Document:

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                                                                    EXHIBIT 10.1

                       FIFTH AMENDMENT TO CREDIT AGREEMENT

         THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
effective as of June 26, 2002, is among ENCOMPASS SERVICES CORPORATION, a Texas
corporation (formerly Group Maintenance America Corp., the "Company"), the
Subsidiaries of the Company listed on the signature pages hereto as Guarantors
(together with each other Person who subsequently becomes a Guarantor,
collectively, the "Guarantors"), the banks and other financial institutions
listed on the signature pages hereto under the caption "Banks" (together with
each other Person who becomes a Bank, collectively, the "Banks"), JPMORGAN CHASE
BANK (formerly the Chase Manhattan Bank), individually as a Bank and as
Syndication Agent (the "Syndication Agent"), WACHOVIA BANK NATIONAL ASSOCIATION
(formerly First Union National Bank), individually as a Bank and as
Documentation Agent (the "Documentation Agent"), and BANK OF AMERICA, N.A.,
individually as a Bank ("Bank of America") and as Administrative Agent for the
other Banks (in such capacity, together with any other Person who becomes the
administrative agent, the "Administrative Agent").

         A.     The Company, the Banks, the Syndication Agent, the Documentation
Agent and the Administrative Agent have entered into that certain Credit
Agreement dated as of February 22, 2000 (as amended, restated, supplemented or
modified from time to time, the "Credit Agreement").

         B.     The Company has requested that the Credit Agreement be amended
in certain respects, and the Banks party hereto are willing to comply with such
request subject to the terms and provisions of this Amendment.

         NOW, THEREFORE, BE IT RESOLVED, THAT, in consideration of the premises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                    ARTICLE 1

                                   Definitions

         Section 1.1      Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Credit Agreement, as amended hereby.

                                    ARTICLE 2

                                   Amendments

         Section 2.1      Addition of Definitions to Section 1.01. The following
definitions are hereby inserted in alphabetical order to Section 1.01 of the
Credit Agreement to read in their entirety as follows:

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 1

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                  "Additional Reserves" means certain reserves or write-offs
         that the Company and its Subsidiaries, on a consolidated basis, would
         be required to establish for certain additional outstanding receivables
         or claims originated prior to December 31, 2001, so long as such
         reserves or write-offs are established after the Fifth Amendment
         Effective Date.

                  "Amended and Restated Security Agreement" means that certain
         Amended and Restated Security Agreement covering all of the Collateral
         of the Company and each of its Domestic Subsidiaries, executed by the
         Company, the Domestic Subsidiaries and the Administrative Agent for the
         benefit of itself and the Banks dated as of June 26, 2002.

                  "Consolidating" means provided by reportable business segment
         applied consistently with Securities and Exchange Commission
         regulations for public companies.

                  "Equity Investment" means the Company's sale of $35,000,000 of
         Common Stock to the Apollo Group in (a) a common stock rights offering
         or (b) another form of investment.

                  "Equity Investment Surplus" means the Company's sale of Common
         Stock, concurrent with, but other than the Equity Investment, in (a) a
         common stock rights offering or (b) another form of investment.

                  "Equity Investment Transaction" means the following:

                  (a)      the Equity Investment shall have occurred;

                  (b)      all gross proceeds from the Equity Investment
          of $35,000,000 less the Permitted Expenses shall have been applied to
          the Loans as set forth in Section 2.07(b)(v), and shall not be less
          than $31,000,000; and

                  (c)      the Company shall have paid substantially all the
          fees and expenses related to the Equity Investment and the Equity
          Investment Surplus that are required to be paid by the Company.

                  "Excess Cash Flow" means with respect to any twelve month
         period ending March 31 (which shall be calculated commencing March 31,
         2003), for the Company and its Subsidiaries on a consolidated basis, an
         amount equal to EBITDA minus the sum of (a) consolidated Capital
         Expenditures, (b) consolidated interest expense, (c) federal, state and
         other income taxes actually paid by the Company and its Subsidiaries on
         a consolidated basis, (d) scheduled consolidated Funded Debt payments,
         (e) voluntary prepayments of any Indebtedness other than Indebtedness
         arising under this Agreement, so long as (i) such prepayments are
         otherwise permitted under this Agreement and (ii) such Indebtedness is
         permanently reduced by the amount of such prepayment, and (f) plus
         decreases in Working Capital or minus increases in Working Capital (in
         each case not taking into account changes in Working Capital resulting
         from sales or acquisitions of businesses).

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 2

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                  "Excess Permitted Expenses" means any of the Company's costs
         and expenses related to the Fifth Amendment, the Equity Investment or
         Equity Investment Surplus exceeding the amount of Permitted Expenses.

                  "Fifth Amendment" means the Fifth Amendment to this Agreement
         dated as of the Fifth Amendment Effective Date.

                  "Fifth Amendment Effective Date" means June 26, 2002.

                  "Junior Securities" means (a) equity securities, or (b) debt
         securities evidencing Indebtedness not to exceed $25,000,000 in the
         aggregate outstanding at any one time, or any securities that have a
         cash return on investment capital in the form of cash interest payments
         or dividends; provided that such Junior Securities:

                  (i)     are subordinate to the Obligations containing
                  subordination terms which are substantially similar to the
                  BOSC Senior Subordinated Notes Indenture or are more favorable
                  to senior creditors (as determined by the Administrative
                  Agent, or if such Junior Securities shall be held by the
                  Administrative Agent, then as determined by the Majority
                  Banks) or that are otherwise consented to by the Majority
                  Banks;

                  (ii)    are unsecured;

                  (iii)   do not increase in the aggregate the Company's cash
                  interest and cash dividend payments on an annual basis;

                  (iv)    shall not require any payments or prepayments of
                  principal or sinking fund amounts to be made in respect of
                  such Indebtedness prior to the one hundred and eightieth
                  (180th) day after the Tranche C Term Loan Maturity Date;

                  (v)     shall not contain any terms as to which compliance
                  would cause an Event of Default to occur based upon the
                  Company's financial projections at the time of the proposed
                  exchange;

                  (vi)    are issued by the Company;

                  (vii)   contain no covenants or contain covenants that are no
                  more restrictive or materially more burdensome to the Company
                  and/or its Subsidiaries than (A) those contained in the
                  documents related to the Indebtedness being exchanged, and (B)
                  those contained in this Agreement (as determined by the
                  Administrative Agent, or if such Junior Securities shall be
                  held by the Administrative Agent, then as determined by the
                  Majority Banks) or are otherwise consented to by the Majority
                  Banks; and

                  (viii)  contain no restrictions or limitations on Liens in
                  favor of the Administrative Agent or any Bank.

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 3

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                  "Permitted Expenses" means up to $4,000,000 of the Company's
         costs and expenses related to the Equity Investment, Equity Investment
         Surplus or the Fifth Amendment that may be deducted from the Equity
         Investment's gross proceeds of $35,000,000, so that the net amount
         applied to the Loans shall not be less than $31,000,000.

                  "Telecom Receivables Income" shall have the meaning set forth
         in the definition of "EBITDA."

                  "Working Capital" means consolidated current assets minus
         consolidated current liabilities (excluding cash, cash equivalents and
         any Indebtedness that is classified as "current" in accordance with
         GAAP), in each case as determined in accordance with GAAP.

         Section 2.2    Amendment to Definitions in Section 1.01. The following
definitions appearing in Section 1.01 of the Credit Agreement are hereby amended
and restated to read in their entirety as follows:

                  "Asset Disposition" means, with respect to any Person, the
disposition of any asset of such Person (including, without limitation, any sale
and leaseback transactions, which sale and leaseback transactions shall not
exceed $10,000,000 in the aggregate during any fiscal year and the sale of any
Capital Stock of any Subsidiary of such Person) other than (a) sales of
Inventory in the ordinary course of business; (b) dispositions of equipment no
longer used in such Person's business; (c) issuance of such Person's capital
stock; (d) disposition to a Wholly-Owned Subsidiary of the Company that is a
Guarantor or to the Company; (e) sales of items in one transaction or a series
of related transactions which generate aggregate proceeds of $100,000 or less;
(f) insurance recoveries with respect to casualty losses; (g) sales of
Janitorial Equipment provided that (i) Net Proceeds of such sales are reinvested
in Janitorial Equipment within one hundred eighty (180) days of the date of such
disposition; (ii) such sales are in the ordinary course of business and do not
constitute a sale of all or a substantial portion of the Janitorial Equipment of
the Company or any Subsidiary, and (iii) such sales do not exceed $3,000,000 in
the aggregate in any single year or (h) dispositions of other equipment to be
replaced (and such equipment is so replaced) with other equipment within one
hundred eighty (180) days of the disposition thereof.

                  "Collateral" means (i) all personal property (except 34% of
the capital stock of first-tier Foreign Subsidiaries and 100% of all capital
stock of Foreign Subsidiaries that are not first-tier Foreign Subsidiaries),
including all accounts, chattel paper, documents, equipment, general
intangibles, goods, financial assets, letter of credit rights, commercial tort
claims (to the extent in existence), investment property, instruments,
inventory, pledged securities, intellectual property, deposit accounts
(including all funds, certificates, checks, drafts, wire transfer receipts, and
other earnings, profits, or other proceeds from time to time representing,
evidencing, deposited into, or held in deposit accounts), stock rights, and
motor vehicles, (ii) all of the capital stock of the Company's Domestic
Subsidiaries, (iii) 66% of the capital stock of the Company's first-tier Foreign
Subsidiaries, and (iv) other personal property (except 34% of the capital stock
of first-tier Foreign Subsidiaries and 100% of all capital stock of Foreign
Subsidiaries that are not first-tier Foreign Subsidiaries), wherever located, in
which the Company and its Domestic

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 4

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Subsidiaries now has or hereafter acquires any right or interest, and the
proceeds, insurance proceeds and products thereof, together with all books and
records, customer lists, credit files, computer files, programs, printouts and
other computer materials and records related thereto, all as more fully
described in, and subject to any exceptions set forth in the Security Documents.

         "EBITDA" means, for any period, and determined in accordance with GAAP
(to the extent applicable), the sum of:

                  (a)     the consolidated pre-tax income of the Company, plus
          the aggregate amount which was deducted for such period in determining
          such consolidated pre-tax income for: (i) interest expense net of
          interest income; (ii) depreciation expense; (iii) amortization
          expense; (iv) compensation expense relating to the issuance of stock
          and stock options to employees, directors and consultants (to the
          extent same do not constitute a use of cash); (v) Permitted Expenses
          and Excess Permitted Expenses; (vi) any non-cash goodwill impairment
          charges; and

                  (b)     for each acquisition of a Qualified Company acquired
          by the Company during the twelve (12) months preceding the date as of
          which EBITDA is calculated and with respect to the period beginning
          twelve (12) months prior to the calculation of EBITDA through the date
          of said acquisition by the Company, the sum of the consolidated
          pre-tax income of such Qualified Company, plus: (i) the aggregate
          amount which was deducted for such period in determining such
          consolidated pre-tax income for (A) interest expense net of interest
          income, (B) depreciation expense, and (C) amortization expense, and
          (ii) Add-Back Adjustments of such Qualified Company; provided, said
          pre-acquisition EBITDA shall be included in EBITDA only to the extent
          any such amount is not included in subparagraph (a) above.

                  Notwithstanding the foregoing, EBITDA will exclude for the
         corresponding period for which EBITDA is calculated (1) any
         extraordinary losses or gains and (2) any gains or losses from asset
         sales (including, but not limited to, the sale of stock of Subsidiaries
         or other dispositions of Subsidiaries or operations for the trailing
         twelve (12) month period immediately preceding the date of calculation)
         other than sales of inventory in the ordinary course of business and
         (3) any EBITDA (whether positive or negative) from operations of
         businesses that were sold in the twelve (12) month period immediately
         preceding the date EBITDA was calculated.

                  Notwithstanding the foregoing, EBITDA will include for the
         corresponding period for which EBITDA is calculated, EBITDA (whether
         positive or negative) from discontinued operations, which operations
         were discontinued after March 31, 2002 but which have not been sold,
         for the trailing twelve (12) month period immediately preceding the
         date of calculation.

                  Furthermore, notwithstanding the foregoing, EBITDA will be
         increased in the fourth quarter of fiscal year 2001 by $18,000,000 for
         historical receivables write-offs or reserves attributable to emerging
         telecommunications and data company customers. To the extent the
         receivables written-off or reserved above are later collected (and
         EBITDA is increased as a result of reversing such write-offs or
         reserves provided above)

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 5

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          ("Telecom Receivables Income"), the positive effect on EBITDA of such
          amount of cash collected shall be excluded in calculating EBITDA for
          the periods in which such Telecom Receivables Income was recorded.
          However, when calculating EBITDA, the Company shall be permitted to
          re-apply (and thus not exclude the positive effect from EBITDA) up to
          an aggregate amount of $5,000,000 of such Telecom Receivables Income
          against any Additional Reserves.

                  "Margin" means:

                  (a)     with respect to Revolving Loans (including Swingline
          Advances) and to Alternate Base Rate Advances, Eurodollar Rate
          Advances, or Commitment Fees, as applicable, the percentage determined
          in accordance with the following table:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Pricing Level        VII              VI               V               IV              III            II            I
-------------------------------------------------------------------------------------------------------------------------
<S>              <C>             <C>              <C>              <C>             <C>             <C>            <C>
Funded           Equal to or     Equal to or      Equal to or      Equal to or     Equal to or     Equal to       Less
Debt/Pro         greater than    greater than     greater than     greater than    greater than    or greater     than
Forma            7.00 to         6.00 to 1.00     5.00 to 1.00     4.00 to 1.00    3.50 to 1.00    than 2.75      2.75 to
EBITDA           1.00            and less than    and less than    and less than   and less than   to 1.00        1.00
Ratio                            7.00 to 1.00     6.00 to 1.00     5.00 to 1.00    4.00 to 1.00    and less
                                                                                                   than 3.50
                                                                                                   to 1.00
-------------------------------------------------------------------------------------------------------------------------
Alternate        2.50%           2.25%            2.00%            1.75%           1.00%           .75%           .50%
Base Rate
Margin
-------------------------------------------------------------------------------------------------------------------------
Eurodollar       4.00%           3.75%            3.50%            3.25%           2.50%           2.25%          2.00%
Margin
-------------------------------------------------------------------------------------------------------------------------
Commitment Fee   .625%           .625%            .625%            .625%           .500%           .375%          .375%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                  (b)     with respect to Tranche A Term Loans and Tranche B
          Term Loans and to Alternate Base Rate Advances and Eurodollar Rate
          Advances, as applicable, the percentage determined in accordance with
          the following table:

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 6

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<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
  Pricing Level         VI              V                IV              III            II             I
---------------------------------------------------------------------------------------------------------------
<S>                <C>             <C>               <C>             <C>            <C>            <C>
Funded Debt/Pro    Equal to or     Equal to or       Equal to or     Equal to or    Equal to or    Less than
Forma EBITDA       greater than    greater than      greater than    greater than   greater than   3.50 to 1.00
Ratio              7.00 to 1.00    6.00 to 1.00      5.00 to 1.00    4.00 to 1.00   3.50 to
                                   and less than     and less than   and less than  1.00 and
                                   7.00 to 1.00      6.00 to 1.00    5.00 to 1.00   less than
                                                                                    4.00 to
                                                                                    1.00
---------------------------------------------------------------------------------------------------------------
Alternate Base     2.75%           2.50%             2.25%           2.00%          1.25%          1.00%
Rate Margin
---------------------------------------------------------------------------------------------------------------
Eurodollar         4.25%           4.00%             3.75%           3.50%          2.75%          2.50%
Margin
---------------------------------------------------------------------------------------------------------------
</TABLE>

                  (c)     with respect to Tranche C Term Loans and to Alternate
          Base Rate Advances for Tranche C Term Loans and Eurodollar Rate
          Advances for Tranche C Term Loans, as applicable, the percentage
          determined in accordance with the following table:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
    Pricing Level                     III                         II                           I
---------------------------------------------------------------------------------------------------------------
<S>                         <C>                         <C>                          <C>
Funded Debt/Pro Forma       Equal to or greater than    Equal to or greater than     Less than 6.00 to 1.00
EBITDA Ratio                7.00 to 1.00                6.00 to 1.00 and less
                                                        than 7.00 to 1.00
---------------------------------------------------------------------------------------------------------------
Alternate Base Rate         2.75%                       2.50%                        2.25%
Margin
---------------------------------------------------------------------------------------------------------------
Eurodollar Margin           4.25%                       4.00%                        3.75%
---------------------------------------------------------------------------------------------------------------
</TABLE>

                  If sufficient information does not exist to calculate the
          applicable Margin, Eurodollar Rate Advances shall not be available to
          the Company and the applicable Margin for Alternate Base Rate Advances
          shall be deemed to be 2.50% for Revolving Loans and 2.75% for Tranche
          A Term Loans, Tranche B Term Loans and Tranche C Term Loans.

                  The pricing, as set forth above, will be at Level VII in the
          case of Revolving Loans, Level VI in the case of Tranche A Term Loans
          and Tranche B Term Loans, and Level III in the case of Tranche C Term
          Loans, from the Fifth Amendment Effective Date until (i) the
          application of the net proceeds of the Equity Investment of at least
          $31,000,000 to the Loans pursuant to Section 2.07(b)(v), and (ii) the
          Company shall have delivered a compliance certificate and unaudited
          financial statements pursuant to Section 6.01 for the fiscal period
          ending June 30, 2002, after which time, pricing will be set as
          described herein.

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 7

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                  "Total Commitment" means the aggregate Commitments of all
          Banks totaling, for all Banks, a maximum of $650,000,000 until the
          Equity Investment Transaction has been consummated and $700,000,000
          thereafter.

                  "Total Revolving Loan Commitment" shall mean (a) until the
          Equity Investment Transaction has been consummated, $250,000,000 and
          (b) after the Equity Investment Transaction has been consummated,
          $300,000,000, representing the sum of the Revolving Loan Commitments
          of each of the Banks, as the same may be terminated or reduced
          pursuant to Section 2.18 and/or 9.02.

          Section 2.3     Deletion of Definitions in Section 1.01. The following
definitions are hereby deleted in their entirety from Section 1.01 of the Credit
Agreement:

                  "Amount Limitation"

                  "Covenant Reduction Date"

                  "Designated"

                  "Designation Notice"

                  "Performance Release Date"

                  "Qualified High Yield Offerings"

          Section 2.4     Amendment to Section 1.03. Section 1.03 of the Credit
Agreement is hereby amended by adding the following sentence at the end of
Section 1.03:

                  Notwithstanding anything to the contrary contained in the
          foregoing, to the extent that all or any portion of the calculation of
          the financial covenants contained in Sections 7.10, 7.11, 7.12, 7.13
          and 7.14 are calculated in accordance with GAAP, such calculation
          shall be in accordance with GAAP in effect as of the Fifth Amendment
          Effective Date.

          Section 2.5     Deletion to Section 2.01(a). Section 2.01(a) of the
Credit Agreement is hereby amended by deleting the last two sentences thereof.

          Section 2.6     Amendment to Section 2.01(a)(i). The second subsection
(i) in Section 2.01(a) of the Credit Agreement is hereby amended by replacing
the reference to "$30,000,000" with "$15,000,000".

          Section 2.7     Amendment to Section 2.07(b). Section 2.07(b) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

         (b)      Mandatory Prepayments.

                  (i)     Revolving Loans. If at any time the Outstanding
          Revolving Credit exceeds the Total Revolving Loan Commitment, the
          Company shall, within one (1)

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 8

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          Business Day after the occurrence thereof, prepay any outstanding
          Swingline Advances (first) and any outstanding Revolving Loans by the
          amount of such excess.

                  (ii)    Prepayments from Asset Dispositions. If the Company or
          any of its Subsidiaries receives Net Proceeds of any Asset
          Disposition, the Company shall make a prepayment in respect of the
          Loans equal to the amount of such Net Proceeds as provided in clause
          (v) below; provided, however, that if no Default or Event of Default
          has occurred and is continuing, the Company shall not be required to
          make such prepayment to the extent that the Net Proceeds from such
          Asset Dispositions during any fiscal year of the Company do not exceed
          $5,000,000 in the aggregate, and provided, further, however, that none
          of the foregoing provisions shall apply to the Net Proceeds of an
          Approved Securitization (which requires the approval of the
          Administrative Agent and the Majority Banks), all the Net Proceeds of
          which shall be applied in accordance with this Section without regard
          to such prior provisions.

                  (iii)   Prepayments from Debt Offerings. In the event that the
          Company or any Subsidiary of the Company issues any debt Securities
          for cash (excluding other Indebtedness permitted by Section 7.03 and
          the issuance of Junior Securities not issued for cash), no later than
          the third Business Day following the date of receipt of the proceeds
          from such issuance, the Company shall make a prepayment in respect of
          the Loans equal to one hundred percent (100%) of the amount of the Net
          Proceeds thereof in prepayment of the Loans as provided in clause (v)
          below.

                  (iv)    Prepayments from Equity Offerings. In the event that
          the Company or any Subsidiary of the Company issues Capital Stock for
          cash (other than pursuant to employee benefit plans sponsored by the
          Company) no later than the third (3rd) Business Day following the date
          of receipt of the Net Proceeds from such issuance, the Company shall
          make a prepayment in respect of the Loans in an amount equal to fifty
          percent (50%) of the amount of such Net Proceeds in prepayment of the
          Loans as provided in clause (v) below; provided, however, that such
          mandatory prepayment shall not be required when the Company's Funded
          Debt to pro forma EBITDA ratio (calculated and determined as provided
          in Section 7.11) is less than or equal to 2.00 to 1.00 at the end of
          the Company's most recently completed fiscal quarter. Notwithstanding
          anything to the contrary contained herein, the Company shall make a
          prepayment in respect of the Loans in an amount equal to (a)
          one-hundred percent (100%) of the net proceeds from the Equity
          Investment (after deduction of the Permitted Expenses), such net
          proceeds not to be less than $31,000,000, and (b) fifty percent (50%)
          of the net proceeds resulting from the Equity Investment Surplus
          (after deduction of the Excess Permitted Expenses), no later than the
          second (2nd) Business Day following the date of receipt thereof, such
          net proceeds to be applied as provided in clause (v) below, unless,
          with respect to the Equity Investment Surplus, such receipt is subject
          to rebate under the terms and conditions of any subscription
          agreements, in which case such net proceeds shall be applied as
          provided in clause (v) below after such rebate period has expired.

                  (v)     Application of Proceeds of Prepayments. Prepayments
          made pursuant to clause (i) above shall be applied to the Revolving
          Loans without any reduction in the Revolving Loan Commitments.
          Prepayments made pursuant to clause (ii) above shall be

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 9

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          applied pro rata to all of the Loans (which, with respect to the Term
          Loans, shall be applied in the inverse order of maturity), with a
          permanent reduction of the Revolving Loan Commitments in the amount of
          the prepayment applied to the Revolving Loans. Prepayments made
          pursuant to clause (iii) and (iv) above, except for the Equity
          Investment and Equity Investment Surplus, shall be applied pro rata to
          all of the Loans (which, with respect to the Term Loans, shall be
          applied in the inverse order of maturity) with a permanent reduction
          of the Revolving Loan Commitments in the amount of the prepayment
          applied to the Revolving Loans. Prepayments made pursuant to the
          Equity Investment (less the Permitted Expenses) shall be applied to
          the Term Loans on a pro rata basis in the inverse order of maturity.
          Prepayments made pursuant to the Equity Investment Surplus (which
          prepayment is understood to be limited to fifty percent (50%) of (A)
          the gross proceeds of the Equity Investment Surplus less (B) the
          Excess Permitted Expenses) shall be applied pro rata to all of the
          Loans (which, with respect to the Term Loans, shall be applied in the
          inverse order of maturity), with a permanent reduction of the
          Revolving Loan Commitments in the amount of the prepayment applied to
          the Revolving Loans. Prepayments made pursuant to clause (vi) shall be
          applied pro rata to all of the Loans (which, with respect to the Term
          Loans, shall be applied in the inverse order of maturity), with a
          permanent reduction of the Revolving Loan Commitments in the amount of
          the prepayment applied to the Revolving Loans. Anything herein to the
          contrary notwithstanding, so long as any Tranche A Term Loan or
          Tranche B Term Loan is outstanding, any holder of a Tranche C Term
          Loan shall have the right to refuse to be prepaid its portion of any
          prepayment pursuant to this Section 2.07(b). In such event, the
          prepayment refused by such holder of a Tranche C Term Loan shall be
          allocated as provided in this clause (v) to Loans other than Tranche C
          Term Loans.

