<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 1999
-------------------
Building One Services Corporation
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(Exact name of registrant specified in Charter)
Delaware 000-23421 52-2054952
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
110 Cheshire Lane, Suite 210, Minnetonka, Minnesota 55305
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(Address of principal executive offices) Zip Code
Registrant's telephone, including area code: 612/249-4900
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Item 5. Other Events.
Building One Services Corporation, a Delaware corporation (the "Company"),
announced that it had entered into an Agreement and Plan of Merger, dated
November 2, 1999 (the "Merger Agreement"), with Group Maintenance America
Corp., a Texas corporation ("GroupMAC"). Under the terms of the Merger
Agreement, the Company shall be merged with and into GroupMAC (the "Merger").
On November 3, 1999, the parties issued a press release announcing the Merger.
The Company hereby incorporates by reference into this Item 5 the press
release, attached hereto as Exhibit 99(a).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
99(a) Press release dated November 3, 1999.
99(b) Agreement and Plan of Merger, dated as of November 2, 1999, by and
between Group Maintenance America Corp. and Building One Services
Corporation.
99(c) Subscription and Exchange Agreement, dated as of November 2, 1999,
between Group Maintenance America Corp. and Boss II, LLC.
99(d) Form of Investor's Rights Agreement among Group Maintenance America
Corp. and Boss II, LLC.
99(e) Form of Statement of Designations for the Convertible Preferred
Stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUILDING ONE SERVICES CORPORATION
Dated: November 5, 1999 By: /s/ F. Traynor Beck
--------------------------------
F. Traynor Beck
Executive Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Exhibit
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99(a) Press release dated November 3, 1999.
99(b) Agreement and Plan of Merger, dated as of November 2, 1999, by and
between Group Maintenance America Corp. and Building One Services
Corporation.
99(c) Subscription and Exchange Agreement, dated as of November 2, 1999,
between Group Maintenance America Corp. and Boss II, LLC.
99(d) Form of Investors' Rights Agreement among Group Maintenance America
Corp.
99(e) Form of Statement of Designations for the Convertible Preferred Stock.
<PAGE>
Exhibit 99(a)
[LOGO OF GROUPMAC] [LOGO OF BUILDING ONE]
Group Maintenance America Corp Building One Services Corporation
8 Greenway Plaza, Suite 1500 110 Cheshire Lane, Suite 210
Houston, TX 77046 Minnetonka, MN 55391
(888) 626-4984 (612) 249-4900
FOR FURTHER INFORMATION
AT GROUPMAC: AT BUILDING ONE: AT FRB/BSMG WORLDWIDE:
Darren B. Miller, CFO Tim Clayton, CFO Norha Lee Darcy Bretz
Russell K. Bay, Vice Rob Moorhead, General Media Inquiries
President Vice President Inquiries
(888) 626-4984 (800) 327-1348 (212) 661-8030 (312) 640-6756
FOR IMMEDIATE RELEASE
WEDNESDAY, NOVEMBER 3, 1999
GROUPMAC AND BUILDING ONE TO COMBINE FORCES
MERGER TO CREATE
LARGEST U.S. FACILITIES SERVICES COMPANY
. Combined annual revenues over $3.2 billion
. Service capability in all top 100 U.S. cities
. Affiliate of Apollo Management IV, L.P. to invest $150 million
. Transaction expected to be accretive to earnings per share in 2000
. Both companies report on-target Q3 earnings
HOUSTON, November 3, 1999 -- Building One Services Corporation (Nasdaq: BOSS)
and Group Maintenance America Corp. (NYSE: MAK), today announced that they have
signed a definitive agreement to merge two of the largest facilities services
companies in the United States. The combined organization will be the largest
company in the industry with combined revenues of over $3.2 billion and combined
EBITDA of over $300 million for the twelve-month period ending June 30, 1999.
Under the terms of the merger, which has been unanimously approved by the boards
of directors of both companies, each outstanding share of Building One common
stock will be exchanged for 1.25 shares of GroupMAC common stock. As part of
the merger, GroupMAC shareholders may elect to receive cash for up to 50 percent
of their shares at $13.50 per share (up to $150 million in the aggregate),
subject to pro-ration. If this cash election is fully subscribed, up to
approximately 11 million GroupMAC shares (or approximately 29% of its shares
currently outstanding) will be
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cancelled in the merger. The transaction is expected to be tax-free to the
shareholders of both companies, except GroupMAC shareholders to the extent of
the cash they receive, and will be accounted for under purchase accounting
rules. The merger is subject to the approval of both companies' shareholders,
concurrent completion of the Apollo investment, regulatory approval and other
customary closing conditions, and is expected to close in the first quarter of
2000. The name of the combined company will be announced on or before the
closing.
Merger Creates Nation's Leading Facilities Services Provider
The combined company, with over 27,000 employees, will have operations in over
250 locations nationwide, providing one or more of mechanical, electrical and
janitorial services in all of the top 100 U.S. markets. In addition, the
combined company will be able to provide all three of its services in 43 of the
top 100 markets.
The combined company will be headquartered in Houston, Texas, and will be
operated by an experienced management team led by J. Patrick Millinor, Jr.,
current chief executive officer of GroupMAC, and Joseph Ivey, current chief
executive officer of Building One. Millinor will serve as the chairman of the
new combined company and Ivey will serve as president and chief executive
officer. The board of directors of the combined company will include
representatives from each of the merged companies, including Millinor and Ivey,
as well as representatives from Apollo and a number of outside directors.
"The merger of Building One and GroupMAC creates the undisputed leader in
providing facilities services in the United States," said Joe Ivey. "The
combination of our two companies' electrical and mechanical operations
significantly enhances our geographic coverage and expands our capabilities.
When combined with Building One's janitorial division, already in all 50 states,
this merger gives us the foundation for a truly world class facilities services
company."
Millinor added, "Our combined strengths in HVAC, electrical, process piping,
controls, voice and data and other high tech applications mean the combined
company will be a major participant in the accelerating trend in upgrading
America's buildings and infrastructure and in the ongoing servicing of these
essential systems. The combined company will benefit from enhanced financial
and operational resources, enabling us to compete more effectively within the
major U.S. markets. This merger multiplies the range of value-added services we
provide to our customers, especially national accounts. It's a win-win for the
customers, employees and shareholders of both companies."
Apollo Investment
Concurrent with the closing of the merger, an affiliate of Apollo Management IV,
L.P., a private investment firm, will exchange its Building One convertible debt
and $150 million of cash for approximately $255 million of GroupMAC convertible
preferred stock. The cash proceeds from the investment will be used to fund the
cash election option for up to approximately 11 million shares of GroupMAC
common stock in the merger.
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The preferred stock will bear a coupon rate of 7.25 percent, is payable on a
quarterly basis, and matures in 2012. The preferred stock will be convertible
into GroupMAC common stock at a conversion price of $14.00 per common share.
Millinor stated, "We are pleased with the confidence that Apollo has shown in
us. Since GroupMAC went public in 1997, we have more than doubled our earnings
per share. The Apollo investment sends a clear message that both management and
Apollo believe that the strong historical performance and future growth
potential of the combined company make for compelling value creation. With a
solid financial partner like Apollo, the strategic possibilities for the
combined company are broadened, and its dependence on the vagaries of the equity
and debt markets is reduced. We believe this greatly enhances the prospects for
immediate and longer term increases in shareholder value."
"Building One and GroupMAC have each built exceptional organizations, assembling
some of the best-in-class companies in this industry to target tremendous new
opportunities in a rapidly evolving market," said Michael Gross, a partner at
Apollo. "Combining GroupMAC and Building One creates a very formidable
operation, with national reach and market leading service offerings and
technical capabilities. We are expecting dynamic growth out of the company in
the future."
Financial Implications of Transactions
An underwritten commitment letter from Bank of America, N.A. and Chase Bank of
Texas, N.A. (as Co-Lead Arrangers and Co-Book Managers) to provide a total of
$800 million in financing has been received by GroupMAC. It is expected that
Building One's $200 million of senior subordinated debt will be assumed by
GroupMAC and remain outstanding, and that GroupMAC will refinance its senior
subordinated notes as a result of change in control provisions in that
Indenture.
After the completion of the merger, the combined company expects to have
approximately 81 million shares outstanding, on a fully diluted basis, assuming
conversion of the preferred stock and full election of the GroupMAC cash
election option in the merger.
Joe Ivey stated, "From a financial perspective, this transaction will put the
combined company in a strong position to build on its industry leadership. The
combination will result in a company with significantly increased market
capitalization, increased liquidity through an estimated public float of at
least 27 million shares, and the ability to attract new sources of debt and
equity investors. The combined company's strong cash flows, representing more
than $300 million of EBITDA, and a conservative debt to total capitalization
ratio of less than 50 percent, translates into significantly greater financial
flexibility."
Chase Securities Inc. acted as financial advisor to GroupMAC in this
transaction. Bear Stearns acted as financial advisor to Building One.
Third Quarter Earnings
GroupMAC will report diluted earnings per share of $0.39 and Building One will
report $0.54 diluted earnings per share for the third quarter. Millinor said,
"The environment for our services
<PAGE>
remains positive, and the combination of these two strong companies should
further ensure earnings growth consistent with analyst expectations."
The companies will discuss their third quarter results in detail in their
regular earnings announcements and during subsequent conference calls. Building
One is scheduled to release earnings before market hours on Wednesday, November
3, 1999 and will host a conference call on the same day at 3:00 p.m. Eastern
Time. GroupMAC will release its results after market hours on Wednesday,
November 3, 1999 and will host a conference call on Thursday, November 4, 1999
at 12:00 p.m. Eastern Time.
There will be a conference call on November 3, 1999 at 11:00 a.m. Eastern Time
to discuss this announcement. To participate in the call from the United
States, dial in on 1-800-305-1078. All callers should ask to be included in the
"GroupMAC/Building One Merger Conference Call." In addition, callers may view
the presentation online at www.vcall.com. For a conference call replay, please
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dial 888-266-2086, confirmation number 2399592.
Apollo Management IV, L.P. is a private investment firm based in New York and
Los Angeles. Since its inception in 1990, Apollo and its affiliated funds have
invested over $10 billion of capital in response to the needs of its strategic
partners in a broad range of businesses.
Building One Services Corporation is a leader in the facilities services
industry and provides the many products and services needed for the routine
operation and maintenance of a building. Building One currently has annualized
revenues of approximately $1.8 billion and provides electrical, mechanical,
janitorial and maintenance services to customers around the country.
Group Maintenance America Corp. is a leader in the $120+ billion market of
providing mechanical and electrical services to commercial, industrial and
residential customers nationwide. Headquartered in Houston, Texas, the company
currently has operations in 110 locations in 28 states throughout the United
States and has annual revenues of approximately $1.5 billion.
This press release and our other public documents contain forward-looking
statements. Any or all of our forward-looking statements in this press release
or in any other public statements we make may turn out to be wrong. They can be
affected by inaccurate assumptions we might make or by known or unknown risks
and uncertainties, including, without limitation, the following: our inability
to achieve synergies; the inability to effectively integrate the two companies;
the volatility of the financial markets; the risks associated with significant
indebtedness; our dependence on key personnel and hourly wage and technical
employees; our inability to maintain favorable relations with labor unions;
risks related to our consolidation strategy, our ability to complete
acquisitions and the continuing consolidation in the industry; our ability to
integrate acquisitions; risks related to acquisition financing, including
potential dilution; possible significant amortization charges; exposure to
downturns in residential, commercial and industrial construction; substantial
competition; and other factors affecting our respective prospects described in
our respective annual reports on Form 10-K for the year ended December 31, 1998
filed with the Securities and Exchange Commission and in our other public
filings.
<PAGE>
TRANSACTION HIGHLIGHTS
----------------------
Immediate Impact of Merger
. Creates the clear leader in the facilities services industry
. Combining GroupMAC's market penetration in the mechanical services
segment and Building One's electrical and janitorial services
capabilities increases immediate cross-marketing and service bundling
opportunities
. Expands national footprint with minimal overlap in field operations
. Purchasing power and other cost synergy opportunities enhanced
Combined Organization
. Over 250 operating locations in 43 states
. Provides at least one service offering in all of top 100 U.S. cities
. Provides mechanical or electrical services in 87 of top 100 U.S. cities
. Provides mechanical, electrical and janitorial services in 43 of top 100
cities
. Over 27,000 skilled employees
. Experienced management team
. Business mix breakdown:
- 49% mechanical; 43% electrical; 8% janitorial
- 52% maintenance, repair and replacement; 48% new construction
- 90% commercial/industrial; 10% residential
Strategic Growth Opportunities Resulting from Merger
. Expanded network of mechanical and electrical service companies creates
greater leverage opportunities from:
. Increasing demand for single-source service providers by local,
regional and national accounts
. Rapidly expanding demand for information technology and
telecommunication related services . Accelerating trend in upgrading
HVAC, electrical and voice and data systems throughout the country
. New markets for bundled services and energy related upgrades created
by electrical utility deregulation
. Continued acquisition of "best-in-class" companies with a focus on the
remaining top markets
. Development of a total facilities management strategy to leverage both
the janitorial and mechanical/electrical services divisions of the
company
Combined Financial Highlights (Last 12 months ended June 30, 1999)
. Revenues over $3.2 billion
. EBITDA in excess of $300 million
. Total assets of approximately $2.2 billion
<PAGE>
. Total debt of approximately $845 million
. Approximately 81 million fully diluted shares outstanding
. Interest coverage ratio of approximately 4.0 times
. Total debt to total capitalization under 50 percent
Summary
. Transaction expected to be accretive to earnings per share in 2000
. Greatly enhanced market share with minimal overlap among operating
companies
. Increased market capitalization, public float and market liquidity
. Strong financial partner in Apollo to support strategic growth plan
. Good cultural fit
<PAGE>
Exhibit 99(b)
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AGREEMENT AND PLAN OF MERGER
Dated as of November 2, 1999
by and between
Group Maintenance America Corp.
and
Building One Services Corporation
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<PAGE>
TABLE OF CONTENTS
Page(s)
ARTICLE I
THE MERGER
Section 1.1 The Merger....................................... 1
Section 1.2 Closing.......................................... 2
Section 1.3 Effects of the Merger............................ 2
Section 1.4 Articles of Incorporation and Bylaws............. 3
Section 1.5 Directors........................................ 3
Section 1.6 Officers......................................... 3
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock...................... 4
Section 2.2 Effect of Merger on Delaware Common Stock........ 4
Section 2.3 Exchange of Delaware Company Stock Certificates.. 6
Section 2.4 Texas Company Eligible Shares.................... 11
Section 2.5 Manner of Conversion of Texas Company Eligible
Shares into Cash; Limitations Thereon............ 11
Section 2.6 Surrender of Texas Company Stock Certificates
and Payment...................................... 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DELAWARE COMPANY
Section 3.1 Due Incorporation, Etc........................... 17
Section 3.2 Qualification as Foreign Entities................ 17
Section 3.3 Capital Stock.................................... 18
Section 3.4 Capitalization of the Delaware Company
Subsidiaries..................................... 19
Section 3.5 Ownership of Equity Interests.................... 19
Section 3.6 Corporate Power and Authority.................... 19
Section 3.7 No Conflicts or Consents......................... 20
Section 3.8 SEC Reports and Financial Statements............. 21
Section 3.9 Information in Disclosure Documents and
Registration Statement........................... 22
Section 3.10 Litigation....................................... 23
Section 3.11 No Material Adverse Change....................... 23
Section 3.12 Taxes............................................ 24
Section 3.13 Vote Required.................................... 26
Section 3.14 Opinion of Financial Advisor..................... 26
Section 3.15 Change in Control Provisions..................... 26
Section 3.16 Undisclosed Material Liabilities................. 26
Section 3.17 Employee Benefit Plans........................... 27
Section 3.18 Licenses and Registration........................ 29
Section 3.19 Compliance with Laws............................. 30
Section 3.20 Environmental Matters............................ 30
Section 3.21 Labor Matters.................................... 32
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<PAGE>
Section 3.22 State Takeover Statutes.......................... 32
Section 3.23 Ownership of Texas Company Common Stock.......... 33
Section 3.24 General.......................................... 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TEXAS COMPANY
Section 4.1 Due Incorporation, Etc........................... 34
Section 4.2 Qualification as Foreign Entities................ 35
Section 4.3 Capital Stock.................................... 35
Section 4.4 Preferred Stock Agreement........................ 36
Section 4.5 Capitalization of the Texas Company
Subsidiaries..................................... 36
Section 4.6 Ownership of Equity Interests.................... 36
Section 4.7 Corporate Power and Authority.................... 36
Section 4.8 No Conflicts or Consents......................... 37
Section 4.9 SEC Reports and Financial Statements............. 38
Section 4.10 Information in Disclosure Documents and
Registration Statement........................... 39
Section 4.11 Litigation....................................... 40
Section 4.12 No Material Adverse Change....................... 40
Section 4.13 Taxes............................................ 40
Section 4.14 Vote Required.................................... 41
Section 4.15 Opinion of Financial Advisor..................... 42
Section 4.16 Change in Control Provisions..................... 42
Section 4.17 Undisclosed Material Liabilities................. 42
Section 4.18 Employee Benefit Plans........................... 42
Section 4.19 Licenses and Registration........................ 45
Section 4.20 Compliance with Laws............................. 45
Section 4.21 Environmental Matters............................ 45
Section 4.22 State Takeover Statutes.......................... 46
Section 4.23 Labor Matters.................................... 46
Section 4.24 General.......................................... 47
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Delaware Company...... 48
Section 5.2 Conduct of Business of the Texas Company......... 52
Section 5.3 Commercially Reasonable Best Efforts............. 56
Section 5.4 Letter of the Delaware Company's Accountants..... 59
Section 5.5 Letter of the Texas Company's Accountants........ 59
Section 5.6 Access to Information............................ 59
Section 5.7 Stock Exchange Listing........................... 60
Section 5.8 Employee Benefit Plans........................... 60
Section 5.9 Insurance and Indemnity.......................... 66
Section 5.10 Fees and Expenses................................ 66
Section 5.11 Brokers or Finders............................... 67
Section 5.12 No Solicitation.................................. 67
Section 5.13 Texas Company and Delaware Company Shareholder
Meetings......................................... 71
Section 5.14 Rule 145......................................... 75
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<PAGE>
Section 5.15 Board Membership and Officers.................... 76
Section 5.16 Takeover Statute................................. 77
Section 5.17 Tax Matters...................................... 77
Section 5.18 Notification of Certain Matters.................. 77
Section 5.19 Transition Planning.............................. 77
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger................................ 78
Section 6.2 Conditions of Obligations of the Delaware
Company.......................................... 80
Section 6.3 Conditions of Obligations of the Texas Company... 81
ARTICLE VII
TERMINATION
Section 7.1 Termination...................................... 81
Section 7.2 Effect of Termination............................ 83
Section 7.3 Terms of Payment................................. 85
Section 7.4 Termination for Costs and Expenses............... 86
ARTICLE VIII MISCELLANEOUS
Section 8.1 Survival of Representations, Warranties
and Agreements.................................. 86
Section 8.2 Amendment....................................... 87
Section 8.3 Extension; Waiver............................... 87
Section 8.4 Notices......................................... 87
Section 8.5 Interpretation.................................. 88
Section 8.6 Counterparts.................................... 88
Section 8.7 Entire Agreement; No Third Party Beneficiaries.. 89
Section 8.8 GOVERNING LAW................................... 89
Section 8.9 Specific Performance............................ 89
Section 8.10 Publicity....................................... 89
Section 8.11 Assignment...................................... 89
Section 8.12 Validity........................................ 90
Section 8.13 Taxes........................................... 90
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<PAGE>
SCHEDULE OF DEFINED TERMS
Defined Term Page
162(m) Bonus Plan............................................... 64
Aggregate Elected Cash Share Number............................. 14
Agreement....................................................... 1
Alternative Transaction......................................... 70
business day.................................................... 2
Cash Share Election............................................. 12
Closing......................................................... 2
COBRA........................................................... 27
Code............................................................ 1
Common Stock Trust.............................................. 9
Confidentiality Agreement....................................... 60
Contracts....................................................... 20
Current Employees............................................... 65
Debentures...................................................... 18
Delaware Company Common Stock................................... 4
Delaware Company Per Share Stock Amount......................... 4
Delaware Company................................................ 1
Delaware Company Stock Certificate.............................. 4
Delaware Company Stock Certificates............................. 4
Delaware Company Senior Indenture............................... 80
Delaware Company Excluded Shares................................ 5
Delaware Company Superior Proposal.............................. 75
Delaware Company Option Plans................................... 18
Delaware Company Plan........................................... 28
Delaware Company Junior Indenture............................... 22
Delaware Company ERISA Affiliate................................ 27
Delaware Company Returns........................................ 24
Delaware Company SEC Documents.................................. 21
Delaware Company Qualified Plans................................ 64
Delaware Company Stockholders' Meeting.......................... 73
Delaware Company Determination Notice........................... 74
Delaware Company Disclosure Schedule............................ 34
Delaware Company Proxy Statement................................ 23
Delaware Company Contracts...................................... 21
Delaware Company Options........................................ 18
Delaware Company Warrants....................................... 18
Delaware Company Acquisition Agreement.......................... 74
Delaware Company Balance Sheet.................................. 24
Delaware Company Environmental Permits.......................... 30
Delaware Company Material Permits............................... 30
Delaware Company Subsequent Determination....................... 74
Delaware Company Multiemployer Plan............................. 29
Delaware Company Subsidiary..................................... 19
Delaware Designees.............................................. 76
-iv-
<PAGE>
DGCL............................................................ 1
Directors Option Plan........................................... 62
Effective Time.................................................. 2
Elected Cash Share.............................................. 12
Election Deadline............................................... 12
Election Form Record Date....................................... 12
Election Form................................................... 12
Employee Benefit Plans.......................................... 64
Employee Stock Purchase Plan.................................... 64
Environmental Law............................................... 31
Equity Rights................................................... 18
ERISA........................................................... 27
Excess Shares................................................... 9
Exchange Act.................................................... 20
Exchange Agent.................................................. 6
Exchange Fund................................................... 7
Executive Committee............................................. 76
GAAP............................................................ 21
Governmental Entity............................................. 20
Group........................................................... 25
Hazardous Materials............................................. 31
Hazardous Materials Contamination............................... 31
HSR Act......................................................... 20
Investor Designees.............................................. 76
Investor Rights Agreement....................................... 26
Joint Designee.................................................. 76
Law............................................................. 21
Liens........................................................... 19
Mailing Date.................................................... 12
material........................................................ 33
material adverse effect......................................... 33
Material Delaware Company Contracts............................. 51
Material Texas Company Contracts................................ 55
Merger.......................................................... 1
Merger Consideration............................................ 8
New Financing................................................... 56
New Investor.................................................... 79
NYSE............................................................ 9
Option Payment Amount........................................... 14
Option Share Reduction Amount................................... 14
Option Waivers.................................................. 61
Parties......................................................... 1
Party........................................................... 1
Payment Fund.................................................... 15
PBGC............................................................ 25
Per Share Cash Amount........................................... 11
Person.......................................................... 5
Pre-Surrender Dividends......................................... 8
Preferred Stock Agreement....................................... 36
-v-
<PAGE>
Proration Factor................................................ 14
Release......................................................... 31
Requisite Delaware Holder Approvals............................. 26
Requisite Texas Holder Approvals................................ 42
Returns......................................................... 25
S-4............................................................. 22
SAS............................................................. 59
SEC............................................................. 21
Securities Act.................................................. 20
Stock Performance Plan.......................................... 63
Subsidiary...................................................... 5
Surviving Corporation........................................... 1
Surviving Corporation Common Stock.............................. 5
Taxes........................................................... 25
TBCA............................................................ 1
Termination Date................................................ 82
Termination Fee................................................. 84
Texas Company Returns........................................... 40
Texas Company Subsidiary........................................ 36
Texas Company Option Plans...................................... 35
Texas Company ERISA Affiliate................................... 43
Texas Company SEC Documents..................................... 38
Texas Company Proxy Statement................................... 39
Texas Company Balance Sheet..................................... 41
Texas Company Contracts......................................... 37
Texas Company Multiemployer Plan................................ 45
Texas Company Acquisition Agreement............................. 72
Texas Company Subsequent Determination.......................... 72
Texas Company Determination Notice.............................. 72
Texas Company Superior Proposal................................. 73
Texas Company Disclosure Schedule............................... 48
Texas Company Environmental Permits............................. 46
Texas Company Plan.............................................. 44
Texas Company Stock Certificate................................. 11
Texas Company Material Permits.................................. 45
Texas Company Options........................................... 35
Texas Company Shareholders' Meeting............................. 71
Texas Company Eligible Share.................................... 4
Texas Company Common Stock...................................... 4
Texas Company................................................... 1
Texas Company Preferred Stock................................... 79
Texas Designees................................................. 76
Third Party..................................................... 71
Total Eligible Options.......................................... 65
Total Eligible Share Number..................................... 14
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<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER, dated as of November 2, 1999 (this
"Agreement"), is by and between Group Maintenance America Corp., a Texas
- ----------
corporation (the "Texas Company"), and Building One Services Corporation, a
-------------
Delaware corporation (the "Delaware Company"). As used in this Agreement, the
----------------
term "Party" shall refer to the Texas Company or the Delaware Company,
-----
individually, and the term "Parties" shall refer to the Texas Company and the
-------
Delaware Company, collectively.
WHEREAS, the respective Boards of Directors of the Texas Company and the
Delaware Company have determined that the combination of the Delaware Company
and the Texas Company in a "merger of equals" transaction would be advisable and
beneficial to their respective corporations and equity holders, and that such
transaction is consistent with and in furtherance of such entities' respective
long-term business strategies; and
WHEREAS, for federal income tax purposes, the Merger (as hereinafter
defined) and the exchange of the debentures issued pursuant to the Delaware
Company Junior Indenture (as hereinafter defined) for Texas Company Preferred
Stock (as hereinafter defined) pursuant to the Preferred Stock Agreement (as
hereinafter defined) are intended to qualify as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
----
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, each of
the Parties agrees as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as hereinafter defined)
----------
and upon the terms and subject to the conditions set forth in this Agreement and
the General Corporation Law of the State of Delaware (the "DGCL") and the Texas
----
Business Corporation Act (the "TBCA"), the Delaware Company shall be merged with
----
and into the Texas Company and the separate corporate existence of the Delaware
Company shall thereupon cease, with the Texas Company being the surviving
corporation (the "Surviving Corporation") of the merger (the "Merger") and
--------------------- ------
continuing its
<PAGE>
existence under the laws of the State of Texas. As promptly as practicable after
the satisfaction or waiver of the conditions set forth in Article VI hereof and
the consummation of the Closing referred to in Section 1.2 hereof, the Delaware
Company and the Texas Company shall cause to be filed (i) with the Secretary of
State of the State of Delaware a properly executed certificate of merger
consistent with the terms of this Agreement and the DGCL, and (ii) with the
Secretary of State of the State of Texas properly executed articles of merger
consistent with the terms of this Agreement and the TBCA. The Merger shall
become effective at such time as the articles of merger are duly filed with the
Secretary of State of the State of Texas and the certificate of merger is duly
filed with the Secretary of State of the State of Delaware, or at such
subsequent date or time as the Parties shall agree and specify in the
certificate of merger and articles of merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
--------------
Section 1.2 Closing. Unless this Agreement is terminated and the
-------
transactions contemplated herein abandoned pursuant to Section 7.1, and assuming
the satisfaction or waiver of the conditions set forth in Article VI, the
closing of the Merger (the "Closing") shall take place (i) no sooner than the
-------
first business day after December 31, 1999, and no later than second business
day thereafter following the satisfaction or waiver of the conditions set forth
in Article VI (other than the conditions to be satisfied or waived at the
Closing), at the offices of Bracewell & Patterson, L.L.P., 2900 South Tower,
Pennzoil Place, Houston, Texas, or (ii) on such other date or at such other
place as agreed to in writing by the Parties. For purposes of this Agreement,
the term "business day" shall mean any calendar day other than Saturday, Sunday
------------
or any day that nationally chartered financial institutions are legally required
to close in either Houston, Texas, or New York, New York.
Section 1.3 Effects of the Merger. At the Effective Time, the Merger
---------------------
will have the effects set forth in the DGCL and the TBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Delaware Company
and the Texas Company shall continue with, or vest in, as the case may be, the
Surviving Corporation, and all debts, liabilities and duties of the Delaware
Company and the Texas Company shall continue with, or become, as the case may
be, the debts, liabilities and duties
-2-
<PAGE>
of the Surviving Corporation. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets of the Delaware Company as
a result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
directed and authorized to execute and deliver, in the name and on behalf of
either of such constituent corporations, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of the
Delaware Company or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties, privileges, franchises or
assets in the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.4 Articles of Incorporation and Bylaws. The articles of
------------------------------------
incorporation of the Texas Company shall be amended and restated in the Merger
to read in their entirety as set forth on Exhibit 1.4(a) hereof, and, as so
amended and restated, shall be the articles of incorporation of the Surviving
Corporation following the Effective Time, until duly amended in accordance with
the TBCA. The bylaws of the Texas Company shall be the bylaws of the Surviving
Corporation after the Effective Time, until duly amended in accordance with
theTBCA.
Section 1.5 Directors. The directors of the Surviving Corporation at
---------
the Effective Time shall be determined in accordance with Section 5.15, and such
directors shall hold office from the Effective Time in accordance with the
articles of incorporation and bylaws of the Surviving Corporation until his or
her successor is duly elected or appointed and qualified.
Section 1.6 Officers. The officers of the Surviving Corporation at the
--------
Effective Time shall be determined in accordance with Section 5.15, and such
officers shall hold office from the Effective Time in accordance with the
articles of incorporation and bylaws of the Surviving Corporation and until his
or her successor is duly appointed and qualified.
-3-
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time, as a
---------------------------
result of the Merger and without any action on the part of the holder of any
capital stock of the Delaware Company or the Texas Company:
(i) Subject to Sections 2.2(d) and 2.3(e), each share of
common stock, par value $.001 per share, of the Delaware Company (the "Delaware
--------
Company Common Stock") that is issued and outstanding immediately prior to the
- --------------------
Effective Time, other than Delaware Company Excluded Shares (as hereinafter
defined), shall be converted into the right to receive 1.25 fully paid, validly
issued and nonassessable shares of Surviving Corporation Common Stock (as
hereinafter defined) (the "Delaware Company Per Share Stock Amount").
---------------------------------------
(ii) Each share of common stock, par value $.001 per share,
of the Texas Company (the "Texas Company Common Stock") that is issued and
--------------------------
outstanding immediately prior to the Effective Time, other than Texas Company
Eligible Shares (as hereinafter defined), shall remain issued and outstanding.
(iii) Each share of Texas Company Preferred Stock that is
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding.
(iv) Each share of Texas Company Common Stock that is issued
and outstanding immediately prior to the Effective Time and which under the
terms of Sections 2.4, 2.5 and 2.6 is to be converted into the right to receive
cash (a "Texas Company Eligible Share") shall, without any action by the holder
----------------------------
thereof, be converted into the right to receive the Per Share Cash Amount (as
hereinafter defined).
Section 2.2 Effect of Merger on Delaware Common Stock. (1) Each share
-----------------------------------------
of Delaware Company Common Stock so converted pursuant to the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
no longer be outstanding and shall be canceled and shall cease to exist, and
each holder of a certificate which, prior to the Effective Time, evidenced any
such share (individually, a "Delaware Company Stock Certificate" and
----------------------------------
collectively, the "Delaware Company Stock Certificates") shall thereafter cease
-----------------------------------
to have any rights with
-4-
<PAGE>
respect to such certificates or the shares formerly represented thereby, except,
upon the surrender of the Delaware Company Stock Certificate in accordance with
Section 2.3, the right to receive from the Surviving Corporation (i) the number
of whole shares of common stock, $.001 par value per share, of the Surviving
Corporation (the "Surviving Corporation Common Stock") equal to the product of
----------------------------------
(A) the Delaware Company Per Share Stock Amount, multiplied by (B) the number of
shares of Delaware Company Common Stock formerly evidenced by such Delaware
Company Stock Certificate, (ii) the amount of cash payable pursuant to Section
2.3(e) in lieu of any fractional shares issuable pursuant to Section 2.1(i), and
(iii) the amount of any Pre-Surrender Dividends payable pursuant to Section
2.3(c).
(b) At the Effective Time, all shares of capital stock of the
Delaware Company that are owned by the Delaware Company or the Texas Company or
any of their respective wholly owned Subsidiaries (as hereinafter defined)
(collectively, "Delaware Company Excluded Shares"), shall be canceled and will
--------------------------------
cease to exist and no capital stock or other consideration will be delivered in
exchange therefor. As used in this Agreement, "Subsidiary" means, with respect
----------
to any specified corporation, partnership, individual, association, organization
or other entity or group ("Person"), any corporation or other entity or
------
organization, whether incorporated or unincorporated, of which (i) such Person
or any other Subsidiary of such Person is a general partner (excluding
partnerships, the general partnership interests of which held by such Person or
any Subsidiary of such Person do not have a majority of the voting interest in
such partnership), or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person, by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries. References to a wholly owned Subsidiary of an
entity include a Subsidiary, all of the common equity of which is owned directly
or through "wholly owned" Subsidiaries by such entity.
(c) The stock transfer books of the Delaware Company shall be
closed at the Effective Time and no transfer of any Delaware Company Common
Stock will thereafter be recorded on any of such stock transfer books.
-5-
<PAGE>
In the event of a transfer of ownership of Delaware Company Common Stock that is
not registered in the transfer records of the Delaware Company at the Effective
Time, a certificate or certificates representing the number of whole shares of
Surviving Corporation Common Stock issuable in respect of such shares of
Delaware Company Common Stock shall be issued to the transferee together with a
cash payment in lieu of fractional shares, if any, in accordance with Section
2.3(e) hereof, and a cash payment in the amount of Pre-Surrender Dividends, if
any, in accordance with Section 2.3(c) hereof, if the Delaware Company Stock
Certificate therefor is presented to the Exchange Agent (as hereinafter
defined), accompanied by all documents required to evidence and effect such
transfer, together with evidence that any applicable stock transfer taxes have
been paid and the payment of any required transfer taxes. Until surrendered as
contemplated by Section 2.3, each Delaware Company Stock Certificate will be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the relevant Merger Consideration (as hereinafter
defined) and the other amounts, if any, payable to such holder pursuant to this
Article II.
(d) In the event that between the date of this Agreement and the
Effective Time the outstanding shares of Delaware Company Common Stock or Texas
Company Common Stock (except pursuant to this Agreement and only upon the
consent of each of the Parties) are changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Delaware Company Per Share Stock Amount and the amount of cash payable in
respect of fractional shares pursuant to Section 2.3(e) or payable pursuant to
Section 2.3(c) will be appropriately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
Section 2.3 Exchange of Delaware Company Stock Certificates.
-----------------------------------------------
(a) Subject to the terms and conditions hereof, the Texas Company
and the Delaware Company shall jointly appoint ChaseMellon Shareholder Services,
L.L.C., as exchange agent to effect the exchange of the Delaware Company Common
Stock for the Surviving Corporation Common Stock in accordance with the
provisions of this Article II (the "Exchange Agent"). After the Effective Time,
--------------
the Surviving Corporation will irrevocably deposit, or will
-6-
<PAGE>
cause to be so deposited, with the Exchange Agent for the benefit of the holders
of Delaware Company Stock Certificates (other than holders of those Delaware
Company Stock Certificates representing Delaware Company Excluded Shares), the
certificates evidencing the shares of the Surviving Corporation Common Stock
payable or issuable pursuant to Section 2.1 upon the due surrender of Delaware
Company Stock Certificates (such certificates evidencing shares of the Surviving
Corporation Common Stock, together with any cash or other dividends or
distributions declared or made, and any other cash or other property paid, with
respect thereto, being hereinafter collectively referred to as the "Exchange
--------
Fund"). The Surviving Corporation shall pay all charges and expenses, including
- ----
those of the Exchange Agent, in connection with the transactions contemplated in
this Article II. Subject to Sections 2.3(e), (f), (g) and (h), the Exchange
Agent will deliver to holders of Delaware Company Stock Certificates (other than
those representing Delaware Company Excluded Shares) in accordance with Section
2.3(b) the Merger Consideration and any other amounts payable to such holders
pursuant to this Article II. The Exchange Fund will not be used for any other
purpose. All interest, dividends or other income earned on cash deposits in the
Exchange Fund shall be for the account of the Surviving Corporation.
(b) Immediately after the Effective Time, the Surviving Corporation
shall cause the Exchange Agent to mail to each holder of record of shares of
Delaware Company Common Stock that were converted pursuant to Section 2.1 (i) a
letter of transmittal (which will be in such form and have such provisions as
the Delaware Company and the Texas Company may reasonably specify prior to the
Effective Time) and (ii) instructions for use in effecting the surrender of the
Delaware Company Stock Certificate in exchange for certificates representing
shares of Surviving Corporation Common Stock. Upon surrender of a Delaware
Company Stock Certificate for cancellation to the Exchange Agent, together with
a properly completed and duly executed letter of transmittal, the holder of such
Delaware Company Stock Certificate will be entitled, after the Effective Time,
to receive in exchange therefor (y) a certificate representing that number of
whole shares of Surviving Corporation Common Stock, pursuant to the provisions
of this Article II, and (z) cash in lieu of fractional shares of Surviving
Corporation Common Stock to which such holder is entitled pursuant
-7-
<PAGE>
to Section 2.3(e) (the shares of Surviving Corporation Common Stock and cash
described in clauses (y) and (z) above being collectively referred to herein as
the "Merger Consideration") and any other amounts, if any, payable to such
--------------------
holder pursuant to this Article II, and the Delaware Company Stock Certificate
so surrendered will forthwith be canceled.
(c) No dividends or other distributions declared or made, or any
other cash or other property paid, after the Effective Time with respect to
shares of Surviving Corporation Common Stock with a record date after the
Effective Time (such dividends or distributions being referred to collectively
herein as the "Pre-Surrender Dividends") will be paid to the holder of any
-----------------------
unsurrendered Delaware Company Stock Certificate with respect to the shares of
Surviving Corporation Common Stock that such holder is entitled to receive upon
the surrender thereof in accordance with this Section 2.3. Subject to the effect
of applicable laws, following surrender of any such Delaware Company Stock
Certificate, there will be paid to the record holder of the certificates
representing whole shares of Surviving Corporation Common Stock issued in
exchange therefor, without interest, (i) the amount of the Pre-Surrender
Dividends theretofore paid or issued with respect to such whole shares of
Surviving Corporation Common Stock, and (ii) at the appropriate payment date,
the amount of Pre-Surrender Dividends with a payment date subsequent to
surrender payable with respect to such whole shares of Surviving Corporation
Common Stock.
(d) The Merger Consideration paid or delivered as provided above,
together with any Pre-Surrender Dividends, will be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Delaware Company
Common Stock and there will be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Delaware Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Delaware Company Stock Certificates are presented to
the Surviving Corporation for any reason, they will be canceled and exchanged as
provided in this Article II.
(e) No fractional shares of and no certificate or scrip representing
fractional shares of Surviving Corporation Common Stock will be issued upon the
surrender for exchange of Delaware Company Stock Certificates. In lieu of the
issuance of any fractional shares of Surviving Corporation Common Stock pursuant
to Section 2.1(i), as
-8-
<PAGE>
promptly as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (i) the number of whole shares of Surviving Corporation
Common Stock delivered to the Exchange Agent by the Surviving Corporation
pursuant to this Article II over (ii) the aggregate number of whole shares of
the Surviving Corporation Common Stock to be issued to holders of Delaware
Company Stock Certificates pursuant to this Article II (such excess being herein
called the "Excess Shares"). As soon after the Effective Time as practicable,
-------------
the Exchange Agent, as agent for the holders of Delaware Company Stock
Certificates, shall sell the Excess Shares at then prevailing prices on the New
York Stock Exchange ("NYSE"), all in the manner provided in this Section.
----
The sale of the Excess Shares by the Exchange Agent shall be executed on
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. The Exchange Agent shall use all
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the holders of Delaware Company Stock Certificates, the
Exchange Agent will hold such proceeds in trust for the holders of Delaware
Company Stock Certificates entitled to receive shares of Surviving Corporation
Common Stock under this Article II (the "Common Stock Trust"). The Surviving
------------------
Corporation shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation, of the Exchange
Agent incurred in connection with such sale of the Excess Shares. The Exchange
Agent shall determine the portion of the Common Stock Trust to which each holder
of a Delaware Company Stock Certificate entitled to receive Surviving
Corporation Common Stock under this Article II shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds compromising the Common
Stock Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of a Delaware Company Stock
Certificate would otherwise be entitled (after taking into account all Delaware
Company Stock Certificates then held by such holder) and the denominator of
which is the aggregate amount of fractional share interest to which all holders
of Delaware Company Stock Certificates would otherwise be entitled.
-9-
<PAGE>
Notwithstanding the previous provisions of this Section 2.3(e), if the
Parties shall so agree in writing prior to the Effective Time, then in lieu of
the sale of Excess Shares and the making of the payments contemplated above,
each holder of a Delaware Company Stock Certificate shall be paid an amount in
cash equal to the product obtained by multiplying the fractional share interest
to which such holder (after taking into account all Delaware Company Stock
Certificates then held by such holder) would otherwise be entitled by the
closing price for a share of Texas Company Common Stock on the NYSE Composite
Transactions tape on the first business day immediately preceding the Effective
Time, and, in such case, all references herein to the cash proceeds of the sale
of the Excess Shares and similar references shall be deemed to mean and refer to
the payments calculated as set forth in this sentence.
As soon as practicable after the determination of the amounts of cash, if
any, to be paid to holders of Delaware Company Stock Certificates in lieu of any
fractional share interests, the Exchange Agent shall make available such amounts
to such holders of Delaware Company Stock Certificates, subject to and in
accordance with this Article II.
(f) The Surviving Corporation shall not be liable to any holder of
shares of Delaware Company Common Stock for any shares of Surviving Corporation
Common Stock (or dividends or distributions with respect thereto) or cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) Any portion of the Exchange Fund or the Common Stock Trust that
remains undistributed to the holders of Delaware Company Stock Certificates for
one year after the Effective Time will be delivered to the Surviving
Corporation, upon demand, and any holders of Delaware Company Stock Certificates
who have not theretofore complied with this Article II will thereafter look only
to the Surviving Corporation for the Merger Consideration and any unpaid Pre-
Surrender Dividends to which they are entitled pursuant to this Article II.
(h) The Surviving Corporation or the Exchange Agent will be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Delaware Company Stock Certificates such amounts as
the Surviving Corporation or the Exchange Agent are required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that
-10-
<PAGE>
amounts are so withheld by the Surviving Corporation or the Exchange Agent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder of the Delaware Company Stock Certificates in respect of
which such deduction and withholding was made by the Surviving Corporation or
the Exchange Agent. Notwithstanding the foregoing, no amount shall be withheld
from any payment made hereunder to a holder of Delaware Company Stock
Certificates who provides the Exchange Agent with a properly completed Internal
Revenue Service Form W-9 or Substitute Form W-9, or who otherwise provides the
Exchange Agent with appropriate evidence that such Person is exempt from federal
income tax back-up withholding.
Section 2.4 Texas Company Eligible Shares. (a) Each holder of a
-----------------------------
certificate which prior to the Effective Time evidenced any Texas Company
Eligible Share (a "Texas Company Stock Certificate") shall thereafter cease to
-------------------------------
have any rights with respect to such certificate or the shares formerly
represented thereby, except, upon the surrender of the Texas Company Stock
Certificate in accordance with Section 2.5, the right to receive from the
Surviving Corporation an amount equal to the product of (i) $13.50 (the
"Per Share Cash Amount") multiplied by (ii) the number of Texas Company Eligible
---------------------
Shares formerly evidenced by such Texas Company Stock Certificate.
