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e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q


(Mark One)

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2002

OR

[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission file Number 1-8929

ABM INDUSTRIES INCORPORATED

(Exact name of registrant as specified in its charter)


Delaware		94-1369354

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

160 Pacific Avenue, Suite 222, San Francisco, California 94111

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 415/733-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Number of shares of Common Stock outstanding as of May 31, 2002: 49,025,599.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Condensed Consolidated Financial Statements
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Qualitative and Quantitative Disclosures about Market Risk
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Stockholders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 3.2
Exhibit 10.69

ABM Industries Incorporated
Form 10-Q
For the three months and six months ended April 30, 2002

Table of Contents


PART I	FINANCIAL INFORMATION	Page

Item 1	Condensed Consolidated Financial Statements		2




	Notes to the Condensed Consolidated Financial Statements		7




Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13




Item 3	Qualitative and Quantitative Disclosures About Market Risk		27

PART II	OTHER INFORMATION





Item 4	Submission of Matters to a Vote of Stockholders		27




Item 6	Exhibits and Reports on Form 8-K		28

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)


			April 30,			October 31,
			2002			2001

ASSETS:




Current assets:
	Cash and cash equivalents		$	2,725		$	3,052
	Trade accounts receivable, net			344,364			367,201
	Inventories			29,502			25,974
	Deferred income taxes			26,914			26,806
	Prepaid expenses and other current assets			40,607			42,508

		Total current assets		444,112			465,541

Investments and long-term receivables				13,715			13,871




Property, plant and equipment, at cost:
	Land and buildings			5,016			4,996
	Transportation equipment			14,896			15,546
	Machinery and other equipment			71,486			73,543
	Leasehold improvements			14,855			14,802

				106,253			108,887
	Less accumulated depreciation and amortization			(66,698	)		(65,951	)

		Property, plant and equipment, net		39,555			42,936

Goodwill				124,465			113,199
Deferred income taxes				34,761			35,400
Other assets				11,498			12,153

Total assets			$	668,106		$	683,100

(Continued)

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)


				April 30,			October 31,
				2002			2001

LIABILITIES AND STOCKHOLDERS’ EQUITY:




Current liabilities:
	Current portion of long-term debt			$	—		$	10,877
	Bank overdraft				1,687			—
	Trade accounts payable				37,743			50,671
	Income taxes payable				6,259			6,816
	Accrued liabilities:
		Compensation			59,846			62,854
		Taxes — other than income			20,123			20,409
		Insurance claims			49,676			48,193
		Other			37,938			36,179

			Total current liabilities		213,272			235,999
Long-term debt (less current portion)					—			942
Retirement plans					21,896			21,483
Insurance claims					64,215			63,499

			Total liabilities		299,383			321,923

Stockholders’ equity:
	Common stock, $0.01 par value, 100,000,000 shares authorized; 49,829,000 and 48,778,000 shares issued at April 30, 2002 and October 31, 2001, respectively				498			488
	Additional paid-in capital				142,099			130,998
	Accumulated other comprehensive income				(760	)		(763	)
	Retained earnings				243,556			230,454
	Cost of treasury stock (900,000 shares)				(16,670	)		—

			Total stockholders’ equity		368,723			361,177

Total liabilities and stockholders’ equity				$	668,106		$	683,100

The accompanying notes are an integral part of the condensed consolidated financial statements.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)


			Three Months Ended				Six Months Ended
			April 30,				April 30,

			2002		2001		2002		2001

Revenues:
	Sales and other income		$	476,861	$	490,494	$	952,837	$	960,913
	Gain on insurance claim			4,300		—		4,300		—

		Total revenues		481,161		490,494		957,137		960,913

Expenses:
	Operating expenses and cost of goods sold			419,574		425,403		842,781		837,802
	Selling, general and administrative			38,791		41,467		78,407		81,886
	Interest			232		796		497		1,709
	Goodwill amortization			—		3,068		—		5,978

		Total expenses		458,597		470,734		921,685		927,375

Income before income taxes				22,564		19,760		35,452		33,538
Income taxes				8,575		7,706		13,472		13,080

Net income			$	13,989	$	12,054	$	21,980	$	20,458

Net income per common share
	Basic		$	0.28	$	0.25	$	0.45	$	0.43
	Diluted		$	0.27	$	0.24	$	0.43	$	0.41
Average number of common shares outstanding
	Basic			49,256		47,472		49,110		46,878
	Diluted			51,494		49,826		51,086		49,371
Dividends per common share			$	0.090	$	0.083	$	0.180	$	0.165

The accompanying notes are an integral part of the condensed consolidated financial statements.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001
(In thousands)


		2002			2001

Cash flows from operating activities:
	Cash received from customers	$	971,422		$	952,218
	Other operating cash receipts		7,353			2,595
	Interest received		303			276
	Cash paid to suppliers and employees		(924,655	)		(910,134	)
	Interest paid		(614	)		(1,820	)
	Income taxes paid		(13,498	)		(18,098	)

	Net cash provided by operating activities		40,311			25,037

Cash flows from investing activities:
	Additions to property, plant and equipment		(3,880	)		(8,714	)
	Proceeds from sale of assets		603			1,418
	Decrease (increase) in investments and long-term receivables		156			(513	)
	Purchase of businesses		(11,577	)		(13,306	)

	Net cash used in investing activities		(14,698	)		(21,115	)

Cash flows from financing activities:
	Common stock issued, including tax benefit		9,740			12,732
	Common stock purchases		(16,670	)		—
	Dividends paid		(8,878	)		(8,030	)
	Increase (decrease) in bank overdraft		1,687			(12,857	)
	Long-term borrowings		—			47,000
	Repayments of long-term borrowings		(11,819	)		(42,856	)

	Net cash used in financing activities		(25,940	)		(4,011	)

Net decrease in cash and cash equivalents			(327	)		(89	)
Cash and cash equivalents beginning of period			3,052			2,000

Cash and cash equivalents end of period		$	2,725		$	1,911

(Continued)

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001
(In thousands)


		2002			2001

Reconciliation of net income to net cash
	provided by operating activities:
Net income		$	21,980		$	20,458
Adjustments:
	Depreciation		7,113			6,874
	Amortization		529			6,074
	Provision for bad debts		2,123			2,434
	Gain on sale of assets		(157	)		(47	)
	Gain on sale of business		—			(718	)
	Decrease (increase) in deferred income taxes		531			(1,641	)
	Decrease (increase) in trade accounts receivable		22,098			(5,170	)
	Increase in inventories		(3,528	)		(1,561	)
	Increase in prepaid expenses and other current assets		1,900			(1,788	)
	Decrease (increase) in other assets		126			(424	)
	Decrease in income taxes payable		(557	)		(3,377	)
	Increase in retirement plans accrual		413			1,141
	Increase (decrease) in insurance claims liability		2,199			(1,736	)
	(Decrease) increase in trade accounts payable and other accrued liabilities		(14,459	)		4,518

Total adjustments to net income			18,331			4,579

Net cash provided by operating activities		$	40,311		$	25,037

Supplemental data:
Non-cash investing activities:
	Common stock issued for net assets of business acquired	$	1,371		$	1,666

The accompanying notes are an integral part of the condensed consolidated financial statements.

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments which are necessary to present fairly ABM Industries Incorporated and subsidiaries (the Company) financial position as of April 30, 2002, the results of operations for the three and six months then ended, and cash flows for the six months then ended. These adjustments are of a normal, recurring nature.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Form 10-K, as amended, for the fiscal year ended October 31, 2001, as filed with the Securities and Exchange Commission.

2. Stock Split

On March 12, 2002, the Company’s Board of Directors approved a 2-for-1 split of its common stock in the form of a stock dividend of one additional share for each share held pre-split, payable to stockholders of record on March 29, 2002. A total of 24,914,000 shares of common stock were issued in connection with the stock split. The par value of the shares was not changed from $0.01. A total of $249,140 was reclassified from the Company’s additional paid in capital account to the Company’s common stock account. All shares and per share amounts have been restated to retroactively reflect the stock split.

3. Treasury Stock

On September 16, 2001, the Company’s Board of Directors authorized the purchase of up to two million shares (post-split) of its outstanding stock at any time through December 31, 2001. On December 17, 2001, the Board of Directors extended this authorization to purchase until December 31, 2002. As of April 30, 2002, the Company had purchased 900,000 shares at a cost of $16,670,000.

4. Goodwill — Adoption of Statement of Financial Accounting Standards No. 142

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 became effective in fiscal years beginning after December 15, 2001, with early adoption permitted. The Company has adopted the provisions of SFAS No. 142 beginning with the first quarter of fiscal 2002. In accordance with this standard, goodwill is no longer amortized but will be subject to an annual assessment for impairment. The Company is required to perform goodwill impairment tests on an annual basis and, in certain circumstances, between annual tests. As of April 30, 2002, no impairment of the Company’s goodwill carrying value has been indicated. As of April 30, 2002, all other intangible assets, consisting principally of contract rights with a net book value of $4.4 million, are included in other assets and will continue to be amortized over the contract periods.