                  (vi)    Prepayments from Excess Cash Flow. Not later than
          July 1 of each year, beginning with year 2003, the Company shall
          prepay an aggregate principal amount equal to fifty percent (50%) of
          Excess Cash Flow less one hundred percent (100%) of any voluntary
          prepayments of the Loans that permanently reduce the Loans during the
          period for which the corresponding Excess Cash Flow was computed, the
          proceeds of which shall be applied to the Loans pursuant to clause (v)
          above. All prepayments made under this clause (vi) shall be
          accompanied by a certificate demonstrating the calculation of Excess
          Cash Flow, which shall be certified by the chief financial officer or
          chief accounting officer or treasurer of the Company.

          Section 2.8     Deletion to Section 3.01(a). Section 3.01(a) of the
Credit Agreement is hereby amended by deleting the last sentence thereof.

          Section 2.9     Amendment to Section 3.01(a)(ii). Section 3.01(a)(ii)
of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:

                  (ii)    the expiry date or, in the case of any Letter of
          Credit containing an expiry date that is renewable at the option of
          the Issuing Bank, the initial expiry date of such Letter of Credit is
          a date that is (A) later than one year from the date of issuance or
          (B) later than the Revolving Loan Maturity Date.

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 10

<PAGE>

          Section 2.10    Replacement of Schedule 5.16. Schedule 5.16 attached
to the Credit Agreement is replaced with the Schedule 5.16 attached hereto.

          Section 2.11    Amendment to Section 6.01(a). Section 6.01(a) of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                  (a)     As soon as available, and in any event within fifty
          (50) days of the end of each fiscal quarter, the consolidated and the
          Consolidating balance sheet of the Company and its Subsidiaries as of
          the end of such period, the related consolidated and Consolidating
          statements of income, and the related consolidated statements of
          stockholders' equity and cash flows for such period and, in each case,
          also for the portion of the fiscal year ended at the end of such
          period, setting forth comparative consolidated figures for the related
          periods in the prior fiscal year, all of which shall be certified by
          the chief financial officer or chief executive officer of the Company
          as fairly presenting, in all material respects, the financial position
          of the Company and its Subsidiaries as of the end of such period and
          the results of their operations for the period then ended in
          accordance with GAAP, subject to changes resulting from normal
          year-end audit adjustments.

          Section 2.12    Amendment to Section 6.01(b). Section 6.01(b) of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                  (b)     (i)  As soon as available, and in any event within
          ninety-five (95) days after the close of each fiscal year of the
          Company, the audited consolidated and the unaudited Consolidating
          balance sheets of the Company and its Subsidiaries as at the end of
          such fiscal year, the related consolidated and Consolidating
          statements of income, and the related consolidated statements of
          stockholders' equity and cash flows for such fiscal year, setting
          forth comparative consolidated figures for the preceding fiscal year
          and certified by KPMG LLP or other independent certified public
          accountants of recognized national standing acceptable to the
          Administrative Agent, whose report shall be without limitation as to
          the scope of the audit and reasonably satisfactory in substance to the
          Banks; and (ii) a copy of Projections for the Company's fiscal year
          immediately following the Fiscal Year which is the subject of the
          financial statements delivered pursuant to clause (i) preceding.

          Section 2.13    Amendment to Section 6.12. Section 6.12 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:

                  Section 6.12 Monthly Reporting. As soon as available, and in
          any event within thirty-five (35) days after the end of each month
          (except for the months of March, June and September), the Company
          shall deliver to the Administrative Agent both paper and electronic
          copies of (i) the consolidated balance sheet and related statements of
          income and cash flow for such month, and also for the portion of the
          fiscal year ended at the end of such month, setting forth comparative
          consolidated figures for the related periods in the prior fiscal year
          and also setting forth a comparison with the budgeted figures for the
          relevant time period, all of which shall be certified by the chief
          financial officer or chief accounting officer or treasurer for the
          Company as fairly representing, in all material

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 11

<PAGE>

          respects, the financial position of the Company and its Subsidiaries
          as of the end of such period and the results of their operations for
          the period then ended in accordance with GAAP, subject to changes
          resulting from normal year-end audit adjustments and the absence of
          footnotes and (ii) a consolidated receivables aging summary for the
          Company and its Subsidiaries as of the end of the preceding month.

          Section 2.14    Addition of Section 6.15. Section 6.15 is hereby added
to the Credit Agreement to read in its entirety as follows:

                  Section 6.15  Registration Statement. The Company shall file a
          registration statement on Form S-3 with the Securities and Exchange
          Commission under the Securities Act covering the rights offering
          relating to the Equity Investment within three (3) Business Days of
          the Fifth Amendment Effective Date.

          Section 2.15    Addition of Section 6.16. Section 6.16 is hereby added
to the Credit Agreement to read in its entirety as follows:

                  Section 6.16 Closing of Equity Investment Transaction. The
          Company shall use its best efforts to ensure that the Equity
          Investment Transaction occurs on or before October 15, 2002. If the
          Equity Investment Transaction is consummated after September 30, 2002
          but on or before October 15, 2002, the financial covenants contained
          in Sections 7.10, 7.11 and 7.12, shall be calculated giving pro forma
          effect to the Equity Investment Transaction as if it had been
          consummated on September 30, 2002.

          Section 2.16    Amendment to Section 7.02. Section 7.02(a) of the
Credit Agreement is amended and restated to read in its entirety as follows:

                  (a)     Except as disclosed on Schedule 7.02, the Company will
          not, and will not permit any of its Subsidiaries to, wind up,
          liquidate or dissolve their affairs, or agree to be acquired by any
          third party in any transaction of merger or consolidation in which the
          Company or a Domestic Subsidiary which is a Guarantor is not the sole
          surviving entity, or sell or otherwise dispose of all or any
          substantial part of their property or assets (including the capital
          stock of any Subsidiary) other than: (i) sales of inventory and
          surplus or obsolete assets in the ordinary course of business that do
          not prejudice the Banks in any material way, (ii) dispositions of the
          stock of Subsidiaries to, or mergers with, other Wholly-Owned Domestic
          Subsidiaries of the Company that have complied with Section 6.09 and
          that are Guarantors, (iii) any sale of assets (including the capital
          stock of any Subsidiary) with a value equal to or less than the
          greater of $50,000,000 or five percent (5%) of the Company's
          Consolidated Net Worth (measured as of the most recently ended fiscal
          quarter), provided the proceeds of such sale are applied as required
          by Section 2.07(b)(ii), (iv) securitization of Accounts pursuant to a
          securitization structure and upon terms and conditions approved by the
          Administrative Agent and Majority Banks (an "Approved
          Securitization"), provided that the proceeds of such securitization
          are applied as required by Section 2.07(b)(ii), and (v) liquidation of
          a Wholly-Owned Subsidiary into another Wholly-Owned Subsidiary,
          provided that a Guarantor may only be liquidated into another
          Guarantor or the Company.

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 12

<PAGE>

          Section 2.17    Amendment to Section 7.03(f). Section 7.03(f) of the
Credit Agreement is amended and restated to read in its entirety as follows:

                  (f)     Intercompany Indebtedness of (i) any Domestic
          Subsidiary of the Company which is a Guarantor to the Company or any
          Wholly-Owned Domestic Subsidiary that is a Guarantor or (ii) the
          Company to any Wholly-Owned Domestic Subsidiary of the Company;

          Section 2.18    Amendment to Section 7.03(g). Section 7.03(g) of the
Credit Agreement is amended and restated to read in its entirety as follows:

                  (g)     guarantees by the Company or any of its Subsidiaries
          of Indebtedness of any Subsidiary of the Company that is a Guarantor
          permitted to be incurred, created or existing pursuant to this
          Agreement, provided that such guarantees are not secured by any Liens;

          Section 2.19    Amendment to Section 7.03(k). Section 7.03(k) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (k)     (i)     following the Fifth Amendment Effective Date,
          other Indebtedness (which shall not include Indebtedness incurred
          pursuant to subsection (ii) of this Section 7.03(k)) meeting the
          following criteria: (A) such Indebtedness is subordinate to the
          Obligations containing subordination terms which are substantially
          similar to the BOSC Senior Subordinated Notes Indenture or are more
          favorable to senior creditors (as determined by the Administrative
          Agent) or that are otherwise consented to by the Majority Banks, (B)
          none of such Indebtedness matures prior to one hundred eighty (180)
          days after the maturity and payment in full of the Tranche C Term
          Loans and termination of the Total Tranche C Term Loan Commitment, (C)
          no payments or prepayments of principal or sinking fund amounts shall
          be made in respect of such indebtedness prior to one hundred eighty
          (180) days after payment in full of the Tranche C Term Loans and
          termination of the Total Tranche C Term Loan Commitment, (D) such
          Indebtedness shall contain covenants that are no more restrictive or
          materially more burdensome to the Company and/or its Subsidiaries than
          the BOSC Senior Subordinated Notes Indenture (as determined by the
          Administrative Agent) or are otherwise consented to by the Majority
          Banks), (E) such Indebtedness shall not contain any terms as to which
          compliance would cause a Default or Event of Default to occur based
          upon the Company's financial projections, (F) such Indebtedness shall
          contain no restrictions or limitations on Liens in favor of the
          Administrative Agent or any Bank, (G) with respect to the first
          $100,000,000 of such Indebtedness, in the aggregate (measured as of
          the date of incurrence), seventy-five percent (75%) of the Net
          Proceeds of such Indebtedness shall be used to reduce the Loans on a
          pro rata basis (which, with respect to the Term Loans, shall be
          applied in the inverse order of maturity), with a permanent reduction
          of the Revolving Loan Commitments in the amount of the prepayment
          applied to the Revolving Loans, and (H) with respect to all of such
          Indebtedness in excess of $100,000,000, in the aggregate (measured as
          of the date of incurrence), one hundred percent (100%) of the Net
          Proceeds of such Indebtedness shall be used to reduce the Loans on a
          pro rata basis (which, with respect to the Term Loans, shall be
          applied in the inverse order of maturity), with a

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 13

<PAGE>

          permanent reduction of the Revolving Loan Commitments in the amount of
          the prepayment applied to the Revolving Loans; and

          (ii)    Indebtedness arising as a result of the exchange of Junior
          Securities for (A) the cancellation and/or redemption, dollar for
          dollar, of any or all Indebtedness under this Agreement and/or (B) the
          exchange, cancellation and/or redemption, dollar for dollar, of the
          Company's other Indebtedness represented by debt securities, to the
          extent the Company and the holder of such Indebtedness mutually agree
          to be exchanged, cancelled or redeemed;

          Section 2.20    Amendment to Section 7.03(l). Section 7.03(l) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (l)     other outstanding Indebtedness permitted under this
          Agreement prior to the Fifth Amendment Effective Date;

          Section 2.21    Deletion of Section 7.03(n). Section 7.03(n) of the
Credit Agreement is hereby deleted in its entirety and replaced with "[omitted
intentionally]".

          Section 2.22 Amendment to Section 7.03(o). Section 7.03(o) of the
Credit Agreement is hereby amended and restated to read its entirety as follows:

                  (o)     other Indebtedness not exceeding $1,000,000;

          Section 2.23 Amendment to Section 7.04(e). Section 7.04(e) of the
Credit Agreement is hereby amended and restated to read its entirety as follows:

                  (e)     other Liens on assets not included in the Collateral
          (as defined prior to the Fifth Amendment Effective Date) securing
          obligations allowed pursuant to Article VII of this Agreement not
          exceeding $3,000,000 in the aggregate at any one time;

          Section 2.24    Amendment to Section 7.04(g). Section 7.04(g) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (g)     Liens arising pursuant to purchase money mortgages or
          security interests securing Indebtedness representing the purchase
          price (or financing of the purchase price within ninety (90) days
          after the respective purchase) of assets acquired after the Effective
          Date, provided that (i) any such Liens attach only to the assets so
          purchased, upgrades thereon and, if the asset so purchased is an
          upgrade, the original asset itself (and such other assets financed by
          the same financing source), (ii) the Indebtedness (other than
          Indebtedness incurred from the same financing source to purchase other
          assets and excluding Indebtedness representing obligations to pay
          installation and delivery charges for the property so purchased)
          secured by any such Lien does not exceed 100%, nor is less than 80%,
          of the lesser of the fair market value or the purchase price of the
          equipment being purchased at the time of the incurrence of such
          Indebtedness, (iii) the Indebtedness secured thereby is permitted to
          be incurred pursuant to Section 7.03(o) and (iv) the Indebtedness
          secured thereby does not exceed $1,000,000 in the aggregate; and

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 14

<PAGE>

          Section 2.25    Amendment to Section 7.04(h). Section 7.04(h) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (h)     Liens securing Indebtedness permitted by Section
          7.03(n) (as in effect immediately prior to the Fifth Amendment
          Effective Date) if secured on the date of the applicable Permitted
          Acquisition and if the Permitted Acquisition occurred prior to the
          Fifth Amendment Effective Date;

          Section 2.26    Amendment to Section 7.05(d). Section 7.05(d) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (d)     Investments in the stock, warrants, stock appreciation
          rights, other securities and/or other assets of Qualified Companies
          consummated prior to the Fifth Amendment Effective Date;

          Section 2.27    Amendment to Section 7.05(e). Section 7.05(e) of the
Credit Agreement is amended and restated to read in its entirety as follows:

                  (e)     other Investments existing as of the Fifth Amendment
          Effective Date or made after the Fifth Amendment Effective Date,
          including Investments in the form of loans, leases or advances to
          customers of the Company and its Subsidiaries made to finance the
          acquisition of equipment by such customers, not exceeding $5,000,000
          in the aggregate at any one time outstanding (to be measured as of the
          date of the Investment);

          Section 2.28    Amendment to Section 7.05(f). Section 7.05(f) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

                  (f)     Investments in the form of stock buy backs allowed
          under Section 7.06 and consummated prior to the Fifth Amendment
          Effective Date; and

          Section 2.29    Amendment to Section 7.06. Section 7.06 of the Credit
Agreement is amended and restated to read in its entirety as follows:

                  Section 7.06  Restricted Payments. The Company will not use
          cash to pay any dividends or redeem, retire, purchase or guaranty the
          value of or make any other acquisition, direct or indirect, of any
          shares of any class of Capital Stock of the Company or any warrants,
          rights or options to acquire any such Capital Stock, now or hereafter
          outstanding, or make any cash payment to any Affiliate of the Company
          (other than a Wholly-Owned Domestic Subsidiary that is a Guarantor)
          with respect to any management service operations, advisory or similar
          expense, except to the extent that the consideration therefor is
          approved by the Majority Banks or otherwise is permitted by Section
          7.09; provided, the Company may: (i) prior to the Fifth Amendment
          Effective Date, complete the Common Stock Repurchase, (ii) prior to
          the Fifth Amendment Effective Date, purchase shares of Common Stock,
          (iii) redeem or purchase shares of the Company Common Stock or options
          to purchase the Company Common Stock, as the case may be, held by
          former employees of the Company or any of its Subsidiaries following
          the termination of their employment (by death, disability or
          otherwise), provided that (x) the only consideration paid by the
          Company in respect of such

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 15

<PAGE>

          redemptions and/or purchases shall be cash, forgiveness of liabilities
          and/or Shareholder Subordinated Notes, (y) the sum of (A) the
          aggregate amount paid by the Company in cash in respect of all such
          redemptions and/or purchases plus (B) the aggregate amount of
          liabilities so forgiven plus (C) the aggregate amount of all cash
          principal and interest payments made on Shareholder Subordinated
          Notes, in each case after the Fifth Amendment Effective Date, and
          pursuant to this subsection (iii), shall not exceed $5,000,000 and (z)
          at the time of any cash payment or forgiveness of liabilities
          permitted to be made pursuant to this Section 7.06(iii), including any
          cash payment under a Shareholder Subordinated Note, no Default or
          Event of Default shall then exist or result therefrom; (iv) pay cash
          in lieu of fractional shares of Common Stock issued in connection with
          a conversion of Preferred Stock into Common Stock in accordance with
          the relevant provisions of the statement of designation therefor, so
          long as the aggregate amount of all cash paid pursuant to this clause
          (iv) does not exceed $500,000 in any calendar year; (v) pay cash in
          lieu of fractional shares of the Company's Common Stock in connection
          with any reverse stock split, so long as the aggregate amount of all
          cash paid pursuant to this clause (v) does not exceed $500,000 in any
          calendar year; and (vi) redeem options to purchase the Company's
          Common Stock, so long as the aggregate amount of all cash paid
          pursuant to this clause (vi) does not exceed $500,000 in any calendar
          year.

          Section 2.30    Amendment to Section 7.09(ii). Subsection (ii) of
Section 7.09 of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:

                  (ii)    intercompany transactions among the Company and its
          Domestic Subsidiaries that are Guarantors;

          Section 2.31    Deletion of Section 7.09(v). Subsection (v) of Section
7.09 of the Credit Agreement is hereby deleted in its entirety and replaced with
"[omitted intentionally]".

          Section 2.32    Amendment to Section 7.11. Section 7.11 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:

                  Section 7.11  Funded Debt to Pro Forma EBITDA Ratio. The
          Company will not permit, as of the last day of any fiscal quarter
          (beginning with the fiscal quarter ended June 30, 2002), the ratio of
          its Funded Debt to pro forma EBITDA calculated for the preceding four
          (4) quarters on a rolling four (4) quarter basis, ending on each date
          as set forth below, to be greater than:

--------------------------------------------------------------------------------
           Period Ending                                   Funded Debt Ratio
--------------------------------------------------------------------------------
June 30, 2002                                                 8.70 to 1.00
--------------------------------------------------------------------------------
September 30, 2002                                            7.60 to 1.00
--------------------------------------------------------------------------------
December 31, 2002                                             7.60 to 1.00
--------------------------------------------------------------------------------
March 31, 2003                                                7.60 to 1.00
--------------------------------------------------------------------------------

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 16

<PAGE>

--------------------------------------------------------------------------------
           Period Ending                                   Funded Debt Ratio
--------------------------------------------------------------------------------
June 30, 2003                                                 7.40 to 1.00
--------------------------------------------------------------------------------
September 30, 2003                                            7.05 to 1.00
--------------------------------------------------------------------------------
December 31, 2003                                             6.65 to 1.00
--------------------------------------------------------------------------------
March 31, 2004                                                6.45 to 1.00
--------------------------------------------------------------------------------
June 30, 2004                                                 6.35 to 1.00
--------------------------------------------------------------------------------
September 30, 2004                                            6.20 to 1.00
--------------------------------------------------------------------------------
December 31, 2004                                             6.10 to 1.00
--------------------------------------------------------------------------------
March 31, 2005                                                6.10 to 1.00
--------------------------------------------------------------------------------
June 30, 2005                                                 6.10 to 1.00
--------------------------------------------------------------------------------
September 30, 2005                                            6.10 to 1.00
--------------------------------------------------------------------------------
December 31, 2005 and thereafter                              5.60 to 1.00
--------------------------------------------------------------------------------

          Section 2.33    Amendment to Section 7.12. Section 7.12 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:

                  Section 7.12  Senior Debt to Pro Forma EBITDA Ratio. The
          Company will not permit, as of the last day of any fiscal quarter
          (beginning with the fiscal quarter ended June 30, 2002), the ratio of
          Senior Debt to its pro forma EBITDA calculated for the preceding four
          (4) quarters on a rolling four (4) quarter basis, ending on each date
          set forth below, to be greater than:

--------------------------------------------------------------------------------
           Period Ending                                   Senior Debt Ratio
--------------------------------------------------------------------------------
June 30, 2002                                                 5.25 to 1.00
--------------------------------------------------------------------------------
September 30, 2002                                            4.50 to 1.00
--------------------------------------------------------------------------------
December 31, 2002                                             4.50 to 1.00
--------------------------------------------------------------------------------
March 31, 2003                                                4.50 to 1.00
--------------------------------------------------------------------------------
June 30, 2003                                                 4.40 to 1.00
--------------------------------------------------------------------------------
September 30, 2003                                            4.25 to 1.00
--------------------------------------------------------------------------------

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 17

<PAGE>

--------------------------------------------------------------------------------
           Period Ending                                   Senior Debt Ratio
--------------------------------------------------------------------------------
December 31, 2003                                             4.00 to 1.00
--------------------------------------------------------------------------------
March 31, 2004                                                3.85 to 1.00
--------------------------------------------------------------------------------
June 30, 2004                                                 3.80 to 1.00
--------------------------------------------------------------------------------
September 30, 2004                                            3.80 to 1.00
--------------------------------------------------------------------------------
December 31, 2004                                             3.70 to 1.00
--------------------------------------------------------------------------------
March 31, 2005                                                3.70 to 1.00
--------------------------------------------------------------------------------
June 30, 2005                                                 3.70 to 1.00
--------------------------------------------------------------------------------
September 30, 2005                                            3.70 to 1.00
--------------------------------------------------------------------------------
December 31, 2005 and thereafter                              3.45 to 1.00
--------------------------------------------------------------------------------

          Section 2.34    Amendment to Section 7.13. Section 7.13 of the Credit
Agreement is amended and restated to read in its entirety as follows:

                  Section 7.13  Capital Expenditures. During each fiscal year
         during the term hereof following fiscal year 2001, the Company will not
         permit nonacquisition related Capital Expenditures (including
         Capitalized Lease Obligations but excluding Janitorial Equipment) to be
         greater than the following, calculated in each case as of the last day
         of the fiscal year: (a) for fiscal year 2002, $45,000,000 and (b) for
         fiscal year 2003 and each fiscal year thereafter, $55,000,000.
         Notwithstanding the foregoing, up to $5,000,000 of any unused portion
         of Capital Expenditures for fiscal years 2001 and 2002 may be carried
         over to fiscal years 2002 and 2003, respectively, and up to $10,000,000
         of any unused portion of Capital Expenditures for fiscal years 2003 and
         2004 may be carried over to fiscal years 2004 and 2005, respectively.

          Section 2.35    Amendment to Section 7.14. Section 7.14 of the Credit
Agreement is hereby amended and restated in its entirety as follows:

                  Section 7.14  Fixed Charge Coverage Ratio. The Company will
          not permit, as of the last day of any fiscal quarter (beginning with
          the fiscal quarter ended June 30, 2002), the ratio of (a) pro forma
          EBITDA calculated for the preceding four (4) quarters on a rolling
          four (4) quarter basis, minus non-acquisition Capital Expenditures
          (including Capitalized Lease Obligations but excluding Janitorial
          Equipment) actually made during the preceding four fiscal quarters, to
          (b) the sum of (without duplication): (i) cash interest expense net of
          interest income, (ii) scheduled amortization of principal of the Term
          Loans and any other amortizing loans and scheduled payments in respect
          of Capitalized Lease Obligations, and (iii) mandatory dividends paid
          in cash on Preferred

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 18

<PAGE>

          Stock, all calculated for the preceding four (4) quarters on a rolling
          four (4) quarter basis, to be less than the following as of the end of
          the applicable period set forth below:

--------------------------------------------------------------------------------
        Period Ending                               Fixed Charge Coverage Ratio
--------------------------------------------------------------------------------
June 30, 2002                                                 0.80 to 1.00
--------------------------------------------------------------------------------
September 30, 2002                                            0.95 to 1.00
--------------------------------------------------------------------------------
December 31, 2002                                             1.00 to 1.00
--------------------------------------------------------------------------------
March 31, 2003                                                1.00 to 1.00
--------------------------------------------------------------------------------
June 30, 2003                                                 1.00 to 1.00
--------------------------------------------------------------------------------
September 30, 2003                                            1.00 to 1.00
--------------------------------------------------------------------------------
December 31, 2003                                             1.00 to 1.00
--------------------------------------------------------------------------------
March 31, 2004                                                1.00 to 1.00
--------------------------------------------------------------------------------
June 30, 2004                                                 1.00 to 1.00
--------------------------------------------------------------------------------
September 30, 2004                                            1.00 to 1.00
--------------------------------------------------------------------------------
December 31, 2004                                             1.00 to 1.00
--------------------------------------------------------------------------------
March 31, 2005                                                1.00 to 1.00
--------------------------------------------------------------------------------
June 30, 2005                                                 1.00 to 1.00
--------------------------------------------------------------------------------
September 30, 2005                                            1.00 to 1.00
--------------------------------------------------------------------------------
December 31, 2005 and thereafter                              1.10 to 1.00
--------------------------------------------------------------------------------

          Section 2.36    Amendment to Section 7.15. Section 7.15 of the Credit
Agreement is amended and restated to read in its entirety as follows:

                  Section 7.15  Limitations on Acquisitions. Following the Fifth
          Amendment Effective Date, the Company will not and will not permit any
          Subsidiary to acquire any Person or business.