(b) In the event that between the date of this Agreement and the
Effective Time the outstanding shares of Texas Company Common Stock (except
pursuant to the this Agreement and only upon the consent of each of the Parties)
are changed into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Per Share Cash Amount and the Total
Eligible Share Number will be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
Section 2.5 Manner of Conversion of Texas Company Eligible Shares into
----------------------------------------------------------
Cash; Limitations Thereon.
- -------------------------
(a) Election Procedures. An election form and other appropriate
-------------------
and customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates formerly evidencing
shares of Texas Company Eligible Shares shall pass, only upon proper delivery of
such certificates to the
-11-
<PAGE>
Exchange Agent, in such form as the Texas Company shall designate ("Election
--------
Form")) shall be mailed at least thirty days prior to the anticipated Effective
- ----
Time or on such other date as the Texas Company shall determine ("Mailing Date")
------------
to each holder of record of shares of Texas Company Common Stock on the business
day which is not more than five days prior to the Mailing Date ("Election Form
-------------
Record Date"). Each Election Form shall permit a holder of shares of Texas
- -----------
Company Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions) to make an unconditional election ("Cash Share
----------
Election"), subject to the allocation procedures set forth below, with respect
- --------
to such holder's (or beneficial owner's) shares of Texas Company Common Stock,
to have up to 50% of such shares become Texas Company Eligible Shares (each, an
"Elected Cash Share").
------------------
No shares of Texas Company Common Stock with respect to which the holder
(or the beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before 5:00
p.m., Houston, Texas time, on or before the business day which is three business
days prior to the Effective Time (or such other time and date as Texas Company
designates) (the "Election Deadline") shall be deemed to be an Elected Cash
-----------------
Share and each such holder (or beneficial owner, as the case may be) shall be
deemed not to have made a Cash Share Election with respect to such share. Any
shares of Texas Company Common Stock with respect to which the holder thereof
(or the beneficial owner, as the case may be) has indicated in an effective,
properly completed Election Form submitted to the Exchange Agent on or before
the Election Deadline an election to have such shares become an Elected Cash
Share but which cannot become an Elected Cash Share because of the 50%
limitation set forth above shall also not be deemed to be an Elected Cash Share
and such holder (or beneficial owner, as the case may be) shall be deemed not to
have made a Cash Share Election with respect to such shares.
The Texas Company shall use its commercially reasonable efforts to make
available one or more Election Forms as may be reasonably requested by any
Person who becomes a holder (or beneficial owner) of shares of Texas Company
Common Stock between the Election Form Record Date and the close of business on
the business day prior
-12-
<PAGE>
to the Election Deadline, and shall provide to the Exchange Agent all
information reasonably necessary for it to perform as specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form on or prior to
the Election Deadline. An Election Form shall be deemed properly completed only
if accompanied by one or more Texas Company Stock Certificates (or customary
affidavits and indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates) representing all
Elected Cash Shares held by the holder or beneficial owner of such shares,
together with duly executed transmittal materials included in the Election Form.
Any Election Form may be revoked or changed by the Person submitting such
Election Form at any time prior to the Election Deadline. In the event an
Election Form is revoked prior to the Election Deadline and no subsequent
Election Form is delivered to the Exchange Agent prior to the Election Deadline,
the Elected Cash Shares represented by such Election Form shall not be deemed to
be Elected Cash Shares and the holder (or beneficial owner) thereof shall not be
deemed to have made a Cash Share Election with respect thereto. Subject to the
terms of this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. Neither the Texas Company nor the
Exchange Agent shall be under any obligation to notify any Person of any defect
in an Election Form.
(b) As soon as practicable after the Election Deadline, and in any
event prior to the Effective Time, the Texas Company shall cause the Exchange
Agent to effect the allocation among the holders (or beneficial owners) of
Elected Cash Shares those shares which shall become Texas Company Eligible
Shares as of the Effective Time as follows:
(1) Elected Cash Shares More Than Total Eligible Share Number. If
---------------------------------------------------------
the aggregate number of Elected Cash Shares reflected in Election Forms properly
completed and timely delivered to the Exchange
-13-
<PAGE>
Agent and not revoked (the "Aggregate Elected Cash Share Number"), as determined
-----------------------------------
by the Exchange Agent, is more than the Total Eligible Share Number (as
hereinafter defined), then:
(1) A proration factor (the "Proration Factor") shall be
----------------
determined by the Exchange Agent and shall be a fraction, (1) the numerator of
which is the Total Eligible Share Number and (2) the denominator of which is the
Aggregate Elected Cash Share Number;
(2) The number of Elected Cash Shares covered by each Cash
Share Election which shall become Texas Company Eligible Shares as of the
Effective Time shall be determined by the Exchange Agent by multiplying the
Proration Factor by the total number of Elected Cash Shares covered by such Cash
Share Election and rounding any fractional share to the nearest whole share
(with .5 of a share or less rounded down); and
(3) All Elected Cash Shares other than those which become
Texas Company Eligible Shares in accordance with Clause (2) above shall not
become Texas Company Eligible Shares and no other outstanding shares of Texas
Company Common Stock shall become Texas Company Eligible Shares; or
(ii) Elected Cash Shares Equal to or Less Than Total Eligible Share
--------------------------------------------------------------
Number. If the Aggregate Elected Cash Share Number is equal to or less than the
- ------
Total Eligible Share Number (as determined by the Exchange Agent), then each
Elected Cash Share shall become a Texas Company Eligible Share as of the
Effective Time and no other outstanding shares of Texas Company Common Stock
shall become Texas Company Eligible Shares.
(c) For purposes of this Agreement, the term "Total Eligible Share Number"
---------------------------
means the number determined as follows:
(i) First, determine the total dollar amount paid by the Texas Company
with respect to options pursuant to Section 5.8(c) (the "Option
------
Payment Amount");
--------------
(ii) Second, divide the Option Payment Amount by 13.50 (the result being
referred to as the "Option Share Reduction Amount"); and
-----------------------------
-14-
<PAGE>
(iii) Third, subtract the Option Share Reduction Amount from
11,111,111, and round the result downward to the nearest
whole number.
Notwithstanding anything in this Agreement to the contrary, the maximum number
of Texas Company Eligible Shares shall be the Total Eligible Share Number (i)
plus any additional shares of Texas Company Common Stock that become Texas
Company Eligible Shares as a result of rounding to the nearest whole share and
(ii) minus any shares of Texas Company Common Stock that do not become Texas
Company Eligible Shares, in either case as a result of rounding to the nearest
whole share pursuant to Section 2.5(b).
Section 2.6 Surrender of Texas Company Stock Certificates and Payment.
---------------------------------------------------------
(a) Upon the latest to occur of the Effective Time and the
completion of the allocation procedures set forth in Section 2.5, the Surviving
Corporation will deposit, or will cause to be so deposited, with the Exchange
Agent for the benefit of the holders (or beneficial owners) of Texas Company
Eligible Shares, the cash amount owed with respect to the Texas Company Eligible
Shares as determined by the Escrow Agent and agreed to by the Texas Company and
the Delaware Company (the "Payment Fund"). Subject to Sections 2.5, the Exchange
------------
Agent will deliver the Per Share Cash Amount with respect to each of the Texas
Company Eligible Shares in accordance with this Section 2.6. All interest,
dividends or other income earned on cash deposits in the Payment Fund shall be
for the account of the Surviving Corporation.
(b) Upon surrender of a Texas Company Stock Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Surviving Corporation, together with a properly completed and
duly executed Election Form, the holder of such Texas Company Stock Certificate
will be entitled, after the Effective Time, to receive (x) any cash payable in
respect of the Texas Company Eligible Shares formerly represented by any such
Texas Company Stock Certificate and (y) a certificate or certificates
representing that number of shares of Surviving Corporation Common Stock , if
any, represented by such Texas Company Stock Certificate which are not Texas
Company Eligible Shares, and the Texas Company Stock Certificate so surrendered
will
-15-
<PAGE>
forthwith be canceled. In the event of a transfer of ownership of Texas Company
Common Stock that is not registered in the transfer records of the Texas
Company, any cash and the certificates representing the proper number of shares
of Surviving Corporation Common Stock may be paid or delivered to a transferee
if the relevant Texas Company Stock Certificate is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer, together with evidence that any applicable stock transfer taxes have
been paid and the payment of any required transfer taxes.
(c) From and after the Effective Time, there will be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Texas Company Eligible Shares which were outstanding
immediately prior to the Effective Time.
(d) The Surviving Corporation will not be liable to any
holder (or beneficial owner) of Texas Company Eligible Shares for any shares of
Surviving Corporation Common Stock or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Any portion of the Payment Fund that remains
undistributed to the former holders (or beneficial owners) of Texas Company
Eligible Shares for one month after the Effective Time will be delivered to the
Surviving Corporation, upon demand, and any holders (or beneficial owners) of
Texas Company Stock Certificates who have not theretofore complied with this
Article II will thereafter look only to the Surviving Corporation, as unsecured
creditors, for the cash and certificates, if any, to which they are entitled
pursuant to this Article II.
(f) The Surviving Corporation or the Exchange Agent will be
entitled to deduct and withhold from the amounts otherwise payable pursuant to
this Agreement to any holder (or beneficial owner) of Texas Company Eligible
Shares such amounts as the Surviving Corporation or the Exchange Agent are
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or the Exchange Agent,
such withheld amounts will be treated for all purposes of this Agreement as
having been paid to the holder (or beneficial owner) of the Texas
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<PAGE>
Company Eligible Shares in respect of which such deduction and withholding was
made by the Surviving Corporation or the Exchange Agent. Notwithstanding the
foregoing, no amount shall be withheld from any payment made hereunder to a
holder (or beneficial owner) of Texas Company Eligible Shares who provides the
Exchange Agent with a properly completed Internal Revenue Service Form W-9 or
Substitute Form W-9, or who otherwise provides the Exchange Agent with
appropriate evidence that such Person is exempt from federal income tax back-up
withholding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DELAWARE COMPANY
The Delaware Company represents and warrants to the Texas Company that,
except as expressly described or permitted in this Agreement or as disclosed to
the Texas Company in the Delaware Company Disclosure Schedule (as hereinafter
defined):
Section 3.1 Due Incorporation, Etc. Each of the Delaware Company and
-----------------------
each Delaware Company Subsidiary (as hereinafter defined) is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority would not, individually or in the aggregate, have a material adverse
effect (as hereinafter defined) on the Delaware Company and its Subsidiaries,
taken as a whole.
Section 3.2 Qualification as Foreign Entities. Each of the Delaware
---------------------------------
Company and each Delaware Company Subsidiary is duly licensed or qualified to do
business and, if applicable, is in good standing, in each state or other
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it requires it to be so licensed or
qualified, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the Delaware Company.
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<PAGE>
Section 3.3 Capital Stock. The authorized capital stock of the Delaware
-------------
Company consists solely of 250,000,000 shares of Delaware Company Common Stock
and 11,000,000 shares of preferred stock, par value $.001 per share. As of the
date hereof, 26,098,806 shares of Delaware Company Common Stock are outstanding
, no shares of preferred stock of the Delaware Company are outstanding,
4,290,102 shares of Delaware Company Common Stock are reserved for issuance
pursuant to the exercise of the Delaware Company Options (as hereinafter
defined), 4,613,556 shares of the Delaware Company Common Stock are reserved for
issuance to the holders of the 7 1/2% Convertible Subordinated Pay in Kind
Debentures Due 2012 issued by the Delaware Company (the "Debentures"), and
----------
3,250,000 shares of Delaware Company Common Stock are reserved for issuance
pursuant to the exercise of the Warrants originally issued by the Delaware
Company to Friedman Billings & Ramsey & Co. Inc. and Jonathan J. Ledecky
pursuant to the Warrant Agreements dated November 25, 1997 (the "Delaware
--------
Company Warrants"). All of the Delaware Company's issued and outstanding shares
- ----------------
of capital stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.3 of the Delaware Company
Disclosure Schedule and as described in this Section 3.3, the Delaware Company
does not have any outstanding convertible or exchangeable securities,
subscriptions, calls, options, warrants, rights contractual or arising by
operation of law (including, without limitation, rights of first refusal and
preemptive rights), or other agreements or commitments of any character relating
to the issuance, purchase, other acquisition or voting of any shares of the
capital stock of, or other equity or ownership interest in (collectively,
"Equity Rights") the Delaware Company. A true and correct list of the
-------------
outstanding options of the Delaware Company (the "Delaware Company Options")
------------------------
granted pursuant to the plans of the Delaware Company set forth in Section 3.3
of Delaware Company Disclosure Schedule or otherwise (the plans described in
Section 3.3 of the Delaware Company Disclosure Schedule being referred to
collectively herein as the "Delaware Company Option Plans") and the purchase
-----------------------------
prices of the shares of Delaware Company Common Stock issuable upon the exercise
of each Delaware Company Warrant and each Delaware Company Option has been
delivered by the Delaware Company to the Texas Company prior to the date of this
Agreement.
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<PAGE>
Section 3.4 Capitalization of the Delaware Company Subsidiaries. Set
----------------------------------------------------
forth on Schedule 3.4 of the Delaware Company Disclosure Schedule is a true and
correct list of all of the direct and indirect Subsidiaries of the Delaware
Company and the issued and outstanding capital stock of such Subsidiaries as of
the date of this Agreement. All issued and outstanding shares of capital stock
of each of the Subsidiaries of the Delaware Company (a "Delaware Company
----------------
Subsidiary") are duly authorized, validly issued, fully paid and nonassessable.
- ----------
Section 3.5 Ownership of Equity Interests. Except as otherwise set
------------------------------
forth in Section 3.5 of the Delaware Company Disclosure Schedule, the Delaware
Company or one or more of its wholly-owned Subsidiaries owns, of record and
beneficially, all of the issued and outstanding capital stock or other equity
interests of each of the Delaware Company Subsidiaries and all outstanding
Equity Rights with respect to each Delaware Company Subsidiary, free and clear
(except as otherwise contemplated in the Credit Agreement dated April 30, 1999,
among the Delaware Company, various lending institutions, Goldman Sachs Credit
Partners LP, as documentation agent, and others) of all material liens, security
interests, charges, adverse claims, options, preferential rights of purchase,
restrictions or legends of any kind (collectively, "Liens"). Except as
-----
described above or as set forth in Section 3.5 of the Delaware Company
Disclosure Schedule, neither the Delaware Company nor any of the Delaware
Company Subsidiaries owns or holds, directly or indirectly, any capital stock
of, or other equity or other ownership interest in (or any securities, rights or
other interests exchangeable for, convertible into or which otherwise relate to
the acquisition of any capital stock of) any Person or is a partner or joint
venturer in any partnership or joint venture material to the Delaware Company.
Section 3.6 Corporate Power and Authority. The Delaware Company has the
------------------------------
requisite corporate power to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, subject, in the case of this
Agreement, to obtaining the Requisite Delaware Holder Approvals (as hereinafter
defined). The execution and delivery of this Agreement by the Delaware Company
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Delaware
Company, subject, to obtaining the Requisite Delaware Holder Approvals. This
Agreement has been duly and validly executed and
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<PAGE>
delivered by the Delaware Company and constitutes the valid and binding
agreement of the Delaware Company, enforceable against the Delaware Company in
accordance with its terms, except as limited by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights and except as limited by
equitable principles.
Section 3.7 No Conflicts or Consents. (a) Except as provided for in
-------------------------
Article I and as required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended and the rules and regulations thereunder (the "HSR Act"),
-------
the Securities Exchange Act of 1934, as amended and the rules and regulations
thereunder (the "Exchange Act"), and the Securities Act of 1933, as amended and
------------
the rules and regulations thereunder (the "Securities Act"), and state
--------------
securities or "blue sky" Laws, no notices, reports or other filings are required
to be made by the Delaware Company or any Delaware Company Subsidiary with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by the Delaware Company from, any domestic governmental or
regulatory authority, agency, commission, court or other entity ("Governmental
------------
Entity"), in connection with the execution and delivery of this Agreement by the
- ------
Delaware Company and the consummation by the Delaware Company of the
transactions contemplated hereby, the failure to make or obtain any or all of
which would have a material adverse effect on the Delaware Company, or would
prevent, materially delay or materially burden the transactions contemplated in
this Agreement.
(b) The execution and delivery of this Agreement by the Delaware
Company does not, and the consummation by the Delaware Company of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or bylaws
of the Delaware Company or the comparable governing instruments of any material
Delaware Company Subsidiary, (ii) except with respect to the Investor Rights
Agreement and as set forth on Schedule 3.7 of the Delaware Company Disclosure
Schedule, a breach or violation of, a default under, the acceleration of or the
creation of any Lien on assets (with or without the giving of notice or the
lapse of time) pursuant to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation not otherwise
terminable on 90 days' or less notice ("Contracts") of the Delaware Company or
---------
any of
-20-
<PAGE>
its Subsidiaries (the "Delaware Company Contracts") or any change in the
--------------------------
rights or obligations of any party under any of the Delaware Company Contracts,
or (iii) a violation of any domestic law, rule, ordinance or regulation ("Law")
---
or judgment, decree, order, award or governmental or non-governmental permit or
license to which the Delaware Company or any of its Subsidiaries is subject,
except in the case of clauses (ii) and (iii) above for such breaches,
violations, defaults, accelerations, Liens or changes that, alone or in the
aggregate, would not have a material adverse effect on the Delaware Company, or
would not prevent, materially delay or materially burden the transactions
contemplated by this Agreement.
Section 3.8 SEC Reports and Financial Statements. Since November 25,
------------------------------------
1997, the Delaware Company has filed with the Securities and Exchange Commission
(the "SEC") all forms, reports and documents required to be filed by it under
---
the Exchange Act or the Securities Act (as they have been amended since the time
of their filing, collectively, the "Delaware Company SEC Documents"). The
------------------------------
Delaware Company SEC Documents, including without limitation, any financial
statements or schedules included therein, at the time filed, and any forms,
reports or other documents filed by the Delaware Company with the SEC after the
date of this Agreement, (a) did not at the time they were filed, or will not at
the time they are filed, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied or will be prepared in compliance in all
material respects with the applicable requirements of the Exchange Act or the
Securities Act, as the case may be. The financial statements of the Delaware
Company included in the Delaware Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
----
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, to
normal audit adjustments) and fairly present (subject, in the case of the
unaudited statements, to normal audit adjustments) the consolidated financial
position of the Delaware Company and its Subsidiaries as at the dates
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<PAGE>
thereof and the consolidated results of their operations and cash flows for the
periods then ended. All liabilities or obligations (absolute, accrued, fixed,
contingent or otherwise) required to be reflected, reserved against or otherwise
disclosed in the financial statements of the Delaware Company included in the
Delaware Company SEC Documents filed prior to the date of this Agreement have
been properly reflected, reserved against or otherwise disclosed in such
financial statements in accordance with the rules and regulations of the SEC and
GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, to
normal audit adjustments). Except as set forth in the financial statements of
the Delaware Company included in the Delaware Company SEC Documents, the
Delaware Company has not incurred any indebtedness (other than indebtedness with
respect to the payment of interest paid in kind) pursuant to the Indenture dated
April 30, 1999, by and between the Company and U. S. Trust Company related to
the Delaware Company's 71/2 % Convertible Junior Subordinated Debentures due
2012 (the "Delaware Company Junior Indenture"). Except as disclosed in Section
---------------------------------
3.8 of the Delaware Company Disclosure Schedule, since June 30,1999' and prior
to the date of this Agreement, no act, omission, occurrence, event, condition or
circumstance has occurred or become known to the Delaware Company, and no
transaction, commitment or agreement has been entered into by the Delaware
Company or any of its Subsidiaries, that should have been disclosed in the
Delaware Company SEC Documents.
Section 3.9 Information in Disclosure Documents and Registration
----------------------------------------------------
Statement. (a) None of the information supplied or to be supplied by the
- ---------
Delaware Company from time to time in writing specifically for inclusion or
incorporation by reference in the registration statement on Form S-4 to be filed
with the SEC by the Texas Company in connection with the issuance of shares of
Surviving Corporation Common Stock in connection with the Merger (the "S-4")
---
will, at the time it becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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<PAGE>
(b) The proxy or information statement relating to the meeting of
the Delaware Company's stockholders to be held to obtain the Requisite Delaware
Holders Approvals (as it may be amended from time to time, the "Delaware Company
----------------
Proxy Statement") will not, at the date mailed to the Delaware Company's
- ---------------
stockholders and at the time of the meeting of stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Delaware Company Proxy Statement will, when
filed with the SEC by the Delaware Company, comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(c) Notwithstanding the foregoing, the Delaware Company makes no
representation with respect to statements made in any of the foregoing documents
based on information supplied by the Texas Company specifically for inclusion
therein.
Section 3.10 Litigation. Except as disclosed in the Delaware Company
----------
SEC Documents filed prior to the date of this Agreement, there is as of the date
hereof no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of the Delaware Company, threatened, against the Delaware Company
or any of its Subsidiaries which, individually or in the aggregate, would have a
material adverse effect on the Delaware Company, or a material adverse effect on
the ability of the Delaware Company to consummate the transactions contemplated
by this Agreement. Except as disclosed in the Delaware Company SEC Documents
filed prior to the date of this Agreement, neither the Delaware Company nor any
of its Subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, would have a material adverse
effect on the Delaware Company, or a material adverse effect on the ability of
the Delaware Company to consummate the transactions contemplated hereby.
Section 3.11 No Material Adverse Change. Except as disclosed in the
--------------------------
Delaware Company SEC Documents filed prior to the date of this Agreement, since
June 30, 1999, the Delaware Company and its Subsidiaries have conducted their
respective businesses in the ordinary and usual course and there has not been
any material
-23-
<PAGE>
adverse change in the assets, business, results of operations or financial
condition of the Delaware Company and its Subsidiaries, taken as a whole.
Section 3.12 Taxes. (a) Except as set forth in the financial statements
-----
(including the notes thereto) included in the Delaware Company SEC Documents,
(i) all Returns material to the Delaware Company and its Subsidiaries, taken as
a whole (the "Delaware Company Returns"), required to be filed with any taxing
------------------------
authority by, or with respect to, the Delaware Company or any of its
Subsidiaries have been timely filed in accordance with all applicable Laws; (ii)
the Delaware Company and its Subsidiaries have timely paid all Taxes shown as
due and payable on the Delaware Company Returns that have been so filed, and, as
of the time of filing, the Delaware Company Returns correctly reflected in all
material respects the facts regarding the income, business, assets, operations,
activities and the status of the Delaware Company and the Delaware Company
Subsidiaries, other than Taxes that are being contested in good faith and for
which adequate reserves are reflected on the Delaware Company's Consolidated
Balance Sheet as of June 30, 1999 (the "Delaware Company Balance Sheet"); (iii)
------------------------------
the Delaware Company and its Subsidiaries have made provision for all Taxes
(material to the Delaware Company and its Subsidiaries, taken as a whole)
payable by them for which no Delaware Company Return has yet been filed or for
which no Delaware Company Returns are required to be filed; (iv) the charges,
accruals and reserves for Taxes with respect to the Delaware Company and its
Subsidiaries reflected on the Delaware Company Balance Sheet are adequate under
GAAP (applied on a consistent basis during the periods involved) to cover the
Tax liabilities accruing through the date thereof; (v) there is no action, suit,
proceeding, audit or claim now pending against or with respect to the Delaware
Company or any of its Subsidiaries, or, to the knowledge of the Delaware
Company, proposed or threatened, in respect of any Tax where there is a
reasonable possibility of an adverse determination material to the Delaware
Company and its Subsidiaries, taken as a whole; (vi) there are no Liens on any
of the assets of the Delaware Company or any of its Subsidiaries with respect to
Taxes, other than Liens for Taxes not yet due and payable or for Taxes that the
Delaware Company or one or more of its Subsidiaries is contesting in good faith
through appropriate proceedings and for which appropriate reserves have been
established,
-24-
<PAGE>
and (vii) neither the Delaware Company nor any of its Subsidiaries has been a
member of an affiliated, consolidated, combined or unitary group other than one
of which the Delaware Company was the common parent.
(b) For purposes of this Agreement, the following definitions shall
apply:
(i) The term "Group" means, individually and collectively,
-----
(1) the Delaware Company and (2) any individual, trust, corporation, partnership
or any other entity as to which the Delaware Company is liable for Taxes
incurred by such individual or entity either as a transferee, or pursuant to
Treasury Regulation Section 1.1502-6, or pursuant to any other provision or
federal, territorial, state, local or foreign law or regulations.
(ii) The term "Taxes" means all taxes, however denominated,
-----
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local or
foreign governmental or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), real property taxes, payroll and employee
withholding taxes, unemployment withholding taxes, unemployment insurance taxes,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation taxes,
real and personal property taxes, stamp taxes, environmental taxes, transfer
taxes, workers' compensation, Pension Benefit Guaranty Corporation ("PBGC")
----
premiums and other governmental charges, and other obligations of the same or of
a similar nature to any of the foregoing, which any member of the Group is
required to pay, withhold or collect.
(iii) The term "Returns" means all reports, estimates,
-------
declarations of estimated tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and any other payments to
third parties.
(c) All material elections made since December 31, 1998, with
respect to Taxes affecting the Delaware Company or any of its Subsidiaries as of
the date of this Agreement are set forth in Section 3.12 of the Delaware Company
Disclosure Schedule.
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<PAGE>
Section 3.13 Vote Required. The affirmative vote of the holders of a
-------------
majority in voting power of the outstanding shares of Delaware Company Common
Stock and the Debentures, voting together as a single class, and the holders of
a majority in voting power of the outstanding principal amount of the
Debentures, voting separately as a class, and the written consent of Boss
Investment pursuant to Section 16(a) of the Investor Rights Agreement dated
March 22, 1999, by and among the Delaware Company and the investors listed
thereon (the "Investor Rights Agreement"), are the only votes of the holders of
-------------------------
any class or series of the Delaware Company's capital stock or any other
securities necessary to adopt this Agreement and approve the transactions
contemplated hereby (the "Requisite Delaware Holder Approvals").
-----------------------------------
Section 3.14 Opinion of Financial Advisor. The Delaware Company has
----------------------------
received the opinion of Bear, Stearns & Co. Inc., its financial advisor, dated
as of the date of this Agreement, and provided a true, correct and complete copy
of such opinion to the Texas Company.
Section 3.15 Change in Control Provisions. Except as set forth in
----------------------------
Section 3.15 of the Delaware Company Disclosure Schedule, neither the Delaware
Company nor any of its Subsidiaries is a party to any Delaware Company Plan or
any material contract, agreement, plan, arrangement or understanding which, by
its terms, would cause any obligation of any of such entities to be created,
triggered or accelerated or would cause any right of any of such entities to be
lost or deferred, in any case as a result of the Delaware Company executing, or
consummating the transactions contemplated by, this Agreement.
Section 3.16 Undisclosed Material Liabilities. The Delaware Company
--------------------------------
and its Subsidiaries, taken as a whole, do not have any material liabilities or
obligations (whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due), except (a) as and to the extent
disclosed in Section 3.16 of the Delaware Company Disclosure Schedule; (b) as
and to the extent reflected, disclosed or reserved against in the Delaware
Company SEC Documents filed prior to the date hereof; or (c) for liabilities and
obligations incurred since June 30, 1999 in the ordinary course of business
consistent with past practice.
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<PAGE>
Section 3.17 Employee Benefit Plans. (a) Except where the failure to
----------------------
be true would not, individually or in the aggregate, have a material adverse
effect on the Delaware Company, (i) each Delaware Company Plan (as hereinafter
defined) has been operated and administered in accordance with its terms and
applicable Law, including, but not limited to, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code, (ii) each Delaware
-----
Company Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified, (iii) except as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985 and the Rules and Regulations thereunder
("COBRA"), no Delaware Company Plan provides death or medical benefits (whether
-----
or not insured), with respect to current or former employees of the Delaware
Company or of any trade or business, whether or not incorporated, which together
with the Delaware Company would be deemed a "single employer" within the meaning
of Section 4001 of ERISA (a "Delaware Company ERISA Affiliate"), beyond their
--------------------------------
retirement or other termination of service, (iv) no liability under Title IV of
ERISA has been incurred by the Delaware Company or any Delaware Company ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Delaware Company or any Delaware Company ERISA
Affiliate of incurring any such liability (other than PBGC premiums), (v) all
contributions or other amounts due from the Delaware Company or any Delaware
Company ERISA Affiliate with respect to each Delaware Company Plan have been
paid in full, (vi) neither the Delaware Company nor any Delaware Company ERISA
Affiliate has engaged in a transaction in connection with which the Delaware
Company or any of its Subsidiaries could reasonably be expected to be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code, and (vii) there are no
pending or anticipated or, to the best knowledge of Delaware Company, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
Delaware Company Plan or any trusts related thereto.
(b) Except as set forth in Section 3.17 of the Delaware Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute payments under
-27-
<PAGE>
Section 280G of the Code or otherwise) becoming due to any current or former
director or any employee of the Delaware Company or any of its Subsidiaries
under any Delaware Company Plan or otherwise or cause any prior payment made to
any current or former director or employee of the Delaware Company or any of its
Subsidiaries to be a parachute payment under Section 280G of the Code, (ii)
materially increase any benefits otherwise payable under any Delaware Company
Plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits. Except as set forth in Section 3.17 of the Delaware Company
Disclosure Schedule, no payments have been made or will be made by the Delaware
Company or any of its Subsidiaries that would not be deductible by the Delaware
Company or any of its Subsidiaries under Section 162(m) of the Code. Except as
set forth in Section 3.17 of the Delaware Company Disclosure, no benefits or
bonus has accrued or will accrue under the Consolidation Capital Corporation
Section 162(m) Bonus Plan or any other bonus program for any officer, director,
or any senior regional manager of the Delaware Company on or before the
Effective Time.
(c) For purposes of this Agreement, the term "Delaware Company Plan"
---------------------
shall mean each deferred compensation, bonus or other incentive compensation,
stock purchase, stock option, including, without limitation, any Delaware
Company Option Plan, or other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance or other "welfare" plan, fund or program (within
the meaning of Section 3(1) of ERISA); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of Section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Delaware Company or by any Delaware Company ERISA Affiliate or to which the
Delaware Company or any Delaware Company ERISA Affiliate is party, whether
written or oral, for the benefit of any employee or former employee of the
Delaware Company or any Delaware Company ERISA Affiliate.
(d) Except where the failure to be true would not, individually or in the
aggregate, have a material adverse effect on the Delaware Company, with respect
to each Delaware Company Multiemployer Plan (as hereinafter defined)
-28-
<PAGE>
(i) no withdrawal liability has been incurred by the Delaware Company or any
Delaware Company ERISA Affiliate, and the Delaware Company has no reason to
believe that any such liability will be incurred, prior to the Closing Date,
(ii) no such plan is in "reorganization" (within the meaning of Section 4241 of
ERISA), (iii) no notice has been received that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of an excise
tax, or that the plan is or may become "insolvent" (within the meaning of
Section 4241 of ERISA), (iv) no proceedings have been instituted by the Pension
Benefit Guaranty Corporation against the plan, (v) there is no contingent
liability for withdrawal liability by reason of a sale of assets pursuant to
Section 4204 of ERISA, and (vi) except as disclosed in Section 3.17(d) of the
Delaware Company Disclosure Schedule, if the Delaware Company or any Delaware
Company ERISA Affiliate were to have a complete or partial withdrawal under
Section 4203 of ERISA as of the Closing, no obligation to pay withdrawal
liability would exist on the part of the Delaware Company or any ERISA
Affiliate. "Delaware Company Multiemployer Plan" means a multiemployer plan
-----------------------------------
within the meaning of Section 4001(a) (3) of ERISA with respect to which the
Delaware Company or any Delaware Company ERISA Affiliate has an obligation to
contribute or has or could have withdrawal liability under Section 4201 of
ERISA.
(e) No Person, except those listed in Section 3.17(e) of the Delaware
Company Disclosure Schedule, is eligible to receive any specified number of
shares of Delaware Company Common Stock under the Stock Performance Plan (as
hereinafter defined), including, without limitation, any allocations or other
rights giving such Person any right to the award or issuance of the Delaware
Company Common Stock whether or not on account of the occurrence of the
transactions contemplated hereby. Waivers of any such rights have been obtained
and copies forwarded to the Texas Company prior to the date of this Agreement.
Section 3.18 Licenses and Registration. The Delaware Company and its
-------------------------
Subsidiaries have all permits, governmental licenses, registrations, orders,
exemptions and approvals necessary to own (or lease, as applicable) and operate
their properties and to carry on their businesses substantially as presently
conducted (and as presently proposed to be conducted) as required by Law or the
rules and regulations of any Governmental Entity (the "Delaware Company
----------------
-29-
<PAGE>
Material Permits") and all of such Delaware Company Material Permits are valid
- ----------------
and in full force and effect, other than those permits, licenses, registrations,
orders, exemptions and approvals, the absence of which would not result in a
material adverse effect on the Delaware Company.
Section 3.19 Compliance with Laws. The Delaware Company and its
--------------------
Subsidiaries have complied with all Laws applicable to their businesses,
properties (whether owned or leased), assets and operations (including, without
limitation, those relating to wages and hours, occupational health and safety,
record keeping, customs, antitrust, labor, consumer protection, employee
relations, workers' compensation and securities), except for such non-compliance
as would not have a material adverse effect on the Delaware Company.
Section 3.20 Environmental Matters. (a) With such exceptions as,
---------------------
individually or in the aggregate, would not have a material adverse effect on
the Delaware Company, (i) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
investigation, action, claim, suit, proceeding or review is pending or, to the
knowledge of the Delaware Company, threatened by any Person against, the
Delaware Company or any of its Subsidiaries, with respect to any applicable
Environmental Law, (ii) the Delaware Company and its Subsidiaries are currently
and have been in compliance with all applicable Environmental Laws, (iii) the
Delaware Company and each of its Subsidiaries have obtained and complied with
the terms and conditions of all permits and other approvals necessary under
applicable Environmental Laws to operate its business and to treat, transport,
store, dispose of and otherwise handle Hazardous Substances ("Delaware Company
----------------
Environmental Permits"), (iv) there have been no Releases or threats of Releases
- ---------------------
(as that term is defined in applicable Environmental Laws) at, from, in, on,
under, or to any property owned or operated by the Delaware Company or any of
its Subsidiaries except as permitted by applicable Environmental Laws, (v) the
Delaware Company or any of its Subsidiaries have reported to all appropriate
authorities to the extent required by applicable Environmental Laws all past and
present sites owned and operated by the Delaware Company or any of its
Subsidiaries where Hazardous Substances have been treated, stored, disposed of
or otherwise handled, and (vi) there is no on-site or off-site location to which
the Delaware Company or any
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of its Subsidiaries have transported or disposed of Hazardous Substances or
arranged for the transportation or disposal of Hazardous Substances.
(b) For purposes of this Agreement, the following terms have the
following meanings:
(i) "Environmental Law" means any law, rule, regulation, or
-----------------
ordinance, as in effect at the Effective Time, of any Governmental Entity
relating to pollution or protection of the environment, including, without
limitation, any Law relating to emissions, discharges, Releases or threatened
Releases of pollutants, contaminants or Hazardous Materials or wastes into the
ambient air, surface water, ground water or land.
(ii) "Hazardous Materials" means (1) any "hazardous waste" as
-------------------
defined in the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Sections 6901 et seq.), as amended through the Effective Time, and regulations
-- ---
promulgated thereunder; (2) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Sections 9601 et seq.), as amended through the Effective Time, and
-- ---
regulations promulgated thereunder; (3) any "toxic substance" as defined in the
Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), as amended
-- ---
through the Effective Time, and regulations promulgated thereunder; and (4)
petroleum, and any of its derivatives, by-products and other petroleum-related
hydrocarbons.
(iii) "Hazardous Materials Contamination" means contamination
---------------------------------
of the soil, groundwater, surface water, air or other elements by Hazardous
Materials that would give rise to liability under applicable Environmental Law.
(iv) "Release" means any spilling, leaking, pumping, pouring,
-------
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers or other closed receptacles containing any Hazardous
Material), but excludes (1) any release which results in exposure to Persons
solely within a workplace, with respect to a claim which such Persons may assert
against the employer of such Persons, (2) emissions from the engine exhaust of a
motor vehicle, rolling stock, aircraft or vessel, and (3) the normal application
of fertilizer.
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Section 3.21 Labor Matters. Neither the Delaware Company nor any of
-------------
its Subsidiaries is the subject of any material proceeding asserting that it or
any of its Subsidiaries has committed an unfair labor practice or seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the knowledge of the Delaware Company, threatened in writing, nor
has there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Delaware Company or any of its
Subsidiaries, except in each case as would not, individually or in the
aggregate, have a material adverse effect on the Delaware Company.
Additionally, except as disclosed in Section 3.21 of the Delaware Company
Disclosure Schedule, (a) neither the Delaware Company nor any of its
Subsidiaries is a party to any collective bargaining agreement, (b) there is no
unfair labor practice complaint against the Delaware Company or any of its
Subsidiaries pending or, to the knowledge of the Delaware Company, threatened
before the National Labor Relations Board that would, if adversely determined
against the Delaware Company or any of its Subsidiaries, have a material adverse
effect on the Delaware Company, (c) there is no labor strike or organized slow
down or stoppage actually pending or, to the knowledge of the Delaware Company,
threatened against the Delaware Company or any of its Subsidiaries which
involves the employees of the Delaware Company or any of its Subsidiaries and
which would have a material adverse effect on the Delaware Company, (d) no
private agreement restricts the Delaware Company or any of its Subsidiaries from
relocating, closing or terminating any of its operations or facilities, and (e)
except for plant closings or layoffs that, individually or in the aggregate,
would not have a material adverse effect on the Delaware Company, neither the
Delaware Company nor any of its Subsidiaries has implemented any plant closing
or layoff of employees that could reasonably be expected to require notification
under the Worker Adjustment Retraining and Notification Act of 1988, as amended,
or any similar state or local Law or regulation and no such layoffs will be
implemented before the Effective Time.
Section 3.22 State Takeover Statutes. No "fair price", "moratorium",
-----------------------
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (with the exception of
Section 203 of the DGCL) applicable to the Delaware Company is applicable to the
Merger or the other transactions
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<PAGE>
contemplated hereby. The action of the Board of Directors of the Delaware
Company in approving this Agreement (and the transactions provided for herein)
is sufficient to render inapplicable to this Agreement (and the transactions
provided for herein or contemplated hereby) the restrictions on "business
combinations" (as defined in Section 203 of the DGCL) as set forth in Section
203 of the DGCL.
Section 3.23 Ownership of Texas Company Common Stock. Neither the
----------------------------------------
Delaware Company nor any Delaware Company Subsidiary, as of the date hereof,
owns of record or beneficially, or is the Beneficial Owner of a number of shares
of Texas Company Common Stock which, in the aggregate, exceeds 1% of the
outstanding shares of Texas Company Common Stock and, without consent of the
Texas Company, which consent shall not be unreasonably withheld, neither the
Delaware Company nor any Delaware Company Subsidiary shall acquire or dispose of
any shares of Texas Company Common Stock until after the Closing Date except in
connection with the transactions contemplated by this Agreement. Beneficial
Owner has the meaning ascribed to such term in Article XIII of the Texas
Company's Articles of Incorporation.
Section 3.24 General. (a) As used above or elsewhere in this
-------
Agreement with respect to the Delaware Company and/or its Subsidiaries, the term
"material adverse effect" means an effect which is both material and adverse
-----------------------
with respect to, and the term "material" means material with respect to, the
--------
assets, business, results of operations or financial condition of the Delaware
Company taken as a whole with its Subsidiaries, and in either case shall be
determined net of, and only after giving the Delaware Company and its
Subsidiaries the benefit of, any insurance, indemnity, reimbursement,
contribution, compensation or other similar right which would operate to reduce,
offset, compensate or otherwise limit the impact thereof on the Delaware Company
and/or any of its Subsidiaries; provided, however, that any change or changes in
or caused by the prices of products or services and any change in Law, rule, or
regulation or GAAP (applied on a consistent basis during the periods involved),
shall not be deemed to constitute a material adverse effect or be deemed
material.
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<PAGE>
(b) For purposes of this Agreement, the term "Delaware Company
----------------
Disclosure Schedule" means the Delaware Company Disclosure Schedule delivered by
- -------------------
the Delaware Company to the Texas Company prior to the date hereof.
(c) No recourse or liability whatsoever with respect to this
Agreement shall be had against any stockholder, officer, director, employee or
agent, as such, past, present or having such capacity at any time prior to the
Effective Time, of the Delaware Company, any of its Subsidiaries, or any
successor thereof, either directly or through the Delaware Company, any of its
Subsidiaries or any successor thereof, such recourse or liability, if any, being
expressly waived and released by the Texas Company and its Subsidiaries as a
condition of, and as consideration for, the execution of this Agreement and any
other documents, instruments or certificates executed or delivered in connection
with this Agreement or the Merger.
(d) The foregoing representations and warranties of the Delaware
Company, and any liability for breach or violation thereof, shall terminate
absolutely and be of no further force and effect at and as of the Effective
Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TEXAS COMPANY
The Texas Company represents and warrants to the Delaware Company that,
except as expressly described or permitted in this Agreement or as disclosed to
the Delaware Company in the Texas Company Disclosure Schedule (as hereinafter
defined):
Section 4.1 Due Incorporation, Etc. Each of the Texas Company and
-----------------------
each Texas Company Subsidiary (as hereinafter defined) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so
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<PAGE>
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a material adverse effect (as
hereinafter defined) on the Texas Company and its Subsidiaries, taken as a
whole.
Section 4.2 Qualification as Foreign Entities. Each of the Texas
---------------------------------
Company and each Texas Company Subsidiary is duly licensed or qualified to do
business and, if applicable, is in good standing, in each state or other
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it requires it to be so licensed or
qualified, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the Texas Company.
Section 4.3 Capital Stock. As of the date hereof, the authorized
-------------
capital stock of the Texas Company consists solely of 100,000,000 shares of the
Texas Company Common Stock and 50,000,000 shares of preferred stock, $.001 par
value per share. As of the date hereof, 38,344,681 shares of Texas Company
Common Stock are outstanding, no shares of the preferred stock of the Texas
Company are outstanding, and 5,033,452 shares of Texas Company Common Stock are
reserved for issuance pursuant to the exercise of Texas Company Options (as
hereinafter defined). All of the Texas Company's issued and outstanding shares
of capital stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 4.3 of the Texas Company
Disclosure Schedule, for the rights contained in the Preferred Stock Agreement
and as set forth in this Section 4.3, there are not outstanding any Equity
Rights with respect to the Texas Company. A true and correct list of all of the
outstanding options of the Texas Company (the "Texas Company Options") granted
---------------------
pursuant to the plans of the Texas Company set forth in Section 4.3 of the Texas
Company Disclosure Schedule or otherwise (the plans described in Section 4.3 of
the Texas Company Disclosure Schedule being referred to collectively herein as
the "Texas Company Option Plans") and the purchase prices of the shares of Texas
--------------------------
Company Common Stock issuable upon the exercise of each Texas Company Option has
been delivered by the Texas Company to the Delaware Company on or prior to the
date of this Agreement.
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<PAGE>
Section 4.4 Preferred Stock Agreement. The Subscription and Exchange
-------------------------
Agreement between the Texas Company and the New Investor (as hereinafter
defined) (the "Preferred Stock Agreement") has been duly executed and delivered
-------------------------
by the Texas Company.
Section 4.5 Capitalization of the Texas Company Subsidiaries. Set
------------------------------------------------
forth on Schedule 4.5 of the Texas Company Disclosure Schedule is a true and
correct list of all of the direct and indirect Subsidiaries of the Texas Company
and the issued and outstanding capital stock of such Subsidiaries as of the date
of this Agreement. All issued and outstanding shares of capital stock of each
of the Subsidiaries of the Texas Company (a "Texas Company Subsidiary") are duly
------------------------
authorized, validly issued, fully paid and nonassessable.