Transitional disclosure of earnings excluding goodwill amortization is as follows:


		Three months ended
		April 30,

		2002		2001

Net income		$	13,989,000	$	12,054,000
Goodwill amortization (after tax)			—		1,871,000

Adjusted net income			13,989,000		13,925,000
Preferred stock dividends			—		(128,000	)

Adjusted net income available to common stockholders		$	13,989,000	$	13,797,000

Net income per common share — basic:
	Net income	$	0.28	$	0.25
	Goodwill amortization		—		0.04

	Adjusted net income	$	0.28	$	0.29

Net income per common share — diluted:
	Net income	$	0.27	$	0.24
	Goodwill amortization		—		0.04

	Adjusted net income	$	0.27	$	0.28

Average common shares outstanding — basic			49,256,000		47,472,000
Average common shares outstanding — diluted			51,494,000		49,826,000


		Six months ended
		April 30,

		2002		2001

Net income		$	21,980,000	$	20,458,000
Goodwill amortization (after tax)			—		3,647,000

Adjusted net income			21,980,000		24,105,000
Preferred stock dividends			—		(256,000	)

Adjusted net income available to common stockholders		$	21,980,000	$	23,849,000

Net income per common share — basic:
	Net income	$	0.45	$	0.43
	Goodwill amortization		—		0.08

	Adjusted net income	$	0.45	$	0.51

Net income per common share — diluted:
	Net income	$	0.43	$	0.41
	Goodwill amortization		—		0.07

	Adjusted net income	$	0.43	$	0.48

Average common shares outstanding — basic			49,110,000		46,878,000
Average common shares outstanding — diluted			51,086,000		49,371,000

5. Net Income per Common Share

The Company has reported its earnings in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share”. Basic net income per common share, after the reduction for preferred stock dividends, is based on the weighted average number of shares outstanding during the period. Diluted net income per common share, after the reduction for preferred stock dividends, is based on the weighted average number of shares outstanding during the period, including common stock equivalents. Preferred stock dividends no longer apply after the redemption of preferred stock on September 4, 2001. The calculation of net income per common share is as follows:


		Three months ended
		April 30,

		2002		2001

Net income		$	13,989,000	$	12,054,000
Preferred stock dividends			—		(128,000	)

Net income available to common stockholders		$	13,989,000	$	11,926,000

Average common shares outstanding — basic			49,256,000		47,472,000
Effect of dilutive securities:
	Stock options		2,238,000		2,234,000
	Other		—		120,000

Average common shares outstanding — diluted			51,494,000		49,826,000

Net income per common share — basic		$	0.28	$	0.25
Net income per common share — diluted		$	0.27	$	0.24


		Six months ended
		April 30,

		2002		2001

Net income		$	21,980,000	$	20,458,000
Preferred stock dividends			—		(256,000	)

Net income available to common stockholders		$	21,980,000	$	20,202,000

Average common shares outstanding — basic			49,110,000		46,878,000
Effect of dilutive securities:
	Stock options		1,976,000		2,373,000
	Other		—		120,000

Average common shares outstanding — diluted			51,086,000		49,371,000

Net income per common share — basic		$	0.45	$	0.43
Net income per common share — diluted		$	0.43	$	0.41

For purposes of computing diluted net income per common share, weighted average common share equivalents do not include stock options with an exercise price that exceeds the average fair market value of the Company’s common stock for the period. For the six months ended April 30, 2002, options to purchase approximately 415,000 shares of common stock at a weighted average exercise price of $18.36 were excluded from the computation. For the six months ended April 30, 2001, options to purchase approximately 790,000 shares of common stock at a weighted average exercise price of $17.46 were excluded from the computation.

6. Comprehensive Income

Accumulated other comprehensive income at April 30, 2002 and October 31, 2001 consists of foreign currency translation adjustments. Comprehensive income for the three and six month periods ended April 30, 2002 approximated net income.

7. Acquisitions

The Company acquired the service contracts and selected assets of Triumph Security Corporation and Triumph Cleaning Corporation with customers located in New York City effective January 26 and 28, 2002, respectively. On February 28, 2002, the Company acquired the security contracts, accounts receivable and selected assets of Foulke Associates, Inc. with customers located throughout Georgia, Florida, Maryland, Pennsylvania and Virginia.

These business combinations were accounted for under the purchase method of accounting. The aggregate consideration paid for these acquisitions was $8,800,000, including $7,118,000 allocated to goodwill. The aggregate purchase price does not include payments of contingent consideration based upon the future results of operations of the businesses acquired. As these acquisitions were not material, pro forma information is not included in the accompanying unaudited condensed consolidated financial statements. The operations of the acquired businesses have been included in the Company’s financial statements from the respective date of acquisition.

In addition, during the six months ended April 30, 2002, contingent payments in cash and common shares were made on prior period acquisitions as provided by the respective purchase agreements. Total cash paid was $2,777,000 and common shares with a fair market value of $1,371,000 at the date of issuance were issued on January 30, 2002. All amounts paid were added to goodwill.

8. Segment Information

The Company’s operations have been grouped into seven segments as defined under Statement of Financial Accounting Standards (SFAS) No. 131. The results of operations from the Company’s six operating divisions that are reportable under SFAS No. 131 for the three and six months ended April 30, 2002, as compared to the three and six months ended April 30, 2001, are more fully described below. Included in Other Divisions are ABM Service Network, CommAir Mechanical Services, and Easterday

Janitorial Supply Company, which was sold on April 30, 2001. For comparative purposes, goodwill amortization has been segregated from the operating profits of the divisions for the three and six months ended April 30, 2001 and reported separately.


			Three months ended
			April 30,

			2002			2001

			(in thousands)
Sales and Other Income:
	ABM Janitorial Services		$	284,229		$	293,481
	ABM Engineering Services			42,667			41,637
	Ampco System Parking			39,364			41,699
	American Commercial Security Services			34,631			24,147
	Amtech Lighting Services			32,071			31,627
	Amtech Elevator Services			28,234			31,400
	Other Divisions			15,532			26,419
	Corporate			133			84

			$	476,861		$	490,494

Operating Profit:
	ABM Janitorial Services		$	16,327		$	18,144
	ABM Engineering Service			2,339			2,110
	Ampco System Parking			1,783			2,138
	American Commercial Security Services			1,065			614
	Amtech Lighting Services			2,095			2,117
	Amtech Elevator Services			608			1,653
	Other Divisions			74			1,749
	Corporate Expenses			(5,795	)		(4,901	)
	Goodwill Amortization			—			(3,068	)

		Operating Profit	$	18,496		$	20,556
	Gain on Insurance Claim			4,300			—
	Interest Expense			(232	)		(796	)

	Income Before Income Taxes		$	22,564		$	19,760


		Six months ended
		April 30,

		2002			2001

		(in thousands)
Sales and Other Income:
	ABM Janitorial Services	$	571,029		$	570,432
	ABM Engineering Services		86,337			84,411
	Ampco System Parking		77,274			84,561
	American Commercial Security Services		66,794			48,723
	Amtech Lighting Services		64,638			63,154
	Amtech Elevator Services		54,727			59,789
	Other Divisions		31,688			49,645
	Corporate		350			198

		$	952,837		$	960,913

Operating Profit:
	ABM Janitorial Services	$	27,170		$	31,658
	ABM Engineering Services		4,660			4,490
	Ampco System Parking		2,831			4,098
	American Commercial Security Services		2,260			1,110
	Amtech Lighting Services		4,004			4,395
	Amtech Elevator Services		1,524			2,966
	Other Divisions		772			2,669
	Corporate Expenses		(11,572	)		(10,161	)
	Goodwill Amortization		—			(5,978	)

	Operating Profit	$	31,649		$	35,247
	Gain on Insurance Claim		4,300			—
	Interest Expense		(497	)		(1,709	)

	Income Before Income Taxes	$	35,452		$	33,538

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

On March 12, 2002, the Company’s Board of Directors approved a 2-for-1 split of the Company’s common stock in the form of a stock dividend of one additional share for each share held pre-split, payable to stockholders of record on March 29, 2002. A total of 24.9 million shares of common stock were issued in connection with the stock split. The par value of the shares was not changed from $0.01. A total of $249,140 was reclassified from the Company’s additional paid in capital account to the Company’s common stock account. All shares and per share amounts have been restated to retroactively reflect the stock split.

Financial Condition

Funds provided from operations and bank borrowings have historically been the sources for meeting working capital requirements, financing capital expenditures and acquisitions, and paying cash dividends. Management believes that funds from these sources will remain available and adequately serve the Company’s liquidity needs. The Company has an unsecured revolving credit agreement with a syndicate of U.S. banks that provides a $150 million line of credit expiring July 1, 2002. At the Company’s option, the credit facility provides interest at the prime rate or IBOR+.35%. As of April 30, 2002, the total amount outstanding was approximately $31.6 million, which was entirely comprised of standby letters of credit. This agreement requires the Company to meet certain financial ratios, places some limitations on outside borrowing and prohibits declaring or paying cash dividends exceeding 50% of the Company’s net income for any fiscal year. Based on the status of current discussions, the Company expects to enter into a three-year agreement with a syndicate of U.S. banks

on or about June 21, 2002 that will provide a $150 million line of credit. The Company also had a separate loan agreement with a major U.S. bank. This loan bore interest at a fixed rate of 6.78%. On March 8, 2002, the loan balance of $942,000 was paid off. The Company’s effective interest rate for all borrowings for the six months ended April 30, 2002 was 4.20%.

At April 30, 2002, working capital was $230.8 million, as compared to $229.5 million at October 31, 2001. The largest component of working capital consists of trade accounts receivable that totaled $344.4 million at April 30, 2002 compared to $367.2 million at October 31, 2001. These amounts were net of allowances for uncollectible accounts of $6.4 million and $9.4 million at April 30, 2002 and October 31, 2001, respectively. As of April 30, 2002, accounts receivable that were over 90 days past due had increased $2 million to $57.9 million (17% of the total outstanding) from $55.9 million (15% of the total outstanding) at October 31, 2001. The balances over 90 days past due related to the World Trade Center and adjacent customers were $14 million and $6 million as of April 30, 2002 and October 31, 2001, respectively.

During the six months ended April 30, 2002, net cash provided by operating activities amounted to $40.3 million, as compared to $25.0 million for the six months ended April 30, 2001. The increase in cash provided from operations is primarily due to greater cash collections in the six months ended April 30, 2002, compared with the six months ended April 30, 2001, and receipt of $6.5 million proceeds from the September 11 insurance claim in April of 2002.

Net cash used in financing activities was $25.9 million in the six months ended April 30, 2002, compared to $4.0 million in the six months ended April 30, 2001. The change is principally due to the purchase of 900,000 shares of treasury stock at a cost of $16.7 million.

On December 19, 2001, the Company advanced $1.2 million and on April 12, 2002, $600,000 to SiteStuff, Inc. as part of a secured convertible promissory note agreement. SiteStuff, Inc. is an e-commerce enterprise within the real estate industry designed to provide owners and managers of real estate the ability to aggregate their buying power for procurement of goods and services. The provisions of this note agreement provide for additional advances payable upon written request by SiteStuff, Inc. at any time prior to May 13, 2003, up to a maximum advance of the lesser of $4.0 million or 80% of its current customer receivables. Interest of 5% on any outstanding amount is payable in arrears at the end of each calendar quarter. The note is secured by the customer accounts of SiteStuff, Inc. as well as records, cash accounts and proceeds related to those accounts. On

or before June 13, 2003, outstanding amounts under this note are convertible, at the option of the Company, into Series D preferred stock at the price defined in the SiteStuff, Inc. certificate of incorporation.