          Section 2.37    Amendment to Section 7.16. Section 7.16 of the Credit
Agreement is amended and restated to read in its entirety as follows:

                  Section 7.16  Subordinated Debt. The Company will not amend or
          obtain or grant a waiver of any provision of (i) the Indentures, or
          (ii) any subordinated

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 19

<PAGE>

          Indebtedness listed on Schedule 7.03(b) or any agreement or
          arrangement in respect thereof, except for amendments and waivers that
          are not to the material detriment of the Banks. The Company will not
          voluntarily prepay any portion of (X) the Indentures, or (Y) any
          subordinated Indebtedness listed on Schedule 7.03(b) unless permitted
          by Section 7.03(k)(ii) hereof, which permitted prepayments shall only
          be in the form of Junior Securities.

          Section 2.38    Additions to Section 9.01. Subsections (k) and (l) are
added to Section 9.01 of the Credit Agreement to read in their entirety as
follows:

                  (k)     the Equity Investment Transaction does not occur on or
          before the earlier of (i) thirty (30) calendar days after shareholder
          approval of the Equity Investment has been obtained and (ii) October
          15, 2002; or

                  (l)     shareholder approval of the Apollo Group's purchase of
          at least $35,000,000 of the Company's common stock as a part of the
          Equity Investment is not obtained when a shareholder vote is held
          thereon.

          Section 2.39    Amendment to Section 9.01(c). The reference to
"Article VIII" contained in subsection (c) of Section 9.01 is hereby deleted in
its entirety and is replaced with "Article VII."

          Section 2.40    Amendment to Section 11.2. The notice addresses
contained in Section 11.2 of the Credit Agreement are amended in their entirety
to read as follows:

                  (a)     If to the Company and the Guarantors:

                          Encompass Services Corporation
                          3 Greenway Plaza, Suite 2000
                          Houston, Texas 77046
                          Telephone No.:   (713)  860-0100
                          Telecopy No.:    (713)  960-0126
                          Attention:       Chief Financial Officer

                  (b)     If to the Administrative Agent:

                          Bank of America
                          901 Main Street, 66th Floor
                          Dallas, Texas 75202
                          Telephone No.:   (214)  209-2023
                          Telecopy No.:    (214)  209-3533
                          Attention:       William E. Livingstone, IV

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 20

<PAGE>

                                   ARTICLE 3

                  RATIFICATIONS, REPRESENTATIONS AND WARRANTIES

          Section 3.1     Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms and provisions
set forth in the Credit Agreement and except as expressly modified and
superseded by this Amendment, the terms and provisions of the Credit Agreement
and the other Loan Documents are ratified and confirmed and shall continue in
full force and effect. The Company, the Guarantors and the Banks agree that the
Credit Agreement as amended hereby and the other Loan Documents shall continue
to be legal, valid, binding and enforceable in accordance with their respective
terms, except, in each case, as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and by general principles of equity regardless of whether such
enforceability is sought in a proceeding in equity or at law.

          Section 3.2     Representations and Warranties. The Company and each
Guarantor each hereby represent and warrant to the Banks that (i) the execution,
delivery and performance of this Amendment and any and all other Loan Documents
executed and/or delivered in connection herewith have been authorized by all
requisite action on the part of the Company and such Guarantor and will not
violate the certificate or articles of incorporation, other organizational
documents or bylaws of the Company or any Guarantor; (ii) the representations
and warranties contained in the Credit Agreement, as amended hereby, and any
other Loan Document are true and correct in all material respects on and as of
the date hereof as though made on and as of the date hereof (except to the
extent that such representations and warranties were expressly, in the Credit
Agreement, made only in reference to a specific date); and (iii) after giving
effect to this Amendment, no Default or Event of Default has occurred and is
continuing.

                                    ARTICLE 4

                                  MISCELLANEOUS

          Section 4.1     Conditions to Effectiveness. This Amendment shall be
effective upon the execution hereof by the Company, the Guarantors, the Majority
Banks and the Administrative Agent and upon the occurrence of or delivery to the
Administrative Agent of the following:

                  (a)     Payment of Amendment Fees. The Company shall have paid
          an amendment fee to the Administrative Agent, for the benefit of each
          of the Banks that have consented to and executed this Amendment on or
          before June 24, 2002, in an amount equal to 0.25% of the Total
          Revolving Loan Commitment and the outstanding principal amount of the
          Term Loans. The amount of the amendment fee shall be calculated (i)
          after giving pro forma effect to the $31,000,000 reduction to the Term
          Loans based upon the net proceeds from the Equity Investment and (ii)
          after giving effect to the $50,000,000 reduction to the Total
          Revolving Loan Commitment contemplated by this Amendment;

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 21

<PAGE>

                  (b)     Amended and Restated Security Agreement. The Company
          and the Domestic Subsidiaries shall have executed that certain Amended
          and Restated Security Agreement dated the date hereof on terms and
          conditions satisfactory to the Administrative Agent;

                  (c)     Resolutions. Resolutions of the board of directors or
          other appropriate body of the Company and each Subsidiary certified by
          its Secretary or an Assistant Secretary or other analogous officer or
          representative which authorize the execution, delivery and performance
          by such Person of this Amendment and such other Loan Documents to be
          executed in connection herewith to which it is or is to be a party;

                  (d)     Incumbency Certificate. A certificate of incumbency
          certified by the Secretary or an Assistant Secretary or other
          analogous officer or representative of the Company and each Subsidiary
          certifying as to the name of each officer or other representative of
          such Person (i) who is authorized to sign this Amendment or any Loan
          Document to which such Person is or is to be a party (including any
          certificate contemplated herein), together with specimen signatures of
          each such officer or other representative, and (ii) who will, until
          replaced by other officers or representatives duly authorized for that
          purpose, act as its representative for the purposes of signing
          documents and giving notices and other communications in connection
          with the Loan Documents and the transactions contemplated thereby;

                  (e)     Articles or Certificates of Incorporation, etc.
          Certified copies of any amendments of or other changes to articles or
          certificates of incorporation, certificate of formation, certificate
          of limited partnership, partnership agreement or other analogous
          constitutional document of the Company and each Subsidiary since
          November 9, 2001, certified by the Secretary of State or other
          applicable Governmental Authority of the state or other jurisdiction
          of incorporation or organization of the Company and each Subsidiary
          and dated within twenty-five (25) days prior to the Fifth Amendment
          Effective Date;

                  (f)     Bylaws. Certified copies of any amendments of or other
          changes to the bylaws or other analogous constitutional document of
          the Company and each Subsidiary since November 9, 2001, certified by
          the Secretary or an Assistant Secretary or other analogous officer or
          representative of such Person;

                  (g)     Government Certificates. Certificates of appropriate
          officials as to the existence and good standing, status or compliance,
          as applicable, of the Company and each Subsidiary in its jurisdiction
          of incorporation or organization and any and all jurisdictions where
          the Company is qualified to do business as a foreign corporation or
          other entity, each such certificate to be dated within twenty-five
          (25) days prior to the Fifth Amendment Effective Date;

                  (h)     Payment of Fees and Expenses. The Company shall have
          paid all reasonable costs, fees, expenses (including, without
          limitation, legal fees and expenses, fees of professional advisors and
          consultants and filing fees) and compensation contemplated hereby of
          or incurred by Banc of America Securities, LLC ("BAS") and the

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 22

<PAGE>

          Administrative Agent (including their counsel and professional
          advisors) to the extent billed on or before the date hereof;

                  (i)     No Prohibitions. A certificate of an officer of the
          Company to the effect that no Governmental Requirement shall prohibit
          the consummation of the transactions contemplated by this Amendment or
          any other Loan Document to be delivered in connection herewith, and no
          order, judgment or decree of any Governmental Authority or arbitrator
          shall, and no litigation or other proceeding shall be pending or
          threatened which would, enjoin, prohibit, restrain or otherwise
          adversely affect the consummation of the transactions contemplated by
          this Amendment or the other Loan Documents to be delivered in
          connection herewith;

                  (j)     Representations and Warranties. The Company shall have
          certified that the representations and warranties contained herein and
          in all other Loan Documents, as amended hereby, shall be true and
          correct in all material respects as of the Fifth Amendment Effective
          Date as if made on the Fifth Amendment Effective Date;

                  (k)     Default. The Company shall have certified that no
          Default or Event of Default shall have occurred and be continuing
          after giving effect to this Amendment, and no event or condition shall
          have occurred that with the giving of notice or lapse of time or both
          would be a Default or Event of Default after giving effect to this
          Amendment;

                  (l)     Compliance Certificate. The Company shall have
          submitted a compliance certificate in form and substance satisfactory
          to the Administrative Agent, demonstrating that no Default or Event of
          Default exists after giving effect to this Amendment;

                  (m)     Material Adverse Change. The Company shall have
          certified that except as previously disclosed in writing to the Banks,
          since December 31, 2001, there shall have been no Material Adverse
          Effect in the consolidated financial condition (including the
          business, assets, operations or condition, financial or otherwise) of
          the Company and its Subsidiaries taken as a whole;

                  (n)     Delivery of Documents. All of the documentation
          pursuant to this Amendment and the other Loan Documents, shall have
          been delivered and in form and substance satisfactory to BAS, the
          Administrative Agent, the Syndication Agent and the Majority Banks;

                  (o)     Agreement Regarding Equity Investment. The Apollo
          Group shall have executed an agreement in form and substance
          satisfactory to the Administrative Agent (i) requiring the Apollo
          Group to vote in favor of the Equity Investment when shareholder
          approval of the Equity Investment is sought and (ii) requiring the
          Apollo Group to purchase at least $35,000,000 in common equity of the
          Company;

                  (p)     Opinions of Company's Counsel. Opinions addressed to
          the Administrative Agent and the Banks from Bracewell & Patterson,
          L.L.P. and the General Counsel to the Company, as to such matters as
          the Administrative Agent may reasonably request; and

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 23

<PAGE>

                  (q)     Proceedings Satisfactory. All matters and proceedings
          taken in connection with this Amendment and the other Loan Documents
          to be delivered in connection herewith shall be reasonably
          satisfactory to the Administrative Agent and its counsel.

The Company shall deliver, or cause to be delivered, to the Administrative Agent
sufficient counterparts of each agreement, document or instrument to be received
by the Administrative Agent under this Section 4.1 to permit the Administrative
Agent to distribute a copy of the same to each Bank.

          Section 4.2     Conditions Subsequent. The following conditions shall
be satisfied following the effective date of this Amendment upon the following
terms:

                  (a)     Field Examination. The Company and its Subsidiaries
          shall permit an agent of the Banks to conduct a field examination on
          terms and conditions satisfactory to the Administrative Agent, which
          field examination shall be completed on or before ninety (90) days
          following the effective date of this Amendment.

          Section 4.3     Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan Document
including any Loan Document furnished in connection with this Amendment shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Banks or the Administrative Agent shall
affect the representations and warranties or the right of the Banks or the
Administrative Agent to rely upon them. The Company, Guarantors, Administrative
Agent and Banks acknowledge that the restrictions contained in the Credit
Agreement prohibiting the payment of dividends are contrary to the dividend
requirements of the Company's preferred stock, and agree that such conflict
shall not constitute a violation of the representation and warranty in the last
sentence of Section 5.4 of the Credit Agreement and any failure to pay such
dividends would not constitute a material default or event of default under a
material instrument or agreement under Section 6.1(c)(v) of the Credit
Agreement.

          Section 4.4     Reference to Credit Agreement. Each of the Loan
Documents, including the Credit Agreement and any and all other agreements,
documents, or instruments now or hereafter executed and delivered pursuant to
the terms hereof or pursuant to the terms of the Credit Agreement as amended
hereby, are hereby amended so that any reference in such Loan Documents to the
Credit Agreement shall mean a reference to the Credit Agreement as amended
hereby.

          Section 4.5     Severability. Any provision of this Amendment held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.

          Section 4.6     Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

          Section 4.7     Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of the Company, the Guarantors, the Banks and the
Administrative Agent and their

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 24

<PAGE>

respective successors and assigns, except that neither the Company nor any
Guarantor may assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Banks.

          Section 4.8     Counterparts. This Amendment may be executed in one or
more counterparts, and on telecopy counterparts each of which when so executed
shall be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.

          Section 4.9     Effect of Waiver. No consent or waiver, express or
implied, by the Banks to or for any breach of or deviation from any covenant,
condition or duty by the Company or any Guarantor shall be deemed a consent or
waiver to or of any other breach of the same or any other covenant, condition or
duty.

          Section 4.10    Headings. The headings, captions, and arrangements
used in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.

          Section 4.11    ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.

          Section 4.12    Reaffirmation of Guaranty. The undersigned Guarantors
of the Obligations of the Company to the Banks under the Credit Agreement and
the other Loan Documents each hereby: (i) consents to the execution and delivery
of the foregoing Amendment, (ii) agrees that the Amendment shall not limit or
diminish the obligations of the undersigned under the Credit Agreement as
Guarantors, (iii) reaffirms its obligations under its guaranty, (iv) agrees that
the Guaranty remains in full force and effect and is hereby ratified and
confirmed, and (v) agrees that for all purposes it is a party (as a Guarantor)
to the Credit Agreement, as amended hereby.

          Section 4.13    Release. The Company and each of the Guarantors hereby
unconditionally and irrevocably remise, acquit, and fully and forever release
and discharge the Administrative Agent and the Banks and all respective
affiliates and subsidiaries of the Administrative Agent and the Banks, their
respective officers, servants, employees, agents, attorneys, principals,
directors and shareholders, and their respective heirs, legal representatives,
successors and assigns (collectively, the "Released Lender Parties") from any
and all claims, demands, causes of action, obligations, remedies, suits, damages
and liabilities (collectively, the "Borrower Claims") of any nature whatsoever,
whether now known, suspected or claimed, whether arising under common law, in
equity or under statute, which the Company or any Guarantor ever had or now has
against the Released Lender Parties which may have arisen at any time on or
prior to the date of this Amendment and which were in any manner related to any
of

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 25

<PAGE>

the Loan Documents or the enforcement or attempted enforcement by the
Administrative Agent or the Banks of rights, remedies or recourses related
thereto. The Company and each of the Guarantors covenants and agrees never to
commence, voluntarily aid in any way, prosecute or cause to be commenced or
prosecuted against any of the Released Lender Parties any action or other
proceeding based upon any of the Borrower Claims which may have arisen at any
time on or prior to the date of this Amendment and were in any manner related to
any of the Loan Documents. The agreements of the Company and the Guarantors set
forth in this Section 4.12 shall survive termination of this Amendment.

FIFTH AMENDMENT TO CREDIT AGREEMENT - Page 26

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.

                                     THE COMPANY:

                                     ENCOMPASS SERVICES CORPORATION

                                     By:         /s/ Darren B. Miller
                                           ------------------------------------
                                     Name:  Darren B. Miller
                                     Title: Senior Vice President

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<PAGE>

GUARANTORS:

A-1 Mechanical of Lansing, Inc.
AA Advance Air, Inc.
AA Jarl, Inc.
A-ABC Appliance, Inc.
A-ABC Services, Inc.
Air Conditioning, Plumbing & Heating Service
   Co., Inc.
Aircon Energy Incorporated
Air Systems, Inc.
Airtron, Inc.
Airtron of Central Florida, Inc.
American Air Company, Inc.
AMS Arkansas, Inc.
B&R Electrical Services, Inc.
Building One Commercial, Inc.
Building One Service Solutions, Inc.
BUYR, Inc.
Callahan Roach Products & Publications, Inc.
Cardinal Contracting Corporation
Central Carolina Air Conditioning Company
Chapel Electric Co.
Charlie Crawford, Inc.
ChiP Corp.
Colonial Air Conditioning Company
Commercial Air Holding Company
CONCH Republic Corp.
Costner Brothers, Inc.
Delta Innovations, Ltd., a limited liability
   company, by Roth Companies Incorporated, its
   sole member
Divco, Inc.
Dynalink Corporation
EET Holdings, Inc.
Electrical Contracting, Inc.
Encompass Capital, Inc., formerly Commercial
   Air, Power & Cable, Inc., successor by merger
   to Central Air Conditioning Contractors, Inc.
   and Tower Electric Company
Encompass Capital, L.P., by CONCH Republic
   Corp., its general partner
Encompass Central Plains, Inc., formerly The
   Lewis Companies, Inc.
Encompass Constructors, Inc., formerly Atlantic
   Industrial Constructors, Inc. and successor by
   merger with Hungerford Mechanical

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<PAGE>

   Corporation
Encompass Design Group, Inc., formerly
   Engineering Design Group, Inc.
Encompass Electrical Technologies Central
   Tennessee, Inc.
Encompass Electrical Technologies Eastern
   Tennessee, Inc.
Encompass Electrical Technologies - Florida,
   LLC, by EET Holdings, Inc., its sole member
Encompass Electrical Technologies Georgia, Inc.
Encompass Electrical Technologies, Inc., formerly
   Continental Electrical Construction Co. and
   successor by merger with Barr Electric Corp.
   and Gregory Electric, Inc.
Encompass Electrical Technologies, Inc., formerly
   Oil Capital Electric, Inc.
Encompass Electrical Technologies - Midwest,
   Inc., formerly Town & Country Electric, Inc.
   successor by merger to SKCE, Inc., SKCE
   Electric, Inc., Cramar Electric, Inc. and Pro
   Wire Security Systems, Inc.
Encompass Electrical Technologies North
   Carolina, Inc.
Encompass Electrical Technologies North Florida,
   Inc.
Encompass Electrical Technologies of Nevada,
   Inc.
Encompass Electrical Technologies of New
   England, Inc.
Encompass Electrical Technologies of Texas, Inc.
Encompass Electrical Technologies Projects
   Group, Inc.
Encompass Electrical Technologies South
   Carolina, Inc.
Encompass Electrical Technologies Southeast,
   Inc., formerly Regency Electric Company, Inc.
   and successor by merger with Encompass
   Electrical Technologies Jacksonville, Inc.
Encompass Electrical Technologies Western
   Tennessee, Inc.
Encompass Facility Services, Inc.
Encompass Global Technologies, Inc.
Encompass Ind./Mech. of Texas, Inc.
Encompass Industrial Services Southwest, Inc.,
   formerly Gulf States, Inc.
Encompass Mechanical Services of Elko, Inc.,

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   formerly Snyder Mechanical
Encompass Mechanical Services - Rocky
   Mountains, Inc., formerly Robinson
   Mechanical Company
Encompass Mechanical Services Southeast, Inc.,
   successor by merger to C.R. Hipp
   Construction, Inc., Del Air Service Company,
   Inc., Sibley Services, Incorporated and
   Reliable Mechanical, Inc.
Encompass Power Services, Inc.,
   formerly EDG Power Services, Inc.
Encompass Residential Services of Houston, Inc.,
   formerly Sterling Air Conditioning, Inc.
Encompass Services Holding Corp.
Encompass Services Indiana L.L.C., by Airtron,
   Inc., Cardinal Contracting Corporation, Paul E.
   Smith Co., Inc., and Roth Companies
   Incorporated, its members
ESR PC, L.P., by CONCH Republic Corp., its
   general partner
EWG Holdings, Inc.
Evans Services, Inc.
FacilityDirect.com, LLC, by Building One Service
   Solutions, Inc., its sole member
The Farfield Company
Ferguson Electric Corporation
Fred Clark Electrical Contractor, Inc.
Gamewell Mechanical, Inc.
Garfield-Indecon Electrical Services, Inc.,
   successor by merger with Clark Converse
   Electric Service, Inc.
Gilbert Mechanical Contractors, Inc.
GroupMAC Texas, L.P., by Encompass Services
   Holding Corp., its general partner
Hallmark Air Conditioning, Inc.
HPS Plumbing Services, Inc.
HVAC Services, Inc.
Interstate Building Services, L.L.C., by Building
   One Service Solutions, Inc., its sole member
Isla Morada, LLC, by CONCH Republic Corp., its
   sole member
Ivey Mechanical Services, L.L.C., by Encompass
   Mechanical Services Southeast, Inc., its sole
   member
K&N Plumbing, Heating and Air Conditioning,
   Inc.

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<PAGE>

Laney's, Inc.
Lexington/Ivey Mechanical Company, L.L.C., by
   Encompass Mechanical Services Southeast,
   Inc., its sole member
Linford Service Co.
L.T. Mechanical, Inc.
MacDonald-Miller Co., Inc.
MacDonald-Miller Industries, Inc.
MacDonald-Miller of Oregon, Inc.
MacDonald-Miller Service, Inc.
Masters, Inc.
Mechanical Services of Orlando, Inc.
Merritt Island Air & Heat, Inc.
National Network Services, Inc.
National Network Services Northwest, LLC, by
   EWG Holdings, Inc., its sole member
Omni Mechanical Company
Omni Mechanical Services, by Omni Mechanical
   Company, general partner
Pacific Rim Mechanical Contractors, Inc.
Paul E. Smith Co., Inc.
Phoenix Electric Company
Ray's Plumbing Contractors, Inc., formerly Ray
   and Claude Goodwin, Inc.
Regency Electric Company, LLC, by EET
   Holdings, Inc., its sole member
Regency Electric Company South Florida Office,
   Inc.
Riviera Electric of California, Inc.
Romanoff Electric Corp.
Roth Companies Incorporated
Sanders Bros., Inc.
Sequoyah Corporation
S.L. Page Corporation, successor by merger with
   Hydro Cooling, Inc.
Southeast Mechanical Service, Inc.
Stephen C. Pomeroy, Inc.
Sun Plumbing, Inc.
Taylor-Hunt Electric, Inc.
Team Mechanical, Inc.
Tri-City Electrical Contractors, Inc.
Tri-M Corporation, successor by merger with
   Costa and Rihl, Inc. and Encompass Plumbing,
   Inc.
Tri-State Acquisition Corp.
United Acquisition Corp.

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United Service Alliance, Inc.
Van's Comfortemp Air Conditioning, Inc.
Vantage Mechanical Contractors, Inc.
Vermont Mechanical, Inc.
Wade's Heating & Cooling, Inc.
Watson Electrical Construction Co.
Wayzata, Inc.
Weigold & Sons, Inc.
Willis Refrigeration, Air Conditioning & Heating,
   Inc.
Wilson Electric Company, Inc.
Yale Incorporated

By:              /s/ Gray H. Muzzy
       -------------------------------------
       Gray H. Muzzy
       Vice President
       Acting on Behalf of Each of the Above

       Encompass Management Co.

       By:             /s/ Gray H. Muzzy
             -------------------------------------
             Gray H. Muzzy
             Senior Vice President

       Encompass Electrical Technologies - Rocky
       Mountains, Inc.

       By:   /s/ Daniel W. Kipp
          -------------------------------------
             Daniel W. Kipp
             Vice President

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<PAGE>

                                   ADMINISTRATIVE AGENT/BANK:

                                   BANK OF AMERICA, N.A.
                                   as Administrative Agent and Individually, as
                                   a Bank

                                   By:    /s/ William E. Livingstone IV
                                       -----------------------------------------
                                       Name: William E. Livingstone IV
                                       Title: Senior Vice President

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<PAGE>

                                   SYNDICATION-AGENT/BANK:

                                   JPMORGAN CHASE BANK
                                   (formerly known as THE CHASE
                                   MANHATTAN BANK),
                                   as Syndication Agent and
                                   Individually, as a Bank

                                   By: /s/ Michael D. Pickerd
                                       ------------------------------------
                                       Name: Michael D. Pickerd
                                       Title: Senior Vice President Texas Region

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<PAGE>

                                   DOCUMENTATION AGENT/BANK:

                                   WACHOVIA BANK, NATIONAL
                                   ASSOCIATION
                                   (formerly known as FIRST UNION
                                   NATIONAL BANK),
                                   as Documentation Agent and
                                   Individually, as a Bank

                                   By: /s/ C. Mark Hedrick
                                       -------------------------------
                                       Name: C. Mark Hedrick
                                       Title: Director

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<PAGE>

                                   BANKS:

                                   ABN-AMRO BANK NV

                                   By:    /s/ Mary L. Honda
                                       -------------------------------
                                       Name: Mary L. Honda
                                       Title: Group Vice President

                                   By:    /s/ Judith M. Bresnen
                                       -------------------------------
                                       Name: Judith M. Bresnen
                                       Title: Group Vice President

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<PAGE>

                                   APEX (IDM) CDO I, LTD.

                                   By:    /s/ Glenn Duffy
                                       -------------------------------
                                       Name: Glenn Duffy
                                       Title: Managing Director

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<PAGE>

                                   BANK OF AMERICA, N.A.

