in the manner
specified in Section 1.6, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective predecessor Securities) are
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 3.8. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 3.7) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, registration
of transfer or exchange or tendered and accepted pursuant to any Change of
Control Offer pursuant to Section 10.13 or any Asset Sale Offer pursuant to
Section 10.14 shall, if surrendered to any Person other than the Trustee, be
delive-
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ed to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of in the customary manner by the Trustee unless
otherwise directed by a Company Order.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 3.11. CUSIP and CINS Numbers.
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use), and, if so, the Trustee shall use the CUSIP
or CINS numbers in notices of redemption or repurchase as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the other identification numbers printed on the Securities, and
any such redemption or repurchase shall not be affected by any defect in or
omission of such numbers.
SECTION 3.12. Deposits of Monies.
Except to the extent payment of interest is made by the
Company's check pursuant to Section 3.1, prior to 11:00 a.m. New York City time
on each Interest Payment Date, Redemption Date, Stated Maturity, and Purchase
Date, the Company shall deposit with the Paying Agent in immediately available
funds money sufficient to make cash payments, if any, due on such Interest
Payment Date, Redemption Date, Stated Maturity and Purchase Date, as the case
may be, in a timely manner which permits the Paying Agent to remit payment to
the Holders on such Interest Payment Date, Redemption Date, Stated Maturity,
and Purchase Date, as the case may be.
SECTION 3.13. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be
delivered to the Trustee as cus-
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todian for such Depository and (iii) bear legends as set forth
in Exhibit B hereto.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository, or the Trustee as
its custodian, or under any Global Security, and the Depository may
be treated by the Company, the Trustee and any agent of the Company
or the Trustee as the absolute owner of the Global Securities for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfer of Global Securities shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global
Securities may not be transferred or exchanged for physical
securities, except that physical securities shall be transferred to
all beneficial owners in exchange for their beneficial interests in
Global Securities if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for any Global
Security, or that it will cease to be a "Clearing Agency" under the
Exchange Act, and in either case a successor Depository is not
appointed by the Company within 90 days of such notice or (ii) an
Event of Default has occurred and is continuing and the Security
Registrar has received a written request from the Depository to issue
physical securities.
(c) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the
Securities.
SECTION 3.14. Special Transfer Provisions.
(a) Transfers to Non-U.S. Persons. The following additional
provisions shall apply with respect to the registration of any
proposed transfer of and the transfer of the beneficial interest in
an Initial Security to any Non-U.S. Person:
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(i) the Security Registrar shall register the transfer of any
Initial Security, whether or not such Security bears the Private
Placement Legend, and a transfer of the beneficial interest in an
Initial Security may be made if (x) the requested transfer is after
the second anniversary of the Issue Date; provided, however, that
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any time
on or prior to the second anniversary of the Issue Date and such
transfer can otherwise be lawfully made under the Securities Act
without registering such Initial Security thereunder,(y) in the case
of the registration of a transfer by the Security Registrar, the
proposed transferor has delivered to the Security Registrar a
certificate substantially in the form of Exhibit C hereto or (i) in
the case of the transfer of the beneficial interest in an Initial
Security, (other than a transfer by an Agent Member, to which clause
(ii) below shall apply), the transfer is made in accordance with
Regulation S under the Securities Act and in accordance with clause
(iii) below to the extent applicable;
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a 144A Global Security, upon receipt by the
Security Registrar of (x) written instructions given in accordance
with the Depository's and the Security Registrar's procedures and (y)
the appropriate certificate, if any, required by clause (y) of
paragraph (i) above, together with any required legal opinions and
certifications, the Security Registrar shall register the transfer
and reflect on its books and records the date and (A) a decrease in
the principal amount of the 144A Global Security from which such
interests are to be transferred in an amount equal to the principal
amount of the Securities to be transferred and (B) an increase in the
principal amount of the Regulation S Global Security in an amount
equal to the principal amount of the Global Security to be
transferred; and
(iii) subject to Section 3.14(b), until the 41st day after the
Issue Date (the "Distribution Compliance Period"), an owner of a
beneficial interest in the Regulation S Global Security may not
transfer such interest to a transferee that is a U.S. Person or for
the account or benefit of a U.S. Person within the meaning of Rule
902(o) of the Securities Act. Subject to Section 3.14(b), during the
Distribution Compliance Period, all beneficial interests in the
Regulation S Global Security shall be transferred only through Cedel
or Euroclear, either directly if the transferor and transferee are
participants in such
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systems, or indirectly through organizations that are participants
therein.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial
Security and the transfer of the beneficial interest in an Initial
Security to a QIB (excluding Non-U.S. Persons):
(i) the Security Registrar shall register the transfer of any
Initial Security, whether or not such Security bears the Private
Placement Legend, and the transfer of the beneficial interest in an
Initial Security may be made if (x) the requested transfer is after
the second anniversary of the Issue Date; provided, however, that
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any time
on or prior to the second anniversary of the Issue Date and such
transfer can otherwise be lawfully made under the Securities Act
without registering such Initial Security thereunder, (y) in the case
of the registration of a transfer by the Security Registrar, such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for on the
form of Security stating, or has otherwise advised the Company and
the Security Registrar in writing, that it is purchasing the Security
for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (z) in the case of the transfer
of the beneficial interest in an Initial Security, (other than a
transfer by an Agent Member, to which clause (ii) below shall apply),
the transfer is made in accordance with Rule 144A under the
Securities Act; and
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Regulation S Global Security, upon receipt
by the Security Registrar of written instructions given in accordance
with the Depository's and the Security Registrar's procedures, the
Security Reg-
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istrar shall register the transfer and reflect on its books and
records the date and (A) a decrease in the principal amount of the
Regulation S Global Security from which interests are to be
transferred in an amount equal to the principal amount of the
Securities to be transferred and (B) an increase in the principal
amount of the 144A Global Security in an amount equal to the
principal amount of the Global Security to be transferred.
(c) Private Legend. Upon the registration of transfer, exchange
or replacement of Securities not bearing the Private Placement
Legend, the Security Registrar shall deliver Securities that do not
bear the Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Securities bearing the Private Placement
Legend, the Security Registrar shall deliver only Securities that
bear the Private Placement Legend unless (i) the circumstances
contemplated by paragraph (a)(i)(x) or (b)(i)(x) of this Section 3.14
exists, (ii) there is delivered to the Security Registrar an opinion
of counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Security has been sold
pursuant to an effective registration statement under the Securities
Act.
(d) Other Transfers. If a Holder proposes to transfer a Security
constituting a Restricted Security pursuant to any exemption from the
registration requirements of the Securities Act other than as
provided for by Section 3.14(a), (b) and (c), the Security Registrar
shall only register such transfer or exchange if such transferor
delivers an opinion of counsel satisfactory to the Company and the
Security Registrar that such transfer is in compliance with the
Securities Act and the terms of this Indenture.
(e) General. By its acceptance of any Security bearing the
Private Placement Legend and by its ownership of a beneficial
interest therein, each Holder of such a Security and each owner of a
beneficial interest therein acknowledges the restrictions on transfer
of such Security and of beneficial interests therein set forth in
this Indenture and in the Private Placement Legend and agrees that it
will transfer such Security and beneficial interests therein only as
provided in this Indenture.
The Security Registrar shall retain copies of all letters,
notices and other written communications received pursuant to Section 3.13 or
this Section 3.14. The Company shall
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have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
prior written notice to the Security Registrar.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed,
lost or stolen and which have been replaced or repaid as
provided in Section 3.6 and (ii) Securities for whose payment
money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section
10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation (other than Securities which have been
destroyed, lost or stolen and which have been replaced or repaid
as provided in Section 3.6),
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
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and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount sufficient to pay and
discharge the entire Indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest on the Securities to the date of such
deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be,
together with irrevocable instructions from the Company directing the
Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company or the Guarantors; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the obligations of the Company to the Trustee under Section
6.7, the obligations of the Company to any Authenticating Agent under Section
6.14 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3,
all money deposited with the Trustee pursuant to Section 4.1 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE V
Remedies
SECTION 5.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if
any, when due and payable, on any of the Securities (at Stated
Maturity, upon optional redemption, required purchase or otherwise);
or
(2) default in the payment of an installment of interest on any
of the Securities, when due and payable, for 30 days; or
(3) default in the performance, or breach, of any covenant or
agreement of the Company under this Indenture (other than a default
in the performance or breach of a covenant or agreement which is
specifically dealt with in clauses (1), (2) or (4)) and such default
or breach shall continue for a period of 45 days after written notice
has been given, by certified mail, (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of at least 25%
in aggregate principal amount of the Outstanding Securities; or
(4) (a) there shall be a default in the performance or breach of
the provisions of Section 8.1 with respect to the Company; (b) the
Company shall have failed to make or consummate an Asset Sale Offer
in accordance with the provisions of Section 10.14; or (c) the
Company shall have failed to make or consummate a Change of Control
Offer in accordance with the provisions of Section 10.13; or
(5) default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or any Significant Subsidiary of
the Company then has outstanding Indebtedness in excess of
$15,000,000, individually or in the aggregate, and (a) such default
or defaults include a failure to make a payment of principal, (b)
such Indebtedness is already due and payable in full or (c) such
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fault or defaults have resulted in the acceleration of the maturity
of such Indebtedness; or
(6) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $15,000,000, either individually or in
the aggregate, shall be entered against the Company or any
Significant Subsidiary of the Company or any of their respective
properties and shall not be discharged and there shall have been a
period of 60 days after the date on which any period for appeal has
expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(7) the entry of a decree or order by a court having
jurisdiction in the premises (A) for relief in respect of the Company
or any Significant Subsidiary in an involuntary case or proceeding
under the Federal Bankruptcy Code or any other federal, state or
foreign bankruptcy, insolvency, reorganization or similar law or (B)
adjudging the Company or any Significant Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant
Subsidiary under the Federal Bankruptcy Code or any other similar
federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any
substantial part of any of their properties, or ordering the winding
up or liquidation of any of their affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; or
(8) the institution by the Company or any Significant Subsidiary
of a voluntary case or proceeding under the Federal Bankruptcy Code
or any other similar federal, state or foreign law or any other case
or proceedings to be adjudicated a bankrupt or insolvent, or the
consent by the Company or any Significant Subsidiary to the entry of
a decree or order for relief in respect of the Company or any
Significant Subsidiary in any involuntary case or proceeding under
the Federal Bankruptcy Code or any other similar federal, state or
foreign law or to the institution of bankruptcy or insolvency
proceedings against the Company or any Significant Subsidiary, or the
filing by the Company or any Significant Subsidiary of a petition or
answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other similar federal, state or foreign law,
or the consent by it to the filing of any such petition or to the
appointment of or taking
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possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of any of the Company or any
Significant Subsidiary or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts
generally as they become due or the taking of corporate action by the
Company or any Significant Subsidiary in furtherance of any such
action; or
(9) any of the Guarantees by a Significant Subsidiary ceases to
be in full force and effect or any of such Guarantees is declared to
be null and void and unenforceable or any of such Guarantees is found
to be invalid or any of such Guarantors denies its liability under
its Guaranty (other than by reason of release of such Guarantor in
accordance with the terms of this Indenture).
SECTION 5.2. Acceleration of Maturity;
Rescission and Annulment.
If an Event of Default (other than those covered by clause (7)
or (8) of Section 5.1 with respect to the Company) shall occur and be
continuing, the Trustee, by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the Securities then Outstanding, by notice
to the Trustee and the Company, may declare the principal of, premium, if any,
and accrued and unpaid interest, if any, on all of the outstanding Securities
due and payable immediately, upon which declaration, all amounts payable in
respect of the Securities (i) shall be due and payable and (ii) if there are
any amounts outstanding under the New Credit Agreement, shall become
immediately due and payable upon the first to occur of an acceleration under
the New Credit Agreement or five business days after receipt by the Company and
the Representative under the New Credit Agreement of such notice of
acceleration. If an Event of Default specified in clause (7) or (8) of Section
5.1 with respect to the Company occurs and is continuing, then the principal
of, premium, if any, and accrued and unpaid interest, if any, on all the
outstanding Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of Securities.
After a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind such declaration if
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(B) all overdue interest on all Securities,
(C) the principal of and premium, if any, on any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities, and
(D) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal at
the rate set forth in the Securities which has become due
otherwise than by such declaration of acceleration;
(2) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and
(3) all Events of Default, other than the nonpayment of
principal of, premium, if any, and interest on the Securities that
have become due solely by such declaration of acceleration, have been
cured or waived.
No such rescission shall affect any subsequent default or impair
any right consequent thereto.
SECTION 5.3. Collection of Indebtedness and
Suits for Enforcement by Trustee.
The Company and each Guarantor covenants that if
(i) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(ii) default is made in the payment of the principal of (or
premium, if any, on) any Security on the due date for payment
thereof, including, with respect to any Security required to have
been purchased pursuant to a Change of Control Offer or an Asset Sale
Offer made by the Company, at the Purchase Date thereof, the Company
or such Guarantor will, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal (and premium, if
any) and interest, and, to the extent
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that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue
interest, at the rate provided by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
In addition to the rights and powers set forth in Section 317(a)
of the Trust Indenture Act, the Trustee shall be entitled to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Holders of the Securities allowed in any
judicial proceeding relative to the Company, any Guarantor or any other obligor
upon the Securities, its creditors, or its property, and to collect and receive
any moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Holders to make such payments to the Trustee, and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for
compensation and expenses, including counsel fees incurred by it up to the date
of such distribution.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company, a
Guarantor (or any other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by intervention in such
proceeding or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed in
any such proceeding. In particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on any such
claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event
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that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors,
or other similar committee.
SECTION 5.5. Trustee May Enforce Claims
Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, distributions and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the
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amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively;
THIRD: To the payment of any and all other amounts due under the
Indenture, the Securities or the Guarantees; and
FOURTH: To the Company (or such other Person as a court of
competent jurisdiction may direct).
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Security shall have and
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall
have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
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SECTION 5.10. Unconditional Right of Holders
to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 3.7) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or in the case of a Change of Control Offer or an Asset Sale
Offer made by the Company and required to be accepted as to such Security, on
the relevant Purchase Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 5.11. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, each Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted,
subject to the determination in such proceeding.
SECTION 5.12. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.13. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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SECTION 5.14. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(i) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(ii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.15. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default
(i) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to
have been purchased pursuant to a Change of Control Offer or an Asset
Sale Offer which has been made by the Company), or
(ii) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.16. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a
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court may require any party litigant in such suit to file an undertaking to pay
the costs of such suit, and may assess costs against any such party litigant,
in the manner and to the extent provided in the Trust Indenture Act; provided,
that neither this Section nor the Trust Indenture Act hall be deemed to
authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company or a Guarantor, in any suit
instituted by the Trustee, in any suit instituted by any Holder or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or in any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the Stated Maturity expressed in such Security (or,
in the case of redemption, on or after the Redemption Date or, in the case of a
Change of Control Offer or an Asset Sale Offer, made by the Company and
required to be accepted as to such Security, on the applicable Purchase Date,
as the case may be).
SECTION 5.17. Waiver of Stay or Extension Laws.
The Company and each Guarantor covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any usury,
stay or extension law wherever enacted, now or at any time hereafter in force,
which may affect the covenants or the performance of this Indenture; and the
Company and each Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VI
The Trustee
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by the provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture but need not verify the contents
thereof.
(b) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent misconduct, except
that no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers under this Indenture,
unless the Trustee has received security and indemnity satisfactory
to it against any loss, liability or expense. The Trustee shall not
be liable for any error of judgment unless it is proved that the
Trustee was negligent in the performance of its duties hereunder.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject
to the provisions of this Section 6.1.
SECTION 6.2. Notice of Defaults.
Within 30 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Security Register, notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of, premium, if
any, or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders.
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SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely as to the truth of the
statements and correctness of the opinions expressed therein and
shall be fully protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party
or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution of the Company;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's Certificate
directing the Trustee with respect to the taking, suffering or
omitting any such action;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
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make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled (subject to
reasonable confidentiality arrangements as may be proposed by the
Company or any Guarantor) to make reasonable examination (upon prior
notice and during regular business hours) of the books, records and
premises of the Company or a Guarantor, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or custodians or nominees and the Trustee
shall not be responsible for the supervision of, or any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture; and
(i) in the event that the Trustee is also acting as
Authenticating Agent, Paying Agent or Security Registrar hereunder,
the rights and protections afforded to the Trustee pursuant to this
Article VI shall also be afforded to such Authenticating Agent,
Paying Agent and Security Registrar.
SECTION 6.4. Not Responsible for Recitals
or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company or any Guarantor, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company or a
Guarantor with the same rights it would have if it were not
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Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other
agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to promptly
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee, its directors, officers, agents
and employees for, and to hold them harmless against, any and all
loss, damage, claim, liability or expense incurred without negligence
or bad faith on its part, including taxes (other than taxes based
upon, measured by or determined by the revenue or income of the
Trustee), arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing to it pursuant to
this Section 6.7, except with respect to funds held in trust for the benefit of
the Holders of particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section
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5.1(7) or Section 5.1(8), the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Federal or State
bankruptcy, insolvency or other similar law.
The Company's obligations under this Section 6.7 shall survive
the termination of this Indenture.
SECTION 6.8. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has, or is a wholly-owned subsidiary of a bank holding company that has, a
combined capital and surplus of at least $100,000,000 and a Corporate Trust
Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of a Federal or State supervising or examining authority, then for
the purposes of this Section and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of Section
6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor
Trustee in accordance with the applicable requirements of Section
6.11 shall not have
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been delivered to the Company and the resigning Trustee within 30
days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.9
and shall fail to resign after written request therefor by the
Company, any Guarantor or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company or any Guarantor, in each
case by a Board Resolution, may remove the Trustee, or (ii) subject
to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint
a successor Trustee. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered
to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 6.11, become
the suc-
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cessor Trustee and supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in accordance with
the applicable requirements of Section 6.11, any Holder who has been
a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, or the Trustee
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to
all Holders in the manner provided in Section 1.6. Each notice shall
include the name of the successor Trustee and the address of its
Corporate Trust Office.
(g) The resignation or removal of the Trustee pursuant to this
Section 6.10 shall not affect the obligation of the Company to
indemnify the Trustee pursuant to Section 6.7(3) in connection with
the exercise or performance by the Trustee prior to its resignation
or removal of any of its powers or duties hereunder.
(h) No Trustee under this Indenture shall be liable for any
action or omission of any successor Trustee.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
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SECTION 6.12. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of
Claims Against the Company or
a Guarantor.
If and when the Trustee shall be or become a creditor of the
Company or a Guarantor (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such Guarantor (or any such other
obligor).
SECTION 6.14. Appointment of Authenticating
Agent.
The Trustee may appoint an Authenticating Agent or Agents which
shall be authorized to act on behalf of the Trustee to authenticate Securities
issued upon original issue and upon exchange, registration of transfer or
partial redemption or partial purchase or pursuant to Section 3.6, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any
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State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$100,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such corporation shall
be otherwise eligible under this Section, without the execution or filing of
any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder,
with like effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services under this Section.
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If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the
following form:
This is one of the Securities described in the within-mentioned
Indenture.
Dated:
State Street Bank and Trust Company,
As Trustee
By:
---------------------------
As Authenticating Agent
By:
---------------------------
Authorized Signatory
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record Date, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Holders as of such Regular Record Date; and (b) at such times as the
Trustee may reasonably request in writing, within 30 days after the receipt by
the Company of any such request, a list of similar form and content to that in
subsection (a) hereof as of a date not more than 15 days prior to the time such
list is furnished; excluding from any such list names and addresses received by
the Trustee in its capacity as Security Registrar.
SECTION 7.2. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Hold-
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ers received by the Trustee in its capacity as Security Registrar, if so
acting.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company, any
Guarantor nor the Trustee nor any agent of either of them shall be held
accountable by reason of any disclosure of information as to the names and
addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing May 15,
1999, the Trustee shall transmit to Holders such reports concerning the Trustee
and its actions under this Indenture to the extent required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when the Securities are listed on any
stock exchange.
SECTION 7.4. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to the Trust Indenture Act;
provided that any such information, documents or reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall
be filed with the Trustee within 15 days after the same is so required to be
filed with the Commission.
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ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1. Company or Guarantor May
Consolidate, Etc. Only on
Certain Terms.
(A) Neither the Company nor, except as otherwise provided by
Section 13.5, any Guarantor will, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as
an entirety to, any Person or Persons, and (B) the Company will not permit any
of its Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to
any other Person or Persons, unless, in each of cases (A) and (B), at the time
and after giving effect thereto by:
(1) either:
(x) if the transaction or series of transactions is a
merger or consolidation, the Company, the Guarantor or such
Restricted Subsidiary, as the case may be, shall be the
surviving Person of such merger or consolidation, or
(y) the Person formed by such consolidation or into which
the Company, such Guarantor or such Restricted Subsidiary,
as the case may be, is merged or to which the properties
and assets of the Company, such Guarantor or such
Restricted Subsidiary, as the case may be, substantially as
an entirety, are transferred (any such surviving Person or
transferee Person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the
United States of America, any state thereof or the District
of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form
satisfactory to the Trustee, (i) in the case of the
Company, all the obligations of the Company under the
Securities, this Indenture and the Registration Rights
Agreement and (ii) in the case of a Guarantor, all the
ob-
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ligations of such Guarantor under its Guaranty, this
Indenture and the Registration Rights Agreement, and in
each case, this Indenture, the Securities, the Guarantees
and the Registration Rights Agreement shall remain in full
force and effect;
(2) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and
be continuing; and
(3) except in the case of any merger of the Company with any
Wholly-Owned Restricted Subsidiary of the Company or any merger of
Guarantors, in each case with no other Person, the Company or the
Surviving Entity, as the case may be, after giving effect to such
transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
Section 10.8 (assuming a market rate of interest with respect to such
additional Indebtedness).
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated by the foregoing provisions of
this Section 8.1, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officer's Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer, lease, assignment, or other disposition and
the supplemental indenture in respect thereof (required under clause (1)(y) of
this Section 8.1) comply with the requirements of this Indenture. Each such
Officer's Certificate shall set forth the manner of determination of the
ability to incur Indebtedness in accordance with clause (3) of this Section
8.1.
SECTION 8.2. Successor Substituted.
Except as otherwise provided by Section 13.5, upon any
consolidation or merger, or any sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all of the properties and assets of the
Company or a Guarantor in accordance with Section 8.1, the successor Person
formed by such consolidation or into which the Company, such Guarantor or a
Restricted Subsidiary, as the case may be, is merged or the
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successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of the Company or Guarantor under the Securities, such
Guarantor's Guaranty, this Indenture and/or the Registration Rights Agreement,
as applicable, with the same effect as if such successor had been named as the
Company or Guarantor in the Securities, such Guaranty, this Indenture and/or in
the Registration Rights Agreement, as the case may be, and, except in the case
of a lease, the Company, the Guarantor or such Restricted Subsidiary, as the
case may be, shall be automatically and unconditionally released and discharged
from its obligations thereunder.
For all purposes of this Indenture and the Securities (including
the provisions of this Article VIII and Sections 10.8, 10.9 and 10.12),
Subsidiaries of any Surviving Entity shall, upon consummation of such
transaction or series of related transactions, become Restricted Subsidiaries
unless and until designated Unrestricted Subsidiaries pursuant to and in
accordance with Section 10.18 and all Indebtedness, and all Liens on property
or assets, of the Company, any Guarantor and the Restricted Subsidiaries in
existence immediately prior to such transaction or series of related
transactions will be deemed to have been incurred upon consummation of such
transaction or series of related transactions.
ARTICLE IX
Amendments; Waivers; Supplemental Indentures
SECTION 9.1. Amendments, Waivers and
Supplemental Indentures
Without Consent of Holders.
Without the consent of any Holders, the Company and each
Guarantor, when authorized by Board Resolutions, and the Trustee, at any time
and from time to time, may together amend, waive or supplement this Indenture,
for any of the following purposes:
(i) to evidence the succession of another Person to the Company
or a Guarantor and the assumption by any such successor of the
covenants of the Company or such Guarantor herein and in the
Securities or such Guarantor's Guaranty and to evidence the
assumption of obligations under this Indenture and a Guaranty
pursuant to Section 10.17; or
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(ii) to add to the covenants of the Company or a Guarantor for
the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or a Guarantor; or
(iii) to secure the Securities pursuant to the requirements of
Section 10.12 or otherwise; or
(iv) to comply with any requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act; or
(v) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect
to matters or questions arising under this Indenture which shall not
be inconsistent with the provisions of this Indenture,
provided that (a) such amendment, waiver or supplement does not adversely
affect the rights of any Holder of Securities and (b) the Company shall have
delivered to the Trustee an Opinion of Counsel stating that such action
pursuant to clauses (i), (ii), (iii), (iv) or (v) above is permitted by this
Indenture. The Trustee shall not be obligated to enter into any such amendment
or supplemental indenture that adversely affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2. Modifications, Amendments and
Supplemental Indentures with
Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company and the Guarantors, when
authorized by Board Resolutions, and the Trustee may together modify, amend or
supplement this Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such modification, amendment or supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(i) reduce the principal amount of, change the fixed maturity of
or alter the redemption provisions of, the Securities,
(ii) change the currency in which any Securities or any premium
or the interest thereon is payable,
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(iii) reduce the percentage in principal amount of Outstanding
Securities that must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture or the Securities or
any Guaranty,
(iv) impair the right to institute suit for the enforcement of
any payment on or with respect to the Securities or any Guaranty,
(v) waive a default in payment with respect to the Securities or
any Guaranty,
(vi) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer after the occurrence of
a Change of Control or make and consummate an Asset Sale Offer with
respect to any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto,
(vii) reduce or change the rate or time for payment of interest
on the Securities, or
(viii) modify or change any provision of this Indenture
affecting the subordination or ranking of the Security or any
Guarantee in a manner which adversely affects the holders of
Securities.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed amendment or
supplemental indenture, but it shall be sufficient if such Act shall approve
the substance thereof.
The Trustee shall join with the Company and each Guarantor in
the execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion but shall not be obligated to enter into such amendment or
supplemental indenture.
In addition, no modification, amendment or supplement to the
provisions of Article XIV which is adverse to the interests of the lenders
under the Credit Facility shall be made without the consent of the
representative of such lenders.
SECTION 9.3. Execution of Supplemental
Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this In-
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denture, the Trustee shall be entitled to receive, and (subject to Section 6.1)
shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise; provided that the Trustee shall
enter into and execute all other supplemental indentures which satisfy all
applicable conditions under this Article IX.
SECTION 9.4. Effect of Supplemental
Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 9.5. Conformity with Trust
Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to
Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture, provided that any failure
by the Trustee to make such notation shall not affect the validity of the
matter provided for in such supplemental indenture or any Security or Guarantee
hereunder. If the Company shall so determine, new Securities or Guarantees so
modified as to conform, in the opinion of the Trustee, the Guarantors and the
Company, to any such supplemental indenture may be prepared and executed by the
Company or Guarantor and authenticated and delivered by the Trustee in exchange
for Outstanding Securities.
SECTION 9.7. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Section 8.1, provided pursuant to
Section 9.1(2) and set forth in Sections 10.4 to 10.12 and 10.15 to 10.18,
inclusive, if before the time
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for such compliance the Holders of at least a majority in principal amount of
the Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in full force
and effect; provided, however, with respect to an Offer as to which an Offer to
Purchase has been mailed, no such waiver may be made or shall be effective
against any Holder tendering Securities pursuant to such Offer, and the Company
may not omit to comply with the terms of such Offer as to such Holder.
SECTION 9.8. No Liability for Certain Persons.
No present or future incorporator, director, officer, employee,
or stockholder of the Company, nor any present or future incorporator,
director, officer or employees of any Guarantor, as such, shall have any
liability directly or indirectly for any obligations of the Company or any
Guarantor under the Securities, the Guarantees or this Indenture based on or by
reason of such obligations or their creation whether by virtue of any
constitution, statute, rule or law, or by the enforcement of any assessment or
penalty or otherwise, it being expressly agreed and understood that this
Indenture, the Securities, Guarantees and obligations are solely corporate
obligations. Each Holder by accepting a Security waives and releases all such
liability. The foregoing waiver and release is an integral part of the
consideration for the issuance of the Securities and the Guarantees.
ARTICLE X
Covenants
SECTION 10.1. Payment of Principal, Premium
and Interest.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City
of New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities
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may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company or any Guarantor in respect of the
Securities, the Guarantees and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands. In the event any such notice or
demands are so made or served on the Trustee, the Trustee shall promptly
forward copies thereof to the Company.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, the
Company will, prior to 11:00 a.m. New York City time on each due date of the
principal of (and premium, if any) or interest on any Securities, deposit with
a Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held as provided by the Trust
Indenture Act, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
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The Company shall cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will: (i) comply with the provisions of the Trust Indenture
Act applicable to it as Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by such Paying Agent; and,
upon such payment by any Paying Agent (other than the Company) to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 10.4. Existence; Activities.
Subject to Article VIII, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and material franchises; provided,
however, that the Company shall not be required to preserve any such right or
fran-
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chise if the Board of Directors of the Company in good faith shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 10.5. Maintenance of Properties.
The Company shall cause all material properties used in the
conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order (regular wear
and tear excepted), all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from disposing of any asset (subject to
compliance with Section 10.14) or from discontinuing the operation or
maintenance of any of such material properties if such discontinuance is, as
determined by the Company in good faith, desirable in the conduct of its
business or the business of any Restricted Subsidiary and not disadvantageous
in any material respect to the Holders.
SECTION 10.6. Payment of Taxes and Other
Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any of its
Restricted Subsidiaries or upon the income, profits or property of the Company
or any of its Restricted Subsidiaries, and (2) all lawful material claims for
labor, materials and supplies which, if unpaid, might by law become a lien upon
property of the Company or any of its Restricted Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 10.7. Maintenance of Insurance.
The Company shall, and shall cause its Restricted Subsidiaries
to, keep at all times all of their material properties which are of an
insurable nature insured against loss or damage with insurers believed by the
Company to be responsible to the extent that property of similar character is
usually so insured by corporations similarly situated and owning like
properties in accordance with good business practice. The Company shall, and
shall cause its Restricted Subsidiaries to, use
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the proceeds from any such insurance policy to repair, replace or otherwise
restore all material properties to which such proceeds relate, provided,
however, that the Company shall not be required to repair, replace or otherwise
restore any such material property if the Company in good faith determines that
such inaction is desirable in the conduct of the business of the Company or any
Restricted Subsidiary and not disadvantageous in any material respect to the
Holders.
SECTION 10.8. Limitation on Indebtedness.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise (in each case, to "incur"), for the payment of any
Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that (i) the Company and any Guarantor will be
permitted to incur Indebtedness (including Acquired Indebtedness), and (ii) a
Restricted Subsidiary will be permitted to incur Acquired Indebtedness, if in
each case, after giving pro forma effect to (1) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness were
incurred at the beginning of the four full fiscal quarters immediately
preceding such incurrence, taken as one period; (2) the incurrence, repayment
or retirement of any other Indebtedness or any obligations giving rise to
Consolidated Rental Payments by the Company and its Restricted Subsidiaries
since the first day of such four-quarter period as if such Indebtedness or
obligations were incurred, repaid or retired at the beginning of such
four-quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter
period); and (3) any Asset Sale or Asset Acquisition occurring since the first
day of such four-quarter period (including to the date of calculation) as if
such acquisition or disposition occurred at the beginning of such four-quarter
period, the Consolidated Fixed Charge Coverage Ratio of the Company is at least
2:1.
SECTION 10.9. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution
or payment on or in respect of Capital Stock of the Company or any of
its Restricted Subsidiaries or make any payment to the direct or
indirect holders (in
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their capacities as such) of Capital Stock of the Company or any of
its Restricted Subsidiaries (other than dividends or distributions
payable solely in Capital Stock of the Company (other than Redeemable
Capital Stock) or in options, warrants or other rights to purchase
Capital Stock of the Company (other than Redeemable Capital Stock))
(other than the declaration or payment of dividends or other
distributions to the extent declared or paid to the Company or any
Restricted Subsidiary);
(b) purchase, redeem, or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Restricted
Subsidiaries or any options, warrants, or other rights to purchase
any such Capital Stock (other than any securities owned by the
Company or a Restricted Subsidiary);
(c) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment, scheduled sinking fund
payment or other Stated Maturity, any Subordinated Indebtedness
outstanding on the Issue Date (other than any such Subordinated
Indebtedness owed by the Company or a Restricted Subsidiary); or
(d) make any Investment (other than any Permitted Investment) in
any Person,
(such payments or Investments described in the preceding clauses (a),
(b), (c) and (d) are collectively referred to as "Restricted
Payments"), unless, after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than
cash, shall be the Fair Market Value of the asset(s) proposed to be
transferred by the Company or such Restricted Subsidiary, as the case
may be, pursuant to such Restricted Payment), (A) no Default or Event
of Default shall have occurred and be continuing, (B) immediately
after giving effect to such Restricted Payment, the Company would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) and (C) the aggregate amount of all Restricted Payments
declared or made from and after the Issue Date would not exceed the
sum of:
(1) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis during the period beginning on the Issue
Date and ending on the last day of the fiscal quarter of the Company
ending immediately prior to the date of such proposed Restricted
Payment (or, if such aggregate cumulative Consolidated Net
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Income of the Company for such period shall be a loss, minus 100%
of such loss);
(2) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after the Issue Date and which
constitute shareholders' equity of the Company in accordance with
GAAP;
(3) the aggregate net cash proceeds received by the Company from
the issuance or sale of Capital Stock (excluding Redeemable Capital
Stock) of the Company to any Person (other than to a Subsidiary of the
Company) after the Issue Date;
(4) the aggregate net cash proceeds received by the Company from
any Person (other than a Subsidiary of the Company) upon the exercise
of any options, warrants or rights to purchase shares of Capital Stock
(other than Redeemable Capital Stock) of the Company after the Issue
Date;
(5) the aggregate net cash proceeds received after the Issue Date
by the Company from any Person (other than a Subsidiary of the
Company) for debt securities that have been converted into or
exchanged for Capital Stock of the Company (other than Redeemable
Capital Stock) (to the extent such debt securities were originally
sold for cash) plus the aggregate amount of cash received by the
Company (other than from a Subsidiary of the Company) in connection
with such conversion or exchange;
(6) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after the Issue Date, an amount
equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case,
less the cost of the disposition of such Investment; and
(7) so long as the Designation (as defined in Section 10.18)
thereof was treated as a Restricted Payment made after the Issue Date,
with respect to any Unrestricted Subsidiary that has been redesignated
as a Restricted Subsidiary after the Issue Date in accordance with
Section 10.18 below, the Fair Market Value of the Company's interest
in such Subsidiary (at the time of such redesignation); provided that
such amount shall not in any case exceed the Designation Amount (as
defined in Section 10.18) with respect to such Restricted Subsidiary
upon its Designation,
minus:
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the Designation Amount (measured as of the date of Designation) with
respect to any Restricted Subsidiary of the Company which has been
designated as an Unrestricted Subsidiary after the Issue Date in
accordance with Section 10.18 below.
For purposes of the preceding clause (C)(4), the value of the
aggregate net proceeds received by the Company upon the issuance of Capital
Stock upon the exercise of options, warrants or rights will be the net cash
proceeds received upon the issuance of such options, warrants or rights plus the
incremental amount received by the Company upon the exercise thereof.
None of the foregoing provisions shall prohibit, so long, in the
case of clauses (ii), (iii), (vi) and (vii) below, as there is no Default or
Event of Default continuing, (i) the payment of any dividend or distribution
within 60 days after the date of its declaration, if at the date of declaration
such payment would be permitted by the first paragraph of this covenant; (ii)
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company in exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale of other shares of
Capital Stock of the Company (other than Redeemable Capital Stock) to any Person
(other than to a Subsidiary of the Company); provided, however, that such net
cash proceeds are excluded from clause (C) of the first paragraph of this
covenant; (iii) any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Subsidiary of the Company); provided, however, that any such net cash proceeds
are excluded from clause (C) of the first paragraph of this covenant; or (2)
Indebtedness of the Company so long as such Indebtedness is Subordinated
Indebtedness which (w) has no scheduled principal payment prior to the 91st day
after the Maturity Date, (x) has an Average Life to Stated Maturity greater than
the remaining Average Life to Stated Maturity of the Securities and (y) is
subordinated to the Securities in the same manner and to the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or
retired; (iv) Investments constituting Restricted Payments made as a result of
the receipt of non-cash consideration from any Asset Sale or other sale of
assets or property made pursuant to and in compliance with this Indenture; (v)
payments to purchase Capital Stock of the Company from management or employees
of the Company or any of its Subsidiaries, or their authorized representatives,
upon the death, disability or termination of employment of such employees, in
aggregate amounts under this
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clause (v) not to exceed $1,000,000 in any fiscal year of the Company; (vi) the
payment of any dividend or distribution by a Restricted Subsidiary to the
holders of its Capital Stock on a pro rata basis and (vii) payments to purchase
Capital Stock of the Company, in the aggregate amount under this clause (vii)
not to exceed $5,000,000 from the Issue Date. Any payments made pursuant to
clauses (i) or (v) of this paragraph shall be taken into account in calculating
the amount of Restricted Payments made from and after the Issue Date.
SECTION 10.10. Limitation on Issuance of
Preferred Stock of Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary to issue
any Preferred Stock other than Preferred Stock issued to the Company or a
Wholly-Owned Restricted Subsidiary. The Company shall not sell, transfer or
otherwise dispose of Preferred Stock issued by a Restricted Subsidiary of the
Company or permit a Restricted Subsidiary to sell, transfer or otherwise dispose
of Preferred Stock issued by a Restricted Subsidiary, other than to the Company
or a Wholly-Owned Restricted Subsidiary. Notwithstanding the foregoing, nothing
in this covenant shall prohibit Preferred Stock (other than Redeemable Capital
Stock) issued by a Person prior to the time (A) such Person becomes a Restricted
Subsidiary of the Company, (B) such Person merges with or into a Restricted
Subsidiary of the Company or (C) a Restricted Subsidiary of the Company merges
with or into such Person; provided, that such Preferred Stock was not issued or
incurred by such Person in anticipation of a transaction contemplated by
subclause (A), (B), or (C) above.
SECTION 10.11. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series of
related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services) with,
or for the benefit of, any of its Affiliates (other than Restricted
Subsidiaries), except (a) on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those which could have been
obtained at the time in a comparable transaction or series of related
transactions from Persons who are not Affiliates of the Company, (b) with
respect to a transaction or series of related transactions involving aggregate
payments or value equal to or greater than $2,000,000 the Company shall have
delivered an Officer's Certificate to the Trustee certifying that such
trans-
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action or transactions comply with the preceding clause (a), and (c) with
respect to a transaction or series of related transactions involving aggregate
payments or value equal to or greater than $5,000,000, such transaction or
transactions shall have been approved by a majority of the disinterested members
of the Board of Directors of the Company.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and the
Restricted Subsidiaries, (ii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company or any
Restricted Subsidiary entered into in the ordinary course of business, (iii) any
dividends made in compliance with Section 10.9, (iv) loans and advances to
officers, directors and employees of the Company or any Restricted Subsidiary
made in the ordinary course of business, (v) the incurrence of intercompany
Indebtedness which constitutes Permitted Indebtedness and (vi) transactions
pursuant to agreements in effect on the Issue Date.
SECTION 10.12. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
securing Indebtedness upon any of its property or assets, or any proceeds
therefrom, unless the Securities are equally and ratably secured (except that
Liens securing Subordinated Indebtedness shall be expressly subordinate to Liens
securing the Securities to the same extent such Subordinated Indebtedness is
subordinate to the Securities), except for (a) Liens securing Senior
Indebtedness and Guarantor Senior Indebtedness; (b) Liens securing the
Securities; (c) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien (other than a Lien in favor of the
Company or a Restricted Subsidiary) permitted under the Indenture and which has
been incurred in accordance with the provisions of this Indenture; provided,
however, that such Liens do not extend to or cover any property or assets of the
Company or any its Restricted Subsidiaries not securing the Indebtedness so
refinanced; and (d) Permitted Liens.
SECTION 10.13. Change of Control.
On or before the 30th day after the date of the occurrence of a
Change of Control (the "Change of Control Date"), the Company shall make an
Offer to Purchase (a "Change of Control Offer") on a Business Day not more than
60 nor less than
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30 days following the occurrence of the Change of Control, (the "Change of
Control Purchase Date") all of the then Outstanding Securities tendered at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the Change of Control Purchase Date. The Company shall be required to purchase
all Securities tendered into the Change of Control Offer and not withdrawn.
On the Change of Control Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof (not less than $1,000
principal amount and integral multiples thereof) tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Trustee the
Securities so accepted together with an Officer's Certificate setting forth the
Securities or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and make available for delivery to such
Holders a new Security of like tenor equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Change of Control Offer not
later than the third Business Day following the Change of Control Purchase Date.
The Company shall not be required to make a Change of Control
offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, to the extent such
laws or regulations are applicable, in the event that a Change of Control occurs
and the Company is required to purchase Securities as described above.
SECTION 10.14. Disposition of Proceeds of
Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Asset Sale unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least
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equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 75% of such consideration consists of cash or Cash
Equivalents or Replacement Assets; provided, however, that (i) the amount of any
Indebtedness (as shown on the most recent balance sheet of the Company or such
Restricted Subsidiary) of the Company or such Restricted Subsidiary that is
assumed by the transferee of such assets and (ii) any securities, notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are converted within 30 days into cash or Cash Equivalents (to
the extent of the cash or Cash Equivalents received) shall be deemed to be cash
for the purposes of this provision; and provided, further, that the 75%
limitation referred to in clause (b) shall not apply to any Asset Sale in which
the cash or Cash Equivalent portion of the consideration received therefrom
determined in accordance with the foregoing provision is equal to or greater
than what the after tax proceeds would have been had such Asset Sale complied
with the aforementioned 75% limitation. To the extent that the Net Cash
Proceeds, or portions thereof, of any Asset Sale are not required to be applied
to repay, and permanently reduce the commitments under Senior Indebtedness,
Guarantor Senior Indebtedness or Indebtedness of a Foreign Restricted Subsidiary
which is not a Guarantor, the Company or such Restricted Subsidiary, as the case
may be, may apply the Net Cash Proceeds, or portions thereof, from such Asset
Sale, within 360 days of such Asset Sale, to an investment in properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that (as determined in good faith by the
Board of Directors of the Company or the Restricted Subsidiary, as the case may
be) are used or useful in the business of the Company and its Restricted
Subsidiaries conducted at such time or in businesses reasonably related thereto
or in Capital Stock of a Person, the principal portion of whose assets consist
of such property or assets ("Replacement Assets"). Any Net Cash Proceeds or
portion thereof from any Asset Sale that are neither used to repay, and
permanently reduce the commitments under, Senior Indebtedness, Guarantor Senior
Indebtedness or Indebtedness of a Foreign Restricted Subsidiary which is not a
Guarantor, nor invested in Replacement Assets within such 360-day period
constitute "Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Securities, an aggregate principal amount of
Securities equal to such Excess Proceeds, at a price in cash equal to 100% of
the outstanding principal amount thereof plus accrued and unpaid interest, if
any, thereon to the Purchase Date (the "Asset Sale Offer Price"). To the extent
that the aggregate principal
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amount of Securities tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. The Securities shall be purchased by the Company, at the option of the
Holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 30 days and not later than 60 days from the date the
notice is given to Holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act. If Securities
purchasable at an aggregate Purchase Price in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Asset Sale Offer to Purchase, the
Company shall purchase Securities on a pro rata basis, based on the Purchase
Price therefor, or such other method as the Trustee shall deem fair and
appropriate (subject in each case to applicable rules of the Depository and any
securities exchange upon which the Securities may then be listed), with such
adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 principal face amount or integral multiples thereof
shall be purchased. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset to zero.
On the Asset Sale Offer Purchase Date, the Company shall (i)
accept for payment (subject to proration as described in the Offer to Purchase)
Securities or portions thereof tendered pursuant to the Asset Sale Offer, (ii)
deposit with the Paying Agent money, in immediately available funds, sufficient
to pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so accepted together
with an Officer's Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and make available for delivery to such Holders a new Security of like tenor
equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer not later than the third Business
Day following the Asset Sale Offer Purchase Date.
Whenever the aggregate amount of Excess Proceeds received by the
Company and its Restricted Subsidiaries exceeds $10,000,000, such Excess
Proceeds shall, prior to the purchase of Securities, be set aside by the Company
or such Restricted Subsidiary, as the case may be, in a separate account pending
(i) deposit with the Paying Agent of the amount required to purchase the
Securities tendered in an Asset Sale Offer or (ii) delivery by the Company of
the Asset Sale Offer Price to
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the Holders of the Securities validly tendered and not withdrawn pursuant to an
Asset Sale Offer. Such Excess Proceeds may be invested in Cash Equivalents, as
directed by the Company, having a maturity date which is not later than the
earliest possible date for purchase of Securities pursuant to the Asset Sale
Offer. The Company will be entitled to any interest or dividends accrued, earned
or paid on such Cash Equivalents.
The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, to the extent such
laws and regulations are applicable, in the event that an Asset Sale occurs and
the Company is required to purchase Securities as described above.
SECTION 10.15. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company, (c) make loans or advances to the Company or any
other Restricted Subsidiary of the Company, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary of the Company or
(e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary
of the Company, except for such encumbrances or restrictions existing under or
by reason of (i) applicable law or any applicable rule, regulation or order,
(ii) customary non-assignment provisions of any contract or any lease governing
a leasehold interest of the Company or any Restricted Subsidiary of the Company,
(iii) customary restrictions on transfers of property subject to a Lien
permitted under this Indenture, (iv) the New Credit Agreement as in effect on
the Issue Date, (v) any agreement or other instrument of a Person acquired by
the Company or any Restricted Subsidiary of the Company in existence at the time
of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, (vi) an agreement entered into for the sale or disposition
of Capital Stock or assets of a Restricted Subsidiary or an agreement entered
into for the sale of specified assets (in either case, so long as such
encumbrance or restriction, by its terms, terminates on the earlier of the
termination of such agreement or
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the consummation of such agreement and so long as such restriction applies only
to the Capital Stock or assets to be sold), (vii) any agreement in effect on the
Issue Date, (viii) this Indenture and the Guarantees, and (ix) any agreement
that amends, extends, refinances, renews or replaces any agreement described in
the foregoing clauses; provided that the terms and conditions of any such
agreement are not materially less favorable to the Holders of the Securities
with respect to such dividend and payment restrictions than those under or
pursuant to the agreement amended, extended, refinanced, renewed or replaced.
SECTION 10.16. Limitation on Issuance of
Subordinated
Indebtedness.
The Company shall not, and shall not permit any Guarantor to,
directly or indirectly, incur any Indebtedness (including Acquired Indebtedness)
that is subordinate in right of payment to any Indebtedness of the Company or
such Guarantor and senior in right of payment to the Securities or the Guarantee
of such Guarantor, as the case may be; provided, however, that the Company and
the Guarantors may incur such Acquired Indebtedness in an aggregate amount no to
exceed $25,000,000 at any one time outstanding.
SECTION 10.17. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries acquires,
creates or designates another Restricted Subsidiary organized under the laws of
the United States, or any possession or territory thereof, any state of the
United States or the District of Columbia, then such newly acquired, created or
designated Restricted Subsidiary shall, within 30 days after the date of its
acquisition, creation or designation, whichever is later, (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Subsidiary shall unconditionally guarantee
all of the Company's obligations under the Securities and this Indenture on the
terms set forth in this Indenture and (ii) deliver to the Trustee an opinion of
counsel that such supplemental indenture has been duly authorized, executed and
delivered by such Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Subsidiary, subject to normal exceptions,
provided that if such Subsidiary (a) is not incorporated or organized in the
State of New York or the State of Delaware and (b) is not a Significant
Subsidiary of the Company, such opinion of counsel may assume due authorization,
execution and delivery of such supplemental indenture. Thereafter, such
Subsidiary shall be a Guarantor for all purposes of this Indenture. The Company
at its option may also cause any
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other Restricted Subsidiary of the Company to so become a Guarantor.
SECTION 10.18. Limitation on Designations of
Unrestricted Subsidiaries.
(a) The Company may designate after the Issue Date any Restricted
Subsidiary as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other
than a Permitted Investment, except a Permitted Investment covered by
clause (x) of the definition thereof) at the time of Designation
(assuming the effectiveness of such Designation) pursuant to the first
paragraph of Section 10.9 in an amount (the "Designation Amount")
equal to the Fair Market Value of the Company's interest in such
Subsidiary on such date; and
(iii) the Company would be permitted under this Indenture to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 10.8 at the time of such Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed
to have made an Investment constituting a Restricted Payment pursuant to Section
10.9 for all purposes of this Indenture in the Designation Amount.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, at any time (x) provide credit support for or subject
any of its property or assets (other than the Capital Stock of any Unrestricted
Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Capital Stock of an
Unrestricted Subsidiary. All Sub-
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sidiaries of Unrestricted Subsidiaries shall automatically be deemed to be
Unrestricted Subsidiaries.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time
of and after giving effect to such Revocation, and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred
at such time, have been permitted to be incurred for all purposes of
this Indenture.
(c) All Designations and Revocations must be evidenced by
Officer's Certificates of the Company delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 10.19. Provision of Financial Information.
For so long as the Securities are outstanding, whether or not the
Company is subject to Section 13(a) or 15(d) of the Exchange Act, or any
successor provision thereto, the Company shall file with the Commission (if
permitted by Commission practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so subject, such documents
to be filed with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so subject. The Company shall also in
any event (a) within 15 days after each Required Filing Date (whether or not
permitted or required to be filed with the Commission) (i) transmit (or cause to
be transmitted) by mail to all Holders of Securities, as their names and
addresses appear in the Securities register, without cost to such Holders, and
(ii) file with the Trustee, copies of the annual reports, quarterly reports and
other documents which the Company would be required to file with the Commission
if the Securities were then registered under the Exchange Act. In addition, for
so long as any Securities remain outstanding, the Company will furnish to the
Holders of Securities and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act, and, to any beneficial holder of
Securities, if not obtainable from the Commission, information of the type that
would be filed with
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the Commission pursuant to the foregoing provisions upon the request of any
such Holder.
SECTION 10.20. Statement by Officers as to
Default; Compliance Certificates.
(a) The Company shall deliver to the Trustee, prior to March 31
in each year commencing March 31, 1999, an Officer's Certificate, stating
whether or not to the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder), and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
he may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible
and in any event within five business days after the Company becomes aware of
the occurrence of a Default or an Event of Default, an Officer's Certificate
setting forth the details of such Default or Event of Default, and the action
which the Company proposes to take with respect thereto.
ARTICLE XI
Redemption of Securities
SECTION 11.1. Right of Redemption.
The Securities may be redeemed at the election of the Company, in
the amounts, at the times, at the Redemption Prices (together with any
applicable accrued and unpaid interest to the Redemption Date), and subject to
the conditions specified in the form of Security and hereinafter set forth.
SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by this Indenture and the provisions of the Securities, shall be made
in accordance with such provisions and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In the event of any
redemption at the election of the Company pursuant to Section 11.1, the Company
shall notify the
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Trustee, in case of a redemption of less than all the Securities, at least 60
days, and in the case of a redemption of all the Securities, at least 40 days,
prior to the Redemption Date fixed by the Company (in each case, unless a
shorter notice shall be satisfactory to the Trustee) of such Redemption Date and
of the principal amount of Securities to be redeemed.
SECTION 11.4. Selection by Trustee of Securities To Be Redeemed.
In the event that less than all of the Securities are to be
redeemed at any time, selection of such Securities for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed or, if the
Securities are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate
(subject to the rules of the Depository); provided, however, that Securities
shall only be redeemable in amounts of $1,000 or an integral multiple of $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture and of the Securities, unless
the context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such Securities
which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be
redeemed (including, if used, CUSIP or CINS numbers) and shall state:
(i) the Redemption Date,
(ii) the Redemption Price,
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(iii) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(iv) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after such Redemption
Date,
(v) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
(vi) if the redemption is being made pursuant to the provisions
of the Securities regarding a Public Equity Offering, a brief
description of the transaction or transactions giving rise to such
redemption, the nature and amount of Qualified Equity Interests sold
by the Company thereto in such transaction or transactions, the
aggregate purchase price thereof and the net cash proceeds therefrom
available for such redemption, the date or dates on which such
transaction or transactions were completed and the percentage of the
aggregate principal amount of Outstanding Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company and shall be
irrevocable.
SECTION 11.6. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) any applicable accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 11.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and any
applicable accrued interest) such Securities shall not bear interest. Upon
surrender of any such Security for redemption in accor-
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dance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with any applicable accrued and unpaid interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more predecessor securities, registered as
such at the close of business on the relevant record dates according to their
terms and the provisions of Section 3.7.
If any Security called for redemption in accordance with the
election of the Company made pursuant to Section 11.1 shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Security.
SECTION 11.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 10.2 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount at Stated Maturity equal
to and in exchange for the unredeemed portion of the principal amount at Stated
Maturity of the Security so surrendered.
ARTICLE XII
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option To Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section
12.2 or Section 12.3 applied to the Outstanding Securities (as a whole and not
in part) upon compliance with the conditions set forth below in this Article.
Any such election shall be evidenced by a Board Resolution.
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SECTION 12.2. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section
applied to the Outstanding Securities (as a whole and not in part), the Company
shall be deemed to have been discharged from its obligations with respect to
such Securities as provided in this Section on and after the date the conditions
set forth in Section 12.4 are satisfied (hereinafter called "Defeasance"). For
this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by such Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of Outstanding Securities to
receive, solely from the trust fund described in Section 12.4 and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2
and 10.3, (3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (4) this Article. Subject to compliance with this Article, the
Company may exercise its option to have this Section applied to the Outstanding
Securities (as a whole and not in part) notwithstanding the prior exercise of
its option to have Section 12.3 applied to such Securities.
SECTION 12.3. Covenant Defeasance.
Upon the Company's exercise of its option to have this Section
applied to the Outstanding Securities (as a whole and not in part), (i) the
Company shall be released from its obligations under Section 8.1(3), Sections
10.5 through 10.19, inclusive, and any covenant provided pursuant to Section
9.1(2) and the Guarantors shall be released from their obligations under Article
XIII and the Guarantees, (ii) the occurrence of any event specified in Sections
5.1(3) and 5.1(4) (with respect to Section 8.1(3) and any of Sections 10.5
through 10.19, inclusive, and any such covenants provided pursuant to Section
9.1(2)), shall be deemed not to be or result in an Event of Default, in each
case with respect to such Securities as provided in this Section on and after
the date the conditions set forth in Section 12.4 are satisfied (hereinafter
called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means
that, with respect to such Securities, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such specified Section (to the extent so specified in the case of
Section 5.1(3) or
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5.1(4)), whether directly or indirectly, by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 12.4. Conditions to Defeasance
or Covenant Defeasance.
The following shall be the conditions to the application of
Section 12.2 or Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 6.9 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or any such other qualifying trustee)
to pay and discharge, the principal of, premium, if any, and any
installment of interest on such Securities on the respective Stated
Maturities thereof, in accordance with the terms of this Indenture and
such Securities. As used herein, "U.S. Government obligation" means
(x) any security which is (i) a direct Obligation of the United States
of America for the payment of which the full faith and credit of the
United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in either case (i) or (ii), is
not callable or redeemable at the option of the issuer thereof, and
(y) any depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in clause (x) above and held
by such bank for the account of the holder of such depositary receipt,
or with respect to any specific payment of prin-
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cipal of or interest on any U.S. Government Obligation which is so
specified and held, provided U (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal or interest evidenced by such
depositary receipt.
(2) In the event of an election to have Section 12.2 apply to the
Outstanding Securities, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (A) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this instrument, there has
been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm that,
the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit, Defeasance
and discharge were not to occur.
(3) In the event of an election to have Section 12.3 apply to the
Outstanding Securities, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such
Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit and Covenant Defeasance to be
effected with respect to such Securities and will be subject to
Federal income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit and Covenant
Defeasance were not to occur.
(4) No Default or Event of Default with respect to the
Outstanding Securities shall have occurred and be continuing at the
time of such deposit (excluding a Default or Event of Default due to a
breach of Section 10.8 which arises solely due to the borrowing of
funds entirely and immediately applied to such deposit).
(5) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities
of the Company or any Guarantor.
(6) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which
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the Company or any Subsidiary is a party or by which it is bound.
(7) The Company shall have delivered to the Trustee an Opinion of
Counsel (which opinion may be subject to customary assumptions and
exceptions) to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally.
(8) The Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of the Securities over the other
creditors of the Company or any Guarantor with the intent of
defeating, hindering, delaying or defrauding creditors of the Company
or any Guarantor or others.
(9) No event or condition shall exist that would prevent the
Company from making payments of the principal of, premium, if any, and
interest on the Securities on the date of such deposit or at any time
ending on the 91st day after the date of such deposit.
(10) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions precedent under this Indenture to either Defeasance or
Covenant Defeasance, as the case may be, have been complied with.
SECTION 12.5. Deposited Money and U.S.
Government Obligations To Be
Held in Trust; Miscellaneous
Provisions.
Subject to the provisions of the last paragraph of Section 10.3,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely for purposes of
this Section and Section 12.6, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to Section 12.4 in respect
of the Outstanding Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by law.
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The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 12.4 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to the Outstanding Securities.
SECTION 12.6. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money
in accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining,
or otherwise prohibiting such application, then the obligations under this
Indenture, such Securities and the Guarantees from which the Company and the
Guarantors have been discharged or released pursuant to Section 12.2 or 12.3
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
12.5 with respect to such Securities in accordance with this Article; provided,
however, that if the Company makes any payment of principal of or any premium or
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
ARTICLE XIII
Guaranty
SECTION 13.1. Guaranty.
Each Guarantor hereby unconditionally and irrevocably guarantees
on a senior subordinated basis, jointly and severally, to each Holder and to the
Trustee and its successors and
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assigns (a) the full and prompt payment (within applicable grace periods) of
principal of and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture and the Securities and (b) the full and prompt
performance within applicable grace periods of all other obligations of the
Company under this Indenture and the Securities (all the foregoing being
hereinafter collectively called the "Guaranty Obligations"). Each Guarantor
further agrees that the Guaranty Obligations may be extended or renewed, in
whole or in part, without notice or further assent from such Guarantor, and that
such Guarantor will remain bound under this Article XIII notwithstanding any
extension or renewal of any Guaranty Obligation.
To the extent that any Guarantor shall be required to pay any
amounts on account of the Securities pursuant to a Guaranty in excess of an
amount calculated as the product of (i) the aggregate amount payable by the
Guarantors on account of the Securities pursuant to the Guarantees times (ii)
the proportion (expressed as a fraction) that such Guarantor's net assets
(determined in accordance with GAAP) at the date enforcement of the Guarantees
is sought bears to the aggregate net assets (determined in accordance with GAAP)
of all Guarantors at such date, then such Guarantor shall be reimbursed by the
other Guarantors for the amount of such excess, pro rata, based upon the
respective net assets (determined in accordance with GAAP) of such other
Guarantors at the date enforcement of the Guarantees is sought. This paragraph
is intended only to define the relative rights of Guarantors as among
themselves, and nothing set forth in this paragraph is intended to or shall
impair the joint and several obligations of the Guarantors under their
respective Guarantees.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under any Guaranty.
Each Guarantor waives presentation to, demand of payment from and
protest to the Company of any of the Guaranty Obligations and also waives notice
of protest for nonpayment. Each Guarantor waives notice of any default under the
Securities or the Guaranty Obligations. The obligations of each Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or
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any other agreement; (d) the release of any security held by any Holder or the
Trustee for the Guaranty Obligations or any of them; (e) the failure of any
Holder or Trustee to exercise any right or remedy against any other guarantor of
the Guaranty Obligations; or (f) any change in the ownership of any Guarantor
(subject to Section 13.5(b)).
Each Guarantor further agrees that its Guaranty herein
constitutes a guaranty of payment, performance and compliance when due (and not
a guaranty of collection) and waives any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the Guaranty
Obligations.
To the fullest extent permitted by law, the obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Guaranty
Obligations or otherwise. Without limiting the generality of the foregoing, to
the fullest extent permitted by law, the obligations of each Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Guaranty Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of such Guarantor or would otherwise
operate as a discharge of each Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Guaranty herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Guaranty
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against each
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Guaranty Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise (within
applicable grace periods), or to perform or comply with any other Guaranty
Obligation (within applicable grace
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periods), each Guarantor hereby promises to and shall, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Holders or the Trustee an amount equal to the sum of (i) the unpaid principal
amount of such Guaranty Obligations (ii) accrued and unpaid interest on such
Guaranty Obligations (but only to the extent not prohibited by law) and (iii)
all other monetary Guaranty Obligations of the Company to the Holders and the
Trustee.
Each Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Guaranty Obligations
guarantied hereby until payment in full of all Guaranty Obligations. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranty
Obligations guarantied hereby may be accelerated as provided in Article V for
the purposes of its Guaranty herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Guaranty
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Guaranty Obligations as provided in Article V, such
Guaranty Obligations (whether or not due and payable) shall forthwith become due
and payable by each Guarantor for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 13.2. Limitation on Liability.
Any term or provision of this Indenture to the contrary
notwithstanding, the maximum aggregate amount of the obligations guaranteed
hereunder by each Guarantor shall not exceed the maximum amount that can be
hereby guaranteed without rendering this Indenture, as it relates to such
Guarantor, voidable under applicable federal or state law relating to fraudulent
conveyance or fraudulent transfer.
SECTION 13.3. Execution and Delivery of
Guarantees.
The Guarantees to be endorsed on the Securities shall be in the
form set forth in Exhibit D. Each of the Guarantors hereby agrees to execute its
Guaranty in such form, to be endorsed on each Security authenticated and
delivered by the Trustee.
Each Guaranty shall be executed on behalf of each respective
Guarantor by any one of such Guarantor's Chairman of the Board, Vice Chairman of
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the Board, President, Chief Financial Officer, or Vice Presidents. The signature
of any or all of these officers on the Guaranty may be manual or facsimile.
A Guaranty bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of a Guarantor shall bind
such Guarantor, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of the Security on
which such Guaranty is endorsed or did not hold such offices at the date of such
Guaranty.