The Company self-insures, generally up to $500,000 per occurrence, certain insurable risks such as general liability, property damage and workers’ compensation. It is the Company’s policy to annually retain an outside actuary to review the adequacy of its self-insurance claim reserves.

Contractual Obligations and Commercial Commitments

The Company is contractually obligated to make future payments under non-cancelable operating lease agreements. As of April 30, 2002, future contractual payments are as follows:


(In thousands)	Payments Due By Period

Contractual Obligations	Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years

Operating Leases	$	194,636	$	46,669	$	56,124	$	29,458	$	62,385

Additionally, the Company has the following commercial commitments:


(In thousands)		Amount of Commitment Expiration Per Period

Commercial		Total Amounts
Commitments		Committed		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years

Standby Letters of Credit		$	31,579	$	31,579		—		—		—
Financial Responsibility Bonds			61,449		61,449		—		—		—

	Total	$	93,028	$	93,028		—		—		—

September 11 Insurance Claims

The Company has commercial insurance policies covering business interruption, property damage and other losses related to the September 11 tragic incident. As previously reported by the Company, the World Trade Center complex in New York was the Company’s largest single job site with annual sales of approximately $75 million (3% of ABM’s consolidated sales). The Company has been working with its carrier, Zurich Insurance, in

providing preliminary claim information regarding the property damage and lost business income. Zurich has neither accepted nor denied coverage for the various claims as of the date of this filing. However, Zurich filed a Declaratory Judgment Action in the Southern District of New York claiming the loss of the business profit falls under a Contingent Business Interruption Sub-limit within the policy of $10 million. The trial date has been set for July 2002. Based on review of the policy and consultation with coverage counsel and other claim experts, the Company believes that its business interruption claim does not fall under the $10 million sub-limit on contingent business interruption. Zurich’s filing does not impact any other aspects of the claim. The Company received a portion of the insurance proceeds in the amount of $6.5 million in April of 2002, of which $5 million was for business interruption and $1.5 million was for property damage. The Company realized $4.3 million of pretax gain from the $6.5 million proceeds in the second quarter of 2002.

Acquisitions

The Company acquired the service contracts and selected assets of Triumph Security Corporation and Triumph Cleaning Corporation with customers located in New York City effective January 26 and 28, 2002, respectively. The terms included a cash payment of $2.8 million made at closing plus five annual contingent payments based on variable gross profits to be made during the sixth through the tenth year after the effective closing date.

On February 28, 2002, the Company acquired the security contracts, accounts receivable and selected assets of Foulke Associates, Inc. with customers located throughout Georgia, Florida, Maryland, Pennsylvania and Virginia. The terms included a $6.0 million cash payment at closing plus annual contingent payments based on operating profit to be made over four years.

Recent Development

On June 11, 2002, the Company announced that the Company and Lakeside Building Maintenance, Inc. (Lakeside) signed a non-binding letter of intent whereby a subsidiary of the Company would acquire Lakeside during the third quarter of 2002, subject to customary conditions such as satisfactory completion of due diligence, a definitive agreement and antitrust clearance. With annual revenues exceeding $160 million, Chicago-based Lakeside is the largest privately-owned janitorial contractor in the Midwest, with operations in Cincinnati, Cleveland, Columbus, Detroit,

Indianapolis, Louisville, Milwaukee, Nashville and St. Louis. The letter of intent contemplates that Lakeside’s founder and chief executive officer and its president would continue to manage Lakeside separate and apart from the Company’s other subsidiaries operating in the Midwest.

Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements of the Company. All information in the discussion and references to the years and quarters are based on the Company’s fiscal year and second quarter which ended on October 31 and April 30, respectively.

Three Months Ended April 30, 2002 vs. Three Months Ended April 30, 2001

Net income for the second quarter of 2002 was $14 million ($0.27 per diluted share), an increase of 16.1% from the net income of $12.1 million ($0.24 per diluted share) for the second quarter of 2001, which included $1.9 million ($0.04 per diluted share) of after-tax goodwill amortization. The other items impacting the period-to-period change are analyzed in the following paragraphs.

The results for the second quarter of 2002 were affected by the destruction of the World Trade Center and adjacent facilities. The Company incurred a quarterly reduction of $19 million in revenues and $2.5 million in pretax income from that earned in the second quarter of 2001 from the loss of these facilities. The divisions affected by this loss were Janitorial, Lighting and Engineering. Second quarter revenues and pretax income for 2002 included a gain of $4.3 million from the $6.5 million proceeds from the September 11 insurance claim. Additionally, the Janitorial operating expenses in New York City increased by $1.5 million in the second quarter of 2002, as a result of World Trade Center related increases in seniority-based payroll ($650,000) and unemployment insurance costs ($900,000).

Sales and other income (hereinafter called sales) for the second quarter of 2002 of $476.9 million decreased by only 2.8% compared to $490.5 million for the second quarter of 2001 despite the loss of the World Trade Center and Easterday Janitorial Supply. Easterday, which was sold effective April 30, 2001 at a pretax gain of $718,000, contributed $8.5 million to sales for the second quarter of 2001. Offsetting the loss of the World Trade Center and Easterday sales in the second quarter of 2002 was new business in the Security Division.

As a percentage of sales and other income (hereinafter called sales), operating expenses and cost of goods sold were 88.0% for the second quarter of 2002, compared to 86.7% for the second quarter of 2001. Consequently, as a percentage of sales, the Company’s gross profit (sales minus operating expenses and cost of goods sold) of 12.0% in the second quarter of 2002 was lower than the gross profit of 13.3% for the second quarter of 2001. The decline was due primarily to the sale of Easterday Janitorial Supply and loss of the World Trade Center account, both of which had higher gross profit margins than those initially realized on newly added business. Also, as explained earlier, the additional $1.5 million of Janitorial operating expenses in the second quarter of 2002 related to the destruction of the World Trade Center could not be absorbed through increased pricing.

Selling, general and administrative expenses for the second quarter of 2002 were $38.8 million compared to $41.5 million for the corresponding three months of 2001. As a percentage of sales, selling, general and administrative expenses decreased to 8.1% for the three months ended April 30, 2002 from 8.5% for the same period in 2001 primarily due to the sale of Easterday Janitorial Supply effective April 30, 2001. Easterday’s selling, general and administrative expenses were $2.9 million or 34% of its sales for the second quarter of 2001.

Interest expense was $232,000 for the second quarter of 2002 compared to $796,000 for the same period in 2001, a decrease of $564,000. This decrease was primarily due to lower weighted average borrowings and interest rates during the second quarter of 2002, compared to the same period in 2001.

The estimated effective federal and state income tax rate was 38% for the second quarter of 2002, compared to 39% for the second quarter of 2001. The lower tax rate was mostly due to an increase in estimated federal tax credits.

Segment Information

The results of operations from the Company’s six reportable operating divisions for the three months ended April 30, 2002, compared to the same period in 2001 are more fully described below. The comparison of the three-month periods are related to the sales and operating profits in Note 8, which exclude goodwill amortization from both periods, to provide a comparable analysis.

Sales for ABM Janitorial Services (also known as American Building Maintenance) were 3.2% lower in the second quarter of 2002 as compared to the same quarter of 2001. Weaknesses in sales were primarily in the Northeast, Southeast and Northwest regions

mostly due to direct and indirect effects of the events of September 11. Operating profits in the second quarter of 2002 were 10.0% lower than the same period in 2001 due to the loss of the higher margin business in the Northeast region. Furthermore, $1.5 million of additional operating expenses attributable to the destruction of the World Trade Center including a higher state unemployment tax rate and an increase in seniority-based payroll in New York City (as explained earlier) could not be absorbed through increased pricing.

Sales for ABM Engineering Services increased 2.5% from the second quarter of 2001 to the second quarter of 2002 due to an increased customer base in all regions and the resolution of disputed additional work performed for the Port Authority of New York. This was partially offset by the lost revenues from the World Trade Center contract. Operating profits increased by 10.9% from the second quarter of 2001 to the second quarter of 2002 primarily due to the increased business.

Ampco System Parking (also known as Ampco System Airport Parking and Ampco Express Airport Parking) sales decreased by 5.6% and its operating profits decreased 16.6% during the second quarter of 2002 compared to the second quarter of 2001. The decrease in sales was primarily due to the loss of an airport contract, the conversion of lease contracts to management fee contracts, and the effects of the terrorist attacks of September 11 on sales at airport and hotel facilities. The decrease in operating profits resulted from the decline in sales and increased insurance costs, which could not be fully absorbed through increased pricing.

American Commercial Security Services sales increased 43.4% due to the acquisitions of Sundown Security in June 2001, Triumph Security in January 2002, and Foulke Security in February 2002, as well as winning several large accounts including Microsoft. Tag sales, or sales in addition to the contractual fees, were also higher due to heightened security after the September 11 terrorist attack. Operating profits increased 73.5% due to increased sales and improvement in gross margin as a result of tight control over labor cost.

Amtech Lighting Services reported a 1.4% increase in sales during the second quarter of 2002 as compared to the second quarter of 2001, while operating profits decreased slightly by 1.0%. Sales from new business offset the loss of the World Trade Center account but at a lower profit margin.

Sales for Amtech Elevator Services decreased by 10.1% in the second quarter of 2002 compared to the same period in 2001 primarily due to lost service contacts in San Francisco and Orange

County. The Division also experienced reduced modernization sales due to non-renewal of contracts. Operating profits decreased by 63.2% for the second quarter of 2002 compared to the corresponding quarter of 2001 primarily due to the lost jobs, increased modernization material and labor costs, particularly in the Chicago office, as well as higher operating expenses, including data processing and insurance.