                                   By:    /s/ Laura T. Sweet
                                       -------------------------------
                                       Name: Laura T. Sweet
                                       Title: Assistant Vice President

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<PAGE>

                                   THE GOVERNOR AND COMPANY OF
                                   THE BANK OF IRELAND

                                   By:    /s/ G. Hannon
                                       -------------------------------
                                       Name: G. Hannon
                                       Title: Authorized Signatory

                                   By:    /s/ T. Hayes
                                       -------------------------------
                                       Name: T. Hayes
                                       Title: Authorized Signatory

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<PAGE>

                                   BANK LEUMI USA

                                   By:    /s/ Joung Hee Hong
                                       -------------------------------
                                       Name: Joung Hee Hong
                                       Title: Vice President

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<PAGE>

                                   THE BANK OF NOVA SCOTIA

                                   By:    /s/ N. Bell
                                       -------------------------------
                                       Name: N. Bell
                                       Title: Senior Manager

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<PAGE>

                                   BANK ONE, N.A.

                                   By:    /s/William V. Clifford
                                       -------------------------------
                                       Name: William V. Clifford
                                       Title: First Vice President

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<PAGE>

                                   BNP PARIBAS
                                   By:    /s/ Jeff Tebeaux
                                      --------------------------------
                                       Name: Jeff Tebeaux
                                       Title: Associate

                                   By:    /s/ Henry Setina
                                      --------------------------------
                                       Name: Henry Setina
                                       Title: Director

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<PAGE>

                                   CALLIDUS DEBT PARNERS CDO
                                   FUND I, Ltd.

                                   By: CALLIDUS CAPITAL
                                   MANAGEMENT, LLC
                                   its Collateral Manager

                                   By:    /s/ Jerry Nichols
                                      --------------------------------
                                       Name: Jerry Nichols
                                       Title: Managing Director

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<PAGE>

                                   CREDIT LYONNAIS
                                   NEW YORK BRANCH

                                   By:    /s/ Attila Koc
                                       -------------------------------
                                       Name: Attila Koc
                                       Title: Senior Vice President

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<PAGE>

                                   DEUTSCHE BANK TRUST COMPANY
                                   AMERICAS (formerly known as
                                   BANKERS TRUST COMPANY)

                                   By:    /s/ Gregory Shefrin
                                       -------------------------------
                                       Name: Gregory Shefrin
                                       Title: Director

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<PAGE>

                                   ELC (CAYMAN) LTD. CDO
                                   SERIES 1999-1

                                   By:    /s/ Glenn Duffy
                                       ------------------------------
                                       Name: Glenn Duffy
                                       Title: Managing Director

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<PAGE>

                                   FIRST DOMINION FUNDING I

                                   By:    /s/ David H. Lerner
                                       -------------------------------
                                       Name: David H. Lerner
                                       Title: Authorized Signatory

                                   FIRST DOMINION FUNDING II

                                   By:    /s/ David H. Lerner
                                       -------------------------------
                                       Name: David H. Lerner
                                       Title: Authorized Signatory

                                   FIRST DOMINION FUNDING III

                                   By:    /s/ David H. Lerner
                                       -------------------------------
                                       Name: David H. Lerner
                                       Title: Authorized Signatory

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<PAGE>

                                   FLEET NATIONAL BANK

                                   By:    /s/ James J. Shaw
                                       -------------------------------
                                       Name: James J. Shaw
                                       Title: Vice President

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<PAGE>

                                   GENERAL ELECTRIC CAPITAL
                                   CORPORATION

                                   By:    /s/ William E. Magee
                                       -------------------------------
                                       Name: William E. Magee
                                       Title: Duly Authorized Signatory

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<PAGE>

                                   GMAC COMMERCIAL CREDIT LLC

                                   By:    /s/ Frank Imperato
                                       ----------------------------
                                       Name: Frank Imperato
                                       Title: Senior Vice President

                                   By:______________________________
                                       Name:________________________
                                       Title:_______________________

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<PAGE>

                                   HELLER FINANCIAL, INC.

                                   By:    /s/ William E. Magee
                                       ------------------------------------
                                       Name: William E. Magee
                                       Title: Duly Authorized Signatory

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<PAGE>

                                   BANK AUSTRIA
                                   CREDITANSTALT CORPORATE
                                   FINANCE, INC.

                                   By:    /s/ Elizabeth Tallmadge
                                       ------------------------------------
                                       Name:  Elizabeth Tallmadge
                                       Title: Managing Director
                                              Chief Investment Officer

                                   By:    /s/ James T. Li
                                       ------------------------------------
                                       Name:  James T. Li
                                       Title: Associate Director

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<PAGE>

                                   INDOSUEZ CAPITAL FUNDING III,
                                   LIMITED

                                   BY:    INDOSUEZ CAPITAL
                                          as Portfolio Advisor

                                   By:    /s/ Jack Henry
                                       ------------------------------------
                                       Name: Jack Henry
                                       Title: Principal and Portfolio Manager

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<PAGE>

                                   ML CBO IV (CAYMAN) LTD.

                                   By:    /s/ Louis Koven
                                       ----------------------------------------
                                       Name: Louis Koven
                                       Title: Executive Vice President
                                              Highland Capital Management, L.P.

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<PAGE>

                                   MORGAN STANLEY DEAN WITTER
                                   PRIME INCOME TRUST

                                   By:    /s/ Peter Gewirtz
                                       ----------------------------
                                       Name:  Peter Gewirtz
                                       Title: Vice President

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<PAGE>

                                   NATIONAL CITY BANK

                                   By: /s/ Stephen Bassett
                                      ------------------------------
                                      Name: Stephen Bassett
                                      Title: Assistant Vice President

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<PAGE>

                                   PAM CAPITAL FUNDING L.P.

                                   By:    /s/ Louis Koven
                                       ----------------------------
                                       Name: Louis Koven
                                       Title: Executive Vice President
                                              Highland Capital Management, L.P.

                                   PAMCO CAYMAN LTD.

                                   By:    /s/ Louis Koven
                                       ----------------------------
                                       Name: Louis Koven
                                       Title: Executive Vice President
                                              Highland Capital Management, L.P.

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   NORSE CBO, LTD.

                                   By: Regiment Capital Management, LLC
                                       as its Investment Advisor

                                   By: Regiment Capital Advisors, LLC
                                          its Manager and pursuant to delegated
                                          authority

                                   By:    /s/ Timothy Peterson
                                       -------------------------------
                                       Name: Timothy Peterson
                                       Title: President

                                   REGIMENT CAPITAL LTD.

                                   By: Regiment Capital Management, LLC
                                       as its Investment Advisor

                                   By: Regiment Capital Advisors, LLC
                                       its Manager and pursuant to delegated
                                       authority

                                   By:    /s/ Timothy Peterson
                                       -------------------------------
                                       Name: Timothy Peterson
                                       Title: President

                                   PRESIDENT & FELLOWS OF
                                   HARVARD COLLEGE

                                   By: Regiment Capital Management, LLC
                                       as its Investment Advisor

                                   By: Regiment Capital Advisors, LLC
                                          its Manager and pursuant to delegated
                                          authority

                                   By:    /s/ Timothy Peterson
                                       -------------------------------
                                       Name: Timothy Peterson
                                       Title: President

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   SOVEREIGN BANK

                                   By: /s/ Kevin E. Flaherty
                                      --------------------------------
                                      Name:  Kevin E. Flaherty
                                      Title: Senior Vice President

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   THE SUMITOMO TRUST & BANKING
                                   CO., LTD., NEW YORK BRANCH

                                   By:    /s/ Elizabeth A. Quirk
                                       -------------------------------
                                       Name: Elizabeth A. Quirk
                                       Title: Vice President

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   TEXTRON FINANCIAL CORPORATION

                                   By:    /s/ Matthew J. Colgan
                                       -------------------------------
                                       Name: Matthew J. Colgan
                                       Title: Director

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   US BANK NATIONAL ASSOCIATION
                                   (formerly known as MERCANTILE BANK
                                   NATIONAL ASSOCIATION and formerly
                                   known as FIRSTAR BANK)

                                   By:    /s/ Alan R. Milster
                                       -------------------------------
                                       Name: Alan R. Milster
                                       Title: Vice President

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   VAN KAMPEN PRIME RATE INCOME
                                   TRUST

                                   BY:    VAN KAMPEN INVESTMENT
                                          ADVISORY CORP

                                   By:    /s/ Darvin D. Pierce
                                       -------------------------------
                                   Name: Darvin D. Pierce
                                   Title: Executive Director

                                   VAN KAMPEN SENIOR INCOME
                                   TRUST

                                   BY:    VAN KAMPEN INVESTMENT
                                          ADVISORY CORP

                                   By:    /s/ Darvin D. Pierce
                                       -------------------------------
                                       Name: Darvin D. Pierce
                                       Title: Executive Director

                                   VAN KAMPEN CLO I, LIMITED

                                   BY:    VAN KAMPEN INVESTMENT
                                          ADVORSY CORP, as Collateral Manager

                                   By:    /s/ Darvin D. Pierce
                                       -------------------------------
                                       Name: Darvin D. Pierce
                                       Title: Executive Director

                                   VAN KAMPEN CLO II, LIMITED

                                   BY:    VAN KAMPEN INVESTMENT
                                          ADVORSY CORP, as Collateral Manager

                                   By:    /s/ Darvin D. Pierce
                                       -------------------------------
                                       Name: Darvin D. Pierce
                                       Title: Executive Director

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                                   ZERMATT CBO LIMITED
                                   (by UBS AG, New York Branch, as its
                                   Collateral Manager)

                                   By: /s/ Joseph V. Chapey
                                      ----------------------------
                                      Name:  Joseph V. Chapey
                                      Title: Executive Director

                                   By: /s/ Sandra Ward Castin
                                      ----------------------------
                                      Name:  Sandra Ward Castin
                                      Title: Executive Director

SIGNATURE PAGES TO
FIFTH AMENDMENT TO CREDIT AGREEMENT

<PAGE>

                             EXHIBIT 5.16

                         SUBSIDIARY COMPANIES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                            Name of Subsidiary                                   Jurisdiction
----------------------------------------------------------------------------------------------
<S>                                                                             <C>
A-1 Mechanical of Lansing, Inc.                                                   Michigan
----------------------------------------------------------------------------------------------
AA Advance Air, Inc.                                                               Florida
----------------------------------------------------------------------------------------------
A-ABC Appliance, Inc.                                                               Texas
----------------------------------------------------------------------------------------------
A-ABC Services, Inc.                                                              Delaware
----------------------------------------------------------------------------------------------
AA Jarl, Inc.                                                                     Delaware
----------------------------------------------------------------------------------------------
Air Conditioning, Plumbing & Heating Service Co., Inc.                            Colorado
----------------------------------------------------------------------------------------------
Aircon Energy Incorporated                                                        California
----------------------------------------------------------------------------------------------
Air Systems, Inc.                                                                 California
----------------------------------------------------------------------------------------------
Airtron, Inc.                                                                     Delaware
----------------------------------------------------------------------------------------------
Airtron of Central Florida, Inc.                                                   Florida
----------------------------------------------------------------------------------------------
American Air Company, Inc.                                                        California
----------------------------------------------------------------------------------------------
AMS Arkansas, Inc.                                                                Arkansas
----------------------------------------------------------------------------------------------
B&R Electrical Services, Inc.                                                     Maryland
----------------------------------------------------------------------------------------------
Building One Commercial, Inc.                                                     Missouri
----------------------------------------------------------------------------------------------
Building One Service Solutions, Inc.                                               Virginia
----------------------------------------------------------------------------------------------
BUYR, Inc.                                                                        Delaware
----------------------------------------------------------------------------------------------
Callahan Roach Products & Publications, Inc.                                      Colorado
----------------------------------------------------------------------------------------------
Cardinal Contracting Corporation                                                   Indiana
----------------------------------------------------------------------------------------------
Central Carolina Air Conditioning Company                                       North Carolina
----------------------------------------------------------------------------------------------
Chapel Electric Co.                                                                 Ohio
----------------------------------------------------------------------------------------------
Charlie Crawford, Inc.                                                            Delaware
----------------------------------------------------------------------------------------------
ChIP Corp.                                                                        Delaware
----------------------------------------------------------------------------------------------
Colonial Air Conditioning Company                                                 Delaware
----------------------------------------------------------------------------------------------
Commercial Air Holding Company                                                    Maryland
----------------------------------------------------------------------------------------------
CONCH Republic Corp.                                                              Delaware
----------------------------------------------------------------------------------------------
Costner Brothers, Inc.                                                          South Carolina
----------------------------------------------------------------------------------------------
Delta Innovations, Ltd.                                                             Ohio
----------------------------------------------------------------------------------------------
Divco, Inc.                                                                      Washington
----------------------------------------------------------------------------------------------
Dynalink Corporation                                                                Ohio
----------------------------------------------------------------------------------------------
EET Holdings, Inc.                                                                Delaware
----------------------------------------------------------------------------------------------
Electrical Contracting, Inc.                                                      California
----------------------------------------------------------------------------------------------
Encompass Capital, Inc.                                                           Maryland
----------------------------------------------------------------------------------------------
Encompass Capital, L.P.                                                             Texas
----------------------------------------------------------------------------------------------
Encompass Central Plains, Inc.                                                    Oklahoma
----------------------------------------------------------------------------------------------
Encompass Constructors, Inc.(fka Atlantic Industrial Constructors, Inc.)           Virginia
----------------------------------------------------------------------------------------------
Encompass Design Group, Inc.                                                      Oklahoma
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies, Inc.(fka Continental Electrical                Delaware
Construction Co.)
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies, Inc.(fka Oil Capital Electric, Inc.)           Oklahoma
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies Central Tennessee, Inc.                         Tennessee
----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                            Name of Subsidiary                                   Jurisdiction
----------------------------------------------------------------------------------------------
<S>                                                                             <C>
Encompass Electrical Technologies Eastern Tennessee, Inc.                         Tennessee
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Florida, LLC                                  Delaware
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies Georgia, Inc.                                    Georgia
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Midwest, Inc.                                 Wisconsin
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies North Carolina, Inc.                          North Carolina
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies North Florida, Inc.                              Florida
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies of Nevada, Inc.                                  Nevada
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies of New England, Inc.                            Delaware
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies of Texas, Inc.                                    Texas
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies Projects Group, Inc.                             Florida
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Rocky Mountains, Inc.                         Colorado
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies South Carolina, Inc.                          South Carolina
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies Southeast, Inc.                                  Florida
----------------------------------------------------------------------------------------------
Encompass Electrical Technologies Western Tennessee, Inc.                         Tennessee
----------------------------------------------------------------------------------------------
Encompass Facility Services, Inc.                                                 Delaware
----------------------------------------------------------------------------------------------
Encompass Global Technologies, Inc.                                               Delaware
----------------------------------------------------------------------------------------------
Encompass Ind./Mech. of Texas, Inc.                                               Delaware
----------------------------------------------------------------------------------------------
Encompass Industrial Services Southwest, Inc.                                       Texas
----------------------------------------------------------------------------------------------
Encompass Management Co.                                                          Delaware
----------------------------------------------------------------------------------------------
Encompass Mechanical Services of Elko, Inc.(fka Snyder Mechanical)                 Nevada
----------------------------------------------------------------------------------------------
Encompass Mechanical Services - Rocky Mountains, Inc.                             Colorado
----------------------------------------------------------------------------------------------
Encompass Mechanical Services Southeast, Inc.                                     Mississippi
----------------------------------------------------------------------------------------------
Encompass Power Services, Inc.                                                    Oklahoma
----------------------------------------------------------------------------------------------
Encompass Residential Services of Houston, Inc.(fka Sterling Air                  Delaware
Conditioning)
----------------------------------------------------------------------------------------------
Encompass Services Holding Corp.                                                  Delaware
----------------------------------------------------------------------------------------------
Encompass Services Indiana L.L.C.                                                  Indiana
----------------------------------------------------------------------------------------------
ESR PC, L.P.                                                                        Texas
----------------------------------------------------------------------------------------------
Evans Services, Inc.                                                               Alabama
----------------------------------------------------------------------------------------------
EWG Holdings, Inc.                                                                Delaware
----------------------------------------------------------------------------------------------
FacilityDirect.com, LLC                                                            Virginia
----------------------------------------------------------------------------------------------
Ferguson Electric Corporation                                                     Delaware
----------------------------------------------------------------------------------------------
Fred Clark Electrical Contractor, Inc.                                              Texas
----------------------------------------------------------------------------------------------
Gamewell Mechanical, Inc.                                                       North Carolina
----------------------------------------------------------------------------------------------
Garfield-Indecon Electrical Services, Inc.                                          Ohio
----------------------------------------------------------------------------------------------
Gilbert Mechanical Contractors, Inc.                                              Minnesota
----------------------------------------------------------------------------------------------
GroupMAC Texas L.P.                                                                 Texas
----------------------------------------------------------------------------------------------
Hallmark Air Conditioning, Inc.                                                   Delaware
----------------------------------------------------------------------------------------------
HPS Plumbing Services, Inc.                                                       California
----------------------------------------------------------------------------------------------
HVAC Services, Inc.                                                                 Ohio
----------------------------------------------------------------------------------------------
Interstate Building Services, L.L.C.                                               Virginia
----------------------------------------------------------------------------------------------
Isla Morada LLC                                                                   Delaware
----------------------------------------------------------------------------------------------
Ivey Mechanical Services, L.L.C.                                                    Texas
----------------------------------------------------------------------------------------------
K&N Plumbing, Heating and Air Conditioning, Inc.                                  Delaware
----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                            Name of Subsidiary                                   Jurisdiction
----------------------------------------------------------------------------------------------
<S>                                                                             <C>
Laney's, Inc.                                                                     Delaware
----------------------------------------------------------------------------------------------
Lexington/Ivey Mechanical Company, L.L.C.                                         Kentucky
----------------------------------------------------------------------------------------------
Linford Service Co.                                                               California
----------------------------------------------------------------------------------------------
L.T. Mechanical, Inc.                                                             Delaware
----------------------------------------------------------------------------------------------
MacDonald-Miller Co., Inc.                                                       Washington
----------------------------------------------------------------------------------------------
MacDonald-Miller Industries, Inc.                                                Washington
----------------------------------------------------------------------------------------------
MacDonald-Miller of Oregon, Inc.                                                  Delaware
----------------------------------------------------------------------------------------------
MacDonald-Miller Service, Inc.                                                   Washington
----------------------------------------------------------------------------------------------
Masters, Inc.                                                                     Maryland
----------------------------------------------------------------------------------------------
Mechanical Services of Orlando, Inc.                                               Florida
----------------------------------------------------------------------------------------------
Merritt Island Air & Heat, Inc.                                                   Delaware
----------------------------------------------------------------------------------------------
National Network Services, Inc.                                                   Delaware
----------------------------------------------------------------------------------------------
National Network Services Northwest, LLC                                          Delaware
----------------------------------------------------------------------------------------------
Omni Mechanical Company                                                           Oklahoma
----------------------------------------------------------------------------------------------
Omni Mechanical Services                                                          Oklahoma
----------------------------------------------------------------------------------------------
Pacific Rim Mechanical Contractors, Inc.                                          California
----------------------------------------------------------------------------------------------
Paul E. Smith Co., Inc.                                                            Indiana
----------------------------------------------------------------------------------------------
Phoenix Electric Company                                                          Delaware
----------------------------------------------------------------------------------------------
Ray's Plumbing Contractors, Inc.                                                   Florida
----------------------------------------------------------------------------------------------
Regency Electric Company, LLC                                                      Florida
----------------------------------------------------------------------------------------------
Regency Electric Company South Florida Office, Inc.                                Florida
----------------------------------------------------------------------------------------------
Riviera Electric of California, Inc.                                              California
----------------------------------------------------------------------------------------------
Romanoff Electric Corp.                                                              Ohio
----------------------------------------------------------------------------------------------
Roth Companies Incorporated                                                        Indiana
----------------------------------------------------------------------------------------------
Sanders Bros., Inc.                                                             South Carolina
----------------------------------------------------------------------------------------------
Sequoyah Corporation                                                             Washington
----------------------------------------------------------------------------------------------
S. L. Page Corporation                                                             Florida
----------------------------------------------------------------------------------------------
Southeast Mechanical Service, Inc.                                                 Florida
----------------------------------------------------------------------------------------------
Stephen C. Pomeroy, Inc.                                                          Delaware
----------------------------------------------------------------------------------------------
Sun Plumbing, Inc.                                                                 Florida
----------------------------------------------------------------------------------------------
Taylor-Hunt Electric, Inc.                                                           Utah
----------------------------------------------------------------------------------------------
Team Mechanical, Inc.                                                                Utah
----------------------------------------------------------------------------------------------
The Farfield Company                                                              Delaware
----------------------------------------------------------------------------------------------
Tri-City Electrical Contractors, Inc.                                              Florida
----------------------------------------------------------------------------------------------
Tri-M Corporation                                                                Pennsylvania
----------------------------------------------------------------------------------------------
Tri-State Acquisition Corp.                                                        Nevada
----------------------------------------------------------------------------------------------
United Acquisition Corp.                                                             Iowa
----------------------------------------------------------------------------------------------
United Service Alliance, Inc.                                                     Delaware
----------------------------------------------------------------------------------------------
Van's Comfortemp Air Conditioning, Inc.                                            Florida
----------------------------------------------------------------------------------------------
Vantage Mechanical Contractors, Inc.                                              Maryland
----------------------------------------------------------------------------------------------
Vermont Mechanical, Inc.                                                          Delaware
----------------------------------------------------------------------------------------------
Wade's Heating & Cooling, Inc.                                                     Florida
----------------------------------------------------------------------------------------------
Watson Electrical Construction Co.                                              North Carolina
----------------------------------------------------------------------------------------------
Wayzata, Inc.                                                                     Delaware
----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                            Name of Subsidiary                                   Jurisdiction
----------------------------------------------------------------------------------------------
<S>                                                                               <C>
Wiegold & Sons, Inc.                                                               Florida
----------------------------------------------------------------------------------------------
Willis Refrigeration, Air Conditioning & Heating, Inc.                               Ohio
----------------------------------------------------------------------------------------------
Wilson Electric Company, Inc.                                                      Arizona
----------------------------------------------------------------------------------------------
Yale Incorporated                                                                 Minnesota
----------------------------------------------------------------------------------------------
</TABLE><PAGE>

                                                                    EXHIBIT 10.2

                                                                  Execution Copy

                          SECURITIES PURCHASE AGREEMENT

                                   dated as of

                                  June 27, 2002

                                     between

                         ENCOMPASS SERVICES CORPORATION

                                       and

                                  THE INVESTORS

                                IDENTIFIED HEREIN

<PAGE>

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
ARTICLE I DEFINITIONS ..................................................    1

ARTICLE II THE TRANSACTION .............................................    7

2.1 Exercise; Sale and Purchase ........................................    7
2.2 Closing ............................................................    8

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY ..............    8

3.1  Organization ......................................................    8
3.2  Subsidiaries ......................................................    8
3.3  Authority; Enforceability .........................................    8
3.4  Capitalization ....................................................    9
3.5  Fairness Opinion ..................................................   10
3.6  Consents and Approvals; No Violations .............................   10
3.7  Authorization of the New Securities ...............................   11
3.8  Offering Valid for the New Securities .............................   11
3.9  SEC Documents; Financial Statements; Other Financial Information ..   11
3.10 Information Supplied ..............................................   12
3.11 Absence of Undisclosed Liabilities ................................   12
3.12 Absence of Changes ................................................   12
3.13 Compliance with Laws and Permits ..................................   13
3.14 Investment Company and Investment Adviser .........................   13
3.15 Brokers ...........................................................   13

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS .............   13

4.1  Organization ......................................................   13
4.2  Authority .........................................................   14
4.3  Consents and Approvals; No Violations .............................   14
4.4  Brokers ...........................................................   14
4.5  Investment Representations and Warranties .........................   15
4.6  Financial Resources ...............................................   15
4.7  Information Supplied ..............................................   15

ARTICLE V COVENANTS ....................................................   16
5.1  Other Actions; Conduct of Business ................................   16
5.2  The Rights Offering ...............................................   16
5.3  Shareholder Meeting; Proxy Statement ..............................   18
5.4  Advice of Changes; Filings ........................................   19
5.5  Delivery of Fairness Opinion ......................................   19
5.6  2003 Annual Shareholder Meeting; Proxy ............................   19

ARTICLE VI ADDITIONAL AGREEMENTS .......................................   20
6.1  Reasonable Efforts; Notification ..................................   20
6.2  Public Announcements ..............................................   21
6.3  Communications with Governmental Entities .........................   21
6.4  Investor Rights Agreement .........................................   21
6.5  Bank Communications ...............................................   22
6.6  Tax Treatment .....................................................   22

ARTICLE VII CONDITIONS .................................................   22
7.1  Closing Conditions to Each Party's Obligations ....................   22
7.2  Conditions to the Company's Obligations ...........................   23

                                       i

<PAGE>

7.3  Conditions to the Investors' Obligations ...........................   24

ARTICLE VIII TERMINATION AND AMENDMENT ..................................   25
8.1  Termination ........................................................   25
8.2  Effect of Termination ..............................................   26

ARTICLE IX MISCELLANEOUS ................................................   26
9.1  Amendment ..........................................................   26
9.2  Extension; Waiver ..................................................   26
9.3  Survival of Representations and Warranties, Limitation on Liability    26
9.4  Notices ............................................................   27
9.5  Indemnification ....................................................   27
9.6  Fees and Expenses ..................................................   29
9.7  Interpretation .....................................................   29
9.8  Entire Agreement; Third Party Beneficiaries ........................   30
9.9  Governing Law ......................................................   30
9.10 Counterparts .......................................................   30
9.11 Assignment .........................................................   30
9.12 Enforcement ........................................................   30
9.13 Time ...............................................................   31

                                       ii

<PAGE>

Annexes

Annex I - Schedule of Investors

Exhibits

Exhibit A - Amendment to the Credit Agreement

Exhibit B - Series C Statement of Designation

Schedules

3.2 - Subsidiaries

3.3 - Company Required Consents and Approvals

3.4 - Company Capitalization

3.6 - Consents and Approvals; No Violations

3.11 - Absence of Undisclosed Liabilities

3.12 - Absence of Changes

4.3 - Investors Required Consents and Approvals

5.2(b) - Certain Optionholders

7.3(e) - Employees Signing Waivers

<PAGE>

                         SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
                    as of June 27, 2002, among Encompass Services Corporation, a
                    Texas corporation (the "Company") and the Investors (the
                    "Investors") identified on Annex I attached hereto.