Section 4.6 Ownership of Equity Interests. The Texas Company or one
-----------------------------
or more of its wholly-owned Subsidiaries owns, of record and beneficially, all
of the issued and outstanding capital stock or other equity interests of each of
the Texas Company Subsidiaries and all outstanding Equity Rights with respect to
each Texas Company Subsidiary, free and clear (except as otherwise contemplated
in the Second Amended and Restated Credit Agreement, dated as of October 15,
1998, among the Texas Company, certain of its Subsidiaries, the banks party
thereto and Chase Bank of Texas, National Association, as Agent for such banks,
as amended by the First Amendment to Second Amended and Restated Credit
Agreement, dated as of May 25, 1999 among the same parties and the documents
related thereto) of all Liens. Except as described above or as set forth in
Section 4.6 of the Texas Company Disclosure Schedule, neither the Texas Company
nor any of the Texas Company Subsidiaries owns or holds, directly or indirectly,
any capital stock of, or other equity or other ownership interest in (or any
securities, rights or other interests exchangeable for, convertible into or
which otherwise relate to the acquisition of any capital stock of), any Person
or is a partner or joint venturer in any partnership or joint venture material
to the Texas Company.
Section 4.7 Corporate Power and Authority. The Texas Company has the
-----------------------------
requisite corporate power to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, subject to obtaining the
Requisite Texas Holder Approvals. The execution and delivery of this Agreement
by the Texas Company
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<PAGE>
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Texas Company,
subject, to obtaining the Requisite Texas Holder Approvals. This Agreement has
been duly and validly executed and delivered by the Texas Company and
constitutes the valid and binding agreement of the Texas Company, enforceable
against the Texas Company in accordance with its terms, except as limited by
bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights
and except as limited by equitable principles.
Section 4.8 No Conflicts or Consents. (a) Except as provided for in
------------------------
Article I and as required under the HSR Act, the Exchange Act, the Securities
Act, and state securities or "blue sky" Laws, no notices, reports or other
filings are required to be made by the Texas Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Texas Company from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by the Texas Company and the
consummation by the Texas Company of the transactions contemplated hereby, the
failure to make or obtain any or all of which would have a material adverse
effect on the Texas Company, or would prevent, materially delay or materially
burden the transactions contemplated in this Agreement.
(b) Except as set forth in Section 4.8 of the Texas Company
Disclosure Schedule, the execution and delivery of this Agreement by the Texas
Company does not, and the consummation by the Texas Company of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of, or a default under, the articles of incorporation or bylaws of the Texas
Company or the comparable governing instruments of any material Texas Company
Subsidiary, (ii) a breach or violation of, or a default under, the acceleration
of or the creation of any lien, pledge, security interest or other encumbrance
on assets (with or without the giving of notice or the lapse of time) pursuant
to, any provision of any Contracts of the Texas Company or any of its
Subsidiaries (the "Texas Company Contracts") or any change in the rights or
-----------------------
obligations of any party under any of the Texas Company Contracts or (iii) any
Law or judgment, decree, order, award or governmental or non-governmental permit
or license to which the Texas
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<PAGE>
Company or any of its Subsidiaries is subject, except, in the case of clause
(ii) and (iii) above for such breaches, violations, defaults, accelerations or
changes that, alone or in the aggregate, would not have a material adverse
effect on the Texas Company, or would not prevent, materially delay or
materially burden the transactions contemplated by this Agreement.
Section 4.9 SEC Reports and Financial Statements. Since January 1, 1997,
--------------------------------
the Texas Company has filed with the SEC all forms, reports and documents
required to be filed by it under the Exchange Act or the Securities Act (as they
have been amended since the time of their filing, collectively, the "Texas
-----
Company SEC Documents"). The Texas Company SEC Documents, including without
- ---------------------
limitation any financial statements or schedules included therein, at the time
filed, and any forms, reports or other documents filed by the Texas Company with
the SEC after the date of this Agreement, (a) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied or will be prepared
in compliance in all material respects with the applicable requirements of the
Exchange Act or the Securities Act, as the case may be. The financial statements
of the Texas Company included in the Texas Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, to normal audit adjustments) and fairly
present (subject, in the case of the unaudited statements, to normal audit
adjustments) the consolidated financial position of the Texas Company and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. All liabilities or
obligations (absolute, accrued, fixed, contingent or otherwise) required to be
reflected, reserved against or otherwise disclosed in the financial statements
of the Texas Company included in the Texas Company SEC Documents filed prior to
the date of this Agreement have been properly reflected, reserved against or
otherwise disclosed in such financial
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<PAGE>
statements in accordance with the rules and regulations of the SEC and GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, to
normal audit adjustments). Except as disclosed in Section 4.9 of the Texas
Company Disclosure Schedule, since June 30, 1999, and prior to the date of this
Agreement, no act, omission, occurrence, event, condition or circumstance has
occurred or become known to the Texas Company, and no transaction, commitment or
agreement has been entered into by the Texas Company or any of its Subsidiaries,
that should have been disclosed in the Texas Company SEC Documents.
Section 4.10 Information in Disclosure Documents and Registration
----------------------------------------------------
Statement. (a) The S-4 will, at the time it becomes effective under the
- ---------
Securities Act and at the Effective Time, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The proxy or information statement relating to the meeting of
the Texas Company's shareholders to obtain the Requisite Texas Holder Approvals
(as it may be amended from time to time, the "Texas Company Proxy Statement")
-----------------------------
will not, at the date mailed to the Texas Company's shareholders and at the time
of the meeting of shareholders to be held in connection with the approval of
this Agreement and the issuance of the Texas Company Common Stock in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Texas Company Proxy Statement will, when filed with
the SEC by the Texas Company, comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.
(c) Notwithstanding the foregoing, the Texas Company makes no
representation with respect to statements made in any of the foregoing documents
based on information supplied by the Delaware Company specifically for inclusion
therein.
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<PAGE>
Section 4.11 Litigation. Except as disclosed in the Texas Company SEC
----------
Documents filed prior to the date of this Agreement, there is as of the date
hereof no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of the Texas Company, threatened, against the Texas Company or
any of its Subsidiaries which, individually or in the aggregate, would have a
material adverse effect on the Texas Company, or a material adverse effect on
the ability of the Texas Company to consummate the transactions contemplated by
this Agreement. Except as disclosed in the Texas Company SEC Documents filed
prior to the date of this Agreement, neither the Texas Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, would have a material adverse effect on
the Texas Company, or a material adverse effect on the ability of the Texas
Company to consummate the transactions contemplated hereby.
Section 4.12 No Material Adverse Change. Except as disclosed in the
--------------------------
Texas Company SEC Documents filed prior to the date of this Agreement, in
connection with the transactions contemplated in this Agreement, and the
negotiation, execution and delivery of the Preferred Stock Agreement or the
consummation of the transactions contemplated thereby, since June 30, 1999,
there has not been any material adverse change in the assets, business, results
of operations or financial condition of the Texas Company and its Subsidiaries,
taken as a whole.
Section 4.13 Taxes. (a) Except as set forth in the financial
-----
statements (including the notes thereto) included in the Texas Company SEC
Documents and in Section 4.13 of the Texas Company Disclosure Schedule, (i) all
Returns material to the Texas Company and its Subsidiaries, taken as a whole
(the "Texas Company Returns"), required to be filed with any taxing authority
---------------------
by, or with respect to, the Texas Company or any of its Subsidiaries have been
timely filed in accordance with all applicable Laws; (ii) the Texas Company and
its Subsidiaries have timely paid all Taxes shown as due and payable on the
Texas Company Returns that have been so filed, and, as of the time of filing,
the Texas Company Returns correctly reflected in all material respects the facts
regarding the income, business, assets, operations, activities and the status of
the Texas Company and its Subsidiaries, other than Taxes that are being
contested in good faith and for which adequate reserves are reflected on the
Texas Company's Consolidated Balance
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<PAGE>
Sheet dated June 30, 1999 (the "Texas Company Balance Sheet"); (iii) the Texas
--------------------------
Company and its Subsidiaries have made provision for all Taxes material to the
Texas Company and its Subsidiaries, taken as a whole, payable by them for which
no Texas Company Return has yet been filed or for which no Texas Company Returns
are required to be filed; (iv) the charges, accruals and reserves for Taxes with
respect to the Texas Company and its Subsidiaries reflected on the Texas Company
Balance Sheet are adequate under GAAP (applied on a consistent basis during the
periods involved) to cover the Tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now pending
against or with respect to the Texas Company or any of its Subsidiaries, or, to
the knowledge of the Texas Company, proposed or threatened, in respect of any
Tax where there is a reasonable possibility of an adverse determination material
to the Texas Company and its Subsidiaries, taken as a whole; (vi) there are no
Liens on any of the assets of Texas Company or any of its Subsidiaries with
respect to Taxes, other than Liens for Taxes not yet due and payable or for
Taxes that the Texas Company or one or more of its Subsidiaries is contesting in
good faith through appropriate proceedings and for which appropriate reserves
have been established, and (vii) neither the Texas Company nor any of its
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Texas Company was the common parent.
(b) All material elections made since December 31, 1998, with respect
to Taxes affecting the Texas Company or any of its Subsidiaries as of the date
of this Agreement are set forth in Section 4.13 of the Texas Company Disclosure
Schedule.
Section 4.14 Vote Required. Assuming that the representations and
-------------
warranties in Section 3.23 of this Agreement, and the reps and warranties of
BOSS II, LLC in Section 4.5 of the Subscription and Exchange Agreement are true
and correct, the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Texas Company Common Stock entitled to vote with respect
to the approval of this Agreement and the affirmative vote of at least a
majority of the votes cast (provided the votes cast represent a majority in
interest of all securities entitled to vote) with respect to the issuance of the
Texas Company Common Stock in connection with the Merger and (if required by the
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<PAGE>
Shareholder Approval Policy of the NYSE) the issuance of the Texas Company
Preferred Stock pursuant to the Preferred Stock Agreement are the only votes of
the holders of any class or series of the Texas Company's capital stock or other
securities necessary to approve this Agreement and the transactions contemplated
hereby or the issuance of the Texas Company Common Stock in connection with the
Merger or the issuance of the Texas Company Preferred Stock pursuant to the
Preferred Stock Agreement (the "Requisite Texas Holder Approvals").
--------------------------------
Section 4.15 Opinion of Financial Advisor. The Texas Company has
----------------------------
received the opinion of Chase Securities, Inc., its financial advisor, to the
effect that, as of the date hereof, and provided a true, correct and complete
copy of such opinion to the Delaware Company.
Section 4.16 Change in Control Provisions. Except as set forth in
----------------------------
Section 4.16 of the Texas Company Disclosure Schedule, neither the Texas Company
nor any of its Subsidiaries is a party to any Texas Company Plan or any material
contract, agreement, plan, arrangement or understanding which, by its terms,
would cause any obligation of any of such entities to be created, triggered or
accelerated or would cause any right of any of such entities to be lost or
deferred, in any case as a result of the Texas Company executing, or
consummating the transactions contemplated by, this Agreement.
Section 4.17 Undisclosed Material Liabilities. The Texas Company and
--------------------------------
its Subsidiaries, taken as a whole, do not have any material liabilities or
obligations (whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due), except (a) as and to the extent
disclosed in Section 4.17 of the Texas Company Disclosure Schedule; (b) as and
to the extent reflected, disclosed or reserved against in the Texas Company SEC
Documents filed prior to the date hereof; or (c) for liabilities and obligations
incurred since June 30, 1999 in the ordinary course of business consistent with
past practice.
Section 4.18 Employee Benefit Plans. (a) Except where the failure to
----------------------
be true would not, individually or in the aggregate, have a material adverse
effect on the Texas Company, (i) each Texas Company Plan (as hereinafter
defined) has been operated and administered in accordance with its terms and
applicable Law, including, but not limited
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<PAGE>
to ERISA and the Code, (ii) each Texas Company Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) except
as required by COBRA, no Texas Company Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of the
Texas Company or of any trade or business, whether or not incorporated, which
together with the Texas Company would be deemed a "single employer" within the
meaning of Section 4001 of ERISA (a "Texas Company ERISA Affiliate"), beyond
-----------------------------
their retirement or other termination of service, (iv) no liability under Title
IV of ERISA has been incurred by the Texas Company or any Texas Company ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Texas Company or any Texas Company ERISA
Affiliate of incurring any such liability (other than PBGC premiums), (v) all
contributions or other amounts due from the Texas Company or any Texas Company
ERISA Affiliate with respect to each Texas Company Plan have been paid in full,
(vi) neither the Texas Company nor any Texas Company ERISA Affiliate has engaged
in a transaction in connection with which the Texas Company or any of its
Subsidiaries could reasonably be expected to be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code, and (vii) there are no pending or
anticipated or, to the best knowledge of Texas Company, threatened claims (other
than routine claims for benefits) by, on behalf of or against any Texas Company
Plan or any trusts related thereto.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute payments under Section 280G of the Code or otherwise) becoming due to
any current or former director or any employee of the Texas Company or any of
its Subsidiaries under any Texas Company Plan or otherwise or cause any prior
payment made to any current or former director or employee of the Delaware
Company or any of its Subsidiaries to be a parachute payment under Section 280G
of the Code, (ii) materially increase any benefits otherwise payable under any
Texas Company Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits. Except as set forth in Section 4.18(b) of the
Texas Company Disclosure Schedule, no
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<PAGE>
payments have been made or will be made by the Texas Company or any of its
Subsidiaries that would not be deductible by the Texas Company or any of its
Subsidiaries under Section 162(m) of the Code. Except as set forth in Section
4.18(b) of the Texas Company Disclosure, no benefits or bonus has accrued or
will accrue under any other bonus program for any officer, director, or any
senior regional manager of the Texas Company on or before the Effective Time.
(c) For purposes of this Agreement, the term "Texas Company Plan"
------------------
shall mean each deferred compensation, bonus or other incentive compensation,
stock purchase, stock option, including, without limitation, any Texas Company
Option Plan, or other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance or other "welfare" plan, fund or program (within
the meaning of Section 3(1) of ERISA); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of Section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Texas Company or by any Texas Company ERISA Affiliate or to which the Texas
Company or any Texas Company ERISA Affiliate is party, whether written or oral,
for the benefit of any employee or former employee of the Texas Company or any
Texas Company ERISA Affiliate.
(d) Except where the failure to be true would not, individually or
in the aggregate, have a material adverse effect on the Texas Company, with
respect to each Texas Company Multiemployer Plan (as hereinafter defined) (i) no
withdrawal liability has been incurred by the Texas Company or any Texas Company
ERISA Affiliate, and the Texas Company has no reason to believe that any such
liability will be incurred, prior to the Closing Date, (ii) no such plan is in
"reorganization" (within the meaning of Section 4241 of ERISA), (iii) no notice
has been received that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, or that the plan
is or may become "insolvent" (within the meaning of Section 4241 of ERISA), (iv)
no proceedings have been instituted by the Pension Benefit Guaranty Corporation
against the plan, (v) there is no contingent liability for withdrawal liability
by reason of a sale of assets pursuant to Section 4204 of ERISA, and (vi) except
as disclosed in Section 4.18(d) of the
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Texas Company Disclosure Schedule, if the Texas Company or any Texas Company
ERISA Affiliate were to have a complete or partial withdrawal under Section 4203
of ERISA as of the Closing, no obligation to pay withdrawal liability would
exist on the part of the Texas Company or any ERISA Affiliate. "Texas Company
-------------
Multiemployer Plan" means a multiemployer plan within the meaning of Section
- ------------------
4001(a) (3) of ERISA with respect to which the Texas Company or any Texas
Company ERISA Affiliate has an obligation to contribute or has or could have
withdrawal liability under Section 4201 of ERISA.
Section 4.19 Licenses and Registration . The Texas Company and its
-------------------------
Subsidiaries have all permits, governmental licenses, registrations, orders,
exemptions and approvals necessary to own (or lease, as applicable) and operate
their properties and to carry on their businesses substantially as presently
conducted (and as presently proposed to be conducted) as required by Law or the
rules and regulations of any Governmental Entity (the "Texas Company Material
----------------------
Permits") and all of such Texas Company Material Permits are valid and in full
- -------
force and effect, other than those permits, licenses, registrations, orders,
exemptions and approvals, the absence of which would not result in a material
adverse effect on the Texas Company.
Section 4.20 Compliance with Laws. The Texas Company and its
--------------------
Subsidiaries have complied with all Laws applicable to their businesses,
properties (whether owned or leased), assets and operations (including, without
limitation, those relating to wages and hours, occupational health and safety,
record keeping, customs, antitrust, labor, consumer protection, employee
relations, workers' compensation and securities), except for such non-compliance
as would not have a material adverse effect on the Texas Company.
Section 4.21 Environmental Matters. With such exceptions as, individually
---------------------
or in the aggregate, would not have a material adverse effect on the Texas
Company, and except as set forth in Section 4.21 of the Texas Company Disclosure
Schedule, (i) no written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by, and no
investigation, action, claim, suit, proceeding or review is pending or, to the
knowledge of the Texas Company, threatened by any Person against, the Texas
Company or any of its Subsidiaries,
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with respect to any applicable Environmental Law, (ii) the Texas Company and its
Subsidiaries are currently and have been in compliance with all applicable
Environmental Laws, (iii) the Texas Company and each of its Subsidiaries have
obtained and complied with the terms and conditions of all permits and other
approvals necessary under applicable Environmental Laws to operate its business
and to treat, transport, store, dispose of and otherwise handle Hazardous
Substances ("Texas Company Environmental Permits"), (iv) there have been no
-----------------------------------
Releases or threats of Releases (as that term is defined in applicable
Environmental Laws) at, from, in, on, under, or to any property owned or
operated by the Texas Company or any of its Subsidiaries except as permitted by
applicable Environmental Laws, (v) the Texas Company and its Subsidiaries have
reported to all appropriate authorities to the extent required by applicable
Environmental Laws all past and present sites owned and operated by the Texas
Company or any of its Subsidiaries where Hazardous Substances have been treated,
stored, disposed of or otherwise handled, and (vi) there is no on-site or off-
site location to which the Texas Company or any of its Subsidiaries have
transported or disposed of Hazardous Substances or arranged for the
transportation or disposal of Hazardous Substances.
Section 4.22 State Takeover Statutes. No "fair price", "moratorium",
-----------------------
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (with the exception of
Article 13.03 of the TBCA) applicable to the Texas Company is applicable to the
Merger or the other transactions contemplated hereby. The action of the Board
of Directors of the Texas Company in approving this Agreement (and the
transactions provided for herein or contemplated hereby) is sufficient to render
Article 13.03 of the TBCA inapplicable to this Agreement.
Section 4.23 Labor Matters. Neither the Texas Company nor any of its
-------------
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or seeking to compel
it to bargain with any labor union or labor organization nor is there pending
or, to the knowledge of the Texas Company, threatened in writing, nor has there
been for the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Texas Company or any of its Subsidiaries,
except in each case as would
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not, individually or in the aggregate, have a material adverse effect on the
Texas Company. Additionally, except as disclosed in Section 4.23 of the Texas
Company Disclosure Schedule, (a) neither the Texas Company nor any of its
Subsidiaries is a party to any collective bargaining agreement, (b) there is no
unfair labor practice complaint against the Texas Company or any of its
Subsidiaries pending or, to the knowledge of the Texas Company, threatened
before the National Labor Relations Board that would, if adversely determined
against the Texas Company or any of its Subsidiaries, have a material adverse
effect on the Texas Company, (c) there is no labor strike or organized slow down
or stoppage actually pending or, to the knowledge of the Texas Company,
threatened against the Texas Company or any of its Subsidiaries which involves
the employees of the Texas Company or any of its Subsidiaries and which would
have a material adverse effect on the Texas Company, (d) no private agreement
restricts the Texas Company or any of its Subsidiaries from relocating, closing
or terminating any of its operations or facilities, and (e) except for plant
closings or layoffs that, individually or in the aggregate, would not have a
material adverse effect on the Texas Company, neither the Texas Company nor any
of its Subsidiaries has implemented any plant closing or layoff of employees
that could reasonably be expected to require notification under the Worker
Adjustment Retraining and Notification Act of 1988, as amended, or any similar
state or local Law or regulation and no such layoffs will be implemented before
the Effective Time.
Section 4.24 General. (1) As used above or elsewhere in this Agreement
-------
with respect to the Texas Company and/or its Subsidiaries, the term "material
adverse effect" means an effect which is both material and adverse with respect
to, and the term "material" means material with respect to, the assets,
business, results of operations or financial condition of the Texas Company
taken as a whole with its Subsidiaries, and in either case shall be determined
net of, and only after giving the Texas Company and its Subsidiaries the benefit
of, any insurance, indemnity, reimbursement, contribution, compensation or other
similar right which would operate to reduce, offset, compensate or otherwise
limit the impact thereof on the Texas Company and/or any of its Subsidiaries;
provided, however, that any change or changes in or caused by the prices of
products or services and any change in Law, rule, or regulation or
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GAAP (applied on a consistent basis during the periods involved), shall not be
deemed to constitute a material adverse effect or be deemed material.
(b) For purposes of this Agreement, the term "Texas Company
-------------
Disclosure Schedule" means the Texas Company Disclosure Schedule delivered by
- -------------------
the Texas Company to the Delaware Company prior to the date hereof.
(c) No recourse or liability whatsoever with respect to this
Agreement or the Merger shall be had against any shareholder, officer, director,
employee or agent, as such, past, present or having such capacity at any time
prior to the Effective Time, of the Texas Company, any of its Subsidiaries, or
any successor thereof, either directly or through the Texas Company, any of its
Subsidiaries or any successor thereof, such recourse or liability, if any, being
expressly waived and released by the Delaware Company and its Subsidiaries as a
condition of, and as consideration for, the execution of this Agreement and any
other documents, instruments or certificates executed or delivered in connection
with this Agreement or the Merger.
(d) The foregoing representations and warranties of the Texas
Company, and any liability for breach or violation thereof, shall terminate
absolutely and be of no further force and effect at and as of the Effective
Time.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Delaware Company. Except as
-------------------------------------------
contemplated by this Agreement or with the prior written consent of the Texas
Company, which consent shall not be unreasonably withheld or delayed and is
hereby given with respect to actions set forth in Section 5.1 of the Delaware
Company Disclosure Schedule, during the period from the date of this Agreement
to the Effective Time or the date of termination of this Agreement, whichever
first occurs, the Delaware Company will, and will cause each of its Subsidiaries
to, conduct its operations only
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<PAGE>
in the ordinary and usual course of business consistent with past practice and,
consistent therewith, will use all reasonable efforts, and will cause each of
its Subsidiaries to use all reasonable efforts, to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with licensors, licensees, customers,
suppliers, employees, consultants and any others having business dealings with
it, in each case in all material respects. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement or
as set forth in Section 5.1 of the Delaware Company Disclosure Schedule, the
Delaware Company will not, and will not permit any of its Subsidiaries to, prior
to the Effective Time, or the date of termination of this Agreement, whichever
first occurs, without the prior written consent of the Texas Company, not to be
unreasonably withheld or delayed:
(a) adopt any amendment to its certificate of incorporation or by-
laws or comparable organizational documents;
(b) except for issuances of capital stock of the Delaware
Company's Subsidiaries to the Delaware Company or a wholly owned Subsidiary of
the Delaware Company, issue, reissue, sell or pledge or authorize or propose the
issuance, reissuance, sale or pledge of additional shares of capital stock of
any class, or securities convertible into capital stock of any class, or any
rights, warrants or options to acquire any convertible securities or capital
stock, other than the issuance of shares of Delaware Company Common Stock upon
the exercise of stock options, warrants or vesting of restricted or deferred
stock unit awards outstanding on the date of this Agreement, in each case in
accordance with their present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that any wholly owned
Subsidiary of the Delaware Company may pay dividends and make distributions to
the Delaware Company or any of the Delaware Company's wholly owned Subsidiaries;
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<PAGE>
(d) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock, other than pursuant to the Delaware
Company Plans;
(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Delaware Company and its
Subsidiaries may incur, assume or pre-pay debt in the ordinary course of
business consistent with past practice, (ii) incur any indebtedness (other than
indebtedness with respect to the payment of interest paid in kind) pursuant to
the Delaware Company Junior Indenture, (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person except in the ordinary course
of business consistent with past practice, or (iv) make any loans, advances or
capital contributions to, or investments in, any other Person except in the
ordinary course of business consistent with past practice and except for loans,
advances, capital contributions or investments between any wholly owned
Subsidiary of the Delaware Company and the Delaware Company or another wholly
owned Subsidiary of the Delaware Company;
(f) settle or compromise any suit or claim or threatened suit or
claim relating to the transactions contemplated hereby;
(g) except for (i) increases in salary, wages and benefits of
employees of the Delaware Company or its Subsidiaries (other than executive or
corporate officers of the Delaware Company or presidents of any of its
Subsidiaries) in accordance with past practice, (ii) increases in salary, wages
and benefits granted to employees of the Delaware Company or its Subsidiaries
(other than executive or corporate officers of the Delaware Company or
presidents of any of its Subsidiaries) in conjunction with promotions or other
changes in job status consistent with past practice or required under existing
agreements, and (iii) increases in salary, wages and benefits to employees of
the Delaware Company or its Subsidiaries pursuant to collective bargaining
agreements entered into in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits payable or to become
payable to directors, officers or employees of the Delaware Company or any of
its Subsidiaries, or pay any benefit not required by any existing
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<PAGE>
plan or arrangement (including the granting of, or waiver of performance or
other vesting criteria under, stock options, stock appreciation rights, shares
of restricted stock or deferred stock or performance units) or grant any
severance or termination pay to (except pursuant to existing agreements or
policies), or enter into any employment or severance agreement with, any
director, officer or other key employee of the Delaware Company or any of its
Subsidiaries or establish, adopt, enter into, terminate or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, welfare, deferred compensation,
employment, termination, severance or other employee benefit plan, agreement,
trust, fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees, except to the extent such termination
or amendment is required by applicable law; provided, however, that nothing
herein will be deemed to prohibit the payment of benefits as they become
payable;
(h) (i) acquire, sell, lease or dispose of any assets that are
material to the Delaware Company and its Subsidiaries, taken as a whole, (ii)
enter into any material commitment or transaction outside the ordinary course of
business consistent with past practice other than transactions between a wholly
owned Subsidiary of the Delaware Company and the Delaware Company or another
wholly owned Subsidiary of the Delaware Company, or (iii) enter into any
material commitment or transaction either in, or outside of, the ordinary course
of business if such commitment or transaction involves the payment or receipt by
the Delaware Company or any of its Subsidiaries of more than $50,000,000;
(i) acquire or sell or enter into any letter of intent, material
commitment or other agreement, whether written or oral, to acquire any debt or
equity securities of any Third Party;
(j) (i) modify, amend or terminate any Delaware Company Contract
which is, or should have been, disclosed in the Delaware Company SEC Documents
filed prior to the date hereof or filed with the SEC in connection therewith or
any Delaware Company Contract to which any Delaware Company Subsidiary is a
party and which, the Delaware Company in good faith believes, could involve the
payment or receipt of more than $10,000,000 (collectively, the "Material
--------
Delaware Company Contracts"), (ii) waive, release, relinquish or assign any
- --------------------------
Material Delaware
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<PAGE>
Company Contract (including any material insurance policy) or other material
right or claim, or (iii) cancel or forgive any material indebtedness owed to the
Delaware Company or any of its Subsidiaries, other than in each case in a manner
in the ordinary course of business consistent with past practice or which is not
material to the business of the Delaware Company and its Subsidiaries taken as a
whole;
(k) make any tax election not required by Law or settle or
compromise any tax liability, in either case that is material to the Delaware
Company and its Subsidiaries taken as a whole;
(l) change any of the material accounting principles or practices
used by it except as required by the SEC or the Financial Accounting Standards
Board;
(m) take any action which the Delaware Company believes when taken
would cause its representations and warranties contained herein to become
inaccurate in any material respect; or
(n) authorize, or commit or agree to take, any of the foregoing
actions.
; provided, however, that none of the restrictions set forth in this Section
5.1 are intended to violate any provision of any agreement governing any
indebtedness of the Delaware Company or any of its Subsidiaries.
Section 5.2 Conduct of Business of the Texas Company. Except as
----------------------------------------
contemplated by this Agreement or with the prior written consent of the Delaware
Company, which consent shall not be unreasonably withheld or delayed and is
hereby given with respect to actions set forth in Section 5.2 of the Texas
Company Disclosure Schedule, any actions necessary or advisable to consummate
the transactions contemplated by the Preferred Stock Agreement or any documents
contemplated therein and any actions necessary to obtain the New Financing (as
hereinafter defined), during the period from the date of this Agreement to the
Effective Time or the date of termination of this Agreement, whichever first
occurs, the Texas Company will, and will cause each of its Subsidiaries to,
conduct its operations only in the ordinary and usual course of business
consistent with past practice and, consistent therewith, will use all reasonable
efforts, and will cause each of its Subsidiaries to use all reasonable efforts,
to preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its relationships
with licensors, licensees,
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<PAGE>
customers, suppliers, employees and any others having business dealings with it,
in each case in all material respects. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, as set
forth in Section 5.2 of the Texas Company Disclosure Schedule, or necessary or
advisable to consummate the transactions contemplated by the Preferred Stock
Agreement or any documents referred to therein or the New Financing, the Texas
Company will not, and will not permit any of its Subsidiaries to, prior to the
Effective Time or the date of termination of this Agreement, whichever first
occurs, without the prior written consent of the Delaware Company, not to be
unreasonably withheld or delayed:
(a) adopt any amendment to its articles of incorporation or by-laws
or comparable organizational documents other than as contemplated by this
Agreement;
(b) except for issuances of capital stock of the Texas Company's
Subsidiaries to the Texas Company or a wholly owned Subsidiary of the Texas
Company, issue, reissue, sell or pledge or authorize or propose the issuance,
reissuance, sale or pledge of additional shares of capital stock of any class,
or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of shares of Texas Company Common Stock upon the
exercise of stock options or vesting of restricted or deferred stock unit awards
outstanding on the date of this Agreement, in each case in accordance with their
present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that any wholly owned
Subsidiary of the Texas Company may pay dividends and make distributions to the
Texas Company or any of the Texas Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock, other than pursuant to the Texas
Company Plans;
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<PAGE>
(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Texas Company and its Subsidiaries
may incur, assume or pre-pay debt in the ordinary course of business consistent
with past practice, (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other Person (other than the Texas Company or any of its Subsidiaries)
except in the ordinary course of business consistent with past practice, or
(iii) make any loans, advances or capital contributions to, or investments in,
any other Person except in the ordinary course of business consistent with past
practice and except for loans, advances, capital contributions or investments
between any wholly owned Subsidiary of the Texas Company and the Texas Company
or another wholly owned Subsidiary of the Texas Company;
(f) settle or compromise any suit or claim or threatened suit or
claim relating to the transactions contemplated hereby;
(g) except for (i) increases in salary, wages and benefits of
employees of the Texas Company or its Subsidiaries (other than executive or
corporate officers of the Texas Company or presidents of any of its
Subsidiaries) in accordance with past practice, (ii) increases in salary, wages
and benefits granted to employees of the Texas Company or its Subsidiaries
(other than executive or corporate officers of the Texas Company or presidents
of any of its Subsidiaries) in conjunction with promotions or other changes in
job status consistent with past practice or required under existing agreements
and (iii) increases in salary, wages and benefits to employees of the Texas
Company or its Subsidiaries pursuant to collective bargaining agreements
entered into in the ordinary course of business consistent with past practice,
increase the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from the Texas Company or any of its
Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, the granting of, or waiver of performance or other
vesting criteria under, stock options, stock appreciation rights, shares of
restricted stock or deferred stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or
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severance agreement with, any director, officer or other key employee of the
Texas Company or any of its Subsidiaries or establish, adopt, enter into,
terminate or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, welfare,
deferred compensation, employment, termination, severance or other employee
benefit plan, agreement, trust, fund, policy or arrangement for the benefit or
welfare of any directors, officers or current or former employees, except to the
extent such termination or amendment is required by applicable law; provided,
however, that nothing herein will be deemed to prohibit the payment of benefits
as they become payable;
(h) (i) acquire, sell, lease or dispose of any assets that are
material to the Texas Company and its Subsidiaries, taken as a whole, (ii) enter
into any material commitment or transaction outside the ordinary course of
business consistent with past practice other than transactions between a wholly
owned Subsidiary of the Texas Company and the Texas Company or another wholly
owned Subsidiary of the Texas Company; or (iii) enter into any material
commitment or transaction either in, or outside of, the ordinary course of
business if such commitment or transaction involves the payment or receipt by
the Texas Company or any of its Subsidiaries of more than $50,000,000;
(i) acquire or sell or enter into any letter of intent, material
commitment or other agreement, whether written or oral, to acquire any debt or
equity securities of any Third Party;
(j) (i) modify, amend or terminate any Texas Company Contract which
is, or should have been disclosed in the Texas Company SEC Documents filed prior
to the date hereof or filed with the SEC in connection therewith or any Texas
Company Contract which the Texas Company in good faith believes could involve
the payment or receipt of more than $10,000,000 (collectively, the "Material
--------
Texas Company Contracts"), (ii) waive, release, relinquish or assign any
- -----------------------
Material Texas Company Contract (including any material insurance policy) or
other material right or claim, or (iii) cancel or forgive any material
indebtedness owed to the Texas Company or any of its Subsidiaries, other than in
each case in a manner in the ordinary course of business consistent with past
practice or which is not material to the business of the Texas Company and its
Subsidiaries taken as a whole;
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(k) make any tax election not required by Law or settle or
compromise any tax liability, in either case that is material to the Texas
Company and its Subsidiaries taken as a whole;
(l) change any of the material accounting principles or practices
used by it except as required by the SEC or the Financial Accounting Standards
Board;
(m) take any action which the Texas Company believes when taken
would cause its representations and warranties contained herein to become
inaccurate in any material respect; or
(n) authorize, or commit or agree to take, any of the foregoing
actions.
; provided, however, that none of the restrictions set forth in this
Section 5.1 are intended to violate any provision of any agreement governing any
indebtedness of the Delaware Company or any of its Subsidiaries. As used
herein, the term "New Financing", shall mean a senior debt facility with terms
-------------
reasonably acceptable to the Texas Company and the Delaware Company and provided
by a lender or lenders reasonably acceptable to the Texas Company and the
Delaware Company which shall provide for loans to the Texas Company, if
necessary, in an amount of at least $800,000,000.
Section 5.3 Commercially Reasonable Best Efforts. (a) Subject to the
------------------------------------
terms and conditions of this Agreement, all of the Parties hereto will use their
respective commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
(i) the prompt delivery in writing of any and all information reasonably
requested by another Party from time to time for inclusion or incorporation by
reference in the S-4, the Delaware Company Proxy Statement and the Texas Company
Proxy Statement, (ii) the prompt preparation and, subject to any limitations set
forth in the Preferred Stock Agreement, filing with the SEC of the S-4, the
Delaware Company Proxy Statement and the Texas Company Proxy Statement, (iii)
such actions as may be required to have the S-4 declared effective under the
Securities Act and the Delaware Company Proxy Statement and the Texas Company
Proxy Statement cleared by the SEC, in each case as
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promptly as practicable, including by consulting with each other as to, and
responding promptly to, any SEC comments with respect thereto, (iv) obtaining,
prior to the Effective Time, all necessary blue sky permits and approvals and
taking such other actions as may be required to be taken under applicable state
securities or blue sky laws in connection with the issuance and delivery of
shares of Texas Company Common Stock contemplated hereby, (v) the making of any
necessary filings, and thereafter make any required submissions, with respect to
this Agreement and the Merger under the HSR Act, or any other applicable Law,
and (vi) obtaining all consents required under applicable Law or by contract
necessary in connection with the Merger and the transactions contemplated in
this Agreement, the Preferred Stock Agreement or the documents contemplated
therein, and the New Financing. Without limiting the generality of the
foregoing, each of the Delaware Company and the Texas Company shall promptly
comply with any requests for additional information under the HSR Act, and shall
use its commercially reasonable efforts to obtain termination of the waiting
period thereunder as promptly as practicable. In addition, if at any time prior
to the Effective Time any event or circumstance relating to the Delaware Company
or the Texas Company or any of their respective Subsidiaries, or any of their
respective officers or directors, should be discovered by the Delaware Company
or the Texas Company, as the case may be, and which should be set forth in an
amendment or supplement to the S-4, the Delaware Company Proxy Statement or the
Texas Company Proxy Statement, the discovering Party will promptly inform the
other Party of such event or circumstance.
(b) Each of the Parties will comply in all material respects with
all applicable Laws and with all applicable rules and regulations of any
Governmental Entity in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby.
(c) Each of the Parties shall, in connection with the efforts
referenced in this Section 5.3, (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) promptly inform the other Parties of any material communication
received by such Party from, or given in connection with any proceeding by a
private
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party, in each case regarding any of the transactions contemplated hereby, (iii)
consult with each other in advance of any meeting or conference with any such
Governmental Entity or, in connection with any proceeding by a private party,
with any other person, and to the extent permitted by the applicable
Governmental Entity or other person, give the other Parties the opportunity to
attend and participate in such meetings and conferences, and (iv) provide any
necessary information with respect to and provide the other (or its counsel)
copies of, all filings made by such Party with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
(d) In furtherance and not in limitation of the covenants of the
Parties contained in this Section 5.3, if any administrative or judicial action
or proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any applicable Law, or if any statute, rule,
regulation, executive order, decree, injunction or administrative order is
enacted, entered or promulgated or enforced by a Governmental Entity which would
make the Merger or the other transactions contemplated hereby illegal or
otherwise prohibit or materially impair or delay consummation of the
transactions contemplated hereby, each of the Parties shall cooperate in all
respects with each other and use all commercially reasonable efforts to contest
and resist any such action or proceeding, to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement and to
have such statute, rule, regulation, executive order, decree, injunction or
administrative order repealed, rescinded or made inapplicable. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
5.3 shall limit a Party's right to terminate this Agreement pursuant to Section
7.1 so long as such Party has up to then complied in all respects with its
obligations under this Section 5.3.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any applicable Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any applicable Law, each of the Texas
Company and the Delaware
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Company shall use its commercially reasonable efforts to resolve any such
objections or challenge as such Governmental Entity or private party may have to
such transactions under such Law so as to permit consummation of the
transactions contemplated by this Agreement.
Section 5.4 Letter of the Delaware Company's Accountants. Following
--------------------------------------------
receipt by PricewaterhouseCoopers, the Delaware Company's independent auditors,
of an appropriate request from the Texas Company pursuant to Statement on
Auditing Standards ("SAS") No. 72, the Delaware Company will use its reasonable
---
best efforts to cause to be delivered to the Texas Company a letter of
PricewaterhouseCoopers, dated a date within two business days before the date on
which the S-4 will become effective and addressed to the Texas Company, in form
and substance reasonably satisfactory to the Texas Company, and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements on Form S-4, which letter will be
brought down to the Effective Time.
Section 5.5 Letter of the Texas Company's Accountants. Following
-----------------------------------------
receipt by KPMG Peat Marwick LLP, the Texas Company's independent auditors, of
an appropriate request from the Delaware Company pursuant to SAS No. 72, the
Texas Company will use its reasonable best efforts to cause to be delivered to
the Delaware Company a letter of KPMG Peat Marwick, LLP, dated a date within two
business days before the date on which the S-4 will become effective and
addressed to the Delaware Company, in form and substance reasonably satisfactory
to the Delaware Company, and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements on Form S-4, which letter will be brought down to the Effective Time.
Section 5.6 Access to Information. Upon reasonable notice, each Party
---------------------
will (and will cause each of their respective Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, facilities, books, contracts, commitments
and records and other information as reasonably requested by such requesting
Party and, during such period, each of the Delaware Company and the Texas
Company will (and will cause each of their respective
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Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of United States federal
securities laws or regulations, and (b) all other information concerning its
business, properties and personnel as such other Party may reasonably request.
The Parties will hold any such information which is nonpublic in confidence in
accordance with the terms of the Confidentiality Agreement, dated June 1, 1999,
-------------------------
between the Delaware Company and the Texas Company, as amended (the
"Confidentiality Agreement"), and in the event of termination of this Agreement
for any reason each Party will promptly comply with the terms of the
Confidentiality Agreement.
Section 5.7 Stock Exchange Listing. The Texas Company will use its best
----------------------
efforts to (i) obtain, prior to the Effective Time, the approval for listing on
the NYSE, effective upon official notice of issuance, of the shares of Surviving
Corporation Common Stock to be issued in connection with the Merger pursuant to
Article II hereof , the shares of Surviving Corporation Common Stock which will
be issuable upon conversion of the Texas Company Preferred Stock and the shares
of Surviving Corporation Common Stock which will be issuable upon exercise
options, warrants, earn outs and convertible securities of the Delaware Company,
and (ii) cause such Surviving Corporation Common Stock to be duly registered or
qualified under all applicable state securities or blue sky laws.
Section 5.8 Employee Benefit Plans. (a) Certain Delaware Company
---------------------- ------------------------
Plans. On or prior to the Effective Time, the Delaware Company and its Board
- -----
of Directors (or a committee thereof) and the Texas Company and its Board of
Directors (or a committee thereof) will take all action necessary to implement
the provisions contained in this Section 5.8 in a manner reasonably acceptable
to the Texas Company.
(i) Options and Warrants to Purchase Delaware Common
------------------------------------------------
Stock.
- -----
(1) Any Delaware Company Options that are
unexercisable, but become exercisable as a result of the transactions
contemplated hereby, shall not become exercisable because of the transactions
contemplated hereby and any discretion or any decision to be made by the
Delaware Company or its delegate with regard to any Delaware Company Options
shall be made not to allow any of such Delaware Company
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Options to become exercisable on account of the transactions contemplated
hereby. In addition, the Delaware Company shall either (i) cause each Person who
has Delaware Company Options that become exercisable because of the transactions
contemplated hereby to execute a waiver whereby such person agrees that such
options shall not become exercisable on account of the transactions contemplated
hereby (the "Option Waivers") or (ii) enter into severance agreements with any
--------------
person that has not signed an Option Waiver. Such severance agreements shall
provide for severance payments at the Effective Time in amounts consistent with
past practice of the Delaware Company and not in excess of the amount set forth
in Section 5.1(g) of the Delaware Company Disclosure Schedule and that all of
Delaware Company Options of such person shall terminate and be of no force and
effect at the Effective Time.
(2) At the Effective Time, the Delaware Company's obligations with
respect to each outstanding Delaware Company Option under the Delaware Company
Option Plans and each of the outstanding Delaware Company Warrants shall be
assumed by the Surviving Corporation. Options for which Option Waivers have not
been obtained and are required shall not be assumed by the Surviving
Corporation. The Delaware Company Options and the Delaware Company Warrants so
assumed by the Surviving Corporation shall continue to have, and be subject to,
the same terms and conditions set forth in the Delaware Company Option Plans (as
to the Delaware Company Option) and agreements pursuant to which such Delaware
Company Options and Delaware Company Warrants were issued as in effect
immediately prior to the Effective Time, except that (i) such Delaware Company
Options and Delaware Company Warrant shall be exercisable for that number of
whole shares of Surviving Corporation Common Stock equal to the product of the
number of shares of Delaware Company Common Stock covered by the Delaware
Company Options and the Delaware Company Warrants immediately prior to the
Effective Time multiplied by the Delaware Company Per Share Stock Amount,
rounded up to the nearest whole number of shares of Surviving Corporation Common
Stock, and (ii) the per share exercise price for the shares of Surviving
Corporation Common Stock issuable upon the exercise of such assumed Delaware
Company Options or the Delaware Company Warrants shall be equal to the quotient
determined by dividing the exercise price per share of Delaware Company Common
Stock specified for such
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Delaware Company Options under the applicable Delaware Company Option Plans or
agreement or Delaware Company Warrants immediately prior to the Effective Time
by the Delaware Company Per Share Stock Amount, rounding the resulting exercise
price down to the nearest whole cent. With respect to the Delaware Company
Options, the date of grant shall be the date on which the Delaware Company
Options were originally granted. Prior to such assumption of such Delaware
Company Options or Delaware Company Warrants by the Surviving Corporation, the
Delaware Company shall make all amendments to the plans and agreements governing
such Delaware Company Options and Delaware Company Warrants to accomplish the
foregoing, which shall be in a form reasonably acceptable to the Texas Company.