Sales for Other Divisions were down 41.2% and operating profits decreased 95.8% during the second quarter of 2002 compared to the same period last year. The decline in operating profits was primarily due to a $500,000 write-down of work-in-progress and reduced project work in the Mechanical Division in the second quarter of 2002 and the pretax gain of $718,000 from the sale of Easterday Janitorial Supply in the second quarter of 2001.

Six Months Ended April 30, 2002 vs. Six Months Ended April 30, 2001

Net income for the first six months of 2002 was $22 million ($0.43 per diluted share), an increase of 7.4% from the net income of $20.5 million ($0.41 per diluted share) for the first six months of 2001, which included $3.7 million ($0.07 per diluted share) of after tax goodwill amortization. The other items impacting the period-to-period change are analyzed in the following paragraphs.

The results for the first half of 2002 were affected by the destruction of the World Trade Center and adjacent facilities. The Company incurred a reduction of $38 million in revenues and $5 million in pretax income from the loss of these facilities during the first half of 2002, compared to the same period of 2001. The divisions affected by this loss were Janitorial, Lighting and Engineering. Second quarter revenues and pretax income for 2002 included a gain of $4.3 million from the $6.5 million proceeds from the September 11 insurance claim. Additionally, the Janitorial operating expenses in New York City increased by $1.5 million in the second quarter of 2002, as a result of World Trade Center related increases in seniority-based payroll ($650,000) and unemployment insurance costs ($900,000).

Sales for the first six months of 2002 of $952.8 million decreased by only 0.8% compared to $960.9 million for the first half of 2001 despite the loss of the World Trade Center and Easterday Janitorial Supply. Easterday, which was sold effective April 30, 2001 at a pretax gain of $718,000, contributed $16 million to sales for the first half of 2001. Offsetting the loss of the World Trade Center and Easterday sales in the first six months of 2002 was new business in the Security Division.

As a percentage of sales, operating expenses and cost of goods sold were 88.4% for the first half of 2002, compared to 87.2% for the same period of 2001. Consequently, as a percentage of sales, the Company’s gross profit (sales minus operating expenses and cost of goods sold) of 11.6% in the first six months of 2002 was lower than the gross profit of 12.8% for the first six months of 2001. The decline was due primarily to the sale of Easterday Janitorial Supply and loss of the World Trade Center account, both of which had higher gross profit margins than those initially realized on newly added business. Also, as explained earlier, the operating expenses for the first six months of 2002 included the additional $1.5 million of Janitorial operating expenses related to the destruction of the World Trade Center and the higher insurance expense which could not be fully absorbed through increased pricing in the first quarter of 2002.

Selling, general and administrative expenses for the first six months of 2002 were $78.4 million compared to $81.9 million for the corresponding six months of 2001. As a percentage of sales, selling, general and administrative expenses decreased to 8.2% for the period ended April 30, 2002 from 8.5% for the same period in 2001 primarily due to the sale of Easterday Janitorial Supply effective April 30, 2001. Easterday’s selling, general and administrative expenses were $5.6 million or 35% of its sales for the first six months of 2001.

Interest expense was $497,000 for the first half of 2002 compared to $1.7 million for the same period in 2001, a decrease of $1.2 million. This decrease was primarily due to lower weighted average borrowings and interest rates during the first half of 2002, compared to the same period in 2001.

The estimated effective federal and state income tax rate was 38% for the first six months of 2002, compared to 39% for the first six months of 2001. The lower tax rate was mostly due to an increase in estimated federal tax credits.

Segment Information

The results of operations from the Company’s six reportable operating divisions for the six months ended April 30, 2002, compared to the same period in 2001 are more fully described below. The comparison of the six-month periods are related to the sales and operating profits in Note 8, which exclude goodwill amortization from both periods, to provide a comparable analysis.

Sales for ABM Janitorial Services increased slightly by 0.1% in the first half of 2002 as compared to the same period of the

prior year, as new business was sufficient to offset the loss of the World Trade Center. However, operating profits were down 14.2% in the first six months of 2002 as compared to the same period of 2001 due to the loss of higher margin business in the Northeast region. Also, as explained earlier, the operating expenses for the first six months of 2002 included the additional $1.5 million of operating expenses related to the destruction of the World Trade Center and the higher insurance expense which could not be fully absorbed through increased pricing in the first quarter of 2002.

Sales for ABM Engineering Services increased 2.3% from the first half of 2001 to the first half of 2002 due to an increased customer base in all regions and, in the second quarter of 2002, the resolution of disputed additional work performed for the Port Authority of New York. This was partially offset by the loss of work at the World Trade Center. Operating profits increased 3.8% from 2001 to 2002 due to the increased business.

Ampco System Parking sales decreased by 8.6% and its operating profits decreased 30.9% during the first half of 2002 compared to the first half of 2001. The decrease in sales was primarily due to the loss of an airport contract, the conversion of lease contracts to management fee contracts, and the effects of the terrorist attacks of September 11 on sales at airport and hotel facilities. The decrease in operating profits resulted from the decline in sales and increased insurance costs, which could not be fully absorbed through increased pricing.

American Commercial Security Services sales increased 37.1% due to the acquisitions of Sundown Security in June 2001, Triumph Security in January 2002, and Foulke Security in February 2002, as well as winning several large accounts including Microsoft. Tag sales, sales in addition to the contractual fees, were also higher due to heightened security after the September 11 terrorist attack. Operating profits increased 103.6% due to improvement in gross margin as a result of tight control over labor cost.

Amtech Lighting Services reported a 2.3% increase in sales during the first six months of 2002 compared to the same six months of 2001. Operating profits decreased 8.9% due to the loss of the World Trade Center account and lower margins on acquired business, primarily in the Southeast.

Sales for Amtech Elevator Services decreased by 8.5% in the first half of 2002 compared to 2001 primarily due to the decline in modernization contracts in Chicago and Philadelphia and the loss of two large service contracts in San Francisco and Orange County. The Division reported a 48.6% decrease in operating profits for the first six months of 2002 as compared to the corresponding six months of 2001. This reduction in operating

profits can be attributed primarily to the lost jobs, lower margins on modernization projects primarily in the Division’s Chicago office, and higher operating expenses, including data processing and insurance.

Sales for Other Divisions were down 36.2% and operating profits decreased 71.1% during the first half of 2002 compared to the same period last year. The decline in operating profits was primarily due to a $500,000 write-down of work-in-progress and reduced project work in the Mechanical Division in the second quarter of 2002 and the pretax gain of $718,000 from the sale of Easterday Janitorial Supply in the second quarter of 2001.

Recent Accounting Pronouncements

In June 2001, FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”, which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 is not anticipated to have a material effect on the Company’s results of operations or financial condition.

In August 2001, FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of”, and elements of APB 30, “Reporting the Results of Operations—Reporting the Effects on Disposal of a Segment of a Business and Extraordinary, Unusual or Infrequently Occurring Events and Transactions”. SFAS No. 144 establishes a single-accounting model for long-lived assets to be disposed of while maintaining many of the provisions relating to impairment testing and valuation. SFAS No. 144 is effective for fiscal years beginning after December 31, 2001. The adoption of SFAS No. 144 is not anticipated to have a material effect on the Company’s results of operations or financial condition.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses. On an ongoing basis, the Company evaluates its estimates, including

those related to self-insurance reserves, allowance for uncollectible accounts, deferred income tax asset, contingencies and litigation expense. The Company bases its estimates on historical experience, independent valuations, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Self-Insurance Reserves: Certain insurable risks such as general liability, property damage and workers’ compensation are self-insured by the Company. However, the Company has umbrella insurance coverage for certain risk exposures subject to specified limits. Accruals for claims under the Company’s self-insurance program are recorded on a claim-incurred basis. The Company uses independent actuaries to annually evaluate and estimate the range of the Company’s claim costs and liabilities. The Company accrues an amount that is within the actuarial range of exposure. Using the annual actuarial report, management develops annual insurance costs for each division, expressed as a rate per $100 of exposure (labor and revenue) to estimate insurance costs on a quarterly basis. Additionally, management monitors new claims and claim development to assess the adequacy of the insurance reserves. The estimated future charge is designed to capture the recent experience and trends. If the number of claims incurred were to increase, or the severity of the claims were to increase, the Company may be required to record an additional expense for self-insurance liabilities.

Allowance for Uncollectible Accounts: The Company’s accounts receivable arise from services provided to its customers and are generally due and payable on terms varying from the receipt of invoice to net thirty days. The Company estimates an allowance for accounts it does not consider collectible. Changes in the financial condition of the customer or adverse development in negotiations or legal proceedings to obtain payment could result in the actual loss exceeding the estimated allowance.

Deferred Tax Asset Valuation: Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. If management determines it is more likely than not that the net deferred tax asset will be realized, no valuation allowance is recorded. At April 30, 2002,

the deferred tax asset was $61.7 million and no valuation allowance was recorded. Should future income be less than anticipated, the deferred tax asset may not be recoverable.

Contingencies and Litigation: The Company and certain of its subsidiaries have been named defendants in certain litigation arising in the ordinary course of business including certain environmental matters. When a loss is probable and estimable the Company records the estimated loss. The actual loss may be greater than estimated or litigation where the outcome was not considered probable may result in a loss.

Environmental Matters

The nature of the Company’s operations, primarily services, would not ordinarily involve it in environmental contamination. However, the Company’s operations are subject to various federal, state and/or local laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, such as discharge into soil, water and air, and the generation, handling, storage, transportation and disposal of waste and hazardous substances. These laws generally have the effect of increasing costs and potential liabilities associated with the conduct of the Company’s operations, although historically they have not had a material adverse effect on the Company’s financial position, cash flows, or its results of operations.

The Company is currently involved in four proceedings relating to environmental matters: one involving alleged potential soil and groundwater contamination at a Company facility in Florida; one involving alleged potential soil contamination at a former Company facility in Arizona; one involving alleged potential soil and groundwater contamination at a former dry-cleaning facility leased by the Company in Nevada; and one involving alleged potential soil contamination at a former parking facility leased by the Company in the State of Washington. While it is difficult to predict the ultimate outcome of these matters, based on information currently available, management believes that none of these matters, individually or in the aggregate, are reasonably likely to have a material adverse effect on the Company’s financial position, cash flows, or its results of operations. One of the four proceedings is under negotiation and a reserve of $250,000 has been set aside for claims liability. The liability related to the other three claims is neither probable nor estimable hence no accruals have been made related to these matters.