     WHEREAS, the Company has determined that it is in the best interests of the
Company and its stockholders to effect a $50,000,000 rights offering (the
"Rights Offering") in which the Company will distribute non-transferable rights
to purchase shares of Common Stock to the holders of Common Stock and
Participating Preferred Stock (pursuant to the Participating Preferred Stock's
participation rights in accordance with the Articles) at a per share price equal
to the Subscription Price and upon the terms set forth in Section 5.2 hereof;
and

     WHEREAS, the Company has requested, in order for the Company to have
guaranteed proceeds of $35,000,000, that the Investors agree to purchase
$35,000,000 of Common Stock at the Subscription Price, through the exercise of
the Investor Rights (including the Basic Subscription Privilege and, to the
extent necessary, the Oversubscription Privilege represented thereby) and
in the event that the exercise of the Investor Rights does not result in the
purchase by the Investors of $35,000,000 of Common Stock at the Subscription
Price, the purchase of additional shares of Series C Preferred Stock at the
Subscription Price (the "Additional Share Purchase"); and

     WHEREAS, the Investors have agreed, subject to the terms and conditions of
this Agreement, to exercise the Investor Rights (including the Basic
Subscription Privilege and, to the extent necessary, the Oversubscription
Privilege represented thereby) and, to the extent necessary, consummate the
Additional Share Purchase in order to purchase $35,000,000 of the Shares at the
Subscription Price.

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

                                    ARTICLE I

                                   DEFINITIONS

     As used in this Agreement, the following terms shall have the following
respective meanings:

     "Additional Share Purchase" has the meaning set forth in the recitals.

     "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 Investors,
any designees of the Investors and Apollo shall exclude operating companies that
would otherwise be deemed an Affiliate of such Persons, but shall include all
investment partnerships and special purpose entities that are not operating
companies,

<PAGE>

whether existing as of the date hereof or created hereafter, if the Persons
controlling Apollo control 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.

     "Agreement" has the meaning set forth in the Caption.

     "Amendment to the Credit Agreement" means the amendment to the Credit
Agreement attached hereto as Exhibit A.

     "Announcement Date" means the date on which the Rights Offering and the
Amendment to Credit Agreement are first disclosed to the public (through any
written, verbal or other medium or means of communication).

     "Apollo" means Apollo Management IV, L.P. and its Affiliates.

     "Articles" means the Company's Restated Articles of Incorporation, as in
effect as of the date hereof.

     "Banks" means Bank of America, N.A. and those other entities (other than
the Company and its Affiliates) that are parties to the Credit Agreement.

     "Basic Subscription Privilege" has the meaning set forth in Section 5.2(b).

     "Board" means the Company's Board of Directors.

     "Business Day" means any day, other than a Saturday, Sunday or a day on
which the banking institutions in the State of New York are authorized or
obligated by Law or executive order to close.

     "Closing" has the meaning set forth in Section 2.2.

     "Closing Date" means the later to occur of (i) the twentieth (20th)
calendar day following the Commencement Date or (ii) the date that is two (2)
Business Days following the date on which any applicable waiting period under
the HSR Act relating to the Transactions shall have expired or been terminated.

     "Closing Price" means with respect to the shares of Common Stock on any
day, 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.

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

     "Commencement Date" has the meaning set forth in Section 5.2(b).

     "Commission" means the United States Securities and Exchange Commission.

                                       2

<PAGE>

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

     "Common Stock Purchase Right" means those rights to purchase Common Stock
issued in the Rights Offering (including the Basic Subscription Privilege and
Oversubscription Privilege represented thereby).

     "Company" has the meaning set forth in the Caption.

     "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,
license, employment agreement, or benefit or option plan or similar arrangement.

     "Conversion Price" has the meaning set forth in the Articles.

     "Credit Agreement" means the credit agreement dated as of February 22, 2000
by and among the Company, Bank of America, N.A., as syndication agent, and the
several Banks named therein, as amended from time to time thereafter.

     "Exchange Act" means the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder, each as amended.

     "GAAP" means generally accepted accounting principles, consistently
applied.

     "Governmental Entity" means any national, federal, state, municipal, local,
territorial, foreign or other government, quasi-governmental entity or
organization or self-regulated organization (including, without limitation, the
NYSE and the NASDAQ National Market) 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 Improvement Act of 1976, as
amended.

     "Indemnified Party" has the meaning set forth in Section 9.5(a).

     "Indenture" means the Indenture dated as of April 30, 1999 by and among the
Company, as Issuer, IBJ Whitehall Bank & Trust, as Trustee, and the Guarantors
(as defined therein), as amended from time to time thereafter.

     "Indenture Trustee" means The Bank of New York, or such other entity
serving as the Trustee under the Indenture.

     "Intended Tax Treatment" has the meaning set forth in Section 6.6.

     "Investor Rights" means the Common Stock Purchase Rights offered to the
Investors pursuant to the Rights Offering (including the Basic Subscription
Privilege and Oversubscription Privilege represented thereby).

                                       3

<PAGE>

     "Investor Rights Agreement" means the Investor Rights Agreement dated as of
February 22, 2000 by and among the Company and the Investor named therein, as
the same may be amended, modified or supplemented from time to time.

     "Investors" has the meaning set forth in the Caption.

     "Knowledge" has the meaning set forth in Section 9.7.

     "Latest Form 10-Q" means the quarterly report on Form 10-Q filed by the
Company with the Commission on May 15, 2002 for the three (3) months ended March
31, 2002.

     "Law" means all provisions of laws, statutes, ordinances, rules, bylaws,
regulations, writs, Permits or Orders of any Governmental Entity.

     "Lehman Brothers" means Lehman Brothers, Inc.

     "Lehman Brothers' Fairness Opinion" has the meaning set forth in Section
3.5(a).

     "Liabilities" has the meaning set forth in Section 3.11.

     "Losses" has the meaning set forth in Section 9.5(a).

     "Material Adverse Change" has the meaning set forth in Section 9.7.

     "Material Adverse Effect" has the meaning set forth in Section 9.7.

     "NASDAQ National Market" means the automated quotation system of the
National Association of Securities Dealers for trading of "Nasdaq National
Market Securities" (as defined in the National Association of Securities Dealers
Manual, as amended).

     "Net Authorized Shares" means the number of authorized but unissued shares
of the Company's Common Stock as of the Closing Date, but after subtracting from
such number the number of shares of Common Stock contractually required to be
reserved as of the Closing Date for issuance upon the conversion, exchange or
exercise of all securities of the Company that are convertible into, or
exchangeable or exercisable for, shares of Common Stock.

     "New Securities" means the Investor Rights and the Shares.

     "NYSE" means the New York Stock Exchange.

     "Order" means all judgments, injunctions, orders and decrees of all
Governmental Entities in Proceedings (as hereinafter defined) in which the
Person in question is a party or by which any of its properties is bound.

     "Organizational Documents" means, with respect to any Person, each
instrument or other document that (a) defines the existence of such Person,
including its certificate of limited partnership or articles or certificate of
incorporation, as filed or recorded with an applicable

                                       4

<PAGE>

Governmental Entity, or (b) governs the internal affairs of such Person,
including its partnership agreement or by-laws (or any equivalent thereof).

     "Outside Date" has the meaning set forth in Section 8.1(b).

     "Oversubscription Privilege" has the meaning set forth in Section 5.2(c).

     "Participating Preferred Stock" means shares of the Company's 7.25%
Convertible Preferred Stock, $0.001 par value per share, the terms of which are
governed by the Statement of Designation.

     "Permits" means, collectively, all franchises, approvals, clearances,
permits, licenses, authorizations, registrations, certificates, and variances
obtained from, or agreements with, any Governmental Entity.

     "Person" has the meaning set forth in Section 9.7.

     "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.

     "Prospectus" means the final prospectus relating to the Rights Offering
delivered pursuant to Rule 424(b) of the Securities Act to those Persons
receiving Common Stock Purchase Rights in the Rights Offering.

     "Proxy Statement" has the meaning set forth in Section 5.3(b).

     "Record Date" means the record date for determination of those Persons
entitled to receive Common Stock Purchase Rights in the Rights Offering, which
record date shall be determined in good faith by the Board.

     "Registration Statement" has the meaning set forth in Section 5.2(a).

     "Rights Offering" has the meaning set forth in the recitals.

     "Rights Shares" means the shares of Common Stock issuable upon exercise of
the Common Stock Purchase Rights.

     "SEC Documents" means all reports, forms, schedules, statements and other
documents required to be filed by the Company or any of its Subsidiaries with
the Commission (including, without limitation, the Registration Statement and
the Proxy Statement).

     "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, each as amended.

     "Series C Preferred Stock" means shares of the Company's Series C
Convertible Participating Preferred Stock, $0.001 par value per share, the terms
of which are governed by the Series C Statement of Designation.

                                       5

<PAGE>

     "Series C Statement of Designation" means the Statement of Designation
setting forth the preferences, privileges, limitations and relative rights of
the Series C Preferred Stock, attached as Exhibit B hereto.

     "Shareholders Meeting" has the meaning set forth in Section 5.3(a).

     "Shares" has the meaning set forth in Section 2.1(b).

     "Shortfall Amount" has the meaning set forth in Section 2.1(c).

     "Special Committee" means the special committee of the Board that has been
established for purposes of reviewing and evaluating the Transactions and all
other related or similar proposed transactions.

     "Statement of Designation" means the Statement of Designation setting forth
the preferences, limitations and relative rights of the Participating Preferred
Stock.

     "Subscription Price" means the lower of (i) $0.70 per share of Common Stock
(or share of Common Stock underlying the Series C Preferred Stock) and (ii) the
Ten-Day Average Trading Price.

     "Subsidiary" has the meaning set forth in Section 9.7.

     "Tax" means any of the Taxes and "Taxes" means with respect to any Person,
(A) all income Taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by taxing
authority (domestic or foreign) on such Person and (B) any Liability for the
payment of any amount of the type described in the immediately preceding clause
(A) as a result of (1) being a "transferee" (within the meaning of Section 6901
of the Code or any other applicable law) of another Person, (2) being a member
of an affiliated, combined, consolidated or unitary group or (3) any contractual
Liability.

     "Ten-Day Average Trading Price" shall mean the average of the Closing
Prices of the Common Stock over a period of ten (10) Business Days which
10-Business Day period shall begin on the first Business Day after the
Announcement Date and end on the tenth (10th) Business Day after such
Announcement Date; provided, that if the average of the Closing Prices of the
Common Stock over such 10-Business Day period is less than $0.55, the Ten-Day
Average Trading Price shall equal $0.55.

                                       6

<PAGE>

     "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.

     "Third Party Claim" has the meaning set forth in Section 9.5(b).

     "Transactions" shall mean the Rights Offering and all other transactions
related thereto, and all other transactions contemplated by this Agreement and
the other Transaction Documents.

     "Transaction Documents" means this Agreement and the other certificates,
documents and instruments executed by the Company or the Investors in connection
with any of the foregoing documents and instruments or any of the transactions
contemplated thereby (including, without limitation, the Series C Statement of
Designation).

                                   ARTICLE II

                                 THE TRANSACTION

2.1 Exercise; Sale and Purchase.

     (a) Subject to the terms and conditions hereof, the Company has authorized
(i) the issuance of the Investor Rights in the Rights Offering, (ii) the
reservation, issuance and sale of the Shares to the Investors on the Closing
Date and (iii) the reservation, issuance and sale of all other shares of Common
Stock issuable upon exercise of the Common Stock Purchase Rights.

     (b) On the Closing Date, the Company shall sell to the Investors, and the
Investors shall purchase from the Company, by the exercise of the Investor
Rights, and, if necessary, the consummation of the Additional Share Purchase a
number of shares of Common Stock equal to $35,000,000 divided by the
Subscription Price (the "Shares") at a price per share equal to the Subscription
Price. For purposes of clarification, the purchase of the Shares pursuant to the
immediately preceding sentence shall be deemed to be the full exercise of the
Investor Rights in connection with the Rights Offering (including the exercise
of the Basic Subscription Privilege and the Oversubscription Privilege to the
extent necessary for the Investors to purchase $35,000,000 of Common Stock at
the Subscription Price) and, if necessary, the consummation of the Additional
Share Purchase. The Investors shall pay for the Shares by wire transfer of
immediately available funds to an account designated by the Company (against
delivery to such Investors of certificates representing such Shares).
Concurrently with the receipt of payment for such Shares, the Company shall (i)
deliver to the Investors certificates representing the Shares being purchased by
such Investors, duly endorsed in the name of the Investors or their Affiliates
or (ii) in the event such Shares are uncertificated, make the appropriate book
entries to reflect the purchase of such Shares by the Investors.

     (c) Notwithstanding anything set forth in this Agreement to the contrary,
if the number of Net Authorized Shares is less than the number of shares of
Common Stock subscribed for by the Company's stockholders in the Rights
Offering, then the Company shall reduce by the Shortfall Amount the number of
Shares it would otherwise have been required to issue to the Investors pursuant
to Section 2.1(b) and shall issue to the Investors shares of Series C Preferred
Stock that are convertible (upon the approval contemplated in Section 5.6
hereof) into the

                                       7

<PAGE>

number of shares of Common Stock equal to the Shortfall Amount, (and all
references herein to "Shares", "Rights Shares", "Common Stock", "New Securities"
and similar terms to describe the purchase of shares of Common Stock in the
Rights Offering shall be deemed to refer to such shares of Series C Preferred
Stock). The difference between the amount of shares of Common Stock subscribed
for by the Company's stockholders (including the Investors) in the Rights
Offering and the amount of Net Authorized Shares is referred to herein as the
"Shortfall Amount". For purposes of clarity, pursuant to Section 2.1(b) and this
Section 2.1(c), the Investors will buy a number of shares of Common Stock,
Common Stock issuable upon conversion of the Series C Preferred Stock, or a
combination of the two, equal to the amount obtained by dividing $35,000,000 by
the Subscription Price.

2.2 Closing.

     The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of O'Sullivan LLP, 30 Rockefeller
Plaza, 24th Floor, New York, New York on the Closing Date.

                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to the Investors as follows:

3.1 Organization.

     Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite power and authority to carry on its business
as now being conducted. Each of the Company and its Subsidiaries 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, licensed or in good
standing (individually or in the aggregate) would not be reasonably expected to
either prevent or materially delay its ability to perform its obligations
hereunder. The Company has made available to the Investors complete and correct
copies of its and its Subsidiaries' Organizational Documents, each as amended to
the date hereof.

3.2 Subsidiaries.

     Except as set forth on Schedule 3.2, the Company has no Subsidiaries or
controlled Affiliates and does not otherwise own or control, directly or
indirectly, any equity or voting interest in any Person, nor has the Company
made any commitment or subscribed for the purchase of any such equity or voting
interest.

3.3 Authority; Enforceability.

     Except for those shareholder consents set forth on Schedule 3.3 hereto, the
Company and its Subsidiaries, as applicable, has the requisite corporate power
and authority to execute and deliver or file, as applicable, this Agreement and
each other Transaction Document to which it is a party and to consummate the
Transactions. The execution, delivery and performance of this Agreement and the
other Transaction Documents have been duly authorized by all necessary corporate
action on the part of the Company and its Subsidiaries, as applicable, and no
other corporate proceedings on the part of the Company or any of its
Subsidiaries, except for the

                                       8

<PAGE>

shareholder approvals listed on Schedule 3.3 hereto, are necessary to authorize
this Agreement or any other Transaction Document or to consummate the
Transactions. This Agreement and the other Transaction Documents have been, or
will be, as applicable, duly executed and delivered by the Company and each of
its Subsidiaries, as applicable, and each such document constitutes, or will
constitute, a valid and binding obligation of the Company or such Subsidiary,
subject to receipt of the shareholder approvals listed on Schedule 3.3 hereto,
enforceable against the Company and each of its Subsidiaries, as applicable, 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).

3.4 Capitalization.

     The authorized capital stock of the Company consists solely of: (i) as of
the date of this Agreement and immediately prior to the Closing Date, Two
Hundred Million (200,000,000) shares of Common Stock of which: (A) 64,280,367
shares are issued and outstanding as of May 31, 2002, (B) 12,000,000 shares are
reserved, as of May 31, 2002, for issuance upon the exercise of options granted
or to be granted under the Company's stock option plans, (C) 4,500,000 shares
are reserved, as of May 31, 2002, for issuance upon the exercise of warrants
granted or to be granted pursuant to warrant agreements with Jonathan J.
Ledecky, James Brady, the Investors, Karl Kerr, Randall & Jan Marie Foco,
Trustees UTD, Theodore Keenan, James T. Broyles, Alfred R. Roach and Mike
Callahan, (D) 22,000,000 shares are reserved, as of May 31, 2002, for issuance
upon the conversion of the Participating Preferred Stock; and (E) 1,642,088
shares are reserved, as of June 1, 2002, for issuance pursuant to the Company's
employee stock purchase plan, and (ii) Fifty Million (50,000,000) shares of
preferred stock, par value $0.001 per share, 275,000 of which have been
designated as Participating Preferred Stock of which 256,191 shares are issued
and outstanding.

     Set forth on Schedule 3.4 is a summary of the Company's capitalization, on
(i) an actual basis prior to giving effect to the Transactions and (ii) on a pro
forma basis (after giving effect to the Transactions expected to be disclosed in
the Registration Statement) setting forth the total number of votes entitled to
be cast at any meeting of the Company's Shareholders. All of the Company's and
its Subsidiaries' issued and outstanding shares of capital stock (or other
equity securities) have been duly authorized and validly issued and are fully
paid and nonassessable, with no personal Liability attaching to the ownership
thereof. Except as provided for in this Agreement and on Schedule 3.4, (i) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any shares of capital stock of the Company
or any of its Subsidiaries is authorized or outstanding, (ii) neither the
Company nor any of its Subsidiaries has any obligation (contingent or otherwise)
to issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock or
other equity securities any evidences of indebtedness or assets of the Company
or such Subsidiary, (iii) neither the Company nor any of its Subsidiaries has
any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock (or other equity securities) or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company or any
of its Subsidiaries. All of the issued and outstanding

                                       9

<PAGE>

shares of the Company's and its Subsidiaries' capital stock (or other equity
securities) have been offered, issued and sold by the Company or such Subsidiary
in compliance with applicable federal and state securities Laws. Except as set
forth on Schedule 3.4, as of the date hereof, each subscription, warrant,
option, convertible security or other right (contingent or otherwise) (other
than the Common Stock Purchase Rights) to purchase or acquire any shares of
capital stock of the Company or any of its Subsidiaries is exercisable at an
exercise price or conversion price that is higher than the Fair Market Value (as
defined in the Series C Statement of Designation) of the security underlying
such subscription, warrant, option, convertible security or other right. Except
as set forth on Schedule 7.3(e), no Person will be entitled to any severance,
change of control payment, acceleration of vested or unvested options,
continuing benefit or similar payment or acceleration that would be triggered,
directly or indirectly, as a result of the Transactions. Joseph Ivey has
delivered to the Company a waiver of all severance, change of control payments,
acceleration of vested or unvested options, continuing benefits or similar
payments or acceleration that would be triggered, directly or indirectly, as a
result of the Transactions.

3.5 Fairness Opinion.

     (a) The Special Committee has determined that the Transactions are fair to
the Company from a financial point of view, and has received the oral opinion of
Lehman Brothers, financial advisor to the Special Committee, attesting to such
effect (the "Lehman Brothers' Fairness Opinion"), and Lehman Brothers has
committed to deliver a written opinion to such effect as soon as practicable.

     (b) The Lehman Brothers' Fairness Opinion satisfies the requirements of the
"affiliate transaction" covenant contained in Section 4.12 of the Indenture.

3.6 Consents and Approvals; No Violations.

     Except as set forth on Schedule 3.6 hereto, neither the execution, delivery
nor performance of this Agreement or the other Transaction Documents, by each of
the Company and its Subsidiaries, as applicable, nor the consummation by each of
the Company and its Subsidiaries, as applicable, of the transactions
contemplated hereby or thereby will (i) conflict with or result in any breach of
any provision of the Company's and its Subsidiaries' respective Organizational
Documents, (ii) require any filing with, notice to, or Permit, authorization,
consent or approval of, any Governmental Entity (except for (A) any filing
requirement pursuant to the HSR Act, (B) the filing of the Registration
Statement and the Proxy Statement with (and subsequent declaration of
effectiveness by) the Commission, (C) any filing requirement of the NYSE (or the
NASDAQ National Market, if applicable) or (D) 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, acceleration (including, without
limitation, the acceleration of any unvested options), non-renewal or contingent
payment or Liability (including any severance or change-of-control Liabilities)
under, any of the terms, conditions or provisions of any Contract to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound or (iv) violate any Law

                                       10

<PAGE>

applicable to the Company, any of its Subsidiaries or any of their respective
properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which would not, individually or in the
aggregate, be reasonably expected to either prevent or materially delay such
Person's ability to perform its obligations hereunder.

3.7 Authorization of the New Securities.

     The New Securities have been duly authorized for issuance, and when issued
and delivered, and when payment for the Shares has been received in accordance
with Section 2.1 of this Agreement, the Shares will be validly issued, fully
paid and nonassessable.

3.8 Offering Valid for the New Securities.

     Assuming the accuracy of the representations and warranties of the
Investors contained in Section 4.5 hereof, the issuance of the New Securities
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities Laws.

3.9 SEC Documents; Financial Statements; Other Financial Information.

     Each of the Company and its Subsidiaries has filed with the Commission all
SEC Documents required to be filed on or prior to the date hereof. As of their
respective filing dates, (i) each SEC Document complied in all material respects
with the requirements of the Securities Act, or the Exchange Act, as the case
may be, and the rules and regulations of the Commission promulgated thereunder
applicable to such SEC Document, and (ii) none of the SEC Documents contained
any untrue statement of a material fact or omitted 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. The financial statements included in the SEC Documents complied in
all material respects, as of their respective filing dates, as to form with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, were prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
Commission) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

                                       11

<PAGE>

3.10 Information Supplied.

     None of the information supplied or to be supplied by the Company or any of
its Subsidiaries specifically for inclusion or incorporation by reference in any
documents to be filed by the Company or any of its Subsidiaries with the
Commission or any other Governmental Entity in connection with the Transactions
(including, without limitation, the Registration Statement filed as contemplated
by Section 5.2 hereof and any Proxy Statement filed pursuant to Section 14 under
the Exchange Act in connection with the Transactions) contains any untrue
statement of a material fact or omits 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.