The Surviving Corporation shall (i) reserve for issuance the number of shares of
Surviving Corporation Common Stock that will become issuable upon the exercise
of such Delaware Company Options and the Delaware Company Warrants pursuant to
this Section 5.8(a)(i)(2) and (ii) at the Effective Time, execute a document
evidencing the assumption by the Surviving Corporation of the Delaware Company's
obligations with respect thereto under this 5.8(a)(i)(2). As soon as practicable
after the Effective Time, the Surviving Corporation shall file a registration
statement on Form S-8 (or any successor form), or another appropriate form with
respect to the shares of Surviving Corporation Common Stock subject to such
Delaware Company Options and shall use its reasonable commercial efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Delaware Company Options remain
outstanding. With respect to those individuals who subsequent to the Merger will
be subject to the reporting requirements under Section 16(a) of the Exchange
Act, where applicable, the Surviving Corporation, to the extent legally
permissible, shall administer the Delaware Company Option Plans assumed pursuant
to this Section 5.8(a)(i)(2) in a manner that complies with Rule 16b-3
promulgated under the Exchange Act.
(ii) Directors Option Plan. All Delaware Company Options issued and
---------------------
outstanding under the Consolidation Capital Corporation 1997 Non-Employee
Directors' Stock Plan (the "Directors Option Plan") shall be exercisable in
---------------------
accordance with such plan; provided that, the Delaware Company agrees to amend
the Directors Option
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Plan prior to the earlier to occur of the Effective Time or December 31, 1999,
to provide that no automatic grants of options under such plan shall occur.
Additionally, the Delaware Company agrees to terminate the Directors Option Plan
effective as of the Effective Time.
(iii) Stock Performance Plan and All Other Stock-Based Plans.
------------------------------------------------------
(1) At the Effective Time, the Delaware Company shall take all
steps necessary to cause any shares of Delaware Company Common Stock granted
pursuant to any Delaware Company Plan, including, without limitation, the
Delaware Company's 1999 Stock Performance Incentive Plan (the "Stock Performance
-----------------
Plan"), to be converted into shares of Surviving Corporation Common Stock in
- ----
accordance with Section 2.1(i) hereof. Except as provided herein or as otherwise
agreed to by the Parties, and to the extent permitted by the applicable plan or
agreement, the provisions in any plan, program or arrangement (other than the
Stock Performance Plan and the Delaware Company Option Plans) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Delaware Company or any of its Subsidiaries will be terminated as of the
Effective Time.
(2) No shares of Delaware Company Stock shall be awarded or issued
on or before the Effective Time on account of the occurrence of the transactions
contemplated hereby pursuant to any Delaware Company Plan, including, without
limitation, the Stock Performance Plan, and any discretion or any decision to be
made by any person, committee or company with regard to the award or issue of
Delaware Company Stock pursuant to any Delaware Company Plan shall not be made
to grant any such award or approve or otherwise authorize such award or
issuance. Prior to the Effective Time and except as set forth in this Section
5.8, the Delaware Company shall cause each person who has a right to have
Delaware Company Stock either awarded or issued prior to the Effective Time
under a Delaware Company Plan whether or not on account of the occurrence of the
transactions contemplated hereby to execute a waiver whereby such person agrees
to release the Delaware Company of its obligation to award or issue Delaware
Company Stock under such Delaware Company Plan. After the Closing, the Texas
Company shall assume the Stock Performance Plan in accordance with its terms (or
adopt a substantially similar plan or utilize an existing Texas
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<PAGE>
Company plan) with respect to the Persons named in Section 3.17(e) of the
Delaware Company Disclosure Schedule, and the "Stock Price" which must be
attained under Section 3 of the Stock Performance Plan and the number of shares
of Delaware Company Common Stock allocated to such individuals set forth in
Section 3.17(e) of the Delaware Company Disclosure Schedule shall be subject to
appropriate adjustments set forth in Section 5.8(a)(i)(2) above; provided,
however, that if the benefits under such plan have been satisfied with respect
to any Person, then no further obligations shall exist with respect to such
Person.
(vi) Employee Stock Purchase Plan. At a date to be agreed on by the
----------------------------
Parties which must be at least three days before the Closing, the Delaware
Company shall terminate the Consolidation Capital Corporation Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") so that no purchase or sales
----------------------------
of Delaware Company Stock can occur under the Employee Stock Purchase Plan after
such date.
(v) 162(m) Bonus Plan. The Delaware Company shall terminate the
-----------------
consolidation Capital Corporation Section 162(m) Bonus Plan (the "162(m) Bonus
------------
Plan") prior to the Effective Time.
- ----
(vi) Delaware Company Qualified Plans. Prior to the Closing Date,
--------------------------------
the Delaware Company and the Texas Company agree to use their best efforts to
come to an agreement with respect to how (i) to maintain the qualified status of
certain Delaware Company Plans which are qualified or intended to be qualified
under Section 401(a) of the Code ("Delaware Company Qualified Plans") from the
--------------------------------
date of this Agreement through the Effective Time and (ii) to provide qualified
retirement benefits to the employees of the Surviving Corporation after the
Effective Time. Notwithstanding the above, the Delaware Company agrees to
maintain the qualified status of the Delaware Company Qualified Plans from the
date of this Agreement through the Effective Time.
(b) All Other Employee Benefit Plans of the Delaware Company and of the
-------------------------------------------------------------------
Texas Company. Except as otherwise contemplated by this Agreement, the employee
- -------------
benefit plans (as defined in Section 3(3) of ERISA) and other employee plans,
programs and policies other than salary (collectively, the "Employee Benefit
----------------
Plans") of the Delaware Company and its Subsidiaries and the Texas Company and
- -----
its Subsidiaries in effect at the date of this Agreement will
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remain in effect until otherwise determined after the Effective Time unless
otherwise determined by the Board of Directors of the Surviving Corporation.
(i) Agreement and Conditions. Without limiting the generality of
------------------------
Section 5.8(b), the Surviving Corporation shall (i) honor (A) in accordance with
their terms all individual employment, severance and termination agreements of
the Delaware Company or any of its Subsidiaries, and (B) without modification
all other employee severance plans, policies, employment and severance
agreements of the Delaware Company or any of its Subsidiaries with respect to
their respective past and present officers, directors, employees and agents that
are in effect as of the Effective Time through the termination date specified in
such document, (ii) waive any limitations regarding pre-existing conditions of
employees of the Delaware Company and its Subsidiaries employed by any of them
as of the Effective Time ("Current Employees") and their eligible dependents
-----------------
under any welfare or other employee benefit plans of the Surviving Corporation
and its affiliates in which they participate after the Effective Time (except to
the extent that such limitations would have applied under the analogous plan of
the Delaware Company and its Subsidiaries immediately before the Effective
Time), and (iii) for the Employee Benefit Plans applicable to employees of the
Surviving Corporation effective after the Effective Time, recognize all service
with the Delaware Company or any of its Subsidiaries and the Texas Company or
any of its Subsidiaries to the extent service is recognized for any purpose
under similar Delaware Company Plans and similar Texas Company Plans, except to
the extent such treatment would result in duplication of benefits or would
violate applicable Law.
(c) Certain Texas Company Options. With respect to the options
-----------------------------
listed on Exhibit 5.8(c), the Delaware Company and the Texas Company agree that,
notwithstanding anything in this Agreement to the contrary, the Texas Company
may, subject to the pre-approval of the Board of Directors of the Texas Company
and effective at the Effective Time, purchase a number of such options equal to
the number of such options requested to be purchased by the holder of such
options in writing up to a maximum of 50% of the options held by such Person
(the "Total Eligible Options"); provided, however, that in the event that the
----------------------
Elected Cash Shares is more than the Total Eligible Share
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<PAGE>
Number, the number of options that may be purchased by the Company pursuant to
this Section 5.8(c) shall be subject to the proration procedures set forth in
Section 2.5 of this Agreement as if such option were Elected Cash Shares. The
purchase price at which the Texas Company may repurchase any of such options
shall be $13.50 per share less the exercise price of such option. Any payments
paid by the Company to purchase such options shall be in exchange for the
termination and relinquishment by the holder of such options.
Section 5.9 Insurance and Indemnity. For a period of six years after the
-----------------------
Effective Time, (a) the Surviving Corporation shall, subject to applicable Law,
maintain in effect the current provisions regarding indemnification of officers
and directors contained in the articles of incorporation and bylaws of the Texas
Company and each of its Subsidiaries and of the Delaware Company's Subsidiaries
as in effect immediately prior to the Effective Time and honor any
indemnification agreements of the Delaware Company and its respective
Subsidiaries with directors, officers or employees as in effect immediately
prior to the Effective Time, (b) the Surviving Corporation shall maintain in
effect directors and officers liability insurance having substantially the same
terms and conditions and providing at least the same coverage and amounts as the
directors and officers liability insurance maintained by the Delaware Company as
in effect immediately prior to the Effective Time for all directors and officers
of the Delaware Company and its Subsidiaries who served as such at any time
since November 25, 1997; provided, however, that the Surviving Corporation shall
not be required to pay more than $500,000 per year in premiums for such coverage
and may reduce such coverage to the extent required so that annual premiums
therefor do not exceed such amount, and (c) the Surviving Corporation shall
indemnify the directors and officers of the Delaware Company to the fullest
extent to which the Surviving Corporation is permitted to indemnify such
officers and directors under its articles of incorporation and bylaws and
applicable Law.
Section 5.10 Fees and Expenses. Whether or not the Merger is consummated,
-----------------
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the Party incurring such
expenses except (i) as set forth in Section 7.4, and (ii) that the Delaware
Company shall pay 60% of the fees and
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expenses of Baker Robbins to prepare a report on the Y2K compliance of the
Delaware Company and its Subsidiaries and the Texas Company shall pay the
remaining 40% of such fees and expenses.
Section 5.11 Brokers or Finders. Each of the Delaware Company and the
------------------
Texas Company represents, as to itself, its Subsidiaries and its affiliates,
that no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any brokers, or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Bear Stearns & Co. Inc., whose fees and
expenses will be paid by the Delaware Company or, if the Effective Time occurs,
by the Surviving Corporation, in accordance with the Delaware Company's
agreement with such firm, a copy of which has been provided to the Texas
Company, and Chase Securities, Inc., whose fees and expenses will be paid by the
Texas Company or, if the Effective Time occurs, by the Surviving Corporation in
accordance with the Texas Company's agreement with such firm, a copy of which
has been provided to the Delaware Company, and each of the Delaware Company and
the Texas Company will indemnify and hold the other harmless from and against
any and all claims, liabilities or obligations with respect to any other
brokers, or finders, fees, commissions or expenses asserted by any Person on the
basis of any act or statement alleged to have been made by such Party or any of
its Subsidiaries or affiliates.
Section 5.12 No Solicitation. (a) From and after the date hereof, the
---------------
Texas Company shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountants or other
representatives retained by it or any of its Subsidiaries to, directly or
indirectly through another Person, solicit, initiate or encourage (including by
way of furnishing information), or take any other action designed to facilitate,
any inquiry, offer, proposal or agreement with respect to an Alternative
Transaction (as hereinafter defined); provided however, that if, at any time
prior to obtaining the Requisite Texas Holder Approvals, the Board of Directors
of the Texas Company determines in good faith, based on advice from outside
counsel and its financial advisors, that providing such information or
participating in such negotiations or discussions is required to prevent the
Board of Directors of the Texas Company from breaching their fiduciary duties to
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<PAGE>
the Texas Company's shareholders under applicable Law, the Board of Directors of
the Texas Company may, in response to any proposal that has been determined by
it to be a Texas Company Superior Proposal (as hereinafter defined), that was
not solicited by it and that did not otherwise result from a breach of this
Section 5.12(a), and subject to the Texas Company giving the Delaware Company at
least two business days written notice of its intention to do so, (x) furnish
information with respect to the Texas Company and its Subsidiaries to any Person
pursuant to a customary confidentiality agreement containing terms no less
restrictive than the terms of the Confidentiality Agreement, provided that a
copy of all such information is delivered simultaneously to the Delaware
Company, and (y) participate in negotiations regarding such proposal. The Texas
Company shall promptly notify the Delaware Company orally and in writing of any
request for information or of any proposal in connection with an Alternative
Transaction, the material terms and conditions of such request or proposal
(including a copy thereof, if in writing, and all other documentation and any
related correspondence) and the identity of the person making such request or
proposal. The Texas Company will keep the Delaware Company reasonably informed
of the status and details (including amendments or proposed amendments) of such
request or proposal on a current basis. The Texas Company shall immediately
cease and terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any Third Party conducted heretofore by
the Texas Company or its representatives with respect to the foregoing. Subject
to the first sentence of this Section 5.12(a), the Texas Company (i) agrees not
to release any Third Party (as hereinafter defined) from, or waive any provision
of, or fail to enforce, any standstill agreement or similar agreements to which
it is a party related to, or which could affect, an Alternative Transaction and
agrees that the Delaware Company shall be entitled to enforce the Texas
Company's rights and remedies under and in connection with such agreements and
(ii) acknowledges that the provisions of clause (i) are an important and
integral part of this Agreement. Nothing contained in this Section 5.12 or
Section 5.13 shall prohibit the Texas Company (i) from taking and disclosing to
its shareholders a position contemplated by Rule 14c-9 or Rule 14e-2(a)
promulgated under the Exchange Act, or (ii) from making any disclosure to its
shareholders if, in the good faith judgment of the Board of Directors of the
Texas Company, after receipt of advice from outside counsel and
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its financial advisors, such disclosure is required to prevent the Board of
Directors of the Texas Company from breaching their fiduciary duties to the
Texas Company's shareholders under applicable Law. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
this Section 5.12(a) by any director or officer of the Texas Company or any of
its Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative of the Texas Company or any of its
Subsidiaries shall be deemed to be a breach of this Section 5.12(a) by the Texas
Company.
(b) From and after the date hereof, the Delaware Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountants or other representatives retained by it or any of
its Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate any inquiry, offer, proposal or agreement
with respect to an Alternative Transaction, or (ii) participate in any
discussions or negotiations regarding any Alternative Transaction; provided,
however, that if, at any time prior to obtaining the Requisite Delaware Holder
Approvals, the Board of Directors of the Delaware Company determines in good
faith, based on advice from outside counsel and its financial advisors, that
providing such information or participating in such negotiations or discussions
is required to prevent the Board of Directors of the Delaware Company from
breaching their fiduciary duties to the Delaware Company's stockholders under
applicable Law, the Board of Directors of the Delaware Company may, in response
to a proposal that has been determined by it to be a Delaware Company Superior
Proposal (as hereinafter defined), that was not solicited by it and that did not
otherwise result from a breach of this Section 5.12(b), and subject to the
Delaware Company giving the Texas Company at least two business days written
notice of its intention to do so, (x) furnish information with respect to the
Delaware Company and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms no less restrictive than the terms of
the Confidentiality Agreement, provided that a copy of all such information is
delivered simultaneously to the Texas Company, and (y) participate in
negotiations regarding such proposal. The Delaware Company shall promptly
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notify the Texas Company orally and in writing of any request for information or
of any proposal in connection with an Alternative Transaction, the material
terms and conditions of such request or proposal (including a copy thereof, if
in writing, and all other documentation any related correspondence) and the
identity of the person making such request or proposal. The Delaware Company
will keep the Texas Company reasonably informed of the status and details
(including amendments or proposed amendments) of such request or proposal on a
current basis. The Delaware Company shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any Third Party conducted heretofore by the Delaware Company or
its representatives with respect to the foregoing. Subject to the first sentence
of this Section 5.12(b), the Delaware Company (i) agrees not to release any
Third Party from, or waive any provision of, or fail to enforce, any standstill
agreement or similar agreements to which it is a Party related to, or which
could affect, an Alternative Transaction and agrees that the Texas Company shall
be entitled to enforce the Delaware Company's rights and remedies under and in
connection with such agreements and (ii) acknowledges that the provisions of
clause (i) are an important and integral part of this Agreement. Nothing
contained in this Section 5.12 or in Section 5.13 shall prohibit the Delaware
Company (i) from taking and disclosing to its stockholders a position
contemplated by Rule 14e-9 or Rule 14e-2(a) promulgated under the Exchange Act,
or (ii) from making any disclosure to its stockholders if, in the good faith
judgment of the Board of Directors of the Delaware Company, based on advice from
outside counsel and its financial advisors, such disclosure is required to
prevent the Board of Directors of the Delaware Company from breaching their
fiduciary duties to the Delaware Company's stockholders under applicable Law.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in Section 5.12(b) by any director or officer of the
Delaware Company or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative of the Delaware Company or
any of its Subsidiaries shall be deemed to be a breach of Section 5.12(b) by the
Delaware Company.
(c) For purposes of this Agreement, "Alternative Transaction" means
-----------------------
any of (i) a transaction or series of transactions pursuant to which any Person
(or group of Persons) other than the Texas Company and its
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Subsidiaries and other than the Delaware Company and its Subsidiaries (a "Third
-----
Party") acquires or would acquire, directly or indirectly, beneficial ownership
- -----
(as defined in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding shares of the Texas Company or the Delaware Company, as the case may
be, whether from the Texas Company or the Delaware Company or pursuant to a
tender offer or otherwise, (ii) any acquisition or proposed acquisition of, or
business combination with, the Texas Company or any of its Subsidiaries or the
Delaware Company or any of its Subsidiaries, as the case may be, by a merger or
other business combination (including any so-called "merger-of-equals" and
whether or not the Texas Company or any of its Subsidiaries or the Delaware
Company or any of its Subsidiaries, as the case may be, is the entity surviving
any such merger or business combination), and (iii) any other transaction
pursuant to which any Third Party acquires or would acquire, directly or
indirectly, control of 20% or more of the consolidated assets (including for
this purpose the outstanding equity securities of Subsidiaries of the Texas
Company or the Delaware Company, as the case may be, and any entity surviving
any merger or business combination including any of them) of the Texas Company
or any of its Subsidiaries or the Delaware Company or any of its Subsidiaries,
as the case may be. Notwithstanding the foregoing, neither the Preferred Stock
Agreement nor the transactions or documents contemplated therein shall
constitute an Alternative Transaction.
Section 5.13 Texas Company and Delaware Company Shareholder Meetings.
-------------------------------------------------------
(a) As promptly as practicable after the S-4 is declared effective under the
Securities Act, the Texas Company shall duly give notice of, convene and hold a
meeting of its shareholders (the "Texas Company Shareholders' Meeting") in
-----------------------------------
accordance with the TBCA for the purpose of obtaining the Requisite Texas
Holders Approvals and shall, subject to the provisions of Section 5.13(b)
hereof, through its Board of Directors, recommend to its shareholders the
approval of this Agreement, the issuance of the Texas Company Common Stock in
connection with the Merger and the issuance of the Texas Company Preferred Stock
pursuant to the Preferred Stock Agreement.
(b) Neither the Board of Directors of the Texas Company nor
any committee thereof shall (i) except as expressly permitted by this Section
5.13(b), withdraw, qualify or modify, or propose publicly to withdraw, qualify
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or modify, in a manner adverse to the Delaware Company, the approval or
recommendation of such Board of Directors or such committee thereof of this
Agreement, the issuance of the Texas Company Common Stock in connection with the
Merger or the issuance of the Texas Company Preferred Stock pursuant to the
Preferred Stock Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Alternative Transaction, or (iii) cause the Texas
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Texas Company Acquisition
-------------------------
Agreement") related to any Alternative Transaction. Notwithstanding the
- ---------
foregoing, in the event that prior to the later of the approval of this
Agreement, of the issuance of the Texas Company Common Stock in connection with
the Merger by the holders of the Texas Company Common Stock and the issuance of
the Texas Company Preferred Stock pursuant to the Preferred Stock Agreement, the
Board of Directors of the Texas Company determines in good faith, after it has
received a Texas Company Superior Proposal and after receipt of advice from
outside counsel and its financial advisors, that doing so is required to prevent
the Board of Directors of the Texas Company from breaching its fiduciary duties
to the Texas Company shareholders under applicable Law, the Board of Directors
of the Texas Company may (subject to this and the following sentences) inform
the Texas Company shareholders that it no longer believes that such approval is
advisable and no longer recommends approval (a "Texas Company Subsequent
------------------------
Determination") or pay the Termination Fee and terminate this Agreement, but
- -------------
only at a time that is after the fifth business day following the Delaware
Company's receipt of written notice advising the Delaware Company that the Board
of Directors of the Texas Company has received a Texas Company Superior Proposal
specifying the material terms and conditions of such the Texas Company Superior
Proposal (and including a copy thereof with all accompanying documentation, if
in writing), identifying the Person making such Texas Company Superior Proposal
and stating that it intends to make a Texas Company Subsequent Determination or
to terminate this Agreement (a "Texas Company Determination Notice"). After
----------------------------------
providing the Texas Company Determination Notice, the Texas Company shall cause
its financial and legal advisors to negotiate in good faith with the Delaware
Company during such five business days to make such adjustments to the terms and
conditions of this Agreement as would enable the Texas Company to
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proceed with the Merger on such adjusted terms; provided, however, that any such
adjustment shall be at the discretion of the Parties at the time. For purposes
of this Agreement, a "Texas Company Superior Proposal" means any proposal (on
-------------------------------
its most recent amended or modified terms, if amended or modified) made by a
Third Party to enter into an Alternative Transaction which the Board of
Directors of the Texas Company determines in its good faith judgment (based on,
among other things, the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Texas Company's shareholders than the
Merger and the transactions contemplated herein, in the Preferred Stock
Agreement and by the New Financing, taking into account all relevant factors
(including whether, in the good faith judgment of the Board of Directors of the
Texas Company, based on the advice of a financial advisor of nationally
recognized reputation, the Third Party is reasonably able to finance the
transaction, and any proposed changes to this Agreement that may be proposed by
the Delaware Company in response to such Alternative Transaction).
Notwithstanding the foregoing, but subject to its right to terminate pursuant to
Section 7.1(g), the Texas Company agrees that its obligations pursuant to
5.13(a) to give notice of, convene and hold a meeting of its shareholders in
accordance with the TBCA and its articles of incorporation and bylaws shall not
be affected by the withdrawal or modification (other than a withdrawal or
modification in which the Texas Company Board of Directors recommends that its
shareholders not grant the Requisite Texas Holders Approvals) by the Texas
Company Board of Directors, in accordance with this Section 5.13(b), of its
recommendation to the shareholders of the Texas Company to grant the Requisite
Texas Holders Approvals.
(c) As promptly as practicable after the S-4 is declared
effective under the Securities Act, the Delaware Company shall duly give notice
of, convene and hold a meeting of its stockholders and the holders of its
Debentures (the "Delaware Company Stockholders' Meeting") in accordance with the
--------------------------------------
DGCL and its certificate of incorporation and bylaws for the purpose of
obtaining the Requisite Delaware Holders Approvals and shall, subject to the
provisions of Section 5.13(d) hereof, through its Board of Directors, recommend
to its stockholders and the holders of the Debentures the adoption of this
Agreement.
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(d) Neither the Board of Directors of the Delaware Company nor
any committee thereof shall (i) except as expressly permitted by this Section
5.13(d), withdraw, qualify or modify, or propose publicly to withdraw, qualify
or modify, in a manner adverse to the Texas Company, the approval or
recommendation of such Board of Directors or such committee thereof of this
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Alternative Transaction, or (iii) cause the Delaware Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, a "Delaware Company Acquisition Agreement")
--------------------------------------
related to any Alternative Transaction. Notwithstanding the foregoing, in the
event that prior to obtaining the Requisite Delaware Holders Approvals, the
Board of Directors of the Delaware Company determines in good faith, after it
has received a Delaware Company Superior Proposal and after receipt of advice
from outside counsel and its financial advisors, that doing so is required to
prevent the Board of Directors of the Delaware Company from breaching its
fiduciary duties to the Delaware Company stockholders under applicable Law, the
Board of Directors of the Delaware Company may (subject to this and the
following sentences) inform the Delaware Company stockholders that it no longer
believes that the Merger is advisable and no longer recommends approval (a
"Delaware Company Subsequent Determination") or pay the Termination Fee and
-----------------------------------------
terminate this Agreement, but only at a time that is after the fifth business
day following the Texas Company's receipt of written notice advising the Texas
Company that the Board of Directors of the Delaware Company has received a
Delaware Company Superior Proposal specifying the material terms and conditions
of such Delaware Company Superior Proposal (and including a copy thereof with
all accompanying documentation, if in writing), identifying the Person making
such Delaware Company Superior Proposal and stating that it intends to make a
Delaware Company Subsequent Determination or to terminate this Agreement (a
"Delaware Company Determination Notice") . After providing a Delaware Company
-------------------------------------
Determination Notice, the Delaware Company shall cause its financial and legal
advisors to negotiate in good faith with the Texas Company during such five
business days to make such adjustments to the terms and conditions of this
Agreement as would enable the Delaware Company to proceed with the Merger on
such adjusted terms; provided however, that any such adjustment shall be at the
discretion of the Parties at the time.
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For purposes of this Agreement, a "Delaware Company Superior Proposal" means any
----------------------------------
proposal (on its most recently amended or modified terms, if amended or
modified) made by a Third Party to enter into an Alternative Transaction which
the Board of Directors of the Delaware Company determines in its good faith
judgment (based on, among other things, the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Delaware Company's
stockholders than the Merger taking into account all relevant factors (including
whether, in the good faith judgment of the Board of Directors of the Delaware
Company, based on the advice of a financial advisor of nationally recognized
reputation, the Third Party is reasonably able to finance the transaction, and
any proposed changes to this Agreement that may be proposed by the Texas Company
in response to such Alternative Transaction). Notwithstanding the foregoing, but
subject to its right to terminate pursuant to Section 7.1(g), the Delaware
Company agrees that its obligations pursuant to 5.13(c) to give notice of,
convene and hold a meeting of its stockholders and the holders of the Debentures
in accordance with the DGCL and its certificate of incorporation and bylaws
shall not be affected by the withdrawal or modification by the Delaware Company
Board of Directors, in accordance with this Section 5.13(d), of its
recommendation to the stockholders of the Delaware Company and the holders of
the Debentures to adopt this Agreement.
Section 5.14 Rule 145. The Delaware Company will use its reasonable
--------
best efforts to cause all Persons who, at the time of the meeting of the
Delaware Company's stockholders to adopt this Agreement, may be deemed to be
affiliates of the Delaware Company as that term is used in Rule 145 under the
Securities Act and who will become the beneficial owners of Surviving
Corporation Common Stock pursuant to the Merger to execute "affiliates' letters"
in customary form prior to the Effective Time. Except as otherwise provided in
any separate agreements between the Texas Company and any such affiliates, the
Texas Company will use its reasonable efforts to comply with the provisions of
Rule 144(c) under the Securities Act in order that such affiliates may resell
such Surviving Corporation Common Stock pursuant to Rule 145(d) under the
Securities Act. After the first anniversary of the Closing Date, upon a written
request, the Surviving Corporation will remove any restrictive legends related
to Rule 145 on the certificates evidencing Merger
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Consideration received by Persons who are affiliates of the Delaware Company
immediately before the Effective Time but who are not affiliates of the
Surviving Corporation immediately after the Effective Time.
Section 5.15 Board Membership and Officers. The Boards of Directors of
-----------------------------
the Texas Company shall take such action as may be required to cause the
directors comprising the full Board of Directors of the Surviving Corporation
and the officers of the Surviving Corporation immediately after the Effective
Time to reflect the provisions of this Section 5.15. The initial Board of
Directors of the Surviving Corporation following the Merger shall consist of 13
individuals; four shall be designees of the Delaware Company which shall be
reasonably acceptable to the other parties hereto (the "Delaware Designees"),
------------------
four shall be designees of the Texas Company which shall be reasonably
acceptable to the other parties hereto (the "Texas Designees"), four shall be
---------------
designees of the Investor (the "Investor Designees") and one (the "Joint
------------------ -----
Designee") shall be chosen jointly by the Delaware Company, the Texas Company
- --------
and the Investor. At least two of the Delaware Designees shall not be employed
by the Delaware Company or its Subsidiaries, and at least two of the Texas
Designees shall not be employed by the Texas Company or its Subsidiaries. J.
Patrick Millinor shall serve as Chairman of the Board of the Surviving
Corporation immediately following the Merger and Joseph Ivey shall serve as
President and Chief Executive Officer of the Surviving Corporation. Each shall
report to the full Board of Directors. The executive committee (the "Executive
---------
Committee") of the Board shall consist of five members of the Board, two of whom
- ---------
shall be Ivey and Millinor. In the event that either of Messrs. Millinor or Ivey
ceases to be employed by the Texas Company or the Delaware Company,
respectively, immediately prior to the Effective Time, then the position with
the Surviving Corporation which would otherwise be held by them shall be filled
promptly after the Effective Time by the Board of Directors of the Surviving
Corporation. Except as set forth in this Section 5.15, all other officers of the
Surviving Corporation shall be selected by the Board of Directors of the
Surviving Corporation after consultation with Messrs. Millinor and Ivey. All
directors and officers so elected shall hold office from the Effective Time in
accordance with the charter documents governing such corporation until his or
her successor is duly elected or appointed and qualified.
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Section 5.16 Takeover Statute. If any "fair price", "moratorium",
----------------
"control share acquisition" or other form of anti-takeover statute or regulation
shall become applicable to the transactions contemplated hereby, the Delaware
Company, the Texas Company and their respective members of their respective
Boards of Directors shall grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated herein and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated herein.
Section 5.17 Tax Matters. (a) Each of the Parties shall use its best
-----------
efforts to cause the Merger to constitute a tax-free "reorganization" under Code
Section 368(a). None of the Parties will knowingly take any action, and none of
the Parties will permit any of its Subsidiaries or Affiliates knowingly to take
any action, that would cause the Merger to fail to qualify as a tax-free
reorganization under Code Section 368(a).
(b) The Delaware Company will deliver a Representation
Letter substantially in the form of Exhibit 5.17(c)-1 executed as of the Closing
Date and the Texas Company will deliver a Representation Letter substantially in
the form of Exhibit 5.17(c)-2 executed as of the Closing Date.
Section 5.18 Notification of Certain Matters. Each of the Delaware
-------------------------------
Company and the Texas Company shall give prompt notice to the other of:
(i) the occurrence or nonoccurrence of any event whose
occurrence or nonoccurrence would be likely to cause either (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate with respect to such Party and its Subsidiaries, taken as a whole, at
any time from the date hereof to the Effective Time, or (B) directly or
indirectly, any material adverse effect on such Party; and
(ii) any material failure of such Party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
Section 5.19 Transition Planning. J. Patrick Millinor, Jr., and
-------------------
Joseph Ivey, as Chief Executive Officers of the Texas Company and the Delaware
Company, respectively, jointly shall be responsible for coordinating all aspects
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of transition planning and implementation relating to the Merger and the other
transactions contemplated hereby. If either such person ceases to be Chief
Executive Officer of his respective company for any reason, such Person's
successor as Chief Executive Officer shall assume his predecessor's
responsibilities under this Section 5.19. During the period between the date
hereof and the Effective Time, Messrs. Millinor and Ivey jointly shall (i)
examine various alternatives regarding the manner in which to best organize and
manage the businesses of the Texas Company and the Delaware Company after the
Effective Time, and (ii) coordinate policies and strategies with respect to
employees and employee compensation and benefit matters, in all cases subject to
applicable law.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger. The respective obligations of the Parties to effect the Merger will be
- ------
subject to the satisfaction, on or prior to the Effective Time, of the following
conditions:
(a) The Delaware Company shall have obtained the Requisite
Delaware Holders Approvals.
(b) The Texas Company shall have obtained the Requisite
Texas Company Holders Approvals.
(c) Any waiting period under the HSR Act applicable to the
Merger shall have expired or been terminated.
(d) The S-4 shall have become effective under the Securities
Act and no stop order suspending the effectiveness of the Form S-4 shall then be
in effect and no proceeding for that purpose shall have been initiated or, to
the knowledge of the Texas Company or the Delaware Company, threatened.
(e) The Texas Company shall have received all state
securities or blue sky permits and other authorizations necessary to issue the
shares of Surviving Corporation Common Stock pursuant to this Agreement.
(f) No temporary restraining order, preliminary or permanent
injunction or other order shall have been issued by any court of competent
jurisdiction and no other legal restraint or prohibition preventing the
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consummation of the Merger shall be in effect (each Party agreeing to use all
reasonable efforts to have any such order reversed or injunction lifted).
(g) The shares of Surviving Corporation Common Stock to be
issued in connection with the Merger, the shares of Surviving Corporation Common
Stock which will be issuable upon conversion of the Texas Company Preferred
Stock and the shares of Surviving Corporation Common Stock will be issuable upon
the exercise of the options, warrants and convertible securities of the Delaware
Company shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(h) The Texas Company shall have received the opinion of
Bracewell & Patterson, L.L.P. substantially in the form attached hereto as
Exhibit 6.1(h)(i) and the Delaware Company shall have received the opinion of
Morgan, Lewis and Bockius, LLP, substantially in the form attached hereto as
Exhibit 6.1(h)(ii), addressed to the Texas Company and the Delaware Company,
respectively, based upon representation letters substantially in the forms
referenced in Section 5.17 of this Agreement, dated on or about the date of such
opinion and such other facts and representations as counsel may reasonably deem
relevant, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization qualifying under the provisions of Section 368(a)
of the Code.
(i) The Texas Company shall have received from an
institutional investor or its affiliated designees (the "New Investor"),
------------
pursuant to the Preferred Stock Agreement, the amount of $150,000,000 and all of
the outstanding Debentures as consideration for the issuance of shares of 7.25%
Convertible Preferred Stock, par value $.001 per share, of the Texas Company
(the "Texas Company Preferred Stock").
-----------------------------
(j) The Texas Company shall have obtained the New Financing
and funding thereunder shall be available to the Texas Company.
(k) All material consents, approvals and authorizations from
Government Entities or third parties required to effect, or as a result of, the
Merger, the failure to obtain which would have a material adverse effect on the
Surviving Corporation and its Subsidiaries, taken as a whole, shall have been
obtained.
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(l) There shall exist no default under any material
indebtedness of either the Delaware Company or the Texas Company.
Section 6.2 Conditions of Obligations of the Delaware Company. The
-------------------------------------------------
obligations of the Delaware Company to effect the Merger are further subject to
satisfaction or waiver of the following conditions:
(a) The representations and warranties of the Texas Company
contained in this Agreement shall be true and correct on the date hereof and
(except to the extent such representations and warranties speak as of a date
earlier than the date hereof) shall also be true and correct on and as of the
Closing Date, except for changes contemplated by this Agreement, with the same
force and effect as if made on and as of the Closing Date; provided, however,
that for purposes of this Section 6.2(a) only, such representations and
warranties shall be deemed to be true and correct unless the failure or failures
of such representations and warranties to be so true and correct (without regard
to materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a material adverse effect
on the Texas Company;
(b) the Texas Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or before the Effective
Time; and
(c) the Delaware Company shall have received a certificate
of an executive officer of the Texas Company to the effect set forth in
paragraphs (a) and (b) above.
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Section 6.3 Conditions of Obligations of the Texas Company. The obligations
----------------------------------------------
of the Texas Company to effect the Merger are further subject to the
satisfaction or waiver of the following conditions:
(a) The representations and warranties of the Delaware Company
contained in this Agreement shall be true and correct on the date hereof and
(except to the extent such representations and warranties speak as of a date
earlier than the date hereof) shall also be true and correct on and as of the
Closing Date, except for changes contemplated by this Agreement, with the same
force and effect as if made on and as of the Closing Date; provided, however,
that for purposes of this Section 6.3(a) only, such representations and
warranties shall be deemed to be true and correct unless the failure or failures
of such representations and warranties to be so true and correct (without regard
to materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a material adverse effect
on the Delaware Company;
(b) the Delaware Company shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or before the Effective Time; and
(c) the Texas Company shall have received a certificate of an
executive officer of the Delaware Company to the effect set forth in paragraphs
(a) and (b) above.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time whether before or, subject to the terms of this
Agreement, after approval of this Agreement by the stockholders and holders of
the Debentures of the Delaware Company or the shareholders of the Texas Company,
in each case as authorized by the respective Board of Directors of the Delaware
Company or the Texas Company:
(a) by mutual consent of the Texas Company and the Delaware
Company;
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(b) by either of the Texas Company or the Delaware Company if the
Merger is not consummated before March 31, 2000 (the "Termination Date");
----------------
provided, however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of any condition to be satisfied;
(c) by either of the Texas Company or the Delaware Company if there
shall be any Law that makes the consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction has issued an order,
decree, ruling or injunction permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger, which injunction has become final
and non-appealable;
(d) (i) by the Delaware Company, (A) if the Texas Company shall have
breached in any material respect (without regard to materiality qualifiers
contained therein) any of its representations or warranties contained in this
Agreement or the Texas Company shall have failed to perform in any material
respect any of its covenants or other agreements contained in this Agreement,
which breach or failure to perform (1) is incapable of being cured by the Texas
Company, as the case may be, prior to the Termination Date and (2) renders any
condition under Section 6.1 or 6.2 incapable of being satisfied prior to the
Termination Date, or (B) if a condition under Section 6.1 or 6.2 to the Delaware
Company's obligations hereunder cannot be satisfied prior to the Termination
Date;
(ii) by the Texas Company,(A) if the Delaware Company shall have
breached in any material respect (without regard to materiality qualifiers
contained therein) any of its representations or warranties contained in this
Agreement or shall have failed to perform in any material respect any of its
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by the Delaware Company prior
to the Termination Date and (2) renders any condition under Sections 6.1 or 6.3
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Section 6.1 or 6.3 to the Texas Company's obligations hereunder
cannot be satisfied prior to the Termination Date;
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(e) by either the Delaware Company or the Texas Company if the
Board of Directors of the other (i) shall fail to include in its Proxy Statement
its recommendation without modification or qualification that the stockholders
and Debenture holders of the Delaware Company adopt this Agreement, in the case
of the Delaware Company, or that the shareholders of the Texas Company adopt
this Agreement, approve the issuance of the shares of Texas Company Common Stock
in connection with the Merger and approve the issuance of the Texas Company
Preferred Stock pursuant to the Preferred Stock Agreement, in the case of the
Texas Company, (ii) shall withdraw or modify in any adverse manner its approval
or recommendation of this Agreement or the Merger, in the case of the Delaware
Company, or shall withdraw or modify in any adverse manner its approval or
recommendation of this Agreement or the Merger, the issuance of the shares of
Texas Company Common Stock in connection with the Merger or the issuance of the
Texas Company Preferred Stock pursuant to the Preferred Stock Agreement, in the
case of the Texas Company, (iii) shall fail to reaffirm such approval or
recommendation promptly after such Party's request, (iv) shall approve or
recommend any Alternative Transaction, or (v) shall resolve to take any of the
actions specified in this Section 7.1(e);
(f) by either the Delaware Company or the Texas Company if the
Requisite Delaware Holders Approvals or the Requisite Texas Holders Approvals,
as the case may be, shall fail to have been obtained at a duly held meeting of
such holders of either of such companies, including any adjournments thereof, or
(g)(i) by the Texas Company in accordance with Section 5.13(b), or
(ii) by the Delaware Company in accordance with Section 5.13(d), provided, that,
in each case, the Party terminating this Agreement pays the Termination Fee as a
condition to the effectiveness of such Party's termination under Section 7.1(g).
Section 7.2 Effect of Termination. (1) In the event of termination of this
---------------------
Agreement as provided in Section 7.1 hereof, and subject to the provisions of
Section 8.1 hereof, this Agreement shall forthwith become void and there shall
be no liability on the part of any of the Parties, except (i) as set forth in
this Section 7.2 and in Sections 3.9, 4.10, 5.10 and 5.11 hereof, and (ii)
nothing herein shall relieve any Party from liability for any willful breach
hereof.
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(b) The Texas Company shall pay in accordance with Section 7.3 of this
Agreement to the Delaware Company a termination fee of $15,000,000 (the
"Termination Fee") upon the occurrence of any of the following events: (i) the
---------------
termination of this Agreement by the Delaware Company pursuant to Section 7.1(e)
hereof, (ii) if this Agreement could have been (but was not) terminated by the
Delaware Company pursuant to Section 7.1(e) hereof , upon the termination of
this Agreement by the Texas Company or the Delaware Company pursuant to Section
7.1(f), because of the failure of the Texas Company to obtain the Requisite
Texas Holders Approvals, (iii) (A) if this Agreement could not have been
terminated by the Delaware Company pursuant to Section 7.1(e) hereof but is
subsequently terminated by the Texas Company or the Delaware Company pursuant to
Section 7.1(f) because of the failure of the Texas Company to obtain Requisite
Texas Holders Approvals, (B) prior to the Texas Company Shareholders' Meeting
there shall have been an offer or proposal for, an announcement of any intention
with respect to (including the filing of a statement of beneficial ownership on
Schedule 13D discussing the possibility of or reserving the right to engage in),
or any agreement with respect to, a transaction that would constitute an
Alternative Transaction (except that for the purposes of this Section 7.2(b),
the applicable percentage in clause (i) of the definition of "Alternative
Transaction" shall be fifty percent (50%)) involving the Texas Company or any of
the Texas Company's Subsidiaries, and (C) within 12 months after the termination
of this Agreement, the Texas Company enters into a definitive agreement with any
Third Party with respect to, or consummates, an Alternative Transaction, (iv)
this Agreement is terminated by the Delaware Company pursuant to Section
7.1(d)(i) as a result of the Texas Company's material breach of Sections 5.3,
5.12(a), 5.13(a) or 5.13(b) hereof which, in the case of Section 5.3 only, is
not cured within 30 days after notice thereof to the Texas Company, or (v) this
Agreement is terminated by the Texas Company pursuant to Section 7.1(g). In
addition, the Texas Company shall pay the Delaware Company $30,000,000 as
liquidated damages if the Texas Company shall attempt to terminate this
Agreement in a manner that is not provided in Section 7.1.
(c) The Delaware Company shall pay in accordance with Section 7.3 of
this Agreement to the Texas Company the Termination Fee upon the occurrence of
any of the following events: (i) the termination of this
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Agreement by the Texas Company pursuant to Section 7.1(e) hereof, (ii) if this
Agreement could have been (but was not) terminated by the Texas Company pursuant
to Section 7.1(e) hereof, upon the termination of this Agreement by the Texas
Company or the Delaware Company pursuant to Section 7.1(f) because of the
failure of the Delaware Company to obtain the Requisite Delaware Holders
Approvals, (iii) (A) if this Agreement could not have been terminated by the
Texas Company pursuant to Section 7.1(e) hereof but is subsequently terminated
by the Texas Company or the Delaware Company pursuant to Section 7.1(f) because
of the failure of the Delaware Company to obtain the Requisite Delaware Holders
Approvals, (B) prior to the Delaware Company Stockholders' Meeting there shall
have been an offer or proposal for, an announcement of any intention with
respect to (including the filing of a statement of beneficial ownership on
Schedule 13D discussing the possibility of or reserving the right to engage in),
or any agreement with respect to, a transaction that would constitute an
Alternative Transaction (except that for the purposes of this Section 7.2(c),
the applicable percentage in clause (i) of the definition of "Alternative
Transaction" shall be fifty percent (50%)) involving the Delaware Company or any
of the Delaware Company's Subsidiaries, and (C) within 12 months after the
termination of this Agreement, the Delaware Company enters into a definitive
agreement with any Third Party with respect to, or consummates, an Alternative
Transaction, (iv) this Agreement is terminated by the Texas Company pursuant to
Section 7.1(d) as a result of the Delaware Company's material breach of Sections
5.3, 5.12(b), 5.13(c) or 5.13(d) hereof which, in the case of Section 5.3 only,
is not cured within 30 days after notice thereof to the Delaware Company or (v)
this Agreement is terminated by the Delaware Company pursuant to Section 7.1(g).