Safe Harbor Statement

Cautionary Safe Harbor Disclosure for Forward Looking Statements under the Private Securities Litigation Reform Act of 1995: Because of the factors set forth below, as well as other variables affecting the Company’s operating results, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. The statements contained herein which are not historical facts are forward-looking statements that are subject to meaningful risks and uncertainties, including but not limited to: (1) significant decreases in commercial real estate occupancy, resulting in reduced demand and prices for building maintenance and other facility services in the Company’s major markets, (2) loss or bankruptcy of one or more of the Company’s major customers, which could adversely affect the Company’s ability to collect its accounts receivable or recover its deferred costs, (3) major collective bargaining issues that may cause loss of revenues or cost increases that non-union companies can use to their advantage in gaining market share, (4) significant shortfalls in adding additional customers in existing and new territories and markets, (5) a protracted slowdown in the Company’s acquisition activities, (6) legislation or other governmental action that severely impacts one or more of the Company’s lines of business, such as price controls that could restrict price increases, or the unrecovered cost of any universal employer-paid health insurance, as well as government investigations that adversely affect the Company, (7) reduction or revocation of the Company’s line of credit, which would increase interest expense or the cost of capital, (8) cancellation or nonrenewal of the Company’s primary insurance policies, as many customers contract out services based on the contractor’s ability to provide adequate insurance coverage and limits, (9) catastrophic uninsured or underinsured claims against the Company, the inability of the Company’s insurance carriers to pay otherwise insured claims, or inadequacy in the Company’s reserve for self-insured claims, (10) inability to employ entry level personnel due to labor shortages, (11) resignation, termination, death or disability of one or more of the Company’s key executives, which could adversely affect customer retention and day-to-day management of the Company, and (12) other material factors that are disclosed from time to time in the Company’s public filings with the United States Securities and Exchange Commission, such as reports on Forms 8-K, 10-K and 10-Q.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

The Company does not issue or invest in financial instruments or their derivatives for trading or speculative purposes. The operations of the Company are conducted primarily in the United States, and, as such, are not subject to material foreign currency exchange rate risk. The Company has an insignificant amount of outstanding debt and related interest expense hence market risk in interest rate exposure in the United States is currently not material.

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Stockholders

a) The Annual Meeting of Stockholders was held on March 12, 2002.

b) The following directors were elected by a vote of stockholders: Maryellen C. Herringer, Charles T. Horngren, and Martinn H. Mandles. They will serve for a term ending in the year 2005.

The following directors remained in office: Linda L. Chavez, Luke S. Helms, Henry L. Kotkins, Jr., Theodore T. Rosenberg, Henrik C. Slipsager, William W. Steele, and William E. Walsh.

c) The following matters were voted upon at the meeting:

(1) Proposal 1 — Election of Directors.


			Against
			or				Broker
Nominee	For		Withheld		Abstentions		Non-votes

Maryellen C. Herringer		19,813,610		1,424,509		0		0
Charles T. Horngren		19,796,313		1,441,806		0		0
Martinn H. Mandles		20,154,596		1,083,523		0		0

(2) Proposal 2 — Approval of the Company’s 2002 Price-Vested Performance Stock Option Plan.

Against

Broker

For

Withheld

Abstentions

Non-votes

9,558,309

7,442,710

626,504

3,610,596

Item 6. Exhibits and Reports on Form 8-K


(a)		Exhibits

		Exhibit 3.2 - Bylaws as amended March 12, 2002

		Exhibit 10.69 - 2002 Price-Vested Performance Stock Option Plan

(b)		Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended April 30, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ABM Industries Incorporated

June 14, 2002	/s/ George B. Sundby Senior Vice President and Chief Financial Officer Principal Financial Officer

June 14, 2002	/s/ Maria Placida Y. de la Pena Vice President and Controller Chief Accounting Officer



                                                                     EXHIBIT 3.2
                           ABM INDUSTRIES INCORPORATED

                                     BYLAWS

                            As Amended March 12, 2002

                                    ARTICLE I
                                     OFFICES

        Section 1.1. Registered Office. The registered office shall be located
in the City of Wilmington, County of New Castle, State of Delaware.

        Section 1.2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

                                        ARTICLE II
                                 MEETINGS OF STOCKHOLDERS

        Section 2.1. Place of Meeting. All meetings of stockholders shall be
held at the principal executive office of the Corporation or at any other place,
either within or without the State of Delaware, as may be designated by the
Board of Directors.

        Section 2.2. Annual Meeting. The annual meeting of stockholders shall be
held on such date and at such time as the Board of Directors may designate.

        At each annual meeting the stockholders shall elect directors to succeed
those whose terms expire in that year and to serve until their successors are
elected, and shall transact such other business as may properly be brought
before the meeting.

        Section 2.3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice shall be given either
personally or by mail or other means of written communication, addressed or
delivered to each stockholder entitled to vote at such meeting at the address of
such stockholder appearing on the books of the Corporation or given by him to
the Corporation for the purpose of such notice. If no such address appears or is
given, notice shall be given either personally or by mail or other means of
written communication addressed to the stockholder at the place where the
principal executive office of the Corporation is located. The notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by other means of written communication.

        Section 2.4. Business at Annual Meetings. At an annual meeting of
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) pursuant to the Corporation's



notice of the meeting, (ii) by or at the direction of the Board of Directors or
(iii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Bylaw, who shall be
entitled to vote at such meeting and who shall have complied with the notice
procedures set forth in this Bylaw.

        For business to be properly brought before an annual meeting by a
stockholder pursuant to Section 2.4(a) of this Bylaw, notice in writing must be
delivered or mailed, postage prepaid, to the Secretary of the Corporation and
received at the principal executive offices of the Corporation not less than 60
days prior to the first anniversary of the date on which the Corporation first
mailed its proxy materials for the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of the meeting
is advanced by more than 30 days or delayed by more than 60 days from such
meeting's anniversary date, notice by the stockholder must be received not later
than the close of business on the later of the 60th day prior to such date of
mailing of proxy materials or the 10th day following the day on which public
announcement of the date of the annual meeting is first made. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business to be brought
before the annual meeting and the reasons for conducting such business at such
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, and the name and address of the
beneficial owner, if any, on whose behalf the proposal is made; (iii) the class
and number of shares of the Corporation's stock which are beneficially owned by
the stockholder, and by the beneficial owner, if any, on whose behalf the
proposal is made; and (iv) any material interest of the stockholder, and of the
beneficial owner, if any, on whose behalf the proposal is made, in such
business. Business. For purposes of these Bylaws, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

        Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Bylaw. The chairman of the meeting may, if the facts warrant,
determine that the business was not properly brought before the meeting in
accordance with the provisions of this Bylaw; and if the chairman should so
determine, the chairman shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.


                                       2


        Section 2.5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of the
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.

        Section 2.6. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, may be called at any time by the Board of Directors, or
by a committee of the Board of Directors which has been duly designated by the
Board of Directors and whose power and authority, as provided in a resolution of
the Board of Directors, include the power to call such meetings, but such
special meetings may not be called by any other person or persons.

        Section 2.7. Notice of Special Meetings. Written notice of a special
meeting of stockholders stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.

        Section 2.8. Business at Special Meetings. The business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.

        Section 2.9. Adjourned Meetings and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares represented either in
person or by proxy, but in the absence of a quorum, no other business may be
transacted at such meeting, except as provided in Section 2.10 of these bylaws.

        When a stockholders' meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; except that if
the adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.

        At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.

        Section 2.10. Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or


                                       3


represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation.

        Section 2.11. Majority Vote. If a quorum is present at any meeting, the
vote of the holders of a majority of the shares having voting power, present in
person or represented by proxy, shall decide any question brought before such
meeting, unless a different vote is required on that question by express
provision of statute or of the certificate of incorporation, in which case such
express provision shall govern and control.

        The stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum, in any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum, unless a different vote is required as set
forth above.

        Section 2.12. Voting. Except as otherwise provided in the certificate of
incorporation and subject to Section 8.4 of these bylaws, each stockholder shall
be entitled to one vote, in person or by proxy, for each share of capital stock
having voting power held by such stockholder, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. Vote may be viva voce or by ballot; provided, however, that
elections for directors must be by ballot.

        Any holder of shares entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares or
vote them against the proposal, other than elections to office but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it shall be conclusively presumed that the stockholder's
approving vote is with respect to all shares said stockholder is entitled to
vote.

        Section 2.13. Stockholder Action. Any action required or permitted to be
taken by the stockholders must be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in writing by
such holders.

        Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when a person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened; provided, that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by law or these bylaws to be
included in the notice but not so included if such objection is expressly made
at the meeting.

        Section 2.14. Presiding Officer. The chairman of the Board of Directors,
if there be such officer, shall, if present, call the meetings of


                                       4


the stockholders to order and shall act as the presiding officer thereof.

        Section 2.15. Secretary. The secretary of the Corporation, if present,
shall act as secretary of all meetings of the stockholders. In the absence of
the secretary, an assistant secretary if present shall act as secretary of the
meetings of the stockholders. In the absence of the secretary or any assistant
secretary, the presiding officer may appoint a person to act as secretary of
such meeting.

        Section 2.16. Confidential Voting.

        (a) Proxies and ballots that identify the votes of specific stockholders
shall be kept in absolute confidence by the tabulators and the inspectors of
election unless (i) there is an opposing solicitation with respect to the
election or removal of Directors, (ii) disclosure is required by applicable law,
(iii) a stockholder expressly requests or otherwise authorizes disclosure of the
vote(s) cast by that stockholder, or (iv) the Corporation concludes in good
faith that a bona fide dispute exists as to the authenticity of one or more
proxies, ballots or votes, or as to the accuracy of any tabulation of such
proxies, ballots or votes. Otherwise, no person, group or entity (including but
not limited to any past, present or prospective director, officer, employee,
agent or stockholder of the Corporation) shall be shown, told or given any
information about the vote(s) cast by any specific stockholder.