Each Guaranty shall be registered, transferred, exchanged and
cancelled, and shall be held in definitive or global form, in the same manner
and together with, the Security to which it relates, in accordance with Article
III.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guaranty
endorsed thereon on behalf of the Guarantors. Each of the Guarantors hereby
jointly and severally agrees that its Guaranty set forth in Section 13.1 shall
remain in full force and effect notwithstanding any failure to endorse a
Guaranty on any Security.
SECTION 13.4. Guarantors May Consolidate,
Etc., on Certain Terms.
Except as may be provided in Section 13.5 and in Articles VIII
and X, nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into the Company or a
Guarantor or shall prevent any sale or conveyance of the assets of a Guarantor
as an entirety or substantially as an entirety or the Capital Stock of a
Guarantor to the Company or a Guarantor.
SECTION 13.5. Release of Guarantors.
(a) Concurrently with any consolidation or merger of a Guarantor
or any sale or conveyance of the assets of a Guarantor as an entirety or
substantially as an entirety, in each case as permitted by Section 13.4 hereof
in accordance with the other provisions of this Indenture (including, without
limitation, Sections 10.9, 10.11 and 10.14) and as a result of which such
Guarantor ceases to be a Subsidiary of the Company, upon delivery by the Company
to the Trustee of an Officer's Certificate to the effect that such
consolidation, merger, sale or conveyance was made in accordance with Section
13.4 and the other provisions hereof and an Opinion of Counsel to the effect
that such transaction is permitted by this Indenture (which opinion may be
subject to customary assumptions and limita-
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tions), the Trustee shall execute any documents reasonably required in order to
evidence the release of such Guarantor from its obligations under its Guaranty
endorsed on the Securities and under this Article XIII. Any Guarantor not
released from its obligations under its Guaranty endorsed on the Securities and
under this Article XIII shall remain liable for the full amount of principal of
and premium, if any, and interest on the Securities and for the other
obligations of a Guarantor under its Guaranty endorsed on the Securities and
under this Article XIII.
(b) Except as provided by clause (a) hereof, upon the
consummation of any transaction (whether involving a sale or other disposition
of securities, a merger, or otherwise, including any Asset Sale) whereby any
Guarantor ceases to be a Subsidiary and which transaction is otherwise in
compliance with the provisions of this Indenture, such Guarantor shall
automatically be released from all obligations under its Guaranty endorsed on
the Securities and under this Article XIII without need for any further act or
the execution or delivery of any document.
SECTION 13.6. Successors and Assigns.
This Article XIII shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 13.7. No Waiver, etc.
Neither a failure nor a delay on the part of either the Trustee
or the Holders in exercising any right, power or privilege under this Article
XIII shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article XIII at law, in
equity, by statute or otherwise.
SECTION 13.8. Modification, etc.
No modification, amendment or waiver of any provision of this
Article, nor the consent to any departure by a Guaran-
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tor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on a Guarantor in any case shall entitle such Guarantor or
any other guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 13.9. Subordination of Guarantees.
The obligations of each Guarantor pursuant to its Guaranty and
this Article XIII shall be (a) junior and subordinated in right of payment to
the prior payment in full in cash of all Guarantor Senior Indebtedness of such
Guarantor and (b) senior in right of payment to all existing and future
Guarantor Subordinated Indebtedness of such Guarantor, in each case on the same
basis as the Securities and the obligations of the Company hereunder are junior
and subordinated to all Senior Indebtedness and senior in right of payment to
all Subordinated Indebtedness. For the purposes of this Section 13.9, Article
XIV shall apply to the obligations of each Guarantor under its Guaranty, this
Article XIII and the other provisions of this Indenture as if references therein
to the Company, the Securities, Senior Indebtedness, Subordinated Indebtedness
and Designated Senior Indebtedness were references to such Guarantor, such
Guarantor's Guaranty, Guarantor Senior Indebtedness, Guarantor Subordinated
Indebtedness and Designated Guarantor Senior Indebtedness, respectively.
ARTICLE XIV
Subordination
SECTION 14.1. Securities Subordinate to Senior
Indebtedness and Senior to
Subordinated Indebtedness.
The Company covenants and agrees, and each Holder of a Security,
by his acceptance thereof, likewise covenants and agrees that, to the extent and
in the manner hereinafter set forth in this Article XIV, the Indebtedness
evidenced by the Securities is hereby expressly made subordinate in right of
payment to the prior payment in full in cash of all Senior Indebtedness and
senior in right of payment to all existing and future Subordinated Indebtedness
of the Company.
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SECTION 14.2. Payment Over of Proceeds
Upon Dissolution, Etc.
In the event of any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or its assets, or
any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary, or any assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company, all Senior
Indebtedness (including, in the case of Designated Senior Indebtedness, any
interest accruing subsequent to the filing of a petition for bankruptcy
(regardless of whether such interest is an allowed claim in the bankruptcy
proceeding)) must be paid in full in cash before any payment (other than
payments in the form of Qualified Equity Interests or other securities the
payment of which is subordinated, at least to the same extent as the Securities,
to the payment of all Senior Indebtedness which may at the time be outstanding
and other than payments from a trust created pursuant to Article XII) is made on
account of the principal of, premium, if any, or interest on the Securities.
SECTION 14.3. No Payment When Designated Senior
Indebtedness in Default.
During the continuance of any default in the payment of
principal, or premium, if any, or interest on any Designated Senior
Indebtedness, when the same becomes due, and after receipt by the Trustee and
the Company from representatives of holders of such Designated Senior
Indebtedness of written notice of such default, no direct or indirect payment
(other than payments from trusts previously created pursuant to Article XII) by
or on behalf of the Company of any kind or character (other than Qualified
Equity Interests or other securities the payment of which is subordinated, at
least to the same extent as the Notes, to the payment of all Senior Indebtedness
which may at the time be outstanding) may be made on account of the principal
of, premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the Securities unless and until such default has been cured or
waived or has ceased to exist or such Designated Senior Indebtedness shall have
been discharged or paid in full in cash, after which the Company shall resume
making any and all required payments in respect of the Securities, including any
missed payments.
In addition, during the continuance of any other default with
respect to any Designated Senior Indebtedness that permits, or would permit with
the passage of time or the giving of notice or both, the maturity thereof to be
accelerated (a "Non-payment Default") and upon the earlier to occur of (a)
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receipt by the Trustee and the Company from the representatives of holders of
such Designated Senior Indebtedness of a written notice of such Non-payment
Default or (b) if such Non-payment Default results from the acceleration of the
maturity of the Securities, the date of such acceleration, no payment (other
than payments from trusts previously created pursuant to Article XII) of any
kind or character (excluding Qualified Equity Interests or subordinated
securities) may be made by the Company on account of the principal of, premium,
if any, or interest on, or the purchase, redemption, or other acquisition of,
the Securities for the period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of
notice of a Non-payment Default by the Trustee and the Company from the
representatives of holders of Designated Senior Indebtedness or the date of the
acceleration referred to in clause (b) of the preceding paragraph, as the case
may be, and shall end on the earliest to occur of the following events: (i) 179
days have elapsed since the receipt of such notice or the date of the
acceleration referred to in clause (b) of the preceding paragraph (provided the
maturity of such Designated Senior Indebtedness shall not theretofore have been
accelerated), (ii) such default is cured or waived or ceases to exist or such
Designated Senior Indebtedness is discharged or paid in full in cash, or (iii)
such Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the representatives of holders of Designated Senior
Indebtedness initiating such Payment Blockage Period, after which the Company
shall promptly resume making any and all required payments in respect of the
Securities, including any missed payments. Only one Payment Blockage Period with
respect to the Securities may be commenced within any 360 consecutive day
period. No Non-payment Default with respect to Designated Senior Indebtedness
that existed or was continuing on the date of the commencement of any Payment
Blockage Period shall be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 360
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days. In no event shall a Payment Blockage Period
extend beyond 180 days from the date of the receipt by the Trustee of the notice
or the date of the acceleration initiating such Payment Blockage Period and
there must be a 180 consecutive day period in any 360 day period during which no
Payment Blockage Period is in effect.
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SECTION 14.4. Subrogation to Rights of
Holders of Senior Indebtedness.
Subject to the payment in full in cash of all Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article XIV to the rights of the holders of
such Designated Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Securities shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article XIV, and no payments over pursuant to the provisions
of this Article XIV to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, be deemed to
be a payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 14.5. Provisions Solely to Define
Relative Rights.
The provisions of this Article XIV are and are intended solely
for the purpose of defining the relative rights of the Holders of the Securities
on the one hand and the holders of Senior Indebtedness on the other hand.
Nothing contained in this Article XIV or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, premium, if any and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms; (b) affect the relative rights against the Company
of the Holders of the Securities and creditors of the Company other than the
holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Securities from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XIV of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
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SECTION 14.6. Trustee to Effectuate Subordination.
Each Holder of a Security by its acceptance thereof authorizes
and directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XIV and
appoints the Trustee its attorney-in-fact for any and all such purposes.
SECTION 14.7. No Waiver of Subordination
Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XIV or the obligations hereunder of the Holders of the Securities to the holders
of Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 14.8. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article XIV or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from the
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Company or a holder of Designated Senior Indebtedness or from any trustee
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 6.1, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received at its Corporate Trust Office the notice provided for in this
Section at least three Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose (including, without
limitation, the payment in cash of the principal of, premium, if any or interest
on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be received by it
within three Business Days prior to such date.
SECTION 14.9. Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article XIV, the Trustee, subject to the provisions of
Section 6.1, and the Holders of the Securities shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
XIV.
SECTION 14.10. Trustee Not Fiduciary for
Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
XIV or otherwise, except in the case of gross negligence or wilful misconduct on
the part of the Trustee.
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SECTION 14.11. Rights of Trustee as Holder of
Senior Indebtedness; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article XIV with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article XIV shall apply to claims of, or payments
to, the Trustee or its agent or counsel under or pursuant to Section 6.7.
SECTION 14.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article XIV shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article XIV in addition to or in place of the Trustee;
provided, however, that Section 14.11 shall not apply to the Company or any
Affiliate of the Company if it or such Affiliate acts as Paying Agent.
-----------------
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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<PAGE> 127
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL M. HOPKINS
----------------------------------
Name: MICHAEL M. HOPKINS
Title: VICE PRESIDENT
Guarantors:
A-1 APPLIANCE & AIR CONDITIONING,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
A-1 MECHANICAL OF LANSING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AA ADVANCE AIR, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
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<PAGE> 128
A-ABC APPLIANCE, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
A-ABC SERVICES, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AA JARL, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AIR CONDITIONING ENGINEERS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AIR CONDITIONING, PLUMBING &
HEATING SERVICE CO., INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AIRCON ENERGY INCORPORATED
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
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<PAGE> 129
AIRTRON, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
AIRTRON OF CENTRAL FLORIDA, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
ALL SERVICE ELECTRIC, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
ARKANSAS MECHANICAL SERVICES,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
ATLANTIC INDUSTRIAL CONSTRUCTORS,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
BARR ELECTRIC CORP.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
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<PAGE> 130
CALLAHAN ROACH PRODUCTS &
PUBLICATIONS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
CENTRAL AIR CONDITIONING
CONTRACTORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
CENTRAL CAROLINA AIR CONDITIONING
COMPANY
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
CHARLIE CRAWFORD, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
CLARK CONVERSE ELECTRIC SERVICE,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
COLONIAL AIR CONDITIONING COMPANY
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
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<PAGE> 131
COMMERCIAL AIR HOLDING COMPANY
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
COMMERCIAL AIR, POWER & CABLE,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
CONTINENTAL ELECTRICAL
CONSTRUCTION CO.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
COSTNER BROTHERS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
DIVCO, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
DYNAMIC SOFTWARE CORPORATION
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-122-
<PAGE> 132
EVANS SERVICES, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
THE FARFIELD COMPANY
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
FERGUSON ELECTRIC CORPORATION
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
GENTZLER ELECTRICAL CONTRACTORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
GILBERT MECHANICAL CONTRACTORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
GREGORY ELECTRIC, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-123-
<PAGE> 133
GROUPMAC HOLDING CORP.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
GROUPMAC MANAGEMENT CO.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
HPS PLUMBING SERVICES, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
HALLMARK AIR CONDITIONING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
HUNGERFORD MECHANICAL CORPORATION
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
J.D. STEWARD AIR CONDITIONING,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-124-
<PAGE> 134
K & N PLUMBING, HEATING AND AIR
CONDITIONING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
LANEY'S, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
LINFORD SERVICE CO.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MACDONALD-MILLER CO., INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MACDONALD-MILLER INDUSTRIES, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MACDONALD-MILLER OF OREGON, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-125-
<PAGE> 135
MACDONALD-MILLER SERVICE, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MASTERS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MECHANICAL INTERIORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
MERRITT ISLAND AIR & HEAT, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
NEW CONSTRUCTION AIR
CONDITIONING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
NORON, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-126-
<PAGE> 136
PAUL E. SMITH CO., INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
PHOENIX ELECTRIC COMPANY
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
RAY AND CLAUDE GOODWIN, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
RELIABLE MECHANICAL, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
ROMANOFF ELECTRIC CORP.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
SIBLEY SERVICES, INCORPORATED
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-127-
<PAGE> 137
SOUTHEAST MECHANICAL SERVICE,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
STEPHEN C. POMEROY, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
STERLING AIR CONDITIONING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
SUN PLUMBING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
TEAM MECHANICAL, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
TRINITY CONTRACTORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-128-
<PAGE> 138
UNITED ACQUISITION CORP.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
VALLEY WIDE PLUMBING AND HEATING,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
VAN'S COMFORTEMP AIR
CONDITIONING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
VANTAGE MECHANICAL CONTRACTORS,
INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
WADE'S HEATING AND COOLING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
WIEGOLD & SONS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-129-
<PAGE> 139
WILLIS REFRIGERATION, AIR
CONDITIONING & HEATING, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
YALE INCORPORATED
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
PACIFIC RIM MECHANICAL
CONTRACTORS, INC.
By: /s/ Darren B. Miller
----------------------------------
Name:
Title:
-130-
<PAGE> 140
Schedule A
GROUP MAINTENANCE AMERICA CORP.
Except as otherwise indicated, 100% of the voting stock of
each of the Subsidiaries listed below is owned by its parent.
<TABLE>
<CAPTION>
State of
Name of Subsidiary Incorporation
- ------------------ -------------
<S> <C>
A-1 Appliance & Air Conditioning, Inc. Delaware
A-1 Mechanical of Lansing, Inc. Michigan
AA Advance Air, Inc. Florida
A-ABC Appliance, Inc. Texas
A-ABC Services, Inc. Delaware
AA JARL, Inc. Delaware
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
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
Central Air Conditioning Contractors, Inc. Delaware
Central Carolina Air Conditioning Company North Carolina
Charlie Crawford, Inc. Delaware
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
Costner Brothers, Inc. South Carolina
Divco, Inc. Washington
Dynamic Software Corporation Maryland
Evans Services, Inc. Alabama
The Farfield Company Delaware
Ferguson Electric Corporation Delaware
Gentzler Electrical Contractors, Inc. Delaware
Gilbert Mechanical Contractors, Inc. Minnesota
Gregory Electric, Inc. Illinois
GroupMAC Holding Corp. Delaware
GroupMAC Management Co. Delaware
HPS Plumbing Services, Inc. California
</TABLE>
<PAGE> 141
<TABLE>
<CAPTION>
State of
Name of Subsidiary Incorporation
- ------------------ -------------
<S> <C>
Hallmark Air Conditioning, Inc. Delaware
Hungerford Mechanical Corporation Virginia
J.D. Steward Air Conditioning, Inc. Colorado
K & N Plumbing, Heating and Air Delaware
Conditioning, Inc.
Laney's, Inc. Delaware
Linford Service Co. California
MacDonald-Miller Co., Inc. Washington
MacDonald-Miller Industries, Inc. Washington
MacDonald-Miller of Oregon, Inc. Delaware
MacDonald-Miller Service, Inc. Washington
Masters, Inc. Maryland
Mechanical Interiors, Inc. Delaware
Merritt Island Air & Heat, Inc. Delaware
New Construction Air Conditioning, Inc. Michigan
Noron, Inc. Ohio
Pacific Rim Mechanical Contractors, Inc. California
Paul E. Smith Co., Inc. Indiana
Phoenix Electric Company Delaware
Ray and Claude Goodwin, Inc. Florida
Reliable Mechanical, Inc. Delaware
Romanoff Electric Corp. Ohio
Sibley Services, Incorporated Tennessee
Southeast Mechanical Service, Inc. Florida
Stephen C. Pomeroy, Inc. Delaware
Sterling Air Conditioning, Inc. Delaware
Sun Plumbing, Inc. Florida
Team Mechanical, Inc. Utah
Trinity Contractors, Inc. Delaware
United Acquisition Corp. Iowa
Valley Wide Plumbing and Heating, Inc. Colorado
Van's Comfortemp Air Conditioning, Inc. Florida
Vantage Mechanical Contractors, Inc. Maryland
Wade's Heating and Cooling, Inc. Florida
Wiegold & Sons, Inc. Florida
Willis Refrigeration, Air Conditioning & Heating, Inc. Ohio
Yale Incorporated Minnesota
</TABLE>
-2-
<PAGE> 142
EXHIBIT A-1
[FORM OF SECURITY]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A "U.S. PERSON" AND IS
ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 or
904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS
TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) THAT PURCHASES THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, AND THE SECURITY REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION
A-1-1
<PAGE> 143
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Group Maintenance America Corp.
9 3/4% Senior Subordinated Note due 2009, Series A
No. ___________ $_________
CUSIP NO.__________
Group Maintenance America Corp., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ___________ or
registered assigns, the principal sum of __________ Dollars on January 15, 2009
and to pay interest thereon from January 22, 1999 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually in arrears on January 15 and July 15 in each year, commencing July
15, 1999 at the rate of 9 3/4% per annum, until the principal hereof is paid or
duly provided for, provided that any principal and premium, and any such
installment of interest, which is overdue shall bear interest at the rate of 9
3/4% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or duly
provided for. The interest so payable and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 1 and July 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
A-1-2
<PAGE> 144
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-1-3
<PAGE> 145
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
Attest: Group Maintenance America Corp.
By:
- ------------------------------- ----------------------------
Title: Title:
A-1-4
<PAGE> 146
Trustee's Certificate of Authentication
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: January 22, 1999 By:
--------------------------------------
Authorized Signatory
A-1-5
<PAGE> 147
Form of Reverse of Security
This Security is one of a duly authorized issue of Securities of the
Company designated as 9 3/4% Senior Subordinated Notes due 2009, Series A
(herein called the "Initial Securities"), limited in aggregate principal amount
at Stated Maturity to $130,000,000 issued and to be issued under an Indenture,
dated as of January 22, 1999 (herein called the "Indenture," which term shall
have the meaning assigned to it in such instrument), among the Company, the
guarantors named therein and State Street Bank and Trust Company, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
Securities include the Initial Securities and the Exchange Securities referred
to below, issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 7aaa - 77bbbb (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured senior subordinated obligations of the Company limited to
$200,000,000.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after January 15, 2004, at the Redemption Prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, thereon to the Redemption Date, if redeemed during the
12-month period beginning January 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004...................................................................104.875
2005...................................................................103.250
2006...................................................................101.625
2007 and thereafter....................................................100.000%
</TABLE>
A-1-6
<PAGE> 148
In addition, at any time, or from time to time, on or prior to January
15, 2002, the Company may, at its option, use the net cash proceeds of one or
more Equity Offerings to redeem up to an aggregate of 35% of the principal
amount of the Securities originally issued, at a redemption price equal to
109.750%. of the principal amount thereof plus accrued and unpaid interest, if
any, thereon to the Redemption Date; provided that at least 65% of the
originally issued principal amount of Securities remains outstanding immediately
after the occurrence of such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Company shall send a
redemption notice not later than 90 days after the consummation of any such
Equity Offering.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control to make an offer to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase and
(b) to make an offer to purchase Securities with a portion of the net cash
proceeds of certain sales or other dispositions of assets (not applied as
specified in the Indenture within the periods set forth therein) at a purchase
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer, a new Security or
Securities for the unredeemed or unpurchased portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or of certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal of, premium, if any, and accrued and
unpaid interest, if any, on all of the outstanding Securities, in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of
A-1-7
<PAGE> 149
a majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed herein
(or, in the case of redemption, on or after the Redemption Date or, in the case
of any purchase of this Security required to be made pursuant to a Change of
Control Offer or an Asset Sale Offer, on or after the relevant Purchase Date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency
A-1-8
<PAGE> 150
of the Company in the Borough of Manhattan, The City of New York, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Pursuant to the Registration Rights Agreement by and among the Company
and the Initial Purchasers, the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 9 3/4% Senior Subordinated Notes due 2009,
Series B, of the Company (herein called the "Exchange Securities"), which have
been registered under the Securities Act, in like principal amount and having
identical terms as the Initial Securities (other than as set forth in this
paragraph). The Holders of Initial Securities shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Such additional interest
will constitute liquidated damages and will be the exclusive monetary remedy
available to the Holder of this Security in respect of a Registration Default
(as defined in the Registration Rights Agreement), but without prejudice to any
non-monetary remedies otherwise available to such Holder, whether pursuant to
the Registration Rights Agreement or otherwise.
A-1-9
<PAGE> 151
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
The obligations of the Company under the Indenture and this Security
are expressly subordinated to all Senior Indebtedness and senior in right of
payment to all Subordinated Indebtedness, in each case to the extent set forth
in Article XIV of the Indenture, and reference is hereby made to such Indenture
for the precise terms of such subordination.
As provided in the Indenture and subject to certain limitations therein
set forth, the obligations of the Company under the Indenture and this Security
are Guaranteed pursuant to Guarantees endorsed hereon as provided in the
Indenture. Each Holder, by holding this Security, agrees to all of the terms and
provisions of said Guarantees. The Indenture provides that each Guarantor shall
be released from its Guaranty upon compliance with certain conditions.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-1-10
<PAGE> 152
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- -------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration settlement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) the date two years (or such shorter period of time as
permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) after the later of the original issuance date appearing on the face
of this Security (or any predecessor thereto) or the last date on which the
Company or any affiliate of the Company was the owner of this Security (or any
predecessor thereto), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
A-1-11
<PAGE> 153
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents, and a transferor certificate substantially in the
form of Exhibit C to the Indenture in the case of a transfer pursuant
to Regulation S, are being furnished which comply with the conditions
of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Security Registrar shall not be obliged to register this Security in
the name of any Person other than the Holder hereof unless and until the
conditions to any such transfer of registration set forth herein and in Section
3.14 of the Indenture shall have been satisfied.
Date: Your Signature:
-------- -------------------------------
(Sign exactly as your name
appears on the other
side of this Security)
By:
----------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
----------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Date:
-------- ------------------------------
NOTICE: To be executed by an
executive officer
A-1-12
<PAGE> 154
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 10.13 or 10.14 of the Indenture,
check the applicable box:
Section 10.13 [ ]
Section 10.14 [ ]
If you want to elect to have only a part of the principal amount of
this Security purchased by the Company pursuant to Section 10.13 or 10.14 of the
Indenture, state the portion of such amount: $
--------------
Date: Your Signature:
-------- --------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
-------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent
Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other
signature guarantee program as may be determined by the
Security Registrar in addition to, or in substitution
for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-1-13
<PAGE> 155
EXHIBIT A-2
Group Maintenance America Corp.
9 3/4% Senior Subordinated Note due 2009, Series B
No. ___________ $__________
CUSIP NO.__________
Group Maintenance America Corp., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ________________ Dollars on January 15,
2009 and to pay interest thereon from January 22, 1999 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually in arrears on January 15 and July 15 in each year, commencing
January 22, 1999 at the rate of 9 3/4% per annum, until the principal hereof is
paid or duly provided for, provided that any principal and premium, and any such
installment of interest, which is overdue shall bear interest at the rate of 9
3/4% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or duly
provided for. The interest so payable and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 1 and July 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of
A-2-1
<PAGE> 156
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that, at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-2-2
<PAGE> 157
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
Attest: Group Maintenance America Corp.
By:
- ---------------------------- --------------------------
Title: Title:
A-2-3
<PAGE> 158
Trustee's Certificate of Authentication
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: January 22, 1999 By:
---------------------------
Authorized Signatory
A-2-4
<PAGE> 159
Form of Reverse of Security
This Security is one of a duly authorized issue of Securities of the
Company designated as 9 3/4% Senior Subordinated Notes due 2009, Series B
(herein called the "Exchange Securities"), limited in aggregate principal amount
at Stated Maturity to $130,000,000 issued and to be issued under an Indenture,
dated as of January 22, 1999 (herein called the "Indenture," which term shall
have the meaning assigned to it in such instrument), among the Company, the
guarantors named therein and State Street Bank and Trust Company, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
Securities include the Initial Securities and the Exchange Securities, issued in
exchange for the Initial Securities pursuant to the Registration Rights
Agreement. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 7aaa - 77bbbb (the "TIA")), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured senior subordinated obligations of the Company limited to
$200,000,000.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after January 15, 2004, at the Redemption Prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, thereon to the Redemption Date, if redeemed during the
12-month period beginning January 15 of the years indicated below:
A-2-5
<PAGE> 160
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004................................................ 104.875
2005................................................ 103.250
2006................................................ 101.625
2007 and thereafter................................. 100.000%
</TABLE>
In addition, at any time, or from time to time, on or prior to January
15, 2002, the Company may, at its option, use the net cash proceeds of one or
more Equity Offerings to redeem up to an aggregate of 35% of the principal
amount of the Securities originally issued, at a redemption price equal to
109.750% of the principal amount thereof plus accrued and unpaid interest, if
any, thereon to the Redemption Date; provided that at least 65% of the
originally issued principal amount of Securities remains outstanding immediately
after the occurrence of such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Company shall send the
redemption notice not later than 90 days after the consummation of any such
Equity Offering.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control to make an offer to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase and
(b) to make an offer to purchase Securities with a portion of the net cash
proceeds of certain sales or other dispositions of assets (not applied as
specified in the Indenture within the periods set forth therein) at a purchase
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer, a new Security or
Securities for the unredeemed or unpurchased portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or of certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal of, premium, if any, and accrued and
unpaid interest, if any, on all
A-2-6
<PAGE> 161
of the outstanding Securities, in the manner and with the effect provided in
the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed herein
(or, in the case of redemption, on or after the Redemption Date or, in the case
of any purchase of this Security required to be made pursuant to a Change of
Control Offer or an Asset Sale Offer, on or after the relevant Purchase Date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional,
A-2-7
<PAGE> 162
to pay the principal of (and premium, if any) and interest on this Security at
the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
The obligations of the Company under the Indenture and this Security
are expressly subordinated to all Senior Indebtedness, in each case to the
extent set forth in Article XIV of the Indenture, and reference is hereby made
to such Indenture for the precise terms of such subordination.
As provided in the Indenture and subject to certain limitations therein
set forth, the obligations of the Company under the Indenture and this Security
are Guaranteed pursuant to Guarantees endorsed hereon as provided in the
Indenture.
A-2-8
<PAGE> 163
Each Holder, by holding this Security, agrees to all of the terms and provisions
of said Guarantees. The Indenture provides that each Guarantor shall be released
from its Guaranty upon compliance with certain conditions.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-2-9
<PAGE> 164
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
Date: Your Signature:
-------- -------------------------------
(Sign exactly as your name
appears on the other
side of this Security)
By:
----------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
------------------------------------------------
A-2-10
<PAGE> 165
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 10.13 or 10.14 of the Indenture,
check the applicable box:
Section 10.13 [ ]
Section 10.14 [ ]
If you want to elect to have only a part of the principal amount of
this Security purchased by the Company pursuant to Section 10.13 or 10.14 of the
Indenture, state the portion of such amount: $
---------------
Date: Your Signature:
-------- --------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
-------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent
Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other
signature guarantee program as may be determined by the
Security Registrar in addition to, or in substitution
for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-2-11
<PAGE> 166
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder t shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 167
EXHIBIT C
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Re: Group Maintenance America Corp.
(the "Company") 9 3/4% Senior
Subordinated Notes due 2009
(the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any Person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market described in
Rule 902(a) of Regulation S and neither we nor any Person acting on
our behalf knows that the transaction has been pre-arranged with a
buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities;
(6) if the circumstances set forth in rule 904(c) under the
Securities Act are applicable, we have complied
C-1
<PAGE> 168
with the additional conditions therein, including (if applicable)
sending a confirmation or other notice stating that the Securities may
be offered and sold during the distribution compliance period
specified in Rule 903(c)(2) or (3), as applicable, only in accordance
with the provisions of Regulation S; pursuant to registration of the
Securities under the Securities Act; or pursuant to another available
exemption from the registration requirements under the Securities Act;
and
(7) if the sale is made during a distribution compliance period
and the provisions of Rule 903(c)(3) are applicable thereto, we
confirm that such sale has been made in accordance with such
provisions.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------
Authorized Signature
C-2
<PAGE> 169
EXHIBIT D
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTY]
GUARANTY
________________, a _________________ corporation (the "Guarantor,"
which term includes any successor under the Indenture (the "Indenture") referred
to in the Security upon which this notation is endorsed), hereby unconditionally
and irrevocably guarantees on a senior subordinated basis, jointly and severally
with each other Guarantor of the Securities, to each Holder and to the Trustee
and its successors and assigns (a) the full and prompt payment (within
applicable grace periods) of principal of and interest on the Securities when
due, whether at maturity, by acceleration, by redemption or otherwise, and all
other monetary obligations of the Company under this Indenture and the
Securities and (b) the full and prompt performance within applicable grace
periods of all other obligations of the Company under the Indenture and the
Securities, subject to certain limitations set forth in the Indenture (all the
foregoing being hereinafter collectively called the "Guaranty Obligations"). The
Guarantor further agrees that the Guaranty Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Guarantor, and that such Guarantor will remain bound under Article XIII of the
Indenture notwithstanding any extension or renewal of any Guaranty Obligation.
Capitalized terms used herein have the meanings assigned to them in the
Indenture unless otherwise indicated.
Subject to the terms of the Indenture, this Guaranty shall be binding
upon the Guarantor and its successors and assigns and shall inure to the benefit
of the successors and assigns of the Trustee and the Holders and, in the event
of any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof.
This Guaranty shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guaranty is
noted shall have been executed by the Trustee under the Indenture by the
signature of one of its authorized officers.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to this Guaranty and the
D-1
<PAGE> 170
Indenture are expressly subordinated to all Guarantor Senior Indebtedness and
senior in right of payment to all Guarantor Subordinated Indebtedness, in each
case to the extent set forth in Section 13.9 and Article XIV of the Indenture,
and reference is hereby made to such Indenture for the precise terms of such
subordination.
Notwithstanding any other provision of the Indenture or this Guaranty,
under the Indenture and this Guaranty the maximum aggregate amount of the
obligations guaranteed by the Guarantor shall not exceed the maximum amount that
can be guaranteed without rendering the Indenture or this Guaranty, as it
relates to such Guarantor, voidable under applicable federal or state law
relating to fraudulent conveyance or fraudulent transfer. This Guaranty shall be
governed by the internal laws of the State of New York, without regard to
conflict of laws provisions thereof.
[Name of Guarantor]
By:
-------------------------------
Name:
Title:
D-2
<PAGE> 1
EXECUTION COPY
EXHIBIT 4.2
===============================================================================
Group Maintenance America Corp.,
the Companies Named Herein
and
State Street Bank and Trust Company,
Trustee
------------------
First Supplemental Indenture
Dated as of March 10, 1999
-------------------
Up to $200,000,000
9 3/4% Senior Subordinated Notes
Due January 15, 2009
===============================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of March 10, 1999, among GROUP
MAINTENANCE AMERICA CORP., a corporation duly organized and existing under the
laws of the State of Texas (herein called the "Company"), having its principal
office at 8 Greenway Plaza, Suite 1500, Houston, Texas 77046, STATE STREET BANK
AND TRUST COMPANY, a bank duly organized and existing under the laws of the
United States (herein called the "Trustee"), and the various subsidiaries of
the Company named herein, as Guarantors.
RECITALS OF THE COMPANY
WHEREAS, the Company has heretofore executed and delivered to the
Trustee its Indenture, dated as of January 22, 1999 (herein called the
"Original Indenture"), to provide for the issuance of an aggregate principal
amount of up to $200,000,000 of the Company's 9 3/4% Senior Subordinated Notes
Due January 15, 2009 (the "Notes"), $130,000,000 aggregate principal amount of
which are currently outstanding; and
WHEREAS, Section 9.1 of the Original Indenture provides that, subject
to certain limitations, without the consent of any holders of the Notes, the
Company, when authorized by a resolution of its Board of Directors, and the
Trustee may at any time and from time to time enter into an indenture or
indentures supplemental to the Original Indenture; and
WHEREAS, pursuant to Section 10.17 of the Original Indenture,
Statewide Heating & Air Conditioning, Inc., a Delaware corporation
("Statewide"), is to become a Guarantor under the Original Indenture; and
WHEREAS, the Company's Board of Directors has duly authorized the
substance of the modifications of the Indenture hereinafter set forth (the
"First Supplemental Indenture") and the execution and delivery of this First
Supplemental Indenture; and
WHEREAS, the Board of Directors of Statewide has authorized the
execution and delivery of this First Supplemental Indenture; and
WHEREAS, the Company, the Initial Guarantors (as defined in the
Original Indenture), Statewide and the Trustee desire to execute this First
Supplemental Indenture; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of Statewide, in accordance with its terms, have
been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
<PAGE> 3
For and in consideration of the premises, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Notes, as follows:
1. Statewide hereby unconditionally guarantees all of the Company's
obligations under the Securities (as defined in the Original Indenture) and
under the Original Indenture on the terms set forth in the Original Indenture.
Notwithstanding the foregoing, this guarantee shall be automatically and
unconditionally released and discharged (with respect to Statewide) upon the
terms and conditions specified in Section 13.5 of the Original Indenture.
2. Capitalized terms used herein but not defined herein shall have the
meanings given to them in the Original Indenture.
3. Except as specifically supplemented and amended by this First
Supplemental Indenture, the terms and provisions of the Original Indenture
shall remain in full force and effect.
4. The Recitals of the Company preceding Section 1 of this First
Supplemental Indenture are statements of the Company, and the Trustee has no
responsibility for the accuracy or completeness thereof.
5. This First Supplemental Indenture shall be governed by, and
construed in accordance with, the law of the State of New York without regard
to the conflicts of laws principles thereof.
6. This First Supplemental Indenture may be executed in one or more
counterparts, all of which, taken together, shall constitute one and the same
First Supplemental Indenture.
-2-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have cause this First
Supplemental Indenture to be duly executed, all as of the day and year first
above written.
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Darren B. Miller
--------------------------------------
Name: Darren B. Miller
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ E. C. Hammer
-------------------------------------
Name: Elizabeth C. Hammer
Title: Vice President
Guarantors
A-1 APPLIANCE & AIR CONDITIONING, INC.
A-1 MECHANICAL OF LANSING, INC.
AA ADVANCE AIR, INC.
A-ABC APPLIANCE, INC.
A-ABC SERVICES, INC.
AA JARL, INC.
AIR CONDITIONING ENGINEERS, INC.
AIR CONDITIONING, PLUMBING & HEATING
SERVICE CO., INC.
AIRCON ENERGY INCORPORATED
AIRTRON, INC.
AIRTRON OF CENTRAL FLORIDA, INC.
ALL SERVICE ELECTRIC, INC.
ARKANSAS MECHANICAL SERVICES, INC.
ATLANTIC INDUSTRIAL CONSTRUCTORS,
INC.
BARR ELECTRIC CORP.
CALLAHAN ROACH PRODUCTS &
PUBLICATIONS, INC.
CENTRAL AIR CONDITIONING
-3-
<PAGE> 5
CONTRACTORS, INC.
CENTRAL CAROLINA AIR CONDITIONING
COMPANY
CHARLIE CRAWFORD, INC.
CLARK CONVERSE ELECTRIC SERVICE, INC.
COLONIAL AIR CONDITIONING COMPANY
COMMERCIAL AIR HOLDING COMPANY
COMMERCIAL AIR, POWER & CABLE, INC.
CONTINENTAL ELECTRICAL CONSTRUCTION
CO.
COSTNER BROTHERS, INC.
DIVCO, INC.
DYNAMIC SOFTWARE CORPORATION
EVANS SERVICES, INC.
THE FARFIELD COMPANY
FERGUSON ELECTRIC CORPORATION
GENTZLER ELECTRICAL CONTRACTORS, INC.
GILBERT MECHANICAL CONTRACTORS, INC.
GREGORY ELECTRIC, INC.
GROUPMAC HOLDING CORP.
GROUPMAC MANAGEMENT CO.
HPS PLUMBING SERVICES, INC.
HALLMARK AIR CONDITIONING, INC.
HUNGERFORD MECHANICAL CORPORATION
J.D. STEWARD AIR CONDITIONING, INC.
K & N PLUMBING, HEATING AND AIR
CONDITIONING, INC.
LANEY'S, INC.
LINFORD SERVICE CO.
MACDONALD-MILLER CO., INC.
MACDONALD-MILLER INDUSTRIES, INC.
MACDONALD-MILLER OF OREGON, INC.
MACDONALD-MILLER SERVICE, INC.
MASTERS, INC.
MECHANICAL INTERIORS, INC.
MERRITT ISLAND AIR & HEAT, INC.
NEW CONSTRUCTION AIR CONDITIONING,
INC.
NORON, INC.
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PACIFIC RIM MECHANICAL CONTRACTORS,
INC.
PAUL E. SMITH CO., INC.
PHOENIX ELECTRIC COMPANY
RAY AND CLAUDE GOODWIN, INC.
RELIABLE MECHANICAL, INC.
ROMANOFF ELECTRIC CORP.
SIBLEY SERVICES, INCORPORATED
SOUTHEAST MECHANICAL SERVICE, INC.
STEPHEN C. POMEROY, INC.
STERLING AIR CONDITIONING, INC.
SUM PLUMBING, INC.
TEAM MECHANICAL, INC.
TRINITY CONTRACTORS, INC.
UNITED ACQUISITION CORP.
VALLEY WIDE PLUMBING AND HEATING,
INC.
VAN'S COMFORTEMP AIR CONDITIONING,
INC.
VANTAGE MECHANICAL CONTRACTORS, INC.
WADE'S HEATING AND COOLING, INC.
WIEGOLD & SONS, INC.
WILLIS REFRIGERATION, AIR CONDITIONING
& HEATING, INC.
YALE INCORPORATED
By: /s/ Darren B. Miller
-------------------------------------
Name: Darren B. Miller
Title: Vice President of each
of the foregoing Guarantors
STATEWIDE HEATING & AIR CONDITIONING
INC.
By: /s/ Darren B. Miller
-------------------------------------
Name: Darren B. Miller
Title: Vice President
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of March
1, 1998, between GroupMAC Management Co., a Delaware corporation (the
"Company"), Group Maintenance America Corp., a Texas corporation ("GroupMAC"),
and James P. Norris, a resident of Denver County, Colorado ("Employee").
W I T N E S S E T H:
WHEREAS, Employee and GroupMAC entered into an Employment Agreement
dated as of June 1, 1997 (the "Original Employment Agreement"); and
WHEREAS, GroupMAC assigned the Original Employment Agreement to the
Company, and Employee became an employee of the Company, effective as of
February 1, 1998; and
WHEREAS, the Company, GroupMAC and Employee desire to amend and restate
the Original Employment Agreement to reflect the effects of the foregoing
assignment, to modify the provisions of the Original Employment Agreement
pertaining to changes of control of GroupMAC, and to make certain other changes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby amend and restate the Original
Employment Agreement as follows:
1. Employment. The Company hereby agrees to employ Employee and the
Employee hereby agrees to work for the Company as its Chairman of the Board.
Employee's principal office shall be in Englewood, Colorado. Employee will
report to the Board of Directors of the Company. Subject to consultation with
the Board of Directors, Employee will have direct supervisory responsibility and
authority for the matters set forth in Exhibit A. So long as he is employed by
the Company, Employee shall devote his skill, energy and best efforts to the
faithful discharge of his duties as an employee of the Company. In providing
services hereunder, Employee shall comply with and follow all directives,
policies, standards and regulations from time to time established by the Board
of Directors of the Company.
2. Term of Employment. Employee's employment by the Company pursuant to
this Agreement shall continue in effect for an initial term of three years from
the date of this Agreement, unless terminated in accordance with Section 7, and
shall be extended from year to year thereafter, unless terminated effective as
of the end of the initial term or any one-year extension thereafter by written
notice from the Company to Employee, or by written notice of Employee to the
Company, delivered not less than 90 days prior to the end of the initial term,
or the anniversary of such one-year extension, as applicable.
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3. Representations and Warranties. Employee represents and warrants
that he is under no contractual or other restrictions or obligations that will
significantly limit his activities on behalf of the Company or will prohibit or
limit the disclosure or use of by Employee of any information which directly or
indirectly relates to the nature of the Company or the services to be rendered
by Employee under this Agreement.
4. Compensation. Subject to the provisions of Section 10, Employee will
be entitled to the compensation and benefits set forth in this Section 4.
(a) During 1998, the Company shall pay Employee an Annual Base Salary,
payable semi-monthly, in equal semi-monthly installments at a rate equal to
$150,000 per year. In each subsequent calendar year during the term of this
Agreement, the Company shall pay to Employee an Annual Base Salary equal to the
greater of (i) his salary for the immediately preceding year or (ii) if
determined otherwise by the Board of Directors, an Annual Base Salary determined
by the Board of Directors following its annual salary and performance review.
(b) Employee shall be eligible to receive an annual bonus pursuant to
the incentive compensation program in effect from time to time for executive
employees of GroupMAC. The target bonus of Employee under such program shall not
be less than 100% of Employee's annual salary.
(c) All payments of salary and other compensation to Employee shall be
made after deduction of any taxes required to be withheld with respect thereto
under applicable federal and state laws.
5. Fringe Benefits; Expenses. (a) Employee shall participate in all
employee benefit plans sponsored by the Company or GroupMAC for its executive
employees, including but not limited to stock bonus, stock purchase and stock
option plans, sick leave and disability leave, health insurance, dental
insurance and pension and/or profit sharing plans; provided, however, that
except as provided below, the nature, amount and limitations of such plans shall
be determined from time to time by the Board of Directors of the Company.
(b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of his employment; provided, however,
that Employee must file expense reports with respect to such expenses in
accordance with the Company's policies as are in effect from time to time.
(c) Employee shall be entitled to a minimum of three weeks paid
vacation during each calendar year, increasing to four weeks at June 1, 2000,
and to paid holidays and other paid leave set forth in the Company's policies in
effect from time to time. Any vacation not used during a calendar year may not
be used during any subsequent period.
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(d) The Company will pay all license fees, occupation taxes and
reasonable educational costs and expenses necessary to maintain Employee's good
standing under any professional licenses.
(e) The Company shall use reasonable efforts to provide (i) life
insurance payable to Employee's designated beneficiary in an amount at least
three times Employee's Annual Base Salary and (ii) disability insurance on
behalf of Employee which, as a goal, shall provide for salary continuation in
the event of permanent disability in an amount not less than 60% of Employee's
Annual Base Salary, it being acknowledged by Employee that GroupMAC's present
disability insurance provides a limit of $5,000 per month.
6. Indemnification and Insurance. The Company shall indemnify Employee
with respect to matters relating to his services as an officer and/or director
of the Company or any of its Affiliates to the extent set forth in the Company's
By-laws and in accordance with the terms of any other indemnification which is
generally applicable to executive officers of the Company or any of its
Affiliates that may be provided by the Company or any such Affiliate from time
to time. The foregoing indemnity is contractual and will survive any adverse
amendment to or repeal of the By-laws. The Company will also cover Employee
under a policy of officers' and directors' liability insurance providing
coverage that is comparable to that provided now or hereafter to any other
executive officer or director of the Company or GroupMAC. The provisions of this
Section 6 will survive the termination of Employee's employment for any reason
and the term of this Agreement.
7. Change in Control of the Company.
(a) If a Change of Control (as defined in Exhibit B attached hereto)
occurs and if during the Protected Period (as defined in Exhibit B attached
hereto), Employee's employment is terminated, whether by the Company or by
Employee, then the Company shall promptly pay or otherwise provide to Employee
the benefits set forth below:
(i) An amount equal to two times the sum of (A) Employee's
Annual Base Salary then in effect and (B) Employee's target bonus for
the calendar year in which such termination occurs (assuming the
maximum target bonus will be earned for such year), payable in a single
lump sum by certified or bank cashier's check within five days of such
termination; and
(ii) An amount equal to the product of (A) the maximum monthly
premium payment that may be charged to continue coverage for Employee
and Employee's dependents under the Company's health insurance plan
under COBRA, multiplied by (B) 24 months.
Notwithstanding the foregoing, Employee shall not be entitled to any benefits
under this Section 7 if such termination is (i) due to Employee's death, (ii) by
the Company on account of Employee's Disability as provided in Section 10(d)
below, (iii) by the Company for Cause as
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provided in Section 10(a) below, or (iv) by Employee for other than Good Reason
(as defined in Exhibit B attached hereto) as provided in Section 10 below.
8. Gross-Up of Parachute Payments.
(a) To provide Employee with adequate protection in connection with his
ongoing employment with the Company, this Agreement provides Employee with
various benefits in the event of termination of Employee's employment with the
Company during the Protected Period. If Employee's employment is terminated
following a "change of control" of GroupMAC or the Company, within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a
portion of those benefits could be characterized as "excess parachute payments"
within the meaning of Section 280G of the Code. The parties hereto acknowledge
that the protections set forth in this Section 8 are important, and it is agreed
that Employee should not have to bear the burden of any excise tax that might be
levied under Section 4999 of the Code or any similar provision of state or
federal law, in the event that any portion of the benefits payable to Employee
pursuant to this Agreement are treated as an excess parachute payment. The
parties, therefore, have agreed as set forth in this Section 8.
(b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution (including income
recognized by Employee upon the early vesting of restricted property or upon the
exercise of options whose exercise date has been accelerated) by GroupMAC or the
Company or any other person to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 8) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any similar provision of state or federal law or
any interest or penalties are incurred by Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
(c) Subject to the provisions of Section 8(d) below, all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an
independent public accounting firm with a national reputation selected by
Employee (the "Accounting Firm") that shall provide detailed supporting
calculations both to the Company and to Employee within 15 business days after
the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control of GroupMAC or the Company, Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder
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(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. The Company shall indemnify and hold harmless Employee, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed on Employee as a result of such payment
of fees and expenses. Any Gross-Up Payment, as determined pursuant to this
Section 8, shall be paid by the Company to Employee within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Employee, it shall furnish Employee
with a written opinion that failure to report the Excise Tax on Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding on the Company and Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not
have been made by the Company that should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. If the Company
exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Employee.
(d) Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claims) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Employee is informed in
writing of such claim (or threatened lien) and shall apprize the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which Employee gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due or such tax lien would be imposed). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim (or threatened lien), Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claims (or threatened lien);
(ii) take such action in connection with contesting such claim
(or threatened lien) as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(iv) permit the Company to participate in any proceedings
relating to such claims (or threatened lien);
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including legal fees and expenses, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(d), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Employee to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Employee shall prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as Employee shall
determine (but in no event shall the Company permit or direct Employee to allow
a tax lien to be imposed on Employee's property); provided, further, that if the
Company directs Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Employee, on an interest-free basis,
and shall indemnify and hold Employee harmless on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. In addition, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and Employee shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(e) If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 8(d), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 8(d) above) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt by Employee of an
amount advanced by the Company pursuant to Section 8(d) above, a determination
is made that Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Acceleration of Options. Upon the occurrence of any of the following
events at a time while Employee holds outstanding options to purchase GroupMAC
Common Stock, all such options shall be immediately exercisable in full:
(i) the acquisition described in clause (i) of the definition
of Change of Control;
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(ii) the change in the composition of the Board of Directors
described in clause (ii) of such definition;
(iii) the shareholder approval or adoption described in
clauses (iii) or (iv) of such definition;
(iv) the commencement date of any tender offer subject to the
terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or exchange offer subject to the terms of
the Securities Act of 1933, as amended (the "Securities Act"), or any
other offer or series of offers to purchase for cash, or to exchange
for securities of a person other than the Company or any of its
affiliates, GroupMAC Common Stock by any "person" or "group" of persons
(as such terms are used in Rule 13d of the Exchange Act) other than an
offer or offers by GroupMAC or by employee benefit plan(s) sponsored by
GroupMAC ("Tender Offer") if such person or group would hold 30% or
more of the then outstanding GroupMAC Common Stock after the
consummation of the Tender Offer.
10. Termination.
(a) Either the Company or Employee may terminate Employee's employment
hereunder at any time by delivery of written notice by the terminating party of
its election to terminate this Agreement to the other party. Promptly after such
termination of employment, the Company shall pay to Employee an amount equal to
the sum of (i) Employee's earned but unpaid Annual Base Salary through the date
of termination of employment at the rate in effect at the time of such
termination, (ii) vacation pay earned but not taken to the date of such
termination, and (iii) all other amounts previously deferred by Employee or
earned but not paid as of such date under all Company incentive or deferred
compensation plans or programs.
(b) If the Company terminates Employee's employment without Cause, then
the Company shall promptly pay to Employee the following amounts in addition to
those set forth in Section 10(a):
(i) If such termination occurred during a Protected Period,
the amounts set forth in Section 7; and
(ii) If such termination did not occur during a Protected
Period,
(A) an amount equal to 12 months' compensation at
Employee's then current Annual Base Salary, payable
semimonthly, and shall continue to provide benefits in the
kind and amounts provided up to the date of termination for a
12 month period including, without limitation, continuation of
any Company-paid benefits as described in Section 5 for
Employee and Employee's family;
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(B) any portion of Employee's bonus for the calendar
year prior to the calendar year in which such termination of
employment occurs which has not been paid; and
(C) an additional amount equal to a prorated portion
of Employee's target bonus for the calendar year in which such
termination occurs, assuming that Employee would have earned
the maximum target bonus for such year (such prorated portion
to be determined based upon the number of working days
Employee is employed by the Company during the calendar year
in which Employee's employment is terminated divided by the
total number of working days in such calendar year).
The amounts described in clauses (B) and (C) above shall be paid
promptly after the determination of such bonuses, but in any event
prior to the publication of financial statements of GroupMAC for such
year.
(c) If Employee terminates Employee's employment for Good Reason during
a Protected Period, then the Company shall promptly pay to Employee, in addition
to the amounts set forth in Section 10(a), the amounts set forth in Section 7.
(d) In the event this Agreement is terminated by the Company without
Cause or by Employee with Good Reason, Employee agrees to accept, in full
settlement of any and all claims, losses, damages and other demands that
Employee may have arising out of such termination, as liquidated damages and not
as a penalty, the payments set forth in this Agreement. Employee hereby waives
any and all rights Employee may have to bring any cause of action or proceeding
contesting any termination without Cause or Good Reason; provided, however, that
such waiver shall not be deemed to affect Employee's rights to enforce any other
obligations of the Company. Under no circumstances shall Employee be entitled to
any compensation or confirmation of any benefits under this Agreement for any
period of time following Employee's date of termination if Employee's
termination is for Cause.
(e) If at any time during the term of this Agreement, Employee is
unable due to physical or mental disability, to perform effectively Employee's
duties hereunder, the Company shall continue payment of compensation as provided
in Section 4 during the first 12 month period of such disability to the extent
not covered by the Company's disability insurance policies. Upon the expiration
of such 12 month period, the Company, at its sole option, may continue payment
of Employee's salary for such additional periods as the Company elects, or may
terminate this Agreement without any further obligations hereunder. If Employee
should die during the term of this Agreement, Employee's employment and the
Company's obligations hereunder shall terminate as of the end of the month in
which Employee's death occurs.
(f) So long as Employee receives a severance as provided in Section
10(b) above, Employee shall sign any lock-up letters, standstill agreements, or
other similar documentation required by an underwriter in connection with a
public offering of securities by GroupMAC or
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take other actions reasonably related thereto as requested by the Board of
Directors of GroupMAC; provided, however, that the period of any such lock-up or
standstill agreements shall not exceed the shorter of (i) 180 days or (ii) the
balance of the severance period. Failure to take any such action shall cause
Employee to forfeit any further rights to the salary continuation payments in
Section 10(b)(ii). In addition, in such event the Company can seek and obtain
specific performance of such covenant, including any injunction requiring
execution thereof, and Employee hereby appoints the then current president of
the Company to sign any such documents on his behalf so long as such documents
are prepared on the same basis as other shareholders generally or as all
management shareholders.
11. No Mitigation Obligation. The Company acknowledges that it will be
difficult and may be impossible (i) for Employee to find reasonably comparable
employment following termination of Employee's employment and (ii) to measure
the amount of damages which Employee may suffer as a result of the termination
of Employee's employment. Accordingly, all amounts paid to Employee under this
Agreement following Employee's termination of employment are acknowledged by the
Company to be reasonable and to be liquidated damages, and Employee will not be
required to mitigate the amount of such payments by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever (including from other employment) create any mitigation,
offset, reduction or any other obligation on the part of Employee under this
Agreement.
12. Covenant Not to Compete.
(a) During Employee's employment with the Company or any of its
Affiliates (as defined in Exhibit B attached hereto) and thereafter during the
Restricted Period (as defined in Exhibit B attached hereto), regardless of the
reason for the termination of Employee's employment, Employee will not engage in
or carry on, directly or indirectly, either for himself or as a member of a
partnership or as a shareholder, investor, owner, officer or director of a
company or other entity, or as an employee, agent, associate or consultant of
any person, partnership, corporation or other entity, any business in any State
of the United States or in any other part of the world that directly competes
with any services or products produced, sold, conducted, developed, or in the
process of development by the Company or its Affiliates on the date of
termination of Employee's employment.
(b) Notwithstanding the foregoing, Employee shall be permitted to
engage in the following activities which could otherwise be covered by Section
12(a):
(i) the ownership of less than one percent of any class of
securities of a publicly-held company whose gross assets exceed
$100,000,000; and
(ii) working in the indoor air quality, heating, ventilation
and air conditioning or plumbing maintenance services industry if such
activities are not in direct competition with any products or services
produced, sold, conducted, developed, or in the process of
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development by the Company or its Affiliates on the date of termination
of Employee's employment.
(c) Employee acknowledges that the limitations set forth herein on his
rights to compete with the Company and its Affiliates are reasonable and
necessary for the protection of the Company and its Affiliates. In this regard,
Employee specifically agrees that the limitations as to period of time and
geographic area, as well as all other restrictions on his activities specified
herein, are reasonable and necessary for the protection of the Company and its
Affiliates. In particular, Employee acknowledges that the parties anticipate
that Employee will be actively seeking markets for the products and services of
the Company and its Affiliates throughout the United States during Employee's
employment with the Company.
(d) In the event that there shall be any violation of the covenant not
to compete set forth in this Section 12, then the time limitation thereof shall
be extended for a period of time equal to the period of time during which such
violation continues; and in the event the Company is required to seek relief
from such violation in any court, board of arbitration or other tribunal, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including all appeals.
(e) Employee agrees that the remedy at law for any breach by Employee
of this Section 12 will be inadequate and that the Company shall also be
entitled to injunctive relief.
13. Confidential Information. During the term of this Agreement, and
for five years after Employee's termination of employment, Employee shall not
use or disclose, without the prior written consent of the Company, Confidential
Information (as defined in Exhibit B attached hereto) relating to the Company or
any of its Affiliates, and upon termination of Employee's employment will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. Employee will promptly disclose to the Company all
Confidential Information, as well as any business opportunity which comes to
Employee's attention during the term of Employee's employment with the Company.
Employee will not take advantage of or divert any business opportunity for the
benefit of Employee or any other Person (as defined in Exhibit B attached
hereto) without the prior written consent of the Company. Employee agrees that
the remedy at law for any breach by him of this Section 13 will be inadequate
and that the Company shall also be entitled to injunctive relief.
14. Intellectual Property.
(a) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company or any of its
Affiliates, Employee hereby agrees that all patents, trademarks, copyrights,
trade secrets, and other intellectual property rights, all inventions, whether
or not patentable, and any product, drawing, design, recording, writing,
literary work or other author's work, in any other tangible form developed in
whole or in part by Employee during the term of this Agreement, or otherwise
developed, purchased or acquired by
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the Company or any of its Affiliates, shall be the exclusive property of the
Company or such Affiliate, as the case may be ("Intellectual Property").
(b) Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in his possession or control
to the Company upon request and, in any event, at the end of his employment with
the Company.
(c) Employee shall assign and does hereby assign to the Company all
property rights that he may now or hereafter have in the Intellectual Property.
Employee shall take such action, including, but not limited to, the execution,
acknowledgment, delivery and assistance in preparation of documents, and the
giving of testimony, as may be requested by the Company to evidence, transfer,
vest or confirm the Company's right, title and interest in the Intellectual
Property.
(d) Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.
15. Definitions. As used in this Agreement , the terms defined in
Exhibit B have the means assigned to such terms in such exhibit.
16. Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) If to Employee:
262 Monroe
Denver, CO. 80206
(b) If to the Company or GroupMAC:
GroupMAC Management Co.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attention: Corporate Secretary
Facsimile: 713-626-4788
Any party may change such party's address by such notice to the other parties.
17. No Set-off Rights. The Company's obligations to make the payments
and provide the benefits required by this Agreement and otherwise to perform its
obligations
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<PAGE> 12
hereunder shall not be affected by any set off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
Employee or others.
18. Assignment. This Agreement is personal to Employee, and Employee
shall not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company. Neither Employee nor
Employee's spouse will have the right to commute, encumber, or otherwise dispose
of any payments under this Agreement. The Company shall have the right to assign
this Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of the
industries in which the Company is then active shall not be deemed to expand the
scope of Employee's covenant not to compete with such operations, products or
services without Employee's written consent. The Company shall require any
Person who is the successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company or GroupMAC to expressly assume and agree
to perform, by a written agreement in form and substance reasonably satisfactory
to Employee, all of the obligations of the Company and GroupMAC under this
Agreement. As used in this Agreement, the term "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement or otherwise.
19. Survival. The provisions of this Agreement shall survive the
termination of Employee's employment hereunder in accordance with their terms.
20. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of Texas without regard to the
choice-of-law principles thereof.
21. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.
23. Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any
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<PAGE> 13
party to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as a waiver hereof, nor shall any single or partial exercise of
any such right or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right or remedy.
24. Cumulative Rights And Remedies. All rights and remedies hereunder
are cumulative and are in addition to all other rights and remedies provided by
law, agreement or otherwise. Employee's obligations to the Company and the
Company's rights and remedies hereunder are in addition to all other obligations
of Employee and rights and remedies of the Company created pursuant to any other
agreement.
25. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.
26. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with respect
to those provisions which were held to be invalid, illegal or unenforceable.
27. Attorneys' Fees and Costs. If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.
28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.
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<PAGE> 14
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the date first above written.
GROUPMAC MANAGEMENT CO.
By: /s/ J. Patrick Millinor, Jr.
-----------------------------------------
J. Patrick Millinor, Jr.
President
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Donald L. Luke
-----------------------------------------
Donald L. Luke
President
EMPLOYEE:
/s/ James P. Norris
-------------------------------------------
James P. Norris
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<PAGE> 15
EXHIBIT A
DUTIES AND FUNCTIONS
CHAIRMAN OF THE BOARD GROUPMAC
1. Chair the Board of Directors and support executive management's efforts
in managing the Company; perform duties assigned by the Board of
Directors.
2. Refine GroupMAC's mission and develop long-range strategic plan and
specific initiation; communicate GroupMAC's vision, mission,
philosophy, etc. to all GroupMAC companies and affiliates.
3. Develop plan for and chair the "Quality Advisory Board" for the
creation of "best practices," company operations standards, training
standards and goals, etc.
4. Create GroupMAC MIX groups.
5. Develop model for "Complete Residential Service" program; implement
model on pilot project basis; expand model to new GroupMAC locations.
6. Develop (with Callahan/Roach & others) GroupMAC's definition and
approach toward "quality" and "employee training" and lead its
implementation; establish management training plan for managers and
personnel at GroupMAC companies to maintain local management continuity
and career development opportunities; establish technician training
plan for personnel at GroupMAC companies; maintain positive liaison and
communications with local GroupMAC companies.
7. Develop strategies and plans for recruiting management and technical
personnel for GroupMAC companies.
8. Lead GroupMAC's effort in developing a "Leadership Warranty" program.
9. Assist in the identification and acquisition of key companies in
markets GroupMAC considers priority.
10. Lead GroupMAC involvement in the HVAC industry; develop and spearhead
GroupMAC active involvement in plumbing and electrical contractor
associations; develop acceptance of GroupMAC as a positive force in
maintenance, replacement and construction industries.
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11. Define GroupMAC's options in relation to major constituencies in the
industry (utilities, energy marketers, home warranty issuers,
manufacturers, distributors, etc.) and develop strategic plans or
alliances to leverage opportunities and/or complete effectively.
12. Monitor regulatory and legislative activities affecting the industry.
13. Plan and develop (with Callahan/Roach) and build an affiliate network
of companies.
14. Assist GroupMAC vendor/purchasing programs to assure best possible
equipment prices for the Company; identify and implement areas of
positive cost savings, shared services, group purchase options, etc.
15. Resolve GroupMAC structure and operations issues to allow for union
operations within or among GroupMAC companies.
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<PAGE> 17
EXHIBIT B
DEFINITIONS
"Annual Base Salary" means the salary of Employee in effect at the
relevant time determined in accordance with Section 4(a) hereof.
"Affiliate" means, with respect to any Person, each other Person who
controls, is controlled by, or is under common control with the Person
specified.
"Cause" when used in connection with the termination of employment with
the Company, means the termination of Employee's employment by the Company by
reason of (i) the conviction of Employee of a crime involving moral turpitude by
a court of competent jurisdiction as to which no further appeal can be taken;
(ii) the proven commission by Employee of an act of fraud upon the Company;
(iii) the willful and proven misappropriation of any funds or property of the
Company by Employee; (iv) the willful, continued and unreasonable failure by
Employee to perform material duties assigned to Employee and agreed to by
Employee after reasonable notice and opportunity to cure such performance; (v)
the knowing engagement by Employee in any direct, material conflict of interest
with the Company without compliance with the Company's conflict of interest
policy, if any, then in effect; (vi) the knowing engagement by Employee, without
the written approval of the Board of Directors of the Company, in any activity
which competes with the business of the Company or any of its Affiliates or
which would result in a material injury to the Company or any of its Affiliates;
or (vii) the knowing engagement in any activity which would constitute a
material violation of the provisions of the Company's Insider Trading Policy or
Business Ethics Policy, if any, then in effect.