In addition, the Delaware Company shall pay the Texas Company $30,000,000 as
liquidated damages if the Delaware Company shall attempt to terminate this
Agreement in violation of Section 7.1.
Section 7.3 Terms of Payment. Each terminate fee payable under Sections
----------------
7.2(b) and (c) above shall be payable in cash, payable no later than one
business day following the delivery of notice of termination to the other Party,
except that (i) if such fee shall be payable pursuant to clause (iii) of either
of Section 7.2(b) or (c), such fee shall be payable no later than one business
day following the day such Party enters into the definitive agreement or
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consummates a transaction referenced in such clause (iii)(C) of either Section
7.2(b) or (c), (ii) if such fee shall be payable by the Texas Company pursuant
to Section 7.2(b)(ii) or by the Delaware Company pursuant to Section 7.2(c)(ii),
such fee shall be payable prior to, and as a condition precedent to, termination
of this Agreement by the Texas Company pursuant to Section 7.1(f) because of the
failure of the Texas Company to obtain the Requisite Texas Holders Approvals or
by the Delaware Company pursuant to Section 7.1(f) because of the failure of the
Delaware Company to obtain the Requisite Delaware Holders Approvals, as the case
may be, and (iv) the Termination Fee shall be paid prior to or contemporaneous
with termination of this Agreement pursuant to Section 7.1(g).
Section 7.4 Termination for Costs and Expenses. The Delaware Company and
----------------------------------
the Texas Company agree that the Agreements contained in Sections 7.2(b) and (c)
above are an integral part of the transactions contemplated by this Agreement
and that without these Agreements, they would not enter into this Agreement. In
the event of any dispute as to whether any fee due under such Sections 7.2(b)
and (c) is due and payable, the prevailing Party shall be entitled to receive
from the other Party the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other
legal action, relating to such dispute. Interest shall be paid on the amount of
any unpaid fee at the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival of Representations, Warranties and Agreements. The
------------------------------------------------------
representation, warranties and Agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
7.1 hereof, as the case may be, except that (a) the covenants, representations
and warranties set forth in Articles I and II and Sections 3.9, 4.9, 5.6, 5.10,
5.11 5.14, 5.15, 5.17 and 7.2 hereof shall survive termination
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indefinitely, and (b) nothing contained herein shall limit any covenant or
Agreement of the Parties which by its terms contemplates performance after the
Effective Time.
Section 8.2 Amendment. This Agreement may be amended by the Parties, by
---------
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders or Debenture holders of the Delaware Company or the
shareholders of the Texas Company; provided, however, no such amendment shall be
made which by Law requires the further approval of such stockholders or
shareholders or Debenture holders, as the case may be, without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties.
Section 8.3 Extension; Waiver. At any time prior to the Effective Time, any
-----------------
Party may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other Party, (ii)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto and (iii) waive compliance with any of
the Agreements or conditions contained herein. Any agreement on the part of a
Party to any such extension or waiver will be valid only if set forth in a
written instrument signed on behalf of such Party. The failure of any Party to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
Section 8.4 Notices. All notices and other communications hereunder will be
-------
in writing and will be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the Parties at the following addresses (or at such other address
for a Party as is specified by like notice):
(a) if to the Texas Company, to
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attn.: Chief Executive Officer
Telecopy: 713-626-4766
-87-
<PAGE>
with a copy to
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Attn.: John L. Bland
Telecopy: 713-221-1212
and
(b) if to the Delaware Company, to
Building One Services
110 Cheshire Lane, Suite 210
Minnetonka, Minnesota 55305
Attn: Joseph M. Ivey
Telecopy: 612-249-4977
with a copy to
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attn: N. Jeffrey Klauder
Telecopy: 215-963-5299
Section 8.5 Interpretation. When a reference is made in this Agreement to
--------------
Sections, such reference will be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they will be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, will be deemed
to refer to the date set forth in the introductory paragraph of this Agreement.
Section 8.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which will be considered one and the same agreement and
will become effective when two or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
-88-
<PAGE>
Section 8.7 Entire Agreement; No Third Party Beneficiaries. This Agreement
----------------------------------------------
(including the documents and the instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement and supersede all
prior Agreements and understandings, both written and oral, between the Parties
with respect to the subject matter hereof and thereof, and (b) other than
Article II, and Sections 3.24(c) and 4.24(c), are not intended to confer upon
any Person other than the Parties hereto and thereto any rights or remedies
hereunder or thereunder.
Section 8.8 GOVERNING LAW. EXCEPT AS SET FORTH IN THIS SECTION 8.8, THIS
-------------
AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE, EXECUTED, DELIVERED AND
PERFORMED WHOLLY WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO ANY APPLICABLE
CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THIS AGREEMENT PERTAINS TO THE
INTERNAL AFFAIRS OF A TEXAS CORPORATION, IN WHICH EVENT, AND ONLY WITH RESPECT
TO SUCH EVENT, THE LAWS OF THE STATE OF TEXAS SHALL APPLY.
Section 8.9 Specific Performance. The Parties agree that if any of the
--------------------
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at Law would exist and damages would be difficult to determine,
and that the Parties will be entitled to specific performance of the terms
hereof, in addition to any other remedy at Law or equity.
Section 8.10 Publicity. Except as otherwise required by Law or the
---------
applicable rules of any national securities exchange, for so long as this
Agreement is in effect, neither the Texas Company nor the Delaware Company will,
or will permit any of its Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without having consulted with the other Party.
Section 8.11 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder will be assigned by any Party (whether by
operation of Law or otherwise) without the prior written consent of the other
-89-
<PAGE>
Party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
Section 8.12 Validity. The invalidity or unenforceability of any provision
--------
of this Agreement will not affect the validity or enforceability of any other
provisions hereof or thereof, which will remain in full force and effect.
Section 8.13 Taxes. Any liability arising out of the New York State Real
-----
Property Gains Tax and any other tax imposed by any domestic or foreign taxing
authority with respect to the property of the Delaware Company or the Texas
Company due with respect to the Merger will be borne by the Surviving
Corporation and expressly will not be a liability of the stockholders of the
Delaware Company or the shareholders of the Texas Company.
IN WITNESS WHEREOF, the Texas Company and the Delaware Company have caused
this Agreement to be signed by their respective officers hereunto duly
authorized as of the date first written above.
GROUP MAINTENANCE AMERICA CORP.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
BUILDING ONE SERVICES CORPORATION
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
-90-
<PAGE>
Exhibit 99(c)
SUBSCRIPTION AND EXCHANGE AGREEMENT
BETWEEN
GROUP MAINTENANCE AMERICA CORP.
AND
BOSS II, LLC
Dated as of November 2, 1999
<PAGE>
TABLE OF CONTENTS
Article I Definitions..........................................................1
Article II Issuance of Convertible Preferred Stock.............................6
2.1 ISSUANCE OF CONVERTIBLE PREFERRED STOCK..............................6
2.2 CLOSING..............................................................6
2.3 COMPANY ACTIONS......................................................6
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................7
3.1 AUTHORITY............................................................7
3.2 AUTHORIZATION OF CONVERTIBLE PREFERRED STOCK AND CONVERSION SHARES...7
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS................................7
3.4 STATE TAKEOVER STATUTES..............................................8
3.5 SHARE RETENTION AGREEMENTS...........................................8
3.6 MERGER AGREEMENT.....................................................8
3.7 FINANCING............................................................9
Article IV REPRESENTATIONS AND WARRANTIES OF INVESTOR..........................9
4.1 ORGANIZATION.........................................................9
4.2 AUTHORITY............................................................9
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS................................9
4.4 OWNERSHIP OF THE BOSC DEBENTURES....................................10
4.5 OWNERSHIP OF COMPANY COMMON STOCK...................................10
4.6 BROKERS.............................................................10
4.7 INVESTMENT REPRESENTATIONS AND WARRANTIES...........................11
Article V COVENANTS...........................................................11
5.1 OTHER ACTIONS.......................................................11
5.2 ADVICE OF CHANGES; FILINGS..........................................12
5.3 FINANCIAL INFORMATION...............................................12
5.4 MERGER AGREEMENT COVENANTS..........................................13
Article VI ADDITIONAL AGREEMENTS..............................................13
6.1 ACCESS TO INFORMATION...............................................13
6.2 REASONABLE EFFORTS; NOTIFICATION....................................13
6.3 FEES AND EXPENSES...................................................14
6.4 PUBLIC ANNOUNCEMENTS................................................15
6.5 NYSE................................................................15
6.6 SECURITIES AND EXCHANGE COMMISSION..................................16
6.7 USE OF PROCEEDS.....................................................16
6.8 MERGER AGREEMENT....................................................16
6.9 CONFIDENTIALITY.....................................................16
Article VII CONDITIONS........................................................17
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION...............................17
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS.............................17
7.3 CONDITIONS TO THE INVESTOR'S OBLIGATIONS............................18
Article VIII TERMINATION AND AMENDMENT........................................20
8.1 TERMINATION.........................................................20
8.2 EFFECT OF TERMINATION...............................................21
<PAGE>
Article IX MISCELLANEOUS......................................................22
9.1 AMENDMENT...........................................................22
9.2 EXTENSION; WAIVER...................................................22
9.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS, LIMITATION
ON LIABILITY........................................................22
9.4 NOTICES.............................................................22
9.5 INDEMNIFICATION.....................................................23
9.6 INTERPRETATION......................................................25
9.7 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.........................25
9.8 GOVERNING LAW.......................................................25
9.9 COUNTERPARTS........................................................25
9.10 ASSIGNMENT..........................................................26
9.11 ENFORCEMENT.........................................................26
ii
<PAGE>
Exhibits
- --------
Exhibit A: Form of Investor's Rights Agreement
Exhibit B: Form of Statement of Designations
Exhibit C: Form of Fee Letter
Exhibit 4.4: Form of Agreement Letter
Exhibit 7.3(d): Form of Opinion of Bracewell & Patterson
Schedules
- ---------
Schedule 3.3(d): Third Party Consents
Schedule 3.5: Share Retention Agreements
Schedule 5.1(e): Employees
Schedule 7.3(g): BOSC Share Retention Agreement
iii
<PAGE>
SUBSCRIPTION AND EXCHANGE
AGREEMENT (this "Agreement"), dated as of
---------
November 2, 1999, between GROUP MAINTENANCE
AMERICA CORP., a Texas corporation (the
"Company") and BOSS II, LLC, a Delaware limited
-------
liability company (the "Investor").
--------
WHEREAS, the Company and Building One Services Corporation have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), pursuant to which the Company agrees to fund the conversion
- -----------------
of up to $150,000,000 aggregate share value of its Common Stock (as hereinafter
defined), into cash pursuant to the Merger Agreement, and
WHEREAS, the Company desires to issue to the Investor shares of its
Convertible Preferred Stock (as hereinafter defined) equal to an aggregate share
value of $250,000,000 plus an amount equal to the accrued but unpaid interest as
of the Closing Date on the BOSC Debentures (as hereinafter defined), in exchange
for $150,000,000 in cash and the BOSC Debentures, on the terms and conditions
set forth herein, and
WHEREAS, the Merger and the exchange hereunder of the BOSC Debentures
for Convertible Preferred Stock are intended to qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
Investor and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" means, with respect to any specified person, any other person
---------
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common ownership or control with, or is owned or
controlled by, such specified person; provided that Affiliates of the Investor,
any designees of the Investor and Apollo shall exclude operating companies that
would otherwise be deemed an Affiliate of such Persons, and shall include all
investment partnerships and special purpose entities that are not operating
companies, whether existing as of the date hereof or created hereafter, if the
Persons controlling Apollo have the dominant management role in such entities.
As used in this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a person
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise.
<PAGE>
"Apollo" means Apollo Management IV, L.P. and its Affiliates.
------
"Beneficial Owner" means a Person who is determined to be a "beneficial
----------------
owner" of, or who "beneficially owns" any capital stock of the Company (i) which
such person or any of its Affiliates or Associates (each as defined in the
Exchange Act) owns, directly or indirectly; (ii) which such Person or any of its
Affiliates or Associates has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of any
period of time), pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding; or (iii) which are owned, directly or indirectly, by any other
Person with which such Person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Capital Stock.
"BOSC" means Building One Services Corporation, a Delaware corporation.
----
"BOSC Debentures" means the 7 1/2% Convertible Subordinated Junior
---------------
Debentures due 2012 of BOSC, governed by an Indenture dated as of April 30, 1999
by and between BOSC and United States Trust Company of New York.
"BOSC Debentureholders" has the meaning set forth in Section 4.4.
---------------------
"BOSC Share Retention Agreement" has the meaning set forth in Section
------------------------------ -------
7.3(g).
- ------
"business day" means any calendar day that is not a Saturday, Sunday or day
------------
on which nationally chartered banks are required to be closed in New York, New
York.
"Closing" has the meaning set forth in Section 2.2.
------- -----------
"Closing Date" has the meaning set forth in Section 2.2.
------------ -----------
"Commission" means the United States Securities and Exchange Commission.
----------
"Common Stock" means the common stock of the Company, $.001 par value per
------------
share.
"Common Stock Equivalent" means one share of Common Stock or the right to
-----------------------
acquire, whether or not immediately exercisable, one share of Common Stock,
whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar event.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Condition Termination Date" has meaning set forth in Section 7.3(g).
-------------------------- --------------
"Confidentiality Agreement" has the meaning set forth in Section 6.9.
------------------------- -----------
2
<PAGE>
"Contract" means any loan or credit agreement, note, bond, mortgage,
--------
indenture, lease, sublease, purchase order or other contract, agreement,
commitment, instrument, Permit (as hereinafter defined), concession, franchise
or license.
"Conversion Shares" has the meaning set forth in Section 2.1(c).
----------------- --------------
"Convertible Preferred Stock" means the Company's 7 1/4% convertible
---------------------------
preferred stock, par value $.001 per share, to be issued by the Company to the
Investor pursuant to the terms and conditions of this Agreement and to be
governed by the Statement of Designations.
"Delaware Company Warrants" has the meaning set forth in Section 3.3 of the
-------------------------
Merger Agreement.
"Effective Time" has the meaning set forth in Section 1.1 of the Merger
--------------
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934 and the rules and
------------
regulations promulgated thereunder, each as amended.
"Expense Reimbursement Event" shall mean that this Agreement shall have
---------------------------
been terminated pursuant to Section 8.1(d)(i),(ii), (iii),(iv), (v) or, pursuant
------------------------------------------
to Section 8.1(d)(vi) or Section 8.1(g)(iii) if such termination pursuant to
Section 8.1(d)(vi) or Section 8.1(g)(iii) occurs after a breach by the Company
of the Merger Agreement, provided, however, that no Expense Reimbursement Event
-------- -------
shall be deemed to occur pursuant to Section 8.1(d)(v) unless the shareholders
of the Company shall not have approved the transactions contemplated by the
Merger Agreement and the Company shall have consummated an Alternative
Transaction (as defined in the Merger Agreement) within one year of the
termination of this Agreement.
"Fee Letter" has the meaning set forth in Section 7.3(e).
---------- --------------
"Financing Letter" has the meaning set forth in Section 3.7.
---------------- -----------
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Entity" means any national, federal, state, municipal, local,
-------------------
territorial, foreign or other government or any department, commission, board,
bureau, agency, regulatory authority or instrumentality thereof, or any court,
judicial, administrative, or arbitral body or public or private tribunal.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Indebtedness" has the meaning set forth in Section 10 of the Statement of
------------
Designations.
"Indemnified Party" has the meaning set forth in Section 9.5.
----------------- -----------
"Investor" means BOSS II, LLC, a Delaware limited liability company.
--------
"Investment Amount" has the meaning set forth in Section 2.1(a).
----------------- --------------
3
<PAGE>
"Investor's Expenses" means all reasonable out-of-pocket expenses
-------------------
(including reasonable attorneys fees) paid or incurred by or on behalf of the
Investor to a Third Party in connection with the negotiation, execution and
delivery of, the due diligence conducted by the Investor and its agents and
representatives in connection with, and the consummation (to the extent
applicable) of the transactions contemplated by, (i) this Agreement, (ii) the
Merger Agreement, (iii) the Investor's Rights Agreement and each of the
documents and instruments referred to in any of the foregoing, including,
without limitation, the indebtedness to be incurred in connection with the
transactions contemplated by this Agreement and the Merger Agreement.
Notwithstanding anything in this Agreement to the contrary, the maximum amount
of Investor Expenses shall be $3,000,000.
"Investor's Rights Agreement" has the meaning set forth in Section 7.3(e).
--------------------------- --------------
"Law" means all provisions of laws, statutes, ordinances, rules, bylaws,
---
regulations, writs, Permits or Orders of any Governmental Entity.
"Liens" means, with respect to any asset, (a) any mortgage, deed of trust,
-----
lien, pledge, encumbrance, charge or security interest of any kind whatsoever in
or on such asset (including the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction), (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
Lease or title retention agreement relating to such asset and (c) in the case of
securities, any purchase option, right of first refusal, call, appreciation
right or similar right of a third party with respect to such securities.
"material adverse change" has the meaning set forth in Section 9.6.
----------------------- -----------
"Material Adverse Effect" has the meaning set forth in Section 9.6.
----------------------- -----------
"Material Contract" means any Contract that (i) evidences or provides for
-----------------
any Indebtedness of the Company or any Subsidiary, or any of their Affiliates,
in an amount in excess of $5,000,000, or any encumbrance securing such
Indebtedness, (ii) restricts the Company or any Subsidiary, or any of their
Affiliates, from engaging in any line of business or (iii) is required to be
disclosed by the Company pursuant to the Exchange Act or the Securities Act (as
hereinafter defined).
"Merger" has the meaning set forth in Section 7.2(b).
------ --------------
"Merger Agreement" has the meaning set forth in the recitals to this
----------------
Agreement.
"Merger Shares" has the meaning set forth in Section 7.3(g).
------------- --------------
"NYSE" has the meaning set forth in Section 6.5.
---- -----------
"Order" means all judgments, injunctions, orders and decrees of all
-----
Governmental Entities in Proceedings (as hereinafter defined) in which the
person in question is a party or by which any of its properties is bound.
4
<PAGE>
"Organizational Documents" means, with respect to any person, each
------------------------
instrument or other document that (a) defines the existence of such person,
including its certificate of limited partnership or articles or certificate of
incorporation, as filed or recorded with an applicable Governmental Entity, or
(b) governs the internal affairs of such person, including its partnership
agreement or by-laws.
"Outside Date" has the meaning set forth in Section 8.1(b).
------------ --------------
"Payment Event" shall mean that this Agreement shall have been terminated
------- -----
pursuant to Section 8.1(d)(i),(ii), (iii),(iv), (v) or, pursuant to Section
------------------------------------------
8.1(d)(vi) or Section 8.1(g)(iii) if such termination pursuant to Section
8.1(d)(vi) or Section 8.1(g)(iii) occurs after a breach by the Company of the
Merger Agreement, provided, however, that no Payment Event shall be deemed to
-------- -------
occur pursuant Section 8.1(d)(v) unless the shareholders of the Company shall
not have approved the transactions contemplated by the Merger Agreement and the
Company shall have consummated an Alternative Transaction (as defined in the
Merger Agreement) within one year of the termination of this Agreement.
"Permits" means, collectively, all franchises, approvals, clearances,
-------
permits, licenses, authorizations, registrations, certificates, and variances
obtained from, or agreements with, any Governmental Entity.
"Proceeding" means any claim, demand, suit, action, hearing, grievance,
----------
arbitration, mediation or proceeding in any court or before any Governmental
Entity, whether at law or in equity.
"Securities Act" means the Securities Act of 1933 and the rules and
--------------
regulations promulgated thereunder, each as amended.
"Share Retention Agreement" has the meaning set forth in Section 3.5.
------------------------- -----------
"Statement of Designations" means the statement of designations,
-------------------------
preferences, limitations and relative rights of the Convertible Preferred Stock,
in the form set forth in Exhibit B.
---------
"Subsidiary" has the same meaning has the meaning set forth in Section
----------
2.2(b) of the Merger Agreement.
"Termination Fee" has the meaning set forth in Section 6.3(b).
--------------- --------------
"Third Party" means any person or "group," as described in Rule 13d-5(b)
----- -----
promulgated under the Exchange Act, other than the Investors or any of their
Affiliates.
"Transaction Documents" means this Agreement, the Fee Letter, the
---------------------
Investor's Rights Agreement, the Statement of Designations and the Merger
Agreement.
5
<PAGE>
ARTICLE II
ISSUANCE OF CONVERTIBLE PREFERRED STOCK
2.1 Issuance of Convertible Preferred Stock.
(a) At the Closing, the Company shall issue and deliver to the Investor a
certificate or certificates representing the sum of $250,000,000 plus an amount
equal to the accrued and unpaid interest as of the Closing Date on the BOSC
Debentures (the "Investment Amount"), aggregate share value of Convertible
-----------------
Preferred Stock against receipt by the Company of:
(i) a wire transfer of immediately available funds in the amount of
$150,000,000 to an account designated by the Company at least two business
days prior to the Closing; and
(ii) all of the certificates representing all of the outstanding BOSC
Debentures.
(b) The Convertible Preferred Stock certificates shall be registered in
the names designated by the Investor to the Company at least two business days
prior to the Closing.
(c) The Company has authorized and reserved and covenants to continue to
reserve, free of preemptive rights and other preferential rights, a sufficient
number of shares of Common Stock to satisfy the rights of conversion of the
holders of the Convertible Preferred Stock. Any shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock, and such shares of Common
Stock when issued, are herein referred to as the "Conversion Shares."
-----------------
(d) The number of shares of Convertible Preferred Stock to be issued
pursuant to the terms and conditions of this Agreement shall be determined by
dividing the number representing the Investment Amount by 1,000.
2.2 Closing.
The closing (the "Closing") hereunder with respect to the issuance and sale
-------
of the Convertible Preferred Stock shall take place at the offices of O'Sullivan
Graev & Karabell, LLP, 30 Rockefeller Plaza, 24th Floor, New York, New York (or
at the offices of the lenders to the Company or such other place as the parties
may agree) as soon as practicable after December 31, 1999 and promptly after the
satisfaction or waiver of all of the conditions set forth in Article VII (the
-----------
date upon which the Closing occurs being referred to as the "Closing Date") and
------------
immediately prior to the consummation of the consummation of the transactions
contemplated under the Merger Agreement.
2.3 Company Actions.
The Company represents and warrants that at meetings duly called and held,
its Board of Directors has (a) taken all necessary steps to render the
restrictions of Article 13.03 of the Texas Business Corporation Act inapplicable
to the transactions contemplated by this Agreement and (b) resolved to elect not
to be subject, to the extent permitted by Law, to any state takeover law
6
<PAGE>
other than Article 13.03 of the Texas Business Corporation Act that may purport
to be applicable to the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as of the date hereof
and as of the Closing Date as follows:
3.1 Authority.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and each other Transaction Document and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the other Transaction Documents and the other
agreements, documents and instruments referred to herein and therein have been
duly authorized by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement, any other Transaction Document or any such other
agreement, document or instrument or to consummate the transactions so
contemplated hereby or thereby. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company and each such
document will, upon approval of the Company's shareholders, constitute a valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in equity).
3.2 Authorization of Convertible Preferred Stock and Conversion Shares.
The shares of Convertible Preferred Stock have been duly authorized for
issuance and, when issued and delivered, and consideration recited herein has
been received in accordance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable. The Conversion Shares have been
duly authorized and reserved for issuance, and, when the shares of Convertible
Preferred Stock have been issued by the Company, (i) the Convertible Preferred
Stock will be convertible into Conversion Shares in accordance with the terms as
set forth in the Statement of Designations, and (ii) the Conversion Shares
issuable upon such conversion, when issued and delivered in accordance with the
provisions of the Statement of Designations, will be validly issued, fully paid
and nonassessable.
3.3 Consents and Approvals; No Violations.
Except for Permits as may be required under, and other applicable
requirements of, the Securities Act, the Exchange Act and applicable foreign and
state securities or blue sky laws and the HSR Act, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (a) conflict with or
result in any breach of any provision of the Organizational Documents of the
Company or any of its material Subsidiaries, (b) require the Company to make any
filing with, provide any
7
<PAGE>
notice to, or obtain any Permit, authorization, consent or approval of, any
Governmental Entity (except where the failure to obtain such Permit,
authorization, consent or approval or to make such filings would not reasonably
be expected to prevent or materially delay the consummation of the transactions
contemplated by this Agreement), (c) result in the creation or imposition of any
Liens upon the properties or assets of the Company or any Subsidiary, (d) except
as set forth on Schedule 3.3(d), result in a violation or breach of, require any
--------------
notice to any party pursuant to, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation, acceleration or right of non- renewal or require any
prepayment or offer to purchase any debt) under, any of the terms, conditions or
provisions of any Material Contract to which the Company or any of its
Subsidiaries is a party or by which the Company's or any of its Subsidiaries'
properties or assets may be bound, (e) violate any Order or Law applicable to
the Company or any of its Subsidiaries or any of their respective properties or
assets or (f) result in the loss, forfeiture, revocation, termination or
diminution of any Permit, except in the case of clauses (b), (c), (d), (e) and
(f), for violations, breaches, defaults, losses, forfeitures, revocations,
terminations or diminutions which would not, individually or in the aggregate,
cause a Material Adverse Effect.
3.4 State Takeover Statutes.
No "fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal laws in the
United States (with the exception of Article 13.03 of the TBCA) applicable to
the Company is applicable to this Agreement, the Merger Agreement or the other
transactions contemplated hereby or thereby. The action of the Board of
Directors of the Company in approving this Agreement and the Merger Agreement
(and the transactions provided for herein and therein) is sufficient to render
Article 13.03 of the TBCA inapplicable to this Agreement and the Merger
Agreement.
3.5 Share Retention Agreements.
The Company has received extensions to each share retention agreement from
the shareholders listed in Schedule 3.5, copies of which have been delivered to
------------
the Investor (the "Share Retention Agreements"). Except in connection with the
--------------------------
Merger, no Share Retention Agreement has been amended, waived, supplemented or
restated and each Share Retention Agreement remains in full force and effect,
enforceable in accordance with its terms against the shareholders party thereto.
Except in connection with the Merger, the Company has not amended, waived,
supplemented or restated any contractual restrictions on transfer of any shares
of Common Stock (except pursuant to the Share Retention Agreements) and all such
restrictions are enforceable in accordance with their terms against the
shareholders party thereto.
3.6 Merger Agreement
The Company and BOSC have entered into the Merger Agreement, a copy of
which has been delivered to the Investor. The Company hereby restates the
representations and warranties of the Company set forth in the Merger Agreement
as if such representations and warranties were set forth herein in their
entirety, and such representations and warranties are incorporated by reference
herein.
8
<PAGE>
3.7 Financing.
The Company has obtained a commitment letter from Bank of America with
respect to $800,000,000 of senior debt financing, a copy of which has been
delivered to the Investor (the "Financing Letter"). There have been no changes,
----------------
modifications or waivers with respect to the Financing Letter since the date of
its delivery to the Investor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company as of the date hereof
and as of the Closing Date as follows:
4.1 Organization.
The Investor is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite power and
authority to carry on its business as now being conducted. The Investor is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualifications or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not be reasonably expected to either
prevent or materially delay its ability to perform its obligations hereunder.
The Investor has made available to the Company complete and correct copies of
its certificate of formation, operating agreement and by-laws, as amended to the
date hereof.
4.2 Authority.
The Investor has the requisite power and authority to execute and deliver
this Agreement and each other Transaction Document to which it is a party, and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the other Transaction Documents and
the other agreements, documents and instruments referred to herein and therein,
in each case to which the Investor is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action on the part of the Investor and no other proceedings on the
part of the Investor are necessary to authorize this Agreement, any other
Transaction Document or any such other agreement, document or instrument or to
consummate the transactions so contemplated hereby or thereby. This Agreement
and the other Transaction Documents and the other agreements, documents and
instruments referred to herein and therein to which the Investor is a party have
been duly executed and delivered by the Investor and each such document
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its respective terms.
4.3 Consents and Approvals; No Violations.
Except for filings, Permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act,
Exchange Act, applicable foreign
9
<PAGE>
and state securities or blue sky laws, the HSR Act, and applicable state
takeover laws, neither the execution, delivery or performance of this Agreement,
the other Transaction Documents or other agreements, documents or instruments
referred to herein or therein, by the Investor, nor the consummation by the
Investor of the transactions contemplated hereby or thereby will (i) conflict
with or result in any breach of any provision of its Organizational Documents,
(ii) require any filing with, notice to, or Permit, authorization, consent or
approval of, any Governmental Entity (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
reasonably be expected to prevent or materially delay the consummation of the
transactions contemplated by this Agreement), (iii) result in a violation or
breach of, require any notice to any party pursuant to, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any Contract to which the Investor or any of
its subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or (iv) violate any Order or Law applicable to the
Investor or any of its properties or assets, except in the case of clauses (iii)
and (iv) for violations, breaches or defaults which could not, individually or
in the aggregate, be reasonably expected to either prevent or materially delay
its ability to perform its obligations hereunder.
4.4 Ownership of the BOSC Debentures.
The lawful owners, of record and beneficially, of the BOSC Debentures are
limited partnerships under common control with the Investor (the "BOSC
----
Debentureholders"). The BOSC Debentureholders have good and marketable title to
- ----------------
such debentures, free and clear of any Liens and the Investor will cause the
transfer of the BOSC Debentures as per the Agreement Letter, in the form
attached hereto as Exhibit 4.4, in accordance with the terms of, and subject to
-----------
the conditions set forth in, this Agreement.
4.5 Ownership of Company Common Stock.
As of the date hereof, the Investor does not own of record or beneficially,
and is not the Beneficial Owner of a number of shares of Common Stock which, in
the aggregate, exceeds 1% of the outstanding shares of Common Stock on the date
hereof and, without the consent of the Company, the Investor shall not acquire
or dispose of any shares of Common Stock until after the Closing Date except in
connection with the transactions contemplated in Section 2.1 of this Agreement.
4.6 Brokers.
No broker, investment banker, financial advisor, finder or other person is
entitled to any brokerage, investment banker's, financial advisor's, finder's or
other fee or commission for which the Company will be liable in connection with
the execution of this Agreement by the Investor or the performance by the
Investor of its obligations hereunder, except as otherwise set forth in the Fee
Letter.
10
<PAGE>
4.7 Investment Representations and Warranties.
(a) The Investor is acquiring the Convertible Preferred Stock to be
acquired hereunder for its own account, for investment and not with a view to
the distribution thereof, and without any present intention of distributing the
same.
(b) The Investor understands that the Convertible Preferred Stock has not
been, and will not upon issuance be, registered or qualified under the
Securities Act, or any applicable state securities laws, by reason of its
issuance in a transaction exempt from the registration or qualification
requirements of the Securities Act and such laws, that the Convertible Preferred
Stock and any Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered or qualified under the Securities Act and such
laws or is exempt from such registration or qualification, and that the
certificates representing the shares of Preferred Stock will carry appropriate
legends with respect to the foregoing.
(c) The Investor will be an "accredited investor" at the Closing within
the meaning of Rule 501(a) promulgated under the Securities Act.
(d) The Investor (i) has been furnished with or has had access to the
information that such Investor has requested from the Company sufficient to
enable the Investor to evaluate the merits and risks of an investment in the
Convertible Preferred Stock, (ii) has had an opportunity to discuss with, and
ask questions of, management of the Company the intended business and financial
affairs of the Company, and (iii) has generally such knowledge and experience in
business and financial matters so as to enable the Investor to understand and
evaluate the risks of and form an investment decision with respect to its
investment in the Convertible Preferred Stock.
(e) The Investor has no need for liquidity in its investment in the
Convertible Preferred Stock and is able to bear the economic risk of its
investment in the Convertible Preferred Stock and the complete loss of all of
such investment.
(f) The Investor understands that there is no public market for the
Convertible Preferred Stock and that the transferability of the Convertible
Preferred Stock is restricted.
(g) The Investor recognizes that an investment in the Company involves
certain risks, and has taken full cognizance of, and understands all of, the
risk factors related to the purchase of the Convertible Preferred Stock.
ARTICLE V
COVENANTS
5.1 Other Actions.
(a) The Company shall not, and shall cause each Subsidiary not to, take
or omit to take any action, the taking or omission of which would reasonably be
expected to result in (i) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or inaccurate in any
material respect or (ii) any of the conditions set forth in Article VII
-----------
11
<PAGE>
not being satisfied (subject to the Company's right to take actions specifically
permitted by Section 8.1).
-----------
(b) Without limiting Section 5.1(a), effective at the Effective Time, the
--------------
Company shall file the Statement of Designations with the Secretary of State of
the State of Texas, decrease the size of its board of directors to 13 persons
and cause at least 4 persons designated by the Investors to be added to the
Company's board of directors.
(c) Without limiting Section 5.1(a), the Company shall use its
--------------
commercially reasonable best efforts to obtain the requisite funds required for
the consummation of the transactions contemplated hereby and pursuant to the
Merger Agreement; and to pay the related fees and expenses, all on the terms and
conditions set forth in the Financing Letter or on other terms acceptable to the
Investor and the Company.
(d) The Investor shall not take or omit to take any action, the taking or
omission of which would reasonably be expected to result in (i) any of the
representations and warranties, of the Investor set forth in this Agreement
becoming untrue or inaccurate in any material respect or (ii) any of the
conditions set forth in Article 7 not being satisfied (subject to the Investors
right to take actions specifically permitted by Section 8.1).
(e) The Company shall not amend the employment agreement of any of the
individuals listed on Schedule 5.1(e) without the prior written consent of
---------------
Investor.
(f) the Company will take such action as is necessary to prevent the
acceleration of the vesting of any Company Stock Options or Warrants except
pursuant to the Merger Agreement and except for the acceleration of vesting of
the options of Persons listed on part 4 of Schedule 4.16 of the Merger
Agreement, which Persons are not marked with an asterisk on such Schedule.
5.2 Advice of Changes; Filings.
From the date hereof until the Closing Date, the Company shall confer with
the Investor on a regular basis as reasonably requested by the Investor, report
on operational matters and promptly advise the Investor orally and, if requested
by the Investor, in writing of any material change with respect to the Company
or any Subsidiary. From the date hereof until the Closing Date, the Company
shall promptly after filing provide to the Investor (or its counsel) copies of
all filings made by the Company or any Subsidiary with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
5.3 Financial Information.
From the date hereof until the Closing Date, the Company shall furnish to
the Investor all documents filed with or submitted to the Commission by the
Company during such period promptly after such filing or submission. From the
date hereof until the Closing Date, the Company shall also furnish to the
Investor as soon as available but in any event within 30 days of each calendar
month, the unaudited consolidated and consolidating balance sheets and income
statements of the Company and its Subsidiaries, showing its financial condition
as of the close of such month and the results of operations during such month
and for then elapsed portion of the
12
<PAGE>
Company's fiscal year, in each case, setting forth, to the extent available, the
comparative figures for the corresponding month in the prior fiscal year, the
corresponding elapsed portion of the prior fiscal year and the budget amount for
such month (all to be prepared in accordance with GAAP consistently applied).
5.4 Merger Agreement Covenants.
The Company hereby agrees to perform all its obligations set forth in the
Merger Agreement as if such obligations were set forth herein in their entirety
and such obligations are incorporated herein by reference.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information.
The Company and its Subsidiaries shall afford to the Investor, and to the
Investor's officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours from the
date hereof to the Closing Date to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to the Investor all other information concerning
its business, properties and personnel as the Investor may reasonably request.
6.2 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or non- actions, waivers, consents
and approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings required by the HSR Act) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
any of the transactions contemplated by this Agreement, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement and the other Transaction
Documents and (v) subject to the execution of appropriate confidentiality
agreements, reasonably cooperating with all potential sources of financing to
the Investor in connection with the transactions contemplated by this Agreement,
and the taking of all reasonable steps as may be necessary or advisable to
consummate one or more financing transactions with such potential sources of
financing, including participating in "road shows" with respect to the issuance
of securities in one or more
13
<PAGE>
private placements or transactions registered under the Securities Act. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall (i) take all action necessary to ensure that no "fair price,"
"moratorium," "control share acquisition" or other similar or antitakeover
statute or similar statute or regulation enacted under applicable Law is or
becomes applicable to this Agreement or any other transactions contemplated by
this Agreement and (ii) if any such statute or regulation becomes applicable to
any transaction contemplated by this Agreement, take all action reasonably
necessary to ensure that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
this Agreement and the transactions contemplated by this Agreement. Nothing in
this Agreement shall be deemed to require the Investor to dispose of or hold
separate any asset or collection of assets.
(b) The Company shall give prompt notice to the Investor of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it,
including its failure to cause a Subsidiary, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it or any Subsidiary under this Agreement; provided, however, that
-------- -------
no such notification shall affect the representations, warranties, covenants or
agreement of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) The Investor shall give prompt notice to the Company of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
-------- -------
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
6.3 Fees and Expenses.
(a) Except as otherwise provided in this Agreement or as otherwise agreed
to by the parties hereto in writing, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the transactions contemplated by this Agreement are consummated.
(b) If a Payment Event shall occur at any time, then, within five
business days following such Payment Event, the Company shall pay to the
Investor a fee in an amount equal to $3.75 million (the "Termination Fee") and
---------------
shall reimburse the Investor for the Investor's Expenses not previously
reimbursed.
(c) If an Expense Reimbursement Event shall occur at any time, then,
within five business days following such Expense Reimbursement Event, the
Company shall reimburse the Investor for the Investor's Expenses not previously
reimbursed.
14
<PAGE>
(d) If the transactions contemplated by this Agreement are consummated,
the Company shall reimburse the Investor for all of the Investor's Expenses,
such reimbursement to occur at the Closing by wire transfer of immediately
available funds.
(e) Notwithstanding anything to the contrary set forth in this Agreement,
if this Agreement shall have been terminated by the Investor for any reason and
at the time of termination this Agreement could have been terminated pursuant to
more than one subsection of Section 8.1 and could not have terminated by the
-----------
Company pursuant to Section 8.1, then the Investor shall be entitled to choose
-----------
which such subsection this Agreement shall have been terminated pursuant to.
(f) The Company acknowledges that the agreements contained in this
Section 6.3 are an integral part of the transactions contemplated by this
- -----------
Agreement and that, without these agreements, the Investor would not enter into
this Agreement. Accordingly, if the Company fails to pay the Termination Fee or
the Investor's Expenses when due and, in order to obtain such payment, the
Investor commences a suit which results in a judgment against the Company for
the Termination Fee and/or the Investor's Expenses, the Company shall pay to the
Investor all reasonable out-of-pocket costs and expenses (including reasonable
attorneys fees and expenses) paid by or on behalf of the Investor to a Third
Party in connection with such suit, together with interest on the amount of the
Termination Fee and the Investor's Expenses that are the subject of such
judgment at the prime rate as set by Chase Manhattan Bank in effect on the date
such payment was required to be made.
(g) In the event that any Termination Fee and related Investor's Expenses
are paid by the Company to the Investor hereunder, the Termination Fee and
related Investor's Expenses shall be the sole and exclusive remedy of the
Investor for claims related to, based on or arising out of this Agreement, the
Merger Agreement, the subject matter hereof or thereof or the transactions
contemplated herein or therein.
6.4 Public Announcements.
The Investor, on the one hand, and the Company, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement without the prior
consent of the other party, except to the extent required by applicable Law or
on the advice of legal counsel that such press release or public statement is
required under applicable Law or the rules of any national securities exchange.
6.5 NYSE.
The Company shall use its commercially reasonable best efforts to obtain
prior to Closing the approval for listing on the New York Stock Exchange
("NYSE"), effective upon official notice of issuance, of the Conversion Shares
----
(without any modification of the terms of the Convertible Preferred Stock as set
forth in the Statement of Designations). The Company shall consult and
cooperate with the Investor and its counsel in performing its obligations under
this Section 6.5. The Company and its advisors will not engage in any
-----------
substantive discussions or
15
<PAGE>
otherwise communicate in writing with the NYSE or any of its agents or
representatives with respect to the transactions contemplated by the Transaction
Documents without the prior written consent of the Investor. The Investor agrees
to cooperate and assist the Company in connection with the foregoing.
6.6 Securities and Exchange Commission.
The Company and its advisors will not engage in any substantive discussions
or otherwise communicate in writing with the Commission or any of its agents or
representatives with respect to the transactions contemplated by the Transaction
Documents without the prior written consent of the Investor. The Investor
agrees to cooperate and assist the Company in connection with the foregoing.
6.7 Use of Proceeds.
The Company shall use all the proceeds received from the sale of the
Convertible Preferred Stock pursuant to this Agreement to fund the conversion of
Common Stock into cash and the purchase of options pursuant to the Merger
Agreement, or to the extent that the entirety of the $150,000,000 received
pursuant hereto is not used to effect such conversion, for the repayment of all
or part of any Indebtedness of the Company or any of its Subsidiaries or for the
purchase of shares of Common Stock, so long as the purchase price paid for such
shares is less than the Conversion Price (as defined in the Statement of
Designations), and provided that the Company will not purchase any shares from
any Person that is an officer or employee of the Company, if such purchase would
reduce such Person's ownership of Common Stock Equivalents below 50% of the
level of such Person's ownership as of the date hereof.
6.8 Merger Agreement.
(a) The Company shall not amend, waive or supplement any provision of the
Merger Agreement without the prior written consent of the Investor.
(b) The Company shall promptly deliver to the Investor any notices
delivered by the Company or received by the Company in connection with the
Merger Agreement.
6.9 Confidentiality.
The Parties will hold any such information which is nonpublic in confidence
in accordance with the terms of the Confidentiality Agreement, dated May 27,
1999, and accepted June 1, 1999, between the Company and Apollo Management IV,
L.P., (the "Confidentiality Agreement"), and in the event of termination of this
-------------------------
Agreement for any reason each party will promptly comply with the terms of the
Confidentiality Agreement.
16
<PAGE>
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation.
The respective obligations of each party to consummate the transactions
contemplated by Section 2.1 are subject to the prior satisfaction or waiver,
-----------
where permissible, of the following conditions:
(a) No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Entity that prohibits or restricts the consummation of the
transactions contemplated by this Agreement or the other Transaction Documents
or makes such consummation illegal (each party agreeing to use commercially
reasonable efforts to have any such prohibition lifted).
(b) The waiting period applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or been
terminated.
(c) The conditions set forth in the Financing Letter shall have been
satisfied or waived and the funding referred to therein shall be available to
the Company on terms and conditions and in such amounts satisfactory to the
Investor and the Company.
(d) The Common Stock (including the Conversion Shares) shall have been
approved for listing on the NYSE.
(e) There shall exist no default under any material indebtedness of
either BOSC or the Company.
7.2 Conditions to the Company's Obligations.
The obligation of the Company to consummate the transactions contemplated
by Section 2.1 are subject to the prior satisfaction or waiver of the following
-----------
conditions:
(a) All of the representations and warranties of the Investor set forth
in this Agreement shall be true and correct in all material respects (except for
those representations and warranties that are qualified as to materiality, which
shall be true and correct in all respects and except for those representations
and warranties that speak as of a specific time, which shall be true and correct
as of such time) as of the Closing Date as though made on and as of such time,
and the Investor shall have performed in all material respects all covenants and
agreements (except for the payment of cash and the delivery of the BOSC
Debentures, which shall be
17
<PAGE>
performed in all respects, without regard to materiality) required to be
performed by it under this Agreement at or prior to the Closing Date and the
Company shall have received a certificate signed by an executive officer of the
Investor to the foregoing effect.