        (b) Comments written on proxies, consents or ballots shall be
transcribed and provided to the secretary of the Corporation with the name and
address of the stockholder. The vote of the stockholder shall not be disclosed
at the time any such comment is provided to the secretary except where such vote
is included in the comment or disclosure is necessary, in the opinion of the
inspector, for an understanding of the comment.

        (c) The tabulators and inspectors of election and any authorized agents
or other persons engaged in the receipt, count and tabulation of proxies and
ballots shall be advised of this Bylaw and instructed to comply herewith.

        (d) The inspectors of election shall certify, to the best of their
knowledge based on due inquiry, that proxies and ballots have been kept in
confidence as required by this Section 2.16.

        (e) Nothing in this Bylaw shall prohibit the inspector from making
available to the Corporation, during the period prior to any annual or special
meeting, information as to which stockholders have not voted and periodic status
reports on the aggregate vote.

                                   ARTICLE III

                                    DIRECTORS

        Section 3.1. Number of Directors, Election and Term of Office. The
number of directors which shall constitute the whole board shall be ten. The
Board of Directors shall be classified, with respect to the


                                       5


time for which they severally hold office, into three classes, as nearly equal
in number as possible, as determined by the Board of Directors, one class to
hold office initially for a term expiring at the annual meeting of stockholders
to be held in 1986, another class to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1987, and another class to
hold office initially for a term expiring at the annual meeting of stockholders
to be held in 1988, with the members of each class to hold office until their
successors are elected and qualified. At each annual meeting of stockholders,
the successors of the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.

        The term "entire board" as used in these bylaws means the total number
of directors which the Corporation would have if there were no vacancies.

        Section 3.2. Vacancies. A vacancy in the Board of Directors shall be
deemed to exist in case of the death, resignation, or removal of any director,
or if the authorized number of directors be increased, or if the stockholders
fail at any annual or special meeting of stockholders to elect the full
authorized number of directors to be voted for at that meeting.

        Unless otherwise provided in the certificate of incorporation, vacancies
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director, and any director
so chosen shall hold office until the next election of the class for which he
was chosen and until his successor is fully elected and qualified, unless sooner
displaced. If at any time the Corporation should have no directors in office,
then an election of directors may be held in the manner provided by statute. If,
at the time of filling any vacancy or any newly created directorship, the
directors then in office constitute less than a majority of the entire board (as
constituted immediately prior to any such increase), the Court of the Chancery
may upon application of any stockholder or stockholders holding at least ten
percent (10%) of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.

        Section 3.3. Powers. The business and affairs of the Corporation shall
be managed by its Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.

        Section 3.4. Compensation of Directors. The Board of Directors


                                       6


shall have the authority to fix the compensation of directors. No such
compensation shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.

        Section 3.5. Resignation. Any director may resign effective upon giving
written notice to the chief executive officer, the secretary, or the Board of
Directors of the Corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is effective at a future
time, a successor may be elected to take office when the resignation becomes
effective.

        Section 3.6. Nominations of Directors. Only persons who are nominated in
accordance with the procedures set forth in these Bylaws shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors may be made at a meeting of stockholders (i) by the Board of Directors
or a committee appointed by the Board of Directors authorized to make such
nominations or (ii) by any stockholder of the Corporation who is a stockholder
of record at the time of giving of the notice provided for in this Bylaw, who
shall be entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Bylaw. Nominations by
stockholders shall be made pursuant to notice in writing, delivered or mailed,
postage prepaid, to the Secretary of the Corporation and received at the
principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than 60 days prior to the first anniversary of the date on
which the Corporation first mailed its proxy materials for the preceding year's
annual meeting of stockholders, provided, however, that in the event that the
date of the meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice by the stockholder must be received not
later than the close of business on the later of the 60th day prior to such date
of mailing of proxy materials or the 10th day following the day on which public
announcement of the date of the meeting is first made; or (ii) in the case of a
special meeting at which directors are to be elected, not later than the close
of business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement of the date of the
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting is first made. Such stockholder's notice shall set forth (i) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or


                                       7


understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated by the Board of Directors; and (v) the written consent of such
nominee to serve as a director of the Corporation if elected. At the request of
the Board of Directors, or any committee appointed by the Board of Directors
authorized to make such nominations, any person nominated by the Board of
Directors, or such committee, for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination that pertains to the nominee. Notwithstanding
anything in this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public statement naming all the nominees for Director
or specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.

        No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
these Bylaws. The chairman of the meeting may, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed in
this Bylaw; and if the chairman should so determine, the chairman shall so
declare to the meeting, and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also
comply with all applicable requirements of the Exchange Act, and the rules and
regulations thereunder with respect to the matters set forth in this Bylaw.

                                   ARTICLE IV
                       MEETINGS OF THE BOARD OF DIRECTORS

        Section 4.1. Place of Meeting. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.

        Section 4.2. Organization Meeting. Immediately after each annual meeting
of stockholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, electing officers


                                       8


and transacting other business. No notice of such meeting need be given. In the
event such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given as hereafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.

        Section 4.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such time and at such place as shall from time to time
be determined by the Board of Directors; provided, however, that if the date so
designated falls upon a legal holiday, then the meeting shall be held at the
same time and place on the next succeeding day which is not a legal holiday.
Such regular meetings may be held without notice.

        Section 4.4. Special Meetings. Special meetings of the Board of
Directors may be called by the chairman of the board of directors, chairman of
the executive committee of the Board of Directors, the chief executive officer
or the president or on the written request of the directors constituting a
majority of the entire board.

        Section 4.5. Notice of Special Meetings. Notice of the time and place of
special meetings of the Board of Director shall be delivered personally to each
director, or sent to each director by mail, telephone, or telegraph. In case
such notice is sent by mail or telegraphed it shall be deposited in the United
States mail or delivered to the telegraph company in the place in which the
principal office of the Corporation is located at least 48 hours prior to the
time of the holding of the meeting. In case such notice is delivered personally
or by telephone, it shall be so delivered at least 24 hours prior to the time of
the holding of the meeting. Such notice shall not be necessary if appropriate
waivers, consents and/or approvals are filed in accordance with Section 4.6 of
these bylaws.

        Section 4.6. Waiver of Notice. Notice of a meeting need not be given to
any director who signs a waiver of notice, whether before or after the meeting,
or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.

        The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.

        Section 4.7. Quorum. At all meetings of the board, the


                                       9


presence of one-third of the entire board shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meetings at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
without notice other than announcement at the meeting, until a quorum shall be
present. A meeting at which a quorum is initially present may continue to
transact business, notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.

        Section 4.8. Adjournment. Any meeting of the Board of Directors, whether
or not a quorum is present, may be adjourned to another time and place by the
vote of a majority of the directors present. Notice of the time and place of the
adjourned meeting need not be given to absent directors if said time and place
are fixed at the meeting adjourned.

        Section 4.9. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.

        Section 4.10. Conference Communication. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the Board of
Directors or any committee designated by the board may participate in a meeting
of the Board of Directors or committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in a meeting pursuant to this
action shall constitute presence in person at such meeting.

                                    ARTICLE V

                             COMMITTEES OF DIRECTORS

        Section 5.1. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the entire board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a


                                       10


member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolutions of the Board of Directors,
shall have and may exercise all the power and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the bylaws of the Corporation and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.

        Section 5.2. Committee Minutes. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.

        Section 5.3. Audit Committee. There shall be an Audit Committee
comprised of at least three members of the Board. The members will be appointed
by and serve at the pleasure of the board. Each member of the Audit committee
will be "independent" as defined by and to the extent required by the rules of
the New York Stock Exchange. Each member of the Audit Committee will be
"financially literate" as interpreted by the board, in its business judgement,
or must become "financially literate" within a reasonable period of time after
his or her appointment to the Audit Committee. At least one member of the Audit
Committee must have "accounting or related financial management expertise", as
interpreted by the board in its business judgement.

               The Audit Committee as a group will meet individually with the
Company's outside auditors, Chief Executive Officer and Chief Financial Officer
upon completion of the annual audit, and at such other times as it deems
appropriate, to review the outside auditors' examination and management report.

               The Audit Committee shall oversee the corporate financial
reporting process and the internal and external audits of the


                                       11


Corporation. The Audit Committee will undertake those specific duties,
responsibilities and processes listed below and such other duties as the Board
of Directors from time to time prescribe. The Audit Committee will ensure that
there is effective communication among the Board, management and outside
auditors.

        The responsibilities of the Audit Committee include:


        1.  Recommending outside auditors for approval by the Board and, if
            necessary, the termination of the outside auditors presently
            engaged;

        2.  Approving the fees for the audit and related services at least
            annually;

        3.  Reviewing the quarterly and annual financial statements, and
            discussing the audited annual financial statements with both the
            Company's outside auditors and the Company's management, prior to
            any public filing of those reports;

        4.  Discussing with the Company's outside auditors the quality of
            accounting principles applied in the Company's financial statements
            and the other matters required by SAS 61 and amendments or
            supplements thereto, such as management judgments and accounting
            estimates that affect financial statements, significant new
            accounting policies and disagreements with management;

        5.  Ensuring the receipt of, and reviewing, a formal written statement
            from the Company's outside auditors delineating all relationships
            between the outside auditor and the Company, consistent with
            Independence Standards Board Standard 1;

        6.  Reviewing and actively discussing with the Company's outside
            auditors the auditor's independence, including any disclosed
            relationship or service that may impact the objectivity and
            independence of the outside auditor;

        7.  Recommending that the Board take appropriate action to ensure the
            independence of the outside auditor;

        8.  Overseeing the Company's compliance with SEC requirements for
            disclosure of auditor's services and Audit Committee members and
            activities;

        9.  Reviewing the Company's system of internal accounting controls;

        10. Making inquiries into matters within the scope of its functions and
            retaining outside counsel if it deems appropriate in connection with
            such inquiries;

        11. Ensuring that the Company provides annual written affirmation to the
            NYSE regarding: (i) any Board determination regarding the
            independence of the Audit


                                       12

            Committee members, (ii) the financial literacy of the Audit
            Committee members, (iii) the determination that at least one member
            has the requisite accounting or financial expertise; and (iv) the
            annual review of this Charter;

        12. Ensure that the outside auditors understand both: (i) their ultimate
            accountability to the Board and to the Audit Committee, as
            representatives of the Company's stockholders, and (ii) the Board's
            and the Audit Committee's ultimate authority and responsibility to
            select, evaluate and, where appropriate in the exercise of their
            business judgment, replace the Company's outside auditors, or
            nominate the outside auditor to be proposed for stockholder approval
            in any proxy statement.