"Change of Control" means
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Designated Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) of 30% or more of either (1) the then
outstanding shares of Common Stock of GroupMAC (the "Outstanding
GroupMAC Common Stock") or (2) the combined voting power of the then
outstanding voting securities of GroupMAC entitled to vote generally in
the election of directors (the "Outstanding GroupMAC Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change in Control if: (i) any acquisition of Common
Stock of GroupMAC or voting securities of GroupMAC directly from
GroupMAC (excluding an acquisition by virtue of the exercise of a
conversion privilege), (ii) any acquisition of Common Stock of GroupMAC
or voting securities of GroupMAC by GroupMAC, (iii) any acquisition of
Common Stock of GroupMAC or voting securities of GroupMAC by any
employee benefit plan(s) (or related trust(s)) sponsored or maintained
by GroupMAC or any corporation controlled by GroupMAC and approved by
the
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<PAGE> 18
Incumbent Board, or (iv) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation, if, immediately following
such reorganization, merger or consolidation, the conditions described
in clauses (1), (2) and (3) of paragraph (iii) of this definition are
satisfied; or
(ii) individuals who, as of the date hereof, constitute the
entire Board of Directors of GroupMAC (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors
of GroupMAC (the "Board"); provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by GroupMAC's shareholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of the Regulation 14A promulgated under the
Exchange Act), or an actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board or (2) a plan
or agreement to replace a majority of the members of the Board then
comprising the Incumbent Board; or
(iii) approval by the shareholders of GroupMAC of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation, (1)
more than 60% (or such greater percentage as may be approved by the
Incumbent Board) of the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(including, without limitation, a corporation which as a result of such
transaction owns GroupMAC through one or more subsidiaries) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding GroupMAC Common
Stock and Outstanding GroupMAC Voting Securities immediately prior to
such reorganization, merger or consolidation in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation, of the Outstanding GroupMAC
Common Stock or Outstanding GroupMAC Voting Securities, as the case may
be, (2) no Designated Person (excluding GroupMAC, any employee benefit
plan(s) (or related trust(s)) of GroupMAC and/or its subsidiaries or
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 30%
(or such lesser percentage as may be approved by the Incumbent Board)
or more of the Outstanding GroupMAC Common Stock or Outstanding
GroupMAC Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 30% (or such lesser percentage as may be
approved by the Incumbent Board) or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (3) at
least a majority of the
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<PAGE> 19
members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) approval by the shareholders of GroupMAC of (1) a
complete liquidation or dissolution of GroupMAC or (2) the sale or
other disposition of all or substantially all of the assets of
GroupMAC, other than to a corporation, with respect to which
immediately following such sale or other disposition, (A) more than 60%
(or such greater percentage as may be approved by the Incumbent Board)
of the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were beneficial
owners, respectively, of the Outstanding GroupMAC Common Stock and
Outstanding GroupMAC Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting
Securities, as the case may be, (B) no Designated Person (excluding
GroupMAC and any employee benefit plan (or related trust) of GroupMAC
and/or its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% (or such lesser percentage as may be approved by the
Incumbent Board) or more of the Outstanding GroupMAC Stock or
Outstanding GroupMAC Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% (or such lesser
percentage as may be approved by the Incumbent Board) or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors, and (C) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of GroupMAC.
"Confidential Information" includes information conveyed or assigned to
the Company or any of its Affiliates by Employee or conceived, compiled,
created, developed, discovered or obtained by Employee from and during his
employment relationship with the Company, whether solely by Employee or jointly
with others, which concerns the affairs of the Company or its Affiliates and
which the Company could reasonably be expected to desire be held in confidence,
or the disclosure of which would likely be embarrassing, detrimental or
disadvantageous to the Company or its Affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and the
trade secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company or any of its Affiliates and information
made available to the Company or any of its Affiliates by other parties under a
confidential relationship. Confidential Information,
B-3
<PAGE> 20
however, shall not include information (a) which is, at the time in question, in
the public domain through no wrongful act of Employee, (b) which is later
disclosed to Employee by one not under obligations of confidentiality to the
Company or any of its Affiliates or Employee, (c) which is required by court or
governmental order, law or regulation to be disclosed, or (d) which the Company
has expressly given Employee the right to disclose pursuant to written
agreement.
"Good Reason" means the occurrence of any of the following events:
(a) Employee is assigned any duties materially inconsistent with, or
diminished from, Employee's positions, duties, responsibilities and status with
the Company or GroupMAC immediately prior to the commencement of the Protected
Period, or Employee's status, reporting responsibilities, titles or offices are
materially diminished from those in effect immediately prior to the commencement
of the Protected Period, or Employee is removed from or is not re-elected or
appointed to any of such responsibilities, titles, offices or positions, or
Employee's duties and responsibilities are materially increased without a
corresponding increase in the Employee's compensation (such increase in
compensation to be satisfactory to Employee, in Employee's sole reasonable
judgment), except in each case in connection with the termination of Employee's
employment by the Company for Cause or on account of disability, or as a result
of the Employee's death, or by the Employee for other than Good Reason;
provided, however, that Good Reason shall not be triggered under this subsection
(a) by an insubstantial action not taken in bad faith and that is remedied by
the Company promptly after receipt of written notice from Employee; or
(b) Employee's Annual Base Salary is reduced from that in effect
immediately prior to the commencement of the Protected Period or as the same may
be increased from time to time thereafter; or
(c) The Company or GroupMAC fails to continue in effect any benefit or
compensation plan, including, but not limited to, the annual bonus plan,
qualified retirement plan, executive life insurance plan and/or health and
accident plan, in which Employee is participating immediately prior to the
commencement of the Protected Period, or plans providing, in the sole reasonable
judgment of Employee, Employee with substantially similar benefits, or the
Company or GroupMAC takes any action that would adversely affect Employee's
participation in or reduce Employee's benefits under any of such plans
(excluding any such action by the Company or GroupMAC that is required by law);
or
(d) The Company's or GroupMAC's principal executive offices are
relocated at any time following a Change in Control more than 20 miles from
where such offices were located immediately prior to such Change in Control; or
(e) The Company requires Employee at any time following a Change in
Control to relocate more than 20 miles from where Employee's office was located
immediately prior to such Change in Control; or
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<PAGE> 21
(f) The amendment, modification or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Company or GroupMAC that was in
effect immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect Employee's
rights to indemnification by the Company; or
(g) The Company or GroupMAC shall violate or breach any obligation of
the Company or GroupMAC in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in the Bylaws
of the Company or GroupMAC and/or in this Agreement or any other separate
agreement entered into between the Company or GroupMAC and Employee) to
indemnify Employee against any claim, loss, expense or liability sustained or
incurred by Employee by reason, in whole or in part, of the fact that Employee
is or was an officer or director of the Company; or
(h) The Company or GroupMAC shall violate or breach any other material
obligation of the Company or GroupMAC owing to Employee in effect immediately
prior to the commencement of the Protected Period relating to Employee's
employment with the Company, but only if such violation or breach (if capable of
being remedied) shall continue unremedied for more than 15 days after written
notice thereof is given by Employee to the Company; or
(i) The Board (or any nominating committee of the Board) fails to
recommend and support Employee's re-election as a director of the Company or
GroupMAC if the Employee is a director of the Company or GroupMAC immediately
prior to the commencement of the Protected Period; or
(j) The Company and GroupMAC shall fail to keep in force, for the
benefit of Employee, directors' and officers' insurance policy with coverage
amounts and scope equal to the coverage amounts and scope under such policy
immediately prior to the commencement of the Protected Period; or
(k) The Company or GroupMAC fail to obtain from a successor (including
a successor to a material portion of the business or assets of the Company or
GroupMAC) a satisfactory assumption in writing of the Company's or GroupMAC's
obligations under this Agreement; or
(l) The Company fails to provide Employee with office space, related
facilities and support personnel (including, but not limited to, administrative
and secretarial assistance) that are both commensurate with the Employee's
position and Employee's responsibilities to and position with the Company
immediately prior to the Change of Control and not materially dissimilar to the
office space, related facilities and support personnel provided to other
executive officers of the Company; or
(m) The Company or GroupMAC notifies Employee of the Company's or
GroupMAC's intention not to observe or perform one or more of the obligations of
the Company or GroupMAC under this Agreement.
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"Person" means any individual, corporation, trust, partnership, limited
partnership, foundation, association, limited liability company, joint stock
association or other legal entity.
"Protected Period" means the period of time beginning with a Change of
Control and ending 24 months following such Change of Control; provided,
however, that if any event has occurred which could reasonably be expected to
result in a Change of Control and a Change of Control occurs within six months
after such event, then the Protected Period will begin on the date of such
event.
"Restricted Period" means the period beginning on the date of the
termination of Employee's employment with the Company and its Affiliates and
ending as follows, as applicable:
(i) six months after the termination of Employee's employment;
(ii) one year after the termination of Employee's employment,
if Employee is entitled to benefits under Section 10(b)(ii); or
(iii) two years after the termination of Employee's
employment, if Employee is entitled to benefits under Section 10(b)(i).
B-6
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of March
1, 1998, between GroupMAC Management Co., a Delaware corporation (the
"Company"), Group Maintenance America Corp., a Texas corporation ("GroupMAC"),
and J. Patrick Millinor, Jr., a resident of Harris County, Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employee and the predecessor of GroupMAC entered into an
Employment Agreement dated as of October 24, 1996,(the "Original Employment
Agreement"); and
WHEREAS, GroupMAC assigned the Original Employment Agreement to the
Company, and Employee became an employee of the Company, effective as of March
1, 1998; and
WHEREAS, the Company, GroupMAC and Employee desire to amend and restate
the Original Employment Agreement to reflect the effects of the foregoing
assignment, to modify the provisions of the Original Employment Agreement
pertaining to changes of control of GroupMAC, and to make certain other changes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby amend and restate the Original
Employment Agreement as follows:
1. Employment. The Company hereby agrees to employ Employee and the
Employee hereby agrees to work for the Company as its Chief Executive Officer.
Employee's principal office shall be in Houston, Texas. Employee will report to
the Board of Directors of the Company. Subject to consultation with the Board of
Directors, Employee will have direct supervisory responsibility and authority
for the matters set forth on Exhibit A. So long as he is employed by the
Company, Employee shall devote his skill, energy and best efforts to the
faithful discharge of his duties as an employee of the Company. In providing
services hereunder, Employee shall comply with and follow all directives,
policies, standards and regulations from time to time established by the Board
of Directors of the Company.
2. Term of Employment. Employee's employment by the Company pursuant to
this Agreement shall continue in effect for an initial term of three years from
the date of this Agreement, unless terminated in accordance with Section 7, and
shall be extended from year to year thereafter, unless terminated effective as
of the end of the initial term or any one-year extension thereafter by written
notice from the Company to Employee, or by written notice of Employee to the
Company, delivered not less than 90 days prior to the end of the initial term,
or the anniversary of such one-year extension, as applicable.
<PAGE> 2
3. Representations and Warranties. Employee represents and warrants
that he is under no contractual or other restrictions or obligations that will
significantly limit his activities on behalf of the Company or will prohibit or
limit the disclosure or use of by Employee of any information which directly or
indirectly relates to the nature of the Company or the services to be rendered
by Employee under this Agreement.
4. Compensation. Subject to the provisions of Section 10, Employee will
be entitled to the compensation and benefits set forth in this Section 4.
(a) During 1998, the Company shall pay Employee an Annual Base Salary,
payable semi-monthly, in equal semi-monthly installments at a rate equal to
$150,000 per year. In each subsequent calendar year during the term of this
Agreement, the Company shall pay to Employee an Annual Base Salary equal to the
greater of (i) his salary for the immediately preceding year or (ii) if
determined otherwise by the Board of Directors, an Annual Base Salary determined
by the Board of Directors following its annual salary and performance review.
(b) Employee shall be eligible to receive an annual bonus pursuant to
the incentive compensation program in effect from time to time for executive
employees of GroupMAC. The target bonus of Employee under such program shall not
be less than 100% of Employee's annual salary.
(c) All payments of salary and other compensation to Employee shall be
made after deduction of any taxes required to be withheld with respect thereto
under applicable federal and state laws.
5. Fringe Benefits; Expenses. (a) Employee shall participate in all
employee benefit plans sponsored by the Company or GroupMAC for its executive
employees, including but not limited to stock bonus, stock purchase and stock
option plans, sick leave and disability leave, health insurance, dental
insurance and pension and/or profit sharing plans; provided, however, that
except as provided below, the nature, amount and limitations of such plans shall
be determined from time to time by the Board of Directors of the Company.
(b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of his employment; provided, however,
that Employee must file expense reports with respect to such expenses in
accordance with the Company's policies as are in effect from time to time.
(c) Employee shall be entitled to a minimum of three weeks paid
vacation during each calendar year, increasing to four weeks at January 1, 1999,
and to paid holidays and other paid leave set forth in the Company's policies in
effect from time to time. Any vacation not used during a calendar year may not
be used during any subsequent period.
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<PAGE> 3
(d) The Company will pay all license fees, occupation taxes and
reasonable educational costs and expenses necessary to maintain Employee's good
standing under any professional licenses.
(e) The Company shall use reasonable efforts to provide (i) life
insurance payable to Employee's designated beneficiary in an amount at least
three times Employee's Annual Base Salary and (ii) disability insurance on
behalf of Employee which, as a goal, shall provide for salary continuation in
the event of permanent disability in an amount not less than 60% of Employee's
Annual Base Salary, it being acknowledged by Employee that GroupMAC's present
disability insurance provides a limit of $5,000 per month.
6. Indemnification and Insurance. The Company shall indemnify Employee
with respect to matters relating to his services as an officer and/or director
of the Company or any of its Affiliates to the extent set forth in the Company's
By-laws and in accordance with the terms of any other indemnification which is
generally applicable to executive officers of the Company or any of its
Affiliates that may be provided by the Company or any such Affiliate from time
to time. The foregoing indemnity is contractual and will survive any adverse
amendment to or repeal of the By-laws. The Company will also cover Employee
under a policy of officers' and directors' liability insurance providing
coverage that is comparable to that provided now or hereafter to any other
executive officer or director of the Company or GroupMAC. The provisions of this
Section 6 will survive the termination of Employee's employment for any reason
and the term of this Agreement.
7. Change in Control of the Company.
(a) If a Change of Control (as defined in Exhibit B attached hereto)
occurs and if during the Protected Period (as defined in Exhibit B attached
hereto), Employee's employment is terminated, whether by the Company or by
Employee, then the Company shall promptly pay or otherwise provide to Employee
the benefits set forth below:
(i) An amount equal to two times the sum of (A) Employee's
Annual Base Salary then in effect and (B) Employee's target bonus for
the calendar year in which such termination occurs (assuming the
maximum target bonus will be earned for such year), payable in a single
lump sum by certified or bank cashier's check within five days of such
termination; and
(ii) An amount equal to the product of (A) the maximum monthly
premium payment that may be charged to continue coverage for Employee
and Employee's dependents under the Company's health insurance plan
under COBRA, multiplied by (B) 24 months.
Notwithstanding the foregoing, Employee shall not be entitled to any benefits
under this Section 7 if such termination is (i) due to Employee's death, (ii) by
the Company on account of Employee's Disability as provided in Section 10(d)
below, (iii) by the Company for Cause as
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<PAGE> 4
provided in Section 10(a) below, or (iv) by Employee for other than Good Reason
(as defined in Exhibit B attached hereto) as provided in Section 10 below.
8. Gross-Up of Parachute Payments.
(a) To provide Employee with adequate protection in connection with his
ongoing employment with the Company, this Agreement provides Employee with
various benefits in the event of termination of Employee's employment with the
Company during the Protected Period. If Employee's employment is terminated
following a "change of control" of GroupMAC or the Company, within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a
portion of those benefits could be characterized as "excess parachute payments"
within the meaning of Section 280G of the Code. The parties hereto acknowledge
that the protections set forth in this Section 8 are important, and it is agreed
that Employee should not have to bear the burden of any excise tax that might be
levied under Section 4999 of the Code or any similar provision of state or
federal law, in the event that any portion of the benefits payable to Employee
pursuant to this Agreement are treated as an excess parachute payment. The
parties, therefore, have agreed as set forth in this Section 8.
(b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution (including income
recognized by Employee upon the early vesting of restricted property or upon the
exercise of options whose exercise date has been accelerated) by GroupMAC or the
Company or any other person to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 8) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any similar provision of state or federal law or
any interest or penalties are incurred by Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
(c) Subject to the provisions of Section 8(d) below, all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an
independent public accounting firm with a national reputation selected by
Employee (the "Accounting Firm") that shall provide detailed supporting
calculations both to the Company and to Employee within 15 business days after
the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control of GroupMAC or the Company, Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder
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(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. The Company shall indemnify and hold harmless Employee, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed on Employee as a result of such payment
of fees and expenses. Any Gross-Up Payment, as determined pursuant to this
Section 8, shall be paid by the Company to Employee within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Employee, it shall furnish Employee
with a written opinion that failure to report the Excise Tax on Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding on the Company and Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not
have been made by the Company that should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. If the Company
exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Employee.
(d) Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claims) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Employee is informed in
writing of such claim (or threatened lien) and shall apprize the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which Employee gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due or such tax lien would be imposed). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim (or threatened lien), Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claims (or threatened lien);
(ii) take such action in connection with contesting such claim
(or threatened lien) as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(iv) permit the Company to participate in any proceedings
relating to such claims (or threatened lien);
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<PAGE> 6
provided, however, that the Company shall bear and pay directly all costs and
expenses (including legal fees and expenses, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(d), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Employee to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Employee shall prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as Employee shall
determine (but in no event shall the Company permit or direct Employee to allow
a tax lien to be imposed on Employee's property); provided, further, that if the
Company directs Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Employee, on an interest-free basis,
and shall indemnify and hold Employee harmless on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. In addition, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and Employee shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(e) If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 8(d), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 8(d) above) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt by Employee of an
amount advanced by the Company pursuant to Section 8(d) above, a determination
is made that Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Acceleration of Options. Upon the occurrence of any of the following
events at a time while Employee holds outstanding options to purchase GroupMAC
Common Stock, all such options shall be immediately exercisable in full:
(i) the acquisition described in clause (i) of the definition
of Change of Control;
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<PAGE> 7
(ii) the change in the composition of the Board of Directors
described in clause (ii) of such definition;
(iii) the shareholder approval or adoption described in
clauses (iii) or (iv) of such definition;
(iv) the commencement date of any tender offer subject to the
terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or exchange offer subject to the terms of
the Securities Act of 1933, as amended (the "Securities Act"), or any
other offer or series of offers to purchase for cash, or to exchange
for securities of a person other than the Company or any of its
affiliates, GroupMAC Common Stock by any "person" or "group" of persons
(as such terms are used in Rule 13d of the Exchange Act) other than an
offer or offers by GroupMAC or by employee benefit plan(s) sponsored by
GroupMAC ("Tender Offer") if such person or group would hold 30% or
more of the then outstanding GroupMAC Common Stock after the
consummation of the Tender Offer.
10. Termination.
(a) Either the Company or Employee may terminate Employee's employment
hereunder at any time by delivery of written notice by the terminating party of
its election to terminate this Agreement to the other party. Promptly after such
termination of employment, the Company shall pay to Employee an amount equal to
the sum of (i) Employee's earned but unpaid Annual Base Salary through the date
of termination of employment at the rate in effect at the time of such
termination, (ii) vacation pay earned but not taken to the date of such
termination, and (iii) all other amounts previously deferred by Employee or
earned but not paid as of such date under all Company incentive or deferred
compensation plans or programs.
(b) If the Company terminates Employee's employment without Cause, then
the Company shall promptly pay to Employee the following amounts in addition to
those set forth in Section 10(a):
(i) If such termination occurred during a Protected Period,
the amounts set forth in Section 7; and
(ii) If such termination did not occur during a Protected
Period,
(A) an amount equal to 12 months' compensation at
Employee's then current Annual Base Salary, payable
semimonthly, and shall continue to provide benefits in the
kind and amounts provided up to the date of termination for a
12 month period including, without limitation, continuation of
any Company-paid benefits as described in Section 5 for
Employee and Employee's family;
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(B) any portion of Employee's bonus for the calendar
year prior to the calendar year in which such termination of
employment occurs which has not been paid; and
(C) an additional amount equal to a prorated portion
of Employee's target bonus for the calendar year in which such
termination occurs, assuming that Employee would have earned
the maximum target bonus for such year (such prorated portion
to be determined based upon the number of working days
Employee is employed by the Company during the calendar year
in which Employee's employment is terminated divided by the
total number of working days in such calendar year).
The amounts described in clauses (B) and (C) above shall be paid
promptly after the determination of such bonuses, but in any event
prior to the publication of financial statements of GroupMAC for such
year.
(c) If Employee terminates Employee's employment for Good Reason during
a Protected Period, then the Company shall promptly pay to Employee, in addition
to the amounts set forth in Section 10(a), the amounts set forth in Section 7.
(d) In the event this Agreement is terminated by the Company without
Cause or by Employee with Good Reason, Employee agrees to accept, in full
settlement of any and all claims, losses, damages and other demands that
Employee may have arising out of such termination, as liquidated damages and not
as a penalty, the payments set forth in this Agreement. Employee hereby waives
any and all rights Employee may have to bring any cause of action or proceeding
contesting any termination without Cause or Good Reason; provided, however, that
such waiver shall not be deemed to affect Employee's rights to enforce any other
obligations of the Company. Under no circumstances shall Employee be entitled to
any compensation or confirmation of any benefits under this Agreement for any
period of time following Employee's date of termination if Employee's
termination is for Cause.
(e) If at any time during the term of this Agreement, Employee is
unable due to physical or mental disability, to perform effectively Employee's
duties hereunder, the Company shall continue payment of compensation as provided
in Section 4 during the first 12 month period of such disability to the extent
not covered by the Company's disability insurance policies. Upon the expiration
of such 12 month period, the Company, at its sole option, may continue payment
of Employee's salary for such additional periods as the Company elects, or may
terminate this Agreement without any further obligations hereunder. If Employee
should die during the term of this Agreement, Employee's employment and the
Company's obligations hereunder shall terminate as of the end of the month in
which Employee's death occurs.
(f) So long as Employee receives a severance as provided in Section
10(b) above, Employee shall sign any lock-up letters, standstill agreements, or
other similar documentation required by an underwriter in connection with a
public offering of securities by GroupMAC or
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<PAGE> 9
take other actions reasonably related thereto as requested by the Board of
Directors of GroupMAC; provided, however, that the period of any such lock-up or
standstill agreements shall not exceed the shorter of (i) 180 days or (ii) the
balance of the severance period. Failure to take any such action shall cause
Employee to forfeit any further rights to the salary continuation payments in
Section 10(b)(ii). In addition, in such event the Company can seek and obtain
specific performance of such covenant, including any injunction requiring
execution thereof, and Employee hereby appoints the then current president of
the Company to sign any such documents on his behalf so long as such documents
are prepared on the same basis as other shareholders generally or as all
management shareholders.
11. No Mitigation Obligation. The Company acknowledges that it will be
difficult and may be impossible (i) for Employee to find reasonably comparable
employment following termination of Employee's employment and (ii) to measure
the amount of damages which Employee may suffer as a result of the termination
of Employee's employment. Accordingly, all amounts paid to Employee under this
Agreement following Employee's termination of employment are acknowledged by the
Company to be reasonable and to be liquidated damages, and Employee will not be
required to mitigate the amount of such payments by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever (including from other employment) create any mitigation,
offset, reduction or any other obligation on the part of Employee under this
Agreement.
12. Covenant Not to Compete.
(a) During Employee's employment with the Company or any of its
Affiliates (as defined in Exhibit B attached hereto) and thereafter during the
Restricted Period (as defined in Exhibit B attached hereto), regardless of the
reason for the termination of Employee's employment, Employee will not engage in
or carry on, directly or indirectly, either for himself or as a member of a
partnership or as a shareholder, investor, owner, officer or director of a
company or other entity, or as an employee, agent, associate or consultant of
any person, partnership, corporation or other entity, any business in any State
of the United States or in any other part of the world that directly competes
with any services or products produced, sold, conducted, developed, or in the
process of development by the Company or its Affiliates on the date of
termination of Employee's employment.
(b) Notwithstanding the foregoing, Employee shall be permitted to
engage in the following activities which could otherwise be covered by Section
12(a):
(i) the ownership of less than one percent of any class of
securities of a publicly-held company whose gross assets exceed
$100,000,000; and
(ii) working in the indoor air quality, heating, ventilation
and air conditioning or plumbing maintenance services industry if such
activities are not in direct competition with any products or services
produced, sold, conducted, developed, or in the process of
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<PAGE> 10
development by the Company or its Affiliates on the date of termination
of Employee's employment.
(c) Employee acknowledges that the limitations set forth herein on his
rights to compete with the Company and its Affiliates are reasonable and
necessary for the protection of the Company and its Affiliates. In this regard,
Employee specifically agrees that the limitations as to period of time and
geographic area, as well as all other restrictions on his activities specified
herein, are reasonable and necessary for the protection of the Company and its
Affiliates. In particular, Employee acknowledges that the parties anticipate
that Employee will be actively seeking markets for the products and services of
the Company and its Affiliates throughout the United States during Employee's
employment with the Company.
(d) In the event that there shall be any violation of the covenant not
to compete set forth in this Section 12, then the time limitation thereof shall
be extended for a period of time equal to the period of time during which such
violation continues; and in the event the Company is required to seek relief
from such violation in any court, board of arbitration or other tribunal, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including all appeals.
(e) Employee agrees that the remedy at law for any breach by Employee
of this Section 12 will be inadequate and that the Company shall also be
entitled to injunctive relief.
13. Confidential Information. During the term of this Agreement, and
for five years after Employee's termination of employment, Employee shall not
use or disclose, without the prior written consent of the Company, Confidential
Information (as defined in Exhibit B attached hereto) relating to the Company or
any of its Affiliates, and upon termination of Employee's employment will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. Employee will promptly disclose to the Company all
Confidential Information, as well as any business opportunity which comes to
Employee's attention during the term of Employee's employment with the Company.
Employee will not take advantage of or divert any business opportunity for the
benefit of Employee or any other Person (as defined in Exhibit B attached
hereto) without the prior written consent of the Company. Employee agrees that
the remedy at law for any breach by him of this Section 13 will be inadequate
and that the Company shall also be entitled to injunctive relief.
14. Intellectual Property.
(a) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company or any of its
Affiliates, Employee hereby agrees that all patents, trademarks, copyrights,
trade secrets, and other intellectual property rights, all inventions, whether
or not patentable, and any product, drawing, design, recording, writing,
literary work or other author's work, in any other tangible form developed in
whole or in part by Employee during the term of this Agreement, or otherwise
developed, purchased or acquired by
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the Company or any of its Affiliates, shall be the exclusive property of the
Company or such Affiliate, as the case may be ("Intellectual Property").
(b) Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in his possession or control
to the Company upon request and, in any event, at the end of his employment with
the Company.
(c) Employee shall assign and does hereby assign to the Company all
property rights that he may now or hereafter have in the Intellectual Property.
Employee shall take such action, including, but not limited to, the execution,
acknowledgment, delivery and assistance in preparation of documents, and the
giving of testimony, as may be requested by the Company to evidence, transfer,
vest or confirm the Company's right, title and interest in the Intellectual
Property.
(d) Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.
15. Definitions. As used in this Agreement , the terms defined in
Exhibit B have the means assigned to such terms in such exhibit.
16. Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) If to Employee:
409 Ripple Creek
Houston, Texas 77024
(b) If to the Company or GroupMAC:
GroupMAC Management Co.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attention: Corporate Secretary
Facsimile: 713-626-4788
Any party may change such party's address by such notice to the other parties.
17. No Set-off Rights. The Company's obligations to make the payments
and provide the benefits required by this Agreement and otherwise to perform its
obligations
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hereunder shall not be affected by any set off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
Employee or others.
18. Assignment. This Agreement is personal to Employee, and Employee
shall not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company. Neither Employee nor
Employee's spouse will have the right to commute, encumber, or otherwise dispose
of any payments under this Agreement. The Company shall have the right to assign
this Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of the
industries in which the Company is then active shall not be deemed to expand the
scope of Employee's covenant not to compete with such operations, products or
services without Employee's written consent. The Company shall require any
Person who is the successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company or GroupMAC to expressly assume and agree
to perform, by a written agreement in form and substance reasonably satisfactory
to Employee, all of the obligations of the Company and GroupMAC under this
Agreement. As used in this Agreement, the term "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement or otherwise.
19. Survival. The provisions of this Agreement shall survive the
termination of Employee's employment hereunder in accordance with their terms.
20. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of Texas without regard to the
choice-of-law principles thereof.
21. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.
23. Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any
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party to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as a waiver hereof, nor shall any single or partial exercise of
any such right or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right or remedy.
24. Cumulative Rights And Remedies. All rights and remedies hereunder
are cumulative and are in addition to all other rights and remedies provided by
law, agreement or otherwise. Employee's obligations to the Company and the
Company's rights and remedies hereunder are in addition to all other obligations
of Employee and rights and remedies of the Company created pursuant to any other
agreement.
25. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.
26. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with respect
to those provisions which were held to be invalid, illegal or unenforceable.
27. Attorneys' Fees and Costs. If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.
28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.
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IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the date first above written.
GROUPMAC MANAGEMENT CO.
By: /s/ Donald L. Luke
-------------------------------------
Donald L. Luke
President
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Donald L. Luke
-------------------------------------
Donald L. Luke
President
EMPLOYEE:
/s/ J. Patrick Millinor, Jr.
----------------------------------------
J. Patrick Millinor, Jr.
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EXHIBIT A
DUTIES OF CHIEF EXECUTIVE OFFICER
RESOLVED, that
A. It is hereby declared to be the sense of the Board that the
duties of the Chief Executive Officer provided for in Section 5.6 of
the By-Laws should include particular attention to the following:
1. Develop long range objectives with policies and
operating plans to accomplish such goals.
2. Formulate and adopt policies to develop the
Company's resources and to provide for successful future
management and operation of the business.
3. Assure the soundness and adequacy of the Company's
financial structure and financial practices.
4. Define goals, direct the efforts, provide the
resources, and appraise the results of the Company's operating
managements.
5. Establish and maintain an effective system of
communications throughout the Company and with outside
financial, business and governmental entities.
B. Pursuant to the provisions of Section 5.6 of the By-Laws of
the Company, there are hereby imposed upon the Chief Executive Officer
the following specific responsibilities, in addition to those provided
for in said Section 5.6.
1. To prepare and submit to the Board a plan of
operations for the Company for the ensuing year (hereinafter
referred to in this resolution as the "Plan"). The term
"Company" when used in this resolution shall be deemed to
include the Company and its consolidated subsidiaries, unless
the context otherwise requires.) The Plan shall consist of the
following information concerning the Company for the ensuing
year: a statement of estimated profit and loss, a statement of
estimated source and application of funds, a capital
expenditure budget and an estimated resulting consolidated
balance sheet as of the end of such year. The Plan shall be
submitted for Board review no later than the first regular
Board meeting of the new calendar year. It shall be in
sufficient detail to permit the Board to render judgment
concerning the propriety of the Plan and the direction that
the Company will have taken if the Plan is fully implemented.
Upon approval of the Plan by the Board, it shall be the duty
of the
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Chief Executive Officer to conduct the business on a basis
consistent with the Plan. Any significant deviation from the
Plan shall be approved by the Board.
2. To keep the Board currently informed of all
occurrences and developments which, in the judgment of the
Chief Executive Officer, may have a material effect upon the
business or interests of the Company.
3. To submit to the Board on a timely basis monthly
financial statements that will permit the Board to monitor the
progress of the Plan.
4. To obtain Board authorization of any capital
expenditure exceeding $50,000 in amount, and in this
connection to submit to the Board such information concerning
such expenditures as the Chief Executive Officer considers
pertinent; provided, however, the Chief Executive Officer may
make, or authorize to be made, a capital expenditure not
specifically authorized by the Board whenever in his judgment
it is necessary to preserve the property of the Company and
the delay incident to obtaining prior approval of the Board of
such expenditure would be harmful to the best interests of the
Company. Each such emergency expenditure shall thereafter be
reported promptly to the Board. As used in this Resolution,
the term "capital expenditure" shall include investments and
capital leases.
5. To obtain Board authorization of any increase in a
specifically authorized capital expenditure when such increase
exceeds the lesser of (a) $50,000, or (b) 20% of the amount of
such expenditure theretofore specifically authorized.
6. To authorize a capital expenditure not exceeding
$50,000 in amount so long as such expenditure is, in the
judgment of the Chief Executive Officer, consistent with the
approved Plan and the total of all such expenditures during
the Plan period is not anticipated to exceed the approved Plan
level.
7. To authorize other expenditures and charges
relating to the operations of the Company and not involving
capital expenditures without further authority from the Board
so long as such expenditures are, in the judgment of the Chief
Executive Officer, consistent with the approved Plan.
8. To authorize the disposal of fixed assets or
investments or other non-current assets of the Company having
a depreciated book value, sales price or current market value
not in excess of $50,000; provided, that the Chief Executive
Officer may sell, exchange or otherwise dispose of such
property having such value in excess of $50,000 whenever, in
his judgment, the delay incident to obtaining prior approval
of the Board or the Executive Committee for such purpose would
be harmful to the best interests of the Company. Each such
action shall thereafter be reported promptly to the Board.
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9. To approve the sale, exchange or disposition of
assets not currently in investment accounts without
limitations as to price or value.
10. To engage any person (other than as an officer or
employee), firm, association or corporation to perform
consulting, professional and related services for the Company,
other than the Company's independent accounting firm, when the
compensation for each separate service does not exceed $50,000
for any twelve-month period, and to obtain Board approval of
any amounts in excess thereof.
C. The following additional authority and responsibilities are
hereby conferred upon the Chief Executive Officer:
1. He shall vote the stock of each consolidated
subsidiary held by the Company so as to require the prior
approval of the Company, in its capacity as a shareholder of
such subsidiary, (i) of any capital expenditure by such
subsidiary or by any of its subsidiaries which, pursuant to
the terms of this resolution, would require specific Board
authorization if made by the Company, and (ii) of any action
by such subsidiary or by any of its subsidiaries that is
described in Paragraph B of this resolution and that would
require prior approval if taken by the Company. Any approval
of the Company provided for in this Paragraph C shall be
evidenced by resolution of the Board.
2. Any discretionary authority granted by this
resolution to the Chief Executive Officer concerning action
affecting the Company may be exercised by the chief executive
officer of any consolidated subsidiary concerning action
affecting such subsidiary, subject to the control and approval
of the Chief Executive Officer.
3. The Chief Executive Officer or any other officer
of the Company designated by the Board shall have the
authority to (i) appoint agents of the Company to exercise in
the name and on behalf of the Company the powers and rights
that the Company may have as the holder of stock or other
securities in any other company, (ii) vote or consent in
respect of such stock or securities, and (iii) execute or
cause to be executed in the name and on behalf of the Company
and under its corporate seal, or otherwise, such written
proxies, powers of attorney or other instruments as he may
deem necessary or proper in order that the Company may
exercise such powers and rights. Subject to the provisions of
this Paragraph C, the Chief Executive Officer or any such
designated officer may instruct any officer or any such
designated officer may instruct any person as to the manner of
exercising such powers and rights. The Chief Executive Officer
may designate any officer of a consolidated subsidiary of the
Company who shall have comparable authority to act with
respect to stock or other securities owned by such subsidiary.
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4. The identities and qualifications of the persons
proposed to be nominated as chief executive officers of the
Company's principal subsidiaries and divisions shall be
reviewed with the Board by the Chief Executive Officer prior
to the selection of such persons for nomination to such
offices.
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EXHIBIT B
DEFINITIONS
"Annual Base Salary" means the salary of Employee in effect at
the relevant time determined in accordance with Section 4(a) hereof.
"Affiliate" means, with respect to any Person, each other
Person who controls, is controlled by, or is under common control with
the Person specified.
"Cause" when used in connection with the termination of
employment with the Company, means the termination of Employee's
employment by the Company by reason of (i) the conviction of Employee
of a crime involving moral turpitude by a court of competent
jurisdiction as to which no further appeal can be taken; (ii) the
proven commission by Employee of an act of fraud upon the Company;
(iii) the willful and proven misappropriation of any funds or property
of the Company by Employee; (iv) the willful, continued and
unreasonable failure by Employee to perform material duties assigned to
Employee and agreed to by Employee after reasonable notice and
opportunity to cure such performance; (v) the knowing engagement by
Employee in any direct, material conflict of interest with the Company
without compliance with the Company's conflict of interest policy, if
any, then in effect; (vi) the knowing engagement by Employee, without
the written approval of the Board of Directors of the Company, in any
activity which competes with the business of the Company or any of its
Affiliates or which would result in a material injury to the Company or
any of its Affiliates; or (vii) the knowing engagement in any activity
which would constitute a material violation of the provisions of the
Company's Insider Trading Policy or Business Ethics Policy, if any,
then in effect.
"Change of Control" means
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (a "Designated Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended, (the
"Exchange Act")) of 30% or more of either (1) the then
outstanding shares of Common Stock of GroupMAC (the
"Outstanding GroupMAC Common Stock") or (2) the combined
voting power of the then outstanding voting securities of
GroupMAC entitled to vote generally in the election of
directors (the "Outstanding GroupMAC Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change in Control if: (i) any acquisition of
Common Stock of GroupMAC or voting securities of GroupMAC
directly from GroupMAC
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(excluding an acquisition by virtue of the exercise of a
conversion privilege), (ii) any acquisition of Common Stock of
GroupMAC or voting securities of GroupMAC by GroupMAC, (iii)
any acquisition of Common Stock of GroupMAC or voting
securities of GroupMAC by any employee benefit plan(s) (or
related trust(s)) sponsored or maintained by GroupMAC or any
corporation controlled by GroupMAC and approved by the
Incumbent Board, or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if,
immediately following such reorganization, merger or
consolidation, the conditions described in clauses (1), (2)
and (3) of paragraph (iii) of this definition are satisfied;
or
(ii) individuals who, as of the date hereof,
constitute the entire Board of Directors of GroupMAC (the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Board of Directors of GroupMAC (the
"Board"); provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by GroupMAC's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either (1)
an actual or threatened election contest (as such terms are
used in Rule 14a-11 of the Regulation 14A promulgated under
the Exchange Act), or an actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(iii) approval by the shareholders of GroupMAC of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or
consolidation, (1) more than 60% (or such greater percentage
as may be approved by the Incumbent Board) of the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(including, without limitation, a corporation which as a
result of such transaction owns GroupMAC through one or more
subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding GroupMAC
Common Stock and Outstanding GroupMAC Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation, of the Outstanding GroupMAC Common Stock or
Outstanding GroupMAC Voting Securities, as the case may be,
(2) no
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Designated Person (excluding GroupMAC, any employee benefit
plan(s) (or related trust(s)) of GroupMAC and/or its
subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation,
directly or indirectly, 30% (or such lesser percentage as may
be approved by the Incumbent Board) or more of the Outstanding
GroupMAC Common Stock or Outstanding GroupMAC Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 30% (or such lesser percentage as may be approved
by the Incumbent Board) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the
members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization, merger or
consolidation; or
(iv) approval by the shareholders of GroupMAC of (1)
a complete liquidation or dissolution of GroupMAC or (2) the
sale or other disposition of all or substantially all of the
assets of GroupMAC, other than to a corporation, with respect
to which immediately following such sale or other disposition,
(A) more than 60% (or such greater percentage as may be
approved by the Incumbent Board) of the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities
who were beneficial owners, respectively, of the Outstanding
GroupMAC Common Stock and Outstanding GroupMAC Voting
Securities immediately prior to such sale or other disposition
in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the
Outstanding GroupMAC Common Stock and Outstanding GroupMAC
Voting Securities, as the case may be, (B) no Designated
Person (excluding GroupMAC and any employee benefit plan (or
related trust) of GroupMAC and/or its subsidiaries or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 30% (or such lesser percentage as may be approved
by the Incumbent Board) or more of the Outstanding GroupMAC
Stock or Outstanding GroupMAC Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 30% (or
such lesser percentage as may be approved by the Incumbent
Board) or more of, respectively, the then outstanding shares
of common stock of such corporation or the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors, and (C) at least a majority of the members of the
board of directors of such
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corporation were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of
GroupMAC.
"Confidential Information" includes information conveyed or
assigned to the Company or any of its Affiliates by Employee or
conceived, compiled, created, developed, discovered or obtained by
Employee from and during his employment relationship with the Company,
whether solely by Employee or jointly with others, which concerns the
affairs of the Company or its Affiliates and which the Company could
reasonably be expected to desire be held in confidence, or the
disclosure of which would likely be embarrassing, detrimental or
disadvantageous to the Company or its Affiliates and without limiting
the generality of the foregoing includes information relating to
inventions, and the trade secrets, technologies, algorithms, products,
services, finances, business plans, marketing plans, legal affairs,
supplier lists, client lists, potential clients, business prospects,
business opportunities, personnel assignments, contracts and assets of
the Company or any of its Affiliates and information made available to
the Company or any of its Affiliates by other parties under a
confidential relationship. Confidential Information, however, shall not
include information (a) which is, at the time in question, in the
public domain through no wrongful act of Employee, (b) which is later
disclosed to Employee by one not under obligations of confidentiality
to the Company or any of its Affiliates or Employee, (c) which is
required by court or governmental order, law or regulation to be
disclosed, or (d) which the Company has expressly given Employee the
right to disclose pursuant to written agreement.
"Good Reason" means the occurrence of any of the following
events:
(a) Employee is assigned any duties materially inconsistent
with, or diminished from, Employee's positions, duties,
responsibilities and status with the Company or GroupMAC immediately
prior to the commencement of the Protected Period, or Employee's
status, reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or Employee's duties and responsibilities are
materially increased without a corresponding increase in the Employee's
compensation (such increase in compensation to be satisfactory to
Employee, in Employee's sole reasonable judgment), except in each case
in connection with the termination of Employee's employment by the
Company for Cause or on account of disability, or as a result of the
Employee's death, or by the Employee for other than Good Reason;
provided, however, that Good Reason shall not be triggered under this
subsection (a) by an insubstantial action not taken in bad faith and
that is remedied by the Company promptly after receipt of written
notice from Employee; or
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(b) Employee's Annual Base Salary is reduced from that in
effect immediately prior to the commencement of the Protected Period or
as the same may be increased from time to time thereafter; or
(c) The Company or GroupMAC fails to continue in effect any
benefit or compensation plan, including, but not limited to, the annual
bonus plan, qualified retirement plan, executive life insurance plan
and/or health and accident plan, in which Employee is participating
immediately prior to the commencement of the Protected Period, or plans
providing, in the sole reasonable judgment of Employee, Employee with
substantially similar benefits, or the Company or GroupMAC takes any
action that would adversely affect Employee's participation in or
reduce Employee's benefits under any of such plans (excluding any such
action by the Company or GroupMAC that is required by law); or
(d) The Company's or GroupMAC's principal executive offices
are relocated at any time following a Change in Control more than 20
miles from where such offices were located immediately prior to such
Change in Control; or
(e) The Company requires Employee at any time following a
Change in Control to relocate more than 20 miles from where Employee's
office was located immediately prior to such Change in Control; or
(f) The amendment, modification or repeal of any provision of
the Certificate of Incorporation or Bylaws of the Company or GroupMAC
that was in effect immediately prior to the commencement of the
Protected Period, if such amendment, modification or repeal would
materially adversely affect Employee's rights to indemnification by the
Company; or
(g) The Company or GroupMAC shall violate or breach any
obligation of the Company or GroupMAC in effect immediately prior to
the commencement of the Protected Period (regardless whether such
obligation be set forth in the Bylaws of the Company or GroupMAC and/or
in this Agreement or any other separate agreement entered into between
the Company or GroupMAC and Employee) to indemnify Employee against any
claim, loss, expense or liability sustained or incurred by Employee by
reason, in whole or in part, of the fact that Employee is or was an
officer or director of the Company; or
(h) The Company or GroupMAC shall violate or breach any other
material obligation of the Company or GroupMAC owing to Employee in
effect immediately prior to the commencement of the Protected Period
relating to Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall
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<PAGE> 24
continue unremedied for more than 15 days after written notice thereof
is given by Employee to the Company; or
(i) The Board (or any nominating committee of the Board) fails
to recommend and support Employee's re-election as a director of the
Company or GroupMAC if the Employee is a director of the Company or
GroupMAC immediately prior to the commencement of the Protected Period;
or
(j) The Company and GroupMAC shall fail to keep in force, for
the benefit of Employee, directors' and officers' insurance policy with
coverage amounts and scope equal to the coverage amounts and scope
under such policy immediately prior to the commencement of the
Protected Period; or
(k) The Company or GroupMAC fail to obtain from a successor
(including a successor to a material portion of the business or assets
of the Company or GroupMAC) a satisfactory assumption in writing of the
Company's or GroupMAC's obligations under this Agreement; or
(l) The Company fails to provide Employee with office space,
related facilities and support personnel (including, but not limited
to, administrative and secretarial assistance) that are both
commensurate with the Employee's position and Employee's
responsibilities to and position with the Company immediately prior to
the Change of Control and not materially dissimilar to the office
space, related facilities and support personnel provided to other
executive officers of the Company; or
(m) The Company or GroupMAC notifies Employee of the Company's
or GroupMAC's intention not to observe or perform one or more of the
obligations of the Company or GroupMAC under this Agreement.
"Person" means any individual, corporation, trust,
partnership, limited partnership, foundation, association, limited
liability company, joint stock association or other legal entity.
"Protected Period" means the period of time beginning with a
Change of Control and ending 24 months following such Change of
Control; provided, however, that if any event has occurred which could
reasonably be expected to result in a Change of Control and a Change of
Control occurs within six months after such event, then the Protected
Period will begin on the date of such event.
"Restricted Period" means the period beginning on the date of
the termination of Employee's employment with the Company and its
Affiliates and ending as follows, as applicable:
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(i) six months after the termination of Employee's
employment;
(ii) one year after the termination of Employee's
employment, if Employee is entitled to benefits under Section
10(b)(ii); or
(iii) two years after the termination of Employee's
employment, if Employee is entitled to benefits under Section
10(b)(i).
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of March
1, 1998, between GroupMAC Management Co., a Delaware corporation (the
"Company"), Group Maintenance America Corp., a Texas corporation ("GroupMAC"),
and Donald L. Luke, a resident of Harris County, Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employee and GroupMAC entered into an Employment Agreement
dated as of August 1, 1997 (the "Original Employment Agreement"); and
WHEREAS, GroupMAC assigned the Original Employment Agreement to the
Company, and Employee became an employee of the Company, effective as of March
1, 1998; and
WHEREAS, the Company, GroupMAC and Employee desire to amend and restate
the Original Employment Agreement to reflect the effects of the foregoing
assignment, to modify the provisions of the Original Employment Agreement
pertaining to changes of control of GroupMAC, and to make certain other changes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby amend and restate the Original
Employment Agreement as follows:
1. Employment. The Company hereby agrees to employ Employee and the
Employee hereby agrees to work for the Company as its President. Employee's
principal office shall be in Houston, Texas. Employee will report to the Chief
Executive Officer of the Company. Subject to consultation with the Chief
Executive Officer, Employee will have direct supervisory responsibility and
authority for the matters set forth on Exhibit A. So long as he is employed by
the Company, Employee shall devote his skill, energy and best efforts to the
faithful discharge of his duties as an employee of the Company. In providing
services hereunder, Employee shall comply with and follow all directives,
policies, standards and regulations from time to time established by the Board
of Directors of the Company.
2. Term of Employment. Employee's employment by the Company pursuant to
this Agreement shall continue in effect for an initial term of three years from
the date of this Agreement, unless terminated in accordance with Section 7, and
shall be extended from year to year thereafter, unless terminated effective as
of the end of the initial term or any one-year extension thereafter by written
notice from the Company to Employee, or by written notice of Employee to the
Company, delivered not less than 90 days prior to the end of the initial term,
or the anniversary of such one-year extension, as applicable.
<PAGE> 2
3. Representations and Warranties. Employee represents and warrants
that he is under no contractual or other restrictions or obligations that will
significantly limit his activities on behalf of the Company or will prohibit or
limit the disclosure or use of by Employee of any information which directly or
indirectly relates to the nature of the Company or the services to be rendered
by Employee under this Agreement.
4. Compensation. Subject to the provisions of Section 10, Employee will
be entitled to the compensation and benefits set forth in this Section 4.
(a) During 1998, the Company shall pay Employee an Annual Base Salary,
payable semi-monthly, in equal semi-monthly installments at a rate equal to
$150,000 per year. In each subsequent calendar year during the term of this
Agreement, the Company shall pay to Employee an Annual Base Salary equal to the
greater of (i) his salary for the immediately preceding year or (ii) if
determined otherwise by the Board of Directors, an Annual Base Salary determined
by the Board of Directors following its annual salary and performance review.
(b) Employee shall be eligible to receive an annual bonus pursuant to
the incentive compensation program in effect from time to time for executive
employees of GroupMAC. The target bonus of Employee under such program shall not
be less than 100% of Employee's annual salary.
(c) All payments of salary and other compensation to Employee shall be
made after deduction of any taxes required to be withheld with respect thereto
under applicable federal and state laws.
5. Fringe Benefits; Expenses. (a) Employee shall participate in all
employee benefit plans sponsored by the Company or GroupMAC for its executive
employees, including but not limited to stock bonus, stock purchase and stock
option plans, sick leave and disability leave, health insurance, dental
insurance and pension and/or profit sharing plans; provided, however, that
except as provided below, the nature, amount and limitations of such plans shall
be determined from time to time by the Board of Directors of the Company.
(b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of his employment; provided, however,
that Employee must file expense reports with respect to such expenses in
accordance with the Company's policies as are in effect from time to time.
(c) Employee shall be entitled to a minimum of three weeks paid
vacation during each calendar year, increasing to four weeks at August 1, 2000,
and to paid holidays and other paid leave set forth in the Company's policies in
effect from time to time. Any vacation not used during a calendar year may not
be used during any subsequent period.
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<PAGE> 3
(d) The Company will pay all license fees, occupation taxes and
reasonable educational costs and expenses necessary to maintain Employee's good
standing under any professional licenses.
(e) The Company shall use reasonable efforts to provide (i) life
insurance payable to Employee's designated beneficiary in an amount at least
three times Employee's Annual Base Salary and (ii) disability insurance on
behalf of Employee which, as a goal, shall provide for salary continuation in
the event of permanent disability in an amount not less than 60% of Employee's
Annual Base Salary, it being acknowledged by Employee that GroupMAC's present
disability insurance provides a limit of $5,000 per month.
6. Indemnification and Insurance. The Company shall indemnify Employee
with respect to matters relating to his services as an officer and/or director
of the Company or any of its Affiliates to the extent set forth in the Company's
By-laws and in accordance with the terms of any other indemnification which is
generally applicable to executive officers of the Company or any of its
Affiliates that may be provided by the Company or any such Affiliate from time
to time. The foregoing indemnity is contractual and will survive any adverse
amendment to or repeal of the By-laws. The Company will also cover Employee
under a policy of officers' and directors' liability insurance providing
coverage that is comparable to that provided now or hereafter to any other
executive officer or director of the Company or GroupMAC. The provisions of this
Section 6 will survive the termination of Employee's employment for any reason
and the term of this Agreement.
7. Change in Control of the Company.
(a) If a Change of Control (as defined in Exhibit B attached hereto)
occurs and if during the Protected Period (as defined in Exhibit B attached
hereto), Employee's employment is terminated, whether by the Company or by
Employee, then the Company shall promptly pay or otherwise provide to Employee
the benefits set forth below:
(i) An amount equal to two times the sum of (A) Employee's
Annual Base Salary then in effect and (B) Employee's target bonus for
the calendar year in which such termination occurs (assuming the
maximum target bonus will be earned for such year), payable in a single
lump sum by certified or bank cashier's check within five days of such
termination; and
(ii) An amount equal to the product of (A) the maximum monthly
premium payment that may be charged to continue coverage for Employee
and Employee's dependents under the Company's health insurance plan
under COBRA, multiplied by (B) 24 months.
Notwithstanding the foregoing, Employee shall not be entitled to any benefits
under this Section 7 if such termination is (i) due to Employee's death, (ii) by
the Company on account of Employee's Disability as provided in Section 10(d)
below, (iii) by the Company for Cause as
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<PAGE> 4
provided in Section 10(a) below, or (iv) by Employee for other than Good Reason
(as defined in Exhibit B attached hereto) as provided in Section 10 below.
8. Gross-Up of Parachute Payments.
(a) To provide Employee with adequate protection in connection with his
ongoing employment with the Company, this Agreement provides Employee with
various benefits in the event of termination of Employee's employment with the
Company during the Protected Period. If Employee's employment is terminated
following a "change of control" of GroupMAC or the Company, within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a
portion of those benefits could be characterized as "excess parachute payments"
within the meaning of Section 280G of the Code. The parties hereto acknowledge
that the protections set forth in this Section 8 are important, and it is agreed
that Employee should not have to bear the burden of any excise tax that might be
levied under Section 4999 of the Code or any similar provision of state or
federal law, in the event that any portion of the benefits payable to Employee
pursuant to this Agreement are treated as an excess parachute payment. The
parties, therefore, have agreed as set forth in this Section 8.
(b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution (including income
recognized by Employee upon the early vesting of restricted property or upon the
exercise of options whose exercise date has been accelerated) by GroupMAC or the
Company or any other person to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 8) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any similar provision of state or federal law or
any interest or penalties are incurred by Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments.
(c) Subject to the provisions of Section 8(d) below, all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an
independent public accounting firm with a national reputation selected by
Employee (the "Accounting Firm") that shall provide detailed supporting
calculations both to the Company and to Employee within 15 business days after
the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control of GroupMAC or the Company, Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder
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(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. The Company shall indemnify and hold harmless Employee, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed on Employee as a result of such payment
of fees and expenses. Any Gross-Up Payment, as determined pursuant to this
Section 8, shall be paid by the Company to Employee within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Employee, it shall furnish Employee
with a written opinion that failure to report the Excise Tax on Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding on the Company and Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not
have been made by the Company that should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. If the Company
exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Employee.
(d) Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claims) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Employee is informed in
writing of such claim (or threatened lien) and shall apprize the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which Employee gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due or such tax lien would be imposed). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim (or threatened lien), Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claims (or threatened lien);
(ii) take such action in connection with contesting such claim
(or threatened lien) as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(iv) permit the Company to participate in any proceedings
relating to such claims (or threatened lien);
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<PAGE> 6
provided, however, that the Company shall bear and pay directly all costs and
expenses (including legal fees and expenses, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(d), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Employee to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Employee shall prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as Employee shall
determine (but in no event shall the Company permit or direct Employee to allow
a tax lien to be imposed on Employee's property); provided, further, that if the
Company directs Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Employee, on an interest-free basis,
and shall indemnify and hold Employee harmless on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. In addition, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and Employee shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(e) If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 8(d), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 8(d) above) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt by Employee of an
amount advanced by the Company pursuant to Section 8(d) above, a determination
is made that Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Acceleration of Options. Upon the occurrence of any of the following
events at a time while Employee holds outstanding options to purchase GroupMAC
Common Stock, all such options shall be immediately exercisable in full:
(i) the acquisition described in clause (i) of the definition
of Change of Control;
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<PAGE> 7
(ii) the change in the composition of the Board of Directors
described in clause (ii) of such definition;
(iii) the shareholder approval or adoption described in
clauses (iii) or (iv) of such definition;
(iv) the commencement date of any tender offer subject to the
terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or exchange offer subject to the terms of
the Securities Act of 1933, as amended (the "Securities Act"), or any
other offer or series of offers to purchase for cash, or to exchange
for securities of a person other than the Company or any of its
affiliates, GroupMAC Common Stock by any "person" or "group" of persons
(as such terms are used in Rule 13d of the Exchange Act) other than an
offer or offers by GroupMAC or by employee benefit plan(s) sponsored by
GroupMAC ("Tender Offer") if such person or group would hold 30% or
more of the then outstanding GroupMAC Common Stock after the
consummation of the Tender Offer.
10. Termination.
(a) Either the Company or Employee may terminate Employee's employment
hereunder at any time by delivery of written notice by the terminating party of
its election to terminate this Agreement to the other party. Promptly after such
termination of employment, the Company shall pay to Employee an amount equal to
the sum of (i) Employee's earned but unpaid Annual Base Salary through the date
of termination of employment at the rate in effect at the time of such
termination, (ii) vacation pay earned but not taken to the date of such
termination, and (iii) all other amounts previously deferred by Employee or
earned but not paid as of such date under all Company incentive or deferred
compensation plans or programs.
(b) If the Company terminates Employee's employment without Cause, then
the Company shall promptly pay to Employee the following amounts in addition to
those set forth in Section 10(a):
(i) If such termination occurred during a Protected Period,
the amounts set forth in Section 7; and
(ii) If such termination did not occur during a Protected
Period,
(A) an amount equal to 12 months' compensation at
Employee's then current Annual Base Salary, payable
semimonthly, and shall continue to provide benefits in the
kind and amounts provided up to the date of termination for a
12 month period including, without limitation, continuation of
any Company-paid benefits as described in Section 5 for
Employee and Employee's family;
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<PAGE> 8
(B) any portion of Employee's bonus for the calendar
year prior to the calendar year in which such termination of
employment occurs which has not been paid; and
(C) an additional amount equal to a prorated portion
of Employee's target bonus for the calendar year in which such
termination occurs, assuming that Employee would have earned
the maximum target bonus for such year (such prorated portion
to be determined based upon the number of working days
Employee is employed by the Company during the calendar year
in which Employee's employment is terminated divided by the
total number of working days in such calendar year).
The amounts described in clauses (B) and (C) above shall be paid
promptly after the determination of such bonuses, but in any event
prior to the publication of financial statements of GroupMAC for such
year.
(c) If Employee terminates Employee's employment for Good Reason during
a Protected Period, then the Company shall promptly pay to Employee, in addition
to the amounts set forth in Section 10(a), the amounts set forth in Section 7.
(d) In the event this Agreement is terminated by the Company without
Cause or by Employee with Good Reason, Employee agrees to accept, in full
settlement of any and all claims, losses, damages and other demands that
Employee may have arising out of such termination, as liquidated damages and not
as a penalty, the payments set forth in this Agreement. Employee hereby waives
any and all rights Employee may have to bring any cause of action or proceeding
contesting any termination without Cause or Good Reason; provided, however, that
such waiver shall not be deemed to affect Employee's rights to enforce any other
obligations of the Company. Under no circumstances shall Employee be entitled to
any compensation or confirmation of any benefits under this Agreement for any
period of time following Employee's date of termination if Employee's
termination is for Cause.
(e) If at any time during the term of this Agreement, Employee is
unable due to physical or mental disability, to perform effectively Employee's
duties hereunder, the Company shall continue payment of compensation as provided
in Section 4 during the first 12 month period of such disability to the extent
not covered by the Company's disability insurance policies. Upon the expiration
of such 12 month period, the Company, at its sole option, may continue payment
of Employee's salary for such additional periods as the Company elects, or may
terminate this Agreement without any further obligations hereunder. If Employee
should die during the term of this Agreement, Employee's employment and the
Company's obligations hereunder shall terminate as of the end of the month in
which Employee's death occurs.
(f) So long as Employee receives a severance as provided in Section
10(b) above, Employee shall sign any lock-up letters, standstill agreements, or
other similar documentation required by an underwriter in connection with a
public offering of securities by GroupMAC or
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<PAGE> 9
take other actions reasonably related thereto as requested by the Board of
Directors of GroupMAC; provided, however, that the period of any such lock-up or
standstill agreements shall not exceed the shorter of (i) 180 days or (ii) the
balance of the severance period. Failure to take any such action shall cause
Employee to forfeit any further rights to the salary continuation payments in
Section 10(b)(ii). In addition, in such event the Company can seek and obtain
specific performance of such covenant, including any injunction requiring
execution thereof, and Employee hereby appoints the then current president of
the Company to sign any such documents on his behalf so long as such documents
are prepared on the same basis as other shareholders generally or as all
management shareholders.
11. No Mitigation Obligation. The Company acknowledges that it will be
difficult and may be impossible (i) for Employee to find reasonably comparable
employment following termination of Employee's employment and (ii) to measure
the amount of damages which Employee may suffer as a result of the termination
of Employee's employment. Accordingly, all amounts paid to Employee under this
Agreement following Employee's termination of employment are acknowledged by the
Company to be reasonable and to be liquidated damages, and Employee will not be
required to mitigate the amount of such payments by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever (including from other employment) create any mitigation,
offset, reduction or any other obligation on the part of Employee under this
Agreement.
12. Covenant Not to Compete.
(a) During Employee's employment with the Company or any of its
Affiliates (as defined in Exhibit B attached hereto) and thereafter during the
Restricted Period (as defined in Exhibit B attached hereto), regardless of the
reason for the termination of Employee's employment, Employee will not engage in
or carry on, directly or indirectly, either for himself or as a member of a
partnership or as a shareholder, investor, owner, officer or director of a
company or other entity, or as an employee, agent, associate or consultant of
any person, partnership, corporation or other entity, any business in any State
of the United States or in any other part of the world that directly competes
with any services or products produced, sold, conducted, developed, or in the
process of development by the Company or its Affiliates on the date of
termination of Employee's employment.
(b) Notwithstanding the foregoing, Employee shall be permitted to
engage in the following activities which could otherwise be covered by Section
12(a):
(i) the ownership of less than one percent of any class of
securities of a publicly-held company whose gross assets exceed
$100,000,000; and
(ii) working in the indoor air quality, heating, ventilation
and air conditioning or plumbing maintenance services industry if such
activities are not in direct competition with any products or services
produced, sold, conducted, developed, or in the process of
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<PAGE> 10
development by the Company or its Affiliates on the date of termination
of Employee's employment.