(b) All of the conditions to the obligations of the Company and BOSC to
consummate the merger contemplated in the Merger Agreement (the "Merger")
------
capable of being satisfied prior to the consummation of this Agreement shall
have been satisfied to the Company's reasonable satisfaction, unless the failure
------
to consummate the Merger is due to a breach by the Company of the Merger
Agreement.
(c) The Company shall have been provided with a certificate from an
officer of the Investor certifying that the conditions precedent to the
Company's obligations set forth in this Section shall have been satisfied.
(d) The Company shall have obtained financing pursuant to the term sheet
attached as an exhibit to the Financing Letter on such other terms reasonably
acceptable to the Company.
(e) Neither the Company nor BOSC shall be required by any Governmental
Entity to divest any material portion of its business in connection with the
consummation of the Merger or as a condition to the effectiveness of the Merger.
(f) All notices required to be given prior to the Closing Date with, and
all consents, approvals, authorizations, waivers and amendments required to be
obtained prior to the Closing Date from, any Third Party in connection with the
consummation by the Company and the Investor of the transactions contemplated by
this Agreement have been made and/or obtained, except in the case of a Third
Party other than a Governmental Entity, the failure to give such notice or
obtain such consent, approval, authorization, waiver or amendment would not be
likely to have a Material Adverse Effect on the Company.
7.3 Conditions to the Investor's Obligations.
The obligations of the Investor to consummate the transactions contemplated
by Section 2.1 are subject to the prior satisfaction or waiver by the Investor
-----------
of the following conditions:
(a) All of the representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the Closing Date as though made
on and as of such time except to the extent that the failure to be true and
correct has not had and could not reasonably be expected to have, in the
aggregate, an adverse effect on the Company and its Subsidiaries, taken as a
whole, that a reasonably prudent investor in the Investor's position would
consider material relative to the investment to be made by the Investor pursuant
to this Agreement (except for those representations and warranties that are
qualified as to materiality, which shall be true and correct in all respects,
and except for those representations and warranties that speak as of a specific
time, which shall be true and correct as of such time), and the Company shall
have performed in all material respects all covenants and agreements (except for
the obligation to deliver the certificates representing the Convertible
Preferred Stock, which shall be performed in all respects, without regard to
materiality) required to be performed by it
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<PAGE>
under this Agreement at or prior to the Closing Date (it being understood that
any such breach may be cured to the extent permitted by Section 8.1(d)). The
--------------
Investor shall have received a certificate signed by an executive officer of the
Company to the foregoing effect.
(b) All of the conditions set forth in the Merger Agreement that are
capable of being satisfied prior to the consummation of this Agreement shall
have been satisfied to the Investor's reasonable satisfaction.
(c) All notices required to be given prior to the Closing Date with, and
all consents, approvals, authorizations, waivers and amendments required to be
obtained prior to the Closing Date from, any Third Party in connection with the
consummation by the Company of the transactions contemplated by this Agreement
have been made and/or obtained, except in the case of a Third Party other than a
Governmental Entity, the failure to give such notice or obtain such consent,
approval, authorization, waiver or amendment would not be likely to have a
Material Adverse Effect on the Investor.
(d) The Investor shall have been provided with an opinion of Bracewell &
Patterson, counsel to the Company, or the general counsel of the Company, as to
the matters set forth in Exhibit 7.3(d).
--------------
(e) The Company and the Investor shall have executed the Investor's
Rights Agreement, a form of which is attached hereto as Exhibit A (the
---------
"Investor's Rights Agreement"), and a Fee Letter, a form of which is attached
---------------------------
hereto as Exhibit C (the "Fee Letter"), and the Company shall have performed all
--------- ----------
of its obligations required to be performed at or prior to the Closing pursuant
to the Investor's Rights Agreement and the Fee Letter.
(f) The Company shall have filed the Statement of Designations,
substantially in the form of Exhibit B, with the Secretary of State of the State
---------
of Texas.
(g) The holders of BOSC capital stock representing two-thirds of the
shares described on Schedule 7.3(g), each of which have previously executed an
---------------
agreement with respect to the retention of such BOSC shareholder's shares of
BOSC capital stock (each, a "BOSC Share Retention Agreement"), shall have
------------------------------
executed an amended BOSC Share Retention Agreement pursuant to which such
shareholder agrees that any shares of Common Stock such shareholder receives in
connection with the Merger (the "Merger Shares") shall be subject to the same
-------------
restrictions on transfer as set forth in the BOSC Share Retention Agreement;
provided, however, that (i) notwithstanding anything in this Agreement to the
- -------- -------
contrary, the right of the Investor not to consummate the transactions
contemplated in this Agreement and to terminate this Agreement because of a
failure of the Company to satisfy the condition set forth in this Section 7.2(g)
must be exercised by the Investor in writing by 11:59 p.m. on the date (the
"Condition Termination Date") that is 14 days after receipt thereby of written
--------------------------
notice from the Company that the Company is ready to file the first draft of the
S-4 (as defined in the Merger Agreement) with the Commission (it being
understood that the Company agrees to withhold filing of the S-4 until the
expiration of such 14 day period), and (ii) if the Company does not receive a
written notice from the Investor that it will not consummate the transactions
contemplated in the Agreement and is terminating the Agreement because the
Company has failed to satisfy the condition set forth in Section 7.2(g) on or
prior to the Condition Termination Date, all rights of the Investor not to
19
<PAGE>
consummate the transactions contemplated in the Agreement and to terminate the
Agreement because the condition set forth in Section 7.2(g) has not been
satisfied shall terminate and be of no further force or effect.
(h) Since June 30, 1999 there shall have been no development, change or
effect that is likely to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(i) There shall have been no changes (i) with respect to the employment
by the Company of J. Patrick Millinor, Jr., Donald L. Luke, Chester J.
Jachimiec, Darren B. Miller or Alfred R. Roach, Jr. or (ii) with respect to the
employment by the Company or by BOSC of Joseph Ivey, William Love or Michael
Sullivan that are not satisfactory to the Investor.
(j) The Investor shall have been provided with a certificate from an
officer of the Company certifying that the conditions precedent to the
Investor's obligations set forth in this Section have been satisfied.
(k) The Company shall have obtained financing pursuant to the term sheet
attached as an exhibit to the Financing Letter on terms reasonably acceptable to
Investor.
(l) Neither the Company nor BOSC shall be required by any Governmental
Entity to divest any material portion of its business in connection with the
consummation of the Merger or as a condition to the Effectiveness of the Merger.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date as
follows:
(a) By mutual written consent of the Investor and the Company.
(b) By either the Investor or the Company if the Closing Date shall not
have occurred on or before March 31, 2000 (the "Outside Date"); provided that
------------
the right to terminate this Agreement under this Section 8.1(b) shall not be
--------------
available to any party whose breach of any representation, warranty or covenant
under this Agreement has been the cause of or resulted in the failure of the
Closing Date to occur on or before such date.
(c) By either the Investor or the Company if any Governmental Entity
shall have issued an Order permanently enjoining, restraining or otherwise
prohibiting the issuance of the Convertible Preferred Stock, the consummation of
the transactions contemplated by the Merger Agreement, and such Order or other
action shall have become final and nonappealable.
(d) By the Investor, if (i) any of the representations and warranties of
the Company contained in this Agreement shall fail to be true and correct in any
material respect when made or have become untrue or incorrect except to the
extent that the failure to be true and
20
<PAGE>
correct has not had and could not reasonably be expected to have, in the
aggregate, an adverse affect on the Company and its Subsidiaries, taken as a
whole, that a reasonably prudent investor in the Investor's position would
consider material relative to the transactions to be consummated by the Investor
pursuant to this Agreement, (ii) the Company shall have breached or failed to
comply in any material respect with any of its obligations under this Agreement,
and such breach or failure shall continue unremedied for 15 days after the
Company has received written notice from the Investor of the occurrence of such
breach or failure; provided, however, that in remedying any such breach or
-------- -------
failure the Company shall not have spent any money, incurred any liabilities or
undertaken any obligations which expenditure, incurrence or undertaking,
individually or together with the breach or failure so remedied, would itself
constitute a material breach of or failure to perform any, representation,
warranty or covenant of this Agreement, (iii) the Company shall have terminated
the Merger Agreement pursuant to Section 7.1(g)(i) thereof, (iv) the Company
shall have breached or failed to comply in any material respect with any of its
obligations under the Merger Agreement and such breach or failure results in the
termination of the Merger Agreement, (v) the shareholders of the Company shall
not have approved the transactions contemplated by the Merger Agreement;
provided, however, that the right to terminate this Agreement under this Section
- -------- -------
8.1(d)(v) shall not be available to the Investor if the Investor's breach of any
representation, warranty or covenant under this Agreement has been the cause of
the failure of the shareholders to not approve the transactions contemplated by
the Merger Agreement or (vi) if the Company or BOSC shall have terminated the
Merger Agreement.
(e) By the Investor if there shall have occurred any material adverse
change since June 30, 1999.
(f) By the Company if (i) any of the representations and warranties of
the Investor contained in this Agreement shall fail to be true and correct in
any material respect, in each case either as of the date hereof or have since
become, and at the time of termination remain, untrue in any material respect,
(ii) the Investor shall have breached or failed to comply in any material
respect with any of its obligations under this Agreement (other than as a result
of a breach by the Company of any of its obligations under this Agreement) and
such failure to be true and correct, breach or failure shall continue unremedied
for 15 days after the Investor has received written notice from the Company of
the occurrence of such breach or failure, (iii) BOSC shall have terminated the
Merger Agreement.
8.2 Effect of Termination.
In the event of a termination of this Agreement by either the Company or
the Investor as provided in Section 8.1, this Agreement shall forthwith become
-----------
void and there shall be no liability or obligation on the part of the Investor
or the Company or their respective officers, directors or Affiliates, except
that Section 6.3, Section 6.4, Section 6.8, Section 8.1, this Section 8.2 and
----------- ----------- ----------- ----------- -----------
Article IX shall survive any such termination and except that nothing herein
- ----------
shall relieve any party for liability for any breach hereof.
21
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Amendment.
This Agreement may not be amended except by an instrument in writing signed
on behalf of all of the parties.
9.2 Extension; Waiver.
At any time prior to the Closing Date, the parties hereto, by action taken
or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any of the
agreements or conditions applicable to such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
9.3 Survival of Representations, Warranties and Agreements, Limitation on
Liability.
The representations, warranties and covenants contained in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
execution and delivery of this Agreement until 30 days after the delivery to the
Investor of the Company's audited financial statements for the twelve months
ending December 31, 2001 and may be relied upon by any permitted subsequent
holder of Convertible Preferred Stock, regardless of any investigation made by
or on behalf of the Investors or any other holder of Convertible Preferred Stock
at any time.
9.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed),
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to the Investor, to:
BOSS II, LLC
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Attention: Mr. Andrew Africk
Telecopy No.: (212) 515-3262
22
<PAGE>
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Attention: John M. Scott, Esq.
Telecopy No.: (212) 728-5950
and, if to the Company, to:
Group Maintenance America, Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attn: Chief Executive Office
Telecopy No.: (713) 626-4766
with a copy to:
Bracewell & Patterson
711 Louisiana, Suite 2900
Houston, Texas 77002
Attention: John L. Bland, Esq.
Telecopy No.: (713) 221-1212
9.5 Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless the Investor
and its Affiliates, partners, officers, directors, employees, agents and
representatives (each, an "Indemnified Party") against any (i) losses,
-----------------
liabilities or damages other than those that result from or relate to a
Proceeding by any Third Party (including derivative actions brought through or
in the name of the Company), or (ii) losses, liabilities or damages resulting
from or relating to a Proceeding by any third party (including derivative
actions brought through or in the name of the Company), in the case of clause
(i) and (ii) of this Section 9.5(a), in connection with any breach of the
representations and warranties or the covenants made by the Company in this
Agreement, the Investor's Rights Agreement, or any other document or instrument
entered into by the Investor in connection with the transactions contemplated
hereby or thereby.
Notwithstanding anything in this Section 9.5 to the contrary, no
Indemnified Party shall have any right to collect any consequential or punitive
damages from the Company pursuant to Section 9.5(a)(i) above.
(b) Except as set forth in Section 6.3 of this Agreement, the rights set
forth in this Section 9.5 shall be the sole and exclusive remedy of the Investor
for claims related to, based on or arising out of this Agreement, the subject
matter hereof or the transactions contemplated herein; provided, however, that
-------- -------
if a Termination Fee and related Investor's Expenses are paid by the Company to
the Investor pursuant to Section 6.3 of this Agreement, the indemnification
rights contained in this Section 9.5 shall automatically terminate and the
payment of such
23
<PAGE>
Termination Fee and related Investor's Expenses shall be the sole and exclusive
remedy of the Investor for such claims.
(c) With respect to Section 9.5(a)(ii), the Indemnified Party shall give
prompt notice to the Company of the assertion of any claim, or the commencement
of any suit, action or proceeding in respect of which indemnity may be sought
under this Agreement. Any failure on the part of any Indemnified Party to give
the notice described in this Section 9.5(c) shall relieve the Company of its
obligations under this Section 9.5 only to the extent that the Company has been
prejudiced by the lack of timely and adequate notice (except that the Company
shall not be liable for any expenses incurred by the Indemnified Party during
the period in which the Indemnified Party failed to give such notice).
Thereafter, the Indemnified Party shall deliver to the Company, promptly (and in
any event within 10 days) after the Indemnified Party's receipt thereof, copies
of all notices and documents (including without limitation court papers)
received by the Indemnified Party relating to such claim, action, suit or
proceeding.
(d) With respect to any claim under Section 9.5(a)(ii), the Company shall
have the sole right to assume the defense or settlement of any third-party
claim, suit, action or proceeding in respect of which indemnity may be sought
under this Agreement if it has agreed irrevocably to indemnify the Indemnified
Parties, provided that an Indemnified Party shall at all times have the right,
at such Indemnified Party's option, to participate fully therein, provided,
--------
further, that the Company shall not be entitled to assume the defense or
- -------
settlement if any of the Indemnified Parties reasonably determines it has
defenses that are inconsistent with the Company's defenses to such claims. In
the event the Company does not proceed diligently to defend the third-party
claim, suit, action or proceeding within 10 days after receipt of written notice
by an Indemnified Party of such third-party claim, suit, action or proceeding,
the Indemnified Party shall have the right, but not the obligation, to undertake
the defense of any such third-party claim, suit, action or proceeding and in
such event the Company shall have the right to participate at its own expense.
(e) With respect to any claim under Section 9.5(a)(ii), the Company shall
not be required to indemnify the Indemnified Party with respect to any amounts
paid in settlement of any third-party suit, action, proceeding or investigation
entered into without the written consent of the Company (which consent shall not
be unreasonably withheld or delayed), provided, further, neither the Company nor
-------- -------
any Indemnified Party may enter into any settlement of a third party Claim if
such settlement (i) has any non-cash component that purports to apply to the
other side or (ii) any cash component that is not being paid by the party
entering into such settlement.
(f) The Parties shall cooperate in defending any such third-party suit,
action, proceeding or investigation, and the defending party shall have
reasonable access to the books, records, and personnel in the possession or
control of the Indemnified Party that are pertinent to the defense. The
Indemnified Party may join the Company in any suit, action, claim or proceeding
brought by a third party, as to which any right of indemnity created by this
Agreement would or might apply, for the purpose of enforcing any right of the
indemnity granted to such Indemnified Party pursuant to this Agreement.
24
<PAGE>
9.6 Interpretation.
When a reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Unless the context otherwise requires, words
importing the singular shall include the plural, and vice versa. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
------- -------- ---------
shall be deemed to be followed by the words "without limitation". The phrase
------------------
"made available" in this Agreement shall mean that the information referred to
--------------
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, the term "subsidiary" of any
----------
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person. As used in this Agreement,
"Material Adverse Effect" means, when used in respect of the Company and its
-----------------------
Subsidiaries, any effect or condition that, individually or in the aggregate
with any other effect or condition, is materially adverse to the assets,
properties, business, financial condition, results of operations of the Company
and its Subsidiaries, taken as a whole. As used in this Agreement, "material
--------
adverse change" means, when used in respect of the Company and its Subsidiaries,
- --------------
any change or event that, individually or in the aggregate with any other change
or event, is materially adverse to the assets, properties, business, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole. As used in this Agreement, except where expressly indicated otherwise,
the phrase "knowledge" with respect to the Company, means to the actual
---------
knowledge, after due inquiry (i.e., the amount of inquiry that would be
----
undertaken by a reasonably prudent business person given like facts and
circumstances) of each of the Company's directors and officers. As used in this
Agreement, the term "person" shall be interpreted broadly and shall include any
person, individual, corporation, limited partnership, limited liability company,
trust, association or other entity or business organization of any kind or
division thereof.
9.7 Entire Agreement; Third Party Beneficiaries.
This Agreement (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York without regard to the conflicts of laws principles
thereof.
9.9 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more
25
<PAGE>
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
9.10 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto (whether by operation of law or
otherwise) without the prior written consent of the other party; provided, that
--------
an Investor may assign its rights, interests and obligations to an Affiliate
without the consent of the Company. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
9.11 Enforcement.
The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of New
York or in a State court located in the City of New York, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto irrevocably and unconditionally (i) consents to
submit such party to the personal jurisdiction of any such Federal or State
court if any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than a Federal court sitting in the state of New York or a New York State court
located in the City of New York and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
26
<PAGE>
IN WITNESS WHEREOF, the Investor and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
BOSS II, LLC
By:
-------------------------------
Name:
Title:
GROUP MAINTENANCE AMERICA CORP.
By:
-------------------------------
Name:
Title:
27
<PAGE>
Exhibit 99(d)
================================================================================
INVESTOR'S RIGHTS AGREEMENT
dated ________________, 2000
among
GROUP MAINTENANCE AMERICA CORP.
and
BOSS II, LLC
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS ................................................... 1
SECTION 2. RIGHTS TO SUBSCRIBE FOR SECURITIES ............................ 7
SECTION 3. BOARD OF DIRECTORS ............................................ 8
SECTION 4. INFORMATION RIGHTS; COVENANTS ................................. 11
SECTION 5. DEMAND REGISTRATION ........................................... 13
SECTION 6. PIGGYBACK REGISTRATION ........................................ 15
SECTION 7. S-3 REGISTRATIONS ............................................. 15
SECTION 8. EXPENSES ...................................................... 16
SECTION 9. PREPARATION AND FILING ........................................ 16
SECTION 10. INDEMNIFICATION ............................................... 19
SECTION 11. UNDERWRITING AGREEMENT ........................................ 21
SECTION 12. INFORMATION BY HOLDERS ........................................ 21
SECTION 13. EXCHANGE ACT COMPLIANCE ....................................... 21
SECTION 14. NO CONFLICT OF RIGHTS ......................................... 22
SECTION 15. PROTECTIVE PROVISIONS ......................................... 22
SECTION 16. STANDSTILL .................................................... 25
SECTION 17. VOTING AGREEMENT .............................................. 25
SECTION 18. MISCELLANEOUS ................................................. 26
<PAGE>
INVESTOR'S RIGHTS AGREEMENT dated as of
______________, 2000, among GROUP MAINTENANCE
AMERICA CORP., a Texas corporation (the
"Company"), and BOSS II, LLC, a Delaware limited
-------
liability company (the "Investor").
--------
The Investor currently holds the Convertible Preferred Stock, which is
initially convertible into _________ shares of Common Stock. The parties
hereto deem it to be in their best interests to set forth their rights and
obligations in connection with public offerings, sales of shares of Common Stock
and certain other matters. Accordingly, the parties agree as follows:
Section 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
"Accountants" has the meaning assigned to such term in Section
-----------
4(b)(iii).
"Affiliate" has the meaning assigned to such term in the Subscription
---------
Agreement.
"Board" means the Board of Directors of the Company.
-----
"Business" shall mean the provision of all manner of facilities
--------
services to the owners, lessees or operators of industrial, commercial,
institutional and residential plants, buildings, homes and other facilities and
the properties related thereto (collectively, "Facilities"), including, without
----------
limitation (i) design, engineering, construction, project management, repair,
replacement, maintenance and service, performance contracting, energy management
and aggregation and project financing of all of the mechanical (heating,
ventilation, air conditioning; plumbing and piping; appliance repair; fire
suppression systems) and electrical (internal and external wiring; generators
and UPS systems; voice and data systems; fire and life safety systems;
temperature control, building automation and energy management) systems, (ii)
rigging, millwright and other industrial services, (iii) janitorial, specialty
cleaning and other services for the repair, maintenance and upkeep of
Facilities, including, without limitation, the provision of onsite maintenance
and support personnel and the outsourcing of the Facilities management function
by an owner, lessee or operator of any Facilities.
"Capital Expenditure" means any expenditure by the Company and its
-------------------
Subsidiaries for the acquisition, construction, or leasing (pursuant to a
capital lease) of fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such period) which
should be capitalized under generally accepted accounting principles on a
consolidated balance sheet of the Company and its Subsidiaries; provided,
--------
however, this definition shall not include any acquisition of a business.
- -------
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at
<PAGE>
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Closing" has the meaning assigned to such term in the Subscription
-------
Agreement.
"Closing Date" has the meaning assigned to such term in the
------------
Subscription Agreement.
"Commission" means the United States Securities and Exchange
----------
Commission or any other Federal agency at the time administering the Securities
Act.
"Common Stock" means the Common Stock, par value $.001 per share, of
------------
the Company.
"Common Stock Equivalent" means one share of Common Stock or the right
-----------------------
to acquire, whether or not immediately exercisable, one share of Common Stock,
whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar event.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary, unusual
or nonrecurring gains or losses), (B) Consolidated Interest Expense and (C)
depreciation and amortization less any out of the ordinary course non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Subsidiaries in accordance with GAAP.
"Consolidated Indebtedness" means with respect to any Person, as of
-------------------------
the date of determination, the aggregate amount of all Indebtedness of such
Person and its Subsidiaries on a consolidated basis included on the face of the
balance sheet of such Person (determined in accordance with GAAP) plus any
Indebtedness included on the face of the balance sheet of any other Person
(determined in accordance with GAAP) as to which such Person and/or any of its
Subsidiaries has created a guarantee or other contingent obligation (to the
extent of such guarantee or other contingent obligation).
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation, (a)
any amortization of debt discount and amortization or write-off of deferred
financing costs (including the amortization of costs relating to interest rate
caps or other similar agreements, but excluding any write-off of debt discount
or deferred financing costs resulting from the Merger or any related financing),
(b) the net costs required by GAAP to be recorded as interest expense for
Interest Swap Obligations, and (c) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease
-2-
<PAGE>
Obligations paid or accrued by such Person and its Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP, minus
interest income for such period.
"Consolidated Leverage Ratio" means, with respect to any Person, the
---------------------------
ratio of Consolidated Indebtedness of such Person on the date of the transaction
giving rise to the need to calculate the Consolidated Leverage Ratio (the
"Transaction Date") to Consolidated EBITDA of such Person for the four full
fiscal quarters (the "Four Quarter Period") most recently ending on or prior to
the Transaction Date for which quarterly consolidated financial statements of
the Company and its Subsidiaries have been distributed to Investor. In addition
to and without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and "Consolidated Indebtedness" shall be calculated after
giving effect on a pro forma basis, including appropriate adjustments determined
in accordance with Article XI of Regulation S-X promulgated by the Commission,
for the period of such calculation for any asset sales or asset acquisitions
(including, without limitation, any asset acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the asset
acquisition) incurring, assuming or otherwise being liable for acquired
Indebtedness and also including any Consolidated EBITDA attributable to the
assets which are the subject of the asset acquisition but excluding the
Consolidated EBITDA attributable to the assets which are the subject of the
asset sale) occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such asset sale or asset acquisition (including the incurrence,
assumption or liability for any such acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Net Income" means, with respect to any Person, for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) out of the ordinary course
after-tax gains or losses from asset sales or abandonments or reserves relating
thereto, (b) after-tax items classified as extraordinary or nonrecurring gains
or losses, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any Subsidiary
of the referent Person, (d) the net income (but not loss) of any Subsidiary of
the referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is prohibited by a contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a wholly owned Subsidiary of
the referent Person by such Person, (f) in the case of a successor to the
referent Person by consolidation or merger or as a transferee of the referent
Person's assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets, and (g) after tax charges
associated with consummating the Merger and related financing.
"Conversion Shares" means the shares of Common Stock issuable upon
-----------------
conversion of the Convertible Preferred Stock.
-3-
<PAGE>
"Convertible Preferred Stock" means the Company's 7.25% convertible
---------------------------
preferred stock, $.001 par value share, governed by the Statement of
Designations.
"Credit Agreement" means the Credit Agreement dated as of
----------------
____________, 2000 between the Corporation and ____________________, as it may
be amended from time to time, other than amendments to the size of the facility.
"Election Notice" has the meaning assigned to such term in Section
---------------
15(c).
"Equity-Linked Plan" shall mean a benefit or compensation plan in
------------------
which benefits or awards are denominated or payable in capital stock of the
Company, valued in whole or in part by reference to, or otherwise based on, the
value of such capital stock.
"Event of Non-Compliance" means the occurrence of any of the
-----------------------
following:
(i) any material, intentional breach by the Company of this
Agreement or the Subscription Agreement;
(ii) the occurrence of a payment default, or any other default
giving rise to a right of acceleration, under any Indebtedness of the Company
that has an aggregate principal amount outstanding, as of the date of such
default or acceleration, in excess of $10,000,000 (after giving effect to any
notice or cure period relating to such Indebtedness); or
(iii) the Company or any of its material Subsidiaries shall (A)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other federal, state or foreign
bankruptcy, insolvency or similar law, (B) consent to the institution of, or
fail to controvert in a timely and appropriate manner, any such proceeding or
the filing of any such petition, (C) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator or similar official for any such
Person or for any substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (E) make a general assignment for the benefit of creditors, (F) fail
generally to pay its debts as they become due or (G) take any corporate or
shareholder action in furtherance of any of the foregoing; or
(iv) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(A) relief in respect of the Company or any of its material Subsidiaries, or of
any substantial part of their respective property or assets, under Title 11 of
the United States Code or any other federal, state or foreign bankruptcy,
insolvency or similar law, (B) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any such Person or for any
substantial part of its property or (C) the winding-up or liquidation of any
such Person, and such proceeding, petition or order shall continue unstayed and
in effect for a period of 60 consecutive days.
-4-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, and the
------------
rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect from time to time.
"Excluded Stock" means (i) shares of Common Stock issuable upon
--------------
exercise of any warrants or options of the Company outstanding on the Closing
Date or issued under the Company's incentive plans approved by the Board, (ii)
shares of Common Stock issued pursuant to the conversion of the Convertible
Preferred Stock, (iii) shares of Common Stock issued as consideration pursuant
to any acquisition of any business, (iv) shares of Convertible Preferred Stock
issued as dividends to the Investors, (v) shares issued pursuant to earn out
arrangements in definitive, binding agreements in existence on the date hereof
relating to acquisitions by the Company and (vi) Securities issued in an
underwritten public offering that is registered under the Securities Act.
"Fair Market Value" has the meaning assigned to such term in the
-----------------
Statement of Designations.
"GAAP" means United States generally accepted accounting principles.
----
"Indebtedness" has the meaning assigned to such term in the Statement
------------
of Designations.
"Information" has the meaning assigned to such term in Section 9(i).
-----------
"Inspectors" has the meaning assigned to such term in Section 9(i).
----------
"Interest Swap Obligations" means the obligations of any Person
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investor" means BOSS II, LLC.
--------
"Liquidation" has the meaning assigned to such term in the Statement
-----------
of Designations.
"Maturity Date" has the meaning assigned to such term in the Statement
-------------
of Designations.
"Merger" has the meaning assigned to such term in the Subscription
------
Agreement.
"NASDAQ" means the automated quotation system of the NASD.
------
"Notice of Acceptance" has the meaning assigned to such term in
--------------------
Section 2(b).
-5-
<PAGE>
"NYSE" means the New York Stock Exchange.
----
"Offer" has the meaning assigned to such term in Section 2(a).
-----
"Offer Period" has the meaning assigned to such term in Section 2(a).
------------
"Offered Securities" means (A) shares of Common Stock, (B) any other
------------------
equity security of the Company, (C) any debt security of the Company which by
its terms is convertible into or exchangeable for any equity security of the
Company or has any equity participation rights, (D) any security of the Company
that is a combination of debt and equity or (E) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any equity security or any
such debt security of the Company, in each case other than Excluded Stock.
"Other Shares" means at any time those shares of Common Stock that do
------------
not constitute Primary Shares.
"Person" shall be construed broadly and shall include, without
------
limitation, an individual, a partnership, an investment fund, a limited
liability corporation, a corporation, an association, a joint stock corporation,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
"Preferred Directors" has the meaning assigned to such term in Section
-------------------
3(c).
"Primary Shares" means at any time the authorized but unissued shares
--------------
of Common Stock or shares of Common Stock held by the Company in its treasury.
"Proposed Transaction" has the meaning assigned to such term in
--------------------
Section 15(c).
"Purchase Price" has the meaning assigned to such term in Section
--------------
15(c).
"Recapitalization" means, with respect to any Person, any transaction,
----------------
other than a merger, consolidation, amalgamation or sale of all or substantially
all of the assets of such Person, in which holders of any class of securities of
such Person receive in exchange therefor some other security of such Person or
any other issuer and/or cash, other than the issuance of cash or securities in
accordance with the terms of the securities to be exchanged or Section 8(b)(v)
of the Statement of Designations.
"Records" has the meaning assigned to such term in Section 9(i).
-------
"Refused Securities" has the meaning assigned to such term in Section
------------------
2(d).
"Representatives" has the meaning assigned to such term in Section
---------------
4(a).
"Restricted Shares" means at any time the shares of Common Stock held
-----------------
by the Investor.
"Retained Shares" has the meaning assigned to such term in Section
---------------
15(c).
-6-
<PAGE>
"Rule 144" means Rule 144 promulgated under the Securities Act or any
--------
successor rule thereto or any complementary rule thereto.
"Securities" means "securities" as defined in Section 2(1) of the
----------
Securities Act and includes capital stock or other equity interests or any
options, warrants or other securities that are directly or indirectly
convertible into, or exercisable or exchangeable for, capital stock or other
equity interests. Whenever a reference herein to Securities is referring to any
derivative Securities, the rights of Investor shall apply to such derivative
Securities and all underlying Securities directly or indirectly issuable upon
conversion, exchange or exercise of such derivative Securities.
"Securities Act" means the Securities Act of 1933, and the rules and
--------------
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Selling Holder" shall have the meaning assigned to such term in
--------------
Section 9(b).
"Selling Holders' Counsel" shall have the meaning assigned to such
------------------------
term in Section 9(b).
"Subscription Agreement" means the Subscription and Exchange Agreement
----------------------
dated as of the date hereof between the Company and the Investor, as the same
may be amended or modified.
"Statement of Designations" means the Statement of Designations
-------------------------
setting forth the preferences, limitations and relative rights of the
Convertible Preferred Stock.
"Subsidiary" has the meaning assigned to such term in the Statement of
----------
Designations.
"Trigger Event" shall have the meaning assigned to such term in
-------------
Section 3(h).
"Voting Stock" of a Person means any class or all classes of capital
------------
stock or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
Section 2. Rights to Subscribe for Securities.
----------------------------------
(a) For so long as Investor and its Affiliates hold in the aggregate
Common Stock Equivalents representing at least 25% of the Conversion Shares
issuable upon conversion of the Convertible Preferred Stock acquired by the
Investor on the Closing Date, the Company shall not, prior to the Maturity Date
(assuming full payment and performance by the Company of all of its obligations
as of such date; if the Company has not fully paid and performed all of its
obligations as of such date, the Company's obligations under this section shall
survive until such obligations have been satisfied), issue, sell, or agree to
issue or sell, any Offered Securities for cash unless the Company shall have
first offered to sell the Offered Securities to the Investor, at a price and on
such other terms as shall have been specified by the Company in writing
delivered
-7-
<PAGE>
to the Investor (the "Offer"), which Offer by its terms shall remain open for a
period of 10 business days from the date it is delivered to the Investor (the
"Offer Period").
(b) Notice of the Investor's intention to accept an Offer shall be
evidenced by a writing signed by the Investor and delivered to the Company prior
to the end of the Offer Period (the "Notice of Acceptance"). Within 20 days
--------------------
after receipt by the Company of such Notice of Acceptance, the Company shall
sell and the Investor shall purchase the Offered Securities in respect of which
the Notice of Acceptance was delivered, upon the terms and conditions of the
Offer.
(c) In the event the Company materially amends the terms of the Offer
at any time, the Offer Period shall be extended for a period of not less than 10
business days (or 48 hours if the amendment relates solely to the price of the
Offer or the number of shares to be sold in the Offer).
(d) In the event that the Notice of Acceptance is not given by the
Investor, the Company shall have 90 days from the expiration of the Offer Period
to sell all of such Offered Securities (the "Refused Securities") to any other
------------------
Person(s), but only upon financial terms (e.g., price, interest rate, dividend
rate) at least as favorable to the Company in every respect as those set forth
in the Offer, and otherwise on general terms and conditions that are no more
favorable, in the aggregate, to such other Person(s) or less favorable, in the
aggregate, to the Company than those set forth in the Offer, provided, however,
-------- -------
that in the event that the Company sells all such Offered Securities to any
other Person(s), the Investor shall have the right to purchase the proportionate
number of such Offered Securities that represents its then ownership percentage
of the total outstanding Common Stock of the Company, determined in accordance
with Rule 13d-3 under the Exchange Act.
(e) Any Offered Securities not purchased by the Investor or any other
Person(s) in accordance with Sections 2(b) and 2(d) may not be sold or otherwise
disposed of until they are again offered to the Investor under the procedures
specified in this Section 2.
(f) The provisions of this Section 2 shall terminate on the first date
on which the Investor and its Affiliates fail to satisfy the Common Stock
Equivalents ownership requirements set forth in paragraph (a), such termination
to be effective with respect to the first Offer after such date.
Section 3. Board of Directors.
------------------
(a) Investor shall be entitled to designate individuals for election
to the Board as follows until the Maturity Date (assuming full payment and
performance by the Company of all of its obligations as of such date; if the
Company has not fully paid and performed all of its obligations as of such date,
the Company's obligations under this section shall survive until such
obligations have been satisfied):
(i) For so long as Investor and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 50% of the number
of Conversion Shares issuable upon conversion of the Convertible Preferred
Stock issued on the Closing Date, the
-8-
<PAGE>
Investor shall be entitled to designate a number of individuals for
election to the Board equal to the greater of 3 directors or the number of
directors that represents 30% of the Board, rounded up to the nearest whole
director;
(ii) For so long as Investor and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 25% of the number
of Conversion Shares issuable upon conversion of the Convertible Preferred
Stock issued on the Closing Date, the Investor shall be entitled to
designate a number of individuals for election to the Board equal to the
number of directors that represents 22% of the Board, rounded up to the
nearest whole director; and
(iii) For so long as Investor and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 12.5% of the
number of Conversion Shares issuable upon conversion of the Convertible
Preferred Stock issued on the Closing Date, the Investor shall be entitled
to designate a number of individuals for election to the Board equal to the
number of directors that represents 15% of the Board, rounded up to the
nearest whole director.
(b) In the event the number of directors the Investor is entitled to
designate decreases in accordance with paragraph (a) above, then the number of
directors the Investor is entitled to designate pursuant to paragraph (a) shall
not thereafter be increased, irrespective of any subsequent acquisition of
Common Stock Equivalents by the Investor or its Affiliates. In determining the
number of directors the Investor shall be entitled to designate pursuant to
paragraph (a) above, the Investor shall be deemed to hold each Common Stock
Equivalent that is held of record by the Investor or any of its Affiliates, or,
as to which the Investor or any of its Affiliates retains the entire economic
interest.
(c) Except as set forth in (c)(i) and (c)(ii) below, each committee of
the Board shall include directors designated by the Investor pursuant to the
provisions set forth above, (each, a "Preferred Director"), in the same
------------------
proportion, rounded up to the nearest whole director, as such representatives
comprise the Board. The Company shall provide each Preferred Director serving on
any committee of the Board with appropriate notice at least 48 hours prior to
any meeting of any committee that such person serves on:
(i) The Executive Committee shall be comprised of five members
as follows: two Preferred Directors designated by the Investor (or, if the
Investor is only entitled to designate one director to the Board, then only
one Preferred Director), the Chairman of the Board of Directors, the Chief
Executive Officer of the Company and one independent director to be
selected by the Board of Directors. The Preferred Directors designated by
the Investor pursuant to this Section 3(c)(i) shall not be removed by
subsequent action of the Board; and
(ii) The Acquisitions Committee shall be comprised of one
Preferred Director designated by the Investor, the Chairman of the Board of
Directors and the Chief Executive Officer. The Preferred Director
designated by the Investor pursuant to this Section 3(c)(ii) shall not be
removed by subsequent action of the Board.
-9-
<PAGE>
(d) If the persons designated by the Investor as set forth in Section
3(a) above are not elected to the Board for any reason and the Investor owns at
least 25% of the shares of Common Stock that it owns on the Closing Date
(assuming the conversion of all the Convertible Preferred Stock), then the
Investor shall have the right to designate one representative to serve as an
observer at each meeting of the Board and each committee thereof. The Company
shall provide such observer with copies of all actions taken by written consent
of the Board or any committee thereof, advance notice of such meeting as if such
observer were a director and copies of all materials that are distributed to the
Board (in each case as if such observer was a director), provided, however, all
-------- -------
such information and materials shall be subject to a mutually agreeable
confidentiality agreement. The Company shall reimburse the observer for all
out-of-pocket expenses incurred in connection with attending any meetings of the
Board.
(e) For so long as the Investor owns 5% or more of the Common Stock of
the Company outstanding (assuming the conversion of all the Convertible
Preferred Stock), then the Investor shall be entitled to designate one member to
the Board; provided, however, that the right provided in this Section 3(e) shall
not be in addition to the rights provided in Section 3(a) above.
(f) The Company shall cause its bylaws to provide, at all times from
and after the Closing Date in which the Investor has the right to designate a
director, that meetings of the Board or any committee thereof may be conducted
by teleconference.
(g) The Company shall deliver a notice to the Investors if an Event of
Non- Compliance shall occur or is reasonably likely to occur. Such notice shall
set forth in reasonable detail a description of the Event of Non- Compliance.
(h) Prior to the earlier of the Maturity Date (assuming full payment
and performance by the Company of all of its obligations as of such date; it
being understood that if the Company has not fully paid and performed all of its
obligations as of such date, the Company's obligations under this Section 3
shall survive until such obligations have been satisfied) and the date on which
Sections 15(a) and 15(b) hereof have ceased to have any effect, if the Investor
concludes, either as a result of a notice delivered by the Company pursuant to
Section 3(g), or otherwise, that an Event of Non-Compliance has occurred or is
reasonably likely to occur, the Investor shall deliver a notice to the Company
to such effect. If an Event of Non- Compliance shall occur and shall be
continuing at the end of the one week period following delivery by the Investor
of the notice referred to in the preceding sentence (each, a "Trigger Event"),
-------------
the Investor shall have the special right to designate that number of
individuals to the Board that, when combined with the Preferred Directors, will
constitute a majority of the Board. The Company agrees to take all necessary and
desirable action within its control in connection with and in furtherance of the
execution of such special right. Such special right shall continue until such
time as there is no longer a Trigger Event in existence, at which time such
special right shall terminate, subject to revesting upon the subsequent
occurrence and continuation of any Trigger Event. After designees of the
Investor represent a majority of the Board, the directors of the Company shall
use commercially reasonable efforts promptly to cure the condition that
constituted the Event of Non-Compliance. After the expiration of such Trigger
Event, the term of office of such newly elected directors shall automatically
cease and the number of directors constituting the entire Board shall be reduced
accordingly.
-10-
<PAGE>
(i) Whenever the Investor shall have the right to designate one or
more directors of the Board pursuant to this Section 3, the Company shall, to
the extent permitted by applicable law (a) increase as required the number of
directors constituting the entire Board, (b) fill the vacancies created by such
expansion with designees who are approved by the Company, which approval will
not be unreasonably withheld and (c) submit the name of each such designee to
the shareholders of the Company (together with a recommendation of his or her
election) at each meeting of the shareholders at which directors are elected and
which is held during the period which the Investor is entitled to designate one
or more directors. The Company shall take such actions as shall be within its
control and reasonably necessary to effectuate the provisions of this Section 3,
including, if required, the calling of a special or annual meeting of the
shareholders of the Company to fill vacancies created by any increase in the
size of the entire Board.
(j) Notwithstanding any provision of this Agreement to the contrary,
the rights of the Investor to designate Board members pursuant to this Section 3
shall in no event be operative at any time when the holders of the Convertible
Preferred Stock shall have rights to elect directors pursuant to the Statement
of Designations.
Section 4. Information Rights; Covenants.
-----------------------------
(a) Access to Records.
-----------------
The Company shall, and shall cause each Subsidiary to, afford to the
Investor, the Affiliates of the Investor and each of their respective officers,
employees, advisors, counsel and other authorized representatives (collectively
with the Affiliates of the Investor, the "Representatives"), during normal
---------------
business hours, at their expense, reasonable access, upon reasonable advance
notice, to all of the books, records and properties of the Company and such
Subsidiary and all officers and employees of the Company and such Subsidiary.
The Investor shall use its best efforts to maintain the confidentiality of any
information designated by the Company as confidential or proprietary; provided,
--------
however, that the foregoing shall in no way limit or otherwise restrict the
- -------
ability of the Investor or any of its Representatives to disclose any such
information concerning the Company and each Subsidiary which it may be required
to disclose (i) to its partners or limited partners to the extent required to
satisfy its fiduciary obligations to such Persons, provided such Persons agree
in writing to be bound by the provisions of this Section, or (ii) otherwise
pursuant to or as required by law.
(b) Financial Reports.
-----------------
The Company shall furnish the Investor with the following:
(i) Monthly Reports. As soon as available, but not later than 30
---------------
days after the end of each fiscal month, a consolidated balance sheet of the
Company as of the end of such period and consolidated statements of income of
the Company for such period and for the period commencing at the end of the
previous fiscal year and ending with the end of such period, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, and including comparisons for income
statements to the budget or business plan all prepared in
-11-
<PAGE>
accordance with generally accepted accounting principles consistently applied
(except for the absence of footnotes and year-end adjustments);
(ii) Quarterly Reports. As soon as available, but not later than
-----------------
50 days after the end of each quarterly accounting period, (A) a consolidated
balance sheet of the Company as of the end of such period and consolidated
statements of income and cash flows for such quarterly accounting period and/or
for the period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to the budget or business plan for the income
statement only, all prepared in accordance with GAAP consistently applied and
(B) a report by management of the Company in a format consistent with Form 10-Q
of the operating and financial highlights of the Company and its Subsidiaries
for such period;
(iii) Annual Audit. As soon as available, but not later than 100
------------
days after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of income,
cash flows and changes in shareholders' equity for such fiscal year and a
balance sheet as of the last day thereof, each prepared in accordance with
generally accepted accounting principles, consistently applied, and accompanied
by the report of a "Big 5" firm of independent certified public accountants
selected by the Board (the "Accountants"). The Company and its Subsidiaries
-----------
shall maintain a system of accounting sufficient to enable its Accountants to
render the report referred to in this Section 4; and
(iv) Miscellaneous. Promptly upon becoming available, the Company
-------------
shall provide to the Investor:
(A) copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by the Company
or its Subsidiaries to its investors generally or released to the public
and copies of all regular and periodic reports, if any, filed by the
Company or its Subsidiaries with the Securities and Exchange Commission,
any securities exchange or the NYSE;
(B) notification in writing of any litigation or
governmental proceeding in which it or any of its Subsidiaries is involved
and which could reasonably be expected to, materially and adversely affect
the Company or any of its material Subsidiaries;
(C) notification in writing of the existence of any default
under any material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of their assets are bound;
(D) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by its
accountants;
-12-
<PAGE>
(E) upon request, any other routinely collected financial or
other information available to management of the Company or its
subsidiaries (including, without limitation, routinely collected
statistical data); and
(F) The provisions of this Section 4 shall terminate upon
the earlier to occur of the twelfth anniversary of the Closing Date and the
date on which the Investor shall no longer be entitled to elect any
directors pursuant to Section 3(a) of this Agreement.