        13. review and reassess the adequacy of its committee charter at least
            once a year.

        Section 5.4 Executive Committee. There shall be an Executive Committee
of the Board of Directors that shall include a minimum of any three directors
appointed from time to time by the Board.

        Any outside director or directors may attend any meeting of the
Executive Committee as participants; however, a quorum shall be determined
without regard to the attendance of such outside director or directors. If more
than one outside director attends a meeting of the Executive Committee, only the
director with the longest service on the Board of Directors shall have a vote on
matters coming before the Executive Committee.

        The functions of the Executive Committee shall be to exercise all power
and authority of the Board in the management of the business and affairs of the
Corporation, except for: (a) any functions delegated to other committees of the
Board. (b) amending the Articles or Certificate of Incorporation, (c) adopting
an agreement of merger or consolidation, (d) recommending to the stockholders
the sale, lease or exchange of substantially all of the Corporation's property
and assets, (e) recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, (f) amending the Bylaws of the
Corporation, (g) declaring a dividend, or (h) authorizing the issuance of stock
in the Corporation.

        Section 5.5. Executive Officer Compensation & Stock Option Committee.
There shall be an Executive Officer Compensation & Stock Option Committee of the
Board of Directors that shall include a minimum of any three independent
directors appointed from time to time by the Board. The functions of the
Executive Officer Compensation & Stock Option Committee shall be to: (a) review
and recommend to the Board the compensation and other contractual terms and
conditions for employment of the Corporation's executive officers, (b) review
and recommend to the Board the compensation and


                                       13


other contractual terms and conditions for employment of any and all former
executive officers of the company who resume service to the Company as
independent contractors or non-officer employees, (c) review the compensation
and other contractual terms and conditions for employment of other corporate or
subsidiary officers whose annual cash compensation exceeds $250,000, (d)to
administer the Corporation's stock option plans and authorize grants thereunder,
and (e) to administer the Corporation's employee stock purchase plan.

        Section 5.6 Nominating, Governance & Succession Committee. There shall
be a Nominating, Governance & Succession Committee of the Board of Directors
that shall include a minimum of any three independent directors appointed from
time to time by the board. The functions of the Nominating, Governance &
Succession Committee shall be to: (a) make recommendations to the board as to
the optimal number of directors on the Board, (b) review and recommend criteria
for the reelection of incumbent directors, (c) have jurisdiction over the
compensation of directors, (d)review and recommend executive officer succession,
and (e) be responsible for all matters of corporate governance.

                                   ARTICLE VI

                                    OFFICERS

        Section 6.1 Officers. The officers of the Corporation shall be a chief
executive officer, a chief administrative officer, a president, a chairman of
the Board, one or more executive vice presidents, one or more senior vice
presidents, one or more vice presidents, a secretary, a controller, and a
treasurer, each of whom shall be an executive officer of the Corporation
appointed by the Board of Directors. The Corporation may also have one or more
assistant vice presidents, one or more assistant secretaries, one or more
assistant controllers, and one or more assistant treasurers, each of whom shall
be an assistant officer of the Corporation appointed by the Executive Committee
of the Board of Directors. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.

        Section 6.2 Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect all principal officers for the
ensuing year and shall designate a chief executive officer and a chief financial
officer. At its first meeting after each annual meeting of stockholders, the
Executive Committee shall elect all assistant officers.

        Section 6.3 Other Officers. The Board of Directors may appoint such
other officers and agents as it shall deem necessary and they shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to


                                       14


time by the Board of Directors.

        Section 6.4 Term. Subject to an applicable written employment agreement,
if any, between the Corporation and any principal officer elected or appointed
by the Board of Directors or any assistant officer appointed by the Executive
Committee of the Board of Directors, said officer may be removed at any time,
either with or without cause, by the affirmative vote of a majority of the Board
of Directors or of the Executive Committee of the Board of Directors,
respectively. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors or by the Executive Committee of the Board of
Directors pursuant to the requirements of Section 6.1 of this Article VI.
Compensation and other terms and conditions of employment of any principal
officer shall be subject to approval of the Officer Compensation and Stock
Option Committee and the Board of Directors. Compensation and other terms and
conditions of employment of assistant officers shall be subject to approval of
the Executive Committee of the Board of Directors.

        Section 6.5 The Chairman of the Board of Directors. The chairman of the
Board of Directors shall be responsible to the Board of Directors, shall prepare
communications to the Board, and with input from the Executive Committee, shall
prepare agenda for meetings of the Board of Directors. The Chairman of the Board
of Directors shall be a member of the Executive Committee and shall preside over
all meetings of the Board of Directors and of the stockholders. At the request
of the President and Chief Executive Officer, the Chairman shall assist him in
communications with stockholders, the press and the investment community. The
chairman shall exercise and perform such other powers and duties as may, from
time to time, be assigned to him by the Board of Directors or prescribed by
these bylaws.

        Section 6.6 The President. The president shall have general and active
management over the business and affairs of the corporation, subject, however,
to the powers and authority of the chief executive officer and to the control of
the Board of Directors. In the absence or disability of the chief executive
officer, the president shall perform the duties of the chief executive officer,
and when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the chief executive officer.

        Section 6.7 The Chief Administrative Officer. In the absence or
disability of the chief executive officer and the president, the chief
administrative officer or any other officer of the corporation designated by the
Board of Directors, shall perform the duties of the chief executive officer, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the chief executive officer. The chief administrative officer
shall have such powers and


                                       15


perform such other duties as from time to time may be prescribed by the chief
executive officer.

        Section 6.8 The Senior Vice Presidents. In the absence of the chairman
of the board or any executive vice presidents, the senior vice presidents, in
order of their rank as fixed by the board of directors, or, if not ranked, the
senior vice president designated by the Board of Directors shall perform the
duties of the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon the president. The senior vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Executive Committee of the Board
of Directors.

        Section 6.9 The Vice Presidents. The vice presidents shall have such
powers and perform such duties as may from time to time be prescribed by the
Executive Committee of the Board of Directors.

        Section 6.10 The Secretary. The secretary shall keep, or cause to be
kept, a book of minutes in written form of the proceedings of the Board of
Directors, committees of the board, and stockholders. Such minutes shall include
all waivers of notice, consents to the holding of meeting, or approvals of the
minutes of meetings executed pursuant to these bylaws or statute. The secretary
shall keep, or cause to be kept, at the principal executive office or at the
office of the Corporation's transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders, and the number
and class of shares held by each.

        The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these bylaws or by
law to be given, and shall keep the seal of the Corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or these bylaws.

        Section 6.11 The Assistant Secretary. The assistant secretary shall have
all the powers and perform all the duties of the secretary in the absence or
inability of the secretary to act.

        Section 6.12 The Controller. The Controller of the Corporation shall be
the general manager of the accounting, tax and internal audit functions of the
Corporation and its subsidiaries, subject to the control of the chief financial
officer. The controller shall have such other powers and perform such other
duties as from time to time may be prescribed by the chief financial officer.

        Section 6.13 The Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all monies and other valuables in the name and to the credit of the Company. The
treasurer shall also have


                                       16


such other powers and perform such other duties as may be prescribed by the
Executive Committee of the Board of Directors.

                                   ARTICLE VII

                          INDEMNIFICATION OF DIRECTORS,
                         OFFICERS, EMPLOYEES AND AGENTS

        Section 7.1. Actions, Suits or Proceedings Other Than by or in the Right
of the Corporation. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided however, that the
foregoing indemnity shall not be applicable as to any person who is or was or
agreed to become an employee or agent of the Corporation (other than employees
or agents who are or were also officers or directors of the Corporation), or is
or was serving or agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (other than employees or agents who are or were also officers
or directors of any such other corporation, partnership, joint venture, trust or
enterprise), unless and until such indemnity is specifically approved by the
Board of Directors. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.

        Section 7.2. Actions or Suits by or in the Right of the


                                       17


Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper; provided, however, that the foregoing
indemnity shall not be applicable as to any person who is or was or agreed to
become an employee or agent of the Corporation (other than employees or agents
who are or were also officers or directors of the Corporation), or is or was
serving or agreed to serve at the request of the Corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise other than employees or agents who are or were also officers or
directors of any such other corporation, partnership, joint venture, trust or
enterprise), unless and until such indemnity is specifically approved by the
Board of Directors.

        Section 7.3. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Article, to the
extent that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 7.1 and 7.2 of this Article, or in defense of
any claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.


                                       18


        Section 7.4. Determination of Right to Indemnification. Any
indemnification under Sections 7.1 and 7.2 of this Article (unless ordered by a
court) shall be paid by the Corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Sections 7.1 and 7.2 of this Article.

        Section 7.5. Advance of Costs, Charges and Expenses. Costs, charges and
expenses (including attorneys' fees incurred by a person referred to in Sections
7.1 and 7.2 of this Article in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding; providing, however, that the payment of such
costs, charges and expenses incurred by a director or officer in his capacity as
a director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer) in advance of the final
disposition of such action, suit or proceeding shall be made only upon receipt
of an undertaking by or on behalf of the director or officer to repay all
amounts so advanced in the event that it shall ultimately be determined that
such director or officer is not entitled to be indemnified by the Corporation as
authorized in this Article. Such costs, charges and expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate. The Board of Directors may, in the
manner set forth above, and upon approval of such director, officer, employee or
agent of the Corporation, authorize the Corporation's counsel to represent such
person, in any action, suit or proceeding, whether or not the Corporation is a
party to such action suit or proceeding.