(c) Employee acknowledges that the limitations set forth herein on his
rights to compete with the Company and its Affiliates are reasonable and
necessary for the protection of the Company and its Affiliates. In this regard,
Employee specifically agrees that the limitations as to period of time and
geographic area, as well as all other restrictions on his activities specified
herein, are reasonable and necessary for the protection of the Company and its
Affiliates. In particular, Employee acknowledges that the parties anticipate
that Employee will be actively seeking markets for the products and services of
the Company and its Affiliates throughout the United States during Employee's
employment with the Company.
(d) In the event that there shall be any violation of the covenant not
to compete set forth in this Section 12, then the time limitation thereof shall
be extended for a period of time equal to the period of time during which such
violation continues; and in the event the Company is required to seek relief
from such violation in any court, board of arbitration or other tribunal, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including all appeals.
(e) Employee agrees that the remedy at law for any breach by Employee
of this Section 12 will be inadequate and that the Company shall also be
entitled to injunctive relief.
13. Confidential Information. During the term of this Agreement, and
for five years after Employee's termination of employment, Employee shall not
use or disclose, without the prior written consent of the Company, Confidential
Information (as defined in Exhibit B attached hereto) relating to the Company or
any of its Affiliates, and upon termination of Employee's employment will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. Employee will promptly disclose to the Company all
Confidential Information, as well as any business opportunity which comes to
Employee's attention during the term of Employee's employment with the Company.
Employee will not take advantage of or divert any business opportunity for the
benefit of Employee or any other Person (as defined in Exhibit B attached
hereto) without the prior written consent of the Company. Employee agrees that
the remedy at law for any breach by him of this Section 13 will be inadequate
and that the Company shall also be entitled to injunctive relief.
14. Intellectual Property.
(a) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company or any of its
Affiliates, Employee hereby agrees that all patents, trademarks, copyrights,
trade secrets, and other intellectual property rights, all inventions, whether
or not patentable, and any product, drawing, design, recording, writing,
literary work or other author's work, in any other tangible form developed in
whole or in part by Employee during the term of this Agreement, or otherwise
developed, purchased or acquired by
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<PAGE> 11
the Company or any of its Affiliates, shall be the exclusive property of the
Company or such Affiliate, as the case may be ("Intellectual Property").
(b) Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in his possession or control
to the Company upon request and, in any event, at the end of his employment with
the Company.
(c) Employee shall assign and does hereby assign to the Company all
property rights that he may now or hereafter have in the Intellectual Property.
Employee shall take such action, including, but not limited to, the execution,
acknowledgment, delivery and assistance in preparation of documents, and the
giving of testimony, as may be requested by the Company to evidence, transfer,
vest or confirm the Company's right, title and interest in the Intellectual
Property.
(d) Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.
15. Definitions. As used in this Agreement, the terms defined in
Exhibit B have the means assigned to such terms in such exhibit.
16. Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) If to Employee:
25 Wynden Oaks Drive
Houston, Texas 77056
(b) If to the Company or GroupMAC:
GroupMAC Management Co.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attention: Corporate Secretary
Facsimile: 713-626-4788
Any party may change such party's address by such notice to the other parties.
17. No Set-off Rights. The Company's obligations to make the payments
and provide the benefits required by this Agreement and otherwise to perform its
obligations
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<PAGE> 12
hereunder shall not be affected by any set off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
Employee or others.
18. Assignment. This Agreement is personal to Employee, and Employee
shall not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company. Neither Employee nor
Employee's spouse will have the right to commute, encumber, or otherwise dispose
of any payments under this Agreement. The Company shall have the right to assign
this Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of the
industries in which the Company is then active shall not be deemed to expand the
scope of Employee's covenant not to compete with such operations, products or
services without Employee's written consent. The Company shall require any
Person who is the successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company or GroupMAC to expressly assume and agree
to perform, by a written agreement in form and substance reasonably satisfactory
to Employee, all of the obligations of the Company and GroupMAC under this
Agreement. As used in this Agreement, the term "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement or otherwise.
19. Survival. The provisions of this Agreement shall survive the
termination of Employee's employment hereunder in accordance with their terms.
20. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of Texas without regard to the
choice-of-law principles thereof.
21. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.
23. Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any
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<PAGE> 13
party to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as a waiver hereof, nor shall any single or partial exercise of
any such right or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right or remedy.
24. Cumulative Rights And Remedies. All rights and remedies hereunder
are cumulative and are in addition to all other rights and remedies provided by
law, agreement or otherwise. Employee's obligations to the Company and the
Company's rights and remedies hereunder are in addition to all other obligations
of Employee and rights and remedies of the Company created pursuant to any other
agreement.
25. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.
26. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with respect
to those provisions which were held to be invalid, illegal or unenforceable.
27. Attorneys' Fees and Costs. If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.
28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.
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IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the date first above written.
GROUPMAC MANAGEMENT CO.
By: /s/ J. Patrick Millinor, Jr.
-----------------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. Patrick Millinor, Jr.
-----------------------------------------
J. Patrick Millinor, Jr.
Chief Executive Officer
EMPLOYEE:
/s/ Donald L. Luke
--------------------------------------------
Donald L. Luke
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EXHIBIT A
DUTIES AND FUNCTIONS
Employee will report to the Chief Executive Officer and serve as a
member of the Board. He will serve as the senior Operations professional, and as
a result, all operating companies will report directly to him as displayed in
the attached organization chart, as the same may be changed by the Chief
Executive Officer and/or Board of Directors of the Company. His principal
responsibility will be to begin to build a cohesive operating unit out of the
acquired companies, directing them to achieve maximum financial results, while
preserving the local identities of each company. He will begin to implement
programs that offer synergies in both operating efficiencies and cost savings
across a broad range of functions such as finance, insurance and purchasing.
Simultaneously, he should develop a "best practices" program that will impact
areas such as training, safety and quality. Working with the existing management
at the company level, the Chief Operating Officer will, over time, need to put
into place a succession management plan at each company. He will also focus on
increasing market share through cross-marketing and other initiatives.
The Chief Operating Officer will be responsible for working closely
with other senior management, including finance, legal and acquisitions. Given
the growth strategy of the Company, he will assist in both identifying and
conducting due diligence on acquisition targets. Finally, as a member of senior
management, he will be a key participant in all strategic and tactical matters
affecting the Company.
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EXHIBIT B
DEFINITIONS
"Annual Base Salary" means the salary of Employee in effect at the
relevant time determined in accordance with Section 4(a) hereof.
"Affiliate" means, with respect to any Person, each other Person who
controls, is controlled by, or is under common control with the Person
specified.
"Cause" when used in connection with the termination of employment with
the Company, means the termination of Employee's employment by the Company by
reason of (i) the conviction of Employee of a crime involving moral turpitude by
a court of competent jurisdiction as to which no further appeal can be taken;
(ii) the proven commission by Employee of an act of fraud upon the Company;
(iii) the willful and proven misappropriation of any funds or property of the
Company by Employee; (iv) the willful, continued and unreasonable failure by
Employee to perform material duties assigned to Employee and agreed to by
Employee after reasonable notice and opportunity to cure such performance; (v)
the knowing engagement by Employee in any direct, material conflict of interest
with the Company without compliance with the Company's conflict of interest
policy, if any, then in effect; (vi) the knowing engagement by Employee, without
the written approval of the Board of Directors of the Company, in any activity
which competes with the business of the Company or any of its Affiliates or
which would result in a material injury to the Company or any of its Affiliates;
or (vii) the knowing engagement in any activity which would constitute a
material violation of the provisions of the Company's Insider Trading Policy or
Business Ethics Policy, if any, then in effect.
"Change of Control" means
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Designated Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) of 30% or more of either (1) the then
outstanding shares of Common Stock of GroupMAC (the "Outstanding
GroupMAC Common Stock") or (2) the combined voting power of the then
outstanding voting securities of GroupMAC entitled to vote generally in
the election of directors (the "Outstanding GroupMAC Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change in Control if: (i) any acquisition of Common
Stock of GroupMAC or voting securities of GroupMAC directly from
GroupMAC (excluding an acquisition by virtue of the exercise of a
conversion privilege), (ii) any acquisition of Common Stock of GroupMAC
or voting securities of GroupMAC by GroupMAC, (iii) any acquisition of
Common Stock of GroupMAC or voting securities of GroupMAC by any
employee benefit plan(s) (or related trust(s)) sponsored or maintained
by GroupMAC or any corporation controlled by GroupMAC and approved by
the
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Incumbent Board, or (iv) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation, if, immediately following
such reorganization, merger or consolidation, the conditions described
in clauses (1), (2) and (3) of paragraph (iii) of this definition are
satisfied; or
(ii) individuals who, as of the date hereof, constitute the
entire Board of Directors of GroupMAC (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors
of GroupMAC (the "Board"); provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by GroupMAC's shareholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of the Regulation 14A promulgated under the
Exchange Act), or an actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board or (2) a plan
or agreement to replace a majority of the members of the Board then
comprising the Incumbent Board; or
(iii) approval by the shareholders of GroupMAC of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation, (1)
more than 60% (or such greater percentage as may be approved by the
Incumbent Board) of the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(including, without limitation, a corporation which as a result of such
transaction owns GroupMAC through one or more subsidiaries) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding GroupMAC Common
Stock and Outstanding GroupMAC Voting Securities immediately prior to
such reorganization, merger or consolidation in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation, of the Outstanding GroupMAC
Common Stock or Outstanding GroupMAC Voting Securities, as the case may
be, (2) no Designated Person (excluding GroupMAC, any employee benefit
plan(s) (or related trust(s)) of GroupMAC and/or its subsidiaries or
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 30%
(or such lesser percentage as may be approved by the Incumbent Board)
or more of the Outstanding GroupMAC Common Stock or Outstanding
GroupMAC Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 30% (or such lesser percentage as may be
approved by the Incumbent Board) or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (3) at
least a majority of the
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members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) approval by the shareholders of GroupMAC of (1) a
complete liquidation or dissolution of GroupMAC or (2) the sale or
other disposition of all or substantially all of the assets of
GroupMAC, other than to a corporation, with respect to which
immediately following such sale or other disposition, (A) more than 60%
(or such greater percentage as may be approved by the Incumbent Board)
of the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were beneficial
owners, respectively, of the Outstanding GroupMAC Common Stock and
Outstanding GroupMAC Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting
Securities, as the case may be, (B) no Designated Person (excluding
GroupMAC and any employee benefit plan (or related trust) of GroupMAC
and/or its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% (or such lesser percentage as may be approved by the
Incumbent Board) or more of the Outstanding GroupMAC Stock or
Outstanding GroupMAC Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% (or such lesser
percentage as may be approved by the Incumbent Board) or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors, and (C) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of GroupMAC.
"Confidential Information" includes information conveyed or assigned to
the Company or any of its Affiliates by Employee or conceived, compiled,
created, developed, discovered or obtained by Employee from and during his
employment relationship with the Company, whether solely by Employee or jointly
with others, which concerns the affairs of the Company or its Affiliates and
which the Company could reasonably be expected to desire be held in confidence,
or the disclosure of which would likely be embarrassing, detrimental or
disadvantageous to the Company or its Affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and the
trade secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company or any of its Affiliates and information
made available to the Company or any of its Affiliates by other parties under a
confidential relationship. Confidential Information,
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<PAGE> 19
however, shall not include information (a) which is, at the time in question, in
the public domain through no wrongful act of Employee, (b) which is later
disclosed to Employee by one not under obligations of confidentiality to the
Company or any of its Affiliates or Employee, (c) which is required by court or
governmental order, law or regulation to be disclosed, or (d) which the Company
has expressly given Employee the right to disclose pursuant to written
agreement.
"Good Reason" means the occurrence of any of the following events:
(a) Employee is assigned any duties materially inconsistent with, or
diminished from, Employee's positions, duties, responsibilities and status with
the Company or GroupMAC immediately prior to the commencement of the Protected
Period, or Employee's status, reporting responsibilities, titles or offices are
materially diminished from those in effect immediately prior to the commencement
of the Protected Period, or Employee is removed from or is not re-elected or
appointed to any of such responsibilities, titles, offices or positions, or
Employee's duties and responsibilities are materially increased without a
corresponding increase in the Employee's compensation (such increase in
compensation to be satisfactory to Employee, in Employee's sole reasonable
judgment), except in each case in connection with the termination of Employee's
employment by the Company for Cause or on account of disability, or as a result
of the Employee's death, or by the Employee for other than Good Reason;
provided, however, that Good Reason shall not be triggered under this subsection
(a) by an insubstantial action not taken in bad faith and that is remedied by
the Company promptly after receipt of written notice from Employee; or
(b) Employee's Annual Base Salary is reduced from that in effect
immediately prior to the commencement of the Protected Period or as the same may
be increased from time to time thereafter; or
(c) The Company or GroupMAC fails to continue in effect any benefit or
compensation plan, including, but not limited to, the annual bonus plan,
qualified retirement plan, executive life insurance plan and/or health and
accident plan, in which Employee is participating immediately prior to the
commencement of the Protected Period, or plans providing, in the sole reasonable
judgment of Employee, Employee with substantially similar benefits, or the
Company or GroupMAC takes any action that would adversely affect Employee's
participation in or reduce Employee's benefits under any of such plans
(excluding any such action by the Company or GroupMAC that is required by law);
or
(d) The Company's or GroupMAC's principal executive offices are
relocated at any time following a Change in Control more than 20 miles from
where such offices were located immediately prior to such Change in Control; or
(e) The Company requires Employee at any time following a Change in
Control to relocate more than 20 miles from where Employee's office was located
immediately prior to such Change in Control; or
B-4
<PAGE> 20
(f) The amendment, modification or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Company or GroupMAC that was in
effect immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect Employee's
rights to indemnification by the Company; or
(g) The Company or GroupMAC shall violate or breach any obligation of
the Company or GroupMAC in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in the Bylaws
of the Company or GroupMAC and/or in this Agreement or any other separate
agreement entered into between the Company or GroupMAC and Employee) to
indemnify Employee against any claim, loss, expense or liability sustained or
incurred by Employee by reason, in whole or in part, of the fact that Employee
is or was an officer or director of the Company; or
(h) The Company or GroupMAC shall violate or breach any other material
obligation of the Company or GroupMAC owing to Employee in effect immediately
prior to the commencement of the Protected Period relating to Employee's
employment with the Company, but only if such violation or breach (if capable of
being remedied) shall continue unremedied for more than 15 days after written
notice thereof is given by Employee to the Company; or
(i) The Board (or any nominating committee of the Board) fails to
recommend and support Employee's re-election as a director of the Company or
GroupMAC if the Employee is a director of the Company or GroupMAC immediately
prior to the commencement of the Protected Period; or
(j) The Company and GroupMAC shall fail to keep in force, for the
benefit of Employee, directors' and officers' insurance policy with coverage
amounts and scope equal to the coverage amounts and scope under such policy
immediately prior to the commencement of the Protected Period; or
(k) The Company or GroupMAC fail to obtain from a successor (including
a successor to a material portion of the business or assets of the Company or
GroupMAC) a satisfactory assumption in writing of the Company's or GroupMAC's
obligations under this Agreement; or
(l) The Company fails to provide Employee with office space, related
facilities and support personnel (including, but not limited to, administrative
and secretarial assistance) that are both commensurate with the Employee's
position and Employee's responsibilities to and position with the Company
immediately prior to the Change of Control and not materially dissimilar to the
office space, related facilities and support personnel provided to other
executive officers of the Company; or
(m) The Company or GroupMAC notifies Employee of the Company's or
GroupMAC's intention not to observe or perform one or more of the obligations of
the Company or GroupMAC under this Agreement.
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<PAGE> 21
"Person" means any individual, corporation, trust, partnership, limited
partnership, foundation, association, limited liability company, joint stock
association or other legal entity.
"Protected Period" means the period of time beginning with a Change of
Control and ending 24 months following such Change of Control; provided,
however, that if any event has occurred which could reasonably be expected to
result in a Change of Control and a Change of Control occurs within six months
after such event, then the Protected Period will begin on the date of such
event.
"Restricted Period" means the period beginning on the date of the
termination of Employee's employment with the Company and its Affiliates and
ending as follows, as applicable:
(i) six months after the termination of Employee's employment;
(ii) one year after the termination of Employee's employment,
if Employee is entitled to benefits under Section 10(b)(ii); or
(iii) two years after the termination of Employee's
employment, if Employee is entitled to benefits under Section 10(b)(i).
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of November 13,
1997 by and between Masters, Inc., (the "Company"), a Maryland corporation and
a subsidiary of Group Maintenance America Corp., a Texas corporation
("GroupMAC"), and Ronald D. Bryant, an individual resident of the State of
Maryland ("Employee").
1. Employment. The Company hereby agrees to employ the Employee and
the Employee hereby agrees to work for the Company upon the terms and
conditions set forth herein.
2. Term of Employment. This Agreement shall continue in effect for an
initial term of three (3) years from the date of this Agreement and may
continue for additional one year periods upon the mutual written agreement of
the Company and the Employee, unless terminated in accordance with Section 6.
3. Scope of Duties; Representations and Warranties.
(a) The Employee will have such duties as are assigned or delegated
to the Employee by the Board of Directors of the Company and will initially
serve as the President of the Company. The Employee will devote his entire
business time, attention, skills, and energy exclusively to the business of the
Company, and will use his best efforts to promote the success of the Company's
business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Company. If the Employee is elected as
a director of the Company or as a director or officer of any of its affiliates,
the Employee will fulfill his duties as such director or officer without
additional compensation.
(b) The Employee represents and warrants that the execution and
delivery by the Employee of this Agreement do not, and the performance by the
Employee of the Employee's obligations hereunder will not, with or without the
giving of notice or the passage of time, or both: (i) violate any judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Employee, (ii) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Employee is a party or by which the Employee is or may
be bound.
4. Compensation.
(a) The Company shall initially pay the Employee an annual base
salary of $150,000, subject to adjustment as provided below, which will be
payable in equal periodic
<PAGE> 2
installments according to the Company's customary payroll practices, but no
less frequently than monthly. Employee's base salary will be reviewed by the
Board of Directors of the Company not less frequently than annually, and may be
adjusted upward or downward in the sole discretion of the Board of Directors of
the Company, but in no event will Employee's base salary be less than $150,000
per year. The Company agrees to provide a vehicle comparable to the Employee's
present vehicle and all reasonable costs associated therewith for maintenance,
gasoline and insurance.
(b) All payments of salary and other compensation to the Employee
shall be made after deduction of any taxes and other amounts which are required
to be withheld with respect thereto under applicable federal and state laws.
5. Fringe Benefits; Expenses.
(a) So long as the Employee is employed by the Company, the
Employee shall participate in all employee benefit plans sponsored by the
Company for its executive employees, including but not limited to vacation
policy, sick leave and disability leave, life insurance, health insurance,
dental insurance, and stock ownership and/or profit sharing plans; provided,
however, that the nature, amount and limitations of such plans shall be
determined from time to time by the Board of Directors of the Company.
(b) The Company shall pay the Employee for all reasonable business
expenses incurred by the Employee in the scope of his employment; provided,
however, that the Employee must file expense reports with respect to such
expenses in accordance with the Company's policies as are in effect from time
to time.
(c) The Employee shall be entitled to a minimum of 4 weeks paid
vacation in accordance with the vacation policies of the Company in effect from
time to time. The Employee will also be entitled to the paid holidays and other
paid leave set forth in the Company's policies. Vacation days earned during any
calendar year that are not used by the Employee by the end of the following
calendar year will be forfeited.
6. Termination. Employee agrees that this Agreement may be terminated
by the Company with or without "Cause" at any time, subject to the terms of
this Section 6. Such termination shall be effective upon delivery of written
notice to Employee of the Company's election to terminate this Agreement under
this Section 6.
(a) Definition of "Cause". When used in connection with the
termination of employment with the Company, "Cause" shall mean: (i) Employee's
breach of his obligations under this Agreement; (ii) Employee's failure to
adhere to any written Company policy after the Employee has been given a
reasonable opportunity to comply with such policy or cure his failure to
comply; (iii) the conviction of or the entering of a guilty plea or plea of no
contest with respect to, a felony, the equivalent thereof, or any other crime
which results in Employee's imprisonment if such imprisonment effects
Employee's performance hereunder; (iv) the commission by the Employee of an act
of fraud upon the Company or any of its affiliates; (v) the misappropriation
(or attempted
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<PAGE> 3
misappropriation) or any funds or property of the Company or any of its
affiliates by the Employee; (vi) the failure by the Employee to perform duties
assigned to him after reasonable notice and opportunity to cure such
performance; (vii) the engagement by the Employee in any direct, material
conflict of interest with the Company without compliance with the Company's
conflict of interest policy, if any, then in effect; (viii) the engagement by
the Employee, without the written approval of the Board of Directors of the
Company, in any activity which competes with the business of the Company or any
of its affiliates or which would result in a material injury to the Company or
any of its affiliates; (ix) the engagement by the Employee in any activity
which would constitute a material violation of the provisions of the Company's
or GroupMAC's Insider Trading Policy or Business Ethics Policy, if any, then in
effect, or (x) the failure by the Employee to sign any lock-up letters,
standstill agreements, or other similar documentation required by an
underwriter in connection with a public offering of securities by the Company
or GroupMAC or to take other actions reasonably related thereto as requested by
the Board of Directors of the Company.
(b) Termination for Cause or Resignation. If the Company terminates
Employee's employment for Cause or the Employee voluntarily resigns, the
Company shall pay the Employee's base salary earned through the date of
termination, but all rights to any other compensation or benefits arising
hereunder shall be canceled and terminated in all respects concurrently with
such termination of employment; provided that Employee may elect to continue to
participate, at Employee's own expense, in such health insurance and other
benefits as to which the opportunity for continuing participation is mandated
by applicable laws.
(c) Termination Without Cause. In the event that the Employee's
employment is terminated by the Company without Cause, the Company shall,
subject to the terms of subsections (d) and (e) of this Section 6 below, and
only if and as long as Employee is not in breach of his obligations under this
Agreement, (i) pay to the Employee an amount equal to 12 months compensation at
his then current base salary payable in a lump sum, (ii) continue to provide
benefits in the kind and amounts provided up to the date of termination for
such 12 month period, including continuation of any Company-paid benefits as
described in Section 5 for Employee and his family.
(d) Disability; Death. If at any time during the term of this
Agreement, Employee is unable due to physical or mental disability to perform
effectively his duties hereunder, the Company shall continue payment of
compensation as provided in Section 4 during the first 12 months of such
disability to the extent not covered by the Company's disability insurance
policies. Upon the expiration of such 12-month period, the Company, at its sole
option, may continue payment of Employee's salary for such additional periods
as the Company elects, or may terminate this Agreement without further
obligations hereunder. If Employee should die during the term of this
Agreement, Employee's employment and the Company's obligations hereunder shall
terminate as of the end of the month in which Employee's death occurs and there
will be no salary and benefit continuation period.
(e) Securities Matters. Employee agrees that he will sign any
lock-up letters, standstill agreements, or other similar documentation required
by an underwriter in connection with a public offering of securities by the
Company or GroupMAC, or take other actions reasonably
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<PAGE> 4
related thereto as requested by the Board of Directors of the Company. Failure
to take any such action shall be "Cause" for termination, or if termination has
already occurred, shall cause Employee to forfeit any further rights to the
salary continuation or other payments that would otherwise be payable to
Employee. In addition, Employee agrees that in such event the Company can seek
and obtain specific performance of such covenant, including any injunction
requiring execution of such documents and the taking of such actions, and the
Employee hereby appoints the then current president of the Company to sign any
such documents on his behalf so long as such documents are prepared on the same
basis as other management shareholders generally.
(f) Waiver and Release. In the event that employment is terminated
by the Company without Cause, Employee agrees to accept, in full settlement of
any and all claims, losses, damages and other demands which Employee may have
arising out of such termination, as liquidated damages and not as a penalty,
the applicable amounts payable to Employee as set forth in this Section 6.
Employee hereby waives any and all rights he may have to bring any cause of
action or proceeding contesting any termination without Cause. Under no
circumstances shall Employee be entitled to any compensation or confirmation of
any benefits under this Agreement for any period of time following his date of
termination if his termination is for Cause.
7. Covenant Not to Compete.
(a) During the term of this Agreement, Employee will not compete
with the Company or its affiliates, directly or indirectly, either for himself
or as a member of a partnership or as a stockholder (except as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a
publicly-held company whose gross assets exceed one hundred million dollars),
investor, owner, officer or director of a company or other entity, or as an
employee, agent, associate or consultant of any person, partnership,
corporation or other entity, in any business in competition with that carried
on by the Company or its affiliates.
(b) Employee further agrees that, for the period from the date
hereof to the later to occur of (i) five (5) years after the date hereof or
(ii) two (2) years from and after the date of termination of Employee's
employment under this Agreement, regardless of the reason for such termination,
he will neither represent any other company nor engage in or carry on (directly
or indirectly, either for himself or as a member of a partnership or as a
stockholder (other than as a stockholder of less than one percent (1%) of the
issued and outstanding stock of a publicly-held company whose gross assets
exceed one hundred million dollars), investor, owner, officer or director of a
company or other entity, or as an employee, agent, associate or consultant of
any person, partnership, corporation or other entity) any business which
engages in the installation, construction or maintenance of heating,
ventilation, air conditioning systems, fire sprinklers or plumbing within a 100
mile radius of Gaithersburg, Maryland. Notwithstanding the foregoing, nothing
herein shall prevent Employee from working in the indoor air quality, heating,
ventilation and air conditioning, plumbing or electrical contracting
industries, provided that such activities are in areas not in direct
competition with any services or products produced, sold, conducted, developed,
or in the process of development by the Company or its affiliates on the date
of termination of Employee's employment.
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<PAGE> 5
(c) Employee agrees that the limitations set forth herein on his
rights to compete with the Company and its affiliates are reasonable and
necessary for the protection of the Company and its affiliates. In this regard,
Employee specifically agrees that the limitations as to period of time and
geographic area, as well as all other restrictions on his activities specified
herein, are reasonable and necessary for the protection of the Company and its
affiliates. Employee agrees that, in the event that the provisions of this
Agreement should ever be deemed to exceed the scope of business, time or
geographic limitations permitted by applicable law, such provisions shall be
and are hereby reformed to the maximum scope of business, time or geographic
limitations permitted by applicable law.
(d) Employee agrees that the remedy at law for any breach by him of
this Section 7 will be inadequate and that the Company shall also be entitled
to injunctive relief.
8. Confidential Information and Results of Service. Employee agrees
that during the term of this Agreement, and for five (5) years after his
termination of employment, he will not make use of or disclose, without the
prior consent of the Company, Confidential Information (as hereinafter defined)
relating to the Company, or any of its affiliates, and further agrees that he
will return to the Company at the termination of the Employee's employment or
at any other time at the Company's request all written materials in his
possession embodying such Confidential Information. For purposes of this
Agreement, "Confidential Information" includes information conveyed or assigned
to the Company by Employee or conceived, compiled, created, developed,
discovered or obtained by Employee from and during his employment relationship
with the Company, whether solely by the Employee or jointly with others, which
concerns the affairs of the Company or its affiliates and which the Company
could reasonably be expected to desire be held in confidence, or the disclosure
of which would likely be embarrassing, detrimental or disadvantageous to the
Company or its affiliates and without limiting the generality of the foregoing,
such information includes information relating to inventions, and the trade
secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company and information made available to the
Company by other parties under a confidential relationship. Confidential
Information, however, shall not include information (i) which is, at the time
in question, in the public domain through no wrongful act of Employee, (ii)
which is later disclosed to Employee by one not under obligations of
confidentiality to the Company or Employee, (iii) which is required by court or
governmental order, law or regulation to be disclosed, or (iv) which the
Company has expressly given Employee the right to disclose pursuant to written
agreement. Employee agrees that the remedy at law for any breach by him of this
Section 8 will be inadequate and that the Company shall also be entitled to
injunctive relief.
9. Employee Inventions. Each Employee Invention (as defined below)
will belong exclusively to the Company. The Employee acknowledges that all of
the Employee's writing, works of authorship, specially commissioned works, and
other Employee Inventions are works made for hire and the property of the
Company, including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are not
works made for hire, the Employee hereby assigns to the Company all of the
Employee's right, title, and interest,
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<PAGE> 6
including all rights of copyright, patent, and other intellectual property
rights, to or in such Employee Inventions. The Employee covenants that he will
promptly:
(a) disclose to the Company in writing any Employee Invention;
(b) assign to the Company or to a party designated by the
Company, at the Company's request and without additional
compensation, all of the Employee's right to the Employee
Invention for the United States and all foreign
jurisdictions;
(c) execute and deliver to the Company such applications,
assignments, and other documents as the Company may request
in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(d) sign all other papers necessary to carry out the above
obligations; and
(e) give testimony and render any other assistance but without
expense to the Employee in support of the Company's rights to
any Employee Invention.
For purposes of this Agreement, "Employee Invention" means any idea,
invention, technique, modification, process, or improvement (whether patentable
or not), any industrial design (whether registerable or not), any mask work,
however fixed or encoded, that is suitable to be fixed or programmed in a
semiconductor product (whether recordable or not), and any work of authorship
(whether or not copyright protection may be obtained for it) created,
conceived, developed, purchased or acquired by Employee, either solely or in
conjunction with others, during the term of Employee's employment with the
Company that relates in any way to, or is useful in any manner in, the business
then being conducted or proposed to be conducted by the Company, and any such
item created by the Employee, either solely or in conjunction with others,
following termination of the Employee's employment with the Company, that is
based upon or uses Confidential Information.
10. Notice. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently given if delivered by hand, by courier service, sent by registered
mail, postage prepaid, or sent by facsimile (with written confirmation of
receipt) to the parties at their respective addresses listed below:
(a) If to the Employee:
Ronald D. Bryant
c/o Masters, Inc.
7891 Beechcraft Avenue
Gaithersburg, Maryland 20879
Facsimile No.: (301) 258-7368
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<PAGE> 7
(b) If to the Company:
Masters, Inc.
c/o Group Maintenance America Corp.
1800 West Loop South, Suite 1375
Houston, Texas 77027
Facsimile No. (713) 626-4776
Attn: President
Either party may change such party's address by such notice to the other party.
11. Assignment. This Agreement is personal to the Employee, and he
shall not assign any of his rights or delegate any of his duties hereunder
without the prior written consent of the Company. Neither the Employee nor his
spouse will have the right to pledge, encumber, or otherwise dispose of any
payments under this Agreement. The Company shall have the right to assign this
Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of
the industries in which the Company or its affiliates is then active shall not
be deemed to expand the scope of Employee's covenant not to compete with such
operations, products or services without Employee's written consent.
12. Survival. The provisions of this Agreement shall survive the
termination of the Employee's employment hereunder in accordance with their
terms.
13. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of Maryland.
14. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Employee with respect to the terms of employment of
the Employee by the Company and supersedes all prior agreements and
understandings, whether written or oral, between them concerning such terms of
employment.
16. Waiver and Amendments; Cumulative Rights and Remedies.
(a) This Agreement may be amended, modified or supplemented, and
any obligation hereunder may be waived, only by a written instrument executed
by the parties hereto. The waiver by either party of a breach of any provision
of this Agreement shall not operate as a waiver of any subsequent breach.
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<PAGE> 8
(b) No failure on the part of any party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver hereof,
nor shall any single or partial exercise of any such right or remedy by such
party preclude any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies hereunder are cumulative and are
in addition to all other rights and remedies provided by law, agreement or
otherwise.
(c) The Employee's obligations to the Company and the Company's
rights and remedies hereunder are in addition to all other obligations of the
Employee and rights and remedies of the Company created pursuant to any other
agreement.
17. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.
18. Severability. In the event that any provision or provisions of
this Agreement is held to be invalid, illegal or unenforceable by any court of
law or otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with
respect to those provisions which were held to be invalid, illegal or
unenforceable.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement effective as of the date first above written.
COMPANY:
MASTERS, INC.
By: /s/ J. Patrick Millinor, Jr.
------------------------------------------
Name: J. Patrick Millinor, Jr.
Title: Chief Executive Officer
EMPLOYEE:
/s/ Ronald D. Bryant
---------------------------------------------
Ronald D. Bryant
-8-
<PAGE> 1
EXHIBIT 10.8
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
$230,000,000 REVOLVING CREDIT LOAN
AMONG
GROUP MAINTENANCE AMERICA CORP.,
AS THE COMPANY,
THE SUBSIDIARIES OF THE COMPANY,
AS GUARANTORS
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
AS THE AGENT
BANK OF AMERICA TEXAS, N.A.,
AS CO-AGENT
AND
PARIBAS,
AS SYNDICATION AGENT
AND
ABN AMRO BANK, N.V.,
AS DOCUMENTATION AGENT
AND
THE BANKS NAMED HEREIN
DATED AS OF OCTOBER 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION ........................ 2
Section 1.01 Definitions .......................................................... 2
Section 1.02 Types of Advances .................................................... 16
Section 1.03 Accounting Terms ..................................................... 16
Section 1.04 Schedules ............................................................ 16
ARTICLE II THE LOANS ............................................................ 16
Section 2.01 The Loans ............................................................ 16
Section 2.02 The Notes ............................................................ 17
Section 2.03 Notice of Advance .................................................... 17
Section 2.04 Disbursement of Funds for Loans ...................................... 17
Section 2.05 Conversions and Continuances ......................................... 18
Section 2.06 Voluntary Prepayments ................................................ 18
Section 2.07 Mandatory Repayments ................................................. 18
Section 2.08 Method and Place of Payment .......................................... 19
Section 2.09 Pro Rata Advances .................................................... 19
Section 2.10 Interest ............................................................. 19
Section 2.11 Interest Periods ..................................................... 20
Section 2.12 Interest Rate Not Ascertainable ...................................... 21
Section 2.13 Legality ............................................................. 21
Section 2.14 Increased Costs, Taxes or Capital Adequacy Requirements .............. 22
Section 2.15 Eurodollar Advance Prepayment and Default Penalties .................. 23
Section 2.16 Additional Costs, Taxes or Similar Requirements ...................... 24
Section 2.17 Tax Forms ............................................................ 24
Section 2.18 Voluntary Reduction of Commitment .................................... 25
Section 2.19 Fees ................................................................. 25
Section 2.20 Extension of Maturity Date ........................................... 25
Section 2.21 Replacement of Banks ................................................. 26
ARTICLE III LETTERS OF CREDIT .................................................... 26
Section 3.01 Letters of Credit .................................................... 26
Section 3.02 Letters of Credit Requests ........................................... 27
Section 3.03 Letter of Credit Participations 28
Section 3.04 Increased Costs ...................................................... 29
Section 3.05 Conflict between Applications and Agreement .......................... 30
ARTICLE IV CONDITIONS PRECEDENT ................................................. 30
Section 4.01 Conditions Precedent to the Initial Advance .......................... 30
Section 4.02 Conditions Precedent to All Credit Events ............................ 32
Section 4.03 Delivery of Documents ................................................ 33
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES ....................................... 33
Section 5.01 Organization and Qualification ....................................... 33
Section 5.02 Authorization and Validity ........................................... 33
Section 5.03 Governmental Consents ................................................ 33
Section 5.04 Conflicting or Adverse Agreements or Restrictions .................... 34
Section 5.05 Title to Assets ...................................................... 34
Section 5.06 Litigation ........................................................... 34
Section 5.07 Financial Statements ................................................. 34
Section 5.08 Default .............................................................. 35
Section 5.09 Investment Company Act ............................................... 35
Section 5.10 Public Utility Holding Company Act ................................... 35
Section 5.11 ERISA ................................................................ 35
Section 5.12 Tax Returns and Payments ............................................. 35
Section 5.13 Environmental Matters ................................................ 35
Section 5.14 Purpose of Loans ..................................................... 36
Section 5.15 Franchises and Other Rights .......................................... 36
Section 5.16 Subsidiaries and Assets .............................................. 36
Section 5.17 Solvency ............................................................. 37
Section 5.18 Year 2000 ............................................................ 37
ARTICLE VI AFFIRMATIVE COVENANTS ................................................ 37
Section 6.01 Information Covenants ................................................ 37
Section 6.02 Books, Records and Inspections ....................................... 39
Section 6.03 Insurance and Maintenance of Properties .............................. 40
Section 6.04 Payment of Taxes ..................................................... 40
Section 6.05 Corporate Existence .................................................. 40
Section 6.06 Compliance with Statutes ............................................. 40
Section 6.07 Material Privileges, Permits, Licenses and Other Rights .............. 41
Section 6.08 ERISA ................................................................ 41
Section 6.09 Additional Subsidiaries .............................................. 41
Section 6.10 Acquisition Agreements ............................................... 41
Section 6.11 Material Contracts ................................................... 42
Section 6.12 Employee Agreements .................................................. 42
ARTICLE VII NEGATIVE COVENANTS ................................................... 42
Section 7.01 Change in Business ................................................... 42
Section 7.02 Consolidation, Merger or Sale of Assets .............................. 42
Section 7.03 Indebtedness ......................................................... 43
Section 7.04 Liens ................................................................ 44
Section 7.05 Investments .......................................................... 45
Section 7.06 Restricted Payments .................................................. 45
Section 7.07 Change in Accounting ................................................. 46
Section 7.08 Certain Indebtedness ................................................. 46
</TABLE>
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<TABLE>
<S> <C>
Section 7.09 Transactions with Affiliates ......................................... 46
Section 7.10 Consolidated Net Worth ............................................... 46
Section 7.11 Funded Debt to EBITDA Ratio .......................................... 46
Section 7.12 Senior Debt to EBITDA Ratio .......................................... 47
Section 7.13 Funded Debt to Capitalization Ratio .................................. 47
Section 7.14 Capital Expenditures ................................................. 47
Section 7.15 Fixed Charge Coverage Ratio .......................................... 47
Section 7.16 Limitations on Acquisitions .......................................... 47
Section 7.17 Subordinated Debt .................................................... 47
ARTICLE VIII GUARANY .............................................................. 48
Section 8.01 Guaranty ............................................................. 48
Section 8.02 Continuing Guaranty .................................................. 48
Section 8.03 Effect of Debtor Relief Laws ......................................... 49
Section 8.04 Waiver of Subrogation ................................................ 50
Section 8.05 Subordination ........................................................ 50
Section 8.06 Waiver ............................................................... 51
Section 8.07 Full Force and Effect ................................................ 51
Section 8.08 Negative Pledge ...................................................... 51
ARTICLE IX EVENTS DEFAULT AND REMEDIES .......................................... 52
Section 9.01 Events of Default .................................................... 52
Section 9.02 Primary Remedies ..................................................... 54
Section 9.03 Other Remedies ....................................................... 54
ARTICLE X THE AGENT ........................................................... 54
Section 10.01 Authorization and Action ............................................ 54
Section 10.02 Agent's Reliance .................................................... 55
Section 10.03 Agent and Affiliates; Chase and Affiliates .......................... 56
Section 10.04 Banks' Credit Decision .............................................. 56
Section 10.05 Agent's Indemnity ................................................... 56
Section 10.06 Successor Agent ..................................................... 57
Section 10.07 Notice of Default ................................................... 58
ARTICLE XI MISCELLANEOUS ....................................................... 58
Section 11.01 Amendments .......................................................... 58
Section 11.02 Notices ............................................................. 58
Section 11.03 No Waiver; Remedies ................................................. 60
Section 11.04 Costs and Expenses .................................................. 60
Section 11.05 Release and Indemnity ............................................... 60
Section 11.06 Right of Setoff ..................................................... 61
Section 11.07 Governing Law ....................................................... 61
Section 11.08 Interest ............................................................ 62
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Section 11.09 Survival of Representations and Warranties .......................... 62
Section 11.10 Successors and Assigns; Participations .............................. 63
Section 11.11 Confidentiality ..................................................... 64
Section 11.12 Pro Rata Treatment .................................................. 65
Section 11.13 Separability ........................................................ 65
Section 11.14 Execution in Counterparts ........................................... 65
Section 11.15 Interpretation ...................................................... 65
Section 11.16 Submission to Jurisdiction .......................................... 66
Section 11.17 Waiver of Jury Trial ................................................ 67
Section 11.18 Final Agreement of The Parties ...................................... 67
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Exhibits and Schedules:
- -----------------------
<S> <C>
Exhibit 1.01A Administrative Questionnaire
Exhibit 1.01B Form of Adoption Agreement
Exhibit 2.02 Form of Note
Exhibit 2.03 Form of Notice of Advance
Exhibit 2.05 Form of Notice of Conversion
Exhibit 2.20 Form of Extension Request
Exhibit 3.02 Form of Letter of Credit Request
Exhibit 4.01(d)(i) Form of Security Agreement
Exhibit 4.01(d)(ii) Form of Pledge Agreement
Exhibit 4.01(h)(i) Form of Opinion of Borrower's Counsel - Bracewell & Patterson
Exhibit 4.01(h)(ii) Form of Opinion of Borrower's Counsel - Randolph W. Bryant
Exhibit 11.10(c) Form of Assignment and Acceptance
Schedule 5.04 Agreements
Schedule 5.06 Litigation
Schedule 5.13 Exceptions to Environmental Matters
Schedule 5.16 Subsidiaries
Schedule 6.03 Existing Insurance Policies
Schedule 6.11 Material Contracts
Schedule 7.03(b) Existing Indebtedness
Schedule 7.04(a) Existing Liens
Schedule 7.05(b) Investments
</TABLE>
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<PAGE> 7
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of
October 15, 1998 (this "Agreement") is among GROUP MAINTENANCE AMERICA CORP., a
Texas corporation (the "Company"), the Subsidiaries of the Company listed on the
signature pages hereto as Guarantors (together with each other Person who
subsequently becomes a Guarantor, collectively the "Guarantors"), the banks and
other financial institutions listed on the signature pages hereto under the
caption "Banks" (together with each other person who becomes a Bank,
collectively the "Banks"), BANK OF AMERICA TEXAS, N.A., individually as a Bank
and as co-agent, PARIBAS, individually as a Bank and as syndication agent, ABN
AMRO BANK, N.V., as a Bank and as documentation agent, and CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, individually as a Bank ("Chase") and as agent for the
other Banks (in such capacity together with any other Person who becomes the
agent, the "Agent").
The Company, the Agent (then known as Texas Commerce Bank National
Association) and the banks listed on the signature pages thereto entered into
that one certain Credit Agreement dated December 11, 1997 (as amended, the
"First Credit Agreement"), relating to the extension of a series of loans with a
commitment totaling $75,000,000.00 by said banks to the Company. In 1998, the
Company and certain of its subsidiaries, as guarantors, the Agent, the banks and
financial institutions listed on the signature pages thereto, ABN Amro Bank,
N.V. and Paribas, as co-agents agreed to amend and restate the First Credit
Agreement pursuant to the terms and conditions of the Amended and Restated
Credit Agreement dated June 12, 1998 (the "Amended and Restated Credit
Agreement" and, together with the First Credit Agreement, the "Prior Credit
Agreement"), relating to the extension of a series of loans with a commitment
totaling $125,000,000.00 by said banks to the Company. The Company has now
requested the Agent and the Banks to amend and restate the prior Credit
Agreement to increase the amount of credit that may be extended to Borrower to
$230,000,000.00. The Agent and the Banks have agreed to do so, subject to the
terms and conditions hereof and wish to execute this document for the purpose of
setting forth their amended and restated agreement in regard thereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the Company, the Agent, the Guarantors, and the
Banks agree to amend and restate the Prior Credit Agreement as follows:
<PAGE> 8
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION
SECTION 1.01 Definitions . As used in this Agreement, the
following terms have the following meanings:
"Accounts" means all accounts, accounts receivable or other
indebtedness owing to the Company or any Guarantor as consideration for
goods sold or services rendered and billed within thirty (30) days of the
providing of such goods or services.
"Acquisition Agreements" has the meaning set forth in Section
6.10.
"Add-Back Adjustments" means, with respect to any Qualified
Company and for any specified period, those pro forma adjustments for
such period referred to in 17 CFR 210.11-02(b)(6).
"Administrative Questionnaire" means the questionnaire attached
hereto as Exhibit 1.01A to be completed by each Bank and returned to the
Agent.
"Adoption Agreement" means an agreement in the form of Exhibit
1.01B pursuant to which one or more Subsidiaries may become a party
hereto and to the relevant Security Documents from time to time.
"Advance" means an advance, pursuant to a Notice of Advance,
comprised of a single Type of Loan from all the Banks (or resulting from
a conversion or conversions on the same date having, in the case of
Eurodollar Rate Advances, the same Interest Period (except as otherwise
provided in this Agreement)), made by all of the Banks concurrently to
the Company.
"Advance Date" means, with respect to each Advance, the Business
Day upon which the proceeds of such Advance are to be made available to
the Company.
"Affiliate" means any other Person directly or indirectly
controlling (including all directors and officers of such Person),
controlled by, or under direct or indirect common control with such
Person, and any other Person in which such Person's direct or indirect
equity interest is 20% or more of the total outstanding equity interests
of such Person and any immediate family member (parent, spouse or child)
and all spouses of said Persons.
"Agent" has the meaning specified in the introduction to this
Agreement.
"Agreement" has the meaning specified in the introduction to this
Agreement.
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<PAGE> 9
"Alternate Base Rate" means, for any day, a rate per annum
(adjusted, to the nearest 1/16 of 1%) equal to the greater of (a) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (b)
the Prime Rate in effect on such day. For purposes hereof, the term
"Prime Rate" means, as of a particular date, the prime rate of Chase most
recently announced by Chase and in effect on such date, automatically
fluctuating upward or downward, as the case may be, with and at the time
of each change therein without notice to the Company or any other Person,
which prime rate may not necessarily represent the lowest or best rate
actually charged to a customer. "Federal Funds Effective Rate" means, for
any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If, for any reason, the
Agent shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Federal Funds
Effective Rate, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms hereof, the Alternate
Base Rate shall be determined without regard to clause (a) of the first
sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"Alternate Base Rate Advance" means any Advance bearing interest
at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"Alternative Facility" means, as of any day, the short term,
uncommitted working capital loan facility of the Company with any Bank or
Affiliate thereof other than those, if any, provided for in the Loan
Documents.
"Alternative Facilities Advances" means, on any day, the aggregate
advances made by any of the Banks under an Alternative Facility which are
outstanding as of such day.
"Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of an Alternate Base Rate
Advance and such Bank's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Assignment and Acceptance" has the meaning specified in Section
11.10 (c).
"Bank" has the meaning provided in the introduction to this
Agreement.
"Bankruptcy Code" has the meaning specified in Section 9.01(e).
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<PAGE> 10
"Board" means the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Business Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Texas) on which most
banks are open for business in Houston, Texas.
"Capital Expenditures" means, with respect to any Person for any
period, the sum of all expenditures (whether paid in cash, capitalized as
an asset or accrued as a liability) by such Person and its consolidated
Subsidiaries during such period which, in accordance with GAAP, are or
should be included in capital expenditures or similar items reflected in
the consolidated statement of cash flows of such Person; provided,
however, that Capital Expenditures shall not include any such amounts
incurred in connection with the Investment in a Qualified Company
permitted by Section 7.05.
"Capitalization Ratio" means, at any date of determination, the
ratio of (i) Funded Debt of the Company and its consolidated Subsidiaries
determined on a consolidated basis, to (ii) the sum of Funded Debt of the
Company and its consolidated Subsidiaries determined on a consolidated
basis plus Consolidated Net Worth.
"Capitalized Lease Obligations" means all lease or rental
obligations which, pursuant to GAAP, are capitalized for balance sheet
purposes.
"Change of Control" means either (i) any Unrelated Person, or two
or more Unrelated Persons acting in concert, acquire after the date
hereof beneficial ownership of 50% or more of the shares of voting stock
of the Company outstanding at the time of such acquisition, or (ii) all
or substantially all of the assets of the Company are sold after the date
hereof in a single transaction or series of related transactions to any
Persons, if the effect of such transaction or transactions is to change
the Persons controlling the Company. The term "Unrelated Person" shall
mean any Person other than a Related Person. A "Related Person" means (i)
any Plan or trust for any Plan, and (ii) any wholly-owned Subsidiary of
the Company. Any Person who is a party to any stockholders' agreement
shall not be considered to be acting in concert with any other party
thereto merely because such Person is a party thereto.
"Chase" means Chase Bank of Texas, National Association, a
national banking association.
"Code" means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
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<PAGE> 11
"Collateral" means all, or substantially all, of the accounts and
inventory of the Company and its domestic Subsidiaries, all as more fully
described in the Security Documents.
"Commitment" and "Commitments"means the obligation of each of the
Banks to enter into and perform this Agreement, to make available the
Loans to the Company in the amounts shown on the signature page of each
Bank hereto and all other duties and obligations of the Banks hereunder.
"Commitment Fee" has the meaning specified in Section 2.19.
"Company" has the meaning specified in the introduction to this
Agreement.
"Consolidated Net Worth" means, as at any date of determination,
all items which in conformity with GAAP would be included in the
calculation of shareholders' equity on a consolidated balance sheet of
the Company as at such date, plus any amounts included on such
consolidated balance sheet in respect of the Company's preferred stock,
provided the terms of such preferred stock have been approved by the
Majority Banks in their sole discretion.
"Conversion" or "Convert" (in each case whether or not
capitalized) means the changing of a Eurodollar Rate Advance to an
Alternate Base Rate Advance or vice versa in accordance with the
provisions hereof.
"Credit Event" means the making of any Advance or the conversion
of any Advance into a Eurodollar Rate Advance.
"Default" means the occurrence of any event which with or without
the giving of notice or the passage of time or both would become an Event
of Default.
"Default Rate" means the lesser of (i) the Highest Lawful Rate and
(ii) the Alternate Base Rate plus two percent (2%).
"Designated Payment Date" means February 28, May 31, August 31 and
November 30 of each year; provided, however, if a Designated Payment Date
shall be a day which is not a Business Day, such Designated Payment Date
shall be the next succeeding Business Day, and such extension of time
shall be included in determining the amount to be paid on such date.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank designated from time to time as its "Domestic Lending
Office" hereunder.
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<PAGE> 12
"EBITDA" means, for any period, and determined in accordance with
GAAP, the sum of:
(a) the consolidated pre tax income of the Company, plus the
aggregate amount which was deducted for such period in determining such
consolidated pre tax income for (i) interest expense, (ii) depreciation
expense, (iii) amortization expense, and (iv) compensation expense
relating to the issuance of stock and stock options to employees (to the
extent same do not constitute a use of cash); and
(b) for each acquisition of a Qualified Company acquired by the
Company during the twelve (12) months preceding the date as of which
EBITDA is calculated and with respect to the period beginning twelve (12)
months prior to the calculation of EBITDA through the date of said
acquisition by the Company, the sum of the consolidated pre-tax income of
such Qualified Company, plus: (A) the aggregate amount which was deducted
for such period in determining such consolidated pre-tax income for (i)
interest expense, (ii) depreciation expense, and (iii) amortization
expense, and (B) Add-Back Adjustments of such Qualified Company;
provided, said pre-acquisition EBITDA shall be included in EBITDA only to
the extent any such amount is not included in subparagraph (a) above.
"Effective Date" means the date on which all conditions to make an
Advance set forth in Section 4.01 are first met or waived in accordance
with Section 11.01 hereof.
"Eligible Assignee" means (a) any Bank; (b) a commercial bank
organized under the laws of the United States, or any state thereof, and
having total assets in excess of $1,000,000,000.00; (c) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development or any successor
organization, or a political subdivision of any such country, and having
total assets in excess of $1,000,000,000.00; provided that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the Organization
for Economic Cooperation and Development or any successor organization;
(d) the central bank of any country which is a member of the Organization
for Economic Cooperation and Development or any successor organization;
and (e) any other bank or similar financial institution approved by the
Agent.
"Employee Agreements" has the meaning set forth in Section 6.12.
"Environmental Laws" means federal, state or local laws, rules or
regulations, and any judicial, arbitral or administrative interpretations
thereof, including any judicial, arbitral or administrative order,
judgment, permit, approval, decision or determination pertaining to
conservation or protection of the environment as in effect and
enforceable against the Company or any of its Subsidiaries at the time in
question, including the Clean Air Act, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Federal Water
Pollution Control Act, the Occupational Safety and Health Act, the
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<PAGE> 13
Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Superfund Amendment and Reauthorization
Act of 1986, the Hazardous Materials Transportation Act, and comparable
state and local laws, and other environmental conservation and protection
laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is either a member of the same "controlled group" or
under "common control," within the meaning of Section 414 of the Code and
the regulations thereunder, with the Company.
"Eurocurrency Liabilities" has the meaning specified in Regulation
D as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each Bank, the
branches or affiliates of such Bank designated as its "Eurodollar Lending
Office" from time to time hereunder.
"Eurodollar Rate" means, with respect to any Eurodollar Rate
Advance, the rate (rounded to the nearest whole multiple of 1/16 of 1%)
at which dollar deposits approximately equal in principal amount to the
entire portion of such Advance and for a maturity equal to the applicable
Interest Period are offered in immediately available funds to the Agent
by prime banks in whatever Eurodollar interbank market may be selected by
the Agent in its sole and absolute discretion at the time of
determination and in accordance with the then usual practice in such
market at approximately 10:00 a.m. (Houston, Texas time) two Business
Days prior to the commencement of such Interest Period.
"Eurodollar Rate Advance" means any Advance bearing interest at a
rate determined by reference to the Eurodollar Rate in accordance with
the provisions of Article II.
"Events of Default" has the meaning specified in Section 9.01.
"Execution Date" means October 13, 1998.
"Existing Letters of Credit" means all letters of credit issued by
Chase, outstanding on the Effective Date and described in Section
3.01(c).
"Extension Request" means each request by the Company made
pursuant to Section 2.20 for the Banks to extend the Maturity Date.
"Federal Funds Effective Rate" has the meaning specified in the
definition of the term "Alternate Base Rate."
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<PAGE> 14
"Fees" has the meaning specified in Section 2.19.
"Financials" has the meaning specified in Section 5.07.
"Funded Debt" means all indebtedness for borrowed money (including
Capitalized Lease Obligations) evidenced by a written document and
subject to periodic, required payments of interest and/or principal.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States as set forth in the opinions,
statements and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, the Financial
Accounting Standards Board and such other Persons who shall be approved
by a significant segment of the accounting profession and concurred in by
the independent certified public accountants certifying any audited
financial statements of the Company.
"Guaranteed Obligations" has the meaning specified in Section
8.01.
"Guarantors" has the meaning provided in the introduction to this
Agreement and, except as otherwise agreed by the Majority Banks and the
Company, shall include all of the Subsidiaries of the Company.
"Guaranty" means the obligations contained in Article VIII hereof.
"Hazardous Materials" means (a) hazardous waste as defined in the
Resource Conservation and Recovery Act of 1976, or in any applicable
federal, state or local law or regulation, (b) hazardous substances, as
defined in CERCLA, or in any applicable state or local law or regulation,
(c) gasoline, or any other petroleum product or by-product, (d) toxic
substances, as defined in the Toxic Substances Control Act of 1976, or in
any applicable federal, state or local law or regulation or (e)
insecticides, fungicides, or rodenticides, as defined in the Federal
Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable
federal, state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"Highest Lawful Rate" means, as to any Bank, the maximum
nonusurious rate of interest that, under applicable law, may be
contracted for, taken, reserved, charged or received by such Bank on the
Loans or under the Loan Documents at any time or from time to time. If
the maximum rate of interest which, under applicable law, any of the
Banks are permitted to charge the Company on the Loans shall change after
the date hereof, to the extent permitted by applicable law, the Highest
Lawful Rate shall be automatically increased or decreased, as the case
may be, as of the effective time of such change without notice to the
Company or any other Person.
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<PAGE> 15
"Indebtedness" means, without duplication, (a) all indebtedness
for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase price of property or services,
(b) all indebtedness evidenced by bonds, debentures, notes or other
similar instruments, (c) all Capitalized Lease Obligations, (d) all
obligations to reimburse the issuer of any Letter of Credit for amounts
drawn or drawable, and (e) all other items that would be classified as a
liability on the Company's balance sheet pursuant to GAAP.
"Interest Period" has the meaning specified in Section 2.11.
"Issuing Bank" means Chase, in its capacity as a Bank, or such
other Bank to which the Company and the Majority Banks subsequently
agree.
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by such Person of the assets,
stock or other securities of any other Person, or any direct or indirect
loan, advance or capital contribution by such Person to any other Person,
and any other item which would be classified as an "investment" on a
balance sheet of such Person, including any direct or indirect
contribution by such Person of property or assets to a joint venture,
partnership or other business entity in which such Person retains an
interest but shall not include demand deposits.
"Letter of Credit Fee" has the meaning specified in Section
2.19(c).
"Letter of Credit Request" has the meaning specified in Section
3.02(a).
"Letters of Credit" has the meaning specified in Section 3.01(a).
"Lien" means, when used with respect to any Person, any mortgage,
lien, charge, pledge, security interest or encumbrance of any kind
(whether voluntary or involuntary and whether imposed or created by
operation of law or otherwise) upon, or pledge of, any of its property or
assets, whether now owned or hereafter acquired, any capital lease in the
nature of the foregoing, any conditional sale agreement or other title
retention agreement, in each case, for the purpose, or having the effect,
of protecting a creditor against loss or securing the payment or
performance of an obligation.
"Loan" and "Loans" has the meaning set forth in Section 2.01.
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Notice of Advance, and the corporate resolutions
authorizing the Loan Documents.
"Majority Banks" means Banks holding at least 66b % of the
Advances outstanding under the Loans, or, if no Advances are outstanding,
Banks holding such percentage of the Total Commitment.
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<PAGE> 16
"Margin" means, (a) at any time of determination prior to a Public
Debt Issuance Event, with respect to Alternate Base Rate Advances,
Eurodollar Rate Advances, or Commitment Fees, as applicable, the
percentage determined in accordance with the following table:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Equal to Equal to Equal to Equal to
or less than or less than or less than or less than
2.75 to 1.00 2.25 to 1.00 2.00 to 1.00 1.50 to 1.00
and and and and Equal to
Funded Debt/ greater than greater than greater than greater than or less than
EBITDA Ratio 2.25 to 1.00 2.00 to 1.00 1.50 to 1.00 1.00 to 1.00 1.00 to 1.00
=================================================================================================
<S> <C> <C> <C> <C> <C>
Alternate Base Rate
Margin .50% .25% 0% 0% 0%
- -------------------------------------------------------------------------------------------------
Eurodollar Margin 2.00% 1.75% 1.50% 1.25% 1.00%
=================================================================================================
Commitment Fee .375% .375% .375% .25% .25%
- -------------------------------------------------------------------------------------------------
</TABLE>
and (b) at any time of determination on or after a Public Debt Issuance Event,
with respect to Alternate Base Rate Advances, Eurodollar Rate Advances, or
Commitment Fees, as applicable, the percentage determined in accordance with the
following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Equal to Equal to Equal to Equal to Equal to or
or less than or less than or less than or less than Less than
4.00 to 1.00 3.50 to 1.00 2.75 to 1.00 2.00 to 1.00 1.50 to 1.00
and and and and
Funded Debt/ greater than greater than greater than greater than
EBITDA Ratio 3.50 to 1.00 2.75 to 1.00 2.00 to 1.00 1.50 to 1.00
===================================================================================================
<S> <C> <C> <C> <C> <C>
Alternate Base Rate
Margin .50% .25% 0% 0% 0%
Eurodollar Margin 2.00% 1.75% 1.50% 1.25% 1.00%
- ---------------------------------------------------------------------------------------------------
Commitment Fee .375% .375% .375% .25% .25%
===================================================================================================
</TABLE>
If sufficient information does not exist to calculate the
applicable Margin, Eurodollar Rate Advances shall not be available to the
Company and the applicable Margin for Alternate Base Rate Advances shall
be deemed to be .50%.
"Margin Period" means a period commencing three (3) days after the
date on which the quarterly or annual financial statements of the Company
are required to be delivered pursuant to Section 6.01(a) or Section
6.01(b), as the case may be, and ending three (3) days after the next
date a financial statement is required to be so delivered.
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<PAGE> 17
Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), (a) a material
adverse effect on the financial condition, business or operations of the
Company and its Subsidiaries taken as a whole or (b) a material
impairment of the collective ability of the Company and its Subsidiaries
taken as a whole to make payment hereunder or under any Note or the right
of any Bank to enforce any of its remedies to collect any amounts owing
under the Loan Documents.
"Material Contract" means the Contracts listed on Schedule 6.11,
as amended from time to time.
"Maturity Date" means October 13, 2001, unless accelerated
pursuant to Article IX hereof.
"Maximum Guaranteed Amount" means for each Guarantor the maximum
amount which any Guarantor could pay under the Guaranty without having
such payment set aside as a fraudulent transfer or conveyance or similar
action under the Bankruptcy Code or any applicable state or foreign law.
"Multiemployer Plan" means any plan that is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA).
"Note" and "Notes" have the meanings specified in Section 2.02.
"Notice of Advance" has the meaning provided in Section 2.03(a).
"Notice of Conversion" has the meaning provided in Section 2.05.
"Notice of Default" has the meaning specified in Section 9.02.
"Obligations" means all the obligations of the Company now or
hereafter existing under the Loan Documents, whether for principal,
interest, Fees, expenses, indemnification or otherwise.
"Other Activities" has the meaning specified in Section 10.03.
"Other Financings" has the meaning specified in Section 10.03.
"Payment Office" means the office of the Agent located at 1111
Fannin Street, Houston, Texas 77002, or such other office as the Agent
may hereafter designate in writing as such to the other parties hereto.
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<PAGE> 18
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or a substantial portion of its functions under
ERISA.
"Permitted Investments" means, as to any Person:
(a) securities issued or directly and fully guaranteed or
insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not
more than twelve months from the date of acquisition thereof,
(b) time deposits and certificates of deposit with
maturities of not more than twelve months from the date of
acquisition by such Person which deposits or certificates are
either: (a) fully insured by the Federal Deposit Insurance
Corporation or (b) in any Bank or other commercial bank
incorporated in the United States or any U.S. branch of any other
commercial bank, in each case having capital, surplus and
undivided profits aggregating $100,000,000.00 or more with a
long-term unsecured debt rating of at least A- from Standard &
Poor's Ratings Group or A3 from Moody's Investors Service,
(c) commercial paper issued by any Person incorporated in
the United States rated at least A2 or the equivalent thereof by
Standard & Poor's Ratings Group or at least P2 or the equivalent
thereof by Moody's Investors Service and, in each case, maturing
not more than 270 days after the date of issuance,
(d) investments in money market mutual funds having assets
in excess of $2,000,000,000.00 substantially all of whose assets
are comprised of securities of the types described in clauses (a)
through (c) above, and
(e) repurchase or reverse purchase agreements respecting
obligations with a term of not more than seven days for underlying
securities of the types described in clause (a) above entered into
with any bank listed in or meeting the qualifications specified in
clause (b) above.