Section 5. Demand Registration.
-------------------
(a) If the Company shall be requested by holders of at least 20% of
the total number of outstanding Restricted Shares (assuming conversion of all
shares of Convertible Preferred Stock) to effect a registration under the
Securities Act of all or a portion of Restricted Shares with an aggregate Fair
Market Value as of the date of such request equal to at least $25,000,000, or,
if the Restricted Shares have an aggregate Fair Market Value of less than
$25,000,000, all of the remaining Restricted Shares, in accordance with this
Section, then the Company shall promptly give written notice of such proposed
registration to all holders of Restricted Shares and shall offer to include in
such proposed registration any Restricted Shares requested to be included in
such proposed registration by such holders who respond in writing to the
Company's notice within 15 days after delivery of such notice (which response
shall specify the number of Restricted Shares proposed to be included in such
registration and the intended method of distribution, which may be pursuant to a
shelf registration). If a registration pursuant to Section 7 hereof is
available, the holders of Restricted Shares shall utilize such registration
instead of making a request pursuant to this Section 5, unless the holders of
Restricted Shares reasonably determine that it is advantageous to such holders
of Restricted Shares to make a request under this Section 5. The Company shall
promptly use its best efforts to effect such registration on an appropriate form
under the Securities Act of the Restricted Shares which the Company has been so
requested to register; provided, however, that the Company shall not be
-------- -------
obligated to effect any registration under the Securities Act except in
accordance with the following provisions:
(i) the Company shall not be obligated to file more than four
registration statements in total pursuant to this Section, subject to paragraph
(c) below;
(ii) the Company shall not be obligated to file any registration
statement during any period in which (A) any other registration statement (other
than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto) pursuant to which Primary Shares are to be or were sold
has been filed and not withdrawn or has been declared effective within the prior
90 days or (B) the Company has determined in good faith that the filing of a
registration statement would require the disclosure of material information that
the Company has a bona fide business purpose for preserving as confidential,
such filing to be delayed until the date which is 90 days after such request for
registration pursuant to this Section 5(a); provided that the Company may only
--------
so delay the filing or effectiveness of a registration statement pursuant to
this Section 5(a)(ii)(B) on one occasion during any twelve-month period; and
-13-
<PAGE>
(iii) with respect to the registration pursuant to this Section,
the Company may include in such registration any Primary Shares or Other Shares;
provided, however, that if the managing underwriter advises the Company in
- -------- -------
writing that the inclusion of all Restricted Shares, Primary Shares and Other
Shares proposed to be included in such registration would interfere with the
successful marketing (including pricing) of all such securities, then the number
of Restricted Shares, Primary Shares and Other Shares proposed to be included in
such registration shall be included in the following order:
(A) First, the Restricted Shares, pro rata based upon the
----- --- ----
number of Restricted Shares owned by each holder at the time of such
registration;
(B) Second, the Primary Shares; and
------
(C) Third, the Other Shares.
-----
(b) The holders of Restricted Shares requesting a registration
pursuant to this Section may, in the notice delivered pursuant to paragraph (a)
above, elect that such registration cover an underwritten offering. Upon such
election, such holders shall select one or more nationally recognized firms of
investment banks to act as the managing underwriters and shall select any
additional investment banks to be used in connection with such offering,
provided that such investment banks must be reasonably satisfactory to the
Company. The Company shall, together with all holders proposing to sell
Restricted Shares in such offering, enter into a customary underwriting
agreement with such underwriters.
(c) A requested registration under this Section may be rescinded by
written notice to the Company by the Persons holding a majority of the
Restricted Shares to be included in such registration with the following
consequences:
(i) If such registration statement is rescinded prior to the
filing date, such rescinded registration shall not count as a registration
statement initiated pursuant to this Section for purposes of paragraph (a)
above;
(ii) If such registration statement is rescinded after the
filing date but prior to its effective date, such rescinded registration
shall not count as a registration statement initiated pursuant to this
Section for purposes of paragraph (a) above if the participating holders
(x) have reimbursed the Company for all out-of-pocket expenses incurred by
the Company in connection with such rescinded registration or (y) (1)
reasonably believed that the registration statement contained an untrue
statement of material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading, (2) notified the Company of such fact and requested that the
Company correct such alleged misstatement or omission and (3) the Company
has refused to correct such alleged misstatement or omission; and
(iii) A registration that becomes effective shall not count as a
registration statement initiated pursuant to this Section for purposes of
paragraph (a) above unless the participating holders are able to sell at
least 80% of the Restricted Shares sought to be included in such
registration statement.
-14-
<PAGE>
Section 6. Piggyback Registration.
----------------------
If at any time the Company proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms thereto, it
shall promptly give written notice to the holders of Restricted Shares of its
intention to so register the Primary Shares or Other Shares and, upon the
written request, given within 15 days after delivery of any such notice by the
Company, of any holders of Restricted Shares to include in such registration
Restricted Shares held by such holders (which request shall specify the number
of Restricted Shares proposed to be included in such registration), the Company
shall use its best efforts to cause all such Restricted Shares to be included in
such registration on the same terms and conditions as the securities otherwise
being sold in such registration; provided, however, that if the managing
-------- -------
underwriter advises the Company that the inclusion of all Restricted Shares or
Other Shares proposed to be included in such registration would interfere with
the successful marketing (including pricing) of the Primary Shares proposed to
be registered by the Company, then the number of Primary Shares, Restricted
Shares and Other Shares proposed to be included in such registration shall be
included in the following order:
(a) first, the Primary Shares;
-----
(b) second, Other Shares entitled to registration pursuant to the
------
Registration Rights Agreements set forth on Annex A;
-------
(c) third, Restricted Shares, pro rata based upon the number of
----- --- ----
Restricted Shares owned by each holder at the time of such registration; and
(d) fourth, the Other Shares (other than those shares of Common Stock
------
which are not subject to any registration rights agreement), pro rata based upon
--- ----
the number of shares of Common Stock (based upon Common Stock Equivalents) owned
by each such seller at the time of such registration.
Section 7. S-3 Registrations.
-----------------
If at any time (i) the Persons holding at least 20% of the total
number of outstanding Restricted Shares (assuming conversion of all shares of
Convertible Preferred Stock) request that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all or a
portion of Restricted Shares with an aggregate Fair Market Value as of the date
of such request equal to at least $25,000,000, or, if the aggregate Restricted
Shares have an aggregate Fair Market Value of less than $25,000,000, all of the
remaining Restricted Shares and (ii) the Company is a registrant entitled to use
Form S-3 or any successor thereto to register such shares, then the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Shares
specified in such notice. Whenever the Company is required by this Section 7 to
use its best efforts to effect the registration of Restricted Shares, each of
the procedures and requirements of Section 5 (including but not limited to the
requirement that the Company notify all holders of Restricted Shares from whom
notice has not been received and provide them with the opportunity to
participate in the
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<PAGE>
offering) shall apply to such registration. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 7 within
three months after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Restricted Shares shall have been entitled to join pursuant to
Section 5 or 6 in which there shall have been effectively registered all
Restricted Shares as to which registration shall have been requested. There is
no limitation on the number of registrations pursuant to this Section 7 that the
Company is obligated to effect.
Section 8. Expenses.
--------
The Company shall bear the expense of any registrations effected
pursuant to Sections 5, 6 and 7 including, without limitation, all registration
and filing fees (including all expenses incident to filing with the NYSE), fees
and expenses of complying with securities and blue sky laws, printing expenses,
and fees and expenses of the Company's counsel and accountants, and the fees and
expenses of the Selling Holders' Counsel (as defined below), but excluding any
underwriters' or brokers' discounts or commissions, transfer taxes (to the
extent that such taxes are required by law to be paid by the Selling Holders)
and the fees of any counsel to any Selling Holder, other than the Selling
Holders' Counsel (it being understood that the fees and expenses of any
underwriter and such underwriter's counsel shall be the responsibility of such
underwriter).
Section 9. Preparation and Filing.
----------------------
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Restricted Shares, the Company shall, as expeditiously as practicable:
(a) with respect to a registration under Sections 5, 6 and 7, use its
best efforts to cause a registration statement that registers such Restricted
Shares to become and remain effective for a period of 180 days or until all of
such Restricted Shares have been disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Restricted Shares, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or
prospectus, to each holder of Restricted Shares, to any counsel to any seller of
Restricted Shares (the "Selling Holder") and to one counsel selected by the
--------------
holders of a majority of such Restricted Shares (the "Selling Holders'
---------------
Counsel"), copies of all such documents proposed to be filed (it being
- -------
understood that such five-business-day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to such counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least the periods set forth in Section 9(a) or until all of such Restricted
Shares have been disposed of (if earlier) and to comply with the
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<PAGE>
provisions of the Securities Act with respect to the sale or other disposition
of such Restricted Shares;
(d) notify in writing any counsel to any Selling Holder and the
Selling Holders' Counsel promptly (i) of the receipt by the Company of any
notification with respect to any comments by the Commission with respect to such
registration statement or prospectus or any amendment or supplement thereto or
any request by the Commission for the amending or supplementing thereof or for
additional information with respect thereto, (ii) of the receipt by the Company
of any notification with respect to the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or prospectus
or any amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of such
Restricted Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Restricted Shares
under such other securities or blue sky laws of such jurisdictions as any seller
of Restricted Shares reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller of
Restricted Shares to consummate the disposition in such jurisdictions of the
Restricted Shares owned by such seller; provided, however, that the Company will
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not be required to qualify generally to do business, subject itself to general
taxation or consent to general service of process in any jurisdiction where it
would not otherwise be required so to do but for this paragraph (e);
(f) furnish to each seller of such Restricted Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such seller of Restricted Shares may reasonably request in
order to facilitate the public sale or other disposition of such Restricted
Shares;
(g) use its best efforts to cause such Restricted Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Restricted Shares;
(h) notify on a timely basis each seller of such Restricted Shares at
any time when a prospectus relating to such Restricted Shares is required to be
delivered under the Securities Act within the appropriate period mentioned in
paragraph (a) of this Section, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of such seller, prepare and furnish to such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
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<PAGE>
(i) make available for inspection by any counsel to any Selling Holder
and the Selling Holders' Counsel or any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
----------
documents and properties of the Company (collectively, the "Records"), as shall
-------
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information (together with the Records, the "Information") reasonably
-----------
requested by any such Inspector in connection with such registration statement.
Any of the Information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, shall
not be disclosed by the Inspectors unless (i) the disclosure of such Information
is necessary to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public. The seller of
Restricted Shares agrees that it will, upon learning that disclosure of such
Information is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Information deemed confidential;
(j) in the case of an underwritten offering, use its best efforts to
obtain from its independent certified public accountants "comfort" letters in
customary form and at customary times and covering matters of the type
customarily covered by comfort letters;
(k) in the case of an underwritten offering, use its best efforts to
obtain from its counsel an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same
entity and which may not be the Company) for such Restricted Shares;
(m) issue to any underwriter to which any seller of Restricted Shares
may sell shares in such offering certificates evidencing such Restricted Shares;
provided, however, that the Company shall have the right to approve any such
- -------- -------
underwriter with such approval not to be unreasonably withheld;
(n) list such Restricted Shares on any national securities exchange on
which any shares of the Common Stock are listed or on NASDAQ if then included,
or if the Common Stock is not listed on a national securities exchange, use its
best efforts to qualify such Restricted Shares for inclusion on such national
securities exchange or NASDAQ as the holders of a majority of such Restricted
Shares shall request;
(o) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its securityholders, as
soon as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months beginning within three months after the effective
date of the registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
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<PAGE>
(p) use its best efforts to take all other steps necessary to effect the
registration of such Restricted Shares contemplated hereby.
Section 10. Indemnification.
---------------
(a) In connection with any registration of any Restricted Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the seller of such Restricted Shares, its officers and directors,
each underwriter, broker or any other person acting on behalf of such seller and
each other person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, (or actions in respect thereof) to which any of
the foregoing persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the registration statement under which
such Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Restricted Shares, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse such seller, such officer or director, such
underwriter, such broker or such other person acting on behalf of such seller
and each such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
-------- -------
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in said
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document incident to registration or qualification of any
Restricted Shares in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller or
underwriter specifically for use in the preparation thereof; provided, further,
-------- -------
that with respect to any preliminary prospectus, the foregoing indemnity shall
not inure to the benefit of (a) any underwriter or, in the case of a
registration statement filed with respect to an offering which is not an
underwritten offering, any Selling Holder, from whom the person asserting any
losses, claims, damages and liabilities and judgments purchased Restricted
Shares or (b) any person controlling such underwriter or Selling Holder, if (i)
a copy of the prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was required by law to
have been delivered by such underwriter or Selling Holder (as applicable), (ii)
the prospectus had not been sent or given by or on behalf of such underwriter or
Selling Holder (as applicable) to such person with or prior to a written
confirmation of the sale of the Restricted Shares to such person, (iii) the
prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment and (iv) such failure to
deliver the prospectus (as so amended and supplemented) was not the result of
noncompliance by the Company with Section 9(f) hereof.
(b) In connection with any registration of Restricted Shares under the
Securities Act pursuant to this Agreement, each seller of Restricted Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the preceding paragraph of
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<PAGE>
this Section) the Company, each director of the Company, each officer of the
Company, each underwriter, broker or other person acting on behalf of such
seller, each person who controls any of the foregoing persons within the meaning
of the Securities Act and each other seller of Restricted Shares under such
registration statement with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of any
Restricted Shares, if such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company or such
underwriter through an instrument duly executed by such seller specifically for
use in connection with the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment, supplement or document;
provided, however, that the obligation to indemnify will be several, not joint
- -------- -------
and several, among such sellers of Restricted Shares, and the maximum amount of
liability in respect of such indemnification shall be in proportion to and
limited to, in the case of each seller of Restricted Shares, an amount equal to
the net proceeds actually received by such seller from the sale of Restricted
Shares effected pursuant to such registration.
(c) The indemnification required by this Section 10 will be made by
periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred, subject to prompt refund in the event
any such payments are determined not to have been due and owing hereunder.
(d) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action (it being understood that no delay in
delivering or failure to deliver such notice shall relieve the indemnifying
persons from any liability or obligation hereunder unless (and then solely to
the extent that) the indemnifying person is prejudiced by such delay and/or
failure). In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
provided, however, that if any indemnified party shall have reasonably concluded
- -------- -------
that there may be one or more legal or equitable defenses available to such
indemnified party which are additional to or conflict with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or
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<PAGE>
any officer, director or controlling person of such indemnified party and will
survive the transfer of securities.
(f) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the sellers of Restricted Shares agree that it would not be just
and equitable if contributions pursuant to this paragraph were determined by
pro rata allocation or by any other method of allocation which did not take into
account the equitable considerations referred to herein. The amount paid or
payable to an indemnified party as a result of the losses, claims, damages,
liabilities or expenses referred to above shall be deemed to include, subject to
the limitation set forth in the fourth paragraph of this Section 10, any legal
or other expenses reasonably incurred in connection with investigating or
defending the same. Notwithstanding the foregoing, in no event shall the amount
contributed by a seller of Restricted Shares exceed the aggregate net offering
proceeds received by such seller from the sale of its Restricted Shares.
Section 11. Underwriting Agreement.
----------------------
Notwithstanding the provisions of Sections 9 and 10, to the extent
that the Company and the holders selling Restricted Shares in a proposed
registration shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such Sections addressing such issue or
issues shall be superseded with respect to such registration by such other
agreement.
Section 12. Information by Holders.
----------------------
The holders selling Restricted Shares in a proposed registration shall
furnish to the Company such written information regarding such holder and the
distribution proposed by such holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
Section 13. Exchange Act Compliance.
-----------------------
The Company shall comply with all of the reporting requirements of the
Exchange Act and with all other public information reporting requirements of the
Commission
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<PAGE>
which are conditions to the availability of Rule 144 for the sale of the Common
Stock. The Company shall cooperate with the Investor in supplying such
information as may be necessary for such Investor to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144.
Section 14. No Conflict of Rights.
---------------------
The Company represents and warrants to the Investors that the
registration rights granted to the Investors hereby do not conflict with any
other registration rights granted by the Company. The Company shall not, after
the date hereof, grant any registration rights which conflict with the
registration rights granted hereby; provided, however, that such prohibition
shall not apply to the assumption by the Company of any registration right
obligations of Building One Services Corporation.
Section 15. Protective Provisions.
---------------------
(a) Until the Maturity Date (assuming full payment and performance by
the Company of all of its obligations as of such date, if the Company has not
fully paid and performed all of its obligations as of such date, it being
understood that the Company's obligations under this section shall survive until
such obligations have been satisfied), and so long as (X) if the Convertible
Preferred Stock has been converted into shares of Common Stock after the receipt
by the holders of notice of the Company's intention to redeem the Convertible
Preferred Stock pursuant to the Statement of Designations, then for two years
from the date of such conversion, provided that, the Investor and its Affiliates
hold in the aggregate Common Stock Equivalents representing at least 25% of the
Conversion Shares issuable upon conversion of the Convertible Preferred Stock
issued on the Closing Date, or (Y) the Investor and its Affiliates hold in the
aggregate at least 25% of the shares of Convertible Preferred Stock issued on
the Closing Date, the Company shall not, and shall not permit any Subsidiary,
without the prior written consent of the Investor, to take any of the following
actions; provided, however, that nothing in this Section 15 shall prohibit any
-------- -------
transaction between or among the Company and one or more wholly-owned
Subsidiaries or between or among wholly-owned Subsidiaries:
(i) merge, consolidate or amalgamate with any person or entity,
or sell all or substantially all of the assets of the Company or such
Subsidiary (other than in connection with an acquisition or disposition of
any business or assets for which the consent of the Investor is not
required under clauses (vi) or (vii) below), unless prior to the
consummation of such merger, consolidation, amalgamation or sale, the
Company has paid the amount provided for in Section 15(c) below;
(ii) enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of property, the rendering of any
service or the payment of any management, advisory or similar fees, with
any Affiliate unless such transaction is (i) in the ordinary course of
business of the Company and its Subsidiaries, and (ii) upon fair and
reasonable terms no less favorable to the Company and its Subsidiaries than
they would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate;
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<PAGE>
(iii) engage in any business other than the Business;
(iv) effect, approve or authorize any Liquidation, or any
Recapitalization (other than any Liquidation or Recapitalization of any
wholly-owned Subsidiary);
(v) amend, supplement or waive any of the terms or conditions
of any agreement between the Company and a shareholder of the Company with
respect to the retention by the shareholder of shares of the Company's
capital stock unless such amendment waiver or restatement pertains to an
agreement with a non-employee of the Company and involves less than 10,000
shares of Common Stock (adjusted for stock splits, stock dividends and
similar events after the date hereof);
(vi) dispose of any business or asset, (whether by merger,
consolidation, sale of stock, share exchange or otherwise) in a single
transaction or a series of related transactions with an aggregate value in
such transaction or series of related transactions (including all assumed
debt, all cash payments, and the fair market value of all securities or
other property issued as consideration) in excess of 2.5% of the total
assets of the Company;
(vii) acquire any business or assets (whether by merger,
consolidation, share exchange or otherwise) in a single transaction or a
series of related transactions with an aggregate value in such transaction
or series of related transactions (including all assumed debt, all cash
payments, and the fair market value of all securities or other property
issued as consideration) in excess of 2.0% of total assets of the Company;
(viii) hire or fire, or amend the employment terms of the
Chairman of the Board or the Chief Executive Officer of the Company (or the
top two executive officers of the Company, if different), other than
amendments to the benefits to which such executives are entitled resulting
solely from an amendment to any benefit plan or program in which employees
of the Company participate generally;
(ix) through any transaction or series of related transactions
incur or refinance any Indebtedness; except that the Company and any of its
Subsidiaries may incur or refinance any (x) Indebtedness under the Credit
Agreement so long as at the time such Indebtedness is incurred and after
giving effect to the incurrence thereof, the Consolidated Leverage Ratio of
the Company is less than 4.0 to 1.0; (y) any other Indebtedness so long as
at the time such Indebtedness is incurred and after giving effect to the
incurrence thereof, the aggregate outstanding amount of all such
Indebtedness shall not exceed 2 1/2% of the total assets of the Company; or
(z) Indebtedness incurred to repurchase or redeem the Convertible Preferred
Stock;
(x) make any single Capital Expenditure exceeding $10,000,000,
or make aggregate Capital Expenditures for the Company and its Subsidiaries
in any year exceeding 1.75% of the aggregate consolidated net revenues, as
reflected in a budget approved by the Board for such fiscal year;
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<PAGE>
(xi) create or acquire any interest in any Subsidiary other than
a wholly-owned Subsidiary unless, after giving effect to such acquisition,
the Company's aggregate investment in non-wholly owned Subsidiaries does
not exceed 1% of the Company's consolidated total assets as of the end of
the last fiscal quarter;
(xii) adopt or amend any Equity-Linked Plan or make any bonus
payment to any (i) employee of the Company or (ii) any President of any
Subsidiary in excess of $250,000 (except pursuant to the terms of the
arrangements in effect on the Closing Date); or
(xiii) agree or otherwise commit to take any of the actions set
forth above.
(b) Until the Maturity Date (assuming full payment and performance by
the Company of all of its obligations as of such date, if the Company has not
fully paid and performed all of its obligations as of such date, it being
understood that the Company's obligations under this Section shall survive until
such obligations have been satisfied) in the event the Convertible Preferred
Stock has been converted into shares of Common Stock after the receipt by the
holders of notice of the Company's intention to redeem the Convertible Preferred
Stock pursuant to the Statement of Designations and two years has elapsed since
the date of such conversion, for so long as the Investor and its Affiliates hold
in the aggregate at least 10% of the outstanding Common Stock of the Company,
the Company shall not, and shall not permit any Subsidiary, without the prior
written consent of the Investor to take any of the following actions provided,
however, that nothing in this Section 15 shall prohibit any transaction between
the Company and one or more wholly owned Subsidiaries between or among wholly
owned Subsidiaries:
(i) merge, consolidate or amalgamate with any person or entity,
or sell all or substantially all of the assets of the Company or such
Subsidiary (other than in connection with an acquisition or disposition of
any business or assets for which the consent of the Investor is not
required under clauses 15(a)(vi) or (vii) above, unless prior to the
consummation of such merger, consolidation, amalgamation or sale, the
Company has paid the amount provided for in Section 15(c) below;
(ii) enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of property, the rendering of any
service or the payment of any management, advisory or similar fees, with
any Affiliate unless such transaction is (i) in the ordinary course of
business of the Company and its Subsidiaries, and (ii) upon fair and
reasonable terms no less favorable to the Company and its Subsidiaries than
they would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate;
(iii) effect, approve or authorize any Liquidation (other than a
Liquidation or Recapitalization of a wholly-owned Subsidiary);
(iv) hire or fire, or amend the employment terms of the Chairman
of the Board or the Chief Executive Officer of the Company (or the top two
executive officers of the Company, if different), other than amendments to
the benefits to which such
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<PAGE>
executives are entitled resulting solely from an amendment to any benefit
plan or program in which employees of the Company participate generally; or
(v) agree or otherwise commit to take any of the actions set
forth above.
(c) If the Company requests that the Investor consent to a merger,
consolidation or amalgamation described in Section 15(a)(i) or 15(b)(i) (a
"Proposed Transaction") and the Investor fails to consent to such Proposed
--------------------
Transaction within 15 days after delivery of such request, then the Company may
consummate the Proposed Transaction without the consent of the Investor,
provided the Company purchases from the Investor all of (i) the shares of
Convertible Preferred Stock and (ii) the shares of Common Stock of the Company
received upon conversion thereof, in each case that are held by the Investor as
of the date of the Election Notice (as defined below)((i) and (ii) together the
"Retained Shares"), on the terms specified herein. In the event the Company
---------------
elects to exercise the right of repurchase set forth herein, it shall deliver
written notice to the Investor (an "Election Notice") no less than 20 days prior
---------------
to the date of consummation of the Proposed Transaction. The purchase price of
the Retained Shares shall be a sum (the "Purchase Price") that would provide to
--------------
the Investor a 25% annual rate of return compounded quarterly, on the Original
Cost of the shares of Convertible Preferred Stock represented by the Retained
Shares, such return to be calculated from the Closing Date through the date of
consummation of the Proposed Transaction. The Investor shall and shall cause all
of its Affiliates to vote all their shares of capital stock of the Company (or
to execute one or more written consents) in favor of any Proposed Transaction as
to which it has received an Election Notice. The closing of the purchase of the
Retained Shares pursuant to this Section 15(c) shall take place on the date of
consummation of the Proposed Transaction at which time the Company shall pay to
the Investor the Purchase Price, and the Investor shall deliver or cause to be
delivered to the Company certificates representing the Retained Shares.
Section 16. Standstill.
----------
Except pursuant to Section 2 hereof, prior to the second anniversary
of the Closing Date, the Investor shall not purchase or agree to purchase or
otherwise acquire beneficial ownership of additional shares of Common Stock,
other than by conversion of the Convertible Preferred Stock in accordance with
the terms of the Statement of Designations or by exercise of its warrants to
purchase shares of common stock of Building One Services Corporation, if after
giving effect to such proposed purchase, the Investor and its Affiliates would
own in the aggregate Common Stock Equivalents equal to greater than 30% of the
outstanding Voting Stock of the Company on such date.
Section 17. Voting Agreement.
----------------
The Investor agrees to vote all shares of capital stock held by the
Investor (by proxy or in person) in favor of the slate of directors recommended
by the Board to the shareholders at the annual shareholders' meetings of the
Company to be held in 2000 and 2001 and to cause all other Affiliates of the
Investor to vote their shares of capital stock of the Company in such manner.
The Investor and its Affiliates shall not enter into any agreement or
arrangement that confers on any Person, other than an Affiliate of the Investor,
the right to vote
-25-
<PAGE>
(or execute written consents with respect to) any shares of Convertible
Preferred Stock or Conversion Shares, while such securities are owned by the
Investor or its Affiliates.
Section 18. Miscellaneous.
-------------
(a) Restrictive Legends.
-------------------
(i) Each certificate for Restricted Shares (unless otherwise
permitted by the provisions of Section 18(a) (ii)) shall include a legend
in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE THEREWITH. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON VOTING, TRANSFER AND OTHER MATTERS AS SET
FORTH IN THE INVESTOR'S RIGHTS AGREEMENT DATED AS OF
______________, 2000;"
(ii) Subject to Section 18(a)(iii), any holders of Restricted
Shares registered pursuant to the Securities Act and qualified under
applicable state securities laws may exchange certificates representing
such Restricted Shares on transfer for new certificates that shall not bear
the legend set forth in paragraph (i) of this Section 18(a);
(iii) Compliance with Securities Laws. Upon any proposed transfer
-------------------------------
of Restricted Shares, the Company shall register the transfer of such
Restricted Shares on the stock transfer books of the Company if the Company
shall have received (A) to the extent required to ensure compliance with
the Securities Act, an opinion of counsel reasonably satisfactory to the
Company, to the effect that the proposed transfer of Restricted Shares may
be effected without registration under the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and
(C) the agreement of the transferee to comply with the provisions of
Section 16 and 17 of this Agreement. Each certificate evidencing Restricted
Shares transferred as above provided shall bear the legend set forth in
Section 18(a)(i), except that such certificate shall not bear such legend
if neither such legend nor the restrictions on transfer in Section 18(a)
are required in order to ensure compliance with the provisions of the
Securities Act.
(b) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and such invalid, void or
otherwise unenforceable provisions shall be null and void. It is the intent of
the parties, however, that any invalid, void or otherwise unenforceable
provisions be automatically replaced by other
-26-
<PAGE>
provisions which are as similar as possible in terms to such invalid, void or
otherwise unenforceable provisions but are valid and enforceable to the fullest
extent permitted by law.
(c) Entire Agreement. This Agreement, together with the Subscription
----------------
Agreement, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior arrangements or understandings
with respect hereto.
(d) Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the Company and the Investor and their respective successors and
permitted assigns; provided, however, that each such person or entity shall, as
-------- -------
a condition to the effectiveness of such assignment, be required to execute a
counterpart to this Agreement whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement with respect to such Restricted Shares, including the provisions of
Section 16 and 17; provided, further, that the Investor shall not be entitled to
-------- -------
assign its rights under Sections 2, 3, 4 or 15 without the consent of the
Company other than to an Affiliate of the Investor.
(e) Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one and
the same agreement. It shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart. The failure of any
Investor to execute this Agreement does not make it invalid as against any other
Investor.
(f) Remedies. The Investor shall have all rights and remedies reserved
--------
for such Investor pursuant to this Agreement and the Articles of Incorporation
and the By-laws of the Company, as amended, and all rights and remedies which
such Investor has been granted at any time under any other agreement or contract
and all of the rights which such holder has under any law or equity. Any person
having any rights under any provision of this Agreement will be entitled to
enforce such rights specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law
or equity.
(i) The parties hereto agree that if any parties seek to resolve
any dispute arising under this Agreement pursuant to a legal proceeding,
the prevailing parties to such proceeding shall be entitled to receive
reasonable fees and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with such proceedings.
(ii) It is acknowledged that it will be impossible to measure in
money the damages that would be suffered if the parties fail to comply with
any of the obligations herein imposed on them and that in the event of any
such failure, an aggrieved person will be irreparably damaged and will not
have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce
such obligations, and if any action should be brought in equity to enforce
any of the provisions of this Agreement, none of the parties hereto shall
raise the defense that there is an adequate remedy at law.
(g) Notices. All notices, requests, consents and other communications
-------
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be
-27-
<PAGE>
deemed to have been duly given when delivered in person, by telecopy, by
nationally-recognized overnight courier, or by first class registered or
certified mail, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
the addressee to the addressor:
(i) if to the Company, to:
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Phone: (713) 860-0100
Fax: (713) 626-4766
Attention: Chief Executive Officer
with copies to:
Bracewell & Patterson
711 Louisiana, Suite 2900
Houston, Texas 77002
Phone: (713) 223-2900
Fax: (713) 221-1212
Attention: John L. Bland, Esq.
(ii) and, if to the Investor, to:
BOSS II, LLC
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Phone: (212) 515-3201
Fax: (212) 515-3262
Attention: Andrew Africk
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Phone: (212) 408-2400
Fax: (212) 728-5950
Attention: John M. Scott, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered when received, or if received after the close of business,
on the next business day.
(h) Governing Law; Jurisdiction; Venue; Process. This Agreement shall
-------------------------------------------
be governed by and construed in accordance with the laws of the State of New
York without regard
-28-
<PAGE>
to any choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York.
Any legal action in a proceeding brought in accordance with this Section shall
be brought in the courts of the State of New York or of the United States
District Court for the Southern District of New York, and by execution and
delivery of this Agreement, the parties hereby irrevocably accept for themselves
and in respect of their property, generally and unconditionally, the exclusive
jurisdiction of the aforesaid courts. The parties hereby irrevocably waive any
objection which they may now or hereafter have to laying of venue of any actions
or proceedings arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably waive and agree, not
to plead or claim in any such court that any such action or proceeding has been
brought in an inconvenient forum. The parties further agree that the mailing by
certified or registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of process against
them, without necessity for service by any other means provided by statute or
rule of court.
(i) Further Assurances. Each party hereto shall do and perform or
------------------
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to carry out
the provisions of this Agreement and the consummation of the transactions
contemplated hereby.
(j) Modifications; Amendments; Waivers. The terms and provisions of
----------------------------------
this Agreement may not be modified, amended or waived, except pursuant to a
writing signed by the Company and the Investor, provided, however, Sections 10
-------- -------
through 14 may be amended pursuant to a writing signed by the Company and the
holders of a majority of the Restricted Shares .
(k) Headings. The headings of the various sections of this Agreement
--------
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
(l) Waiver. No course of dealing between the Company and the Investor
------
or any delay in exercising any rights hereunder will operate as a waiver of any
rights of any party to this Agreement. The failure of any party to enforce any
of the provisions of this Agreement will in no way be construed as a waiver of
such provisions and will not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
(m) Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
-29-
<PAGE>
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.
-30-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
GROUP MAINTENANCE AMERICA CORP.
By:
------------------------------
Name:
Title:
BOSS II, LLC
By:
------------------------------
Name:
Title:
-31-
<PAGE>
Exhibit 99(e)
TERMS OF PREFERRED STOCK
1. Rights, Preferences and Powers of the Convertible Preferred Stock.
-----------------------------------------------------------------
The Convertible Preferred Stock shall have the following rights,
preferences, powers, privileges and restrictions, qualifications, and
limitations.
2. Dividends.
---------
(a) The holders of the outstanding shares of Convertible Preferred
Stock shall be entitled to receive dividends at the Applicable Dividend
Rate on the Accumulated Amount, if, as and when declared by the Board of
Directors out of funds legally available therefor. Such dividends shall be
payable in arrears on each of March 31, June 30, September 30 and December
31 (each, a "Preferred Dividend Payment Date"), the first such Preferred
-------------------------------
Dividend Payment Date being March 31, 2000, except that if any Preferred
Dividend Payment Date is not a Business Day, then the Preferred Dividend
Payment Date shall be on the first immediately succeeding Business Day.
Such dividends shall accrue on a daily basis (computed on the basis of a
360-day year of twelve 30-day months) commencing on the date of issuance,
and shall compound, if not paid in cash when due, on the next Preferred
Dividend Payment Date, regardless of whether the Board has declared a
dividend payment or whether there are any profits, surplus or other funds
of the Corporation legally available for dividends.
(b) During the Initial Dividend Period, dividends accruing during any
quarterly dividend period shall be payable in cash out of funds legally
available therefor at the option of the Company.
(c) During the Second Dividend Period, dividends accruing during any
quarterly dividend period shall be paid in cash, out of funds legally
available therefor.
(d) In the event a Change of Control occurs prior to the fifth
anniversary of the Original Issuance Date, the holders of the outstanding
shares of Convertible Preferred Stock, as of the close of business on the
Business Day immediately preceding the date of consummation of the Change
of Control, shall be entitled to receive, out of funds legally available
therefor, all accrued or accumulated and unpaid dividends as of the date of
the consummation of such Change of Control and the lesser of (i) all
dividends that would accrue from the date of the consummation of such
Change of Control through the fifth anniversary of the Original Issuance
Date and (ii) all dividends that would accrue from the date of the
consummation of such Change of Control through the date that is two and
one-half (2 1/2) years from the date of the consummation of the Change of
Control, such dividends to be paid in cash, provided that, any holder of
Convertible Preferred Stock who converts such shares into shares of Common
Stock pursuant to Section 4 hereof after receipt of a notice from the
Corporation pursuant to Section 6 hereof and prior to the date of
consummation of the Change of Control to which such notice relates, may
elect to receive the sum payable pursuant to this paragraph in the form of
cash, shares of Common Stock or any combination thereof, all as specified
in such holder's notice of election to convert. Shares of Common Stock
issued pursuant to the foregoing election
<PAGE>
shall be valued at the Fair Market Value as of the date of consummation of
the Change of Control. Any holder of Convertible Preferred Stock who elects
to require the Company to redeem the Convertible Preferred Stock upon a
Change of Control in accordance with Section 6 hereof, shall be entitled to
receive an amount equal to the amount of such dividends, in cash, as part
of the amount paid for such redemption under Section 6(a). Payment of the
amount specified in clauses (i) and (ii) in accordance with this Section
shall satisfy in full the obligation of the Corporation to otherwise make
such dividend payments on the scheduled Preferred Dividend Payment Dates.
(e) The dividends payable with respect to the Convertible Preferred
Stock on each Preferred Dividend Payment Date pursuant to Sections 2(a)
through (c) shall be paid to the holders of shares of the Convertible
Preferred Stock as they appear on the stock records of the Corporation on
such date (the "Preferred Record Date") as shall be fixed by the Board,
---------------------
which Preferred Record Date shall not be more than 40 days prior to the
applicable Preferred Dividend Payment Date and shall not precede the date
upon which the resolution fixing such Preferred Record Date is adopted.
(f) Except as otherwise provided herein, if at any time the
Corporation pays less than the total amount of dividends then accrued or
accumulated with respect to the Convertible Preferred Stock, such payment
shall be distributed ratably among the holders of the shares of Convertible
Preferred Stock based upon the number of shares of Convertible Preferred
Stock then held by each holder.
(g) In addition to all dividends payable pursuant to Sections 2(a)
through (d), whenever the Corporation shall declare any dividend on its
Common Stock (other than a distribution described in Section 4(e)(5) or a
dividend described in Section 4(e)(11) (a "Common Dividend")), the holders
---------------
of the outstanding shares of Convertible Preferred Stock shall have the
option, exercisable by the Requisite Convertible Preferred Shareholders to
(i) participate in such dividends on a ratable basis with such Common
Stock, pro rata in accordance with the number of shares of Common Stock
--- ----
into which such shares of Convertible Preferred Stock are then convertible
(the "Cash Election"), or (ii) reduce the Conversion Price then in effect
-------------
by the amount of dividends payable with respect to one share of Common
Stock or, if not payable in cash, by an amount equal to the Fair Market
Value of such dividends. The Corporation shall notify each holder of
Convertible Preferred Stock within two Business Days following the date on
which the Board declares a Common Dividend, which notice shall specify the
amount of such dividend per share of such Common Stock. If the Corporation
shall have received, prior to the 10th day following the date of such
notice from the Corporation (the "Determination Date"), notices from the
Requisite Preferred Shareholders electing the Cash Election, then the
holders of record of Convertible Preferred Stock as of the Determination
Date shall be entitled to receive, out of funds legally available therefor,
the Common Dividend in accordance with clause (i). Any such dividend shall
be payable no later than 10 Business Days after the Determination Date.
Unless a Cash Election has been made prior to the Determination Date, the
adjustment to the Conversion Price specified in clause (ii) shall become
effective as of the close of the business on the Determination Date.
2
<PAGE>
3. Liquidation.
-----------
Upon a Liquidation, after payment or provision for payment of the
debts and other liabilities of the Corporation and the liquidation preference of
any class or series of capital stock of the Corporation ranking senior to the
Convertible Preferred Stock, the holders of Convertible Preferred Stock shall be
entitled to receive, out of the remaining assets of the Corporation available
for distribution to its shareholders, with respect to each share of Convertible
Preferred Stock, an amount equal to the greater of (i) the Liquidation Amount of
such share and (ii) the amount the holder of such share would have received if
such holder had converted such share of Convertible Preferred Stock into shares
of Common Stock immediately prior to such Liquidation, before any distribution
shall be made to the holders of the Common Stock or any other class or series of
capital stock of the Corporation ranking junior to the Convertible Preferred
Stock. If upon any Liquidation the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
Convertible Preferred Stock the full amount to which they shall be entitled, the
holders of Convertible Preferred Stock shall share in any distribution of assets
pro rata in accordance with the total amount that each such holder would have
- --- ----
received had there been such sufficient assets.
4. Conversion.
----------
(a) Upon the terms set forth in this Section 4, each holder of shares
of Convertible Preferred Stock shall have the right, at such holder's
option, at any time and from time to time, to convert all or any portion of
such shares into the number of fully paid and nonassessable shares of
Common Stock equal to the quotient obtained by dividing (A) the aggregate
Liquidation Amount of the shares of Convertible Preferred Stock to be
converted by (B) the Conversion Price (as defined below), as last adjusted
and then in effect, by surrender of the certificate or certificates
representing such shares in accordance with this Section 4. The initial
conversion price per share at which shares of Common Stock shall be
issuable upon conversion of shares of Convertible Preferred Stock (the
"Conversion Price") shall be $14.00, subject to adjustment as set forth
----------------
herein.
(b) Any holder of shares of Convertible Preferred Stock electing to
convert all or any portion of the shares in accordance with Section 4(a)
above shall give written notice to the Corporation as specified herein
(which notice may be given by facsimile transmission) that such holder
elects to convert the same and shall state therein the number of shares of
Convertible Preferred Stock to be converted and the name or names in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued. Promptly thereafter, the holder shall surrender the
certificate or certificates representing the shares of Convertible
Preferred Stock to be converted, duly endorsed, at the office of the
Corporation or any transfer agent for such shares, or at such other place
designated by the Corporation, provided that the Corporation shall at all
times maintain an office or agency for such purposes. The Corporation
shall, promptly upon receipt of such notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing
the shares of Convertible Preferred Stock that have been converted, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled (in the number(s) and denomination(s)
designated by
3
<PAGE>
such holder), and the Corporation shall deliver to such holder a
certificate or certificates for the number of shares of Convertible
Preferred Stock that such holder has not elected to convert. To the extent
the holder requests that the shares of Common Stock to be issued upon
conversion shall be issued in the name of any Person other than the holder
of the Convertible Preferred Stock surrendered for conversion, such holder
shall deliver to the Corporation (and its transfer agent, if applicable)
such documents and certificates, including, if requested, an opinion of
counsel to the effect that the transfer thereof will not constitute a
violation of the Securities Act of 1933, as amended, or state securities
laws. The Corporation shall pay any documentary, stamp or similar issue or
transfer tax due on the issuance of Common Stock upon the conversion of
Convertible Preferred Stock or due on the issuance of a new certificate or
certificates for any Convertible Preferred Stock not converted, other than
any tax in respect of any transfer involved in any issuance of shares of
Common Stock in a name other than the name in which the shares of
Convertible Preferred Stock so converted were registered. The conversion
right with respect to any shares of Convertible Preferred Stock shall be
deemed to have been exercised at the earliest date upon which both the
notice of conversion referred to in the first sentence of this paragraph
and the certificates therefor shall have been so delivered (the "Conversion
----------
Date") and the Person or persons entitled to receive the Common Stock
----
issuable upon conversion shall be treated for all purposes as the record
holder or holders of such Common Stock upon that date.
(c) No fractional shares of Common Stock or scrip shall be issued upon
conversion of shares of Convertible Preferred Stock. The number of full
shares of Common Stock issuable upon conversion of Convertible Preferred
Stock shall be computed on the basis of the aggregate number of shares of
such Convertible Preferred Stock to be converted. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
any such shares, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to the product of (i) the Fair
Market Value of one share of Common Stock and (ii) such fractional
interest. The holders of fractional interests shall not be entitled to any
rights as shareholders of the Corporation in respect of such fractional
interests.
(d) The Corporation shall reserve out of its authorized but unissued
Common Stock a sufficient number of shares of Common Stock to permit the
conversion of all of the then-outstanding shares of Convertible Preferred
Stock. For the purposes of this Section 4(d), the full number of shares of
Common Stock then issuable upon the conversion of all then-outstanding
shares of Convertible Preferred Stock shall be computed as if at the time
of computation all outstanding shares of Convertible Preferred Stock were
held by a single holder. The Corporation shall from time to time, in
accordance with the laws of the State of Texas and its articles of
incorporation, increase the authorized amount of its Common Stock if at any
time the authorized amount of its Common Stock remaining unissued shall not
be sufficient to permit the conversion of all shares of Convertible
Preferred Stock at the time outstanding. All shares of Common Stock issued
upon conversion of the shares of Convertible Preferred Stock shall be
validly issued, fully paid and nonassessable.