3.11 Absence of Undisclosed Liabilities.

     Except as set forth on Schedule 3.11 or as disclosed in the Latest Form
10-Q, neither the Company nor any of its Subsidiaries has any liability or
obligation of any nature (whether matured or unmatured, secured or unsecured,
fixed or contingent, accrued or unaccrued) ("Liabilities"), except for (a)
Liabilities discussed in the most recent annual report filed on Form 10-K under
the Exchange Act with the Commission, (b) Liabilities which have arisen in the
ordinary course of business since the date the Company filed it most recent
annual report on Form 10-K under the Exchange Act with the Commission and which
are similar in nature and amount to the Liabilities which arose during the
comparable period of time in the immediately preceding fiscal period and (c)
contractual Liabilities incurred in the ordinary course of business.

3.12 Absence of Changes.

     Except as set forth on Schedule 3.12 hereto or as disclosed in the Latest
Form 10-Q, since the Company filed its most recent annual report on Form 10-K
under the Exchange Act with the Commission, there has not been (a) any Material
Adverse Change, (b) any borrowing or agreement to borrow funds or any Liability
incurred by the Company or any of its Subsidiaries, other than current
Liabilities incurred in the ordinary course of business consistent in type and
amount with past practice, (c) any asset or property of the Company or any of
its Subsidiaries made subject to any encumbrance, lien or similar restriction of
any kind, (d) any waiver of any right of the Company or any of its Subsidiaries,
or the cancellation of any debt owed to or claim held by the Company or any of
its Subsidiaries, (e) any payment of dividends on, or other distribution with
respect to, or any direct or indirect redemption, purchase or acquisition of,
any shares of the capital stock or other securities of the Company or any of its
Subsidiaries, (f) any issuance of any stock, bond or other security of the
Company or any of its Subsidiaries, (g) any disposition of any tangible or
intangible asset of the Company or any of its Subsidiaries, (h) any loan by the
Company or any of its Subsidiaries to any officer, director, employee,
consultant, agent, affiliate or stockholder of the Company or any of its
Subsidiaries (other than advances to such Persons in the ordinary course of
business consistent with past practice in connection with bona fide business
expenses), (i) any damage, destruction or loss (whether or not covered by
insurance) of any asset of the Company or any of its Subsidiaries, (j) any
extraordinary increase, direct or indirect, in the compensation paid or payable
to any officer, director, employee, consultant or agent of the Company or any of
its Subsidiaries, (k) any write-down of the value of any inventory, or any
write-off as uncollectible of any account or note receivable of the

                                       12

<PAGE>

Company or any of its Subsidiaries that is not consistent in type and amount
with the Company's or such Subsidiary's past practice, (l) any change in the
accounting methods, practices or policies followed by the Company or any of its
Subsidiaries or any change in depreciation or amortization policies or rates
theretofore adopted, which has not been adequately provided for or disclosed in
the Company's annual report on Form 10-K for the year ended December 31, 2001
filed pursuant to the Exchange Act, (m) any change in the executive officers of
the Company or any of its Subsidiaries, (n) any "Default" or "Event of Default"
(each as defined in the Credit Agreement), under the Credit Agreement or any
event, fact or circumstance that is reasonably likely to constitute a Default or
Event of Default under the Credit Agreement or (o) any agreement or commitment
with respect to any of the foregoing matters.

3.13 Compliance with Laws and Permits.

     The Company and each of its Subsidiaries has complied in all respects with,
and is not in violation in any respect of, any Law or Permit applicable to the
business of the Company or any of its Subsidiaries as presently or previously
conducted, or as currently proposed to be conducted except where such
non-compliance or violation would not have, or be reasonably expected to have, a
Material Adverse Effect.

3.14 Investment Company and Investment Adviser.

     Neither the Company nor any of its Subsidiaries is an "investment company"
or "investment adviser" as defined in the Investment Company Act of 1940, as
amended.

3.15 Brokers.

     Except for customary fees payable to Lehman Brothers and to Bank of America
Securities for the services they have provided in connection with the
Transactions, 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 investment banking or financial advisory
services for which the Company or any of its Subsidiaries has been, is, or will
be liable in connection with the execution of this Agreement by the Company or
the performance by the Company of its obligations hereunder (including, without
limitation, in connection with the Rights Offering).

                                   ARTICLE IV

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

     The Investors represent and warrant to the Company as follows:

4.1 Organization.

     The Investors are duly organized, validly existing and in good standing
under the Laws of the jurisdiction of their organization and have all requisite
power and authority to carry on their business as now being conducted. The
Investors are duly qualified or licensed to do business and are in good standing
in each jurisdiction in which the nature of their business or the ownership or
leasing of their properties makes such qualifications or licensing necessary,
other than in such

                                       13

<PAGE>

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 their ability to perform their obligations hereunder.

4.2 Authority.

     The Investors have the requisite power and authority to execute and deliver
this Agreement and each other Transaction Document to which they are a party,
and to consummate the Transactions. The execution, delivery and performance of
this Agreement and the other Transaction Documents, and the consummation of the
Transactions, have been duly authorized by all necessary action on the part of
the Investors and no other proceedings on the part of the Investors are
necessary to authorize this Agreement or any other Transaction Document or to
consummate the Transactions. This Agreement and the other Transaction Documents
have been duly executed and delivered by the Investors and each such document
constitutes a valid and binding obligation of the Investors enforceable against
the Investors 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).

4.3 Consents and Approvals; No Violations.

     Except as set forth on Schedule 4.3 hereto, neither the execution, delivery
nor performance of this Agreement or the other Transaction Documents by the
Investors, nor the consummation by the Investors of the transactions
contemplated hereby or thereby, will (i) conflict with or result in any breach
of any provision of their Organizational Documents, (ii) require any filing
with, notice to, or Permit, authorization, consent or approval of, any
Governmental Entity (except for (A) any filing requirement pursuant to the HSR
Act, (B) the filing of the Registration Statement and the Proxy Statement with
(and subsequent declaration of effectiveness by) the Commission, (C) any filing
requirement of the NYSE (or the NASDAQ National Market, if applicable) or (D)
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, non-renewal or contingent payment or Liability
under, any of the terms, conditions or provisions of any Contract to which any
of the Investors is a party or by which any of them or any of their respective
properties or assets may be bound or (iv) violate any Law applicable to the
Investors or any of their properties or assets, except in the case of clauses
(iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to either prevent or
materially delay such Person's ability to perform its obligations hereunder.

4.4 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

                                       14

<PAGE>

the Company will be liable in connection with the execution of this Agreement by
the Investors or the performance by the Investors of their obligations
hereunder.

4.5 Investment Representations and Warranties.

     (a) The Investors are acquiring, or will acquire, as applicable, the Shares
hereunder for their own account, for investment and not with a view to the
distribution thereof, and without any present intention of distributing the
same.

     (b) The Investors will be "accredited investors" at the Closing within the
meaning of Rule 501(a) promulgated under the Securities Act.

     (c) The Investors (i) have been furnished with or have had access to the
information that the Investors requested from the Company sufficient to enable
the Investors to evaluate the merits and risks of an investment in the Shares,
(ii) have had an opportunity to discuss with, and ask questions of, management
of the Company regarding the intended business and financial affairs of the
Company, and (iii) have generally such knowledge and experience in business and
financial matters so as to enable the Investors to understand and evaluate the
risks of and form an investment decision with respect to its investment in the
Shares.

     (d) The Investors have no need for liquidity in their investment in the
Shares and are able to bear the economic risk of its investment in the Shares
and the complete loss of all of such investment.

     (e) The Investors recognize that an investment in the Company involves
certain risks, and have taken full cognizance of, and understand all of, the
risk factors related to the purchase of the Shares.

4.6 Financial Resources.

     The Investors have access to sufficient funds to pay the purchase price for
the Shares on the Closing Date.

4.7 Information Supplied.

     None of the information supplied or to be supplied by the Investors about
the Investors specifically for inclusion or incorporation by reference in any
documents to be filed by the Company or any of its Subsidiaries with the
Commission or any other Governmental Entity in connection with the Transactions
(including, without limitation, the Registration Statement filed as contemplated
by Section 5.2 hereof and any Proxy Statement filed pursuant to Section 14 under
the Exchange Act in connection with the Transactions) contains any untrue
statement of a material fact or omits 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, and the Investors
hereby agree to indemnify the Company for any losses, Liabilities or damages
(including, without limitation, the fees and expenses of the Company's legal
counsel) in connection with any breach of the representations and warranties
contained in this Article IV.

                                       15

<PAGE>

                                    ARTICLE V

                                    COVENANTS

5.1 Other Actions; Conduct of Business.

     (a) Prior to the Closing, the Company shall not, and shall cause each of
its Subsidiaries 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 respect, (ii) a breach of any other
agreement or covenant set forth in this Agreement or (iii) any of the conditions
set forth in Article VII not being satisfied. From and after the date hereof
until the Closing Date, the Company will, and will cause each of its
Subsidiaries to, conduct its business only in the ordinary course of business
consistent with past practice and use its commercially reasonable efforts to
preserve intact its current business organizations.

     (b) Prior to the Closing, no Investor shall 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 that Investor set forth in
this Agreement becoming untrue or inaccurate in any material respect, (ii) a
breach of any other agreement or covenant set forth in this Agreement or (iii)
any of the conditions set forth in Article VII not being satisfied.

5.2 The Rights Offering.

     (a) As promptly as practicable after the date hereof, the Company will
prepare and file with the Commission a registration statement on Form S-3 as
adopted pursuant to the Securities Act (or, if Form S-3 is not then available to
the Company, on Form S-1 as adopted pursuant to the Securities Act) (together
with the Prospectus, the "Registration Statement") covering the issuance of the
Common Stock Purchase Rights and the Rights Shares. The Company will not permit
any securities other than the Common Stock Purchase Rights and Rights Shares to
be included in or covered by such Registration Statement. Neither the
Registration Statement nor any amendment or supplement thereto, nor request for
acceleration of effectiveness thereof, will be filed or submitted to any
Governmental Entity without the Investors' prior consent (except if, upon the
advice of legal counsel, such filing or submission is required by Law, in which
event it may be filed only at the time required by Law (and no earlier)). The
Investors and their counsel will be given the opportunity to participate in all
drafting sessions, negotiations and other discussions with respect to such
Registration Statement, and the Company will provide the Investors and their
counsel with any written comments or other written communications that the
Company or its counsel receives from time to time from the Commission or its
staff with respect to the Registration Statement promptly after such
communications are received by the Company. The Registration Statement will
comply in all material respects with the provisions of applicable federal
securities Laws. The Company promptly will correct any information provided by
it for use in the Registration Statement if and to the extent that such
information becomes false or misleading in any material respect or omits to
state any material fact, and the Company will take all steps necessary to cause
the Registration Statement, as so corrected, to be filed with the Commission and
to be disseminated to the distributees of the Common Stock Purchase Rights, in
each case as and to the extent required by

                                       16

<PAGE>

applicable federal securities Laws. The Company will use its best efforts to
cause the Registration Statement to be filed pursuant to this Section 5.2(a) to
be declared effective by the Commission as soon as possible after the
Registration Statement is filed with the Commission.

     (b) Promptly following the effective date of the Registration Statement,
the Company will commence the Rights Offering (the date the Rights Offering is
commenced is referred to herein as the "Commencement Date"). In the Rights
Offering, the Company will distribute to each holder of Common Stock (and each
holder of options or warrants issuable for Common Stock identified on Schedule
5.2(b) hereto) as of the Record Date, at no cost to such holder, one Common
Stock Purchase Right for each share of Common Stock held as of the Record Date
(treating each share of Participating Preferred Stock, for purposes of
determining the holders of Common Stock and the number of shares of Common Stock
held on the Record Date, as if it was converted into the number of shares of
Common Stock for which it is convertible pursuant to Section 4 of the Statement
of Designation, provided that notwithstanding the foregoing, nothing herein
requires the holders of the Participating Preferred Stock to convert such
Participating Preferred Stock into Common Stock in order to obtain the rights
set forth in this Agreement). Each Common Stock Purchase Right will entitle the
holder thereof, in such holder's sole discretion (the "Basic Subscription
Privilege"), to purchase, at the Subscription Price, a number of shares of
Common Stock equal to (i) $50,000,000 divided by the Subscription Price divided
by (ii) the aggregate number of Common Stock Purchase Rights issued in the
Rights Offering. The Company shall not, without the express prior written
consent of the Investors, sell shares of Common Stock in the Rights Offering at
less than the Subscription Price. If any Person who holds a Common Stock
Purchase Right exercises more than one Common Stock Purchase Right in connection
with the Rights Offering, such Person shall receive the number of shares of
Common Stock resulting from aggregating all such exercises, rounded down to the
nearest whole share. The Rights Offering will remain open until the Closing
Date, and the Common Stock Purchase Rights will expire at 5:00 p.m., New York,
New York local time on the Closing Date, except as otherwise required by
applicable Law.

     (c) Each holder of Common Stock Purchase Rights who exercises its Basic
Subscription Privilege in full will be entitled to subscribe for those Rights
Shares it did not subscribe for through its Basic Subscription Privilege at the
Subscription Price (the "Oversubscription Privilege"). If the number of Rights
Shares remaining after the exercise of all Basic Subscription Privileges is not
sufficient to satisfy the exercise of all Oversubscription Privileges, the
holders exercising such Oversubscription Privileges will be allocated such
Rights Shares pro rata and in proportion to the number of Rights Shares such
holders purchased through their respective Basic Subscription Privileges. If the
pro rata allocation referred to in the immediately preceding sentence exceeds
the number of Rights Shares requested to be purchased by such holder through the
exercise of its Oversubscription Privilege, then such holder only will receive
the number of Rights Shares so requested, and the remaining Rights Shares from
such holder's pro rata allocation will be divided among other holders of Common
Stock Purchase Rights exercising their Oversubscription Privileges. If the pro
rata allocation referred to in the second sentence of this Section 5.2(c) is
less than the number of Rights Shares requested to be purchased by such holder
through the exercise of its Oversubscription Privilege, then the excess funds
paid by such holder as the Subscription Price for the Rights Shares not issued
will be returned without interest or deduction. The closing of the exercise of
the Oversubscription Privileges will also occur on the Closing Date.

                                       17

<PAGE>

     (d) The Company will pay all expenses associated with the Registration
Statement referred to in Section 5.2(a) and the Rights Offering and registration
of the Rights Shares and the Common Stock Purchase Rights, including, without
limitation, filing and printing fees, fees and expenses of the subscription
agent, counsel and accounting fees and expenses, costs associated with clearing
the Rights Shares and the Common Stock Purchase Rights for sale under applicable
state securities Laws, listing fees and the Investors reasonable fees in
connection with the registration including, without limitation, the reasonable
attorneys' fees of counsel to the Investors.

     (e) The Company will use all reasonable efforts to ensure that all of its
outstanding shares of Common Stock will remain listed on the NYSE or, if shares
of the Common Stock are no longer listed on the NYSE for any reason, the NASDAQ
National Market, from and after the date of this Agreement. The Company will
take all reasonable steps necessary, and pay all reasonable fees required, to
list all of the Rights Shares and, when authorized and available, the shares of
Common Stock issuable upon conversion of the shares of Series C Preferred Stock
on the NYSE (or the NASDAQ National Market). Notwithstanding the foregoing, the
Company shall have no obligation to list the shares of Series C Preferred Stock
on the NYSE, the NASDAQ National Market or any other securities exchange.

     (f) Notwithstanding anything to the contrary set forth in the Articles, the
Investors waive any adjustment to the Conversion Price of the Participating
Preferred Stock that would otherwise be required under Section 4(e) of the
Statement of Designation with respect to the Company's issuance of the New
Securities to the Investors. For the avoidance of doubt, the Conversion Price
will be adjusted as required pursuant to Section 4(e) of the Statement of
Designation as a result of any other issuance of Rights Shares in the Rights
Offering.

5.3 Shareholder Meeting; Proxy Statement.

     (a) The Company shall, as soon as practicable following execution of this
Agreement, (i) call a special meeting of its shareholders in order to, among
other things, approve the Transactions and approve an increase in the authorized
number of shares of its Common Stock to 275,000,000 shares (the "Shareholders
Meeting") and (ii) hire a proxy solicitation firm that is reasonably
satisfactory to the Investors to solicit votes from the Company's shareholders
in favor of the Transactions. Once the Shareholders Meeting has been called, and
the Company's shareholders have been given notice thereof, the Company shall not
postpone or adjourn the Shareholders Meeting (other than for the absence of a
quorum in person or by proxy) without the written consent of the Investors. The
Board will declare that any action contemplated by any of the Transaction
Documents that would require the approval of the Company's shareholders under
applicable Law is advisable and recommend approval of the same by the Company's
shareholders, will not withdraw or modify such recommendation and shall take all
Lawful action to solicit and secure such approval; provided, however, that the
Board may fail to make, or may withdraw or modify, such recommendation, but only
to the extent that the disinterested members of the Board shall have determined
in good faith, based upon the written advice of outside counsel, that their
fiduciary duties to the Company's shareholders under applicable Law require them
to advise the Company's shareholders against approving the Transactions.

                                       18

<PAGE>

     (b) In connection with the Shareholders Meeting, the Company shall prepare
and deliver to each Investor, as promptly as reasonably practicable after the
date hereof, a draft of a proxy statement (the "Proxy Statement"). Thereafter,
the Investors and the Company each shall use their reasonable best efforts to
cooperate fully to make such changes to the Proxy Statement as are reasonably
requested by the Investors or otherwise appropriate, file the Proxy Statement
with the Commission as soon as practicable and respond promptly to any
Commission comments; provided, that the Company shall not file the Proxy
Statement with the Commission, respond to any Commission comments or have any
communications with the Commission concerning the Proxy Statement without the
prior consent of the Investors. Upon filing the final, definitive Proxy
Statement with the Commission, the Company shall promptly mail such Proxy
Statement to its shareholders.

     (c) At the Shareholders Meeting, the Investors shall vote all of their
shares of Participating Preferred Stock in favor of the Transactions having all
the terms and conditions set forth herein.

5.4 Advice of Changes; Filings.

     From the date hereof until the earlier to occur of the Closing Date and the
date this Agreement is terminated in accordance with Article VIII, the Company
shall confer with the Investors on a regular basis as reasonably requested by
the Investors, report on operational matters and promptly advise the Investors
orally and, if requested by the Investors, in writing, of any material change
with respect to the Company or any Subsidiary. From the date hereof until the
Closing Date, (i) the Company will provide the Investors with a reasonable
opportunity to review, consult with counsel regarding, and comment upon any
filing, report or communication (including, without limitation, the Registration
Statement) with any Governmental Entity in connection with the Transactions,
(ii) neither the Company nor any Subsidiary shall make any such filing, report
or communication (including, without limitation, the Registration Statement)
with any Governmental Entity in connection with the Transactions without first
obtaining the consent of the Investors (except if, upon the advice of legal
counsel, such filing, report or communication is required by Law, in which event
it shall be made only at the time required by Law (and no earlier)), and (iii)
the Company shall, promptly after filing, provide to the Investors (or their
counsel) copies of all filings, reports or communications made by the Company or
any Subsidiary with any Governmental Entity in connection with this Agreement,
the Transaction Documents or the Transactions.

5.5 Delivery of Fairness Opinion.

     The Company shall promptly upon its receipt thereof deliver a copy of the
Lehman Brothers Fairness Opinion to the Investors and to the Indenture Trustee
and promptly respond to any supplementary requests or inquiries of the Indenture
Trustee regarding the Transactions.

5.6 2003 Annual Shareholder Meeting; Proxy.

     (a) In connection with each of the Company's meetings of shareholders after
December 31, 2002, the Company shall, if any of the Series C Preferred Stock has
not been

                                       19

<PAGE>

mandatorily converted into Common Stock pursuant to the Series C Statement of
Designation, (i) submit for the approval of its shareholders a proposal to amend
the Articles to increase the authorized number of shares of its Common Stock to
a number sufficient to permit the conversion of all then outstanding shares of
Series C Preferred Stock into Common Stock (assuming, for purposes of
determining the number sufficient to allow such conversion, the reservation of
the number of shares of Common Stock contractually required to be reserved for
issuance upon the conversion, exchange or exercise of all securities of the
Company that are convertible into, or exchangeable or exercisable for, shares of
Common Stock and (ii) hire a proxy solicitation firm that is reasonably
satisfactory to the Investors to solicit votes from the Company's shareholders
in favor of such amendment to the Articles. The Company shall include such
proposal in the proxy statement delivered to its stockholders in connection with
such annual meeting, and the Board will declare that such approval is advisable
and recommend the same to the Company's shareholders.

     (b) At such meeting, the Investors shall vote all of their shares entitled
to vote thereon in favor of such proposal.

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

6.1 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
(including, without limitation, payment by the Company of all reasonable fees
and expenses (including fees and expenses of the Investors and their counsel and
any fees and expenses in connection with any filing required to be made by the
Investors or their Affiliates pursuant to the HSR Act)) 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 the Transactions in the most expeditious manner
practicable, 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, without
limitation, all filings under the Securities Act, Exchange Act and 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 (including, without limitation, necessary waivers and consents under the
Credit Agreement), (iii) the defending of any lawsuits or other Proceedings,
whether judicial or administrative, challenging this Agreement or any of the
other Transaction Documents or the consummation of any of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (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 (including, without limitation,
obtaining an amendment to the Credit Agreement).

                                       20

<PAGE>

     (b) The Company shall give prompt notice to the Investors of (i) any
representation or warranty made by it contained in this Agreement or any of the
other Transaction Documents becoming untrue or inaccurate in any 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 or any
of the other Transaction Documents; 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.

     (c) The Investors 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 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.

6.2 Public Announcements.

     The Investors, on the one hand, and the Company, on the other hand, will
consult with each other before issuing, and provide each other a reasonable
opportunity to review, consult with their advisors regarding, and comment upon,
any press release or other public statements with respect to the Transactions
and shall not issue any such press release or make any such public statement
without the prior consent of the other party, except on the advice of legal
counsel that such press release or public statement is required under applicable
Law or by obligations pursuant to any listing agreement with NYSE or, if shares
of the Common Stock are no longer listed on the NYSE for any reason, the NASDAQ
National Market. The Company (or its Affiliates) shall make its initial press
release or other initial public statement with respect to the Rights Offering
and the Amendment to the Credit Agreement on the same date.

6.3 Communications with Governmental Entities.

     The Company, its Subsidiaries and their respective advisors will not engage
in any discussions or otherwise communicate in writing with the NYSE (or, if
applicable, the NASDAQ National Market), the Commission or any other
Governmental Entity, or any of their respective agents or representatives
concerning the Transactions without the consent of the Investors and without
allowing for the participation by each Investor in such discussions or
communications if such Investor desires, in its sole discretion, to participate.
The Investors agree to use commercially reasonable efforts (which shall not
include making any expenditures unless the same are reimbursed by the Company)
to cooperate and assist the Company in connection with the foregoing.

6.4 Investor Rights Agreement.

     (a) The Investors hereby agree that in the event that the Investors vote
any of the Shares in favor of any merger, consolidation or amalgamation that
requires the Investors' or their Affiliates' consent pursuant to Section
15(a)(i) or Section 15(b)(i) of the Investor Rights

                                       21

<PAGE>

Agreement (as applicable), then such vote shall constitute the Investors'
consent for purposes of Section 15(a)(i) or Section 15(b)(i) of the Investor
Rights Agreement (as applicable).

     (b) For avoidance of doubt, the Company and the Investors agree and
acknowledge that the Shares shall constitute "Restricted Shares" as defined in,
and for purposes of, the Investor Rights Agreement, and shall have all of the
benefits of, and be subject to all of the limitations on, "Restricted Shares"
set forth in the Investor Rights Agreement.

     (c) The Investors hereby agree, for purposes of the Investor Rights
Agreement, that their participation in the Rights Offering is limited to the
agreements set forth herein.

     (d) The Investors consent to the Company entering into the Amendment to the
Credit Agreement; for purpose of clarity, nothing in this consent shall affect
the Investors' (or their Affiliates') rights in any way with respect to the
increase in the dividend rate or board representation following an Event of
Non-Compliance under the Statement of Designation and/or the Investor Rights
Agreement.

6.5 Bank Communications.

     The Company, its Subsidiaries and their respective advisors will consult
with the Investors, on a good faith basis, during any discussions or other
communications with the Banks or any of their respective agents or
representatives with respect to the Transactions. The Investors agree to use
commercially reasonable efforts (which shall not include making any expenditures
unless the same are reimbursed by the Company) to cooperate and assist the
Company in connection with the foregoing.

6.6 Tax Treatment.

     The Company and the Investors intend that the distribution of Common Stock
Purchase Rights in the Rights Offering to all recipients shall be treated for
all Tax purposes as a Tax-free distribution on shares of common stock pursuant
to Section 305 of the Code. The foregoing intended tax treatment shall be
referred to herein as the "Intended Tax Treatment", and none of the parties
hereto will take any position in their respective Tax or other financial and
accounting filings that is contrary to or inconsistent with the Intended Tax
Treatment, unless such position, in the written opinion of such parties' tax
counsel, is otherwise required by Law. The Investors hereby acknowledge that
they have relied on their own tax advisors and have not relied on the tax advice
of the Company or the Company's tax advisors for purposes of entering into this
Agreement.