"Permitted Liens" means, as to any Person:
(a) Liens for taxes, assessments, levies or other
governmental charges not yet due or which are being contested in
good faith by appropriate proceedings and for which adequate
reserves are maintained in accordance with GAAP;
(b) Liens in connection with worker's compensation,
unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being
contested in good faith by appropriate proceedings and for which
adequate reserves are maintained in accordance with GAAP;
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(c) operator's, vendors', carriers', warehousemen's,
repairmen's, mechanics', workers', materialmen's or other like
Liens arising by operation of law in the ordinary course of
business (or deposits to obtain the release of any such Lien) and
securing amounts of $100,000.00 or less or amounts not yet due or
which are being contested in good faith by appropriate proceedings
and for which adequate reserves are maintained in accordance with
GAAP;
(d) deposits to secure insurance or adequate self insurance
arrangements in the ordinary course of business;
(e) deposits and other Liens to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
indebtedness for borrowed money or the deferred purchase price of
goods or services), leases, licenses, franchises, trade contracts,
statutory obligations, surety and appeal bonds and performance
bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) easements, rights of way, covenants, restrictions,
reservations, exceptions, encroachments, zoning and similar
restrictions and other similar encumbrances (other than to secure
the payment of indebtedness for borrowed money or the deferred
purchase price of goods or services) or title defects, in each
case incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any
case singly or in the aggregate materially detract from the value
or usefulness of the Property subject thereto for the business
conducted by the Company and its Subsidiaries or materially
interfere with the ordinary conduct of the business of the Company
and its Subsidiaries;
(g) bankers' liens arising by operation of law;
(h) inchoate Liens arising under ERISA to secure contingent
liabilities of the Company and its Subsidiaries;
(i) landlord's liens that are subordinated to the Liens in
favor of the Agent, unless waived by the Agent;
(j) Liens on assets of Subsidiaries to secure indebtedness
to the Company provided same are collaterally assigned to the
Agent, provided, such Liens may be incurred only to the extent the
underlying Indebtedness is otherwise permitted under the terms of
this Agreement;
(k) Liens on the right to rebates of prepaid insurance
premiums financed by third parties on behalf of the Company or any
of its Subsidiaries to secure up to $1,000,000.00 outstanding at
any time;
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<PAGE> 20
(l) judgment Liens that do not constitute an Event of
Default; and
(m) Liens permitted under Section 7.04 (excluding
subsection (c) thereof).
"Person" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a foreign
or domestic state or political subdivision thereof or any agency of such
state or subdivision.
"Plan" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of
the Code, other than a Multiemployer Plan, with respect to which the
Company or an ERISA Affiliate contributes or has an obligation or
liability to contribute, including any such plan that may have been
terminated.
"Pledge Agreement" has the meaning specified in Section
4.01(d)(ii).
"Prescribed Forms" shall mean such duly executed form(s) or
statement(s), and in such number of copies, which may, from time to time,
be prescribed by law and which, pursuant to applicable provisions of the
Code or an income tax treaty between the United States and the country of
residence of the party providing the form(s) or statement(s), permit each
of the Company and the Agent to make payments hereunder for the account
of such party free of deduction or withholding of income and other taxes.
"Prior Credit Agreement" has the meaning specified in the
Introduction hereto on page one.
"Property" or "assets" (whether or not capitalized) means any
interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.
"Public Debt Issuance Event" means, the issuance by the Company of
Subordinated Debentures, which event shall be deemed to have occurred on
the date of such issuance.
"Qualified Company" means any Person in the residential or
commercial/industrial service industry whose primary business is to
provide residential or commercial/industrial services, consisting of
heating, ventilation and air conditioning, mechanical, indoor air
quality, plumbing, process piping, appliance, electrical, installation,
reinstallation and maintenance services.
"Regulations A, D, T, U and X" means Regulations A, D, T, U and X
of the Board as the same are from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
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<PAGE> 21
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding
of barrels, containers and other closed receptacles).
"Reportable Event" means an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the 30-day notice requirement
has not been waived by the PBGC.
"Requirements of Environmental Laws" means, as to any Person, the
requirements of any applicable Environmental Law relating to or affecting
such Person or the condition or operation of such Person's business or
its properties, both real and personal.
"Reserve Percentage" means, for any Interest Period and for any
Bank, the reserve percentage applicable during such Interest Period under
regulations issued from time to time by the Board (or if more than one
such percentage is so applicable, the daily average for such percentages
for those days in such Interest Period during which any such percentage
shall be so applicable) for determining the maximum reserve requirement
(including any marginal, supplemental or emergency reserves) for such
Bank in respect of liabilities or assets consisting of or including
Eurocurrency Liabilities.
"Responsible Officer" means, with respect to the Company, the
president, chief executive officer, chief operating officer, treasurer or
chief financial officer of the Company.
"Security Agreement" has the meaning specified in Section
4.01(d)(i).
"Security Documents" means the documents described in Section
4.01(d) of this Agreement executed by the Company and its Subsidiaries in
favor of Chase, as Agent, for the benefit of the Banks, pursuant to the
terms hereof.
"Senior Debt" means Funded Debt other than Subordinated Debentures
and Subordinated Shareholder Debt.
"Subordinated Debentures" means subordinated debentures issued by
the Company, with a scheduled final maturity of such principal of no
sooner than the Maturity Date and containing terms and provisions
satisfactory to the Majority Banks in their sole discretion.
"Subordinated Shareholder Debt" means any Indebtedness of the
Company and its Subsidiaries, subordinated in each instance to the
satisfaction of the Agent, owing to any seller of any Qualified Company
and incurred in connection with the acquisition of such Qualified
Company.
"Subsidiary" means, with respect to any Person, (a) any
corporation more than 50% of whose stock of any class or classes having
by the terms thereof ordinary voting power to
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<PAGE> 22
elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person,
directly or indirectly, and (b) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly, has
greater than 50% of the equity interest. Unless otherwise provided or the
context otherwise requires, the term "Subsidiary" or "Subsidiaries" shall
mean a Subsidiary or Subsidiaries of the Company.
"Total Commitment" means the aggregate Commitments of all Banks
totaling a maximum of $230,000,000.00 for all Banks.
"Unrelated Person" means any Person who is not a Related Person.
"Unutilized Commitment" means the Total Commitment less the sum of
outstanding Advances and all issued and outstanding Letters of Credit.
SECTION 1.02 Types of Advances. Advances and Loans hereunder are
distinguished by "Type". The Type of an Advance refers to the determination
whether such Advance is a Eurodollar Rate Advance or an Alternate Base Rate
Advance.
SECTION 1.03 Accounting Terms. All accounting terms not defined
herein shall be construed in accordance with GAAP, as applicable, and all
calculations required to be made hereunder and all financial information
required to be provided hereunder shall be done or prepared in accordance with
GAAP.
SECTION 1.04 Schedules. Schedules hereto may be updated by the
Company from time to time to reflect transactions and other matters not
prohibited by the Loan Documents.
ARTICLE II
THE LOANS
SECTION 2.01 The Loans. Subject to the terms and conditions
hereof, each Bank severally agrees at any time and from time to time on and
after the Execution Date and prior to the Maturity Date, to make and maintain a
revolving credit loan or loans (each a "Loan" and collectively, the "Loans") to
the Company not to exceed at any time outstanding the maximum amount of its
Commitment, which Loans (i) shall, at the option of the Company, be made and
maintained pursuant to one or more Advances comprised of Alternate Base Rate
Advances or Eurodollar Rate Advances, provided that, except as otherwise
specifically provided herein, all Advances made pursuant to a single Notice of
Advance shall be of the same Type, (ii) in the case of Eurodollar Rate Advances,
shall be made in the minimum amount of $1,000,000.00 and integral multiples of
$100,000.00 and, in the case of Alternate Base Rate Advances, in the minimum
amount of $300,000.00 and integral multiples of $100,000.00, or, in either case,
the amount of the Unutilized
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<PAGE> 23
Commitment, (iii) may be repaid and, so long as no Default or Event of Default
exists hereunder, reborrowed, at the option of the Company in accordance with
the provisions hereof, and (iv) shall, in the aggregate at any time outstanding,
not exceed the maximum total amount of the Commitments. There shall be no
further Advances after the Maturity Date.
SECTION 2.02 The Notes. The Loans shall be evidenced by Notes in
favor of each Bank (individually a "Note" and collectively, the "Notes"),
substantially in the form of: Exhibit 2.02 hereto.
SECTION 2.03 Notice of Advance. Whenever the Company desires an
Advance, it shall give written notice thereof (a "Notice of Advance") (or
telephonic notice promptly confirmed in writing) to the Agent in the case of an
Alternate Base Rate Advance, not later than 10:00 a.m. (Houston, Texas time) on
the date of such Advance and in the case of a Eurodollar Rate Advance, not later
than 11:00 a.m. (Houston, Texas time) three Business Days prior to the date of
such Advance. Each Notice of Advance shall be irrevocable and shall be in the
form of Exhibit 2.03 hereto, specifying (i) the aggregate principal amount of
the Advance to be made, (ii) the date of such Advance (which shall be a Business
Day), (iii) the Type of Advance, and (iv) if the proposed Advance is to be a
Eurodollar Rate Advance, the initial Interest Period to be applicable thereto.
The Agent shall promptly give the Banks written notice or
telephonic notice (promptly confirmed in writing) of each proposed Advance, of
each Bank's proportionate share thereof and of the other matters covered by each
Notice of Advance.
SECTION 2.04 Disbursement of Funds for Loans. No later than 1:00
p.m. (Houston, Texas time) on any Advance Date for Loans, each Bank shall make
available its pro rata portion of the amount of such Advance in U.S. dollars and
in immediately available funds at the Payment Office. At such time, the Agent
shall credit the amounts so received to the general deposit account of the
Company maintained with the Agent in immediately available funds.
Unless the Agent shall have been notified by any Bank prior to
disbursement of the Advance by the Agent that such Bank does not intend to make
available to the Agent such Bank's portion of the Advance to be made on such
date, the Agent may assume that such Bank has made such amount available to the
Agent on such Advance Date and the Agent may, in reliance upon such assumption,
make available to the Company a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank and the Agent has
made available same to the Company, the Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Company, and the Company shall pay such corresponding amount
to the Agent within two (2) Business Days after demand therefor. The Agent shall
also be entitled to recover from such Bank or the Company, as the case may be,
interest on such corresponding amount from the date such corresponding amount
was made available by the Agent to the Company to the date such corresponding
amount is recovered by the Agent, at a rate per annum equal to the Alternate
Base Rate or the Eurodollar Rate plus the applicable Margin, as
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appropriate. Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its Commitments hereunder or to prejudice any rights which
the Company may have against any Bank as a result of any default by such Bank
hereunder. No failure of any Bank hereunder shall relieve any other Bank of its
obligations.
SECTION 2.05 Conversions and Continuances. The Company shall have
the option to convert or continue on any Business Day all or a portion of the
outstanding principal amount of one Type of Advance into another Type of
Advance, provided, no Advances may be converted into or continued as Eurodollar
Rate Advances if a Default or Event of Default is in existence on the date of
the conversion. Any continuation of an Advance as the same Type of Advance in
the same amount shall be effected by the Company giving notice to the Agent, in
writing, or by telephone promptly confirmed in writing, of its intention to
continue such Advance as an Advance of the same Type. Each such conversion shall
be effected by the Company giving the Agent written notice (each a "Notice of
Conversion"), substantially in the form of Exhibit 2.05 hereto, prior to 11:00
a.m. (Houston, Texas time) at least (a) three (3) Business Days prior to the
date of such conversion in the case of conversion into or continuance as
Eurodollar Rate Advances and (b) prior to 10:00 a.m. (Houston, Texas time) one
Business Day prior to the date of conversion in the case of a conversion into
Alternate Base Rate Advances, specifying each Advance (or portions thereof) to
be so converted and, if to be converted into or continued as Eurodollar Rate
Advances, the Interest Period to be initially applicable thereto. The Agent
shall thereafter promptly notify each Bank of such Notice of Conversion.
SECTION 2.06 Voluntary Prepayments. The Company shall have the
right to voluntarily prepay the Loans in whole or in part at any time on the
following terms and conditions: no Eurodollar Rate Advance may be prepaid prior
to the last day of its Interest Period unless, simultaneously therewith, the
Company pays to the Agent for the benefit of the Banks all sums necessary to
compensate the Banks for all reasonable costs and expenses actually incurred by
the Banks as a result of such prepayment (excluding loss of anticipated
profits), as reasonably determined by the Banks, including but not limited to
those costs described in Section 2.15 hereof; and each prepayment pursuant to
this section shall be applied first, to the payment of accrued and unpaid
interest, and then, to the outstanding principal, pro-rata.
SECTION 2.07 Mandatory Repayments. The Company shall repay Loans
on any day on which the aggregate outstanding principal amount of the Loans plus
the amount of all outstanding Alternative Facilities Advances exceeds the Total
Commitment in the amount of such excess. The aggregate amount under the Notes
(and all accrued, unpaid interest) shall be due and payable, and the Total
Commitment shall terminate, on the Maturity Date.
SECTION 2.08 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement due from the
Company shall be made to the Agent for the benefit of the Banks not later than
1:00 p.m. (Houston, Texas time) on the date when due and shall be made in lawful
money of the United States in immediately available funds at the Payment Office.
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SECTION 2.09 Pro Rata Advances. All Advances under this Agreement
shall be incurred from the Banks pro rata, on the basis of their respective
Commitments. It is understood that no Bank shall be responsible for any default
by any other Bank in its obligation to make Loans hereunder and that each Bank
shall be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its commitments
hereunder.
SECTION 2.10 Interest. (a) Subject to Section 11.08, the Company
shall pay interest on the total outstanding principal balance of all Alternate
Base Rate Advances from the date of each respective Advance to maturity of said
Loan (whether by acceleration or otherwise) at a rate per annum which shall at
all times be equal to the lesser of (i) the Highest Lawful Rate and (ii) the
Alternate Base Rate in effect from time to time plus the applicable Margin for
Alternate Base Rate Advances, which applicable Margin shall be adjusted on the
first day of each Margin Period. If the Alternate Base Rate is based on the
Prime Rate, interest shall be computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be. If the Alternate
Base Rate is based on the Federal Funds Effective Rate, interest shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
(b) Subject to Section 11.08, the Company shall pay interest on
the total outstanding principal balance of all Eurodollar Rate Advances under
all of the Loans from the date of each respective Advance to maturity of said
Loan (whether by acceleration or otherwise) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) which shall,
during each Interest Period applicable thereto, be equal to the lesser of (i)
the Highest Lawful Rate and (ii) the applicable Eurodollar Rate for such
Interest Period plus the applicable Margin for Eurodollar Rate Advances. The
applicable Eurodollar Rate shall be fixed for each Interest Period and shall not
change during said Interest Period nor shall the applicable Margin, which is
added to said Eurodollar Rate to determine the total interest payable to the
Banks, be adjusted until the first day of each Interest Period that begins after
the effective date of the new Margin Period.
(c) Subject to Section 11.08, overdue principal and, to the extent
permitted by law, overdue interest in respect of any Advance and all other
overdue amounts owing hereunder shall bear interest for each day that such
amounts are overdue at a rate per annum equal to the Default Rate.
(d) Interest on each Advance shall accrue from and including the
date of such Advance to but excluding the date of any repayment thereof and
shall be payable in arrears (i) in respect of Eurodollar Rate Advances (A) on
the last day of the Interest Period (as defined below) applicable thereto and on
each Designated Payment Date during any Interest Period in excess of three (3)
months and (B) on the date of any voluntary or mandatory repayment or any
conversion or continuance, (ii) in respect of Alternate Base Rate Advances (A)
on each Designated Payment Date commencing November 30, 1997, and (B) on the
date of any voluntary or mandatory repayment of such Advances on the principal
amount repaid and (iii) in respect of each Advance, at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
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(e) The Agent, upon determining the Eurodollar Rate for any
Interest Period, shall notify the Company thereof. Each such determination
shall, absent manifest error, be final and conclusive and binding on all parties
hereto. In addition, prior to the due date for the payment of interest on any
Advances set forth in the immediately preceding paragraph, the Agent shall
notify the Company of the amount of interest due by the Company on all
outstanding Advances on the applicable due date, but any failure of the Agent to
so notify the Company shall not reduce the Company's liability for the amount
owed.
(f) So long as any Bank shall be required under regulations of the
Board to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities and, as a result, the cost to such Bank is
increased above the level it would be but for such requirement, then such Bank
may require the Company to pay to the Agent, for the account of such Bank,
additional interest on the unpaid principal amount of each such Eurodollar Rate
Advance, from the date of such Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times during the Interest
Period for such Advance to the lesser of (i) the Highest Lawful Rate and (ii)
the remainder obtained by subtracting (A) the Eurodollar Rate for such Interest
Period from (B) the rate obtained by dividing such Eurodollar Rate referred to
in clause (A) above by that percentage equal to 100% minus the Reserve
Percentage of such Bank for such Interest Period. Such additional interest shall
be determined by such Bank as incurred and shall be payable upon demand therefor
by the Bank to the Company. Each determination by such Bank of additional
interest due under this Section shall be conclusive and binding for all purposes
in the absence of manifest error if such determination is made on a reasonable
basis.
SECTION 2.11 Interest Periods. (a) At the time the Company gives
any Notice of Advance or Notice of Conversion or provides notice of its intent
to continue a loan as the same Type in respect of the making of, or conversion
into, a Eurodollar Rate Advance, the Company shall have the right to elect, by
giving the Agent on the dates and at the times specified in Section 2.03 or
Section 2.05, as the case may be, notice of the interest period (each an
"Interest Period") applicable to such Eurodollar Rate Advance, which Interest
Period shall be either a one, two, three or six month period; provided, that:
(i) the initial Interest Period for any Eurodollar Rate Advance
shall commence on the date of such Eurodollar Rate Advance (including the
date of any conversion thereto or continuance thereof pursuant to Section
2.05); each Interest Period occurring thereafter in respect of such
Eurodollar Rate Advance shall commence on the expiration date of the
immediately preceding Interest Period;
(ii) if any Interest Period relating to a Eurodollar Rate Advance
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
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(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if there are no more Business
Days in that month, the Interest Period shall expire on the preceding
Business Day;
(iv) no Interest Period for Advances shall extend beyond the
applicable Maturity Date; and
(v) the Company shall be entitled to have a maximum of nine (9)
separate Eurodollar Rate Advances hereunder for all Loans outstanding at
any one time.
(b) If, upon the expiration of any Interest Period applicable to a
Eurodollar Rate Advance, the Company has failed to elect a new Interest Period
to be applicable to such Advance as provided above, the Company shall be deemed
to have elected to convert such Advance into an Alternate Base Rate Advance
effective as of the expiration date of such current Interest Period.
SECTION 2.12 Interest Rate Not Ascertainable. In the event that
the Agent shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) that on any date for determining
the Eurodollar Rate for any Interest Period, by reason of any changes arising
after the date of this Agreement affecting the Eurodollar interbank market
adequate and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate, then, and
in any such event, the Agent shall forthwith give notice to the Company and to
the Banks of such determination. Until the Agent notifies the Company that the
circumstances giving rise to the suspension described herein no longer exist,
the obligations of the Banks to make Eurodollar Rate Advances shall be
suspended.
SECTION 2.13 Legality. (a) Notwithstanding anything to the
contrary herein contained, if any law or regulation or the interpretation
thereof by any governmental authority charged with the administration or
interpretation thereof makes it unlawful for any Bank or its Eurodollar Lending
Office to make or maintain any Eurodollar Rate Advance or to give effect to its
obligations as contemplated hereby, then, by prompt written notice to the
Company, such Bank may:
(i) declare that Eurodollar Rate Advances will not thereafter be
made by such Bank hereunder, whereupon the right of the Company to
receive Eurodollar Rate Advances from such Bank hereunder shall be
suspended until such declaration is subsequently withdrawn, provided,
such request for a Eurodollar Rate Advance shall be automatically
converted (as to such Bank) into a request for an Alternate Base Rate
Advance and the affected Bank or Banks shall respond thereto as provided
herein; and
(ii) require that all outstanding Eurodollar Rate Advances made by
such Bank be converted to Alternate Base Rate Advances, in which event
(A) all such Eurodollar Rate Advances shall be automatically converted to
Alternate Base Rate Advances as of the effective date of such notice as
provided in paragraph (b) below if required by applicable law
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or regulation, or if not so required, at the end of the current Interest
Period and (B) all payments and prepayments of principal which would
otherwise have been applied to repay the converted Eurodollar Rate
Advances shall instead be applied to repay the Alternate Base Rate
Advances resulting from the conversion of such Eurodollar Rate Advances.
(b) For purposes of this Section, a notice to the Company by the
Agent pursuant to paragraph (a) above shall be effective on the date of receipt
thereof by the Company.
SECTION 2.14 Increased Costs, Taxes or Capital Adequacy
Requirements. (a) If any applicable law or regulation or compliance by any Bank
with any applicable guideline or request by any central bank or governmental
authority having jurisdiction over such Bank (whether or not having the force of
law)
(i) shall change the basis of taxation of payments to such Bank of
the principal of or interest on any Eurodollar Rate Advance made by such
Bank or any other fees or amounts payable hereunder with respect to
Eurodollar Rate Advances (other than taxes imposed on the overall net
income of such Bank or its Applicable Lending Office or franchise taxes
imposed upon it by the jurisdiction in which such Bank or its Applicable
Lending Office has an office),
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement with respect to Eurodollar Rate Advances
against assets of, deposits with or for the account of, or credit
extended by, such Bank (without duplication of any amounts paid pursuant
to Section 2.10(f)) or
(iii) shall impose on such Bank any other condition affecting this
Agreement with respect to Eurodollar Rate Advances or any Eurodollar Rate
Advance made by such Bank, and the result of any of the foregoing shall
be to increase the cost to such Bank of maintaining its Commitment or of
making or maintaining any Eurodollar Rate Advance or to reduce the amount
of any sum received or receivable by such Bank hereunder (whether of
principal, interest or otherwise) in respect thereof by an amount deemed
in good faith by such Bank to be material,
then the Company shall pay to such Bank such additional amount as will
compensate it for such increase or reduction within ten (10) days after notice
thereof pursuant to Section 2.14(c).
(b) If any Bank shall have determined in good faith that any law,
rule, regulation or guideline regarding capital adequacy, or any interpretation
or administration thereof of any such authority, central bank or comparable
agency has or would have the effect of reducing the rate of return on the
capital of such Bank as a consequence of, or with reference to, such Bank's
obligations to lend hereunder to a level below that which it could have achieved
but for such adoption, change or compliance by an amount deemed by such Bank to
be material, then, from time to time, the Company shall pay to the Agent for the
benefit of such Bank such additional amount as will
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reasonably compensate it for such reduction within ten (10) days after notice
thereof pursuant to Section 2.14(c).
(c) Each Bank will notify the Company through the Agent of any
event occurring after the date of this Agreement which will entitle it to
compensation pursuant to this Section, as promptly as practicable after it
becomes aware thereof and determines to request compensation and in any case,
within 180 days after becoming aware thereof. A certificate setting forth in
reasonable detail the amount necessary to compensate the Bank in question as
specified in paragraph (a) or (b) above, as the case may be, and the calculation
of such amount shall be delivered to the Company and shall be conclusive absent
manifest error if such determination is made on a reasonable basis. The Company
shall pay to the Agent for the account of such Bank the amount shown as due on
any such certificate within ten (10) days after its receipt of the same. The
failure on the part of any Bank to demand increased compensation with respect to
any Interest Period shall not constitute a waiver of the right to demand
compensation thereafter within the 180 day time limit set forth above. Each Bank
agrees, to the extent it may lawfully do so without incurring additional costs,
to use its best efforts to minimize costs arising under this section by
designating another lending office for the Loans affected, provided no Bank
shall be required to do so.
(d) Any notice given pursuant to this Section 2.14 shall be deemed
to contain a representation by the Bank issuing such notice that the increased
costs and charges are common to substantially all of the loan customers of such
Bank and are not unique to the Company.
SECTION 2.15 Eurodollar Advance Prepayment and Default Penalties.
Subject to Section 11.08, the Company shall indemnify each Bank against any loss
or expense (excluding loss of anticipated profits) which it may sustain or incur
as a consequence of (a) an Advance of, or a conversion from or into, Eurodollar
Rate Advances that does not occur on the date specified therefor in a Notice of
Advance or Notice of Conversion, (b) any payment, prepayment or conversion of a
Eurodollar Rate Advance required by any other provision of this Agreement or
otherwise made on a date other than the last day of the applicable Interest
Period or (c) any default in the payment or prepayment of the principal amount
of any Eurodollar Rate Advance or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by notice of prepayment or
otherwise). Such loss or expense shall include an amount equal to the excess
determined by each Bank of (i) its cost of obtaining the funds for the Advance
being paid, prepaid or converted or not borrowed (based on the Eurodollar Rate)
for the period from the date of such payment, prepayment or conversion or
failure to borrow to the last day of the Interest Period for such Advance (or,
in the case of a failure to borrow, the Interest Period for the Advance which
would have commenced on the date of such failure to borrow) over (ii) the amount
of interest (as determined by each Bank) that would be realized in reemploying
the funds so paid, prepaid or converted or not borrowed for such period or
Interest Period, as the case may be. The Agent, on behalf of the Banks, will
notify the Company of any loss or expense which will entitle the Banks to
compensation pursuant to this Section, as promptly as possible after it becomes
aware thereof, but failure to so notify shall not affect the Company's liability
therefor. A certificate of any Bank setting forth any amount which it is
entitled to receive pursuant to this Section shall be delivered to the Company
and
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shall be conclusive absent manifest error if such determination is made on a
reasonable basis. The Company shall pay to the Agent for the account of the
Banks the amount shown as due on any certificate within ten (10) days after its
receipt of the same. Without prejudice to the survival of any other obligations
of the Company hereunder, the obligations of the Company under this Section
shall survive the termination of this Agreement and the assignment of any of the
Notes.
SECTION 2.16 Additional Costs, Taxes or Similar Requirements.
Subject to the terms of Section 11.08, all payments by the Company to any Bank
shall be payable in full by the Company without any reduction or set off of any
kind for any purpose and all costs and expenses incurred by any Bank in
connection herewith, direct or indirect, shall be reimbursed by the Company. To
the extent that any additional payments of any kind are required, any reductions
to payments made to any Bank occur or may reasonably be expected to occur, any
costs are incurred, any taxes (or the withholding thereof) are due to, or
required by, any governmental or regulatory agency, foreign or domestic, state,
federal, local, regional or national, based on any law, rule, regulation,
guideline or similar provision, (other than taxes payable on the taxable income
of any Bank to the United States of America or any state or local entity), or
any similar items, all such payments and costs or reduced income shall be the
responsibility of the Company. This provision shall be interpreted in the
broadest possible terms to include any increased costs, payments or reduced
income for any reason, including, but specifically not by way of limitation, due
to taxes, capital adequacy provisions, reserve requirements, withholding
obligations, costs due to the payment of any sums on a date other than the
regularly scheduled date or for any other reason and the Company does hereby
indemnify and hold harmless each Bank, for all such costs and does agree to pay
same or cover any Bank's expenses or losses in regard to same. The Company shall
immediately pay such sums to any Bank as are necessary to mitigate all such
items. This obligation is in addition to all other obligations of the Company
contained herein.
SECTION 2.17 Tax Forms. If any Bank or any entity that is or
hereafter becomes a borrower is organized under the laws of a jurisdiction
outside the United States, such Person shall provide the Agent and the other
parties hereto with the Prescribed Forms on the date of the initial Advance
hereunder or on the date it becomes a party hereto, as the case may be, and from
time to time thereafter if requested by the affected party hereto or the Agent.
Unless the party requesting them and the Agent have received such Prescribed
Forms, the Agent, if required by applicable law or regulation, may withhold
taxes from payments under the Loan Documents at the applicable rate in the case
of payments to or for any Bank organized under the laws of a jurisdiction
outside the United States, provided the Company shall, unless otherwise directed
in writing by the Agent, make all payments in full to the Agent without
deducting any withholding or similar taxes.
SECTION 2.18 Voluntary Reduction of Commitment. Upon at least five
(5) Business Days' prior written notice, the Company shall have the right,
without premium or penalty, to reduce ratably in part or terminate in whole the
unused portions of the respective Commitments of the Banks provided that each
partial reduction shall be in the aggregate amount of $5,000,000 or any integral
multiple of $1,000,000 in excess thereof.
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SECTION 2.19 Fees. Subject to Section 11.08 hereof, the Company
agrees to pay the following fees (the "Fees"):
(a) The Company shall pay to the Agent for the ratable account of
the Banks a commitment fee (the "Commitment Fee") for the period from and
including the Execution Date to the Maturity Date calculated on the basis of a
360-day year and computed on the daily average of the Unutilized Commitment of
each Bank at the rate for Commitment Fees set forth in the definition of Margin.
Commitment Fees shall be due and payable in arrears on each Designated Payment
Date commencing on the first such date following the Execution Date and on the
Maturity Date.
(b) The Company shall pay to the Agent for the benefit of the
Banks (and, in the case of clause (z) below, for the benefit of the Issuing
Bank) an annual fee (the "Letter of Credit Fee") in respect of each Letter of
Credit issued hereunder equal to (y) the greater of (i) the then effective
Eurodollar Margin multiplied by the face amount of such Letter of Credit
(computed on the basis of the actual number of days elapsed over a year of 360
days) or (ii) $500.00, plus (z) 0.125% multiplied by the face amount of such
Letter of Credit, to be paid to the Issuing Bank. Such fees shall be payable
quarterly in arrears on each Designated Payment Date commencing on the first
such date following the Execution Date and on the Maturity Date.
SECTION 2.20 Extension of Maturity Date. Not less than 60 days and
no more than 90 days prior to the Maturity Date then in effect, provided that no
Event of Default shall have occurred and be continuing, the Company may request
an extension of such Maturity Date by submitting to the Agent an Extension
Request containing the information in respect of such extension specified in
Exhibit 2.20, which the Agent shall promptly furnish to each Bank. Each Bank
shall, not less than 30 days and not more than 60 days prior to the Maturity
Date then in effect, notify the Company and the Agent of its election (in its
sole and absolute discretion) to extend or not extend the Maturity Date as
requested in such Extension Request. Notwithstanding any provision of this
Agreement to the contrary, any notice by any Bank of its willingness to extend
the Maturity Date shall be revocable by such Bank in its sole and absolute
discretion at any time prior to the date that is 30 days prior to the Maturity
Date then in effect. If all Banks shall approve in writing the extension of the
Maturity Date requested in such Extension Request, the Maturity Date shall
automatically and without any further action by any Person be extended for the
period specified in such Extension Request; provided that (i) each extension
pursuant to this Section 2.20 shall be for a maximum of 364 days and (ii) the
Maturity Date shall not be extended beyond the second anniversary of the
original Maturity Date. If, not less than 30 days and not more than 60 days
prior to the Maturity Date then in effect, all Banks shall not approve in
writing the extension of the Maturity Date requested in an Extension Request,
the Maturity Date shall not be extended pursuant to such Extension Request. The
Agent shall promptly notify the Banks and the Company of any extension of the
Maturity Date pursuant to this Section 2.20.
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SECTION 2.21 Replacement of Banks. If any Bank requests
compensation under Section 2.10(f), 2.14 or 2.16 or if any Bank notifies the
Company that it cannot fund certain Loans or is unable to deliver the Prescribed
Forms, or if any Bank defaults in its obligation to fund Advances hereunder,
then the Company may, at its sole expense and effort, upon notice to such Bank
and the Agent, require such Bank to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 11.10), all
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Bank, if a Bank
accepts such assignment); provided that (i) the Company shall have received the
prior written consent of the Agent, which consent shall not unreasonably be
withheld, (ii) such Bank shall have received payment of an amount equal to the
outstanding principal of its Advances, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder, from the assignee (to the extent
of such outstanding principal and accrued interest and fees) or the Company (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.10(f), 2.14 or 2.16,
such assignment will result in a reduction in such compensation. A Bank shall
not be required to make any such assignment and delegation if, prior thereto, as
a result of a waiver by such Bank or otherwise, the circumstances entitling the
Company to require such assignment and delegation cease to apply.
ARTICLE III
LETTERS OF CREDIT
SECTION 3.01 Letters of Credit. (a) Subject to and upon the terms
and conditions herein set forth, the Issuing Bank will, at any time and from
time to time on or after the Execution Date and prior to the Maturity Date,
promptly following its receipt of a Letter of Credit Request and application for
Letter of Credit, issue for the account of the Company or any of the Guarantors
and in support of the obligations of the Company or any of its Subsidiaries, one
or more irrevocable letters of credit (all such letters of credit together with
the Existing Letters of Credit collectively, the "Letters of Credit"), up to a
maximum amount outstanding at any one time for all Letters of Credit and
Existing Letters of Credit equal to $20,000,000.00, provided that the Issuing
Bank shall not issue any Letter of Credit if at the time of such issuance: (i)
the stated amount of such Letter of Credit is greater than an amount which, when
added to all other Letters of Credit outstanding and all other Advances under
the Notes then outstanding, would exceed the Total Commitment; or (ii) the
expiry date or, in the case of any Letter of Credit containing an expiry date
that is extendible at the option of the Issuing Bank, the initial expiry date of
such Letter of Credit is a date that is later than the Maturity Date, unless
such Letter of Credit is secured by cash.
(b) The Issuing Bank shall neither renew nor permit the renewal of
any Letter of Credit if any of the conditions precedent to such renewal set
forth in Section 4.02 are not satisfied or, after giving effect to such renewal,
the expiry date of such Letter of Credit would be a date that is later than the
Maturity Date.
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(c) The Company, the Agent and the Banks acknowledge that Chase
has issued, for the account of the Company, the Existing Letters of Credit. Upon
the Execution Date, the Letters of Credit outstanding shall be that amount equal
to the aggregate stated amount of the Existing Letters of Credit, and the amount
available for Loans and Letters of Credit under the Commitments shall be reduced
by such amount so long as said Letters of Credit are outstanding and the amount
available under each Bank's Commitment shall be reduced by such Bank's
percentage participation of such amount. If the Company or any of the Guarantors
desires to extend the existing expiry date of any Existing Letter of Credit, or
request a substitute letter of credit be issued for any reason in respect of any
Existing Letter of Credit, the Company or any of the Guarantors shall submit to
the Issuing Bank a Letter of Credit Request as provided in Section 3.02(a).
SECTION 3.02 Letters of Credit Requests. (a) Whenever the Company
desires that a Letter of Credit be issued for its account or that the existing
expiry date shall be extended, it shall deliver to the Issuing Bank (with copies
to be sent to the Agent) in the case of a Letter of Credit to be issued, at
least three (3) Business Days' prior written request therefor and in the case of
the extension of the existing expiry date of any Letter of Credit, at least five
days prior to the date on which the Issuing Bank must notify the beneficiary
thereof that the Issuing Bank does not intend to extend such existing expiry
date. Each such request shall be executed by the Company and shall be in the
form of Exhibit 3.02 attached hereto (each a "Letter of Credit Request") and
shall be accompanied by an application for Letter of Credit therefor, completed
to the reasonable satisfaction of the Issuing Bank, and such other certificates,
documents and other papers and information as the Issuing Bank or any Bank
(through the Agent) may reasonably request. Each Letter of Credit shall be
denominated in U.S. dollars, shall expire no later than the date specified in
Section 3.01, shall not be in an amount greater than is permitted under clauses
(i) or (ii) of Section 3.01(a) and shall be in such form as may be reasonably
approved from time to time by the Issuing Bank and the Company.
(b) The delivery of each Letter of Credit Request shall be deemed
to be a representation and warranty by the Company that such Letter of Credit
may be issued in accordance with, and will not violate the requirements of, this
Agreement. Unless the Issuing Bank has received notice from any Bank before it
issues the respective Letter of Credit or extends the existing expiry date of a
Letter of Credit that one or more of the conditions specified in Article IV are
not then satisfied, or that the issuance of such Letter of Credit would violate
this Agreement, then the Issuing Bank may issue the requested Letter of Credit
in accordance with the Issuing Bank's usual and customary practices. Upon its
issuance of any Letter of Credit or the extension of the existing expiry date of
any Letter of Credit, as the case may be, the Issuing Bank shall promptly notify
the Company, the Agent and each Bank of such issuance or extension, which notice
shall be accompanied by a copy of the Letter of Credit actually issued or a copy
of any amendment extending the existing expiry date of any Letter of Credit, as
the case may be.
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SECTION 3.03 Letter of Credit Participations. (a) All Obligations
of the Company and the Guarantors with respect to all Existing Letters of Credit
and all Letters of Credit issued subsequent hereto shall be deemed to have been
sold and transferred by the Issuing Bank to each Bank, and each Bank shall be
deemed irrevocably and unconditionally to have purchased and received from the
Issuing Bank, without recourse or warranty, an undivided interest and
participation, (to the extent of such Bank's percentage participation in the
Commitments) in each such Obligation, each substitute letter of credit, each
drawing made thereunder and the obligations of the Company under this Agreement
and the other Loan Documents with respect thereto, and any security therefor or
guaranty pertaining thereto including the Guaranty.
(b) The Issuing Bank shall have no obligation relative to the
Banks other than to confirm that any documents required to be delivered under
such Letter of Credit appear to have been delivered and that they appear to
comply on their face with the requirements of such Letter of Credit.
(c) In the event that the Issuing Bank makes any payment under any
Letter of Credit, the same shall be considered an Alternate Base Rate Advance
without further action by any Person. The Issuing Bank shall promptly notify the
Agent, which shall promptly notify each Bank thereof. Each Bank shall
immediately pay to the Agent for the account of the Issuing Bank the amount of
such Bank's percentage participation of such Advance. If any Bank shall not have
so made its percentage participation available to the Agent, such Bank agrees to
pay interest thereon, for each day from such date until the date such amount is
paid at the lesser of the Federal Funds Effective Rate and the Highest Lawful
Rate.
(d) The Issuing Bank shall not be liable for, and the obligations
of the Company and the Banks to make payments to the Agent for the account of
the Issuing Bank with respect to Letters of Credit shall not be subject to, any
qualification or exception whatsoever, including any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Company may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit, the Agent, the
Issuing Bank, any Bank, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transaction between the Company and the beneficiary named in any such
Letter of Credit);
(iii) any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(e) THE ISSUING BANK SHALL NOT BE LIABLE FOR ANY ERROR, OMISSION,
INTERRUPTION OR DELAY IN TRANSMISSION, DISPATCH OR DELIVERY OF ANY MESSAGE OR
ADVICE, HOWEVER TRANSMITTED, IN CONNECTION WITH ANY LETTER OF CREDIT, EXCEPT FOR
ERRORS OR OMISSIONS CAUSED BY THE ISSUING BANK'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE ISSUING
BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL BE INDEMNIFIED AND
HELD HARMLESS FROM ANY ACTION TAKEN OR OMITTED BY SUCH PERSON UNDER OR IN
CONNECTION WITH ANY LETTER OF CREDIT OR ANY RELATED DRAFT OR DOCUMENT ARISING
OUT OF OR RESULTING FROM SUCH PERSON'S SOLE OR CONTRIBUTORY NEGLIGENCE. The
Company agrees that any action taken or omitted by the Issuing Bank under or in
connection with any Letter of Credit or the related drafts or documents, if done
in accordance with the standards of care specified in the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500 (and any subsequent revisions thereof approved by
a Congress of the International Chamber of Commerce and adhered to by the
Issuing Bank) and, to the extent not inconsistent therewith, the Uniform
Commercial Code of the State of Texas, shall not result in any liability of the
Issuing Bank to the Company.
SECTION 3.04 Increased Costs. (a) Notwithstanding any other
provision herein, but subject to Section 11.08, if any Bank shall have
determined in good faith that any law, rule, regulation or guideline or the
application or effectiveness of any applicable law or regulation or any change
in applicable law or regulation or any change after the Execution Date in the
interpretation or administration thereof, or compliance by any Bank (or any
lending office of such Bank) with any applicable guideline or request from any
central bank or governmental authority (whether or not having the force of law)
either shall impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against letters of credit issued, or
participated in, by any Bank or shall impose on any Bank any other conditions
affecting this Agreement or any Letter of Credit, and the result of any of the
foregoing is to increase the cost to any Bank of issuing, maintaining or
participating in any Letter of Credit, or reduce the amount received or
receivable by any Bank hereunder with respect to Letters of Credit, by an amount
deemed by such Bank to be material, then, from time to time, the Company shall
pay to the Agent for the account of such Bank such additional amount or amounts
as will reasonably compensate such Bank for such increased cost or reduction by
such Bank.
(b) Each Bank will notify the Company through the Agent of any
event occurring after the date of this Agreement which will entitle such Bank to
compensation pursuant to subsection (a) above, as promptly as practicable. A
certificate of a Bank setting forth in reasonable detail such amount or amounts
as shall be necessary to compensate such Bank as specified in subsection (a)
above may be delivered to the Company (with a copy to the Agent) and shall be
conclusive absent manifest error. The Company shall pay to the Agent for the
account of such Bank the amount shown
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as due on any such certificate within 30 days after its receipt of the same. No
Bank shall be entitled to recover any costs pursuant to this Section 3.04(b)
incurred more than 180 days prior to such Bank's giving notice to the Company
for reimbursement thereof.
SECTION 3.05 Conflict between Applications and Agreement. To the
extent that any provision of any application for Letter of Credit is
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall control.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Initial Advance. The
obligation of each Bank to make its initial Advance hereunder to the Company is
subject to the occurrence of or receipt by the Agent of the following, all in
form and substance satisfactory to the Agent, and, where relevant, executed by
all appropriate parties:
(a) this Agreement (which includes the Guaranty);
(b) one Note for each Bank;
(c) Landlord's lien waivers as required by the Agent in respect of
all leased property;
(d) each of the following Security Documents granting a first and
prior (except for Liens permitted under Section 7.04) Lien or security interest
on the Collateral to the Agent for the benefit of itself and the Banks as
security for the Obligations, substantially in the form of Exhibits 4.01(d)(i)
and (ii) hereto:
(i) the Security Agreement (the "Security Agreement") covering
substantially all of the accounts and inventory of the Company and each
of its domestic Subsidiaries existent as of the date hereof (except as
set forth in such Security Agreement or other Security Documents which
exclusions have been agreed to by the Majority Banks), accompanied by all
documents, instruments and other items necessary to obtain and perfect a
Lien thereon;
(ii) the Pledge Agreement (the "Pledge Agreement") pledging to the
Agent all stock owned by the Company or any Subsidiary in all domestic
Subsidiaries accompanied by original stock certificates evidencing such
shares and executed stock powers for such certificates; and
(iii) UCC-1 and UCC-3 Financing Statements and other documents or
instruments necessary to perfect the Liens granted in the Security
Documents.
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(e) A Notice of Advance with respect to the initial Advance
meeting the requirements of Section 2.03(a);
(f) a certificate of the secretary or an assistant secretary of
the Company and each Guarantor certifying, inter alia, (i) true and complete
copies of each of the articles or certificate of incorporation, as amended and
in effect of the Company, the bylaws, as amended and in effect, of the Company
and the resolutions adopted by the Board of Directors of the Company and each of
the Guarantors (A) authorizing the execution, delivery and performance by the
Company and each of its Subsidiaries of this Agreement and the other Loan
Documents to which it is or will be a party and, in the case of the Company, the
Advances to be made hereunder, (B) approving the forms of the Loan Documents to
which it is or will be a party and which will be delivered at or prior to the
date of the initial Advance hereunder and (C) authorizing officers of the
Company and each of its Subsidiaries to execute and deliver the Loan Documents
to which it is or will be a party and any related documents, including, any
agreement contemplated by this Agreement, and (ii) the incumbency and specimen
signatures of the officers of the Company and each of its Subsidiaries executing
any documents on its behalf;
(g) a certificate of the President, Chief Financial Officer or
Treasurer of the Company certifying that there has been no change in the
businesses or financial condition of the Company which could reasonably be
expected to have a Material Adverse Effect since December 31, 1997;
(h) opinions addressed to the Agent and the Banks from (i)
Bracewell & Patterson, L.L.P., counsel to the Company and the Guarantors,
substantially in the form set forth as Exhibit 4.01(h)(i), and (ii) from
Randolph W. Bryant, General Counsel to the Company, substantially in the form of
Exhibit 4.01(h)(ii);
(i) the payment to the Agent and the Banks of all reasonable fees
and expenses agreed upon by such parties to be paid on the Execution Date
including, without limitation, any accrued unpaid portions of Commitment Fees
due under the Prior Credit Agreement;
(j) certificates of appropriate public officials as to the
existence, good standing and qualification to do business as a foreign
corporation, as applicable, of the Company and its Subsidiaries in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualifications and where the failure to so qualify would
have a Material Adverse Effect;
(k) certificates of insurance as contemplated by Section 6.03(a);
and
(l) UCC searches and other title information reasonably requested
by the Agent on the Company and each of its Subsidiaries.
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The acceptance of the benefits of the initial Credit Event
hereunder shall constitute a representation and warranty by the Company to the
Agent and each of the Banks that, to the best of its knowledge, all of the
conditions specified in this Section above shall have been satisfied or waived
as of that time.
SECTION 4.02 Conditions Precedent to All Credit Events. The
obligation of the Banks to make any Advance, including, without limitation, the
initial Advance hereunder, is subject to the further conditions precedent that
on the date of such Credit Event:
(a) The representations and warranties set forth in Article V
shall be true and correct in all material respects as of, and as if such
representations and warranties were made on, the date of the proposed Advance
(unless such representation and warranty expressly relates to an earlier date or
is no longer true and correct solely as a result of transactions permitted by
the Loan Documents), and the Company shall be deemed to have certified to the
Agent and the Banks that such representations and warranties are true and
correct in all material respects by submitting a Notice of Advance.
(b) The Company shall have complied with the provisions of Section
2.03 hereof.
(c) No Default or Event of Default shall have occurred and be
continuing or would result from such Credit Event.
(d) No Material Adverse Effect shall have occurred in the
consolidated financial condition of the Company and its consolidated
Subsidiaries since the delivery of the most recent financial statements
delivered pursuant to Section 6.01(b).
(e) the Agent shall have received the most recent unqualified
report and opinion on the Company's financial statements issued by KPMG Peat
Marwick LLP, or other independent certified public accountant of recognized
national standing.
(f) Except for any foreign Subsidiaries, all Persons that have
become Subsidiaries subsequent to the Execution Date shall have executed and
delivered to the Agent an Adoption Agreement to the extent required at the time
of such Credit Event pursuant to Section 6.09.
(g) The Agent shall have received such other approvals, opinions
and documents as the Agent or the Banks may reasonably request.
The acceptance of the benefits of each such Credit Event shall
constitute a representation and warranty by the Company to the Agent and each of
the Banks that all of the conditions specified in this Section above exist as of
that time.
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SECTION 4.03 Delivery of Documents. All of the Notes,
certificates, legal opinions and other documents and papers referred to in this
Article IV, unless otherwise specified, shall be delivered to the Agent for the
account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks and shall be reasonably satisfactory in form
and substance to the Banks.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to
make the Advances provided for herein, the Company, as to itself and each of its
Subsidiaries, makes, on or as of the occurrence of each Credit Event (except to
the extent such representations or warranties relate to an earlier date or are
no longer true and correct in all material respects solely as a result of
transactions not prohibited by the Loan Documents), the following
representations and warranties to the Agent and the Banks:
SECTION 5.01 Organization and Qualification. Each of the Company
and its Subsidiaries (a) is duly formed or organized, validly existing and in
good standing under the laws of the state of its organization, (b) has the power
to own its property and to carry on its business as now conducted, except where
the failure to do so would not have a Material Adverse Effect and (c) is duly
qualified to do business and is in good standing in every jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect.
SECTION 5.02 Authorization and Validity. Each of the Company and
its Subsidiaries has the corporate power and authority to execute, deliver and
perform its obligations hereunder and under the other Loan Documents to which it
is a party and all such action has been duly authorized by all necessary
corporate proceedings on its part. Each Loan Document to which the Company or
any of its Subsidiaries is a party have been duly and validly executed and
delivered by such Person and constitute a valid and legally binding agreement of
such Person enforceable in accordance with the respective terms thereof, except,
in each case, as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws relating
to or affecting the enforcement of creditors' rights generally, and by general
principles of equity regardless of whether such enforceability is sought in a
proceeding in equity or at law.
SECTION 5.03 Governmental Consents. No authorization, consent,
approval, license or exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is necessary for the valid execution or delivery by the
Company or any Subsidiary of any Loan Document.
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SECTION 5.04 Conflicting or Adverse Agreements or Restrictions.
Neither the Company nor any Subsidiary is a party to any contract or agreement
or subject to any restriction which would reasonably be expected to have a
Material Adverse Effect. As of the Execution Date, all agreements of the Company
relating to the lending of money or the issuance of letters of credit by any
party are described hereto on Schedule 5.04. Neither the execution nor delivery
of the Loan Documents nor compliance with the terms and provisions hereof or
thereof will be contrary to the provisions of, or constitute a default under,
(a) the charter or bylaws of the Company or any Subsidiary or (b) any law,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality that is applicable to the Company or any Subsidiary or (c) any
material agreement to which the Company or any of its Subsidiaries is a party or
by which it is bound or to which any of them is subject.
SECTION 5.05 Title to Assets. Each of the Company and its
Subsidiaries has good title to all material personal property and good and
indefeasible title to all material real property as reflected on the books and
records of the Company or any of its Subsidiaries as being owned by them, except
for properties disposed of in the ordinary course of business, subject to no
Liens, except those permitted hereunder, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect. All of such assets
have been and are being maintained by the appropriate Person in good working
condition in accordance with industry standards, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.06 Litigation. No proceedings against the Company or any
Subsidiary are pending or, to the knowledge of the Company, threatened before
any court or governmental agency or department which involve a reasonable
material risk of having a Material Adverse Effect except those listed on
Schedule 5.06 hereof.
SECTION 5.07 Financial Statements. Prior to the Execution Date,
the Company has furnished to the Banks its audited consolidated balance sheet as
of December 31, 1997 and audited consolidated income statement and statement of
cash flows for the period ended December 31, 1997, and the unaudited balance
sheet and consolidated income statement and statements of cash flow for the
period from January 1, 1998 through June 30, 1998 (such financials, the
"Financials"). The Financials have been prepared in conformity with GAAP
consistently applied (except as otherwise disclosed in such financial
statements) throughout the periods involved and present fairly, in all material
respects, the consolidated financial condition of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations for the periods then ended. As of the Execution Date, no
Material Adverse Effect has occurred in the consolidated financial condition of
the Company and its consolidated Subsidiaries since the date of said Financials.
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SECTION 5.08 Default. Neither the Company nor any Subsidiary is in
default under any material provisions of any instrument evidencing any
Indebtedness or of any agreement relating thereto, or in default in any respect
under any order, writ, injunction or decree of any court, or in default in any
respect under or in violation of any order, injunction or decree of any
governmental instrumentality, in each case in such manner as to cause a Material
Adverse Effect.
SECTION 5.09 Investment Company Act. Neither the Company nor any
Subsidiary is, or is directly or indirectly controlled by or acting on behalf of
any Person which is, an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
SECTION 5.10 Public Utility Holding Company Act. Neither the
Company nor any Subsidiary is a non-exempt "holding company," or subject to
regulation as such, or, to the knowledge of the Company's or such Subsidiary's
officers, an "affiliate" of a "holding company" or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
SECTION 5.11 ERISA. No accumulated funding deficiency (as defined
in Section 412 of the Code or Section 302 of ERISA), whether or not waived,
exists or is expected to be incurred with respect to any Plan. No liability to
the PBGC (other than required premium payments) has been or is expected by the
Company to be incurred with respect to any Plan by the Company or any ERISA
Affiliate. Neither the Company nor any ERISA Affiliate has incurred any
withdrawal liability under Title IV of ERISA with respect to any Multi-Employer
Plans.
SECTION 5.12 Tax Returns and Payments. Each of the Company and its
Subsidiaries has filed all federal income tax returns and other tax returns,
statements and reports (or obtained extensions with respect thereto) which are
required to be filed and has paid or deposited or made adequate provision, in
accordance with GAAP for the payment of all taxes (including estimated taxes
shown on such returns, statements and reports) which are shown to be due
pursuant to such returns, except for such taxes as are being contested in good
faith and by appropriate proceedings, except, in each such case, where such
failure could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.13 Environmental Matters. Each of the Company and its
Subsidiaries (a) possesses all environmental, health and safety licenses,
permits, authorizations, registrations, approvals and similar rights necessary
under law or otherwise for the Company or such Subsidiary to conduct its
operations as now being conducted (other than those with respect to which the
failure to possess or maintain would not, individually or in the aggregate for
the Company and such Subsidiaries, reasonably be expected to have a Material
Adverse Effect) and (b) each of such licenses, permits, authorizations,
registrations, approvals and similar rights is valid and subsisting, in full
force and effect and enforceable by the Company or such Subsidiary, and each of
the Company and its Subsidiaries is in compliance with all effective terms,
conditions or other provisions of such permits, authorizations, registrations,
approvals and similar rights except for such
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failure or noncompliance that, individually or in the aggregate for the Company
and such Subsidiaries, would not reasonably be expected to have a Material
Adverse Effect. Except as disclosed on Schedule 5.13, neither the Company nor
any of its Subsidiaries has received any notices of any violation of,
noncompliance with, or remedial obligation under, Requirements of Environmental
Laws (which violation or non-compliance has not been cured), and there are no
writs, injunctions, decrees, orders or judgments outstanding, or lawsuits,
claims, proceedings, investigations or inquiries pending or, to the knowledge of
the Company or any Subsidiary, threatened, relating to the ownership, use,
condition, maintenance or operation of, or conduct of business related to, any
property owned, leased or operated by the Company or such Subsidiary or other
assets of the Company or such Subsidiary, other than those violations, instances
of noncompliance, obligations, writs, injunctions, decrees, orders, judgments,
lawsuits, claims, proceedings, investigations or inquiries that, individually or
in the aggregate for the Company and such Subsidiaries, would not have a
Material Adverse Effect. Except as disclosed on Schedule 5.13, there are no
material obligations, undertakings or liabilities arising out of or relating to
Environmental Laws to which the Company or any of its Subsidiaries has agreed,
assumed or retained, or, to the knowledge of the Company, by which the Company
or any of its Subsidiaries is adversely affected, by contract or otherwise and,
further, except as disclosed on Schedule 5.13, neither the Company nor any of
its Subsidiaries has received a written notice or claim to the effect that the
Company or any of its Subsidiaries is or may be liable to any other Person as
the result of a Release or threatened Release of a Hazardous Material which, in
either case, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.14 Purpose of Loans. (a) The proceeds of the Loan will
be used for general corporate purposes and no proceeds of any Loan will be used
for any purpose which would violate any applicable law, rule or regulation.
(b) None of the proceeds of any Advance will be used directly or
indirectly for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
stock.
SECTION 5.15 Franchises and Other Rights. The Company and each of
its Subsidiaries has all franchises, permits, licenses, patents, trademarks and
other intangible assets or authority as are necessary to enable them to carry on
their respective businesses as now being conducted and is not in default in
respect thereof where the absence of such or any such default could reasonably
be expected to have a Material Adverse Effect.
SECTION 5.16 Subsidiaries and Assets. The Subsidiaries which are
parties to this Agreement and listed on Schedule 5.16 are all of the
Subsidiaries of the Company as of the Execution Date and the address given for
such Subsidiaries is the correct mailing address as of the Execution Date.
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SECTION 5.17 Solvency. After giving effect to the initial Advance
hereunder and all other Indebtedness of the Company existing at the time of such
Advance, the Company and its Subsidiaries, viewed as a consolidated entity, will
have at such time (a) capital sufficient to carry on their businesses and
transactions and (b) assets, the fair market value of which exceeds their
consolidated liabilities (as reflected on the Financials or on the financial
statements most recently delivered to the Banks).
SECTION 5.18 Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (a) the Company's or any
Subsidiary's computer systems and (b) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Company's
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by September 30, 1999, except where the failure
to do such reprogramming and testing would not reasonably be expected to have a
Material Adverse Effect. The cost to the Company and its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Company and its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or would not reasonably be expected to have a Material
Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Company and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be
sufficient to permit the Company to conduct its business in all material
respects and such upgrading and maintenance would not reasonably be expected to
have a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company, as to itself and each of its Subsidiaries, covenants
and agrees that on and after the date hereof until the Notes have been paid in
full and the Commitments have terminated:
SECTION 6.01 Information Covenants. The Company will furnish to
each Bank:
(a) As soon as available, and in any event within fifty (50) days
of the end of each fiscal quarter, the consolidated and, if requested by the
Agent, the consolidating balance sheet of the Company and its Subsidiaries as of
the end of such period and the related consolidated and, if requested by the
Agent, consolidating statements of income for such period and, in each case,
also for the portion of the fiscal year ended at the end of such period, setting
forth comparative consolidated figures for the related periods in the prior
fiscal year, all of which shall be certified by the chief financial officer or
chief executive officer of the Company as fairly presenting in all material
respects, the financial position of the Company and its Subsidiaries as of the
end of such
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period and the results of their operations for the period then ended in
accordance with GAAP, subject to changes resulting from normal year-end audit
adjustments.
(b) As soon as available, and in any event within ninety-five (95)
days after the close of each fiscal year of the Company, the audited
consolidated and, if requested by the Agent, the unaudited consolidating balance
sheets of the Company and its Subsidiaries as at the end of such fiscal year and
the related consolidated and, if requested by the Agent, consolidating
statements of income, stockholders' equity and cash flows for such fiscal year,
setting forth comparative figures for the preceding fiscal year and certified by
KPMG Peat Marwick LLP or other independent certified public accountants of
recognized national standing, whose report shall be without limitation as to the
scope of the audit and reasonably satisfactory in substance to the Banks.
(c) Immediately after any Responsible Officer of the Company
obtains verified knowledge thereof, notice of:
(i) any material violation of, noncompliance with, or remedial
obligations under, Requirements of Environmental Laws;
(ii) any material Release or threatened material Release of
Hazardous Materials affecting any property owned, leased or operated by
the Company or any of its Subsidiaries;
(iii) any event or condition which constitutes a Default or an
Event of Default (including any default under the Subordinated
Debentures);
(iv) any condition or event which, in the opinion of management of
the Company, would reasonably be expected to have a Material Adverse
Effect;
(v) any Person having given any written notice to the Company or
taken any other action with respect to a claimed material default or
event under any material instrument or material agreement;
(vi) the institution of any litigation which could reasonably be
expected in the good faith judgment of the Company either to have a
Material Adverse Effect or result in a final, non-appealable judgment or
award in excess of $5,000,000.00 with respect to any single cause of
action;
(vii) all ERISA notices required by Section 6.08; and
(viii) any sale of assets other than as permitted hereby;
Such notice shall specify the nature and period of existence thereof and the
action taken by such Person and the nature of any such claimed default, event or
condition and, in the case of an Event
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of Default or Default, what action has been taken, is being taken or is proposed
to be taken with respect thereto.
(d) At the time of the delivery of the quarterly and annual
financial statements provided for in Sections 6.01(a) and 6.01(b), a certificate
of a Responsible Officer to the effect that, to his knowledge, no Default or
Event of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof and the action that is being taken or
that is proposed to be taken with respect thereto, which certificate shall set
forth the calculations required to establish whether the Company was in
compliance with the provisions of Sections 7.10 through 7.17 as at the end of
such fiscal period or year, as the case may be.
(e) Upon request by the Agent, a summary report (by Subsidiary) of
all Accounts of the Company and its Subsidiaries.
(f) Promptly following request by the Agent such environmental
reports, studies and audits of the Company's procedures and policies, assets and
operations in respect of Environmental Laws as the Agent may reasonably request.
(g) Promptly upon receipt thereof, a copy of any report or letter
submitted to the Company by its independent accountants in connection with any
regular or special audit of the Company's records and simultaneously with the
sending or filing thereof, copies of all proxy statements, financial statements
and reports which the Company sends to its stockholders, and copies of all
regular, periodic or special reports, and all registration statements, in each
case, which the Company or any of its Subsidiaries files with the Securities and
Exchange Commission or any other securities exchange or securities market.
(h) Promptly following request by the Agent such financial
projections, budgets and unaudited consolidating financial statements of the
Company and its Subsidiaries as the Agent may reasonably request.
(i) From time to time and with reasonable promptness, such other
information or documents as the Agent or any Bank through the Agent may
reasonably request.
SECTION 6.02 Books, Records and Inspections. The Company will
maintain, and will cause its Subsidiaries to maintain, the corporate books and
financial records of the Company and its Subsidiaries and will permit, or cause
to be permitted, any Person designated by any Bank or the Banks to visit and
inspect any of the properties of the Company and its Subsidiaries, to examine
such books and records and make copies thereof or extracts therefrom, audit its
accounts, inventory and finances of any such corporations with the officers,
employees and agents of the Company and its Subsidiaries and with their
independent public accountants, all at such reasonable times and as often as the
Agent or such Bank may request. Such inspections shall be at the expense of the
Company if made annually and shall be at the expense of the Bank or Banks
requiring same if made more often than annually.
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SECTION 6.03 Insurance and Maintenance of Properties. (a) Each of
the Company and its Subsidiaries will keep reasonably adequately insured by
financially sound and reputable insurers all of its material property, and
against the interruption of its business, which is of a character, and in
amounts and against such risks, usually and reasonably insured by similar
Persons engaged in the same or similar businesses, including, without
limitation, insurance against fire, casualty and any other hazards normally
insured against, which policies shall name the Agent for the benefit of the
Banks, as a loss payee. Each of the Company and its Subsidiaries will at all
times maintain insurance against its liability for injury to Persons or
property, which insurance shall be by financially sound and reputable insurers
and in such amounts and form as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties and which shall name the Agent, for the benefit of the Banks,
as an additional insured. The Company shall provide the Agent a listing of all
such insurance and such other certificates and other evidence thereof, on or
prior to the Execution Date hereof and annually thereafter. A listing of all
policies of the Company and its Subsidiaries as of the Execution Date is
attached hereto as Schedule 6.03.