4
<PAGE>
(e) The Conversion Price shall be subject to adjustment from time to
time as follows:
(1) If the Corporation shall, (A) at any time or from time to
time after the Original Issuance Date through the date that is two and
one-half (2 1/2) years after the Original Issuance Date, issue any
shares of Common Stock, options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, other than
Excluded Stock, without consideration or for a consideration per share
less than the greater of (x) the Conversion Price or (y) the Fair
Market Value of the Common Stock, in effect immediately prior to the
issuance of such Common Stock or securities, or (B) at any time or
from time to time after the date that is two and one-half (2 1/2)
years after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities, other than Excluded Stock,
without consideration or for a consideration per share less than the
Fair Market Value of the Common Stock, in effect immediately prior to
the issuance of such Common Stock or securities, then such Conversion
Price, as in effect immediately prior to each such issuance, shall
forthwith be lowered to a price equal to the price obtained by
multiplying:
(A) the Conversion Price at which shares of Convertible
Preferred Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be the
number of shares of Common Stock outstanding on a fully-diluted
basis immediately after such issuance and (y) the numerator shall
be the sum of (1) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to the
date of such issuance and (2) the number of additional shares of
Common Stock which the aggregate offering price of the number of
shares of Common Stock so offered would purchase at the greater
of the Conversion Price or the Fair Market Value per share of
Common Stock.
(2) If the Corporation shall, at any time or from time to time
after the Original Issuance Date, directly or indirectly, redeem, purchase
or otherwise acquire any shares of Common Stock, options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, for a
consideration per share greater than the Fair Market Value (plus, in the
case of such options, rights, or securities, the additional consideration
required to be paid to the Corporation upon exercise, conversion or
exchange) for shares of Common Stock in effect immediately prior to such
event, then such Conversion Price, as in effect immediately prior to each
such event, shall forthwith be lowered to a price equal to the price
obtained by multiplying:
5
<PAGE>
(A) the Conversion Price at which shares of Convertible
Preferred Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be the Fair
Market Value per share of Common Stock immediately prior to such event
and (y) the numerator shall be the result of dividing:
i) (1) the product of the number of shares of Common
Stock outstanding on a fully-diluted basis and the Fair
Market Value per share of Common Stock, in each case
immediately prior to such event, minus (2) the aggregate
consideration paid by the Corporation in such event (plus,
in the case of such options, rights, or convertible or
exchangeable securities, the aggregate additional
consideration to be paid by the Corporation upon exercise,
conversion or exchange), by
ii) the number of shares of Common Stock outstanding
on a fully-diluted basis immediately after such redemption.
(3) For the purposes of any adjustment of the Conversion Price
pursuant to Sections 4(e)(1) or (2) above, the following provisions shall
be applicable:
(A) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor by the investors without
deducting any discounts, commissions or placement fees payable by the
Corporation to any underwriter or placement agent in connection with
the issuance and sale thereof that are usual and customary for such a
transaction. Notwithstanding anything provided above to the contrary,
for purposes of issuances described in this clause, Fair Market Value
for such issuance shall be deemed to be the lesser of (i) the Closing
Price on the date of the execution of the underwriting, placement,
subscription or purchase agreement executed in connection with such
offering or placement and (ii) the Fair Market Value (as defined
herein) determined as of the date of the execution of the
underwriting, placement, subscription or purchase agreement executed
in connection with such offering or placement.
(B) In the case of the issuance of Common Stock for consideration
consisting in whole or in part other than cash, the value of such
non-cash consideration shall be deemed to be the fair market value
thereof as determined in good faith by the Board or a duly authorized
committee thereof, irrespective of any accounting treatment.
Notwithstanding anything provided above to the contrary, for purposes
of issuances described in this clause, Fair Market Value for such
issuance shall be deemed to be the fair market value as determined in
good faith by
6
<PAGE>
the Board or a duly authorized committee thereof, irrespective of any
accounting treatment, as of the date of the approval of such
transaction by the Board or appropriate committee of the Board.
(C) In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities,
except for options to acquire Excluded Stock:
i) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase
or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in Sections 4(e)(3)(A)
and (B) above), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common
Stock covered thereby;
ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration
received by the Corporation for any such securities and
related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights
(the consideration in each case to be determined in the
manner provided in Sections 4(e)(3)(A) and (B) above); and
iii) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such
options or rights or conversions of or exchanges for such
securities, other than a change resulting from the
antidilution provisions thereof, the applicable Conversion
Price shall forthwith be readjusted to such Conversion Price
as would have been obtained had the adjustment made upon the
issuance of such options, rights
7
<PAGE>
or securities not converted prior to such change or options
or rights related to such securities not converted prior to
such change been made upon the basis of such change;
iv) Upon the expiration of the right to convert,
exchange or acquire Common Stock in accordance with the
terms of any securities, the issuance of which securities
had effected an adjustment to the Conversion Price pursuant
to the terms of this Section 4(e), if any such securities
shall not have been converted, exercised or exchanged prior
to such expiration, the number of shares of Common Stock
deemed to have been issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or
exercise of any such security pursuant to Section 4(e)(l)
above, shall no longer be computed as set forth above and
the Conversion Price shall forthwith be readjusted and
thereafter be the price at which it would have been had the
adjustment to the Conversion Price made upon the issuance or
sale of any such security been made on the basis of the
issuance only of the number of additional shares of Common
Stock actually issued upon exercise, conversion or exchange
thereof and thereupon only the number of additional shares
of Common Stock actually so issued shall be deemed to have
been issued and the only consideration actually received by
the Corporation (computed as set forth above) shall be
deemed to have been received by the Corporation; and
v) No further adjustment of the Conversion Price
adjusted upon the issuance of any such options, rights,
convertible securities or exchangeable securities shall be
made as a result of the actual issuance of Common Stock on
the exercise of any such rights or options or any conversion
or exchange of any such securities.
(4) All calculations under this Section will be made to the nearest
one- hundredth of a cent or to the nearest whole share, as the case may be.
No adjustment to the Conversion Price will be required unless such
adjustment would result in an increase or decrease of at least one percent
(1%) of the Conversion Price; provided, however, that any adjustments which
by reason of this clause (4) are not required to be made will be carried
forward and taken into account in a subsequent adjustment, if any.
(5) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then the provisions of Section 4(e)(1) shall not apply and,
following the record
8
<PAGE>
date for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, the Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Convertible Preferred Stock shall
be increased in proportion to such increase in outstanding shares.
(6) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for
such combination, the Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each
share of Convertible Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(7) In the event of any capital reorganization of the Corporation,
any reclassification of the stock of the Corporation (other than a change
in par value or from par value to no par value or from no par value to par
value or as a result of a stock dividend or subdivision, split-up or
combination of shares), or any consolidation or merger of the Corporation
(other than the Merger), each share of Convertible Preferred Stock shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities
or property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion
of such share of Convertible Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
(8) In any case in which the provisions of this Section 4(e) shall
require that an adjustment shall become effective immediately after a
record date of an event, the Corporation may defer until the occurrence of
such event (1) issuing to the holder of any share of Convertible Preferred
Stock converted after such record date and before the occurrence of such
event the shares of capital stock issuable upon such conversion by reason
of the adjustment required by such event in addition to the shares of
capital stock issuable upon such conversion before giving effect to such
adjustments, and (2) paying to such holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 4(c) above; provided,
--------
however, that the Corporation shall deliver to such holder an appropriate
-------
instrument evidencing such holder's right to receive such additional shares
and such cash.
(9) Whenever a Conversion Price shall be adjusted as provided in this
Section 4(e), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its
chief financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price
9
<PAGE>
that shall be in effect after such adjustment. The Corporation shall also
cause a copy of such statement to be sent by first class certified mail,
return receipt requested and postage prepaid, to each holder of Convertible
Preferred Stock affected by the adjustment at such holder's address
appearing on the Corporation's records. Where appropriate, such copy may be
given in advance and may be included, as part of any notice required to be
mailed under the provisions of this Section 4(e) below.
(10) If the Corporation shall propose to take any action of the types
described in clauses (5), (6) or (7) of this Section 4(e), the Corporation
shall give notice to each holder of shares of Convertible Preferred Stock,
in the manner set forth in clause (9) above, which notice shall specify the
record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the date
of such notice) on the Conversion Price and the number, kind or class of
shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of shares of Convertible Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice shall
be given at least 20 days prior to the date so fixed, and in case of all
other action, such notice shall be given at least 30 days prior to the
taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
(11) Without duplication of any other adjustment provided for in this
Section 4, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Corporation other than
shares of Common Stock, provision shall be made so that each holder of
Convertible Preferred Stock shall have the option to (i) receive as part of
such dividend or distribution the number of securities of the Corporation
which such holder would have received had its shares of Convertible
Preferred Stock been converted into shares of Common Stock immediately
prior to the date of such event or (ii) receive upon conversion thereof, in
addition to the shares of Common Stock receivable thereupon, the number of
securities of the Corporation which such holder would have received had its
shares of Convertible Preferred Stock been converted into shares of Common
Stock on the date of such event and had such holder thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by it pursuant to this paragraph during
such period, subject to the sum of all other adjustments called for during
such period under this Section 4 with respect to the rights of such holder
of Convertible Preferred Stock.
(12) If the Corporation issues any securities after the Original
Issuance Date containing provisions protecting the holder or holders
thereof against dilution in any manner more favorable to such holder or
holders thereof than
10
<PAGE>
those set forth in this Section 4, such provisions (or any more favorable
portion thereof) shall be deemed to be incorporated herein as if fully set
forth in this Statement and, to the extent inconsistent with any provision
of this Statement, shall be deemed to be substituted therefor.
5. Redemption at Option of the Corporation.
---------------------------------------
(a) The Corporation shall have the right to redeem, at any time after the
fifth anniversary of the Original Issuance Date, out of funds legally available
for such purpose, all, but not less than all, of the shares of Convertible
Preferred Stock then outstanding, for an amount per share (the "Corporation
-----------
Redemption Price"), which shall be payable in cash, as set forth below:
- ----------------
(i) 103% of the Liquidation Amount, if such redemption occurs on or
after the fifth anniversary of the Original Issuance Date and
before the sixth anniversary date of the Original Issuance Date;
(ii) 102% of the Liquidation Amount, if such redemption occurs on or
after the sixth anniversary of the Original Issuance Date and
before the eighth anniversary date of the Original Issuance
Date; and
(iii) 101% of the Liquidation Amount, if such redemption occurs on or
after the eighth anniversary of the Original Issuance Date but
prior to the Maturity Date.
(b) Not less than 20 nor more than 60 days (such date as fixed by the Board
of Directors of the Corporation is referred to herein as the "Redemption Record
-----------------
Date") prior to the date fixed for any redemption of shares of the Convertible
- ----
Preferred Stock pursuant to this Section 5, a notice specifying the time and
place of the redemption, the redemption price and the number of shares to be
redeemed shall be given by first class mail, postage prepaid, to the holders of
record on the Redemption Record Date of the shares of the Convertible Preferred
Stock to be redeemed at their respective addresses as the same shall appear on
the books of the Corporation, calling upon each holder of record to surrender to
the Corporation on the redemption date at the place designated in the notice
such holder's certificate or certificates representing the number of shares
specified in the notice of redemption. Neither failure to mail such notice, nor
any defect therein or in the mailing hereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether
or not the holder receives the notice. On or after the redemption date, each
holder of shares of Convertible Preferred Stock to be redeemed shall present and
surrender such holder's certificate or certificates for such shares to the
Corporation at the place designated in the redemption notice and thereupon the
Corporation Redemption Price shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled.
11
<PAGE>
(c) If a notice of redemption has been given pursuant to this Section 5 and
if, on or before the redemption date, the funds necessary for such redemption
(including all dividends on the shares of Convertible Preferred Stock to be
redeemed that will accrue to the redemption date) shall have been set aside by
the Corporation, separate and apart from its other funds in trust for the pro
---
rata benefit of the holders of the shares of Convertible Preferred Stock so
- ----
called for redemption, then, notwithstanding that any certificates for such
shares of Convertible Preferred Stock have not been surrendered for
cancellation, on the redemption date dividends shall cease to accrue on the
shares of the Convertible Preferred Stock to be redeemed, and the holders of
such shares shall cease to be shareholders with respect to those shares and
shall have no voting or other rights with respect thereto, except the right to
receive the moneys payable upon such redemption, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares of Convertible Preferred Stock evidenced thereby
shall no longer be outstanding, provided, however, nothing in this Section 5
-------- -------
will limit the right of the holders of shares of Convertible Preferred Stock to
convert such shares after the notice of redemption has been given and prior to
the redemption date in accordance with Section 4. If the holder of any shares of
Convertible Preferred Stock shall not, within one year after the redemption
date, claim the amount deposited for the redemption thereof, such funds shall be
released to the Corporation and held thereby until such holder shall make a
claim therefor.
(d) If a notice of redemption has been given pursuant to this Section 5 and
any holder of shares of Convertible Preferred Stock shall, prior to the close of
business on the Business Day immediately preceding the redemption date, give
written notice to the Corporation pursuant to Section 4 above of the conversion
of any or all of the shares to be redeemed held by the holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation, as required by Section 4 above), then such redemption shall not
become effective as to such shares to be converted and such conversion shall
become effective as provided in Section 4 above, whereupon any funds deposited
by the Corporation for the redemption of such shares shall immediately upon such
conversion be returned to the Corporation or, if then held in trust by the
Corporation, shall automatically and without further corporate action or notice
be discharged from the trust.
6. Redemption at the Option of the Holders.
---------------------------------------
(a) Each holder of Convertible Preferred Stock shall have the right to
require the Corporation to redeem, out of funds legally available therefor, any
or all of such holder's shares of Convertible Preferred Stock at the Redemption
Price, plus the amount described in the first sentence of Section 2(d), in
connection with the occurrence of a Change of Control as set forth herein.
(b) The Corporation shall notify the holders of the Convertible Preferred
Stock in writing promptly upon the occurrence of a Change of Control; provided,
--------
however, that any failure by the Corporation to provide such notice shall not
- -------
affect the right of the holders of shares of Convertible Preferred Stock to
require a redemption of such shares in
12
<PAGE>
connection with such Change of Control. Such notice shall state the terms and
conditions of such Change of Control.
(c) In the event the Requisite Convertible Preferred Shareholders expect
that a Change of Control will occur, the Requisite Convertible Preferred
Shareholders may so notify the Corporation, which notice shall specify the
circumstances constituting the expected Change of Control. Within three Business
Days following the receipt by the Corporation of such notice, the Corporation
shall notify each holder of Convertible Preferred Stock of the receipt of such
notice from the Requisite Convertible Preferred Shareholders. For a period of 15
days following such notice by the Corporation, each holder of Convertible
Preferred Stock may elect to have any or all of such holder's shares of
Convertible Preferred Stock redeemed under this Section 6(c) by providing an
irrevocable written notice (a "Section 6(c) Redemption Notice") to the
------------------------------
Corporation of such election; provided, however, no redemption shall be effected
-------- -------
prior to the consummation of the Change of Control. The Corporation shall effect
such redemption on the later to occur of (i) 15 days following receipt by the
Corporation of such Section 6(c) Redemption Notice and (ii) the date of the
consummation of such Change of Control (such date on which redemption is
required, the "Redemption Date") and the holders of record of shares of
---------------
Convertible Preferred Stock being redeemed in accordance with this Section 6(c)
shall promptly deliver certificates representing the shares being redeemed to
the Corporation or its agents. If a holder has delivered a Section 6(c)
Redemption Notice and no Change of Control shall have been consummated within
180 days from the date of such Section 6(c) Redemption Notice, then such Section
6(c) Redemption Notice shall be null and void and the holders shall again be
entitled to deliver a new Section 6(c) Redemption Notice in accordance with the
terms of this Section 6(c).
(d) If the Corporation has delivered to the holders of the Convertible
Preferred Stock a notice pursuant to Section 6(b) above that a Change of Control
has occurred, each holder of Convertible Preferred Stock may elect to have any
or all of such holder's shares of Convertible Preferred Stock redeemed under
this Section 6(d) by providing an irrevocable written notice (a "Section 6(d)
------------
Redemption Notice") to the Corporation of such election at any time prior to the
- -----------------
90th day following the date of the Corporation's notice given pursuant to
Section 6(b) (the "Expiration Date"). The Corporation shall effect the
---------------
redemption of all shares pursuant to this Section 6(d) on the date which is 15
days after the Expiration Date.
(e) If, on or before any redemption date specified in paragraph (c) or (d)
above, the funds necessary for such redemption (including all dividends on the
shares of Convertible Preferred Stock to be redeemed that will accrue to the
redemption date) shall have been set aside by the Corporation, separate and
apart from its other funds in trust for the pro rata benefit of the holders of
the shares of Convertible Preferred Stock so called for redemption, then,
notwithstanding that any certificates for such shares of Convertible Preferred
Stock have not been surrendered for cancellation, on the redemption date,
dividends shall cease to accrue on the shares of the Convertible Preferred Stock
to be redeemed, and the holders of such shares shall cease to be shareholders
with respect to those shares and shall have no voting or other rights with
respect thereto, except the right to receive the monies payable upon such
redemption, without interest thereon, upon
13
<PAGE>
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares of Convertible Preferred Stock evidenced
thereby shall no longer be outstanding. Upon delivery to the Corporation of
an irrevocable notice from a holder of Convertible Preferred Stock pursuant
to paragraph (c) or (d) above, the right of such holder to convert the
shares of Convertible Preferred Stock to be redeemed into shares of Common
Stock pursuant to Section 4 shall cease and terminate. If the holder of any
shares of Convertible Preferred Stock shall not, within one year after the
redemption date, claim the amount deposited for the redemption thereof,
such funds shall be released to the Corporation and held thereby until such
holder shall make a claim therefor. On and after the redemption date
pursuant to either Section 6(c) or (d) above (unless default shall be made
by the Corporation in the payment of the applicable Redemption Price, in
which event such rights shall be exercisable until such default is cured),
all rights in respect of the shares of Convertible Preferred Stock to be
redeemed, except the right to receive the Redemption Price, shall cease and
terminate, and such shares shall no longer be deemed to be outstanding,
whether or not the certificates representing such shares have been received
by the Corporation.
(f) If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of
the entire Redemption Price required to be paid pursuant to this Section 6,
then the holders of Convertible Preferred Stock shall share ratably in any
such redemption based on the respective number of shares of Convertible
Preferred Stock that each holder thereof holds.
(g) Any communication or notice relating to redemption given pursuant
to this Section 6 shall be sent by first-class certified mail, postage
prepaid, to the holders of record of shares of Convertible Preferred Stock,
at their respective addresses as the same shall appear on the books of the
Corporation, or to the Corporation at the address of its principal, or
registered office, as the case may be.
(h) The Corporation shall not engage in any Sale of the Corporation
transaction unless (i) if the Corporation shall be the surviving or
continuing entity of such transaction, the Corporation shall, after
consummation thereof, have sufficient funds to perform its obligations
under this Section 6, and (ii) if the Corporation shall not be the
surviving or continuing entity of such transaction, proper and adequate
provision shall be made, in the definitive documentation providing for such
transaction or otherwise, to ensure that the surviving or continuing
corporation of such transaction shall expressly assume the Corporation's
obligations under this Section 6 and shall have sufficient funds to perform
its obligations under this Section 6.
7. Mandatory Redemption.
--------------------
On the Maturity Date, the Corporation shall redeem each outstanding share
of Convertible Preferred Stock for the Liquidation Amount of such share at such
time. If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of the
entire Liquidation Amount to which they shall be entitled, the holders of
Convertible Preferred Stock shall share ratably in any such redemption
14
<PAGE>
based on the respective number of shares of Convertible Preferred Stock that
each holder thereof holds.
8. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein or required by law
and so long as any shares of the Convertible Preferred Stock are
outstanding, each share of Convertible Preferred Stock shall entitle the
holder thereof to notice of and to vote, in person or by proxy, at any
special or annual meeting of shareholders, on all matters entitled to be
voted on by holders of Common Stock (and any other series or class of
Voting Stock also entitled to vote with the holders of Common Stock),
voting together as a single class with all other shares entitled to vote
thereon. With respect to any such vote, each share of Convertible Preferred
Stock shall entitle the holder thereof to cast that number of votes as is
equal to the number of votes that such holder would be entitled to cast had
such holder converted such share of Convertible Preferred Stock into shares
of Common Stock as of the record date for determining the shareholders of
the Corporation entitled to vote on any such matters.
(b) At any time after the Original Issuance Date, the Corporation
shall not, and shall not permit any Subsidiary to, without first obtaining
the affirmative written consent or approval of the Requisite Convertible
Preferred Shareholders:
(i) in any manner authorize, create, designate, issue, sell or
reclassify any class or series of capital stock of the Corporation
(including any shares of treasury stock) or rights, options, warrants
or other securities convertible into or exercisable or exchangeable
for capital stock or any debt security which by its terms is
convertible into or exchangeable for any equity security or has any
other equity feature or any security that is a combination of debt and
equity, which, in each case, as to the payment of dividends,
distribution of assets or Redemptions, including, without limitation,
distributions to be made upon a Liquidation, is pari passu with, is
---- -----
senior to the Convertible Preferred Stock or is mandatorily redeemable
prior to the Convertible Preferred Stock or which in any manner
materially adversely affects the rights, preferences or remedies of
the holders of the Convertible Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other
special rights, or the qualifications, limitations or restrictions
thereof, of the Convertible Preferred Stock;
(iii) in any manner authorize, create, issue or sell any
additional shares of Convertible Preferred Stock;
(iv) amend, alter or repeal any of the provisions of (A) the
Articles of Incorporation of the Corporation (as amended or restated)
or (B) the By- laws of the Corporation, if such amendment, alteration
or repeal would alter or change the
15
<PAGE>
rights, preferences or privileges of the holders of such Convertible
Preferred Stock so as to adversely affect them.
(v) declare or pay any dividend with respect to, or make
any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, retirement or other
acquisition of, any shares of any class of capital stock of the
Corporation ranking junior to the Convertible Preferred Stock, or any
warrants or options to purchase any such capital stock, or make any
other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Corporation or
any Subsidiary (other than a declaration or payment of a stock
dividend payable in shares of Common Stock to the holders of Common
Stock); provided, however, that the Corporation may declare or pay any
-------- -------
dividend on (or repurchase) the Common Stock if such amount, when
combined with the sum of all other dividends declared or paid on (plus
all amounts paid in the repurchase of), the Common Stock in the
preceding twelve-month period, does not exceed 5% of the aggregate
Fair Market Value of the Common Stock at the time of the declaration
or payment of such dividend or commitment to repurchase, as the case
may be;
(vi) agree to, or permit any Subsidiary to agree to, any
provision in any agreement that would by its terms impose any
restriction on the ability of the Corporation to honor the exercise of
any rights of the holders of the Convertible Preferred Stock;
(vii) enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property, the
rendering of any service or the payment of any management, advisory or
similar fees, with any Affiliate (other than any transaction between
the Corporation and any wholly-owned Subsidiary or between or among
wholly-owned Subsidiaries) unless such transaction is (a) in the
ordinary course of business of the Corporation and its Subsidiaries,
and (b) upon fair and reasonable terms no less favorable to the
Corporation and its Subsidiaries than they would obtain in a
comparable arm's length transaction with a Person which is not an
Affiliate
9. Board of Directors.
------------------
(a) The holders of the Convertible Preferred Stock, voting as a
separate class, shall be entitled to elect directors (the "Convertible
-----------
Preferred Directors") to the Board as follows:
-------------------
(i) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 50% of the
number of Conversion Shares issuable upon conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the greater of 3 directors or the
number of directors that represents 30% of the Board, rounded up to
the nearest whole director;
16
<PAGE>
(ii) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 25% of the
number of Conversion Shares issuable upon conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the number of directors that
represents 22% of the Board, rounded up to the nearest whole director;
(iii) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 12 1/2% of
the number of Conversion Shares issuable upon the conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the number of directors that
represents 15% of the Board, rounded up to the nearest whole director.
(b) In the event the number of directors the holders of Convertible
Preferred Stock are entitled to elect decreases in accordance with
paragraph (a) above, then the number of directors the holders of
Convertible Preferred Stock are entitled to elect pursuant to paragraph (a)
shall not thereafter be increased, irrespective of any subsequent
acquisition of Common Stock Equivalents by Apollo and its Affiliates. In
determining the number of directors the holders of the Convertible
Preferred Stock shall be entitled to elect pursuant to paragraph (a) above,
Apollo and its Affiliates shall be deemed to hold each Common Stock
Equivalent that is held of record by Apollo or any of its Affiliates, or as
to which Apollo or any of its Affiliates retains the entire economic
interest.
(c) Each committee of the Board shall include directors elected by
the holders of shares of the Convertible Preferred Stock in the same
proportion, rounded up to the nearest whole director, as such directors
comprise the Board and the Corporation shall provide each Convertible
Preferred Director with notice at least 48 hours prior to any meeting of
the Board or any committee.
(d) If an Event of Non-Compliance occurs (each, a "Trigger Event"),
-------------
the Requisite Convertible Preferred Shareholders (voting as a separate
class) shall have the special right to elect that number of individuals to
the Board that will constitute a majority of the Board. Upon receipt by the
Corporation of written notice of the occurrence of a Trigger Event signed
by the Requisite Convertible Preferred Shareholders, the number of
directors constituting the entire Board shall be increased by a number
which, together with the number of directors which the holders of the
Convertible Preferred Stock have elected pursuant to Section 9(a), shall
constitute a majority of the number of directors constituting the entire
Board. Upon receipt by the Corporation of written consents signed by or on
behalf of the Requisite Convertible Preferred Shareholder designating the
persons to fill the vacancy created by any such increase, the Board shall
immediately fill such vacancies with the designees named in such notice. In
lieu of delivery of notice to the Corporation described in the preceding
sentence, at their discretion, the holders of the Convertible Preferred
Stock, voting separately as a single class, may elect such additional
directors at any annual meeting of the shareholders or any special meeting
of the holders of the Convertible Preferred Stock called as hereinafter
provided. At any time during which the power to elect any directors
17
<PAGE>
pursuant to this Section 9(d) has been vested in the holders of Convertible
Preferred Stock, the Secretary of the Corporation, upon written request of
any holder of Convertible Preferred Stock, shall call a meeting of the
holders of the Convertible Preferred Stock for the election of directors as
provided herein. In case any vacancy shall occur among the directors
elected by the holders of the Convertible Preferred Stock pursuant to
Section 9(a) or 9(d), a successor shall be elected by the Convertible
Preferred Directors (or by the holders of the Convertible Preferred Stock,
in the event no such director remains in office). The rights of the holders
of the Convertible Preferred Stock under this Section 9(d) shall continue
until such time as there is no longer a Trigger Event in existence, at
which time such special right shall terminate, subject to revesting upon
the occurrence and continuation of any subsequent Trigger Event which gives
rise hereunder. After the expiration of such Trigger Event, the term of
office of the directors elected pursuant to this Section 9(d) shall
automatically expire and the number of directors shall be reduced
accordingly.
(e) Any transferee of shares of Convertible Preferred Stock shall be
required, as a condition to such transfer, to enter into a written
agreement with the transferor and the Corporation, which agreement shall
confer on Apollo (or such other Person as the Corporation shall approve),
for so long as such shares remain outstanding, sole power and authority to
vote such shares of Convertible Preferred Stock (at any meeting of
shareholders or by execution of a written consent of shareholders), with
respect to (i) any election of directors of the Corporation, including any
election of directors pursuant to Section 9 of this Statement, or (ii) any
matter described in Section 8(b)(vi). A counterpart of any such contract
shall be deposited with the Corporation at its principal place of business
or registered office and shall be subject to examination by shareholders,
in accordance with Article 2.30 of the Texas Business Corporation Act. Upon
any transfer in which the transferee does not agree to such contractual
agreement described above, such shares of Convertible Preferred Stock shall
automatically convert into a like number of Series B Convertible Preferred
Stock, which shall be identical in all respects to the Convertible
Preferred Stock, except such Series B Convertible Preferred Stock shall not
------
be entitled to vote (at any meeting of shareholders or by execution of a
written consent of shareholders) with respect to (i) any election of
directors of the Corporation, including any election of directors pursuant
to Section 9, or (ii) any matter described in Section 8(b)(vi).
10. Definitions.
-----------
As used herein, the following terms shall have the following meanings:
"Accumulated Amount" means an amount per share of Convertible
------------------
Preferred Stock equal to the Original Cost plus the sum of all dividends accrued
but unpaid as of the most recent Preferred Dividend Payment Date.
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person; provided that
Affiliates of Apollo shall exclude any operating companies that would otherwise
be deemed an Affiliate of Apollo, but shall include all
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<PAGE>
investment partnerships and special purpose entities that are not operating
companies, whether existing as of the date hereof or created hereafter, if the
Persons controlling Apollo have a dominant management role in such entities. For
the purpose of the above definition, the term "control" (including, with
correlative meaning, the terms "controlling", "controlled by", and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Applicable Dividend Rate" means 7.25% per annum; provided however
------------------------ --------
that the Applicable Dividend Rate shall be 9.25% upon the occurrence of and
during the continuation of any Event of Non-Compliance until cured, except for
any Event of Non-Compliance related solely to:
(i) a breach by the Company of any provisions of the Purchase
Agreement; or
(ii) any breach of Sections 15(a), (iii), (v), (vi), (vii), or
(ix) through (xiii) (in the case of (xiii), only insofar as it relates
to the foreoging clauses) of the Investor Rights Agreement that does
not have a material adverse effect on the Corporation and its
Subsidiaries, taken as a whole.
"Apollo" means Apollo Management IV, L.P.
------
"Appraisal Procedure" shall mean the following procedure to determine
-------------------
the fair market value, as to any security, for purposes of the definition of
"Fair Market Value" or the fair market value, as to any other property (in
either case, the "valuation amount"). The valuation amount shall be determined
in good faith jointly by the disinterested members of the Board and the
Requisite Convertible Preferred Shareholders; provided, however, that if such
-------- -------
parties are not able to agree on the valuation amount within a reasonable period
of time (not to exceed twenty (20) days) the valuation amount shall be
determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the disinterested members of the Board and the
Requisite Convertible Preferred Shareholders. If the disinterested members of
the Board and the Requisite Convertible Preferred Shareholders are unable to
agree upon an acceptable investment banking firm within ten (10) days after the
date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction).
The arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the disinterested members of
the Board and the Requisite Convertible Preferred Shareholders, of not more than
six investment banking firms of national standing in the United States, of which
no more than three may be named by the disinterested members of the Board and no
more than three may be named by the Requisite Convertible Preferred
Shareholders. The arbitrator may consider, within the ten-day period allotted,
arguments from the parties regarding which investment banking firm to choose,
but the selection by the arbitrator shall be made in its sole discretion from
the list of six. The disinterested members of the Board and the Requisite
Convertible Preferred Shareholders shall submit to the investment banking firm
their respective
19
<PAGE>
determinations of the valuation amount, and any supporting arguments and other
data as they may desire, within ten (10) days of the appointment of the
investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Corporation and the
Requisite Convertible Preferred Shareholders and the valuation amount calculated
by the investment banking firm. The determination of the final valuation amount
by such investment-banking firm shall be final and binding upon the parties. The
party that submits the valuation amount that is not used by the investment
banking firm to calculate the final valuation amount shall pay the fees and
expenses of the investment banking firm and arbitrator (if any) used to
determine the valuation amount. If required by any such investment banking firm
or arbitrator, the Corporation shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and contribution
by the Corporation in favor of such investment banking firm or arbitrator and
its officers, directors, partners, employees, agents and Affiliates.
"Board" means the Board of Directors of the Corporation.
-----
"BOSC" means Building One Services Corporation, a Delaware
----
Corporation.
"Business Day" means any day except a Saturday, Sunday or a day on
------------
which banking institutions are legally authorized to close in the City of New
York
"Change of Control" means the occurrence, after the date of the
-----------------
consummation of the Merger, of any of the following events (each a "Change of
Control"):
(i) the Sale of the Corporation,
(ii) the adoption of a plan relating to a Liquidation,
(iii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than Apollo and
its Affiliates, is or becomes the "beneficial owner" (as
defined in Rules 13-d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of Voting Stock entitled to cast a
majority of the votes entitled to be cast by the holders of
the outstanding Voting Stock of the Corporation,
(iv) (A) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than
Apollo and its Affiliates, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock
entitled to cast more than 30% of the votes entitled to be
cast by the holders of the outstanding Voting Stock of the
Corporation and (B) Apollo and its Affiliates beneficially
owns, directly or indirectly, Voting Stock entitled to cast
in the aggregate a lesser percentage of the votes entitled
to be cast by the outstanding Voting Stock of the
Corporation than such other person or group, or
20
<PAGE>
(v) the first day on which a majority of the Common Stock
Directors are not Continuing Directors.
"Closing Price" means with respect to the shares of Common Stock on
-------------
any day, (i) the last reported sales price, or in the case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices, in either case on the NYSE, or (ii) if the shares of Common Stock are
not listed or admitted to trading on the NYSE, the last reported sales price, or
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading,
or (iii) if the shares of Common Stock are not listed on any national securities
exchange, the average of the closing bid and asked prices in the over-the-
counter market as furnished by any NYSE member firm selected from time to time
by the Corporation for that purpose, or (iv) if such prices in the over-the-
counter market are not available, the Fair Market Value.
"Common Stock" means the Common Stock, par value $0.001, of the
------------
Corporation.
"Common Stock Directors" means those directors who have not been
----------------------
elected by the holders of the shares of the Convertible Preferred Stock pursuant
to Section 9.
"Common Stock Equivalent" means one share of Common Stock or the right
-----------------------
to acquire, whether or not immediately exercisable, one share of Common Stock,
whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar events.
"Consolidated Net Income" means, with respect to any Person, for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains or losses
from asset sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains or losses, (c) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is by a contract, operation of law or otherwise
prohibited, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid to
the referent Person or to a wholly owned Subsidiary of the referent Person by
such Person, and (f) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Continuing Directors" means Common Stock Directors who were directors
--------------------
on the Original Issuance Date or whose election to the Board, or whose
nomination for election by the shareholders of the Corporation, was approved by
a majority of the Common Stock Directors
21
<PAGE>
then still in office who were either directors on the Original Issuance Date or
whose election or nomination for election was previously so approved.
"Conversion Date" shall have the meaning set forth in Section 4(b).
---------------
"Conversion Price" shall have the meaning set forth in Section 4(a).
----------------
"Conversion Shares" means the shares of Common Stock issuable upon
-----------------
conversion of the Convertible Preferred Stock, as adjusted to account for any
stock splits, reverse splits, stock dividends or other similar events.
"Corporation Redemption Price" shall have the meaning set forth in
----------------------------
Section 5(a).
"Event of Non-Compliance" means the occurrence of any of the
-----------------------
following:
(i) the Corporation fails to pay the dividends or distributions
required pursuant to Section 2 hereof and such failure to pay
continues 10 days after notice of such failure has been delivered by
any holder of shares of Convertible Preferred Stock;
(ii) the Corporation fails to pay the full redemption price when
due under Sections 5, 6 or 7 hereof;
(iii) any breach by the Corporation of Section 8(b) hereof, any
other material breach by the Corporation of any of the terms and
conditions hereof, or any material and intentional breach by the
Corporation of any of the terms and conditions of the Investor Rights
Agreement or the Purchase Agreement;
(iv) there is a payment default, or any other default giving
rise to a right of acceleration, under any Indebtedness of the
Corporation that has an aggregate principal amount outstanding, as of
the date of such default or acceleration, in excess of $10,000,000
(after giving effect to any notice or cure period relating to such
Indebtedness);
(v) the Corporation or any of its material Subsidiaries shall
(A) voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code or any other federal,
state or foreign bankruptcy, insolvency or similar law, (B) consent to
the institution of, or fail to controvert in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (C)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any such Person or for
any substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (E) make a general assignment for the benefit of
creditors, (F) fail generally to pay its debts as they become due or
(G) take any corporate or shareholder action in furtherance of any of
the foregoing; or
22
<PAGE>
(vi) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Corporation or any
of its material Subsidiaries, or of any substantial part of their
respective property or assets, under Title 11 of the United States
Code or any other federal, state or foreign bankruptcy, insolvency or
similar law, (B) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any such Person or for any
substantial part of its property or (C) the winding-up or liquidation
of any such Person, and such proceeding, petition or order shall
continue unstayed and in effect for a period of 60 consecutive days.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Excluded Stock" means (i) shares of Common Stock issuable upon
--------------
exercise of any warrants or options of the Corporation outstanding on the
Original Issuance Date, (ii) shares of Common Stock issuable upon exercise of
any warrant or option of BOSC assumed by the Corporation in connection with the
Merger, (iii) shares of Common Stock issued pursuant to the conversion of the
Convertible Preferred Stock, (iv) shares of Common Stock issued as consideration
pursuant to any acquisition by the Company or any Subsidiary of any Person or
assets (an "Acquisition") if (x) the total consideration paid in such
Acquisition is (based on total cash consideration, total Indebtedness assumed by
the Company and its Subsidiaries and the Fair Market Value of the shares of
Common Stock issued and other property paid) is less than 2.0% of the total
assets of the Company and its Subsidiaries as of the end of its most recently
completed fiscal quarter and (y) the Consolidated Net Income per outstanding
share of Common Stock for the immediately preceding full twelve month period
giving pro forma effect to such Acquisition, and related financing, as if such
Acquisition were consummated at the beginning of such period is greater than the
actual Consolidated Net Income per outstanding share of Common Stock for such
period, (v) shares of Convertible Preferred Stock issued as dividends to the
holders of Convertible Preferred Stock, (vi) shares of Common Stock or options
issued pursuant to any Company or BOSC employee incentive or benefit arrangement
existing on the date hereof pursuant to the terms thereof on the date hereof,
(vii) shares of Common Stock or options issued pursuant to Corporation employee
incentive or benefit arrangements adopted after the Original Issuance Date of
substantially the same size and on terms that are no less favorable to the
Company than such plans existing on the date hereof to become effective upon the
termination of such existing plans to replace such existing plans and all
outstanding options thereunder, (viii) shares of Common Stock issued pursuant to
obligations to pay earnouts with respect to the Acquisitions described on
Schedule I hereto in accordance with the agreements relating thereto, (ix) up to
2,500,000 shares of Common Stock under a new employee option plan to be
instituted by the Corporation at the closing of the Merger, (x) up to 1,200,000
shares of Common Stock issued pursuant to a stock performance incentive plan no
less favorable to the Corporation than the BOSC 1999 Stock Performance Incentive
Plan (whether as an addition to such plan, or as a part of an expanded plan
which incorporates the BOSC plan plus the additional 1,200,000 shares) and (xi)
Common Stock issued to the shareholders of BOSC pursuant to the Merger
Agreement.
"Fair Market Value" means, as to any security, the average of the
-----------------
Closing Prices of such security (i) averaged over a period of 21 days consisting
of the day immediately
23
<PAGE>
preceding the day as of which "Fair Market Value" is being determined and the 20
consecutive Business Days prior to such immediately preceding day and (ii)
excluding any trades that are not bona fide, arm's length transactions). If at
any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the "Fair
Market Value" of such security shall be the fair market value thereof as
determined in accordance with the Appraisal Procedure, using an appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of any class or series of Common Stock, a sale
of all of the issued and outstanding Common Stock of the Corporation will be
assumed, without giving regard to the lack of liquidity of such stock due to any
restrictions (contractual or otherwise) applicable thereto or any discount for
minority interests and assuming the conversion or exchange of all securities
then outstanding that are convertible into or exchangeable for Common Stock and
the exercise of all rights and warrants then outstanding and exercisable to
purchase shares of such stock or securities convertible into or exchangeable for
shares of such stock; provided, however that such assumption will not include
-------- -------
those securities, rights and warrants convertible into Common Stock where the
conversion, exchange or exercise price per share is greater than the fair market
value; provided, further, however, that fair market value shall be determined
-------- ------- -------
with regard to the relative priority of each class or series of Common Stock (if
more than one class or series exists.)
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person, provided that Indebtedness shall include contingent purchase price
obligations and other earnout obligations of the Corporation and its
Subsidiaries incurred in connection with the acquisition of any business, to the
extent that it is more likely than not that such obligations will be paid (it
being understood that the "deferred purchase price" in connection with any
purchase of property or assets shall include only that portion of the purchase
price which shall be deferred beyond the date on which the purchase is actually
consummated), (f) all obligations secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (h) all guaranties by such Person of
obligations of others and (i) all capitalized lease obligations of such Person.
"Initial Dividend Period" means the period from and including the
-----------------------
Original Issuance Date through and including the third anniversary of the
Original Issuance Date.
"Investor's Rights Agreement" means the Investor Rights Agreement
---------------------------
dated as of the Original Issuance Date among the Corporation and the Investor.
"Investor" means BOSS II, LLC.
--------
24
<PAGE>
"Lien" means any security interest, lien, pledge, claim, charge,
----
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
"Liquidation" means any voluntary or involuntary liquidation,
-----------
dissolution, or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation of
the Corporation in another jurisdiction.
"Liquidation Amount" means, as to each share of Convertible Preferred
------------------
Stock, the Original Cost plus all accrued and unpaid dividends and all
accumulated and unpaid dividends, whether or not declared and whether or not
there are profits, surplus or other funds legally available for dividends,
payable with respect to such share of Convertible Preferred Stock.
"Maturity Date" means the 12th anniversary of the Original Issuance
-------------
Date.
"Merger" means the merger contemplated by the Agreement and Plan of
------
Merger dated November 2, 1999, by and between Group Maintenance America Corp.
and Building One Services Corporation.
"NASDAQ System" means the National Association of Securities Dealers
-------------
Automated Quotation System.
"Original Cost" means $1,000 per share.
-------------
"Original Issuance Date" for the Convertible Preferred Stock means the
----------------------
date of original issuance of the first share of such Convertible Preferred
Stock.
"Person" shall be construed broadly and shall include, without
------
limitation, an individual, a partnership, an investment fund, a limited
liability corporation, a corporation, an association, a joint stock corporation,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
"Preferred Dividend Payment Date" shall have the meaning set forth in
-------------------------------
Section 2(a).
"Preferred Record Date" shall have the meaning set forth in Section
---------------------
2(b).
"Purchase Agreement" means the Securities Purchase Agreement dated as
------------------
of November 2, 1999 among the Corporation and the Investor.
"Redemption Date" shall have the meaning set forth in Section 6(c).
---------------
"Redemption Price" shall mean 101% of the Liquidation Amount.
----------------
"Redemption Record Date" has the meaning set forth in Section 5(b).
----------------------
25
<PAGE>
"Requisite Convertible Preferred Shareholders" means, as of any date
--------------------------------------------
of determination, the holders of a majority of the outstanding shares of
Convertible Preferred Stock as of such date.
"Sale of the Corporation" shall mean (i) the sale or other
-----------------------
disposition, directly or indirectly, of all or substantially all of the
Corporation's assets in one transaction or a series of transactions or (ii) the
merger or consolidation of the Corporation with or into another Person, in the
case of clause (ii) only, under circumstances in which the holders of Voting
Stock entitled to cast a majority of the votes entitled to be cast by the
holders of the Voting Stock of the Corporation, immediately prior to the merger
or consolidation, own Voting Stock entitled to cast less than a majority of the
votes entitled to be cast by the holders of the Voting Stock of the Corporation
or the surviving or resulting corporation or acquirer, as the case may be,
immediately following such merger or consolidation. A sale (or sales) of one or
more Subsidiaries of the Corporation (whether by way of merger, consolidation,
reorganization or sale of all or substantially all assets or securities) which
constitutes all or substantially all of the consolidated assets of the
Corporation shall be deemed a Sale of the Corporation.
"Second Dividend Period" means the period from, but not including, the
----------------------
third anniversary of the Original Issuance Date through and including the
Maturity Date.
"Statement" means this Statement of designations, rights, preferences,
---------
powers, privileges and restrictions, qualifications, and limitations.
"Subsidiary" means any entity of which a majority of the outstanding
----------
Voting Stock, is owned by the Corporation either directly or indirectly through
Subsidiaries.
"Trigger Event" shall have the meaning set forth in Section 9(d).
-------------
"Voting Stock" of a Person means any class or all classes of capital
------------
stock or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
26