                                  ARTICLE VII

                                   CONDITIONS

7.1 Closing Conditions to Each Party's Obligations.

     The respective obligations of each party to consummate the Transactions are
subject to the prior satisfaction or waiver, where permissible, of the following
conditions:

                                       22

<PAGE>

          (a) No Law shall have been enacted, entered, promulgated or enforced
     by any court or Governmental Entity that prohibits or materially restricts
     the consummation of the Transactions or makes such consummation illegal
     (each party agreeing to use commercially reasonable efforts to have any
     such prohibition lifted).

          (b) No preliminary or permanent injunction or other Order issued by
     any Governmental Entity that restrains, enjoins or otherwise prohibits the
     Transactions shall be in effect (each party agreeing to use commercially
     reasonable efforts to have any such prohibition lifted).

          (c) The Registration Statement shall have become effective, and no
     stop order suspending the effectiveness of the Registration Statement shall
     have been issued under the Securities Act or Proceedings therefor initiated
     or threatened by the Commission.

          (d) The Banks shall have executed and delivered to the Company the
     Amendment to the Credit Agreement, such Amendment to the Credit Agreement
     shall be in full force and effect, and there shall have been no subsequent
     amendments, waivers, or other modifications to the Credit Agreement except
     for those amendments, waivers or modifications which, prior to their
     effectiveness, have been consented to by the Investors in writing.

          (e) The requisite percentage or number of Company's shareholders shall
     have approved all matters relating to the Transactions required to be
     approved by them pursuant to applicable Law.

7.2 Conditions to the Company's Obligations.

     The obligation of the Company to consummate the Transactions is subject to
the prior satisfaction or waiver by the Company of the following conditions:

          (a) All of the representations and warranties of the Investors set
     forth in this Agreement shall be true and correct in all material respects
     as of the Closing Date as though made on and as of such time (ignoring, for
     this purpose, all materiality qualifiers set forth therein), and the
     Investors shall have paid for the Shares pursuant to Section 2.1(b) and
     performed in all material respects all other covenants and agreements
     required to be performed by them under this Agreement at or prior to the
     Closing Date.

          (b) All notices required to be given prior to the Closing Date with,
     and all consents, approvals, authorizations, waivers and amendments
     required or reasonably requested by the Company to be obtained prior to the
     Closing Date from, any Third Party in connection with the consummation by
     the Company and the Investors of the Transactions (including, without
     limitation, those approvals, waivers or consents required pursuant to the
     HSR Act, the Credit Agreement and the Indenture) and the approval of the
     Company's shareholders, as required by Law, of the Transactions have been
     made and/or obtained, except in the case of a Third Party consent,
     approval, authorization, waiver or amendment where the failure to give such
     notice or obtain such consent, approval, authorization, waiver or amendment
     is not reasonably likely to have a Material Adverse Effect on the Company;
     provided, however, that failure to satisfy the listing requirements of the
     NYSE with respect to the Rights Shares shall not be deemed to have a
     Material Adverse Effect on the Company.

                                       23

<PAGE>

7.3 Conditions to the Investors' Obligations.

     The obligations of the Investors to consummate the Transactions are subject
to the prior satisfaction or waiver by the Investors 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 (ignoring, for this purpose, all
     materiality qualifiers set forth therein) 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
     would consider material relative to the investment to be made by the
     Investors pursuant to this Agreement and the other Transaction Documents,
     and the Company shall have delivered the certificates (or, in the event the
     Shares are uncertificated, made the appropriate book entries) representing
     the Shares pursuant to Section 2.1(b) and performed in all material
     respects all other covenants and agreements required to be performed by it
     under this Agreement at or prior to the Closing Date. The Investors shall
     have received a certificate signed by an executive officer of the Company
     to the foregoing effect.

          (b) All notices required to be given prior to the Closing Date with,
     and all consents, approvals, authorizations, waivers and amendments
     required or reasonably requested by the Investors to be obtained prior to
     the Closing Date from, any Third Party in connection with the consummation
     by the Company of the Transactions (including, without limitation, those
     approvals, waivers or consents required or reasonably requested by the
     Investors pursuant to the HSR Act, the Credit Agreement and the Indenture),
     and the approval of the Company's shareholders, as required by Law, of the
     Transactions) have been made and/or obtained, except in the case of a Third
     Party consent, approval, authorization, waiver or amendment where the
     failure to give such notice or obtain such consent, approval,
     authorization, waiver or amendment is not reasonably likely to have a
     Material Adverse Effect on the Company; provided, however, that failure to
     satisfy the listing requirements of the NYSE with respect to the Rights
     Shares shall not be deemed to have a Material Adverse Effect on the
     Company.

          (c) The Rights Offering shall have been completed in conformity with
     all of the requirements related thereto provided in the Registration
     Statement.

          (d) The Investors shall have been provided with an opinion of
     Bracewell & Patterson, counsel to the Company, in form and substance
     satisfactory to the Investors.

          (e) The Company shall have delivered to the Investors written waivers,
     in form and substance satisfactory to the Investors and duly executed by
     each employee of the Company set forth on Schedule 7.3(e), which waivers
     shall state, among other things, that there are no agreements or
     arrangements existing as of the Closing Date that provide for any
     severance, change of control payment, acceleration of unvested options,
     continuing benefit or similar payments to such employee that would be
     triggered, directly or indirectly, as a result of the Transactions.

          (f) Shareholder approval of the Investors' purchase of the Shares
     shall have been obtained at the Shareholders Meeting.

                                       24

<PAGE>

          (g) The Investors 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 7.3 have been satisfied.

          (h) The Company shall have reimbursed the Investors for the fees and
     expenses incurred by the Investors (including the fees and expenses of the
     Investors' legal counsel and any filing fees required to be paid for
     filings made under the HSR Act) as required pursuant to Section 9.6.

          (i) The Series C Statement of Designation shall have been filed with
     the office of the Secretary of State of the State of Texas, shall be in
     full force and effect and the Company shall not have amended, modified or
     altered any provision of the Series C Statement of Designation without the
     prior consent of the Investors.

          (j) The Company and the Investors shall have received a written copy
     of the Lehman Brothers Fairness Opinion.

                                  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 Investors and the Company.

          (b) By either the Investors or the Company if the Closing Date shall
     not have occurred on or before October 15, 2002 (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 Investors or the Company if any Governmental Entity
     shall have issued an Order permanently enjoining, restraining or otherwise
     prohibiting the issuance of the New Securities or the consummation of the
     Transactions, and such Order or other action shall have become final and
     nonappealable.

          (d) By the Investors, if (i) any of the representations and warranties
     of the Company contained in this Agreement shall fail to be true and
     correct in any respect when made or have become untrue or incorrect except
     to the extent that the failure to be true and correct has not had and could
     not reasonably be expected to have, in the aggregate, an adverse affect on
     the Company and its Subsidiaries, taken as a whole, that a reasonably
     prudent investor would consider material relative to the transactions to be
     consummated by the Investors pursuant to this Agreement or (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 Investors of the occurrence of such breach or failure;
     provided, however, that in remedying any such breach or

                                       25

<PAGE>

     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.

          (e) By the Company if (i) any of the representations and warranties of
     the Investors 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 or (ii) the Investors 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 Investors
     has received written notice from the Company of the occurrence of such
     breach or failure.

8.2 Effect of Termination.

     In the event of a termination of this Agreement by either the Company, the
Investors, or the Company and the Investors as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no Liability on the
part of the Investor or the Company, except for this Section 8.2 and Sections
9.5 and 9.6, which shall remain in effect.

                                   ARTICLE IX

                                  MISCELLANEOUS

9.1 Amendment.

     This Agreement may not be amended except by an instrument in writing signed
by or on behalf of all of the parties.

9.2 Extension; Waiver.

     At any time prior to the Closing Date, the parties hereto 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 and Warranties, Limitation on Liability.

     All of the representations and warranties contained in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the execution
and delivery of this Agreement until the later of (i) the first anniversary of
the Closing Date and (ii) 30 days after the Company publicly files with the
Commission its annual report on Form 10-K for the year ended

                                       26

<PAGE>

December 31, 2002, and no claim for breach may be asserted with respect to such
representations and warranties thereafter. The covenants and agreements
contained in this Agreement that are intended to be performed on and after the
Closing Date shall survive the execution and delivery of this Agreement for five
(5) years, unless otherwise stated, in accordance with their terms.

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 Investors, to the addresses set forth on Annex I, hereto;

          and, if to the Company, to:

          Encompass Services Corporation
          3 Greenway Plaza, Suite 2000
          Houston, TX 77046
          Attn:  Mr. Joseph Ivey, President and Chief Executive Officer
          Telecopy No.:  (713) 860-0100

          with a copy to:

          Bracewell & Patterson, L.L.P.
          711 Louisiana, Suite 2900
          Houston, Texas  77002
          Phone: (713) 223-2900
          Fax: (713) 221-1212
          Attention:  Gary W. Orloff, Esq.

          and

          Weil, Gotshal & Manges LLP
          767 Fifth Avenue
          New York, NY
          Phone: (212) 310-8000
          Fax: (212) 310-8007
          Attention: Michael A. King, Esq.

9.5 Indemnification.

     (a) From and after the date hereof, the Company shall indemnify and hold
harmless the Investors and their Affiliates, partners, officers, directors,
employees, agents and representatives (each, an "Indemnified Party") against any
losses, Liabilities or damages

                                       27

<PAGE>

(including, without limitation, the fees and expenses of the Investors' legal
counsel) (collectively, "Losses") in connection with any breach of any
representation, warranty or covenant made by the Company in this Agreement or
any other Transaction Document or any Proceeding involving the Transactions
(including, without limitation, any Losses arising out of, or based upon, any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement (or any related preliminary prospectus or other
document incorporated by reference in such Registration Statement), or 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). To
the extent that any Losses are determined, by a final, nonappealable Order of a
court of competent jurisdiction, to be the direct result of fraud or crime
committed by the Investors, the indemnity set forth in the immediately preceding
sentence shall not apply to such Losses.

     (b) Upon its receipt of notice of any Proceeding initiated by any Third
Party against an Indemnified Party (a "Third Party Claim"), the Indemnified
Party shall give prompt notice to the Company of the assertion of any claim, or
the commencement of any Proceeding in respect of which indemnification 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(b) 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.

     (c) With respect to any Third Party Claim, the Company shall have the sole
right to assume the defense or settlement of such Third Party Claim if it has
agreed irrevocably (notwithstanding any limitation on the rights of any
Indemnified Party to be indemnified for Losses hereunder, including pursuant to
the last sentence of Section 9.5(a) hereof) 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 at its own
expense, 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 in any material respect with the Company
defenses to such claims. If the Company does not proceed diligently to defend
the Third Party Claim within 10 days after receipt of written notice by an
Indemnified Party of such Third Party Claim, the Indemnified Party shall have
the right, but not the obligation, to undertake the defense of any such Third
Party Claim and in such event the Company shall have the right to participate at
its own expense.

     (d) With respect to any such Third Party Claim, the Company shall not be
required to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any such Third Party Claim entered into without the written
consent of the Company (which consent shall not be unreasonably withheld or
delayed), provided, however, 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.

                                       28

<PAGE>

     (e) The parties shall cooperate in defending any such Third Party Claim,
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
Third Party Claim, for the purpose of enforcing any right of the indemnity
granted to such Indemnified Party pursuant to this Agreement.

9.6 Fees and Expenses.

     (a) Without duplication of any provision herein, irrespective of whether
the Closing occurs, the Company agrees to pay, upon demand therefor, (i) any
fees and expenses incurred by the Investors or their Affiliates in connection
with any filing required to be made by the Investors or their Affiliates
pursuant to the HSR Act and (ii) up to $1,500,000 of the other fees and expenses
incurred by the Investors or their Affiliates (including employees and
representatives) in connection with the negotiation, preparation, execution and
delivery of all documents related to the Transactions and all other potential
past or completed transactions or undertakings reviewed, or services performed,
by the Investors or their Affiliates (including employees and representatives)
(including, without limitation, the fees and expenses of the Investors'
counsel).

     (b) The Company hereby acknowledges that its obligation to reimburse the
Investors for the amounts described in Section 9.6(a) may, at the Investors'
option, be fulfilled at the Closing by permitting the Investors to deduct such
fees and charges from the consideration payable by the Investors to the Company
pursuant to Section 2.1(b).

9.7 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 or prospects of
the Company and its Subsidiaries, taken as a whole, that a reasonably prudent
investor would consider material relative to the investment to be made by the
Investors pursuant to this Agreement and the other Transaction Documents. As
used in this Agreement, "Material Adverse Change" means, when used in respect of
the Company and its Subsidiaries, any change to the assets, properties,
business, financial condition, results of

                                       29

<PAGE>

operations or prospects of the Company and its Subsidiaries, taken as a whole,
that a reasonably prudent investor would consider material relative to the
investment to be made by the Investors pursuant to this Agreement and the other
Transaction Documents. 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 Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, General Counsel and Treasurer (or any
successor thereto, regardless of title). 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.

9.8 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) other than as is expressly
provided for in Section 9.5, is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.

9.9 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.

9.10 Counterparts.

     This Agreement may be executed in two or more original or facsimile
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

9.11 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 so long as such Investor remains primarily
and directly obligated hereunder. 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.

9.12 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 the United States District Court for the Southern District of New

                                       30

<PAGE>

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 the United States District Court for the Southern District 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.

9.13 Time.

     Time is of the essence with respect to the performance of all obligations
of each party arising under this Agreement.

                                       31

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.

                                      ENCOMPASS SERVICES CORPORATION

                                      By: /s/ Gray H. Muzzy
                                         --------------------------------------
                                         Name:  Gray H. Muzzy
                                         Title: Senior Vice President

                                      APOLLO INVESTMENT FUND IV, L.P.
                                      By:    Apollo Advisors IV, L.P.
                                      By:    Apollo Capital Management IV, Inc.

                                      By: /s/ Andrew Africk
                                         --------------------------------------
                                         Name:  Andrew Africk
                                         Title: Vice President

                                      APOLLO OVERSEAS PARTNERS IV, L.P.
                                      By:    Apollo Advisors IV, L.P.
                                      By:    Apollo Capital Management IV, Inc.

                                      By: /s/ Andrew Africk
                                         --------------------------------------
                                         Name:  Andrew Africk
                                         Title: Vice President

<PAGE>
                                                                         Annex I

                              Schedule of Investors

APOLLO INVESTMENT FUND IV, L.P.
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

APOLLO OVERSEAS PARTNERS IV, L.P.
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

in either case, with a copy to:

O'Sullivan LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Attention: John M. Scott, Esq.
Telecopy No.: (212) 728-5950

<PAGE>

                                    EXHIBIT A

                         AMENDMENT TO CREDIT AGREEMENT

                            (Intentionally Omitted)

<PAGE>

                                    EXHIBIT B

                         ENCOMPASS SERVICES CORPORATION

                            STATEMENT OF DESIGNATION

               SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK

           Pursuant to Article 2.13 of Texas Business Corporation Act

A.   The name of the corporation is Encompass Services Corporation.

B.   The following preamble and resolution were duly adopted by the Board of
     Directors of Encompass Services Corporation, a Texas corporation (the
     "Corporation"), on         , 2002, pursuant to the provisions of Article
     2.13 of the Texas Business Corporation Act:

     WHEREAS, the Restated Articles of Incorporation of the Corporation (the
"Restated Articles of Incorporation") authorize the issuance of a class of
preferred stock, par value $0.001 per share (the "Preferred Stock"), by the
Corporation;

     RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors by the provisions of the Restated Articles of
Incorporation, the Board of Directors hereby authorizes the issuance of a series
of Preferred Stock, and the Board of Directors hereby fixes and determines the
designation, preferences, limitations and relative rights, including voting
rights, thereof or so much thereof as shall not be fixed and determined by the
Restated Articles of Incorporation, as follows:

     1. Establishment and Designation of Series.

     There is hereby established out of the authorized but unissued shares of
Preferred Stock a series of Preferred Stock to be designated Series C
Convertible Participating Preferred Stock (the "Series C Preferred Stock"), to
consist of an aggregate of            shares and to have the designations,
preferences, limitations and relative rights, including voting rights, thereof,
as set forth herein.

     2. Dividends.

     (a) In the event that the Corporation shall declare any dividend on its
Common Stock (other than a distribution described in Section 4(e)(1) or a
dividend described in Section 4(e)(7)) (a "Common Dividend"), the holders of the
outstanding shares of Series C Preferred Stock shall participate in such Common
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 Series C
Preferred Stock are then convertible pursuant to Section 4 hereof (assuming, for
purposes of such determination, that a sufficient number of authorized shares of
Common Stock

<PAGE>

is available to allow for such conversion at the time of such Common Dividend
declaration), and shall be entitled to receive such Common Dividends out of
funds legally available therefor.

     (b) 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 Series C Preferred Stock, such payment shall be distributed
ratably among the holders of the shares of Series C Preferred Stock based upon
the number of shares of Series C Preferred Stock then held by each holder.

     3. Liquidation.

     (a) 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 Series
C Preferred Stock (including the Series A Participating Preferred Stock), the
holders of Series C Preferred Stock shall be entitled, before any distribution
or payment is made upon any Common Stock or any other class or series of stock
of the Corporation ranking on Liquidation junior to the Series C Preferred
Stock, to an amount equal to the Liquidation Amount for each such share of
Series C Preferred Stock held on the date of such Liquidation. The Series C
Preferred Stock shall rank prior and superior to all other capital stock (other
than the Series A Participating Preferred Stock, which shall rank prior and
superior to the Series C Preferred Stock) of the Corporation with respect to
Liquidation.

     (b) If upon a Liquidation of the Corporation, the assets of the Corporation
available for distribution to the holders of Series C Preferred Stock shall be
insufficient to pay the holders of Series C Preferred Stock the full amount to
which they are entitled pursuant to Section 3(a), then the holders of the Series
C Preferred Stock shall share in any distribution of assets to be so distributed
pro rata in accordance with the total amount that each such holder of Series C
Preferred Stock would otherwise be entitled to receive had their been such
sufficient assets.

     (c) After all payments to the holders of the Series C Preferred Stock have
been made in full pursuant to Section 3(a), the remaining net assets of the
Corporation available for distribution shall be distributed so that the holders
of Series C Preferred Stock and the holders of Common Stock shall share the
remaining assets of the Corporation available for distribution to its
stockholders in the same proportion as the number of shares of outstanding
Common Stock (including, in the case of the holders of the Series C Preferred
Stock, the number of shares of Common Stock issuable upon the conversion of the
outstanding shares of Series C Preferred Stock in accordance with Section 4(a)
hereof (assuming, for purposes hereof, that a sufficient number of authorized
shares of Common Stock is available to allow for such conversion at the time of
the distribution)) then held by each such stockholder bears to the total number
of shares of outstanding Common Stock (including shares of Common Stock issuable
upon conversion of outstanding shares of Series C Preferred Stock in accordance
with Section 4(a) hereof (assuming, for purposes hereof, that a sufficient
number of authorized shares of Common Stock is available to allow for such
conversion at the time of the distribution)).

     (d) Written notice of such Liquidation, stating a payment date, the amount
of payments due pursuant to this Section 3, and the place where said payments
shall be payable,

                                       2

<PAGE>

shall be delivered in person, mailed by certified or registered mail, return
receipt requested, or sent by telecopier or telex, not less than 20 days prior
to the payment date stated therein, to the holders of record of Series C
Preferred Stock. Such notice shall be addressed to each such holder at its
address as shown by the records of the Corporation.

     4. Conversion.

     (a) Upon the occurrence of a Shareholder Approval Event, each share of
Series C Preferred Stock then outstanding shall, by virtue of and simultaneously
with the occurrence of such Shareholder Approval Event, be automatically
converted into the number of fully paid and nonassessable shares of Common Stock
equal to the quotient obtained by dividing (A) the Accumulated Amount by (B) the
Conversion Price (as defined below), as last adjusted and then in effect. The
initial conversion price per share at which shares of Common Stock shall be
issuable upon conversion of shares of Series C Preferred Stock (the "Conversion
Price") shall be the Subscription Price, subject to adjustment as set forth
herein.

     (b) Without limiting the provisions of Section 4(a) hereof in any way, at
any time from time to time, that any Net Authorized Share(s) are available, the
Series C Preferred Stock shall convert automatically into the number of fully
paid and nonassessable shares of Common Stock equal to the quotient obtained by
dividing the Accumulated Amount by the Conversion Price, as last adjusted and
then in effect. If there is more than one holder of shares of Series C Preferred
Stock at the time of any such conversion, each such holder shall have his, her
or its pro rata portion (based on the aggregate number of outstanding shares of
Series C Preferred Stock immediately prior to such conversion) of his, her or
its shares of Series C Preferred Stock converted pursuant to this Section 4(b).

     (c) No fractional shares of Common Stock or scrip shall be issued upon
conversion of shares of Series C Preferred Stock. The number of full shares of
Common Stock issuable upon conversion of Series C Preferred Stock shall be
computed on the basis of the aggregate number of shares of such Series C
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 (other than the right to payment in
respect thereof as set forth in this Section 4(c)).

     (d) The Corporation shall, for as long as any of the Series C Preferred
Stock has not been converted into Common Stock pursuant to Section 4 hereof, use
its best efforts (including without limitation, submitting an amendment to the
Restated Articles of Incorporation to the stockholders of the Corporation for
approval) to increase the authorized number of shares of its Common Stock to a
number sufficient to permit the conversion of all then outstanding shares of
Series C Preferred Stock into Common Stock (assuming, for purposes of
determining the number sufficient to allow such conversion, that all options,
warrants, convertible securities or other rights convertible, directly or
indirectly, into Common Stock have been so exercised or converted, regardless of
whether such options, warrants, convertible securities or other rights

                                       3

<PAGE>

have an exercise or conversion price that is less than or greater than the Fair
Market Value of its underlying security).

     (e) The Conversion Price shall be subject to adjustment from time to time
as follows:

          (1) 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 following the record date for the determination of
     holders of Common Stock entitled to receive such stock dividend,
     subdivision or split-up, the Conversion Price shall be appropriately
     decreased so that the number of shares of Common Stock issuable on
     conversion of each share of Series C Preferred Stock shall be increased in
     proportion to such increase in outstanding shares.

          (2) 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 Series C Preferred Stock shall be decreased in proportion to such
     decrease in outstanding shares.

          (3) 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,
     each share of Series C 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
     Series C 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.

          (4) 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 Series C 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,

                                       4

<PAGE>

     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.

          (5) Whenever a Conversion Price shall be adjusted as provided in this
     Section 4(e), the Corporation shall make available for inspection during
     regular business hours, at its principal executive offices or at such other
     place as may be designated by the Corporation, a statement, signed by its
     chief financial officer, showing in detail the facts requiring such
     adjustment and the Conversion Price that shall be in effect after such
     adjustment. The Corporation shall also cause a copy of such statement to be
     sent by first class certified mail, return receipt requested and postage
     prepaid, to each holder of Series C 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.

          (6) If the Corporation shall propose to take any action of the types
     described in clauses (1), (2) or (3) of this Section 4(e), the Corporation
     shall give notice to each holder of shares of Series C Preferred Stock, in
     the manner set forth in clause (5) 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 Series C 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.

          (7) 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
     Series C 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 Series C 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
     Series C 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

                                       5

<PAGE>

     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 Series C
     Preferred Stock.

          (8) 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 (8) are not required to be made will be carried
     forward and taken into account in a subsequent adjustment, if any.

     5. Mandatory Conversion.

     [Intentionally Omitted.]

     6. Redemption at Option of the Corporation.

     The Series C Preferred Stock shall not be redeemable at the option of the
Corporation.

     7. Redemption at the Option of the Holders.

     The Series C Preferred Stock shall not be redeemable at the option of the
holders thereof.

     8. Mandatory Redemption.

     The Series C Preferred Stock shall not be mandatorily redeemable.

     9. Voting Rights.

     Except as otherwise expressly provided herein or required by law and so
long as any shares of the Series C Preferred Stock are outstanding, each share
of Series C 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 Series C 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 Series C Preferred Stock into shares of Common Stock in
accordance with Section 4(a) hereof as of the record date for determining the
shareholders of the Corporation entitled to vote on any such matters (assuming,
for purposes hereof, that a sufficient number of authorized shares of Common
Stock is available to allow for such conversion on such record date).