(b) Each of the Company and its Subsidiaries will cause all of its
material properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all reasonably necessary
repairs, renewals and replacements thereof, all as in the reasonable judgment of
such Person may be reasonably necessary so that the business carried on in
connection therewith may be properly conducted at all times, except where such
failure could not reasonably be expected to have a Material Adverse Effect.
SECTION 6.04 Payment of Taxes. Each of the Company and its
Subsidiaries will pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
except for such amounts that are being contested in good faith and by
appropriate proceedings, except where such failure could not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.05 Corporate Existence. Each of the Company and its
Subsidiaries will do all things necessary to preserve and keep in full force and
effect (a) the existence of the Company, and (b) unless the failure to do so
would not reasonably be expected to have a Material Adverse Effect, the rights
and franchises of each of the Company and its Subsidiaries.
SECTION 6.06 Compliance with Statutes. Each of the Company and its
Subsidiaries will comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, except to the extent the failure to do so would not reasonably
be expected to have a Material Adverse Effect.
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SECTION 6.07 Material Privileges, Permits, Licenses and Other
Rights. Each of the Company and its Subsidiaries will do all things necessary to
preserve and keep in full force and effect all material privileges, permits,
licenses and other rights necessary to conduct business as such business is
currently conducted as of the Effective Date, except to the extent the failure
to do so would not reasonably be expected to have a Material Adverse Effect.
SECTION 6.08 ERISA. Immediately after any Responsible Officer of
the Company or any of its Subsidiaries knows or has reason to know any of the
following items are true the Company will deliver or cause to be delivered to
the Banks a certificate of the chief financial officer of the Company setting
forth details as to such occurrence and such action, if any, the Company or its
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company or its ERISA
Affiliate with respect thereto: (i) that a Reportable Event has occurred or that
an application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard; (ii) that a
Multiemployer Plan has been or may be terminated, reorganized, partitioned or
declared insolvent under Title IV of ERISA; (iii) that any required contribution
to a Plan or Multiemployer Plan has not been or may not be timely made; (iv)
that proceedings may be or have been instituted under Section 4069(a) of ERISA
to impose liability on the Company or an ERISA Affiliate or under Section 4042
of ERISA to terminate a Plan or appoint a trustee to administer a Plan; (v) that
the Company or any ERISA Affiliate has incurred or may incur any liability
(including any contingent or secondary liability) on account of the termination
of or withdrawal from a Plan or a Multiemployer Plan; and (vi) that the Company
or an ERISA Affiliate may be required to provide security to a Plan under
Section 401(a)(29) of the Code.
SECTION 6.09 Additional Subsidiaries. The Company will cause any
Person that becomes a Subsidiary subsequent to the Execution Date to (i) within
forty-five (45) days after becoming a Subsidiary, execute and deliver to the
Agent an Adoption Agreement and (ii) within forty-five (45) days after becoming
a Subsidiary, deliver to the Agent evidence, satisfactory to the Agent, that all
Indebtedness owing by such Subsidiary to any other Person has been paid in full
and said Indebtedness has been canceled and all Liens securing such Indebtedness
have been released or have terminated, (except for Indebtedness and Liens
permitted hereby) provided, if said Subsidiary is not incorporated under the
laws of the United States or one of its states or territories, no such guaranty
will be required if the Company makes arrangements, satisfactory to the Agent,
in its sole discretion, regarding restrictions on transfer of funds or other
assets by the Company or any Subsidiary to said new foreign Subsidiary. Further,
the Company, or its Subsidiary that owns the stock of said new Subsidiary, as
the case may be, will execute the Adoption Agreement referred to above.
SECTION 6.10 Acquisition Agreements. Upon request of the Agent,
the Company shall provide the Agent with: (a) copies of all acquisition
agreements relating to the acquisitions of Qualified Companies, (b) a specimen
form of such acquisition agreement (the "Acquisition Agreements") and (c)
listing of each then existing Acquisition Agreement.
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SECTION 6.11 Material Contracts. (a) The Company and its
Subsidiaries shall provide the Agent with copies of all material contracts (the
"Material Contracts") as of the Effective Date. A listing of each such Material
Contract is attached hereto as Schedule 6.11.
(b) The Company and its Subsidiaries shall provide the Agent with
an executed copy of each additional Material Contract entered into after the
Effective Date, within ten (10) Business Days after request therefor by the
Agent.
SECTION 6.12 Employee Agreements. The Company and its Subsidiaries
shall provide the Agent with copies of all agreements relating to the employees
of the Company and its Subsidiaries, upon request by the Agent, including, but
not limited to, all collective bargaining agreements, employment contracts,
non-compete agreements, employee savings, employee retirement and employee
benefit plans. Upon request by the Agent, the Company will provide the Agent
with a list of (i) each employment agreement between the Company and each of its
officers, (ii) each employment agreement between a Subsidiary and the key
employees of such Subsidiary (or its predecessor), (iii) each union with which a
Subsidiary of the Company has entered into a collective bargaining agreement,
and (iv) each employee pension benefit plan (as defined in ERISA) sponsored by
the Company or any of its subsidiaries.
ARTICLE VII
NEGATIVE COVENANTS
The Company covenants and agrees, as to itself and, except as
otherwise provided herein, each of its Subsidiaries, that on and after the date
hereof until the Notes have been paid in full and the Commitments have
terminated:
SECTION 7.01 Change in Business. The Company will not, and will
not permit any of its Subsidiaries to, engage in any businesses not of the same
general type as those conducted by the Company on the Execution Date, those
conducted by a Qualified Company when acquired and businesses reasonably related
thereto.
SECTION 7.02 Consolidation, Merger or Sale of Assets. Except as
previously disclosed to the Agent, the Company will not, and will not permit any
of its Subsidiaries to, wind up, liquidate or dissolve their affairs, or agree
to be acquired by any third party in any transaction of merger or consolidation
in which the Company or such Subsidiary is not the sole surviving entity, or
sell or otherwise dispose of all or any substantial part of their property or
assets (including the capital stock of any Subsidiary) other than: (a) sales of
inventory and surplus or obsolete assets in the ordinary course of business that
do not prejudice the Banks in any material way, (b) dispositions of the stock of
Subsidiaries to, or mergers with, other wholly-owned Subsidiaries of the Company
that have complied with Section 6.09, and (c) any sale of assets with a value
equal to or less than five percent (5%) of the Company's Consolidated Net Worth,
provided the proceeds of such sale are used
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to acquire assets for use in the Company's business, or, at the option of the
Company, to reduce the Obligations.
SECTION 7.03 Indebtedness. Neither the Company nor any Subsidiary
of the Company will create, incur, assume or permit to exist any Indebtedness of
the Company or any Subsidiary except:
(a) Indebtedness existing hereunder;
(b) Indebtedness existing on the Execution Date and described in
the Financials or, if not shown, listed on Schedule 7.03(b);
(c) Indebtedness arising as a result of the endorsement in the
ordinary course of business of negotiable instruments in the course of
collection;
(d) accounts payable and unsecured, current and long-term,
liabilities (including accrued insurance related liabilities), not the result of
indebtedness for borrowed money, to vendors, suppliers and other Persons for
goods and services in the ordinary course of business;
(e) agreements (including agreements of intent) to acquire any
Person or assets issued by the Company or any of its Subsidiaries in
anticipation of acquiring such Person or assets if such acquisition is not
prohibited by this Agreement, including any ongoing, contingent payment
obligations contained in such agreements;
(f) Intercompany Indebtedness of any Subsidiary of the Company to
the Company or any other Subsidiary and Indebtedness of the Company to any
Subsidiary of the Company assuming same is subordinate to the Obligations in the
manner provided in Section 8.05 hereof;
(g) guarantees by the Company or any of its Subsidiaries of
Indebtedness of any Subsidiary of the Company permitted to be incurred, created
or existing pursuant to this Agreement, provided, that such guarantees are not
directly secured by any Liens;
(h) current and deferred taxes;
(i) contingent liabilities under surety bonds or otherwise
incurred in the ordinary course of business;
(j) earn-out agreements that are a part of Investments allowed
under Section 7.05(d);
(k) Other Indebtedness not in excess of five percent (5%) of
Consolidated Net Worth in the aggregate at any time outstanding;
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(l) Indebtedness not to exceed two percent (2%) of Consolidated
Net Worth at any time outstanding secured in accordance with clause (j) of the
definition herein of Permitted Liens;
(m) Subordinated Shareholder Debt not to exceed $30,000,000.00;
(n) liabilities incurred in connection with interest rate hedging
and swap agreements, provided, same are entered into in connection with the day
to day business operations of the Company and not for speculative purposes;
(o) Alternative Facilities Advances, provided, the Alternative
Facilities Advances do not exceed at any time the lesser of the Aggregate Unused
Commitment as of such time or $20,000,000.00;
(p) Subordinated Debentures issued and outstanding at any time in
an amount not in excess of $150,000,000.00 in principal amount; and
(q) renewals and extensions with the same lenders (in the same or
lesser principal amount on similar terms and conditions) of any Indebtedness
listed in subparagraphs (a) through (p) above.
SECTION 7.04 Liens. Neither the Company nor any Subsidiary of the
Company will create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets of any kind whether now owned or
hereafter acquired (nor will they covenant with any other Person not to grant
such a Lien to the Agent on Collateral, except property secured or to be secured
by a Lien permitted by this Agreement), except:
(a) Liens existing on the Execution Date and listed on Schedule
7.04(a);
(b) Liens securing currently secured Indebtedness permitted under
Section 7.03(b) or (m) above;
(c) Permitted Liens;
(d) Liens created by the Loan Documents;
(e) Other Liens securing obligations allowed pursuant to Section
7.03(k) or (l) not exceeding $1,500,000.00 in the aggregate at any one time;
(f) deposits under real property leases and deposits with
utilities, provided that such deposits do not exceed amounts customarily
deposited by other Persons similarly situated; and
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(g) any renewal, extension or replacement of any Lien referred to
above with the same lenders; provided, that no Lien arising or existing as a
result of such extension, renewal or replacement shall be extended to cover any
property not theretofore subject to the Lien being extended, renewed or replaced
and provided further that the principal amount of the Indebtedness secured
thereby shall not exceed the principal amount of the Indebtedness so secured at
the time of such extension, renewal or replacement.
SECTION 7.05 Investments. Neither the Company nor any Subsidiary
will, directly or indirectly, make or own any Investment in any Person, except:
(a) Permitted Investments;
(b) Investments owned on the Effective Date as set forth on
Schedule 7.05(b), including Investments in the Subsidiaries, direct and
indirect;
(c) Investments arising out of loans and advances for expenses,
travel per diem and similar items in the ordinary course of business to
officers, directors and employees and intercompany Indebtedness permitted by
Section 7.03(f);
(d) Subject to the limitations contained in Section 7.17,
investments in the stock, warrants, stock appreciation rights, other securities
and/or other assets of Qualified Companies;
(e) other Investments not exceeding two and one-half percent
(2.5%) of Consolidated Net Worth in the aggregate at any one time outstanding;
(f) Investments in the form of stock buy backs allowed under
Section 7.06; and
(g) Investments in the Company or in wholly-owned Subsidiaries of
the Company.
SECTION 7.06 Restricted Payments. The Company will not pay any
dividends or redeem, retire, purchase or guaranty the value of or make any other
acquisition, direct or indirect, of any shares of any class of stock of the
Company, or of any warrants, rights or options to acquire any such shares, now
or hereafter outstanding, except to the extent that the consideration therefor
consists solely of shares of stock (including warrants, rights or options
relating thereto) of the Company or is approved by the Majority Banks; provided,
the Company may (i) purchase its stock in a maximum, aggregate amount not to
exceed $1,000,000.00 in the aggregate; and (ii) purchase its stock in an
additional aggregate amount not to exceed $5,000,000.00 provided the stock is
purchased only from former owners of acquired businesses and provided further,
that the purchased stock is reissued or the same number of shares of the same
class of stock is issued, for value, within one hundred fifty (150) days of
purchase and the Company receives the full net proceeds therefor.
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SECTION 7.07 Change in Accounting. The Company will not and will
not permit any Subsidiary to, change its method of accounting except for (a)
changes permitted by GAAP in which the Company's auditors concur, (b) changes
with respect to any Person or assets acquired by the Company to conform with the
Company's policies and procedures and which are permitted by GAAP or (c) changes
required by GAAP. The Company shall advise the Agent in writing promptly upon
making any material change to the extent same is not disclosed in the financial
statements required under Section 6.01 hereof. In the event of any such change,
the Company, the Banks and the Agent agree to negotiate amendments to Sections
7.10 through 7.18 hereof (and related definitions, if relevant) so as to
equitably reflect such changes thereon with the intended result that the
criteria for evaluating the financial condition of the Company and its
Subsidiaries shall be substantially the same after such changes as before.
SECTION 7.08 Certain Indebtedness. The Company will not make, and
will not permit any of its Subsidiaries to make, after the occurrence and during
the continuance of any Event of Default, any prepayments of principal or
interest on any other of the Company's Indebtedness, except as may be required
thereby.
SECTION 7.09 Transactions with Affiliates. The Company will not,
directly or indirectly, engage in any transaction with any Affiliate, including
the purchase, sale or exchange of assets or the rendering of any service, except
in the ordinary course of business or pursuant to the reasonable requirements of
its business and, in each case, upon terms that are no less favorable than those
which might be obtained in an arm's-length transaction at the time from
non-Affiliates.
SECTION 7.10 Consolidated Net Worth. The Company will not permit
its Consolidated Net Worth to be less than $180,000,000.00, plus, in all cases:
(a) 100% of the net cash proceeds received from the issuance of any capital
stock by the Company or any Subsidiary subsequent to the Execution Date at any
time during the term hereof and (b) 75% of the consolidated after tax income (if
positive) of the Company and its Subsidiaries since July 1, 1998 for each fiscal
year during the term hereof (including any Subsidiaries acquired subsequent
hereto).
SECTION 7.11 Funded Debt to EBITDA Ratio. (a) Prior to the
occurrence of a Public Debt Issuance Event, the Company will not permit the
ratio of its Funded Debt to EBITDA calculated for the preceding four (4)
quarters on a rolling four (4) quarter basis to be greater than 2.75 to 1.0 at
any time during the term hereof.
(b) After the occurrence of a Public Debt Issuance Event, the
Company will not permit the ratio of its Funded Debt to EBITDA calculated for
the preceding four (4) quarters on a rolling four (4) quarter basis to be
greater than 4.00 to 1.0 at any time during the term hereof.
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SECTION 7.12 Senior Debt to EBITDA Ratio. After the occurrence of
a Public Debt Issuance Event, the Company will not permit the ratio of Senior
Debt to EBITDA calculated for the preceding four (4) quarters on a rolling four
(4) quarters basis to be greater than 2.50 to 1.00 at any time during the term
hereof.
SECTION 7.13 Funded Debt to Capitalization Ratio. The Company will
not permit its Capitalization Ratio to be greater than fifty-five percent (55%)
at any time during the term hereof.
SECTION 7.14 Capital Expenditures. During any fiscal year during
the term hereof, the Company will not permit non-acquisition related
consolidated Capital Expenditures (including Capitalized Lease Obligations) to
be greater than eight percent (8%) of Consolidated Net Worth as of the end of
such fiscal year.
SECTION 7.15 Fixed Charge Coverage Ratio. The Company will not
permit the ratio of (a) EBITDA calculated for the preceding four (4) quarters on
a rolling four (4) quarter basis, less cash taxes and Capital Expenditures
actually paid during such four (4) quarters to (b) the sum of (without
duplication): cash interest expense, scheduled amortization of principal and
payments in respect of Capitalized Lease Obligations calculated for the
preceding four (4) quarters on a rolling four quarter basis, plus twenty percent
(20%) of Advances outstanding under this Agreement to be less than 1.20 to 1.0,
as of the end of any fiscal quarter.
SECTION 7.16 Limitations on Acquisitions. The Company will not and
will not permit any Subsidiary to acquire any Qualified Company by funding such
acquisition with consideration other than common stock, without first obtaining
prior approval of such acquisition from the Majority Banks, except for such
funding that is less than $15,000,000.00 in non-equity consideration for each
such acquisition.
SECTION 7.17 Subordinated Debt. (a) The Company will not make any
optional payment, prepayment or redemption of any Indebtedness permitted under
(i) Section 7.03(m) without the consent of the Majority Banks and (ii) Section
7.03(p) without the consent of all of the Banks.
(b) The Company will not amend or obtain or grant a waiver of any
provision of (i) the Subordinated Debentures or the debenture indenture in
respect thereof or (ii) any Subordinated Shareholder Debt or any agreement or
arrangement in respect thereof, except for amendments and waivers that are not
material and are not to the detriment of the Banks.
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ARTICLE VIII
GUARANTY
SECTION 8.01 Guaranty. In consideration of, and in order to induce
the Banks to make the Loans hereunder, the Guarantors hereby absolutely,
unconditionally and irrevocably, jointly and severally guarantee the punctual
payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of the Obligations, and all other obligations and covenants of the
Company now or hereafter existing under this Agreement, the Notes and the other
Loan Documents whether for principal, interest (including interest accruing or
becoming owing both prior to and subsequent to the commencement of any
proceeding against or with respect to the Company under any chapter of the
Bankruptcy Code), Fees, commissions, expenses (including reasonable attorneys'
fees and expenses) or otherwise, and all reasonable costs and expenses, if any,
incurred by the Agent or any Bank in connection with enforcing any rights under
this Guaranty (all such obligations being the "Guaranteed Obligations"), and
agree to pay any and all reasonable expenses incurred by each Bank and the Agent
in enforcing this Guaranty; provided that notwithstanding anything contained
herein or in any of the Loan Documents to the contrary, the maximum liability of
each Guarantor hereunder and under the other Loan Documents shall in no event
exceed such Guarantor's Maximum Guaranteed Amount, and provided further, each
Guarantor shall be unconditionally required to pay all amounts demanded of it
hereunder prior to any determination of such Maximum Guaranteed Amount and the
recipient of such payment, if so required by a final non-appealable order of a
court of competent jurisdiction, shall then be liable for the refund of any
excess amounts. If any such rebate or refund is ever required, all other
Guarantors (and the Company) shall be fully liable for the repayment thereof to
the maximum extent allowed by applicable law. This Guaranty is an absolute,
unconditional, present and continuing guaranty of payment and not of
collectibility and is in no way conditioned upon any attempt to collect from the
Company or any other action, occurrence or circumstance whatsoever. Each
Guarantor agrees that the Guaranteed Obligations may at any time and from time
to time exceed the Maximum Guaranteed Amount of such Guarantor without impairing
this Guaranty or affecting the rights and remedies of the Banks hereunder.
SECTION 8.02 Continuing Guaranty. Each Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement, the Notes and the other Loan Documents. Each Guarantor agrees
that the Guaranteed Obligations and Loan Documents may be extended or renewed,
and Loans repaid and reborrowed in whole or in part, without notice to or assent
by such Guarantor, and that it will remain bound upon this Guaranty
notwithstanding any extension, renewal or other alteration of any Guaranteed
Obligations or Loan Documents, or any repayment and reborrowing of Loans. To the
maximum extent permitted by applicable law, the obligations of each Guarantor
under this Guaranty shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms hereof under any
circumstances whatsoever, including:
(a) any extension, renewal, modification, settlement, compromise,
waiver or release in respect of any Guaranteed Obligations;
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(b) any extension, renewal, amendment, modification, rescission,
waiver or release in respect of any Loan Documents;
(c) any release, exchange, substitution, non-perfection or
invalidity of, or failure to exercise rights or remedies with respect to, any
direct or indirect security for any Guaranteed Obligations, including the
release of any Guarantor or other Person liable on any Guaranteed Obligations;
(d) any change in the corporate existence, structure or ownership
of the Company, any Guarantor, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Company, such Guarantor, any other
Guarantor or any of their respective assets;
(e) the existence of any claim, defense, set-off or other rights
or remedies which such Guarantor at any time may have against the Company, or
the Company or such Guarantor may have at any time against the Agent, any Bank,
any other Guarantor or any other Person, whether in connection with this
Guaranty, the Loan Documents, the transactions contemplated thereby or any other
transaction other than by the payment in full by the Company of the Guaranteed
Obligations after the termination of the Commitments of the Banks;
(f) any invalidity or unenforceability for any reason of this
Agreement or other Loan Documents, or any provision of law purporting to
prohibit the payment or performance by the Company, such Guarantor or any other
Guarantor of the Guaranteed Obligations or Loan Documents, or of any other
obligation to the Agent or any Bank; or
(g) any other circumstances or happening whatsoever, whether or
not similar to any of the foregoing.
SECTION 8.03 Effect of Debtor Relief Laws. If after receipt of
any payment of, or proceeds of any security applied (or intended to be applied)
to the payment of all or any part of the Guaranteed Obligations, the Agent or
any Bank is for any reason compelled to surrender or voluntarily surrenders
(under circumstances in which it believes it could reasonably be expected to be
so compelled if it did not voluntarily surrender), such payment or proceeds to
any Person (a) because such payment or application of proceeds is or may be
avoided, invalidated, declared fraudulent, set aside, determined to be void or
voidable as a preference, fraudulent conveyance, fraudulent transfer,
impermissible set-off or a diversion of trust funds or (b) for any other similar
reason, including (i) any judgment, decree or order of any court or
administrative body having jurisdiction over the Agent, any Bank or any of their
respective properties or (ii) any settlement or compromise of any such claim
effected by the Agent or any Bank with any such claimant (including the
Company), then the Guaranteed Obligations or part thereof intended to be
satisfied shall be reinstated and continue, and this Guaranty shall continue in
full force as if such payment or proceeds have not been received,
notwithstanding any revocation thereof or the cancellation of any Note or any
other instrument evidencing any Guaranteed Obligations or otherwise; and the
Guarantors, jointly and severally, shall be liable to pay the Agent and the
Banks, and hereby do indemnify the
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Agent and the Banks and hold them harmless for the amount of such payment or
proceeds so surrendered and all expenses (including reasonable attorneys' fees,
court costs and expenses attributable thereto) incurred by the Agent or any Bank
in the defense of any claim made against it that any payment or proceeds
received by the Agent or any Bank in respect of all or part of the Guaranteed
Obligations must be surrendered. The provisions of this paragraph shall survive
the termination of this Guaranty, and any satisfaction and discharge of the
Company by virtue of any payment, court order or any federal or state law.
SECTION 8.04 Waiver of Subrogation. Notwithstanding any payment or
payments made by any Guarantor hereunder, or any set-off or application by the
Agent or any Bank of any security or of any credits or claims, no Guarantor will
assert or exercise any rights of the Agent or any Bank or of such Guarantor
against the Company to recover the amount of any payment made by such Guarantor
to the Agent or any Bank hereunder by way of any claim, remedy or subrogation,
reimbursement, exoneration, contribution, indemnity, participation or otherwise
arising by contract, by statute, under common law or otherwise, and such
Guarantor shall not have any right of recourse to or any claim against assets or
property of the Company, in each case unless and until the Obligations of the
Company guaranteed hereby have been fully and finally satisfied. Until such
time, each Guarantor hereby expressly waives any right to exercise any claim,
right or remedy which such Guarantor may now have or hereafter acquire against
the Company that arises under this Agreement or any other Loan Document or from
the performance by any Guarantor of the Guaranty hereunder including any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any claim, right or remedy of the Agent or
any Bank against the Company or any Guarantor, or any security that the Agent or
any Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise. If any amount shall be paid to a Guarantor by the Company or another
Guarantor after payment in full of the Obligations, and the Obligations shall
thereafter be reinstated in whole or in part and the Agent or any Bank forced to
repay any sums received by any of them in payment of the Obligations, this
Guaranty shall be automatically reinstated and such amount shall be held in
trust for the benefit of the Agent and the Banks and shall forthwith be paid to
the Agent to be credited and applied to the Guaranteed Obligations, whether
matured or unmatured. The provisions of this paragraph shall survive the
termination of this Guaranty, and any satisfaction and discharge of the Company
by virtue of any payment, court order or any federal or state law.
SECTION 8.05 Subordination. If any Guarantor becomes the holder of
any indebtedness payable by the Company or another Guarantor, each Guarantor
hereby subordinates all indebtedness owing to it from the Company or such other
Guarantor to all indebtedness of the Company to the Agent and the Banks, and
agrees that during the continuance of any Event of Default it shall not accept
any payment on the same until payment in full of the Obligations of the Company
under this Agreement and the other Loan Documents after the termination of the
Commitments of the Banks and shall in no circumstance whatsoever attempt to
set-off or reduce any obligations hereunder because of such indebtedness. If any
amount shall nevertheless be paid in violation of the foregoing to a Guarantor
by the Company or another Guarantor prior to payment in
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full of the Guaranteed Obligations, such amount shall be held in trust for the
benefit of the Agent and the Banks and shall forthwith be paid to the Agent to
be credited and applied to the Guaranteed Obligations, whether matured or
unmatured.
SECTION 8.06 Waiver. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and waives presentment, demand of
payment, notice of intent to accelerate, notice of dishonor or nonpayment and
any requirement that the Agent or any Bank institute suit, collection
proceedings or take any other action to collect the Guaranteed Obligations,
including any requirement that the Agent or any Bank protect, secure, perfect or
insure any Lien against any property subject thereto or exhaust any right or
take any action against the Company or any other Person or any collateral (it
being the intention of the Agent, the Banks and each Guarantor that this
Guaranty is to be a guaranty of payment and not of collection). It shall not be
necessary for the Agent or any Bank, in order to enforce any payment by any
Guarantor hereunder, to institute suit or exhaust its rights and remedies
against the Company, any other Guarantor or any other Person, including others
liable to pay any Guaranteed Obligations, or to enforce its rights against any
security ever given to secure payment thereof. Each Guarantor hereby expressly
waives to the maximum extent permitted by applicable law each and every right to
which it may be entitled by virtue of the suretyship laws of the State of Texas,
including any and all rights it may have pursuant to Rule 31, Texas Rules of
Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code
and Chapter 34 of the Texas Business and Commerce Code. Each Guarantor hereby
waives marshaling of assets and liabilities, notice by the Agent or any Bank of
any indebtedness or liability to which such Bank applies or may apply any
amounts received by such Bank, and of the creation, advancement, increase,
existence, extension, renewal, rearrangement or modification of the Guaranteed
Obligations. Each Guarantor expressly waives, to the extent permitted by
applicable law, the benefit of any and all laws providing for exemption of
property from execution or for valuation and appraisal upon foreclosure.
SECTION 8.07 Full Force and Effect. This Guaranty is a continuing
guaranty and shall remain in full force and effect until all of the Obligations
of the Company under this Agreement and the other Loan Documents and all other
amounts payable under this Guaranty have been paid in full (after the
termination of the Commitments of the Banks). All rights, remedies and powers
provided in this Guaranty may be exercised, and all waivers contained in this
Guaranty may be enforced, only to the extent that the exercise or enforcement
thereof does not violate any provisions of applicable law which may not be
waived.
SECTION 8.08 Negative Pledge. No Guarantor will create any lien on
its assets to any other Person during the pendency of this Agreement except for
liens that would be permitted by Section 7.04 nor will any of them enter any
agreement with any Person not to grant liens on or pledge assets to the Agent.
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ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.01 Events of Default. The following events shall
constitute Events of Default ("Events of Default") hereunder:
(a) any installment of principal is not paid when due or any
payment of interest or Fees is not paid on the date on which such payment is due
and such failure continues for a period of five (5) days; or
(b) any representation or warranty made or deemed made by the
Company or any Subsidiary herein or in any of the Loan Documents or other
document, certificate or financial statement delivered in connection with this
Agreement or any other Loan Document shall prove to have been incorrect in any
material respect when made or deemed made or reaffirmed, as the case may be; or
(c) the Company or any Subsidiary shall fail to perform or observe
any duty or covenant contained in Article VI of this Agreement or in any of the
Security Documents and such failure continues for a period of fifteen (15) days
or shall fail to perform or observe any other covenant or duty contained in this
Agreement or in any of the Loan Documents; or
(d) (i) the Company shall (A) fail to make any principal payment
of or interest or premium, if any, on the Subordinated Debentures or (B) shall
fail to duly observe, perform or comply with any agreement with any Person or
any term or condition with respect to the Subordinated Debentures, if the effect
of such failure is to cause or to permit the holder or holders of any of the
Subordinated Debentures to cause, such obligations to become due prior to any
stated maturity or (ii) the Company or any Subsidiary shall (A) fail to make
(whether as primary obligor or as guarantor or other surety) any principal
payment of or interest or premium, if any, on any instrument of Indebtedness in
excess of $5,000,000.00 allowed hereunder outstanding beyond any period of grace
provided with respect thereto or (B) shall fail to duly observe, perform or
comply with any agreement with any Person or any term or condition of any
instrument of Indebtedness in excess of $5,000,000.00, if the effect of such
failure is to cause, or to permit the holder or holders to cause, such
obligations to become due prior to any stated maturity; or
(e) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any Subsidiary, or of a substantial part of the
property or assets of the Company or any Subsidiary, under Title 11 of the
United States Code, as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"), or any other federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company or any
Subsidiary or for a substantial part of the property or assets of the Company or
any Subsidiary or (iii) the winding-up or liquidation of the Company or any
Subsidiary; and such
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proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered; or
(f) the Company or any Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking relief under the Bankruptcy Code or
any other federal or state bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
clause (e) above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any Subsidiary or for a substantial part of the property or assets of
the Company or any Subsidiary, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, or admit in
writing its inability or fail generally, to pay its debts as they become due or
(vii) take any action for the purpose of effecting any of the foregoing; or
(g) any Loan Document shall become or be deemed to be
unenforceable in any material respect in the sole judgment of the Majority
Banks; or
(h) a judgment or order, which with other outstanding judgments
and orders against the Company and its Subsidiaries equal or exceed
$5,000,000.00 in the aggregate (to the extent not covered by insurance as to
which the respective insurer has acknowledged coverage), shall be entered
against the Company or any Subsidiary and (i) within 30 days after entry thereof
such judgment shall not have been paid or discharged or execution thereof stayed
pending appeal or, within 30 days after the expiration of any such stay, such
judgment shall not have been paid or discharged or (ii) any enforcement
proceeding shall have been commenced (and not stayed) by any creditor or upon
such judgment; or
(i) any Plan shall incur an accumulated funding deficiency (as
defined in Section 412 of the Code or Section 302 of ERISA) which (individually
or collectively) exceeds $5,000,000.00, whether or not waived, or a waiver in
excess of $5,000,000.00 of the minimum funding standard or material extension of
any amortization period is sought or granted under Section 412 of the Code with
respect to a Plan; any proceeding shall have occurred or is reasonably likely to
occur by the PBGC under Section 4069(a) of ERISA to impose liability on the
Company, any Subsidiary or an ERISA Affiliate which (individually or
collectively) exceeds $5,000,000.00; any required contribution to a Plan or
Multiemployer Plan in excess of $5,000,000.00 shall not have been made within 15
days of the date such contribution is due; or the Company, any Subsidiary or any
ERISA Affiliate has incurred or is reasonably likely to incur a liability to or
on account of a Plan or Multiemployer Plan under Section 515, 4062, 4063, 4201
or 4204 of ERISA, and there shall result (individually or collectively) from any
such event or events a material risk of either (i) the imposition of a Lien(s)
upon, or the granting of a security interest(s) in, the assets of the Company,
any Subsidiary and/or an ERISA Affiliate securing an amount(s) equal to or
exceed $5,000,000.00, or (ii) the Company, any Subsidiary and/or an ERISA
Affiliate incurring a liability(ies) or obligation(s) with respect thereto equal
to or exceeding $5,000,000.00; or
(j) a Change of Control shall occur.
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SECTION 9.02 Primary Remedies. In any such event, and at any time
after the occurrence of any of the above described events, the Agent, if
directed by the Majority Banks, shall by written notice to the Company (a
"Notice of Default") take any or all of the following actions (without prejudice
to the rights of any Bank to enforce any other rights it may have against the
Company, provided that, if an Event of Default specified in Section 9.01(e) or
Section 9.01(f) shall occur, the following shall occur automatically without the
giving of any Notice of Default): (a) declare the Commitments terminated,
whereupon the Commitments shall forthwith terminate immediately and any
Commitment Fee and any other owing and unpaid Fee shall forthwith become due and
payable without any other notice of any kind; (b) declare the principal of and
any accrued and unpaid interest in respect of all Advances, and all obligations
owing hereunder, to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, notice of demand or of dishonor and
non-payment, protest, notice of protest, notice of intent to accelerate,
declaration or notice of acceleration or any other notice of any kind (except as
herein provided), all of which are hereby waived by the Company; (c) set off any
assets or money of the Company or any Guarantor in its or any Bank's possession
against the Obligations (and thereafter in accordance with Section 11.06); and
(d) exercise any rights or remedies under any of the Loan Documents or under any
applicable state or federal law.
SECTION 9.03 Other Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Agent may proceed to protect and
enforce its and the Banks' rights, either by suit in equity or by action at law
or both, whether for the specific performance of any covenant or agreement
contained in this Agreement or in any other Loan Document or in aid of the
exercise of any power granted in this Agreement or in any other Loan Document;
or may proceed to enforce the payment of all amounts owing to the Banks under
the Loan Documents and any accrued and unpaid interest thereon in the manner set
forth herein or therein; it being intended that no remedy conferred herein or in
any of the other Loan Documents is to be exclusive of any other remedy, and each
and every remedy contained herein or in any other Loan Document shall be
cumulative and shall be in addition to every other remedy given hereunder and
under the other Loan Documents or now or hereafter existing at law or in equity
or by statute or otherwise.
ARTICLE X
THE AGENT
SECTION 10.01 Authorization and Action. Each Bank hereby
irrevocably appoints and authorizes the Agent to act on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
specifically delegated to or required of the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. The Agent may perform any
of its duties hereunder by or through its agents and employees. The duties of
the Agent shall be mechanical and administrative in nature; the Agent shall not
have by reason of this Agreement or any other Loan Documents a fiduciary
relationship in respect of any Bank; and nothing in this Agreement or any other
Loan Document, expressed or implied, is intended to, or shall be so construed as
to, impose upon the Agent any obligations in respect of this Agreement or
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any other Loan Document except as expressly set forth herein or therein. As to
any matters not expressly provided for by this Agreement, the Notes or the other
Loan Documents (including enforcement or collection of the Notes), the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Banks,
and such instructions shall be binding upon the Banks and all holders of Notes
and the Obligations; provided, that the Agent shall not be required to take any
action which exposes the Agent to personal liability and shall not be required
or entitled to take any action which is contrary to any of the Loan Documents or
applicable law.
SECTION 10.02 Agent's Reliance. (a) Neither the Agent nor any of
its directors, officers, agents or employees shall be liable to the Banks for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement, the Notes or any of the other Loan Documents (i) with the
consent or at the request of the Majority Banks or (ii) in the absence of its or
their own gross negligence or willful misconduct, it being the express intention
of the parties hereto that the Agent and its directors, officers, agents and
employees shall have no liability to the Banks for actions and omissions under
this Section resulting from their sole ordinary or contributory negligence.
(b) Without limitation of the generality of the foregoing, the
Agent: (i) may treat the payee of each Note and the Obligations as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement, any Note or any other Loan Document; (iv) except as otherwise
expressly provided herein, shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement, any Note or any other Loan Document or to inspect the property
(including the books and records) of the Company; (v) shall not be responsible
to any Bank for the due execution, legality, validity, enforceability,
collectibility, genuineness, sufficiency or value of this Agreement, any Note,
any other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (vi) shall not be responsible to any Bank for the perfection
or priority of any Lien securing the Obligations; and (vii) shall incur no
liability to the Banks under or in respect of this Agreement, any Note or any
other Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier or cable) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
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SECTION 10.03 Agent and Affiliates; Chase and Affiliates. Without
limiting the right of any other Bank to engage in any business transactions with
the Company or any of its Affiliates, with respect to their Commitments, the
Loans made by them and the Notes issued to them, Chase and each other Bank who
may become the Agent shall have the same rights and powers under this Agreement
and its Notes as any other Bank and may exercise the same as though it was not
the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include Chase and any such other Bank, in their individual
capacities. Chase, each other Person who becomes the Agent and their respective
Affiliates may be engaged in, or may hereafter engage in, one or more loan,
letter of credit, leasing or other financing activity not the subject of this
Agreement (collectively, the "Other Financings") with the Company, any
Subsidiary or any of its Affiliates, or may act as trustee on behalf of, or
depositary for, or otherwise engage in other business transactions with the
Company, any Subsidiary or any of its Affiliates (all Other Financings and other
such business transactions being collectively, the "Other Activities") with no
responsibility to account therefor to the Banks. Without limiting the rights and
remedies of the Banks specifically set forth herein, no other Bank by virtue of
being a Bank hereunder shall have any interest in (a) any Other Activities, (b)
any present or future guaranty by or for the account of the Company not
contemplated or included herein, (c) any present or future offset exercised by
the Agent in respect of any such Other Activities, (d) any present or future
property taken as security for any such Other Activities or(e) any property now
or hereafter in the possession or control of the Agent which may be or become
security for the Obligations of the Company hereunder and under the Notes by
reason of the general description of indebtedness secured, or of property
contained in any other agreements, documents or instruments related to such
Other Activities; provided, however, that if any payment in respect of such
guaranties or such property or the proceeds thereof shall be applied to
reduction of the Obligations evidenced hereunder and by the Notes, then each
Bank shall be entitled to share in such application according to its pro rata
portion of such Obligations.
SECTION 10.04 Banks' Credit Decision. Each Bank acknowledges and
agrees that it has, independently and without reliance upon the Agent or any
other Bank and based on the financial statements referred to in Section 6.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
SECTION 10.05 Agent's Indemnity. (a) The Agent shall not be
required to take any action hereunder or to prosecute or defend any suit in
respect of this Agreement, the Notes or any other Loan Document unless
indemnified to the Agent's satisfaction by the Banks against loss, cost,
liability and expense. If any indemnity furnished to the Agent shall become
impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. In addition, the
Banks agree to indemnify the Agent (to the extent not reimbursed by the
Company), ratably according to the respective aggregate principal amounts of the
Notes then held by each of them (or if no Notes are at the time outstanding,
ratably according to the
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respective amounts of the Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
this Agreement, the Notes and the other Loan Documents. Without limitation of
the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including reasonable counsel
fees) incurred by the Agent in connection with the preparation, execution,
administration, or enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement, the Notes and the other Loan Documents
to the extent that the Agent is not reimbursed for such expenses by the Company.
The provisions of this Section shall survive the termination of this Agreement,
the payment of the Obligations and/or the assignment of any of the Notes.
(b) Notwithstanding the foregoing, no Bank shall be liable under
this Section to the Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements due to the Agent resulting from the Agent's gross negligence or
willful misconduct. Each Bank agrees, however, that it expressly intends, under
this Section, to indemnify the Agent ratably as aforesaid for all such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements arising out of or resulting from the Agent's
sole ordinary or contributory negligence.
SECTION 10.06 Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Company and may be removed as
Agent under this Agreement, the Notes and the other Loan Documents at any time
with or without cause by the Majority Banks. Upon any such resignation or
removal, the Majority Banks shall have the right to appoint a successor Agent
with the approval of the Company, which shall not be unreasonably withheld. If
no successor Agent shall have been so appointed by the Majority Banks, and shall
have accepted such appointment, within 30 calendar days after the retiring
Agent's giving of notice of resignation or the Majority Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent with the approval of the Company, which shall not be
unreasonably withheld, which shall be a commercial bank organized under the laws
of the United States of America or of any state thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder and under the Notes and the other Loan Documents
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, the Notes and the other Loan Documents. After any retiring
Agent's resignation or removal as Agent hereunder and under the Notes and the
other Loan Documents, the provisions of this Article X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement, the Notes and the other Loan Documents.
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SECTION 10.07 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent shall have received notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." If the Agent receives such
notice, the Agent shall give notice thereof to the Banks; provided, however, if
such notice is received from a Bank, the Agent also shall give notice thereof to
the Company. The Agent shall be entitled to take action or refrain from taking
action with respect to such Default or Event of Default as provided in Section
10.01 and Section 10.02.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Amendments. No amendment or waiver of any provision
of this Agreement, any Note or any other Loan Document, nor consent to any
departure by the Company herefrom or therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Company, as to amendments,
and by the Majority Banks in all cases, and then, in any case, such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, no such amendment, waiver or consent shall be
effective unless signed by all of the Banks if it attempts to: (a) change the
definition of "Commitment", "Designated Payment Date", "Majority Banks",
"Margin" or "Maturity Date"; (b) modify this Section or Sections 2.19 or 11.05
or any definition related to said sections; (c) release any Guarantor or
Collateral; (d) waive any Default under Section 9.01(a), (e) release any Liens
on any of the Collateral, or in any other manner change the repayment terms of
the Loans, including required principal payments or the rate, amount or time of
interest payments or (f) modify Section 7.17(a)(ii). Further, no provisions of
Article III or Article X or other terms affecting the Agent or the Issuing Bank
may be changed without the consent of said Agent or the Issuing Bank as
appropriate.
SECTION 11.02 Notices. Except with respect to telephone
notifications specifically permitted pursuant to Article II, all notices,
consents, requests, approvals, demands and other communications provided for
herein shall be in writing (including telecopy communications) and mailed,
telecopied, sent by overnight courier or delivered:
(a) If to the Company and the Guarantors:
Group Maintenance America Corp.
8 Greenway Plaza
Suite 1500
Houston, Texas 77046
Telephone No.: (713) 860-0100
Telecopy No: (713) 626-4766
Attention: Chief Financial Officer
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(b) If to the Agent:
Chase Bank of Texas
545 West 19th Street
Houston, Texas 77008
Telephone No.: (713) 868-6737
Telecopy No: (713) 868-8663
Attention: Mr. Mark Walshak
Senior Vice President
with copies to:
Agency Services
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Muniram Appanna
Telephone No.: (212) 552-7943
Telecopy No.: (212) 552-5777
and to:
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
Telephone No.: (713) 220-4268
Telecopy No.: (713) 220-4285
Attention: Mr. Thomas J. Perich
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other
parties.
(c) If to any Bank, to the address shown on the signature page
hereof or specified by such Bank (or the Agent on behalf of any Bank) to the
Company.
All communications shall, when mailed, telecopied or delivered, be
effective when mailed by certified mail, return receipt requested to any party
at its address specified above, or telecopied to any party to the telecopy
number set forth above, or delivered personally to any party at its address
specified above; provided, that communications to the Agent pursuant to Article
II shall not be effective until actually received by the Agent, and provided
further that communications sent by telecopy after 5:00 p.m., Houston, Texas
time, shall be effective on the next succeeding business day.
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SECTION 11.03 No Waiver; Remedies. No failure on the part of any
Bank or the Agent to exercise, and no delay in exercising, any right hereunder,
under any Note or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, or any
abandonment or discontinuance of any steps to enforce such right, preclude any
other or further exercise thereof or the exercise of any other right. No notice
to or demand on the Company in any case shall entitle the Company to any other
or further notice or demand in similar or other circumstances. The remedies
herein are cumulative and not exclusive of any other remedies provided by law,
at equity or in any other agreement.
SECTION 11.04 Costs and Expenses. The Company agrees to pay on
demand: (a) all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, delivery, sale and syndication of this
Agreement, the Notes, the other Loan Documents and the other documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under this Agreement, the Notes and
the other Loan Documents, and any modification, supplement or waiver of any of
the terms of this Agreement or any other Loan Document, (b) all reasonable
out-of-pocket costs and expenses of any Bank including reasonable legal fees and
expenses, in connection with the enforcement of this Agreement, the Notes and
the other Loan Documents and (c) reasonable costs and expenses incurred in
connection with third party professional services reasonably required by the
Agent such as appraisers, environmental consultants, accountants or similar
Persons, provided that, prior to any Event of Default hereunder, the Agent will
first obtain the consent of the Company to such expense, which consent shall not
be unreasonably withheld. Without prejudice to the survival of any other
obligations of the Company hereunder and under the Notes, the obligations of the
Company under this Section shall survive the termination of this Agreement or
the replacement of the Agent and each assignment of the Notes.
SECTION 11.05 Release and Indemnity. (a) The Company shall and
hereby does indemnify the Agent and each Bank and each Affiliate thereof and
their respective directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims or damages
(including reasonable legal fees and expenses) to which any of them may become
subject, insofar as such losses, liabilities, claims or damages arise out of or
result from any actual or proposed use by the Company of the proceeds of any
extension of credit hereunder or any investigation, litigation or other
proceeding (including any threatened investigation or proceeding) relating to
the foregoing or any of the other Loan Documents, and the Company shall
reimburse each Bank and each Affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any expenses (including legal
fees) reasonably incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified (the "Indemnified Obligations").
(b) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL INDEMNIFIED
OBLIGATIONS ARISING OUT OF OR
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RESULTING FROM THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON OR
IMPOSED UPON SAID PARTY UNDER ANY THEORY OF STRICT LIABILITY. Without prejudice
to the survival of any other obligations of the Company hereunder and under the
other Loan Documents, the obligations of the Company under this Section shall
survive the termination of this Agreement and the other Loan Documents and the
payment of the Obligations or the assignment of the Notes.
SECTION 11.06 Right of Setoff. Without limiting the remedies
provided for in Article IX, each Bank is hereby authorized at any time and from
time to time, after acceleration of the Obligations after the occurrence of an
Event of Default to the fullest extent permitted by law, to set off and apply
any and all deposits held and other indebtedness owing by such Bank, or any
branch, subsidiary or Affiliate, to or for the credit or the account of the
Company against any and all the Obligations of the Company now or hereafter
existing under this Agreement and the other Loan Documents and other obligations
of the Company held by such Bank, irrespective of whether or not such Bank shall
have made any demand under this Agreement, its Note or the Obligations and
although the Obligations may be unmatured. Each Bank agrees promptly to notify
the Company after any such set-off and application made by such Bank, provided,
that failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Bank under this Section are in addition to
other rights and remedies (including other rights of setoff) which such Bank may
have.
SECTION 11.07 GOVERNING LAW. THIS AGREEMENT, ALL NOTES, THE OTHER
LOAN DOCUMENTS AND ALL OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH SHALL BE
DEEMED TO BE CONTRACTS AND AGREEMENTS EXECUTED BY THE COMPANY AND EACH BANK
UNDER THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
SAID STATE AND OF THE UNITED STATES OF AMERICA. Without limitation of the
foregoing, nothing in this Agreement, or in the Notes or in any other Loan
Document shall be deemed to constitute a waiver of any rights which any Bank may
have under applicable federal legislation relating to the amount of interest
which such Bank may contract for, take, receive or charge in respect of the Loan
and the Loan Documents, including any right to take, receive, reserve and charge
interest at the rate allowed by the law of the state where any Bank is located.
The Agent, each Bank and the Company further agree that insofar as the
provisions of Texas Finance Code, Chapter 303, as amended, are applicable to the
determination of the Highest Lawful Rate with respect to the Notes and the
Obligations hereunder and under the other Loan Documents, the weekly rate
ceiling of such Article, as described in Article 1D.003 of the Texas Credit
Title, shall be applicable; provided, however, that to the extent permitted by
such Article, the Agent may from time to time by notice to the Company revise
the election of such interest rate ceiling as such ceiling affects the then
current or future balances of the Loans. The provisions of the Texas Finance
Code, Chapter 346 do not apply to this Agreement, any Note issued hereunder or
the other Loan Documents.
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SECTION 11.08 Interest. Each provision in this Agreement and each
other Loan Document is expressly limited so that in no event whatsoever shall
the amount paid, or otherwise agreed to be paid, to the Agent or any Bank, or
charged, contracted for, reserved, taken or received by the Agent or any Bank,
for the use, forbearance or detention of the money to be loaned under this
Agreement or any Loan Document or otherwise (including any sums paid as required
by any covenant or obligation contained herein or in any other Loan Document
which is for the use, forbearance or detention of such money), exceed that
amount of money which would cause the effective rate of interest to exceed the
Highest Lawful Rate, and all amounts owed under this Agreement and each other
Loan Document shall be held to be subject to reduction to the effect that such
amounts so paid or agreed to be paid, charged, contracted for, reserved, taken
or received which are for the use, forbearance or detention of money under this
Agreement or such Loan Document shall in no event exceed that amount of money
which would cause the effective rate of interest to exceed the Highest Lawful
Rate. Anything in any Note or any other Loan Document to the contrary
notwithstanding, the Company shall not be required to pay unearned interest on
any Note and the Company shall not be required to pay interest on the
Obligations at a rate in excess of the Highest Lawful Rate, and if the effective
rate of interest which would otherwise be payable under such Note and such Loan
Documents would exceed the Highest Lawful Rate, or if the holder of such Note
shall receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable
by the Company under such Note and the other Loan Documents to a rate in excess
of the Highest Lawful Rate, then (a) the amount of interest which would
otherwise be payable by the Company shall be reduced to the amount allowed under
applicable law and (b) any unearned interest paid by the Company or any interest
paid by the Company in excess of the Highest Lawful Rate shall in the first
instance be credited on the principal of the Obligations of the Company (or if
all such Obligations shall have been paid in full, refunded to the Company). It
is further agreed that, without limitation of the foregoing, all calculations of
the rate of interest contracted for, reserved, taken, charged or received by any
Bank under the Notes and the Obligations and under the other Loan Documents are
made for the purpose of determining whether such rate exceeds the Highest Lawful
Rate, and shall be made, to the extent permitted by usury laws applicable to
such Bank, by amortizing, prorating and spreading in equal parts during the
period of the full stated term of the Notes and this Agreement all interest at
any time contracted for, charged or received by such Bank in connection
therewith. Furthermore, in the event that the maturity of any Note or other
obligation is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under applicable
law may never include more than the maximum amount allowed by applicable law and
excess interest, if any, provided for in this Agreement, any Note or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be refunded to the Company.
SECTION 11.09 Survival of Representations and Warranties. All
representations, warranties and covenants contained herein or made in writing by
the Company in connection herewith and the other Loan Documents shall survive
the execution and delivery of this Agreement, the Notes and the other Loan
Documents and the termination of the Commitments of the Banks and will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto,
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whether so expressed or not, provided, that the Commitments of the Banks shall
not inure to the benefit of any successor or assign of the Company.
SECTION 11.10 Successors and Assigns; Participations. (a) All
covenants, promises and agreements by or on behalf of the Company or the Banks
that are contained in this Agreement shall bind and inure to the benefit of
their respective permitted successors and assigns. The Company may not assign or
transfer any of its rights or obligations hereunder.
(b) Any of the Banks may assign to or sell participations to one
or more banks of all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including all or a portion of its
Commitment, the Advances and the Obligations of the Company owing to it and the
Notes); provided, that the Company shall continue to deal solely and directly
with the Agent and such assigning or selling Bank in connection with such Bank's
rights and obligations under this Agreement and the other Loan Documents. Except
with respect to cost protections provided to a participant pursuant to this
paragraph and the items listed in Section 11.01 hereof, no participant shall be
a third party beneficiary of this Agreement nor shall it be entitled to enforce
any rights provided to the Banks against the Company under this Agreement. In
the case of participations (but not assignments) (i) the original Bank's
obligations under this Agreement (including without limitation, its Commitment
to the Company hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of such Loan Documents for
all purposes of this Agreement, (iv) the Company, the Agent and the other Banks
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, (v) such Bank shall
continue to be able to agree to any modification or amendment of this Agreement
or any waiver hereunder without the consent, approval or vote of any such
participant or group of participants, other than modifications, amendments and
waivers described in the proviso to Section 11.01, and (vi) except as
contemplated by the immediately preceding clause (v), no participant shall be
deemed to be or to have any of the rights of obligations of a "Bank" hereunder.
(c) A Bank may assign to any other Bank or Banks or to any
Affiliate of a Bank and, with the prior written consent of the Company and the
Agent (which consent shall not be unreasonably withheld), a Bank may assign to
one or more other Eligible Assignees all or a portion of its interests, rights,
and obligations under this Agreement and the other Loan Documents (including all
or a portion of its Commitment and the same portion of the Loans and other
Obligations of the Company at the time owing to it and the Note held by it);
provided, however, that (i) each such assignment shall be in a minimum principal
amount of not less than $5,000,000.00 and shall be of a constant, and not a
varying, percentage of the assigning Bank's Commitment, its rights and
obligations under this Agreement, and its share of the outstanding balance of
each of the Notes, (ii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance, an Assignment and Acceptance,
substantially in the form of Exhibit 11.10(c) hereto, in form and substance
satisfactory to the Agent (an "Assignment and Acceptance") and any Note subject
to such assignment, (iii) no assignment shall be effective until receipt by the
Agent of a reasonable service fee from the Assignee Bank in respect of said
assignment equal to $2,000.00, and (iv) the Assigning
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Bank, provided it does not assign all of its rights and obligations under this
Agreement and the other Loan Documents, shall retain a minimum amount of
$5,000,000.00 of the Commitment following the Assignment. Upon such execution,
delivery and acceptance, from and after the effective date specified in each
Assignment and Acceptance, which effective date (unless otherwise agreed to by
the assigning Bank, the Eligible Assignee thereunder and the Agent) shall be at
least five Business Days after the execution thereof, (x) the Eligible Assignee
thereunder shall be a party hereto as a "Bank" and to the other Loan Documents
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Bank hereunder and under the other Loan Documents and (y)
the assignor Bank thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement and the
other Loan Documents (and, in the case of an Assignment and Acceptance covering
all of the remaining portion of an assigning Bank's rights and obligations under
this Agreement and the other Loan Documents, such Bank shall cease to be a party
hereto).
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) Notwithstanding any other provision herein, any Bank may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this section, disclose to the assignee or participant
or proposed assignee or participant, any information relating to the Company
furnished to such Bank by or on behalf of the Company; provided, however, that
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree in writing for the benefit of the Company to preserve
the confidentiality of any confidential information relating to the Company or
any of its Subsidiaries received by it from such Bank in a manner consistent
with Section 11.11.
SECTION 11.11 Confidentiality. Each Bank and the Agent agrees to
keep any information delivered or made available to it by the Company or any of
its Subsidiaries, confidential from anyone other than Persons employed or
retained by its who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loans and who are bound hereby;
provided that nothing herein shall prevent any Bank or the Agent from disclosing
such information (a) to any other Bank, (b) pursuant to subpoena or upon the
order of any court or administrative agency, (c) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Bank, (d) which
has been publicly disclosed, (e) to the extent reasonably required in connection
with any litigation to which the Agent, any Bank, the Company or its respective
Affiliates may be a party, (f) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (g) to such Bank's legal counsel and
independent auditors and who are bound hereby and (h) to any actual or proposed
participant or assignee of all or part of its rights hereunder which has agreed
in writing to be bound by the provisions of this Section. Each Bank or the Agent
will promptly notify the Company of any information that it is required or
requested to deliver pursuant to clause (b) or (c) of this Section and, if the
Company is a party to any such litigation, clause (e) of this Section.
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SECTION 11.12 Pro Rata Treatment. (a) Except as otherwise
specifically permitted hereunder, each payment or prepayment of principal, if
permitted under this Agreement, and each payment of interest with respect to an
Advance shall be made pro rata among the Banks.
(b) Each Bank agrees that if, through the exercise of a right of
banker's Lien, setoff or claim of any kind against the Company as a result of
which the unpaid principal portion of the Notes and the Obligations held by it
shall be proportionately less than the unpaid principal portion of the Notes and
Obligations held by any other Bank, it shall be deemed to have simultaneously
purchased from such other Bank a participation in the Notes and Obligations held
by such other Bank, in the amount required to render such amounts proportional;
provided, however, that if any such purchase or purchases or adjustments shall
be made pursuant to this Section and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustments restored without interest.
SECTION 11.13 Separability. Should any clause, sentence, paragraph
or Section of this Agreement be judicially declared to be invalid, unenforceable
or void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 11.14 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Any Subsidiary of the Company that executes an Adoption Agreement
after the date of this Agreement shall, upon such execution, become a party
hereto as a Guarantor.
SECTION 11.15 Interpretation. (a) In this Agreement, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or
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individually, provided that nothing in this clause is intended to
authorize any assignment not otherwise permitted by this Agreement;
(v) except as expressly provided to the contrary herein, reference
to any agreement, document or instrument (including this Agreement) means
such agreement, document or instrument as amended, supplemented or
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof, and reference to any Note
or other note includes any Note issued pursuant hereto in extension or
renewal thereof and in substitution or replacement therefor;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of time,
except as expressly provided to the contrary, the word "from" means "from
and including" and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as
amended, modified, codified or reenacted, in whole or in part, and in
effect from time to time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
(d) In the event of any conflict between the specific provisions
of this Agreement and the provisions of any application pertaining to any letter
of credit secured by a Loan Document, the terms of this Agreement shall control.
SECTION 11.16 SUBMISSION TO JURISDICTION. (a) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE COMPANY AND
EACH GUARANTOR FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY
OF THE AFOREMENTIONED COURTS IN ANY
-66-
<PAGE> 73
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02
AND WITH RESPECT TO ANY GUARANTOR, AT THE ADDRESS PROVIDED ON SCHEDULE 5.16
HERETO, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(b) EACH OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND EACH
GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11.18 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN
DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE
TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-67-
<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
COMPANY:
GROUP MAINTENANCE AMERICA CORP.
By: /s/ DARREN B. MILLER
--------------------------
Name: Darren B. Miller
Title: Executive Vice President
<PAGE> 75
GUARANTORS/DOMESTIC SUBSIDIARIES:
AA Advance Air, Inc., a Florida corporation
AA JARL, Inc. (dba Jarrell Plumbing), a Texas corporation
A-ABC Appliance, Inc., a Texas corporation
A-1 Appliance & Air Conditioning, Inc., a Texas corporation
A-1 Mechanical of Lansing, Inc., a Michigan corporation
Air Conditioning Engineers, Inc., a Michigan corporation
Air Conditioning, Plumbing & Heating Service Co., Inc., a Colorado corporation
Aircon Energy Incorporated, a California corporation
Airtron, Inc., a Delaware corporation
Airtron of Central Florida, Inc., a Florida corporation
All Service Electric, Inc., a Florida corporation
Arkansas Mechanical Services, Inc., an Arkansas corporation
Atlantic Industrial Constructors, Inc., a Virginia corporation
Barr Electric Corp., an Illinois corporation
Callahan Roach Products & Publications, Inc., a Colorado corporation
Central Air Conditioning Contractors, Inc., a Delaware corporation
Central Carolina Air Conditioning Company, a North Carolina corporation
Charlie Crawford, Inc., a Texas corporation
Clark Converse Electric Service, Inc., an Ohio corporation
Colonial Air Conditioning Company, a Connecticut corporation
Commercial Air Holding Company, a Maryland corporation
Commercial Air, Power & Cable, Inc., a Maryland corporation
Costner Brothers, Inc., a South Carolina corporation
Divco, Inc., a Washington corporation
Dynamic Software Corporation, a Maryland corporation
Evans Services, Inc., an Alabama corporation
The Farfield Company, a Delaware corporation
Ferguson Electric Corporation, a Delaware corporation
Gentzler Electrical Contractors, Inc., a Texas corporation
Gilbert Mechanical Contractors, Inc., a Minnesota corporation
GroupMAC Holding Corp., a Delaware corporation
HPS Plumbing Services, Inc., a California corporation
Hallmark Air Conditioning, Inc., a Texas corporation
Hungerford Mechanical Corporation, a Virginia corporation
J. D. Steward Air Conditioning, Inc., a Colorado corporation
Jerry Albert Air Conditioning, Inc., a Texas corporation
K & N Plumbing, Heating and Air Conditioning, Inc., a Texas corporation
Laney's Inc., a Delaware corporation
Linford Service Co., a California corporation
MacDonald-Miller Co., Inc., a Washington corporation
MacDonald-Miller Industries, Inc., a Washington corporation
MacDonald-Miller Service, Inc., a Washington corporation
Masters, Inc., a Maryland corporation
<PAGE> 76
Mechanical Interiors, Inc., a Texas corporation
Merritt Island Air & Heat, Inc., a Delaware corporation
New Construction Air Conditioning, Inc., a Michigan corporation
Noron, Inc., an Ohio corporation
Paul E. Smith Co., Inc., an Indiana corporation
Phoenix Electric Company, a Delaware corporation
Ray and Claude Goodwin, Inc., a Florida corporation
Reliable Mechanical, Inc., a Delaware corporation
Romanoff Electric Corp., an Ohio corporation
Sibley Services, Incorporated, a Tennessee corporation
Southeast Mechanical Service, Inc., a Florida corporation
Sterling Air Conditioning, Inc., a Texas corporation
Sun Plumbing, Inc., a Florida corporation
Team Mechanical, Inc., a Utah corporation
United Acquisition Corp. (dba United Service Alliance), an Iowa corporation
Valley Wide Plumbing and Heating, Inc., a Colorado corporation
Van's Comfortemp Air Conditioning, Inc., a Florida corporation
Vantage Mechanical Contractors, Inc., a Maryland corporation
Wade's Heating and Cooling, Inc., a Florida corporation
Wiegold & Sons, Inc., a Florida corporation
Willis Refrigeration, Air Conditioning & Heating, Inc., an Ohio corporation
Yale Incorporated, a Minnesota corporation
By: /s/ DARREN B. MILLER
-------------------------
Name: Darren B. Miller
Title: Vice President
GroupMAC Management Co., a Delaware corporation
By: /s/ DARREN B. MILLER
-------------------------
Name: Darren B. Miller
Title: Vice President
<PAGE> 77
AGENT/BANK:
Amount of Commitment: CHASE BANK OF TEXAS,
$27,500,000.00 NATIONAL ASSOCIATION,
as Agent and Individually, as a Bank
By: /s/ J. M. WALSHAK
---------------------------
J. M. Walshak
Vice President
<PAGE> 78
CO-AGENT/BANK:
Amount of Commitment: BANK OF AMERICA TEXAS, N.A.,
$25,000,000.00 as Co-Agent and
Individually, as a Bank
By: /s/ GEORGE M. SMITH
------------------------
Name: George M. Smith
------------------------
Title: Vice President
------------------------
Address for Notice:
333 Clay Street, Suite 3600
Houston, Texas 77002
Telephone No.: (713) 652-3615
Telecopy No.: (713) 652-3619
Attention: George Smith
<PAGE> 79
DOCUMENTATION AGENT/BANK:
Amount of Commitment: ABN AMRO BANK, N.V.,
$25,000,000.00 as Documentation Agent and
Individually, as a Bank
By: /s/ LAURIE C. TUZO
----------------------------
Name: Laurie C. Tuzo
----------------------------
Title: Senior Vice President
----------------------------
By: /s/ ERIC R. HOLLINGSWORTH
----------------------------
Name: Eric R. Hollingsworth
----------------------------
Title: Assistant Vice President
----------------------------
Address for Notice:
Three Riverway, Suite 1700
Houston, Texas 77056
Telephone No.: (713) 964-3360
Telecopy No.: (713) 629-7533
Attn: Laurie Tuzo
<PAGE> 80
BANKS:
Amount of Commitment: BANK OF MONTREAL
$20,000,000.00
By: /s/ LYNN A. DURNING
----------------------------
Name: Lynn A. Durning
----------------------------
Title: Portfolio Manager
----------------------------
Address for Notice:
115 South LaSalle Street, 12th Floor
Chicago, Illinois 60603
Telephone No.: (312) 750-3474
Telecopy No.: (312) 750-3808
Attn: Amy Dumser
<PAGE> 81
BANKS:
Amount of Commitment: THE BANK OF NOVA SCOTIA
$20,000,000.00
By: /s/ F.C.H. ASHBY
-------------------------------
Name: F.C.H. Ashby
-------------------------------
Title: Senior Manager, Loan Operations
-------------------------------
Address for Notice:
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Telephone No.: (404) 877-1500
Telecopy No.: (404) 888-8998
Attn: F.C.H. Ashby
<PAGE> 82
BANKS:
Amount of Commitment: BANKBOSTON, N.A.
$15,000,000.00
By: /s/ RAVI KACKER
--------------------------------
Name: Ravi Kacker
--------------------------------
Title: Vice President
--------------------------------
Address for Notice:
100 Federal Street, Mail Stop 01-10-01
Boston, Massachusetts 02110
Telephone No.: (617) 434-4708
Telecopy No.: (617) 434-1574
Attn: Ravi Kacker
E-mail: [email protected]
<PAGE> 83
BANKS:
Amount of Commitment: CREDIT LYONNAIS NEW YORK BRANCH
$20,000,000.00
By: /s/ PASCAL POUPELLE
--------------------------------
Name: Pascal Poupelle
--------------------------------
Title: Executive Vice President
--------------------------------
Address for Notice:
2200 Ross Avenue, Suite 4400W
Dallas, Texas 75201
Telephone No.: (214) 220-2303
Telecopy No.: (214) 220-2323
Attn: Blake Wright
<PAGE> 84
BANKS:
Amount of Commitment: KEY CORPORATE CAPITAL INC.
$15,000,000.00
By: /s/ DAVID WOOD
------------------------------
Name: David Wood
Title: Vice President
Address for Notice:
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Telephone No.: (216) 689-0439
Telecopy No.: (216) 689-4077
Attn: David Wood
<PAGE> 85
BANKS:
Amount of Commitment: NATIONAL CITY BANK OF KENTUCKY
$17,500,000.00
By: /s/ DONALD R. PULLEN
----------------------------
Donald R. Pullen
----------------------------
Vice President
----------------------------
Address for Notice:
101 South 5th Street, 31-T08J
Louisville, Kentucky 40202
Telephone No.: (502) 581-6352
Telecopy No.: (502) 581-5122
Attn: Donald R. Pullen
<PAGE> 86
SYNDICATION AGENT/BANK:
Amount of Commitment: PARIBAS,
$25,000,000.00 as Syndication Agent and
Individually, as a Bank
By: /s/ SCOTT CLINGEN
--------------------------------
Name: Scott Clingen
--------------------------------
Title: Vice President
--------------------------------
By: /s/ LARRY ROBINSON
--------------------------------
Name: Larry Robinson
--------------------------------
Title: Vice President
--------------------------------
Address for Notice:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telephone No.: (713) 659-4811
Telecopy No.: (713) 659-5234
Attn: Scott Clingan
<PAGE> 87
BANKS:
Amount of Commitment: UNION BANK OF CALIFORNIA, N.A.
$20,000,000.00
By: /s/ J. SCOTT JESSUP
---------------------------
Name: J. Scott Jessup
---------------------------
Title: Vice President
---------------------------
Address for Notice:
550 S. Hope Street, 3rd Floor
Los Angeles, California 90071
Telephone No.: (213) 243-3559
Telecopy No.: (213) 243-3552
Attn: Scott Jessup
<PAGE> 88
EXHIBIT 1.01A
ADMINISTRATIVE QUESTIONNAIRE
PLEASE COMPLETE THE FOLLOWING
INFORMATION AND RETURN VIA FAX
TO THE ATTENTION OF:
Muniram Appanna: FAX (212) 552-7490
Agent: Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10051
Legal Name of Your Institution
To Appear in Documentation:
--------------------------------------------
Number of Signature Lines Required:
--------------------------------------------
GENERAL INFORMATION - DOMESTIC LENDING OFFICE
Institution Name:
Street Address:
City, State, Zip Code:
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE
Institution Name:
--------------------------------------------
Street Address:
--------------------------------------------
City, State, Zip Code:
--------------------------------------------
CONTACTS/NOTIFICATION METHODS
Primary Contact:
--------------------------------------------
Street Address:
--------------------------------------------
City, State, Zip Code:
--------------------------------------------
Phone Number:
--------------------------------------------
FAX Number:
--------------------------------------------
Back-up Contact:
--------------------------------------------
Street Address:
--------------------------------------------
City, State, Zip Code:
--------------------------------------------
Phone Number:
--------------------------------------------
FAX Number:
--------------------------------------------
<PAGE> 89
TAX WITHHOLDING [FOR US LOANS ONLY]
Non Resident Alien _____ Y _____ N
*Please attach Form 4224 or 1001
Tax ID Number ______________
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.
Contact:
--------------------------------------------
Street Address:
--------------------------------------------
City, State, Zip Code:
--------------------------------------------
Phone Number:
--------------------------------------------
FAX Number:
--------------------------------------------
PAYMENT INSTRUCTIONS:
Name of Bank where funds
are to be transferred:
--------------------------------------------
Name of Account,
if applicable:
--------------------------------------------
Account Number:
--------------------------------------------
Additional Information:
--------------------------------------------
MAILINGS:
Please specify who should receive financial information:
Name:
--------------------------------------------
Street Address:
--------------------------------------------
City, State, Zip Code:
--------------------------------------------
IT IS VERY IMPORTANT THAT ALL OF THE ABOVE INFORMATION IS ACCURATELY FILLED IN
AND RETURNED PROMPTLY. IF THERE IS SOMEONE OTHER THAN YOURSELF WHO SHOULD
RECEIVE THIS QUESTIONNAIRE, PLEASE NOTIFY ME OF THEIR NAME AND FAX NUMBER AND WE
WILL FAX THEM A COPY OF THE QUESTIONNAIRE. IF YOU HAVE ANY QUESTIONS, PLEASE
CALL MUNIRAM APPANNA ON 212-552-7943.
<PAGE> 90
EXHIBIT 1.01B
FORM
OF
ADOPTION AGREEMENT
[Date]
Chase Bank of Texas, National
Association, as Agent
for the Banks that are parties to the
Credit Agreement referred to below
545 W. 19th Street
Houston, Texas 77008
Attention:_________________
Dear Sirs:
Reference is made to the Second Amended and Restated Credit
Agreement dated as of October 15, 1998 (the "Credit Agreement"), among Group
Maintenance America Corp., a Texas corporation (the "Company"), the subsidiaries
of the Company party thereto, as guarantors, the banks party thereto, Chase Bank
of Texas, National Association, as agent for the banks, and Bank of America
Texas, N.A., as co-agent, Paribas, as syndication agent, and ABN AMRO Bank,
N.V., as documentation agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
This agreement (this "Adoption Agreement") is executed and
delivered pursuant to Section 6.09 of the Credit Agreement which provides that
any Person that becomes a Subsidiary subsequent to the Execution Date will
execute and deliver to the Agent an Adoption Agreement acknowledging such
Person's agreement to be bound by the terms of the Credit Agreement and the
applicable Security Documents. In addition, Section 6.09 provides that the
Company or its Subsidiary that owns or holds the stock of said new Subsidiary,
as the case may be, will execute and deliver to the Agent the Adoption Agreement
acknowledging its agreement to be bound by the terms of the Pledge Agreement
with respect to pledging shares of said new Subsidiary and delivering to the
Agent the certificates evidencing its ownership of said new Subsidiary.
Therefore, for and in consideration of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged:
(a) the undersigned party (i) signing as Guarantor hereby
executes this Adoption Agreement to acknowledge it is a Subsidiary and
a Guarantor and agrees to be bound and is hereby bound by all of the
terms and conditions of the Credit Agreement and the Guaranty
<PAGE> 91
contained therein applicable to a Subsidiary or a Guarantor, (ii)
signing as Debtor hereby executes this Adoption Agreement to
acknowledge it is a Debtor as such term is defined in the Security
Agreement and, as such, agrees to be bound and hereby is bound by all
of the terms and conditions of the Security Agreement and in connection
therewith does hereby grant to the Agent for the benefit of the Banks a
first and prior lien or security interest in all of Debtor's right,
title and interest in and to the Collateral (as such term is defined in
the Security Agreement) of such Debtor, and (iii) hereby delivers to
the Agent a UCC-1 Financing Statement signed by the Debtor and
describing the Collateral of such Debtor subject to the Security
Agreement, and
(b) the undersigned party (i) signing as Pledgor hereby
executes this Adoption Agreement to acknowledge it is a Pledgor as such
term is defined in the Pledge Agreement and, as such, agrees to be
bound and hereby is bound by all of the terms and conditions of the
Pledge Agreement and in connection therewith does hereby pledge to the
Agent for the benefit of the Banks, and grant to the Agent for the
benefit of the Banks, a Lien and security interest in Pledgor's right,
title and interest in and to, the Pledged Collateral (as such term is
defined in the Pledge Agreement), (ii) hereby delivers to the Agent the
certificate evidencing shares of stock of the new Subsidiary owned by
the Pledgor, together with a stock power [SIGNED IN BLANK] and (iii)
hereby delivers to the Agent a UCC-1 Financing Statement signed by the
Pledgor.
Executed effective this ____ day of _____________, ____.
GUARANTOR/DEBTOR
--------------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
PLEDGOR
--------------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 92
EXHIBIT 2.02
FORM OF
NOTE
Dated: _________________, 1998
FOR VALUE RECEIVED, the undersigned, GROUP MAINTENANCE AMERICA
CORP., a Texas corporation (the "Company"), HEREBY PROMISES TO PAY to the order
of _______________________________ (the "Bank") the lesser of (i) the amount of
the Bank's Commitment and (ii) the aggregate unpaid principal amount of the
Loans made by the Bank to the Company pursuant to the Credit Agreement (as
defined below).
The Company promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until such principal amount is
paid in full, at such interest rates, and payable at such dates and times, as
are specified in the Second Amended and Restated Credit Agreement dated as of
October 15, 1998 (as the same may from time to time be amended, modified or
supplemented, the "Credit Agreement," the terms defined therein and not
otherwise defined herein being used herein as therein defined), among the
Company, the Subsidiaries of the Company party thereto, the Bank and certain
other banks that are parties thereto, Chase Bank of Texas, National Association,
as Agent for the Bank and such other banks, Bank of America Texas, N.A., as a
co- agent, Paribas, as syndication agent, and ABN AMRO Bank, N.V., as
documentation agent.
Both principal and interest are payable in same day funds in
lawful money of the United States of America to Chase Bank of Texas, National
Association, as Agent, at 1111 Fannin Street, Houston, Texas 77002, or at such
other place as the Agent shall designate in writing to the Company.
This Note may be held by the Bank for the account of its
Domestic Lending Office or its Eurodollar Lending Office and may be transferred
from one to the other from time to time as the Bank may determine.
This Note is one of the Notes referred to in, and is entitled
to the benefits of, the Credit Agreement. The obligations of the Company
hereunder are guaranteed by the Guarantors pursuant to Article VIII of the
Credit Agreement. The Credit Agreement, among other things, (i) provides for the
making of the Loans by the Bank to the Company from time to time, the
indebtedness of the Company resulting from each such Loan being evidenced by
this Note and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events, also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified, and to the effect that no provision of the Credit Agreement
<PAGE> 93
or this Note shall require the payment or permit the collection of interest in
excess of the Highest Lawful Rate.
Except as provided in the Credit Agreement, the Company and
any and all endorsers, guarantors and sureties severally waive grace, demand,
presentment for payment, notice of dishonor or default or intent to accelerate,
protest and notice of protest and diligence in collecting and bringing of suit
against any party hereto, and agree to all renewals, extensions or partial
payments hereon and to any release or substitution of security herefor, in whole
or in part, with or without notice, before or after maturity.
This Note shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Texas and any applicable laws of
the United States of America.
GROUP MAINTENANCE AMERICA CORP.
By:
-----------------------------------
Name: Darren B. Miller
Title: Executive Vice President
<PAGE> 94
EXHIBIT 2.03
FORM
OF
NOTICE OF ADVANCE
[Date]
Chase Bank of Texas, National Association,
as Agent
for the Banks that are parties to the
Credit Agreement referred to below
712 Main Street
Houston, Texas 77002
Attention: _____________________________
Dear Sirs:
Reference is made to the Second Amended and Restated Credit
Agreement dated as of October 15, 1998 (the "Credit Agreement"), among the
Company, the Subsidiaries of the Company party thereto, the Banks party thereto
and Chase Bank of Texas, National Association, as Agent for such Banks.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
The Company hereby requests an Advance under the Credit
Agreement and in that connection sets forth below the information relating to
such Advance (the "Proposed Advance") as required by Section 2.03 of the Credit
Agreement:
(a) Aggregate Principal Amount of Proposed Advance(1) $
------------
(b) Borrowing Date of Proposed Advance(2)
- --------------------------------------------------------------------------------
(c) Type of Advances(3)
------------
- --------
(1) Except with respect to any Proposed Eurodollar Rate Advance, not less than
$1,000,000.00 and in integral multiples of $100,000.00, and with respect to
any Proposed Alternate Base Rate Advance, not less than $300,000.00 and
$100,000.00 multiples thereof.
(2) Must be a Business Day.
(3) Alternate Base Rate Advance or Eurodollar Rate Advance.
<PAGE> 95
(d) Interest Period and last day thereof(4)
- --------------------------------------------------------------------------------
By each of the delivery of this Notice of Advance and the
acceptance of any or all of the Advances made by the Banks in response to this
Notice of Advance, the Company shall be deemed to have represented and warranted
that the conditions to lending specified in Article IV of the Credit Agreement
have been satisfied with respect to the Proposed Advance.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
- --------
(4) Applicable only to a Eurodollar Rate Advance, which shall have a duration
of one, two, three or six months, and which shall end not later than the
Maturity Date; subject, however, to the limitations contained in the Credit
Agreement.
<PAGE> 96
EXHIBIT 2.05
FORM
OF
NOTICE OF CONVERSION
[Date]
Chase Bank of Texas, National Association,
as Agent
for the Banks that are parties to the
Credit Agreement referred to below
712 Main Street
Houston, Texas 77002
Attention: __________________________
Dear Sirs:
Reference is made to the Second Amended and Restated Credit
Agreement dated as of October 15, 1998 (the "Credit Agreement"), among the
Company, the Subsidiaries of the Company party thereto, the Banks party thereto
and Chase Bank of Texas, National Association, as Agent for such Banks.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
The Company hereby requests that a prior Advance under the
Credit Agreement be converted into another Type of Advance and in that
connection sets forth the following information:
(a) Aggregate Principal Amount of Proposed Conversion(5) $
--------------
(b) Date of Proposed Conversion(6)
(c) Type of Conversion (i.e., from Eurodollar Rate to Alternate Base Rate
or vice versa)
- --------
(5) All conversions of the Loan shall be not less than $300,000.00.
(6) Must be a Business Day not less than three (3) Business Days
subsequent in the case of an Eurodollar Rate Advance and one (1) Business Day
subsequent in the case of a Base Rate Advance.
<PAGE> 97
(d) Interest Period and last day thereof (if converting to Eurodollar
Rate Advance)
------------------------------
The Company
GROUP MAINTENANCE AMERICA CORP.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 98
EXHIBIT 2.20
FORM
OF
EXTENSION REQUEST
[Date]
Chase Bank of Texas National
Association, as Agent
for the Banks that are parties to the
Credit Agreement referred to below
545 W. 19th Street
Houston, Texas 77008
Attention:
Dear Sirs:
Reference is made to the Second Amended and Restated Credit
Agreement dated as of October 15, 1998 (the "Credit Agreement"), among Group
Maintenance America Corp., a Texas Corporation (the "Company"), the subsidiaries
of the Company party thereto, as guarantors, the banks party thereto, Chase Bank
of Texas, National Association, as agent for the banks, and Bank of America
Texas, N.A., as co-agent, Paribas, as syndication agent, and ABN AMRO Bank,
N.V., as documentation agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
The Company hereby requests an Extension of the Maturity Date
set forth in the Credit Agreement, and in that connection certifies that this
request complies with the terms of the Credit Agreement, the provisions of
Section 2.20, and that no Default or Event of Default is continuing as of the
date of this request.
GROUP MAINTENACE AMERICA CORP.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 99
EXHIBIT 3.02
FORM OF
LETTER OF CREDIT REQUEST
Chase Bank of Texas, National Association Date: ________________
712 Main Street
Houston, Texas
Attention: ________________
Reference is made to the Second Amended and Restated Credit
Agreement dated effective as of October 15, 1998 (as amended or modified from
time to time, the "Credit Agreement") among Group Maintenance America Corp.,
certain of its Subsidiaries and Chase Bank of Texas, National Association, as
Agent for itself and the other Banks named therein. Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement. The undersigned hereby gives you notice pursuant
to Section 3.02 of the Credit Agreement that it requests that the Issuing Bank
issue a Letter of Credit under the Credit Agreement and in that connection sets
forth below the terms of such Letter of Credit:
1. Name of beneficiary: __________________________
2. Name of account party: __________________________
3. Amount: $ __________________________
4. Expiration date of the
Letter of Credit to be
issued: __________________________
5. Description of the goods,
if any: __________________________
6. Advising bank, if any: __________________________
7. Options: partial drawings __________________________
permitted are/are not
8. Terms and required documents, if any: _______________
_____________________________________________________
By delivery of this request for the issuance of a Letter of
Credit, the undersigned represents and warrants that the conditions to the
issuance thereof specified in the Credit
<PAGE> 100
Agreement have been satisfied and that, following the issuance requested herein,
the total Letters of Credit outstanding does not exceed $20,000,000.00.
Very truly yours,
GROUP MAINTENANCE AMERICA CORP.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 101
EXHIBIT 4.01(d)(I)
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED SECURITY AGREEMENT (as the
same may be amended, amended and restated, modified or supplemented from time to
time, this "Agreement") dated as of October 15, 1998 is executed by GROUP
MAINTENANCE AMERICA CORP., a Texas corporation with an office at 8 Greenway
Plaza, Suite 1500, Houston, TX 77046 (the "Company"), the Subsidiaries (as
defined in the Credit Agreement below) of the Company signatory hereto now or in
the future (collectively with any future Subsidiaries party to the Credit
Agreement and the Company, the "Debtors" and each individually, a "Debtor"), for
the benefit of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association, as collateral agent for itself and for the banks under the Credit
Agreement, as hereinafter defined (in such capacity, the "Secured Party").
PRELIMINARY STATEMENT
WHEREAS, the Company, the Secured Party, as agent (then known
as Texas Commerce Bank National Association) and the banks party thereto entered
into that one certain Credit Agreement dated December 11, 1997 (as amended, the
"First Credit Agreement" ), relating to the extension of a series of loans with
a commitment totaling $75,000,000.00 by said banks to the Company; and
WHEREAS, the Company and certain of its subsidiaries, as
guarantors, the Secured Party, as agent, the banks and financial institutions
listed on the signature pages thereto, ABN AMRO Bank, N.V. and Paribas, as
co-agents agreed to amend and restate the First Credit Agreement pursuant to the
terms and conditions of the Amended and Restated Credit Agreement dated June 12,
1998 (the "Amended and Restated Credit Agreement" and together with the First
Credit Agreement, the "Prior Credit Agreement"), relating to the extension of a
series of loans with a commitment totaling $125,000,000.00 by said banks to the
Company; and
WHEREAS, the Secured Party, as agent, the banks party thereto
(the "Banks"), Bank of America Texas, N.A. as co-agent, Paribas, as syndication
agent, ABN AMRO Bank, N.V., as documentation agent, and the Debtors desire to
amend and restate the Prior Credit Agreement and have entered into that certain
Second Amended and Restated Credit Agreement dated as of October 15, 1998 (as
amended, amended and restated, modified or supplemented from time to time, the
"Credit Agreement"), under the terms of which the Banks agreed to make available
to the Company, a loan of up to $230,000,000.00; and
WHEREAS, in connection with the Prior Credit Agreement and as
partial security therefor, the Secured Party, the Company and certain of its
subsidiaries entered into that one certain Security Agreement dated December 11,
1997 which was amended and restated pursuant to the Amended and Restated
Security Agreement dated June 12, 1998 among the
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Secured Party, the Company and certain of its subsidiaries (collectively, the
"Prior Security Agreement"), granting liens on certain property owned by said
parties to the Secured Party; and
WHEREAS, in connection with the Credit Agreement, and because
certain additional Persons have become Subsidiaries under the Credit Agreement
which were not parties to the Prior Credit Agreement, the parties wish to amend
and restate the Prior Security Agreement to include said Persons and their
assets thereunder; and
WHEREAS, it is a condition precedent to the obligation of the
Secured Party to make the Loans to the Company under the Credit Agreement that
the Company and the Debtors shall execute and deliver this Agreement to the
Secured Party; and
WHEREAS, the Debtors will each benefit from the execution of
the Credit Agreement and wish to execute this Agreement in order to help satisfy
such condition precedent and to secure the obligations under the Credit
Agreement and letters of credit from time to time issued;
NOW THEREFORE, in consideration of the premises and in order
to induce the Secured Party to extend the loans and issue letters of credit
pursuant to the terms of the Credit Agreement, the Debtors hereby agree to amend
and restate the Prior Security Agreement as follows:
SECTION 1. Defined Terms.
(a) Each capitalized term used herein and not otherwise
defined shall have the meaning for such term as defined in the Credit Agreement
and/or a Loan Document.
(b) The term "UCC" means the Uniform Commercial Code as in
effect on the date hereof in the State of Texas; provided that if by mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interests granted pursuant to Section 2 hereof, as well as all
other security interests created or assigned as additional security for the
Secured Obligations pursuant to the provisions of this Agreement, in any
Collateral is governed by the UCC as in effect in a jurisdiction other than
Texas, "UCC" means the UCC as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
(c) "Secured Obligations" means obligations, contingent or
otherwise, of the Company or any Debtor pursuant to any of the Loan Documents,
including, without limitation, all sums owing by the Company or any Debtor to
the Secured Party under any of the Loan Documents, any obligations outstanding
now or in the future, including, but not limited to, any letters of credit
issued by the Secured Party or any other Bank and any interest rate swaps,
hedges or similar agreements between any Debtor or any of its Subsidiaries and
any of the Banks all on a pari passu basis.
<PAGE> 103
(d) All rights and interests granted to the Secured Party
under the Prior Security Agreement are hereby ratified and renewed and brought
forward herein to the extent same are not inconsistent herewith. This Agreement
shall be a restatement of the Prior Security Agreement but shall not invalidate
or adversely affect any rights or interests granted to the Secured Party
thereunder or affect the priority thereof except as expressly set forth herein.
SECTION 2. Grant of Security. Each Debtor hereby grants to the
Secured Party a first and prior lien or security interest in, all of such
Debtor's right, title and interest in and to the following assets of such
Debtor, now owned or hereafter acquired, except as otherwise excluded on
Schedule I hereto (the "Collateral"):
(a) (i) All accounts (as defined in the UCC) and (whether or
not included in such definition), and (ii) all receivables, accounts receivable,
lease receivables, contract rights, chattel paper, drafts, acceptances,
instruments, writings evidencing a monetary obligation or a security interest or
a lease of goods, general intangibles and other obligations of any kind, now or
hereafter existing, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights now or hereafter
existing in and to all agreements, leases, and other contracts securing or
otherwise relating to any such accounts, lease receivables, chattel paper,
drafts, acceptances, instruments, writings evidencing a monetary obligation or a
security interest or a lease of goods, general intangibles or obligations (any
and all of the foregoing in sub-clause (i) and (ii) being the "Receivables");
and
(b) All inventory (as defined in the UCC) in all of its forms,
wherever located, now or hereafter existing and whether acquired by purchase,
merger or otherwise, and all raw materials, stores, tools, and work in process
therefor, all finished goods, spare parts, service parts, and all materials used
or consumed in the manufacture, packing, shipping, advertising, selling, leasing
or production thereof, including (whether or not included in such UCC
definition) goods in which the Debtors have an interest in mass or joint or
other interest or right of any kind and goods which are returned to or
repossessed by the Debtors, and all accessions thereto and products thereof and
documents therefor (any and all of the foregoing being the "Inventory"); and
(c) All instruments, chattel paper or letters of credit (each
as defined in the UCC) and any other items including all promissory notes held
by the Debtors evidencing indebtedness owed to any of them by any Person (any
and all of the foregoing being the "Instruments"); and
(d) All documents (as defined in the UCC) or other receipts
covering, evidencing or presenting goods; and
(e) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments received in
connection with any excluded assets
<PAGE> 104
described on Schedule I(B), all payments under insurance or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral.
SECTION 3. Security for Obligations. This Agreement secures,
on a first and prior basis except for the Permitted Liens, and other Liens
permitted under the Credit Agreement the prompt and complete payment of the
Secured Obligations.
SECTION 4. Debtors Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Debtors shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein (and subject to any defenses thereto) to perform all of their duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Secured Party of any of the rights hereunder
shall not release the Debtors from any of their duties or obligations under the
contracts and agreements included in the Collateral, and (c) the Secured Party
shall have no obligations or liability under the contracts and agreements
included in the Collateral solely by reason of this Agreement, and the Secured
Party shall not be obligated to perform any of the obligations or duties of the
Debtors thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder in each case, solely by reason of this Agreement.
SECTION 5. Representations and Warranties. The Debtors each
represent and warrant as follows:
(a) Those locations specified on Schedule II-A hereto or such
other locations disclosed to the Secured Party after the date hereof constitute
all of the locations at which there is located any Inventory of any Debtors
(other than rolling stock or Inventory in transit). The principal place of
business and chief executive office of the Company and the office where it keeps
its records concerning the Receivables, are located at the address specified in
the introductory paragraph to this Agreement or at such other locations
disclosed to the Secured Party after the date hereof. Each other Debtor has its
chief executive office at the location shown on Schedule II-B hereto or at such
other locations disclosed to the Secured Party after the date hereof.
(b) Each Debtor owns the Collateral free and clear of any
Lien, except for Permitted Liens and other Liens permitted under the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except for protective filings under true leases, filings made in
connection with Permitted Liens and other Liens permitted under the Credit
Agreement.
(c) This Agreement has been duly executed and delivered by
each Debtor. Upon the filing of financing statements in the locations listed on
Schedule III hereto, the security
<PAGE> 105
interests granted herein shall constitute valid and perfected security interests
in substantially all the Collateral, subject only to Permitted Liens and other
Liens permitted under the Credit Agreement, to the extent such security
interests can be perfected by such filings pursuant to the UCC.
(d) No consent of, or notice to, any other Persons and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the grant
by the Debtors of the Liens granted hereby or for the execution, delivery or
performance of this Agreement by the Debtors or (ii) for the perfection of the
rights and remedies hereunder, other than the filing of financing statements as
provided in (c) above.
(e) All information with respect to the Collateral and the
obligors under the Receivables set forth in any schedule hereto, certificate or
other writing at any time heretofore or hereafter furnished by each Debtor to
the Secured Party, taken as a whole, is, to each Debtor's knowledge, true,
correct and complete in all material respects as of the date specified therein.
(f) The Subsidiaries listed on Schedule 5.16 of the Credit
Agreement are all of the Subsidiaries of the Company as of the Execution Date
and the address given for such Subsidiaries is the correct mailing address as of
the Execution Date.
SECTION 6. Further Assurances. (a) Each Debtor agrees that
from time to time, at the expense of the Debtor, each Debtor will promptly
execute and deliver all further instruments and documents, and take all further
action, that the Secured Party may reasonably request as being necessary or
desirable, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Debtor will: (i) if any
Receivable shall be evidenced by a promissory note or other Instrument, deliver
and pledge to the Secured Party such note or Instrument duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance reasonably satisfactory to the Secured Party; and (ii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices as the Secured Party may reasonably request as
being necessary or desirable in order to perfect and preserve the security
interests granted or purported to be granted hereby.
(b) Each Debtor hereby authorizes the Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of such
Debtor, in each case where permitted by law. A carbon, photographic or other
reproduction of any financing statement executed by each Debtor covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
<PAGE> 106
(c) Each Debtor will furnish to the Secured Party from time to
time statements and schedules further identifying and describing the Collateral
as the Secured Party may reasonably request, all in reasonable detail.
(d) Each Debtor will promptly notify the Secured Party of any
change of its name, corporate structure, federal employer identification number
or the address of its principal place of business or chief executive office
where its books and records are maintained.
(e) Each Debtor shall keep its principal place of business and
chief executive office and the office where it keeps its records concerning the
Collateral, at the location or locations therefor specified in Section 5(a) or,
upon 20 days' prior written notice (or such other notice acceptable to the
Secured Party) to the Secured Party, at such other locations in a jurisdiction
where all action required by this Section 6(a) shall have been or shall be taken
with respect to the Collateral.
(f) Except as otherwise provided in this subsection (f), each
Debtor shall continue to collect, at its own reasonable expense, all amounts due
or to become due such Debtor under the Receivables. In connection with such
collections, each Debtor may take (and, upon the occurrence and continuance of
an Event of Default and so long as it is continuing and has not been waived at
the Secured Party's direction, shall take) such action as such Debtor or the
Secured Party may deem necessary or advisable to enforce collection of the
Receivables; provided, that the Secured Party shall have the right at any time
during the existence of an Event of Default, upon written notice to each Debtor
of its intention to do so, to notify the account debtors or obligors under any
Receivables of the assignment of such Receivables to the Secured Party and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to such Debtor thereunder directly to the Secured Party and, upon
such notification and at the expense of such Debtor, to enforce collection of
any such Receivables, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Debtor might have
done. After receipt by the Debtors of the notice from the Secured Party referred
to in the proviso to the preceding sentence, (i) all amounts and proceeds
(including instruments) received by the Debtors in respect of the Receivables
shall be received in trust by the Secured Party under the Credit Agreement,
shall be segregated from other funds of the Debtors and shall be forthwith paid
over to the Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash collateral and either (A) released to the
Debtors so long as no default shall be continuing or (B) if any default shall be
continuing, applied as provided in Section 12(b), and (ii) the Debtors shall not
adjust, settle or compromise the amount or payment of any Receivable, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon, except with the prior written consent of the Secured Party.
<PAGE> 107
(g) The Debtors shall keep substantially all the Inventory
(other than such Inventory sold in the ordinary course of business or Inventory
in transit) at the places therefor specified in Section 5(a) or, upon at least
20 days' prior written notice (or such other notice acceptable to the Secured
Party) to the Secured Party, at such other places in jurisdictions where all
action required by this Section 6(a) shall have been or shall be taken with
respect to such Inventory.
(h) The Debtors shall promptly upon request furnish to the
Secured Party a statement respecting any material loss or damage to any of the
Inventory or any other of the Collateral and will permit the Secured Party or
any other Party to inspect the Collateral upon reasonable notice during normal
business hours.
SECTION 7. Insurance. The Debtors shall, at their own expense,
maintain insurance as required by the Loan Documents.
SECTION 8. Transfers and Other Liens. The Debtors shall not:
(a) sell, assign (by agreement, operation of law or otherwise) or otherwise
dispose of any of the Collateral (other than in the ordinary course of business
or not prohibited by the Credit Agreement) or (b) create or suffer to exist any
Lien upon or with respect to any of the Collateral, except for Permitted Liens
and other Liens permitted by the Credit Agreement.
SECTION 9. Secured Party Appointed Attorney-in-Fact. Each
Debtor hereby irrevocably appoints the Secured Party as the Debtors'
attorney-in-fact, with full authority in the place and stead of the Debtors and
in the name of the Debtors, from time to time in the Secured Party's sole
reasonable discretion after the occurrence of an Event of Default and during the
continuance thereof, to take any action and to execute any instrument which the
Secured Party may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement, including:
(a) to obtain insurance required to be paid pursuant to
Section 7 herein,
(b) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) above,
(d) to file any claims or take any action or institute any
proceedings which the Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to any of the Collateral, and
<PAGE> 108
(e) to sell, transfer, assign, or otherwise deal in or with
the Collateral or the proceeds thereof, as provided herein and subject to
applicable law, as fully and effectually as if the Secured Party were the
absolute owner thereof; provided, that the Secured Party shall give the Debtors
not less than ten (10) days' prior written notice of the time and place of any
sale or other intended disposition of any of the Collateral, except any
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market. The Debtors agree that such
notice constitutes "reasonable notification" within the meaning of ss. 9.504(c)
of the UCC.
SECTION 10. Secured Party May Perform. If any Debtor fails to
perform any agreement contained herein, the Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be payable upon demand by such Debtor and
if not paid shall bear interest at the Default Rate set forth in the Credit
Agreement.
SECTION 11. The Secured Party's Duties. The powers conferred
on the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it or any other Party to exercise
any such powers. In regard to any Debtor, except for reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, neither the Secured Party nor any other party
shall have any duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral. The Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Secured
Party accords its own property, it being understood that the Secured Party shall
not have any responsibility for taking any necessary steps to preserve rights
against any Secured Party with respect to any Collateral.
SECTION 12. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and the Secured Party may also (i) require any Debtor to, and each
Debtor hereby agrees that it will at its reasonable expense and upon request of
the Secured Party forthwith, assemble all or part of the Collateral as directed
by the Secured Party and make it available to the Secured Party at a place to be
designated by the Secured Party, and (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Secured Party's offices or elsewhere, for cash or
on credit, and upon such other terms as may be commercially reasonable. Each
Debtor agrees that, to the
<PAGE> 109
extent notice of sale shall be required by law, at least ten (10) days' prior
notice to the Debtors of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification
thereof. The Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) Any cash received by the Secured Party shall be applied to
repay the Secured Obligations. Any surplus of such cash or cash proceeds held by
the Secured Party and remaining after payment in full of all the Secured
Obligations shall be paid over to the Debtors or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 13. Amendments. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Debtors
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Secured Party with the requisite consent of the Debtors, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 14. Addresses for Notices. All notices and other
communications provided for hereunder shall be given in the manner and at the
addresses and telecopy numbers as set forth in the Credit Agreement, and shall
become effective, as specified in the Credit Agreement and/or the Loan
Documents.
SECTION 15. Termination; Reinstatement. (a) Each Debtor agrees
that this Agreement and the Liens granted hereunder shall terminate when, but
only when, all Secured Obligations have been fully paid and performed and all
Banks' commitments under the Loan Documents have expired or been terminated. At
any time thereafter upon the Debtor's request, the Secured Party shall promptly
reassign and redeliver, including the termination of any financing statements
(or cause to be reassigned and redelivered) to the Debtors, or to such Person or
Persons as the Debtors shall designate in writing, against receipt, such of the
Collateral (if any) as shall not have been sold or otherwise applied by the
Secured Party pursuant to the terms hereof and shall still be held by it
hereunder. Any such reassignment shall be without recourse upon, or
representation or warranty by, the Secured Party (other than that the Secured
Party has not sold, encumbered or otherwise transferred any interest in the
Collateral except as provided in this Agreement) and shall be at the sole
reasonable cost and expense of the Debtors.
(b) This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Secured Party upon the filing of any
bankruptcy proceeding by or of the Debtors or upon the appointment of any
<PAGE> 110
intervenor or conservator of, or trustee or similar official for, the Debtors or
any substantial part of their assets, or otherwise, all as though such payments
had not been made.
SECTION 16. Waiver of Marshaling. All rights of marshaling of
assets of the Debtors, including any such right with respect to the Collateral,
are hereby waived by the Debtors.
SECTION 17. Limitation by Law. All rights, remedies and powers
provided in this Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Agreement are intended to be subject to all applicable mandatory
provisions of law which may be controlling and to be limited to the extent
necessary so that they will not render this Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
SECTION 18. Separability. Should any clause, sentence,
paragraph, subsection or Section of this Agreement be judicially declared to be
invalid, unenforceable or void, such declaration will not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom by the
Secured Party hereto, and the remainder will have the same force and
effectiveness as if such stricken part or parts had never been included herein.
SECTION 19. No Waiver; Remedies. No failure on the part of the
Secured Party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 20. Partial Release of Security Interest. Upon the
request of the Debtors in connection with any sale, transfer or other
disposition of property or assets permitted hereunder or under any Loan
Document, so long as no Event of Default under any of the Loan Documents has
occurred and is continuing, the Secured Party shall execute and deliver to the
Debtors duly executed releases or partial releases, as applicable, of any
security interest it may have in such property or assets, in form and substance
reasonably satisfactory to the Secured Party and the applicable Debtor;
provided, for any such sale other than Inventory that provides net proceeds to
any Debtor in excess of $100,000.00, such proceeds shall be delivered to the
Secured Party as collateral for all of the Secured Obligations.
SECTION 21. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until
<PAGE> 111
payment in full of the Secured Obligations, (b) be binding upon each Debtor, its
successors and assigns, and (c) inure to the benefit of the Secured Party and
its respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Secured Party may assign or
otherwise transfer all or a portion of its interests, rights and obligations
under any Note held by it pursuant to the Credit Agreement or pursuant to any
Loan Document. Upon the payment in full of the Secured Obligations, the Liens
granted hereby shall terminate and all rights to the Collateral shall revert to
the Debtors. Upon any such termination, the Secured Party will, at the Debtors'
reasonable expense, promptly execute and deliver to the Debtors such documents
as the Debtors shall reasonably request to evidence such termination. Any
Material Subsidiary of the Company that executes a counterpart of this Agreement
after the date of this Agreement shall, upon such execution, become a party
hereto as a Debtor.
SECTION 22. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Debtors in connection herewith are true and correct in all
material respects when made or deemed made and shall survive the execution and
delivery of this Agreement until repayment of the Secured Obligations. Any
investigation by the Secured Party shall not diminish in any respect whatsoever
its rights to rely on such representations and warranties.
SECTION 23. Governing Law; Terms. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF TEXAS.
SECTION 24. Inconsistencies. In the event of any
irreconcilable inconsistences between any provision of this Agreement and any
provision of the Credit Agreement and/or the Loan Documents, the provisions of
this Agreement shall control.
SECTION 25. Counterparts. This Agreement may be executed in
any number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute but one and the same
agreement.
SECTION 26. Interpretation.
(a) In this Agreement, unless a clear contrary intention
appears:
(i) the singular number includes the plural number
and vice versa;
<PAGE> 112
(ii) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other
subdivision;
(iii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such
successors and assigns are permitted by this Agreement, and
reference to a Person in a particular capacity excludes such
Person in any other capacity or individually, provided that
nothing in this clause (iii) is intended to authorize any
assignment not otherwise permitted by this Agreement;
(iv) reference to any agreement, document or
instrument means such agreement, document or instrument as
amended, supplemented or modified and in effect from time to
time in accordance with the terms thereof and, if applicable,
the terms hereof, and reference to any Note includes any Note
issued pursuant hereto in extension or renewal thereof and in
substitution or replacement therefor;
(v) unless the context indicates otherwise, reference
to any Section or Schedule means such Section hereof or such
Schedule hereto;
(vi) the words "including" (and with correlative
meaning "include") means including, without limiting the
generality of any description preceding such term;
(vii) with respect to the determination of any period
of time, the word "from" means "from and including" and the
word "to" means "to but excluding;" and
(viii) reference to any law means such as amended,
modified, codified or reenacted, in whole or in part, and in
effect from time to time.
(b) The Section headings herein are for convenience only and
shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 27. Submission to Jurisdiction. (a) ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY OR THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF
<PAGE> 113
TEXAS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH DEBTOR HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDING. EACH DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
IT AT ITS ADDRESS PROVIDED IN SECTION 14, SUCH SERVICE TO BECOME EFFECTIVE
THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE SECURED PARTY OR ANY OF THE PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE DEBTORS IN ANY OTHER JURISDICTION.
(b) EACH DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 28. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, LOAN DOCUMENTS, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM
OR RELATING TO ANY BANKING OR FINANCIAL RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT OR ANY LOAN DOCUMENT, AND AGREES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.
SECTION 29. Final Agreement of the Parties. THIS AGREEMENT
(INCLUDING THE SCHEDULES HERETO) AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE
CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER
<PAGE> 114
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 115
IN WITNESS WHEREOF, the Debtors have caused this Agreement to
be duly executed and delivered by its officer duly authorized as of the date
first above written.
COMPANY/DEBTOR:
GROUP MAINTENANCE AMERICA
CORP., a Texas corporation
By:
------------------------------------------
Name: Darren B. Miller
Title: Executive Vice President
<PAGE> 116
SUBSIDIARIES/DEBTORS:
AA ADVANCE AIR, INC.
AA JARL, INC.
(d/b/a Jarrell Plumbing)
A-ABC APPLIANCE, INC.
A-1 APPLIANCE & AIR CONDITIONING, INC.
A-1 MECHANICAL OF LANSING, INC.
AIR CONDITIONING ENGINEERS, INC.
AIR CONDITIONING, PLUMBING & HEATING SERVICE
CO., INC.
AIRCON ENERGY INCORPORATED
AIRTRON, INC.
AIRTRON OF CENTRAL FLORIDA, INC.
ALL SERVICE ELECTRIC, INC.
ARKANSAS MECHANICAL SERVICES, INC.
(f/k/a AMS Acquisition Corp.)
ATLANTIC INDUSTRIAL CONSTRUCTORS, INC.
BARR ELECTRIC CORP.
CALLAHAN ROACH PRODUCTS & PUBLICATIONS, INC.
CENTRAL AIR CONDITIONING CONTRACTORS, INC.
CENTRAL CAROLINA AIR CONDITIONING COMPANY
(f/k/a Central Carolina Acquisition Corp.)
CHARLIE CRAWFORD, INC.
CLARK CONVERSE ELECTRIC SERVICE, INC.
COLONIAL AIR CONDITIONING COMPANY
COMMERCIAL AIR HOLDING COMPANY
COMMERCIAL AIR, POWER & CABLE, INC.
COSTNER BROTHERS, INC.
DIVCO, INC.
DYNAMIC SOFTWARE CORPORATION
EVANS SERVICES, INC.
THE FARFIELD COMPANY
FERGUSON ELECTRIC CORPORATION
GENTZLER ELECTRICAL CONTRACTORS, INC.
GILBERT MECHANICAL CONTRACTORS, INC.
GROUPMAC HOLDING CORP.
HPS PLUMBING SERVICES, INC.
HALLMARK AIR CONDITIONING, INC.
HUNGERFORD MECHANICAL CORPORATION
<PAGE> 117
J.D. STEWARD AIR CONDITIONING, INC.
JERRY ALBERT AIR CONDITIONING, INC.
K&N PLUMBING, HEATING AND AIR CONDITIONING, INC.
LANEY'S, INC.
LINFORD SERVICE CO.
(f/k/a LSC Acquisition Corp.)
MACDONALD-MILLER CO., INC.
MACDONALD-MILLER INDUSTRIES, INC.
(f/k/a MacDonald-Miller Acquisition Corp.)
MACDONALD-MILLER SERVICE, INC.
MASTERS, INC.
(f/k/a Masters Acquisition Corp.)
MECHANICAL INTERIORS, INC.
MERRITT ISLAND AIR & HEAT, INC.
NEW CONSTRUCTION AIR CONDITIONING, INC.
NORON, INC.
PAUL E. SMITH CO., INC.
PHOENIX ELECTRIC COMPANY
RAY AND CLAUDE GOODWIN, INC.
RELIABLE MECHANICAL, INC.
ROMANOFF ELECTRIC CORP.
SIBLEY SERVICES, INCORPORATED
SOUTHEAST MECHANICAL SERVICE, INC.
(f/k/a SEMS Acquisition Corp.)
STERLING AIR CONDITIONING, INC.
SUN PLUMBING, INC.
TEAM MECHANICAL, INC.
UNITED ACQUISITION CORP.
(d/b/a/ United Service Alliance)
VALLEY WIDE PLUMBING AND HEATING, INC.
VAN'S COMFORTEMP AIR CONDITIONING, INC.
(f/k/a Van's Acquisition Corp.)
VANTAGE MATERIAL CONTRACTORS, INC.
WADE'S HEATING AND COOLING, INC.
WIEGOLD & SONS, INC.
<PAGE> 118
WILLIS REFRIGERATION, AIR CONDITIONING &
HEATING, INC.,
(f/k/a Willis Acquisition Corp.)
YALE INCORPORATED
(f/k/a Yale Acquisition Corp.)
By:
---------------------------------------------
Name: Darren B. Miller
Title: Vice President
GROUPMAC MANAGEMENT CO.
By:
---------------------------------------------
Name: Darren B. Miller
Title: Executive Vice President
<PAGE> 119
AGENT/SECURED PARTY:
CHASE BANK OF TEXAS NATIONAL
ASSOCIATION, as Agent for the Banks
By:
---------------------------------------
Name: J. M. Walshak
Title: Vice President
<PAGE> 120
SCHEDULE I
EXCLUDED ASSETS
Excluded Assets means and refers to (A) that portion of the Debtor's personal
property which, if included in the Collateral, would violate, be prohibited by,
or constitute a default under any agreement, contract, document, or law or would
require any consent which has not yet been obtained and (B) Receivables due from
any residential customer of any Debtor incurred in connection with the
installation of any heating, ventilation or air conditioning equipment not in
excess of $2,000,000.00 at any time and including any note receivable in
connection therewith; provided any and all proceeds from such excluded assets
shall not be excluded assets and shall be Collateral and subject to all of the
terms and conditions of this Agreement.
<PAGE> 121
SCHEDULE II-A
LOCATIONS OF INVENTORY
<TABLE>
<CAPTION>
LOCATION OF INVENTORY AND
DEBTOR ACCOUNTS RECEIVABLE
------ -------------------------
<S> <C>
A-ABC Appliance, Inc. Dallas, Texas
A-1 Appliance & Air Conditioning, Inc. Dallas, Texas
A-1 Mechanical of Lansing, Inc. Lansing, Michigan
AA Advance Air, Inc. Pompano Beach, Florida
AA JARL, Inc. (dba Jarrell Plumbing) Houston, Texas
Air Conditioning Engineers, Inc. Utica, Michigan
Air Conditioning, Plumbing & Heating Denver, Colorado
Service Co., Inc. Longmont, Colorado
Aircon Energy Incorporated Sacramento, California
Arkansas Mechanical Services, Inc. North Little Rock, Arkansas
Fayetteville, Arkansas
Airtron of Central Florida, Inc. East Oldsmar, Florida
Airtron, Inc. East Oldsmar, Florida
Indianapolis, Indiana
Wichita, Kansas
Louisville, Kentucky
Erlanger, Kentucky
Fairfiled, Ohio
Cleveland, Ohio
Columbus, Ohio
Dayton, Ohio
Austin, Texas
Garland, Texas
Houston, Texas
San Antonio, Texas
All Service Electric, Inc. Jacksonville, Florida
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
LOCATION OF INVENTORY AND
DEBTOR ACCOUNTS RECEIVABLE
------ --------------------------
<S> <C>
Atlantic Industrial Constructors, Inc. Richmond, Virginia
Barr Electric Corp. Wheeling, Illinois
Callahan Roach Products & Publications, Inc. Englewood, Colorado
Central Air Conditioning Contractors, Inc. Columbia, Maryland
Central Carolina Air Conditioning Company Greensboro, North Carolina
Winston Salem, North Carolina
Charlie Crawford, Inc. South Houston, Texas
Clark Converse Electric Service, Inc. Grove City, Ohio
Colonial Air Conditioning Company Bloomfield, Connecticut
Commercial Air, Power & Cable, Inc. Beltsville, Maryland
Commercial Air Holding Company Beltsville, Maryland
Costner Brothers, Inc. Rock Hill, South Carolina
Divco, Inc. Spokane, Washington
Dynamic Software Corporation Gaithersburg, Maryland
Evans Services, Inc. Birmingham, Alabama
The Farfield Company Lititz, Pennsylvania
Lancaster County, Pennsylvania
Ferguson Electric Corporation Colorado Springs, Colorado
Gentzler Electrical Contractors, Inc. Dallas, Texas
Gilbert Mechanical Contractors, Inc. Minneapolis, Minnesota
GroupMAC Holding Corp. Houston, Texas
GroupMAC Management Co. Houston, Texas
HPS Plumbing Services, Inc. Bakersfield, California
Hallmark Air Conditioning, Inc. Houston, Texas
Hungerford Mechanical Corporation Richmond, Virginia
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
LOCATION OF INVENTORY AND
DEBTOR ACCOUNTS RECEIVABLE
------ -------------------------
<S> <C>
J.D. Steward Air Conditioning, Inc. Colorado Springs, Colorado
Jerry Albert Air Conditioning, Inc. San Antonio, Texas
K&N Plumbing, Heating and Air Arlington, Texas
Conditioning, Inc. Las Vegas, Nevada
Laney's, Inc. Fargo, North Dakota
Linford Service Co. Oakland, California
San Jose, California
Ontario, California
San Diego, California
Sacramento, California
MacDonald-Miller Industries, Inc. Seattle, Washington
Portland, Oregon
MacDonald-Miller Co., Inc. Seattle, Washington
Portland, Oregon
MacDonald-Miller Service, Inc. Seattle, Washington
Portland, Oregon
Masters, Inc. Gaithersburg, Maryland
Chantilly, Virginia
Mechanical Interiors, Inc. Dallas, Texas
Austin, Texas
Merritt Island Air & Heat, Inc. Merritt Island, Florida
New Construction Air Conditioning, Inc. Holt, Michigan
Noron, Inc. Toledo, Ohio
Paul E. Smith Co., Inc. Indianapolis, Indiana
Phoenix Electric Company Tigard, Oregon
Ray and Claude Goodwin, Inc. Jacksonville, Florida
Reliable Mechanical, Inc. Louisville, Kentucky
Romanoff Electric Corp. Toledo, Ohio
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
LOCATION OF INVENTORY AND
DEBTOR ACCOUNTS RECEIVABLE
------ -------------------------
<S> <C>
Sibley Services, Incorporated Memphis, Tennessee
Southeast Mechanical Service, Inc. Hollywood, Florida
Sterling Air Conditioning, Inc. Pearland, Texas
Sun Plumbing, Inc. Melbourne, Florida
Team Mechanical, Inc. Kaysville, Utah
United Acquisition Corp. Englewood, Colorado
Valley Wide Plumbing and Heating, Inc. Avon, Colorado
Van's Comfortemp Air Conditioning, Inc. Delray Beach, Florida
Vantage Material Contractors, Inc. Glen Burnie, Maryland
Wade's Heating and Cooling, Inc. Ft. Myers, Florida
Wiegold & Sons, Inc. Naples, Florida
Willis Refrigeration, Air Conditioning & Cincinnati, Ohio
Heating, Inc.
Yale Incorporated Minneapolis, Minnesota
</TABLE>
<PAGE> 125
SCHEDULE II-B
CHIEF EXECUTIVE OFFICE LOCATIONS
OF DEBTORS
<TABLE>
<CAPTION>
DEBTORS LOCATION OF CHIEF EXECUTIVE OFFICE
------- ----------------------------------
<S> <C>
AA Advance Air, Inc. 1920 N.W. 32nd Street
Pompano Beach, Florida 33064
AA JARL, Inc. (dba Jarrell Plumbing) 6920 Winton
Houston, Texas 77021
A-ABC Appliance, Inc. 14001 Distribution Way
Dallas, Texas 75234
A-1 Appliance & Air Conditioning, Inc. 14001 Distribution Way
Dallas, Texas 75234
A-1 Mechanical of Lansing, Inc. 615 S. Waverly Road
Lansing, Michigan 48917
Air Conditioning Engineers, Inc. 5250 Auburn Road
Utica, Michigan 48317
Air Conditioning, Plumbing & Heating 4350 Race Street
Service, Co. Denver, Colorado 80216
Aircon Energy Incorporated 4234 N. Freeway Blvd., Suite 100
Sacramento, California 95834
Airtron, Inc. 7813 North Dixie Drive
Dayton, Ohio 45414
Airtron of Central Florida, Inc. 7813 North Dixie Drive
Dayton, Ohio 45414
All Service Electric, Inc. 1556 Whitlock
Jacksonville, Florida 32211
Arkansas Mechanical Services, Inc. 2201 Lincoln Road
N. Little Rock, Arkansas 72115
Atlantic Industrial Constructors, Inc. 4500 Oakley's Lane
Richmond, Virginia 23231
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
DEBTORS LOCATION OF CHIEF EXECUTIVE OFFICE
------- ----------------------------------
<S> <C>
Barr Electric Corp. 222 East Marquardt Drive
Wheeling, Illinois 60090
Callahan Roach Products & Publications, Inc. 8955 E. Nichols Ave. #200
Englewood, Colorado 80112
Central Air Conditioning Contractors, Inc. 9195 Red Branch Road
Columbia, Maryland 21045-2000
Central Carolina Air Conditioning Company 1800 Fairfax Road
Greensboro, North Carolina 27407
Charlie Crawford, Inc. 1309 Pennsylvania
South Houston, Texas 77587
Clark Converse Electric Service, Inc. 3783 Gantz Road
Grove City, Ohio 43123
Colonial Air Conditioning Company 4 Northwood Drive
Bloomfield, Connecticut 06002
Commercial Air Holding Company 12100 Baltimore Avenue
Beltsville, Maryland 20705
Commercial Air, Power & Cable, Inc. 12100 Baltimore Avenue
Beltsville, Maryland 20705
Costner Brothers, Inc. 3175 Lesslie Hwy.
Rock Hill, South Carolina 29730
Divco, Inc. 715 Madelia Street
Spokane, Washington 99220
Dynamic Software Corporation 7891 Beechcraft Avenue
Gaithersburg, Maryland 20879-1580
Evans Services, Inc. 2406 Valleydale Road
Birmingham, Alabama 35244
The Farfield Company 312 Meadow Valley Road
Lititz, Pennsylvania 17543
Ferguson Electric Corporation 1410 Ford Street
Colorado Springs, Colorado 80915
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
DEBTORS LOCATION OF CHIEF EXECUTIVE OFFICE
------- ----------------------------------
<S> <C>
Gentzler Electrical Contractors, Inc. 10510 Markison
Dallas, Texas 75238
Gilbert Mechanical Contractors, Inc. 4451 West 76th Street
Minneapolis, Minnesota 55435
GroupMAC Holding Corp. 8 Greenway Plaza, Suite 1500
Houston, Texas 77046
GroupMAC Management Co. 8 Greenway Plaza, Suite 1500
Houston, Texas 77046
HPS Plumbing Services, Inc. 401 34th Street
Bakersfield, California 43301
Hallmark Air Conditioning, Inc. 4517 Southerland Road
Houston, Texas 77092
Hungerford Mechanical Corporation 3800 Deepwater Terminal Road
Richmond, Virginia 23234
J. D. Steward Air Conditioning, Inc. 655 Elkton Drive
Colorado Springs, Colorado 80907
Jerry Albert Air Conditioning, Inc. 13718 Lookout Road
San Antonio, Texas 78233
K & N Plumbing, Heating and Air 2706 W. Pioneer Highway
Conditioning, Inc. Arlington, Texas 76013
Laney's, Inc. 55 S. 27th Street
Fargo, North Dakota 58103
Linford Service Co. 2850 Poplar Street
Oakland, California 94608
MacDonald-Miller Industries, Inc. 7717 Detroit S.W.
Seattle, Washington 98106-1903
MacDonald-Miller Co., Inc. 7717 Detroit S.W.
Seattle, Washington 98106-1903
MacDonald-Miller Service, Inc. 7717 Detroit S.W.
Seattle, Washington 98106-1903
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
DEBTORS LOCATION OF CHIEF EXECUTIVE OFFICE
------- ----------------------------------
<S> <C>
Masters, Inc. 7891 Beechcraft
Gaithersburg, Maryland 20879
Mechanical Interiors, Inc. 256 Regal Row
Dallas, Texas 75247-5202
Merritt Island Air & Heat, Inc. 625 Cypress Street
Merritt Island, Florida 32952
New Construction Air Conditioning, Inc. 1900 Cedar Street
Holt, Michigan 48842
Noron, Inc. 5465 Enterprise
Toledo, Ohio 43612
Paul E. Smith Co., Inc. 8171 West 10th Street
Indianapolis, Indiana 46214
Phoenix Electric Company 7379 S.W. Tech Center Drive
Tigard, Oregon 97223
Ray and Claude Goodwin, Inc. 1033 S. Edgewood Avenue
Jacksonville, Florida 32205
Reliable Mechanical, Inc. 13035 Middletown Industrial Blvd.
Louisville, Kentucky 40223
Romanoff Electric Corp. 5055 Enterprise Blvd.
Toledo, Ohio 43612
Sibley Services, Incorporated 1892 Lynnbrook Place
Memphis, Tennessee 38116
Southeast Mechanical Service, Inc. 2100 SW 57th Terrace
Hollywood, Florida 33023
Sterling Air Conditioning, Inc. 1331 East Broadway
Pearland, Texas 77581
Sun Plumbing, Inc. 6935 Vicki Circle
Melbourne, Florida 32902
Team Mechanical, Inc. 151 N. 600 West
Kaysville, Utah 84037
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
DEBTORS LOCATION OF CHIEF EXECUTIVE OFFICE
------- ----------------------------------
<S> <C>
United Acquisition Corp. (dba United Service 8955 E. Nichols Ave., #200
Alliance) Englewood, Colorado 80112
Valley Wide Plumbing and Heating, Inc. 431 Metcalf Road
Avon, Colorado 81620
Van's Comfortemp Air Conditioning, Inc. 135 S. Congress
Delray Beach, Florida 33445
Vantage Mechanical Contractors, Inc. 970 North Langley Road
Glen Burnie, Maryland 21061
Wade's Heating and Cooling, Inc. 12901-1 Metro Parkway
Ft. Myers, Florida 33912
Wiegold & Sons, Inc. 2255 J&C Blvd.; Pine Ridge Industrial Park
Naples, Florida 34109
Willis Refrigeration, Air Conditioning & 885 Ohio Pike
Heating, Inc. Cincinnati, Ohio 45245
Yale Incorporated 9649 Girard Avenue
South, Minneapolis, Minnesota 55431
</TABLE>
<PAGE> 130
SCHEDULE III
UCC FILINGS
<TABLE>
<CAPTION>
LOCATION OF UCC-1 FILINGS
(SECRETARY OF STATE, UNLESS
DEBTORS OTHERWISE INDICATED)
------- --------------------------
<S> <C>
Group Maintenance America Corp. Florida; Indiana; Marion County, Indiana; Kansas;
Kentucky; Ohio; and Texas
A-ABC Appliance, Inc. Texas
A-1 Appliance & Air Conditioning, Inc. Texas
A-1 Mechanical of Lansing, Inc. Michigan
AA Advance Air, Inc. Florida
AA JARL, Inc. Texas
Air Conditioning Engineers, Inc. Michigan
Air Conditioning, Plumbing & Heating Service Co., Colorado
Inc.
Aircon Energy Incorporated California
Airtron, Inc. Delaware; Florida; Indiana; Marion County, Indiana;
Kansas; Kentucky; Ohio; and Texas
Airtron of Central Florida, Inc. Florida and Ohio
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
Central Air Conditioning Contractors, Inc. Maryland
Central Carolina Air Conditioning Company North Carolina
Charlie Crawford, Inc. Texas
Clark Converse Electric Service, Inc. Ohio
Colonial Air Conditioning Company Connecticut
Commercial Air, Power & Cable, Inc. Maryland
Commercial Air Holding Company Maryland
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
LOCATION OF UCC-1 FILINGS
(SECRETARY OF STATE, UNLESS
DEBTORS OTHERWISE INDICATED)
------- --------------------------
<S> <C>
Costner Brothers, Inc. South Carolina
Divco, Inc. Washington
Dynamic Software Corporation Maryland
Evans Services, Inc. Alabama
The Farfield Company Pennsylvania
Ferguson Electric Corporation Colorado
Gentzler Electrical Contractors, Inc. Texas
Gilbert Mechanical Contractors, Inc. Minnesota
GroupMAC Holding Corp. Texas
GroupMAC Management Co. Texas
HPS Plumbing Services, Inc. California
Hallmark Air Conditioning, Inc. Texas
Hungerford Mechanical Corporation Virginia
J.D. Steward Air Conditioning, Inc. Colorado
Jerry Albert Air Conditioning, Inc. Texas
K&N Plumbing, Heating and Air Conditioning, Inc. Texas and Nevada
Laney's, Inc. North Dakota
Linford Service Co. California
MacDonald-Miller Industries, Inc. Oregon and Washington
MacDonald-Miller Co., Inc. Oregon and Washington
MacDonald-Miller Service, Inc. Oregon and Washington
Masters, Inc. Maryland and Virginia
Mechanical Interiors, Inc. Texas
Merritt Island Air & Heat, Inc. Florida
New Construction Air Conditioning, Inc. Michigan
Noron, Inc. Ohio
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
LOCATION OF UCC-1 FILINGS
(SECRETARY OF STATE, UNLESS
DEBTORS OTHERWISE INDICATED)
------- ---------------------------
<S> <C>
Paul E. Smith Co., Inc. Indiana and Marion County, Indiana
Phoenix Electric Company Oregon
Ray and Claude Goodwin, Inc. Florida
Reliable Mechanical, Inc. Kentucky
Romanoff Electric Corp. Ohio
Sibley Services, Incorporated Tennessee
Southeast Mechanical Service, Inc. Florida
Sterling Air Conditioning, Inc. Texas
Sun Plumbing, Inc. Florida
Team Mechanical, Inc. Utah
United Acquisition Corp. Colorado
Valley Wide Plumbing and Heating, Inc. Colorado
Van's Comfortemp Air Conditioning, Inc. Florida
Vantage Material Contractors, Inc. Maryland
Wade's Heating and Cooling, Inc. Florida
Wiegold & Sons, Inc. Florida
Willis Refrigeration, Air Conditioning & Heating, Inc. Ohio
Yale Incorporated Minnesota
</TABLE>
<PAGE> 133
EXHIBIT 4.01(d)(ii)
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
This SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (as the same
may be amended, amended and restated, modified, or supplemented from time to
time, this "Agreement") dated as of October 15, 1998 is executed by GROUP
MAINTENANCE AMERICA CORP., a Texas corporation with an office at 8 Greenway
Plaza, Suite 1500, Houston, TX 77046 (the "Company"), the subsidiaries of the
Company signatory hereto now or in the future (such subsidiaries with the
Company, collectively the "Pledgors" and individually, a "Pledgor") in favor of
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association with
its principal offices in Houston, Harris County, Texas, as agent for itself and
for the banks under the Second Amended and Restated Credit Agreement, as
hereinafter defined (in such capacity, the "Secured Party").