                                       6

<PAGE>

     10. Definitions.

     As used herein, the following terms shall have the following meanings:

     "Accumulated Amount" means an amount equal to two (2) times the
Subscription Price.

     "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person; provided that
Affiliates of Apollo shall exclude any operating companies that would otherwise
be deemed an Affiliate of Apollo, but shall include all investment partnerships
and special purpose entities that are not operating companies, whether existing
as of the date hereof or created hereafter, if the Persons controlling Apollo
have a dominant management role in such entities. For the purpose of the above
definition, the term "control" (including, with correlative meaning, the terms
"controlling", "controlled by", and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.

     "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

                                       7

<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.

     "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.

     "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 Dividend" shall have the meaning set forth in Section 2(a).

     "Common Stock" means the Common Stock, par value $0.001, of the
Corporation.

     "Conversion Price" shall have the meaning set forth in Section 4(a).

     "Corporation" shall have the meaning set forth in the preamble to this
resolution.

     "Fair Market Value" means, as to any security, the average of the Closing
Prices of such security (i) averaged over a period of 21 days consisting of the
day immediately preceding the day as of which "Fair Market Value" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's length
transactions). If at any time such security is not listed on any domestic

                                       8

<PAGE>

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.)

     "Liquidation" means (i) 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 and (ii) any Sale of the Corporation.

     "Liquidation Amount" means, as to each share of Series C Preferred Stock,
the Preference Amount 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 Series C Preferred Stock, as adjusted to account for
any stock splits, reverse splits, stock dividends or other similar events.

     "NASDAQ System" means the National Association of Securities Dealers
Automated Quotation System.

     "Net Authorized Shares" means, as of any time, the number of authorized but
unissued shares of the Corporation's Common Stock minus the number of shares of
Common Stock contractually required to be reserved for issuance by the
Corporation at the time of such determination, upon the conversion, exchange or
exercise of all securities of the Corporation that are convertible into, or
exchangeable or exercisable for, shares of Common Stock.

     "NYSE" means the New York Stock Exchange.

     "Original Issuance Date" for the Series C Preferred Stock means the date of
original issuance of the first share of such Series C 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.

     "Preference Amount" means $0.02 per share.

                                       9

<PAGE>

     "Preferred Stock" shall have the meaning set forth in the preamble to this
resolution.

     "Requisite Convertible Preferred Shareholders" means, as of any date of
determination, the holders of a majority of the outstanding shares of Series C
Preferred Stock as of such date.

     "Restated Articles of Incorporation" shall have the meaning set forth in
the preamble to this resolution.

     "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
(on a consolidated basis) 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.

     "Series A Participating Preferred Stock" means the Corporation's 7.25%
Convertible Preferred Stock, par value $0.001 per share.

     "Series C Preferred Stock" shall have the meaning set forth in Section 1.

     "Shareholder Approval Event" means the date on which an amendment to the
Restated Articles of Incorporation which authorizes a sufficient number of
additional shares of Common Stock to allow the holders of the Series C Preferred
Stock to convert all of such shares of Series C Preferred Stock to Common Stock
(assuming, for purposes of determining the number sufficient to allow such
conversion, that all options, warrants, convertible securities or other rights
convertible, directly or indirectly, into Common Stock have been so exercised or
converted, regardless of whether such options, warrants, convertible securities
or other rights have an exercise or conversion price that is less than or
greater than the Fair Market Value of its underlying security) pursuant to
Section 4 hereof shall have been filed and be in full force and effect in
accordance with all applicable laws.

     "Subscription Price" has the meaning set forth in the Securities Purchase
Agreement dated as of June 27, 2002 by and among the Corporation and the
Investors named therein, as such may be amended from time to time.

     "Subsidiary" means any entity of which a majority of the outstanding Voting
Stock, is owned by the Corporation either directly or indirectly through
Subsidiaries.

     "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

                                       10

<PAGE>

(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.

                                       11

<PAGE>

     IN WITNESS WHEREOF, Encompass Services Corporation has caused this
Statement of Designation to be duly executed this __ day of ____________.

                           ENCOMPASS SERVICES CORPORATION

                           By:______________________________________

                           Name:____________________________________

                           Title:_____________________________________

                                       12

<PAGE>

                                  SCHEDULE 3.2

                     SUBSIDIARIES AND CONTROLLED AFFILIATES
<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
A-1 Mechanical of Lansing, Inc.                                             Michigan          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
AA Advance Air, Inc.                                                         Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
A-ABC Appliance, Inc.                                                         Texas       Encompass Services Holding
                                                                                                     Corp.
-------------------------------------------------------------------------------------------------------------------------
A-ABC Services, Inc.                                                        Delaware      Encompass Services Holding
                                                                                                     Corp.
-------------------------------------------------------------------------------------------------------------------------
AA Jarl, Inc.                                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Air Conditioning, Plumbing & Heating Service Co., Inc.                      Colorado          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Aircon Energy Incorporated                                                 California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Air Systems, Inc.                                                          California       Pacific Rim Mechanical
                                                                                               Contractors, Inc.
-------------------------------------------------------------------------------------------------------------------------
Airtron, Inc.                                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Airtron of Central Florida, Inc.                                             Florida             Airtron, Inc.
-------------------------------------------------------------------------------------------------------------------------
American Air Company, Inc.                                                 California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
AMS Arkansas, Inc.                                                          Arkansas          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
B&R Electrical Services, Inc.                                               Maryland          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Building One Commercial, Inc.                                               Missouri          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Building One Service Solutions, Inc.                                        Virginia          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
BUYR, Inc.                                                                  Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Callahan Roach Products & Publications, Inc.                                Colorado          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Cardinal Contracting Corporation                                             Indiana          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Central Carolina Air Conditioning Company                                North Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Chapel Electric Co.                                                           Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Charlie Crawford, Inc.                                                      Delaware      Encompass Services Holding
                                                                                                     Corp.
-------------------------------------------------------------------------------------------------------------------------
ChIP Corp.                                                                  Delaware          Encompass Services
                                                                                                  Corporation

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Colonial Air Conditioning Company                                           Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Commercial Air Holding Company                                              Maryland          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
CONCH Republic Corp.                                                        Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Costner Brothers, Inc.                                                   South Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Delta Innovations, Ltd.                                                       Ohio        Roth Companies Incorporated
-------------------------------------------------------------------------------------------------------------------------
Divco, Inc.                                                                Washington         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Dynalink Corporation                                                          Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
EET Holdings, Inc.                                                          Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Electrical Contracting, Inc.                                               California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Capital, Inc.                                                     Maryland        Commercial Air Holding
                                                                                                    Company
-------------------------------------------------------------------------------------------------------------------------
Encompass Capital, L.P.                                                       Texas        CONCH Republic Corp. Isla
                                                                                                  Morada, LLC
-------------------------------------------------------------------------------------------------------------------------
Encompass Central Plains, Inc.                                              Oklahoma          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Constructors, Inc.(fka Atlantic Industrial Constructors,          Virginia          Encompass Services
Inc.)                                                                                             Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Design Group, Inc.                                                Oklahoma       Encompass Central Plains,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies, Inc.(fka Continental Electrical          Delaware          Encompass Services
Construction Co.)                                                                                 Corporation
--------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies, Inc.(fka Oil Capital Electric, Inc.)     Oklahoma       Encompass Central Plains,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Central Tennessee, Inc.                   Tennessee         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Eastern Tennessee, Inc.                   Tennessee         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Florida, LLC                            Delaware          EET Holdings, Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Georgia, Inc.                              Georgia         Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Midwest, Inc.                           Wisconsin         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies North Carolina, Inc.                   North Carolina      Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies North Florida, Inc.                        Florida         Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Encompass Electrical Technologies of Nevada, Inc.                            Nevada           Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies of New England, Inc.                      Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies of Texas, Inc.                              Texas           Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Projects Group, Inc.                       Florida         Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies - Rocky Mountains, Inc.                   Colorado          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies South Carolina, Inc.                   South Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Southeast, Inc.                            Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Electrical Technologies Western Tennessee, Inc.                   Tennessee        Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Facility Services, Inc.                                           Delaware      MacDonald-Miller Industries
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Global Technologies, Inc.                                         Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Ind./Mech. of Texas, Inc.                                         Delaware      Encompass Services Holding
                                                                                                     Corp.
-------------------------------------------------------------------------------------------------------------------------
Encompass Industrial Services Southwest, Inc.                                 Texas           Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Management Co.                                                    Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Mechanical Services of Elko, Inc.(fka Snyder Mechanical)           Nevada           Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Mechanical Services - Rocky Mountains, Inc.                       Colorado          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Mechanical Services Southeast, Inc.                              Mississippi        Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Power Services, Inc.                                              Oklahoma       Encompass Central Plains,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Encompass Residential Services of Houston, Inc.(fka Sterling Air            Delaware          Encompass Services
Conditioning)                                                                                     Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Services Holding Corp.                                            Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Encompass Services Indiana L.L.C.                                            Indiana             Airtron, Inc.
                                                                                             Cardinal Contracting
                                                                                                  Corporation
                                                                                            Paul E. Smith Co., Inc.
                                                                                          Roth Companies Incorporated
-------------------------------------------------------------------------------------------------------------------------
ESR PC, L.P.                                                                  Texas        CONCH Republic Corp. Isla
                                                                                                  Morada, LLC

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Evans Services, Inc.                                                         Alabama          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
EWG Holdings, Inc.                                                          Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
FacilityDirect.com, LLC                                                     Virginia         Building One Service
                                                                                                Solutions, Inc.
-------------------------------------------------------------------------------------------------------------------------
Ferguson Electric Corporation                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Fred Clark Electrical Contractor, Inc.                                        Texas        Encompass Central Plains,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Gamewell Mechanical, Inc.                                                North Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Garfield-Indecon Electrical Services, Inc.                                    Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Gilbert Mechanical Contractors, Inc.                                        Minnesota         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
GroupMAC Texas L.P.                                                           Texas       Encompass Services Holding
                                                                                                     Corp.
                                                                                                 Wayzata, Inc.
-------------------------------------------------------------------------------------------------------------------------
Hallmark Air Conditioning, Inc.                                             Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
HPS Plumbing Services, Inc.                                                California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
HVAC Services, Inc.                                                           Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Interstate Building Services, L.L.C.                                        Virginia         Building One Service
                                                                                                Solutions, Inc.
-------------------------------------------------------------------------------------------------------------------------
Isla Morada LLC                                                             Delaware         CONCH Republic Corp.
-------------------------------------------------------------------------------------------------------------------------
Ivey Mechanical Services, L.L.C.                                              Texas          Encompass Mechanical
                                                                                           Services Southeast, Inc.
-------------------------------------------------------------------------------------------------------------------------
K&N Plumbing, Heating and Air Conditioning, Inc.                            Delaware      Encompass Services Holding
                                                                                                     Corp.
-------------------------------------------------------------------------------------------------------------------------
Laney's, Inc.                                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Lexington/Ivey Mechanical Company, L.L.C.                                   Kentucky         Encompass Mechanical
                                                                                           Services Southeast, Inc.
-------------------------------------------------------------------------------------------------------------------------
Linford Service Co.                                                        California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
L.T. Mechanical, Inc.                                                       Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
MacDonald-Miller Co., Inc.                                                 Washington          MacDonald-Miller
                                                                                               Industries, Inc.
-------------------------------------------------------------------------------------------------------------------------
MacDonald-Miller Industries, Inc.                                          Washington         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
MacDonald-Miller of Oregon, Inc.                                            Delaware           MacDonald-Miller
                                                                                               Industries, Inc.
-------------------------------------------------------------------------------------------------------------------------
MacDonald-Miller Service, Inc.                                             Washington          MacDonald-Miller
                                                                                                Industries Inc.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Masters, Inc.                                                               Maryland          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Mechanical Services of Orlando, Inc.                                         Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Merritt Island Air & Heat, Inc.                                             Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
National Network Services, Inc.                                             Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
National Network Services Northwest, LLC                                    Delaware          EWG Holdings, Inc.
-------------------------------------------------------------------------------------------------------------------------
Omni Mechanical Company                                                     Oklahoma          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Omni Mechanical Services                                                    Oklahoma       Encompass Central Plains,
                                                                                                     Inc.
                                                                                            Omni Mechanical Company
-------------------------------------------------------------------------------------------------------------------------
Pacific Rim Mechanical Contractors, Inc.                                   California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Paul E. Smith Co., Inc.                                                      Indiana          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Phoenix Electric Company                                                    Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Ray's Plumbing Contractors, Inc.                                             Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Regency Electric Company, LLC                                                Florida          EET Holdings, Inc.
-------------------------------------------------------------------------------------------------------------------------
Regency Electric Company South Florida Office, Inc.                          Florida         Encompass Electrical
                                                                                            Technologies Southeast,
                                                                                                     Inc.
-------------------------------------------------------------------------------------------------------------------------
Riviera Electric of California, Inc.                                       California         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Romanoff Electric Corp.                                                       Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Roth Companies Incorporated                                                  Indiana          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Sanders Bros., Inc.                                                      South Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Sequoyah Corporation                                                       Washington         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
S. L. Page Corporation                                                       Florida               Encompass
                                                                                              ServicesCorporation
-------------------------------------------------------------------------------------------------------------------------
Southeast Mechanical Service, Inc.                                           Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Stephen C. Pomeroy, Inc.                                                    Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Sun Plumbing, Inc.                                                           Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Taylor-Hunt Electric, Inc.                                                    Utah            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                Name of Subsidiary                                        Jurisdiction         Equity Holder(s)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>

Team Mechanical, Inc.                                                         Utah            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
The Farfield Company                                                        Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Tri-City Electrical Contractors, Inc.                                        Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Tri-M Corporation                                                         Pennsylvania        Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Tri-State Acquisition Corp.                                                  Nevada           Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
United Acquisition Corp.                                                      Iowa            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
United Service Alliance, Inc.                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Van's Comfortemp Air Conditioning, Inc.                                      Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Vantage Mechanical Contractors, Inc.                                        Maryland          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Vermont Mechanical, Inc.                                                    Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Wade's Heating & Cooling, Inc.                                               Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Watson Electrical Construction Co.                                       North Carolina       Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Wayzata, Inc.                                                               Delaware          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Wiegold & Sons, Inc.                                                         Florida          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Willis Refrigeration, Air Conditioning & Heating, Inc.                        Ohio            Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Wilson Electric Company, Inc.                                                Arizona          Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
Yale Incorporated                                                           Minnesota         Encompass Services
                                                                                                  Corporation
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

Other Equity or Voting Interest (50% or less):

<TABLE>
<CAPTION>
             Entity                                                 Equity Holder(s)
------------------------------------------------------------------------------------------------------------------
<S>                                <C>
Oakleaf Waste Management, LLC      12.5% Membership interest held by Wayzata, Inc.
                                   87.5% Membership interest held by James R. Barnes, founder
------------------------------------------------------------------------------------------------------------------
Process Design Builders, LLC       50% Membership interest held by Sanders Bros., Inc.
                                   50% Membership interest held by Penta, Inc.
------------------------------------------------------------------------------------------------------------------
FacilityPro.com Corporation        Approximately 10% equity interest on a fully diluted basis held by Encompass
                                   Management Co. by common stock and warrants.  Other investors include
                                   Constellation Real Technologies and Austin Ventures
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

From time to time the Company or one of its Subsidiaries may enter into a joint
venture or other collaborative agreement in connection with a job specific
project.

<PAGE>

                                  SCHEDULE 3.3

                              SHAREHOLDER CONSENTS

Under the rules of the New York Stock Exchange, shareholder approval is required
prior to listing of the Shares on the Exchange.

<PAGE>

                                  SCHEDULE 3.4
                         Capitalization at June 27, 2002
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                           Number of Votes, after giving
                                                                            effect to the Transactions
                                                                    -----------------------------------------
                                                    Actual                 Assumes               Assumes
                                                 Shares before      Investor subscribes     Full Subscription
                                                 Transactions             at $0.55               at $0.55
                                                 -------------      -------------------     ------------------
<S>                                                   <C>               <C>                    <C>
Convertible Preferred Stock                           256               21,679  (a)            21,679  (a)

Common shares outstanding (net of treasury)        64,280               64,280                 64,280
Investor common shares                                -                 63,636  (b)            23,091  (c)
Non-Investor common shares                            -                   -                    67,818  (d)
Series C Preferred Stock                              -                   -                    40,545  (e)
                                                                       -------                -------
Total votes                                                            149,596                217,414
                                                                       =======                =======

Investor voting percentage                                               57.0%                   39.2%

</TABLE>

(a)  $256,191 plus accrued dividends of $47,318 divided by $14.00 assumed
     conversion price.
(b)  $35,000 divided by $0.55 exercise price.
(c)  25.4% participation in rights offering x $50 million divided by $0.55
     exercise price.
(d)  74.6% participation in rights offering x $50 million divided by $0.55
     exercise price.
(e)  $35,000 Apollo investment less common portion of $12,700 ($50,000 x 25.4%)
     divided by $0.55 exercise price.

Other convertible securities outstanding:

Convertible Preferred Stock                         256
Common stock options                              9,083
Common stock warrants                             4,446
Phantom stock outstanding under director plan        23

The Company has an Employee Stock Purchase Plan, which permits eligible
employees of the Company to purchase shares of Common Stock. Approximately 1,600
shares are reserved for issuance under the plan.

The Company's non-employee directors receive an automatic grant of options upon
election to the Board and upon any annual re-election to the Board. Pursuant
thereto, the Company granted in the aggregate 40 options at $0.54 per share to
its non-employee directors re-elected at the annual meeting of shareholders on
June 26, 2002.

Under the Building One Services Stock Performance Incentive Plan and the 2000
Encompass Services Corporation Stock Price Incentive Plan, certain employees
will receive stock grants upon achieving a minimum stock price of $30 per share.

<PAGE>

                                  SCHEDULE 3.6

                             CONSENTS AND APPROVALS

Under the rules of the New York Stock Exchange, shareholder approval is required
prior to listing of the Shares on the Exchange.

Terms and provisions of the Investor Rights Agreement or the Statement of
Designation.

Pursuant to the terms and conditions of the Indenture relating to the Company's
10-1/2% Senior Subordinated Notes Due 2009, the Company is required to deliver
to the Trustee a letter from an independent financial advisor stating that the
Transaction is fair to the Company from a financial point of view.

The options granted to certain officers and directors of the Company at its
creation (the "Founder's Options") are fully vested.

Pursuant to the Encompass Services Corporation 1997 Stock Option Plan, the
Encompass Services Corporation 1997 Stock Awards Plan, and the Building One
Services Stock Performance Incentive Plan, all options (or stock) granted
thereunder will immediately vest upon a change of control of the Company. A
substantial number of the options referred to in this paragraph are fully vested
and expire within 12 months. In addition, all such options are "out of the
money."

Pursuant to the Building One Services 1997 Long-Term Incentive Plan, the
Building One Services 1998 Long-Term Incentive Plan, the Building One Services
1999 Long-Term Incentive Plan, and the Building One Services 1997 Non-Employee
Directors' Stock Plan, all options (or stock) granted thereunder will
immediately vest upon a change of control of the Company unless the Board of
Directors elects not to vest any unvested options. The Board of Directors will
determine whether to do so in due course.

Pursuant to the Encompass Services Corporation Amended and Restated 1997 Stock
Awards Plan, the Encompass Services Corporation 2000 Stock Awards Plan, and the
2000 Encompass Services Corporation Stock Performance Incentive Plan, the Board
of Directors may elect to vest all unvested options outstanding under the
respective plans upon a change of control of the Company. The Board of Directors
will determine whether to do so in due course.

Under the Company's Employment Agreement with James Patrick Millinor, Jr., the
Transaction qualifies as a Change of Control and would allow Mr. Millinor to
elect to terminate his employment for "Good Reason" if, within six months
following the Change of Control he has not given the Company a written waiver of
this right. Termination by Mr. Millinor for Good Reason would give rise to
severance obligations of the Company. Additionally, all stock options held by
Mr. Millinor will automatically vest six months following the Change of Control
unless he has given the Company a written waiver of this right prior to such
time.

<PAGE>

Under the Company's Employment Agreement with Joseph M. Ivey, the Transaction
qualifies as a Change of Control and would allow Mr. Ivey to elect to terminate
his employment for "Good Reason" if, within six months following the Change of
Control he has not given the Company a written waiver of this right. Termination
by Mr. Ivey for Good Reason would give rise to severance obligations of the
Company. Additionally, all stock options held by Mr. Ivey will automatically
vest six months following the Change of Control unless he has given the Company
a written waiver of this right prior to such time.

Under the Company's Employment Agreements with each of Hank Holland, Gray H.
Muzzy, Daniel Kipp, Darren Miller, Steve Bati, Jim Cocca, Pat McMahon, Ray
Naizer and Jim Phillips, the Transaction qualifies as a Change of Control.
Should any of those individual's employment be terminated within 6 months
following the Change of Control (12 months in the case of Mr. Holland) other
than for cause or by the individual for other than good reason, the individual
would be entitled to severance. Additionally, all stock options held by Mr.
Holland will automatically vest if his employment is terminated within 12 months
following the Change of Control should his employment be terminated other than
for cause or by the Mr. Holland for other than good reason.

<PAGE>

                                  SCHEDULE 3.11

                       ABSENCE OF UNDISCLOSED LIABILITIES

Any and all Liabilities reflected as such on the balance sheets (and the notes
thereto) set forth or incorporated by reference in SEC Documents filed with the
Commission subsequent to January 1, 2002 and on or before June 27, 2002.

Any and all Liabilities referred to in the written minutes of the Audit
Committee of the Board held on February 15 and May 14, 2002.

<PAGE>

                                  SCHEDULE 3.12

                               ABSENCE OF CHANGES

Any and all Liabilities and claims disclosed on Schedule 3.11.

Liens in favor of Liberty Mutual Insurance Company by The Farfield Company in
connection with the SEPTA Project. Liens pursuant to the Credit Agreement.

Terminations, settlements and cancellations of debts owed to or claims made by
the Company or its Subsidiaries (a) which are covered by reserves reflected in
the Company's consolidated balance sheets included in SEC Documents, or (b)
which arose in the ordinary course of business (including bankruptcies of
customers and former customers) in an aggregate amount not exceeding $5 million.

Dispositions of inventory in the ordinary course of business and other
dispositions of tangible and intangible assets (including Subsidiaries) of the
Company and its Subsidiaries in amounts not requiring approval of the Investors
pursuant to the Investor Rights Agreement.

Damage, destruction and loss of assets which in the aggregate are not material
to the continuing operations of the Company and its Subsidiaries taken as a
whole.

Changes in executive officers that are not otherwise material for purposes of
filing current reports under Section 13 or 15(d) of the Securities Exchange Act
of 1934, filed pursuant to Rules 13a-11 or Rule 15d.

Issuance of stock options in the ordinary course of business pursuant to the
Stock Option Plans referenced in Schedule 3.6.

Issuance of shares in the ordinary course of business pursuant to the Company's
Employee Stock Purchase Plan.

In the first quarter of 2002, the Company adopted SFAS Nos. 142 and 144.

<PAGE>

                                  SCHEDULE 4.3

                    INVESTORS REQUIRED CONSENTS AND APPROVALS

None.

<PAGE>

                                SCHEDULE 5.2(b)

                           OPTION AND WARRANT HOLDERS
                   ENTITLED TO PARTICIPATE IN RIGHTS OFFERING

Warrants

Warrant Number          # of Warrants outstanding
--------------          -------------------------

W-3                               125,000
W-6                             1,221,966
W-7                                65,534
W-8                             2,437,500

Options

Pursuant to the terms of certain options granted to certain officers and
directors of the Company at its creation (the "Founder's Options"), there are 56
persons holding 506,817 options that are entitled to participate in a rights
offering.

<PAGE>

                                 SCHEDULE 7.3(e)

                                EMPLOYEE WAIVERS

James Patrick Millinor, Jr.
Joseph M. Ivey

For purposes of Section 3.4, under the Company's Employment Agreements with
other members of senior management (including Sr. Vice Presidents - Operations)
the Transaction qualifies as a Change of Control. Should any of those
individual's employment be terminated within 6 months following the Change of
Control (12 months in the case of Mr. Holland) other than for cause or by the
individual for other than good reason, the individual would be entitled to
severance. In each instance the severance payable upon termination following a
Change of Control is equal to or less than the severance that would be payable
if the individual were terminated other than for cause or by the individual for
other than good reason, regardless of whether there was a Change of Control.
Additionally, all stock options held by Mr. Holland will automatically vest if
his employment is terminated within 12 months following the Change of Control
should his employment be terminated other than for cause or by the Mr. Holland
for other than good reason.

The grants and options and related plans disclosed on Schedule 3.6 are
incorporated herein.

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