PRELIMINARY STATEMENTS
WHEREAS, the Pledgors own the shares (the "Pledged
Shares") of stock described in Schedule I attached hereto and issued by the
corporations named therein; and
WHEREAS, the Company, the Secured Party, as agent
(then known as Texas Commerce Bank National Association) and the banks party
thereto entered into that one certain Credit Agreement dated December 11, 1997
(as amended, the "First Credit Agreement" ), relating to the extension of a
series of loans with a commitment totaling $75,000,000.00 by said banks to the
Company; and
WHEREAS, the Company and certain of its subsidiaries,
as guarantors, the Secured Party, as agent, the banks and financial institutions
listed on the signature pages thereto, ABN Amro Bank, N.V. and Paribas, as
co-agents agreed to amend and restate the First Credit Agreement pursuant to the
terms and conditions of the Amended and Restated Credit Agreement dated June 12,
1998 (the "Amended and Restated Credit Agreement" and together with the First
Credit Agreement, the "Prior Credit Agreement"), relating to the extension of a
series of loans with a commitment totaling $125,000,000.00 by said banks to the
Company; and
WHEREAS, the Secured Party, as agent, the banks party
thereto (the "Banks"), Bank of America Texas, N.A., as co-agent, Paribas, as
syndication agent, ABN AMRO Bank, N.V., as documentation agent, and the Pledgors
desire to amend and restate the Prior Credit Agreement and have entered into
that certain Second Amended and Restated Credit Agreement dated as of October
15, 1998 (as amended, amended and restated, modified or supplemented from time
to time, the "Credit Agreement"), under the terms of which the Banks agreed to
make available to the Company, a loan of up to $230,000,000.00; and
<PAGE> 134
WHEREAS, in connection with the Prior Credit
Agreement and as partial security thereof, the Secured Party, the Company and
certain of its subsidiaries entered into that one certain Pledge Agreement dated
December 11, 1997, which was amended and restated pursuant to the Amended and
Restated Pledge Agreement dated June 12, 1998 among the Secured Party, the
Company and certain of its subsidiaries (collectively, the "Prior Pledge
Agreement") pledging certain shares of stock held by each of them to the Secured
Party; and
WHEREAS, each of the Pledgors will benefit, directly
or indirectly, from the execution of this Pledge Agreement and the granting of a
security interest in the "Pledged Collateral" (hereinafter defined) in which
each Pledgor, respectively, has any right, title, or interest as security for
all of the "Secured Obligations" (hereinafter defined); and
WHEREAS, it is a condition precedent to the
obligation of the Banks to make Loans to the Company under the Credit Agreement
that the Pledgors shall execute and deliver this Agreement to the Secured Party;
and
WHEREAS, the Pledgors desire to execute this
Agreement in order to satisfy such condition precedent and to secure the
obligations under the Credit Agreement and letters of credit from time to time
issued.
NOW THEREFORE, in consideration of the foregoing
premises and in order to induce the Banks to extend the loans and issue letters
of credit pursuant to the terms of the Credit Agreement, the Pledgors hereby
agree to amend and restate the Prior Pledge Agreement as follows:
SECTION 1. Defined Terms and Related Matters.
(a) Each capitalized term used herein (including,
without limitation, in the introductory paragraph and recitals hereof) and not
defined herein shall have the meaning assigned to such term in the Credit
Agreement and/or a Loan Document.
(b) "Pledged Shares" means one hundred percent (100%)
of the shares of all stock of any Pledgor in any domestic Subsidiaries whether
certificated or uncertificated, as set forth on Schedule I hereto.
(c) "UCC" means the Uniform Commercial Code as in
effect on the date hereof in the State of Texas; provided that if by mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interests granted pursuant to Section 2 hereof, as well as all
other security interests created or assigned as additional security for the
Secured Obligations pursuant to the provisions of this Agreement, in any
Collateral is governed by the UCC as in effect in a jurisdiction other than
Texas, "UCC" means the UCC as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
<PAGE> 135
(d) "Secured Obligations" means all obligations,
contingent or otherwise, of the Company or any Pledgor pursuant to any of the
Loan Documents, including, without limitation, all sums owing by the Company or
any Pledgor to the Secured Party under any of the Loan Documents, and any
obligations outstanding now or in the future, including, but not limited to, any
letters of credit issued by the Agent or any other Bank and any interest rate
swaps, hedges or similar agreements between any Pledgor or any of its
Subsidiaries and any of the Banks all on a pari passu basis.
(e) All rights and interests granted to the Secured
Party under the Prior Pledge Agreement are hereby ratified and renewed and
brought forward herein to the extent same are not inconsistent herewith. This
Agreement shall be a restatement of the Prior Pledge Agreement but shall not
invalidate or adversely affect any rights or interests granted to the Secured
Party thereunder or affect the priority thereof except as expressly set forth
herein.
SECTION 2. Pledges. The Pledgors hereby pledge to the
Secured Party and grant to the Secured Party, a Lien and security interest in
the following collateral (collectively, the "Pledged Collateral") as set forth
below:
(i) The Pledged Shares and the certificates,
if any, representing the Pledged Shares, and all
dividends, cash, instruments and other property from
time to time received, receivable or otherwise
distributed in respect of, or in exchange for, any or
all of the Pledged Shares;
(ii) All additional shares of stock of any
issuer of any Pledged Shares of such stock from time
to time acquired by any Pledgor, and the certificates
representing such additional shares, and all
dividends, cash, instruments and other property from
time to time received, receivable or otherwise
distributed in respect of or in exchange for any or
all of such shares; and
(iii) All proceeds of any of the foregoing.
The inclusion of proceeds in this Agreement does not
authorize the Pledgors to sell, dispose of or otherwise use the Pledged
Collateral in any manner not specifically authorized hereby.
SECTION 3. Security for Obligations. This Agreement
secures on a first and prior basis, except for the Permitted Liens and other
Liens permitted under the Credit Agreement, the prompt and complete payment and
performance of the Secured Obligations.
SECTION 4. Delivery of Pledged Collateral. All
certificates, if any, representing or evidencing the Pledged Collateral shall be
delivered to and held by the Secured Party and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed
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instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Secured Party.
SECTION 5. Representations and Warranties. Each of
the Pledgors represents and warrants as follows:
(a) The principal place of business and chief
executive office of the Company and the office where it keeps its records
concerning the Pledged Collateral are located at the address specified in the
introductory paragraph to this Agreement or at such other locations disclosed to
the Secured Party after the date hereof. Each other Pledgor has its chief
executive office at the location shown on Schedule II hereto or at such other
locations as disclosed to the Secured Party after the date hereof.
(b) The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
(c) The Pledgors are the legal and beneficial owners
of the Pledged Shares free and clear of any Lien, security interest, option or
other charge or encumbrance except for the Permitted Liens and other Liens
permitted under the Credit Agreement.
(d) The delivery of the Pledged Shares to the Secured
Party pursuant to this Agreement and the filing of financing statements, if
applicable, creates a valid and perfected first priority security interest in
the Pledged Shares (subject only to Permitted Liens and other Liens permitted
under the Credit Agreement), securing the payment of the Secured Obligations.
(e) No authorization, approval, or other action by,
and no notice to or filing with, any governmental authority is required either
(i) for the pledge by the Pledgors of the Pledged Shares pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgors or (ii) for the exercise by the Secured Party of the voting or other
rights provided for in this Agreement (except as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally).
(f) All shares of stock in any domestic Subsidiary
are pledged to the Secured Party hereunder.
(g) The Subsidiaries listed on Schedule 5.16 of the
Credit Agreement are all of the Subsidiaries of the Company as of the Execution
Date and the address given for such Subsidiaries is the correct mailing address
as of the Execution Date.
SECTION 6. Further Assurances. (a) Each Pledgor
agrees that from time to time, at the reasonable expense of the Pledgor, each
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that the Secured Party may reasonably request as
being necessary or desirable, in order to perfect and protect any security
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interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Pledged Collateral. Without limiting the generality of the foregoing, each
Pledgor will execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as the Secured Party
may reasonably request as being necessary or desirable in order to perfect and
preserve the security interests granted or purported to be granted hereby.
(b) Each Pledgor hereby authorizes the Secured Party
for the benefit of itself and the Banks to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Pledged Collateral without the signature of such Pledgor, in each case where
permitted by law. A carbon, photographic or other reproduction of any financing
statement executed by each Pledgor covering the Pledged Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(c) Each Pledgor will furnish to the Secured Party
from time to time statements and schedules further identifying and describing
the Pledged Collateral as the Secured Party may reasonably request, all in
reasonable detail.
(d) Each Pledgor will promptly notify the Secured
Party of any change of its name, corporate structure, federal employer
identification number or the address of its principal place of business or chief
executive office where its books and records are maintained.
(e) Each Pledgor shall keep its principal place of
business and chief executive office and the office where it keeps its records
concerning the Pledged Collateral at the location or locations therefor
specified in Section 5(a) or, upon 30 days' prior written notice to the Secured
Party, at such other locations in a jurisdiction where all action required by
this Section 6(a) shall have been taken with respect to the Pledged Collateral.
Each Pledgor will hold and preserve such records and will upon reasonable notice
permit representatives of the Secured Party at any time during normal business
hours to inspect and make abstracts from such records.
SECTION 7. Voting Rights. (a) So long as no Event of
Default shall have occurred and be continuing, the Pledgors shall be entitled to
exercise any and all voting and other rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with the terms
of this Agreement, the Credit Agreement, or any Loan Documents.
(b) Upon the occurrence and during the continuance of
an Event of Default, all rights of the Pledgors to exercise the voting rights
which they would otherwise be entitled to exercise pursuant to Section 7(a)
hereof shall cease for so long as such Event of Default shall continue, and the
Secured Party shall thereupon have the sole right to exercise such voting
rights.
SECTION 8. Dividends. If dividends with respect to
the Pledged Collateral are received by the Pledgors in violation of the terms of
the Loan Documents, such dividends shall
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be received in trust for the benefit of the Secured Party for itself and for the
benefit of the Banks, shall be segregated from other funds of the Pledgors and
shall be forthwith paid over to the Secured Party as Pledged Collateral in the
same form as so received.
SECTION 9. Transfers and Other Liens; Additional
Shares. (a) The Pledgors shall not: (i) sell, assign (by agreement, operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral except for transfers to other Pledgors or other
wholly owned Subsidiaries of Pledgors which agree to be bound by the terms
hereof or (ii) create or permit to exist any Lien upon or with respect to any of
the Pledged Collateral, except for the Permitted Liens and other liens permitted
under the Credit Agreement.
(b) The Pledgors agree that they will (i) cause the
companies that issued the shares that constitute the Pledged Collateral not to
issue any stock or other securities in addition to, or in substitution for, the
Pledged Collateral, except to the Pledgor and (ii) pledge to the Secured Party
hereunder, immediately upon such acquisition (directly or indirectly) thereof,
any and all additional shares of stock or other securities of such companies.
(c) Notwithstanding the foregoing or any other
provision hereof, any Subsidiary may be merged with any other Subsidiary whose
shares have been pledged pursuant hereto or pursuant to any Adoption Agreement
or other Security Document or with the Company.
SECTION 10. Secured Party Appointed Attorney-in-Fact.
The Pledgors hereby irrevocably appoint the Secured Party for the benefit of
itself and for the benefit of the Banks as the Pledgors' attorney-in-fact, with
full authority in the place and stead of the Pledgors and in the name of the
Pledgors, from time to time in the Secured Party's sole reasonable discretion
after the occurrence of an Event of Default and during the continuance thereof,
to take any action and to execute any instrument which the Secured Party may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect all
certificates made payable to the Pledgors representing any dividend or other
distribution in respect of the Pledged Collateral or any part thereof. Upon the
occurrence and during the continuance of an Event of Default, the Secured Party
shall have the right, in its sole discretion and without notice to the Pledgors,
to transfer to or to register in the name of the Secured Party or any of its
nominees, for the benefit of itself and the Banks, any or all of the Pledged
Collateral.
SECTION 11. Secured Party May Perform. If any Pledgor
fails to perform any agreement contained herein, the Secured Party may itself
perform, or cause performance of, such agreement, and the reasonable expenses of
the Secured Party incurred in connection therewith shall be payable upon demand
by such Pledgor and if not paid shall bear interest at the Default Rate set
forth in the Credit Agreement.
SECTION 12. The Secured Party's Duties. The powers
conferred on the Secured Party hereunder are solely to protect its interest and
the interests of Banks in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. In regard to any
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Pledgor, except for reasonable care in the custody of any Pledged Collateral in
its possession and the accounting for moneys actually received by it hereunder,
neither the Secured Party nor any other party shall have any duty as to any
Pledged Collateral or as to the taking of any reasonably necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Pledged Collateral. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Secured Party accords its own property, it being understood
that the Secured Party shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not the Secured
Party has or is deemed to have knowledge of such matters or (b) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
SECTION 13. Remedies upon Default. If any Event of
Default shall have occurred and be continuing:
(a) The Secured Party for itself and for the benefit
of the Banks may exercise in respect of the Pledged Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party under the UCC (whether or not the UCC
applies to the affected Collateral), and the Secured Party may also, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Secured Party's offices or elsewhere, for cash,
or for future delivery, and upon such other terms as are commercially
reasonable. Each Pledgor agrees that, to the extent notice of sale shall be
required by applicable law, at least ten (10) days' notice to the Pledgors of
the time and place of any public sale or of the time after which any private
sale is to be made shall constitute reasonable notification thereof. The Secured
Party shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) Any cash received by the Secured Party shall be
applied to repay the Secured Obligations. Any surplus of such cash or cash
proceeds held by the Secured Party and remaining after payment in full of all
the Secured Obligations shall be paid over to the Pledgors or to whomsoever may
be lawfully entitled to receive such surplus.
(c) In connection with the sale of any Pledged
Collateral, the Secured Party is authorized, but not obligated, to limit
prospective purchasers to the extent deemed necessary or desirable by the
Secured Party to render such sale exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state laws and regulations, and no sale so made in good faith by the
Secured Party shall be deemed not to be "commercially reasonable" because so
made.
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(d) All rights and remedies of the Secured Party
expressed herein are in addition to all other rights and remedies possessed by
the Secured Party under the Credit Agreement and any other agreement or
instrument relating to the Obligations.
SECTION 14. Additional Provisions Concerning Sales of
Pledged Collateral. (a) The Pledgors recognize that the Secured Party may be
unable to effect a public sale of any or all of the Pledged Collateral by reason
of certain prohibitions contained in the laws of any jurisdiction outside the
United States or in the Securities Act and applicable state securities laws, but
may instead be compelled to resort to one or more private sales thereof to a
restricted group of purchasers who shall be obligated to agree, among other
things, to acquire such Pledged Collateral for their own account for investment
and not with a view to the distribution or resale thereof. The Pledgors
acknowledge and agree that any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agree that any such private sale shall, to
the extent permitted by law, be deemed to have been made in a commercially
reasonable manner. The Secured Party shall not be under any obligation to delay
a sale of any of the Pledged Collateral for the period of time necessary to
permit the Pledgors to register such securities under the laws of any
jurisdiction outside the United States, under the Securities Act or under any
applicable state securities laws, even if the Pledgors would agree to do so.
(b) The Pledgors further agree to do or cause or be
done, to the extent that the Pledgors may legally do so, all such other acts and
things as may be necessary to make such sales or resales of any portion or all
of the Pledged Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental authorities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the Pledgors'
expense; provided, however, that the Pledgors shall not be obligated to register
such securities under the laws of any jurisdiction including, without
limitation, under the Securities Act. The Pledgors further agree that a breach
of any of the covenants contained in this Section shall cause irreparable injury
to the Secured Party, and that the Secured Party has no adequate remedy at law
in respect of such breach and, as a consequence, agrees that each and every
covenant contained in this Section shall be specifically enforceable against the
Pledgors, and, to the fullest extent permitted by law, the Pledgors hereby waive
and agree not to assert as a defense against an action for specific performance
of such covenants that (i) the Pledgors' failure to perform such covenants shall
not cause irreparable injury to the Secured Party or the Banks or (ii) the
Secured Party for itself and on behalf of the Banks has an adequate remedy at
law in respect of such breach.
SECTION 15. Indemnity and Expenses. (a) The Pledgors
hereby agree to indemnify the Secured Party from and against any and all claims,
losses and liabilities growing out of or resulting from enforcement of this
Agreement, except claims, losses or liabilities, if any, resulting from the
Secured Party's gross negligence or willful misconduct. SUBJECT TO THE
FOREGOING, IT IS THE EXPRESS INTENTION OF THE PLEDGORS THAT THE SECURED PARTY
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DEFICIENCIES, JUDGMENTS OR
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EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY CONTRIBUTORY OR ORDINARY
CONCURRENT NEGLIGENCE OF ANY SUCH PERSON.
(b) The Pledgors shall, upon demand, but subject to
the terms of the Credit Agreement, pay to the Secured Party the amount of any
and all reasonable expenses, including the reasonable fees and expenses of the
such party's counsel and of its experts, that the Secured Party may incur in
connection with (i) administration of this Agreement, (ii) the evaluation,
appraisal, custody or preservation of, or sale of, collection from, or other
realization upon any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Secured Party for itself and for the
benefit of the Banks hereunder or (iv) the failure by the Pledgors to perform or
observe any of the provisions of this Agreement. Each Pledgor agrees to pay
interest on any sums payable to the Secured Party hereunder that are not paid
when due at a rate per annum equal to the Default Rate set forth in the Credit
Agreement.
SECTION 16. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, nor consent to any departure by the Pledgors
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Secured Party with the requisite consent of all other Banks,
if applicable, and the Pledgors, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose of which
given.
SECTION 17. Addresses for Notices. All notices and
other communications to any Pledgor provided for hereunder shall be given in the
manner and at the addresses and telecopy numbers as set forth for the Company in
the Credit Agreement, and shall become effective as specified in the Credit
Agreement and/or Loan Documents.
SECTION 18. Waiver of Marshaling. All rights of
marshaling of assets of the Pledgors, including any such right with respect to
the Pledged Collateral, are hereby waived by the Pledgors.
SECTION 19. Limitation by Law. All rights, remedies
and powers provided in this Agreement may be exercised only to the extent that
the exercise thereof does not violate any applicable provision of law, and all
the provisions of this Agreement are intended to be subject to all applicable
mandatory provisions of law which may be controlling and to be limited to the
extent necessary so that they shall not render this Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
SECTION 20. Severability. Should any clause,
sentence, paragraph, subsection or Section of this Agreement be judicially
declared to be invalid, unenforceable or void, such decision shall not have the
effect of invalidating or voiding the remainder of this Agreement, and the
parties hereto agree that the part or parts of this Agreement so held to be
invalid or unenforceable shall be deemed to have been stricken herefrom by the
parties hereto, and the
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remainder of this Agreement shall have the same force and effectiveness as if
such stricken part or parts had never been included herein.
SECTION 21. Termination; Reinstatement. (a) Each
Pledgor agrees that this Agreement and the Liens granted hereunder shall
terminate when, but only when, all Secured Obligations have been fully and
finally paid and performed and all Banks' Commitments under the Credit Agreement
and/or Loan Documents have expired or been terminated. At any time thereafter
upon the Pledgor's request, the Secured Party shall promptly reassign and
redeliver, including the termination of any financing statements (or cause to be
reassigned and redelivered) to the Pledgors, or to such Person or Persons as the
Pledgors shall designate in writing, against receipt, such of the Pledged
Collateral (if any) as shall not have been sold or otherwise applied by the
Secured Party for the benefit of itself or the Banks pursuant to the terms
hereof and shall still be held by it hereunder. Any such reassignment shall be
without recourse upon, or representation or warranty by, the Secured Party
(other than that the Secured Party for the benefit of itself and the Banks has
not sold, encumbered or otherwise transferred any interest in the Collateral
except as provided in this Agreement) and shall be at the sole reasonable cost
and expense of the Pledgors.
(b) This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time any amount received by the
Secured Party or any other of the Banks in respect of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Secured Party or such
other Banks upon the filing of any bankruptcy proceeding by or of the Pledgors
or upon the appointment of any intervenor or conservator of, or trustee or
similar official for, the Pledgors or any substantial part of their assets, or
otherwise, all as though such payments had not been made.
SECTION 22. No Waiver; Remedies. No failure on the
part of the Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by applicable law.
SECTION 23. Continuing Security Interest; Transfer of
the Notes. This Agreement creates a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the full and
final payment and performance of the Secured Obligations after the Pledgors
shall have no further obligation under the Loan Documents, (b) be binding upon
each Pledgor, its successors and assigns and (c) inure to the benefit of the
Secured Party for the benefit of itself and the Banks and their respective
permitted successors, transferees and assigns. Without limiting the generality
of the foregoing clause (c), any of the Banks may assign or otherwise transfer
all or a portion of its interests, rights and obligations in the Pledged
Collateral held by it pursuant to the Credit Agreement, or pursuant to any Loan
Document, to any other Person in accordance with the terms of the Credit
Agreement, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Secured Party for itself and for the
benefit of the Banks herein or otherwise. Upon the termination of the Secured
Obligations, the Liens granted hereby in
<PAGE> 143
accordance with the foregoing shall revert to Pledgors, and the Secured Party
will, at the Pledgors' sole cost and expense, promptly execute and deliver to
the Pledgor such documents as the Pledgor shall reasonably request to evidence
such termination. Any Subsidiary of the Company that executes a counterpart of
this Agreement after the date of this Agreement shall, upon such execution,
become a party hereto as a Pledgor.
SECTION 24. Security Interest Absolute. All rights of
the Secured Party for itself and for the benefit of Banks and security interests
hereunder, and all obligations of the Pledgors hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the
Credit Agreement, any of the Notes, or any other Loan Document;
(b) any change in the time, manner or place or
payment of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from the Credit
Agreement, any of the Notes, or any other Loan Documents;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgors or any other
third party.
SECTION 25. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF TEXAS.
SECTION 26. Inconsistencies. In the event of any
irreconcilable inconsistences between any provision of this Security Agreement
and any provision of the Credit Agreement and/or the Loan Documents, the
provisions of this Agreement shall control.
SECTION 27. Counterparts. This Agreement may be
executed in any number of counterparts, and by different parties hereto in
separate counterparts either in original form or by telecopy, each of which when
so executed shall be deemed to be an original and all of which when taken
together shall constitute but one and the same agreement.
SECTION 28. Interpretation.
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(a) In this Security Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural
number and vice versa;
(ii) the words "herein," "hereof" and
"hereunder" and other words of similar import refer
to this Security Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iii) reference to any Person includes such
Person's successors and assigns but, if applicable,
only if such successors and assigns are permitted by
this Security Agreement, and reference to a Person in
a particular capacity excludes such Person in any
other capacity or individually, provided that nothing
in this clause (iii) is intended to authorize any
assignment not otherwise permitted by this Security
Agreement;
(iv) reference to any agreement, document or
instrument means such agreement, document or
instrument as amended, supplemented or modified and
in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof,
and reference to any Note includes any Note issued
pursuant hereto in extension or renewal thereof and
in substitution or replacement therefor;
(v) unless the context indicates otherwise,
reference to any Article, Section, Schedule or
Exhibit means such Article or Section hereof or such
Schedule or Exhibit hereto;
(vi) the words "including" (and with
correlative meaning "include") means including,
without limiting the generality of any description
preceding such term;
(vii) with respect to the determination of
any period of time, the word "from" means "from and
including" and the word "to" means "to but
excluding"; and
(viii) reference to any law means such as
amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time.
(b) The Section headings herein are for convenience
only and shall not affect the construction hereof.
(c) No provision of this Security Agreement shall be
interpreted or construed against any Person solely because that Person or its
legal representative drafted such provision.
<PAGE> 145
SECTION 29. Submission to Jurisdiction. (a) ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY
OR THE UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH PLEDGOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS
PROVIDED IN TRANSACTION DOCUMENTS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30)
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SECURED
PARTY OR ANY OF THE PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGORS
IN ANY OTHER JURISDICTION.
(b) EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
SECTION 30. Waiver of Jury Trial. EACH PARTY HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT
OR UNDER ANY AMENDMENT, LOAN DOCUMENTS, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
ARISING FROM OR RELATING TO ANY BANKING OR FINANCIAL RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENT, AND AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 31. Final Agreement of the Parties. THIS
AGREEMENT (INCLUDING THE SCHEDULES HERETO), AND THE OTHER LOAN DOCUMENTS,
CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE
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TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 147
IN WITNESS WHEREOF, the Pledgors have caused this
Agreement to be duly executed and delivered as of the date first above written.
COMPANY/PLEDGOR:
GROUP MAINTENANCE AMERICA
CORP., a Texas corporation
By:
------------------------------------------
Name: Darren B. Miller
Title: Executive Vice President
<PAGE> 148
SUBSIDIARIES/PLEDGORS:
AIRTRON, INC.
COMMERCIAL AIR HOLDING COMPANY
GROUPMAC HOLDING CORP.
HALLMARK AIR CONDITIONING, INC.
MACDONALD-MILLER INDUSTRIES, INC.
By:
----------------------------------
Name: Darren B. Miller
Title: Vice President
<PAGE> 149
AGENT/SECURED PARTY:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, Agent for the Banks
By:
-----------------------------------------
Name: J. M. Walshak
Title: Vice President
<PAGE> 150
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
PERCENTAGE OF STOCK NUMBER
ISSUING COMPANY AND SHARES CERTIFICATE OF
OWNER/PLEDGOR OF STOCK STATE OF INCORPORATION PLEDGED NO. SHARES
----------------------- ---------------------- ------------- ----------- ------
<S> <C> <C> <C> <C>
Group Maintenance America Corp., GroupMAC Holding Corp. 100% 1 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., GroupMAC Management Co. 100% 1 1,000
a Texas corporation (Delaware)
GroupMAC Holding Corp., a A-ABC Appliance, Inc. 100% 8 and 50 and 50
Delaware corporation (Texas) NV 8
GroupMAC Holding Corp., a A-1 Appliance & Air Conditioning, 100% 6 300,000
Delaware corporation Inc. (Texas)
Group Maintenance America Corp., AA JARL, Inc. 100% 2 1,000
a Texas corporation (Texas)
Group Maintenance America Corp., Air Conditioning Engineers, Inc. 100% A001 1,000
a Texas corporation (Michigan)
Group Maintenance America Corp., Air Conditioning, Plumbing & 100% A001 1,000
a Texas corporation Heating Service Co., Inc. (Colorado)
Group Maintenance America Corp., Aircon Energy Incorporated 100% A001 1,000
a Texas corporation (California)
Group Maintenance America Corp., Airtron, Inc. 100% 235 329,513.104
a Texas corporation (Delaware)
Airtron, Inc., a Delaware corporation Airtron of Central Florida, Inc. 100% 1 100
(Florida)
Hallmark Air Conditioning, Inc., a Jerry Albert Air Conditioning, Inc. 100% 8 8,875
Texas corporation (Texas)
Group Maintenance America Corp., All Service Electric, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Arkansas Mechanical Services, Inc. 100% A001 1,000
a Texas corporation (Arkansas)
Group Maintenance America Corp., Barr Electric Corp 100% A001 1,000
a Texas corporation (Illinois)
Group Maintenance America Corp., Callahan Roach Products & 100% A001 1,000
a Texas corporation Publications, Inc.
(Colorado)
</TABLE>
<PAGE> 151
<TABLE>
<CAPTION>
PERCENTAGE OF STOCK NUMBER
ISSUING COMPANY AND SHARES CERTIFICATE OF
OWNER/PLEDGOR OF STOCK STATE OF INCORPORATION PLEDGED NO. SHARES
----------------------- ---------------------- ------------- ------------ ------
<S> <C> <C> <C> <C>
Group Maintenance America Corp., Central Carolina Air Conditioning 100% A001 1,000
a Texas corporation Company (North Carolina)
GroupMAC Holding Corp., a Charlie Crawford, Inc. 100% 4 1,000
Delaware corporation (Texas)
Group Maintenance America Corp., Commercial Air Holding Company 100% A001 1,000
a Texas corporation (Maryland)
Commercial Air Holding Company, Commercial Air, Power & Cable, 100% A001 100,000
a Maryland corporation Inc. (Maryland)
Group Maintenance America Corp., Costner Brothers, Inc. 100% 3 2,000
a Texas corporation (South Carolina)
Group Maintenance America Corp., Evans Services, Inc. 100% A001 1,000
a Texas corporation (Alabama)
Group Maintenance America Corp., Gilbert Mechanical Contractors, Inc. 100% A001 1,000
a Texas corporation (Minnesota)
Group Maintenance America Corp., HPS Plumbing Services, Inc., 100% A001 1,000
a Texas corporation (California)
GroupMAC Holding Corp., a Texas Hallmark Air Conditioning, Inc. 100% 30 180
corporation (Texas)
Group Maintenance America Corp., Hungerford Mechanical Corporation 100% A001 1,000
a Texas corporation (Virginia)
Group Maintenance America Corp., J. D. Steward Air Conditioning, Inc. 100% A001 1,000
a Texas corporation (Colorado)
GroupMAC Holding Corp., a Texas K & N Plumbing, Heating and Air 100% 8 5,000
corporation Conditioning, Inc. (Texas)
Group Maintenance America Corp., Linford Service Co. 100% A001 1,000
a Texas corporation (California)
Group Maintenance America Corp., MacDonald-Miller Industries, Inc. 100% A001 1,000
a Texas corporation (Washington)
MacDonald-Miller Industries, Inc., MacDonald-Miller Co., Inc. 100% 1 30,070
a Washington corporation (Washington)
MacDonald-Miller Industries, Inc., MacDonald-Miller Co., Inc. 100% 2 36,764
a Washington corporation (Washington)
MacDonald-Miller Industries, Inc., MacDonald-Miller Co., Inc. 100% 3 36,764
a Washington corporation (Washington)
</TABLE>
<PAGE> 152
<TABLE>
<CAPTION>
PERCENTAGE OF STOCK NUMBER
ISSUING COMPANY AND SHARES CERTIFICATE OF
OWNER/PLEDGOR OF STOCK STATE OF INCORPORATION PLEDGED NO. SHARES
----------------------- --------------------- ------------- ----------- ------
<S> <C> <C> <C> <C>
MacDonald-Miller Industries, Inc., MacDonald-Miller Service, Inc. 100% 1 500
a Washington corporation (Washington)
Group Maintenance America Corp., Masters, Inc. 100% A001 1,000
a Texas corporation (Maryland)
Group Maintenance America Corp., Mechanical Interiors, Inc. (Texas) 100% A001 1,000
a Texas corporation
Group Maintenance America Corp., Paul E. Smith Co. Inc. 100% 6 550
a Texas corporation (Indiana)
Group Maintenance America Corp., Ray and Claude Goodwin, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Sibley Services, Incorporated 100% 49 396
a Texas corporation (Tennessee)
Group Maintenance America Corp., Southeast Mechanical Service, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Sterling Air Conditioning, Inc. 100% A001 1,000
a Texas corporation (Texas)
Group Maintenance America Corp., United Acquisition Corp. 100% 1 1,000
a Texas corporation (Iowa)
Group Maintenance America Corp., Valley Wide Plumbing and Heating, 100% A001 1,000
a Texas corporation Inc. (Colorado)
Group Maintenance America Corp., Van's Comfortemp Air Conditioning, 100% A001 1,000
a Texas corporation Inc.
(Florida)
Group Maintenance America Corp., Vantage Mechanical Contractors, 100% A001 1,000
a Texas corporation Inc. (Maryland)
Group Maintenance America Corp., Wade's Heating and Cooling, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Willis Refrigeration, Air 100% 1 1,000
a Texas corporation Conditioning & Heating, Inc.
(Ohio)
Group Maintenance America Corp., Yale Incorporated 100% A001 1,000
a Texas corporation (Minnesota)
Group Maintenance America Corp., A-1 Mechanical of Lansing, Inc. 100% A001 1,000
a Texas corporation (Michigan)
</TABLE>
<PAGE> 153
<TABLE>
<CAPTION>
PERCENTAGE OF STOCK NUMBER
ISSUING COMPANY AND SHARES CERTIFICATE OF
OWNER/PLEDGOR OF STOCK STATE OF INCORPORATION PLEDGED NO. SHARES
----------------------- ---------------------- ------------- ----------- ------
<S> <C> <C> <C> <C>
Group Maintenance America Corp., AA Advance Air, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Atlantic Industrial Constructors, Inc. 100% A001 1,000
a Texas corporation (Virginia)
Group Maintenance America Corp., Central Air Conditioning 100% A001 1,000
a Texas corporation Contractors, Inc.
(Delaware)
Group Maintenance America Corp., Clark Converse Electric Service, Inc. 100% A001 100
a Texas corporation (Ohio)
Group Maintenance America Corp., Colonial Air Conditioning Company 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., Divco, Inc. 100% A-001 1,000
a Texas corporation (Washington)
Group Maintenance America Corp., Dynamic Software Corporation 100% 7 30
a Texas corporation (Maryland)
Group Maintenance America Corp., The Farfield Company 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., Ferguson Electric Corporation 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp, Gentzler Electrical Contractors, Inc. 100% A001 1,000
a Texas corporation (Texas)
Group Maintenance America Corp., Laney's, Inc. 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., Merritt Island Air & Heat, Inc. 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., New Construction Air Conditioning, 100% A001 1,000
a Texas corporation Inc.
(Michigan)
Group Maintenance America Corp., Noron, Inc. 100% A001 850
a Texas corporation (Ohio)
Group Maintenance America Corp., Phoenix Electric Company 100% A001 1,000
a Texas corporation (Delaware)
Group Maintenance America Corp., Reliable Mechanical, Inc. 100% A001 1,000
a Texas corporation (Delaware)
</TABLE>
<PAGE> 154
<TABLE>
<CAPTION>
PERCENTAGE OF STOCK NUMBER
ISSUING COMPANY AND SHARES CERTIFICATE OF
OWNER/PLEDGOR OF STOCK STATE OF INCORPORATION PLEDGED NO. SHARES
----------------------- ---------------------- ------------- ----------- ------
<S> <C> <C> <C> <C>
Group Maintenance America Corp., Romanoff Electric Corp. 100% A001 100
a Texas corporation (Ohio)
Group Maintenance America Corp., Sun Plumbing, Inc. 100% A001 1,000
a Texas corporation (Florida)
Group Maintenance America Corp., Team Mechanical, Inc. 100% A001 1,000
a Texas corporation (Utah)
Group Maintenance America Corp., Wiegold & Sons, Inc. 100% A001 1,000
a Texas corporation (Florida)
</TABLE>
<PAGE> 155
SCHEDULE II
CHIEF EXECUTIVE OFFICE LOCATIONS OF OTHER PLEDGORS
Airtron, Inc.
7813 North Dixie Drive
Dayton, Ohio 45414
Commercial Air Holding Company
12100 Baltimore Avenue
Beltsville, Maryland
Hallmark Air Conditioning, Inc.
4517 Southerland Road
Houston, Texas 77092
MacDonald-Miller Industries, Inc.
7717 Detroit SW
Seattle, Washington 98106
Group MAC Holding Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
<PAGE> 156
EXHIBIT 4.01(h)(i)
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
October 15, 1998
To each of the Banks party to the Second
Amended and Restated Credit Agreement
dated as of October 15, 1998 among
Group Maintenance America Corp.,
its Subsidiaries listed on the signature
pages thereto as guarantors ("Guarantors"),
such Banks and Chase Bank of Texas,
National Association, as Agent
("Credit Agreement") and to such Agent
Ladies and Gentlemen:
We have acted as counsel to Group Maintenance America Corp., a Texas corporation
("Borrower") and each of the Guarantors in connection with the Credit Agreement.
As used herein, the term "Texas Collateral Subsidiary" refers to each of A-ABC
Appliance, Inc., a Texas corporation, Group Maintenance America Corp., a Texas
corporation, Hallmark Air Conditioning, Inc., a Texas corporation, K&N Plumbing,
Heating, and Air Conditioning, Inc., a Texas corporation, AA JARL, Inc., a Texas
corporation, Charlie Crawford, Inc., a Texas corporation, Mechanical Interiors,
Inc., a Texas corporation, and Sterling Air Conditioning, Inc., a Texas
corporation.
This opinion is the opinion referred to in Section 4.01(h)(i) of the Credit
Agreement. Capitalized terms used herein and defined in the Credit Agreement but
not defined herein are used herein as therein defined.
In connection with this opinion, we have examined copies of the following
documents (the "Documents"):
(i) a counterpart of the Credit Agreement executed by the
Borrower;
<PAGE> 157
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 2
(ii) the 11 Notes dated October 15, 1998, one executed by the
Borrower for each Bank (the "Notes");
(iii) the Second Amended and Restated Security Agreement dated as of
October 15, 1998, executed by the Borrower and each Guarantor
in favor of the Agent (the "Security Agreement"); and
(iv) the Second Amended and Restated Pledge Agreement dated as of
October 15, 1998, executed by the Borrower and those
Guarantors signatory thereto ("Pledgors") favor of the Agent
(the "Pledge").
We have also examined originals or copies of such records and documents as we
have deemed necessary and relevant for purposes of this opinion. In addition, we
have relied on certificates or comparable documents of an officer of the
Borrower and each Guarantor as to certain matters of fact relating to this
opinion and have made such investigations of law as we have deemed necessary and
relevant as a basis for this opinion. We have assumed (a) the genuineness of all
signatures (including, without limitation, those of the Borrower, each Pledgor
and each Guarantor), (b) the authenticity of all documents and records submitted
to us as originals, (c) the conformity to original documents and records of all
documents and records submitted to us as copies and (d) the truthfulness of all
statements of fact contained therein.
The Credit Agreement, the Notes, and the Security Agreement are collectively
referred to as the "Borrower Loan Documents". The Credit Agreement and the
Security Agreement are collectively referred to as the "Guarantor Loan
Documents".
Based on the foregoing and subject to the limitations and assumptions set forth
in this opinion, and having due regard for such legal considerations as we deem
relevant, we are of the opinion that:
1. Each of the Borrower Loan Documents constitutes the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.
2. Each of the Guarantor Loan Documents constitutes the legal, valid
and binding obligation of each Guarantor enforceable against each Guarantor in
accordance with its terms.
3. The Pledge constitutes the legal, valid and binding obligation of
each of the Pledgors enforceable against each of the Pledgors in accordance with
its terms.
<PAGE> 158
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 3
4. The Security Agreement creates a security interest in the Borrower's
and each Texas Collateral Subsidiary's respective right, title and interest in
the Collateral (as defined in the Security Agreement) to the extent that a
security interest in such Collateral can be created under the Texas Business and
Commerce Code ("UCC"). The forms of the financing statements attached as Exhibit
A hereto ("Financing Statements") are in proper form, for filing with the Office
of the Secretary of State of Texas. To the extent the UCC is applicable to the
creation and perfection of a security interest in such Collateral and except for
any such Collateral the perfection of a security interest in which cannot be
obtained by the filing pursuant to the UCC of a financing statement with the
Office of the Secretary of State of Texas, upon the filing of the Financing
Statements in such forms pursuant to the provisions of the UCC, the security
interests referred to in the first sentence of this paragraph 4 in the
Borrower's and each Texas Collateral Subsidiary's respective right, title and
interest in such Collateral will be perfected. To the extent the UCC is
applicable to the perfection of a security interest created by the Pledge in
certificated securities in registered form described in the Pledge, perfection
of such security interest in such securities may be accomplished by delivery to
the secured party, and the secured party taking possession, in the State of
Texas of the security certificates representing such securities pursuant to the
Pledge.
The foregoing opinion is, with your concurrence, predicated on and
qualified in its entirety by the following:
(a) We are members of the Bar of the State of Texas. The foregoing
opinion is based on and is limited to the law of the State of Texas. We render
no opinion with respect to the law of any other jurisdiction.
(b) No opinion is expressed as to the creation, existence, perfection
or priority of any Lien except as expressly stated in paragraph 4 above.
Furthermore, we express no opinion as to (i) goods not located in Texas, (ii)
goods which are installed in or affixed to, or become a part of a product or
mass with, goods which are not items of collateral; (iii) any collateral which
consists of fixtures, crops, timber, minerals and the like or accounts or
general intangibles resulting from the sale thereof or letters of credit; (iv)
any collateral that is not reasonably identified in the description of
collateral set forth in the relevant Documents; or (v) any collateral in which
the Person purporting to grant a security interest does not have "rights" within
the meaning of Section 9.203(a)(3) of the UCC.
(c) Our opinion is subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, preference,
liquidation, conservatorship or other similar laws affecting creditor's rights
generally.
<PAGE> 159
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 4
(d) The enforceability of the Documents is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and we express no opinion as to the
availability of specific performance or any other equitable remedy.
(e) We express no opinion as to the legality, validity, binding effect
or enforceability of any provision in the Documents (i) purporting to restrict
access to courts or to legal or equitable remedies; (ii) purporting to establish
evidentiary standards; (iii) purporting to grant a right of set-off of moneys,
securities and other properties of Persons other than the Person granting such
right; (iv) providing for enforceability of any assignment of leases or rents
prior to the time that the lienholder obtains possession of the property covered
by any real property security document through foreclosure or appointment of a
receiver for the property covered thereby, or takes some action which is
judicially deemed to be the equivalent thereof; (v) purporting to irrevocably
appoint any Person as attorney-in-fact; (vi) purporting to permit the Agent or
any other Person to sell or otherwise dispose of any collateral except in
compliance with applicable law, (vii) purporting to establish standards for the
care of collateral in a secured party's possession other than as provided in
Section 9.207 of the UCC; (viii) purporting to indemnify, defend or hold
harmless any Person; (ix) purporting to affect any right to trial by jury, venue
or jurisdiction; or (x) pertaining to subrogation rights, delay or omission of
enforcement of rights or remedies, severability or marshaling of assets.
(f) We express no opinion as to any provision of the Documents insofar
as it provides that any Person purchasing a participation from a Bank pursuant
thereto may exercise set-off or similar rights with respect to such
participation.
(g) We express no opinion as to the adequacy or accuracy of any
description of real or personal property, and we have assumed that such
descriptions are adequate and accurate. We express no opinion as to title or
ownership of any property.
(h) We express no opinion as to the legality, validity, binding effect
or enforceability of any waiver under the Documents, or any consent thereunder,
relating to the rights of any party, or duties owing to them, which exist as a
matter of law except to the extent such party may legally so waive or consent
and has so waived and consented.
(i) We have assumed, as to each Person (including, without limitation,
the Borrower, each Pledgor and each Guarantor) shown as being a party to any of
the Documents, (i) that such Person is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized, (ii)
that each of the Documents to which such Person is shown as a party has been
duly authorized, executed and delivered by such Person, (iii) that such Person
has the requisite
<PAGE> 160
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 5
power and authority to execute, deliver and perform its obligations under the
Documents and will perform such obligations in compliance with all laws and
regulations applicable to it, (iv) that there are neither suits, actions or
proceedings pending against such Person nor judicial or administrative orders,
judgments, or decrees binding on such Person that affect the legality, validity,
binding effect or enforceability of the Documents to which such Person is a
party, (v) that no consent, license, approval or authorization of, or filing or
registration with, any governmental authority is required for the valid
execution, delivery and performance of the Documents, and (vi) that the
execution, delivery and performance of the Documents by such Person do not
violate (1) any provision of any law or regulation, (2) any order, judgment,
writ, injunction, award or decree of any court, arbitrator, or governmental
authority, (3) the charter of bylaws of such Person, or (4) any indenture, lease
or other agreement to which such Person is a party or by which such Person or
any of its assets is bound. Furthermore, we have assumed, as to each Person
(other than the Borrower, each Pledgor and each Guarantor) that each of the
Documents to which such Person is shown as a party constitutes the legal, valid
and binding obligation of such Person enforceable against such Person in
accordance with its terms, subject to the type of qualifications regarding
enforceability as are set forth in this opinion. We have also assumed that each
Bank will make each Loan for its own account in the ordinary course of its
commercial lending business and not with a view to, or for sale in connection
with, any distribution of the Notes and that no Bank is participating in any
such distribution.
(j) We have assumed that the Agent and the Banks will comply with each
usury savings clause in the Documents and that neither the Agent nor any of the
Banks has taken, reserved, charged or received interest, or will take, reserve,
charge or receive interest, except as provided in the Loan Documents. We express
no opinion as to the effect of the law of any jurisdiction other than the State
of Texas wherein any Bank may be located or wherein enforcement of the
Documents may be sought which limits the rates of interest legally chargeable
or collectible.
(k) Our opinion is subject to the qualification that certain remedial
provisions of the Documents are or may be unenforceable in whole or in part, but
such possible unenforceability of such remedial provisions will not render any
Document inadequate for enforcing payment of the indebtedness that is evidenced
by such Document and for the practical realization of the principal rights and
benefits afforded by such Document.
(l) In the case of property which becomes collateral after the date
hereof, Section 552 of the Bankruptcy Code limits the extent to which property
acquired by a debtor after the commencement of a case under the Bankruptcy Code
may be subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case.
<PAGE> 161
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 6
(m) We express no opinion as to any choice of law provision insofar as
it may relate to any matter referred to in Section 8.110 or Section 9.103 of
the UCC or any financing statement. Furthermore, our opinion is subject to the
effect of 12 U.S.C. Section 85.
(n) Insofar as any Document covers personal property, we call your
attention to Section 9.311 of the UCC which states that a debtor's rights in
collateral may be voluntarily or involuntarily transferred (by way of sale,
creation of a security interest, attachment, levy, garnishment or other judicial
process) notwithstanding a provision in the security agreement prohibiting any
transfer or making the transfer constitute a default. Our opinion is subject to
the operation of Section 9.311 of the UCC.
(o) This opinion is given only as of the date hereof, and we have no
obligation to report to you or any other Person any fact or circumstance that
may hereafter come to our attention or any change in law. Without limiting the
generality of the foregoing, you are advised that filing of continuation
statements may be required to maintain perfection of security interests, and
perfection of security interests may terminate if the debtor changes its name,
identity, corporate structure or the jurisdiction of its chief executive office
or the collateral is moved to a new jurisdiction. As to any collateral as to
which possession is required for the perfection of a security interest, a
perfected security interest will not continue (with certain exceptions) if
possession is not maintained. Continuation of perfection of a security interest
in proceeds is limited to the extent set forth in the UCC.
(p) We have assumed that (i) value has been given within the meaning of
Section 9.203(a)(2) of the UCC and (ii) financing statements have been or will
be properly filed in the proper offices in the relevant jurisdictions for
perfection of the security interests in all collateral pursuant to the
provisions of local law in effect in the relevant jurisdictions.
This opinion is to be delivered only to you and your assignees permitted under
the Documents and only in connection with the transactions described above and
may not be quoted, circulated, or published, in whole or in part, or furnished
to any other Person (other than to independent auditors
<PAGE> 162
[BRACEWELL & PATTERSON, L.L.P. LETTERHEAD]
To the Banks and the Agent
October 15, 1998
Page 7
and attorneys, participants or transferees, regulators or government agencies,
or pursuant to a court order, subpoena or other legal process) without our prior
written consent.
Very truly yours,
Bracewell & Patterson, L.L.P.
<PAGE> 163
[RANDOLPH W. BRYANT LETTERHEAD]
October 15, 1998
To the Banks and the Agent
referred to below:
c/o Chase Bank of Texas,
National Association
545 West 19th Street
Houston, Texas 77008
Ladies and Gentlemen:
As Senior Vice President and General Counsel of Group Maintenance
America Corp., a Texas corporation (the "Company"), I have acted as counsel for
the Company and its subsidiaries (the "Subsidiaries") in connection with the
Second Amended and Restated Credit Agreement (the "Credit Agreement") dated as
of October 15, 1998, among the Company, the Subsidiaries, Chase Bank of Texas,
National Association, as Agent (the "Agent"), and the Banks party thereto (the
"Banks"). This opinion is being delivered to you pursuant to Section 4.01(h)(ii)
of the Credit Agreement. Unless otherwise defined herein, capitalized terms used
herein have the definitions set forth In the Credit Agreement.
I am familiar with the corporate proceedings of the Company and the
Subsidiaries (the Company and such subsidiaries are herein collectively referred
to as the "GroupMAC Entities") relating to the authorization of the Credit
Agreement. In connection with the Credit Agreement, I have examined such
statutes, corporate records and other instruments and documents as I have deemed
it necessary to examine for the purposes of this opinion.
Based upon the foregoing and having regard to the legal considerations
that I deem relevant, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to execute and deliver each of the
Loan Documents to which it is a party and to perform its obligations thereunder.
<PAGE> 164
October 15, 1998
Page 2
2. Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to execute and deliver each of
the Loan Documents to which it is a party and to perform its obligations
thereunder.
3. Each of the Company, GroupMAC Management Co. and GroupMAC Holding
Corp. is duly licensed or qualified in each jurisdiction in which the character
of its business or its ownership of property requires such licensing or
qualification except where the failure to be so licensed or qualified would not
have a material adverse effect on the business or financial condition of the
Company and its Subsidiaries, taken as a whole.
4. Each of the GroupMAC Entities has duly authorized, by all necessary
corporate action on its part, its execution, delivery and performance of the
Loan Documents to which it is a party and the consummation of the transactions
contemplated therein,
5. Each of the GroupMAC Entities has executed and delivered the Loan
Documents to which it is a party.
6. The execution and delivery by each GroupMAC Entity of the Loan
Documents to which it is a party, and the performance of its obligations
thereunder, (i) do not violate (A) any provision of any existing law or
regulation applicable to the GroupMAC Entities, (B) any order, judgment, writ,
injunction, award or decree, known to me after due inquiry, of any court,
arbitrator, or government authority applicable to GroupMAC Entities, (C) the
charter or by-laws of any GroupMAC Entity, or (D) any material indenture,
material lease or other material agreement, known to me after due inquiry, to
which any GroupMAC Entity is a party or by which any GroupMAC Entity or any of
its assets is bound, and (ii) do not result in, or require, the creation or
imposition of any lien on any property, assets or revenues of any GroupMAC
Entity pursuant to the provisions of any such Indenture, lease or other
agreement, except for liens created by, or required to be created by, any of the
Loan Documents.
7. No consent, license, approval or authorization of, or filing or
registration with, any governmental authority, which has not been obtained or
made, is required for the valid execution and delivery by each GroupMAC Entity
of the Loan Documents to which it is a party.
8. To the best of my knowledge, there is no litigation, investigation
or administrative proceeding of or before any court arbitrator or governmental
authority pending or threatened against any GroupMAC Entity (1) with respect to
the Loan Documents or (ii) that, in my reasonable judgment, would have a
material adverse effect on the business or financial condition of the Company
and its Subsidiaries, taken as a whole.
<PAGE> 165
October 15, 1998
Page 3
I am a member of the State Bar of Texas, and the opinions expressed
herein am based upon and are limited exclusively to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the federal laws
of the United States of America. For purposes of this opinion I have assumed
with your permission, that the laws of any state other than Texas and the
corporate laws of Delaware applicable to the matters addressed herein are
identical to the laws of the State of Texas.
This opinion is provided solely for your benefit and the respective
successors and assigns of each of you and may not be relied upon by, or
disclosed to, any other persons.
Very truly yours,
<PAGE> 166
EXHIBIT 11.10(c)
FORM
OF
ASSIGNMENT AND ACCEPTANCE
DATED ________________, 199___
Reference is made to the Second Amended and Restated Credit Agreement
dated as of October 15, 1998 (the "Credit Agreement"), among Group Maintenance
America Corp., a Texas corporation (the "Company"), certain Subsidiaries of the
Company, as Guarantors, the Banks party thereto, Chase Bank of Texas, National
Association, as Agent for such Banks, Bank of America Texas, N.A., as co-agent,
Paribas, as syndication agent, and ABN AMRO Bank, N.V., as documentation Agent.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.
_________________________ (the "Assignor') and _________________ (the
"Asignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee (without
recourse to the Assignor), and the Assignee hereby purchases and assumes from
the Assignor, a ___% interest (the "Percentage Interest") in and to all the
Assignor's rights and obligations under the Credit Agreement as of the
Assignment Date (as defined below), including, without limitation, (i) the
Percentage Interest in the Commitment of the Assignor on the Assignment Date,
(ii) the Percentage Interest in each of the Loans owing to the Assignor
outstanding on the Assignment Date, (iii) the Percentage Interest in all unpaid
interest with respect to such Loans and all commitment fees due to Assignor in
its capacity as a Bank accrued to the Assignment Date and (iv) the Percentage
Interest in any Notes held by the Assignor.
2. The Assignor (a) represents that as of the date hereof its
Commitment for all Loans (without giving effect to assignments thereof which
have not yet become effective) is $ _____________, and the outstanding balance
of its Loans (unreduced by any assignments thereof which have not yet become
effective) is $ ______________, broken down as follows: _______________________
________________________________________________________________________________
_______________________________________________________________________________;
(b) makes no representation or warranty and assumes no responsibility with
respect to any statements, covenants, warranties or representations made in or
in connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any instrument or document furnished pursuant thereto,
other than that it is the legal and beneficial owner of the interest being
assigned by it
<PAGE> 167
hereunder and that such interest is free and clear of any adverse claim; (c)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any party to the Credit Agreement or the
performance or observance by any party to the Credit Agreement of any of its
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; (and) (d) attaches the Note issued to Assignor and
requests that the Agent exchange such Note for a new Note executed by the
Company and payable to the Assignee in a principal amount equal to
$ ____________ and a new Note executed by the Company and payable to the
Assignor in a principal amount equal to $ _____________.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section ______ thereof and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (iv) confirms that it is
an Eligible Assignee; (v) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Bank; (vii) agrees that it
will comply with Section ____ of the Credit Agreement with respect to
information furnished to it by the Company, the Agent or the Assignor; (viii)
confirms that it has delivered a completed Administrative Questionnaire to the
Agent; and (ix) attaches to this Assignment and Acceptance the Prescribed Forms.
4. The effective date for this Assignment and Acceptance shall be
______________ (the "Assignment Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance and
recording by the Agent pursuant to Section ____________ of the Credit Agreement.
5. Upon such acceptance and recording, from and after the Assignment
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Notwithstanding anything to the contrary contained in the Credit
Agreement, the Company shall be required to reimburse the Agent, the Assignor or
& Assignee for any costs and
<PAGE> 168
expenses (including attorneys' fees) incurred by such Person in connection with
this Assignment and Acceptance.
7. Upon such acceptance and recording, from and after the Assignment
Date, the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Assignment Date by the Agent or with
respect to the making of this assignment directly between themselves.
8. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Texas.
[NAME OF ASSIGNOR),
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[NAME OF ASSIGNEE),
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 169
Consented and Agreed to as
of the date first above written.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
GROUP MAINTENANCE AMERICA CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE> 1
Exhibit 12
Group Maintenance America Corp. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(in thousands, except ratio of earnings to fixed charges)
(Unaudited)
<TABLE>
<CAPTION>
Ten months
Year ended ended Year ended Year ended Year ended
December 31, December 31, February 28, February 29, February 28,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Income (loss) before income tax provision $ 46,255 $ (810) $ 3,908 $3,790 $1,700
Fixed Charges 9,963 2,117 514 493 306
------------------------------------------------------------------------------
Total $ 56,218 $ 1,307 $ 4,422 $4,283 $2,006
==============================================================================
Fixed Charges:
Interest expense (a) $ 6,595 $ 1,542 $ 82 $ -- $ --
Interest portion of rent expense (b) 3,368 575 432 493 306
------------------------------------------------------------------------------
Total $ 9,963 $ 2,117 $ 514 $493 $306
==============================================================================
Ratio of earnings to fixed charges 5.64 -- 8.60 8.69 6.56
Dollar amount of coverage deficiency $ 810
===========
</TABLE>
(a) - Includes amortization of deferred financing costs.
(b) - Estimated at 25% of rent expense.
<PAGE> 1
EXHIBIT 21
GROUP MAINTENANCE AMERICA CORP.
AND SUBSIDIARIES
ORGANIZATION CHART
AS OF DECEMBER 31, 1998
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)
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)
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, Inc. (Illinois)
Costner Brothers, Inc. (South Carolina)
Divco, Inc. (Washington)
Dynamic Software Corporation (Maryland)
Evans Services, Inc. (Alabama)
The Farfield Company (Delaware)
Ferguson Electric Corporation (Delaware)
Gentzler Electrical Contractors, Inc. (Delaware)
Gilbert Mechanical Contractors, Inc. (Minnesota)
GroupMAC Holding Corp. (Delaware)
A-1 Appliance & Air Conditioning, Inc. (Delaware)
A-ABC Appliance, Inc. (Texas)
A-ABC Services, Inc. (Delaware)
Charlie Crawford, Inc. (Delaware)
Hallmark Air Conditioning, Inc. (Delaware)
K & N Plumbing, Heating and Air Conditioning, Inc. (Delaware)
Trinity Contractors, Inc. (Delaware)
<PAGE> 2
GroupMAC Management Co. (Delaware)
HPS Plumbing Services, Inc. (California)
Hungerford Mechanical Corporation (Virginia)
J. D. Steward Air Conditioning, Inc. (Colorado)
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)
Masters, Inc. (Maryland)
Mechanical Interiors, Inc. (Delaware)
Merritt Island Air & Heat, Inc. (Delaware)
New Construction Air Conditioning, Inc. (Michigan)
Noron, Inc. (Ohio)
Paul E. Smith Co., Inc. (Indiana)
Phoenix Electric Company (Delaware)
Ray and Claude Goodwin, Inc. (Florida)
Reliable Mechanical, Inc. (Delaware)
Romanoff Electric Corp. (Ohio)
Sibley Services, Incorporated (Tennessee)
Southeast Mechanical Service, Inc. (Florida)
Stephen C. Pomeroy, Inc. (Delaware)
Sterling Air Conditioning, Inc. (Delaware)
Sun Plumbing, Inc. (Florida)
Team Mechanical, Inc. (Utah)
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)
Wade's Heating & Cooling, Inc. (Florida)
Wiegold & Sons, Inc. (Florida)
Willis Refrigeration, Air Conditioning & Heating, Inc. (Ohio)
Yale Incorporated (Minnesota)
2
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
The Board of Directors
Group Maintenance America Corp.
We consent to incorporation by reference in the registration statements (No.
333-41749, No. 333-41751, No. 333-58651, No. 333-60537 and No. 333-69421) on
Form S-8 and in the registration statements (No. 333-63923 and No. 333-69533) on
Form S-4 of Group Maintenance America Corp. of (i) our report dated February 23,
1999, relating to the consolidated balance sheets of Group Maintenance America
Corp. and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year ended December 31, 1998, the ten months ended December 31, 1997 and
the year ended February 28, 1997, and (ii) our report dated July 11, 1997
relating to the balance sheets of Group Maintenance America Corp. as of
December 31, 1996 and April 30, 1997, and the related statements of operations,
shareholders' equity (deficit) and cash flows for the periods then ended, which
reports appear in the December 31, 1998 annual report on Form 10-K of Group
Maintenance America Corp.
KPMG LLP
Houston, Texas
March 30, 1999
<PAGE> 1
EXHIBIT 24
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ DAVID L. HENNINGER
-----------------------------------
David L. Henninger
<PAGE> 2
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ TIMOTHY JOHNSTON
-----------------------------------
Timothy Johnston
<PAGE> 3
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ ANDREW J. KELLY
-----------------------------------
Andrew J. Kelly
<PAGE> 4
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ THOMAS B. MCDADE
-----------------------------------
Thomas B. McDade
<PAGE> 5
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ ROBERT MUNSON, III
-----------------------------------
Robert Munson, III
<PAGE> 6
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ JAMES P. NORRIS
-----------------------------------
James P. Norris
<PAGE> 7
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ FREDRIC J. SIGMUND
-----------------------------------
Fredric J. Sigmund
<PAGE> 8
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ JOHN M. SULLIVAN
-----------------------------------
John M. Sullivan
<PAGE> 9
GROUP MAINTENANCE AMERICA CORP.
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Group Maintenance
America Corp., does hereby appoint J. Patrick Millinor, Jr., Randolph W. Bryant
and Darren B. Miller, and each of them, severally, his true and lawful
attorneys, or attorney, to execute in his name, place and stead, in his
capacity as a Director of said Company, an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and any and all amendments to said Annual
Report, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission. Each of said
attorneys shall have the power to act hereunder with or without the other of
said attorneys and shall have full power and authority to do and perform, in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument
this 30th day of March, 1999.
/s/ JAMES D. WEAVER
-----------------------------------
James D. Weaver
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,371
<SECURITIES> 0
<RECEIVABLES> 192,606
<ALLOWANCES> 5,355
<INVENTORY> 17,843
<CURRENT-ASSETS> 251,052
<PP&E> 49,582
<DEPRECIATION> 10,390
<TOTAL-ASSETS> 701,081
<CURRENT-LIABILITIES> 164,611
<BONDS> 0
0
0
<COMMON> 33
<OTHER-SE> 315,896
<TOTAL-LIABILITY-AND-EQUITY> 701,081
<SALES> 761,541
<TOTAL-REVENUES> 761,541
<CGS> 585,396
<TOTAL-COSTS> 585,396
<OTHER-EXPENSES> 123,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,188
<INCOME-PRETAX> 46,255
<INCOME-TAX> 20,326
<INCOME-CONTINUING> 25,929
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,929
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.93
</TABLE>