        Section 7.6. Procedure for Indemnification. Any indemnification under
Sections 7.1., 7.2 or 7.3, or advance of costs, charges and expenses under
Section 7.5 of this Article, shall be made promptly, and in any event within 30
days, upon the written request of the director, officer, employee or agent. The
right to indemnification or advances as granted by this Article shall be
enforceable by the director, officer, employee or agent in any court of
competent jurisdiction, if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within 30 days. Such persons, costs
and expenses incurred in connection with


                                       19


successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of costs, charges and expenses under Section 7.5 of this Article
where the required undertaking, if any, has been received by the Corporation)
that the claimant has not met the standard of conduct set forth in Sections 7.1
or 7.2 of this Article, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 7.1 or 7.2 of this Article, nor the
fact that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.

        Section 7.7. Other Rights; Continuation of Right to Indemnification. The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which a person seeking indemnification may be entitled under any
law (common or statutory), agreement, vote of stockholders or disinterested
director or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a director, officer, employee or agent, and shall inure to the benefit of
the estate, heirs, executors and administrators of such person. All rights to
indemnification under this Article shall be deemed to be a contract between the
Corporation and each director, officer, employee or agent of the Corporation who
serves or served in such capacity at any time while this Article is in effect.
Any repeal or modification of this Article or any repeal or modification of
relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall not in any way diminish any rights to indemnification of
such director, officer, employee or agent or the obligations of the Corporation
arising hereunder.

        Section 7.8. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation


                                       20


as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.

        Section 7.9. Savings Clause. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee and
agent of the Corporation as to costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extent permitted by applicable law.

                                  ARTICLE VIII
                                  STOCKHOLDERS

        Section 8.1. Certificates of Stock. Every holder of shares in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman, the president or a vice president and the
secretary or an assistant secretary of the Corporation, or the treasurer or an
assistant treasurer, certifying the number of shares owned by him in the
Corporation. Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.

        Section 8.2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates of stock to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates the Corporation may,
in its discretion, and as a condition precedent to


                                       21


the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond (or
other adequate security) in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.

        Section 8.3. Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

        Section 8.4. Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, unless the Board of Directors fixes a new record date for the adjourned
meeting, but the board shall fix a new record date if the meeting is adjourned
for more than forty-five days from the date set for the original meeting.

        Section 8.5. No Record Date. If no record date is fixed, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business at the day next preceding the day
on which notice is given, or, if notice is waived, at the end of business of the
day next preceding the day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.

        Section 8.6. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person


                                       22


registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.

                                   ARTICLE IX
                               GENERAL PROVISIONS

        Section 9.1. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.

        Section 9.2. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization, and the name of the state
of its incorporation. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.

                                    ARTICLE X
                                   AMENDMENTS

        Section 10.1. Amendments. Subject to the provisions of the Certificate
of Incorporation, these bylaws may be altered, amended or repealed at any
regular meeting of the stockholders (or at any special meeting thereof duly
called for that purpose) by a vote of not less than 70% of the outstanding stock
entitled to vote at such meeting; provided that in the notice of such special
meeting notice of such purpose shall be given. Subject to the laws of the State
of Delaware, the certificate of incorporation and these bylaws, the Board of
Directors may by majority vote of those present at any meeting at which a quorum
is present amend these bylaws, or enact such other bylaws as in their judgment
may be advisable for the regulation of the conduct of the affairs of the
Corporation.



                                       23



                                                                   EXHIBIT 10.69

                          ABM INDUSTRIES INCORPORATED
                2002 PRICE-VESTED PERFORMANCE STOCK OPTION PLAN
                _______________________________________________


1.    PURPOSE; DEFINITIONS.

      ABM Industries Incorporated, hereby establishes the ABM Industries
Incorporated 2002 Price-Vested Performance Stock Option Plan (the "Plan"),
effective as of December 11, 2001. The purpose of the Plan is to give ABM
Industries Incorporated and its Affiliates a long-term stock option plan to help
in recruiting, retaining motivating and rewarding senior executives, and to
provide the Company and its Affiliates with the ability to provide incentives
more directly linked to the profitability of the Company's businesses and
increases in stockholder value.

      For purposes of the Plan, the following terms are defined as set forth
below:

      a.    "Affiliate" or "Affiliates" means any and all subsidiary
corporations or other entities controlled by the Company and designated by the
Committee from time to time as such.

      b.    "Board" or "the Board" means the board of directors ("Directors") of
the Company.

      c.    "Cause" means:

            (1)   misconduct or any other willful or knowing violation of any
Company policy or employment agreement,

            (2)   unsatisfactory performance such that the Company notifies the
Optionee of the Company's intention not to renew the Optionee's employment
agreement with the Company,

            (3)   a material breach by the Optionee of his or her duties as an
employee which is committed in bad faith or without reasonable belief that such
breach is in the best interests of the Company and its affiliated companies
(other than a breach arising from the failure of the Optionee to work as a
result of incapacity due to physical or mental illness) and which is not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such breach, or

            (4)   the conviction of the Optionee of a felony that has been
affirmed on appeal or as to which the period in which an appeal can be taken has
lapsed.

      d.    "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 6b and 6c of the Plan, respectively.

      e.    "Code" or "the Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.

      f.    "Commission" or "the Commission" means the Securities and Exchange
Commission or any successor agency.





      g.    "Committee" or "the Committee" means the committee referred to in
Section 2 of the Plan.

      h.    "Company" or "the Company" means ABM Industries Incorporated, a
Delaware corporation.

      i.    "Disability" means the inability of the Optionee to perform his or
her duties as an employee on an active fulltime basis as a result of incapacity
due to mental or physical illness which continues for more than ninety (90) days
after the commencement of such incapacity, such incapacity to be determined by a
physician selected by the Company or its insurers and acceptable to the Optionee
or the Optionee's legal representative (such agreement as to acceptability not
to be withheld unreasonably).

      j.    "Eligible Person" has the meaning set forth in Section 4 of the
Plan.

      k.    "Exchange Act" or "the Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, and any comparable successor
provisions.

      l.    "Fair Market Value" means, as of any given date, the average of the
highest and lowest reported trades of the Stock on the New York Stock Exchange
Composite Tape for such date, or if there were no trades on such date, the
average of the nearest trading day after such date. If there is no regular
public trading market for such Stock, the Fair Market Value of the Stock shall
be determined by the Committee in good faith.

      m.    "Non-Employee Director" shall mean a member of the Board who
qualifies as a Non-Employee Director as defined in Rule 16b-3, and also
qualifies as an "outside director" for the purposes of Section 162(m) of the
Code and the regulations promulgated thereunder.

      n.    "Optionee" shall mean any Eligible Person who has been granted Stock
Options under the Plan.

      o.    "Plan" or "the Plan" means the ABM Industries Incorporated 2002
Price-Vested Performance Stock Option Plan, as set forth herein and as
hereinafter amended from time to time.

      p.    "Retirement" means retirement from active full-time employment with
the Company or any of its Affiliates at or after age sixty-four (64).

      q.    "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.

      r.    "Stock" means common stock, par value $0.01 per share, of the
Company.

      s.    "Stock Option" or "Option" means an option granted under Section 5
of the Plan.

      t.    "Termination of Employment" means the termination of an Optionee's
employment with the Company or any of its Affiliates, excluding any such
termination where there is a simultaneous reemployment by the Company or any of
its Affiliates. An Optionee shall be deemed to have terminated employment if he
or she ceases to perform services for the Company or any of its Affiliates on an
active full-time basis, notwithstanding the fact that such Optionee continues to



                                       2


receive compensation or benefits pursuant to an employment contract or other
agreement or arrangement with the Company or any of its Affiliates. A
non-medical leave of absence shall, unless such leave of absence is otherwise
approved by the Committee, be deemed a Termination of Employment. An Optionee
employed by an Affiliate of the Company shall also be deemed to incur a
Termination of Employment if that Affiliate ceases to be an Affiliate of the
Company, as the case may be, and that Optionee does not immediately thereafter
become an employee of the Company or any other Affiliate of the Company.

      In addition, certain other terms have definitions given to them as they
are used herein.

2.    ADMINISTRATION.

      The Plan shall be administered by the Executive Officer Compensation &
Stock Option Committee of the Board or such other committee of the Board,
composed solely of not less than two Non-Employee Directors, each of whom shall
be appointed by and serve at the pleasure of the Board. If at any time no such
committee(s) shall be in office, the functions of the Committee specified in the
Plan shall be exercised by the Board.

      The Committee shall have all discretionary authority to administer the
Plan and to grant Stock Options pursuant to the terms of the Plan to senior
executives of the Company and any of its Affiliates.

      Among other things, the Committee shall have the discretionary authority,
subject to the terms of the Plan:

      a.    to select the Eligible Persons to whom Stock Options may from time
to time be granted;

      b.    to determine the number of shares of Stock to be covered by each
Stock Option granted hereunder; and

      c.    to determine the terms and conditions of any Stock Option granted
hereunder including, but not limited to, the option price (subject to Section 5a
of the Plan) and any vesting condition, restriction or limitation based on such
factors as the Committee shall determine.

      The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.

      The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.

      Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Stock Option shall be
made in the sole discretion of the Committee or such delegate at the time of the
grant of the Stock Option or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be



                                       3


final and binding on all persons, including the Company and plan participants,
and shall be given the maximum deference permitted by law.

3.    STOCK SUBJECT TO PLAN.

      Subject to adjustment as provided herein, the total number of shares of
Stock available for grant under the Plan shall be two million (2,000,000). No
individual shall be eligible to receive Stock Options to purchase more than
100,000 shares of Stock under the Plan. Shares subject to a Stock Option under
the Plan may be authorized and unissued shares or may be treasury shares.

      If any Stock Option terminates without being exercised, shares subject to
such Stock Option shall be available for further grants under the Plan.

      In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or extraordinary distribution
with respect to the Stock or other change in corporate structure affecting the
Stock, the Committee or the Board may make such substitution or adjustments in
the number, kind and option price of shares authorized or outstanding as Stock
Options, and/or such other equitable substitution or adjustments as its may
determine to be appropriate in its sole discretion; provided, however, that the
number of shares subject to any Stock Option shall always be a whole number.

4.    ELIGIBILITY.

      Senior executives who are actively employed on a full-time basis by the
Company or any of its Affiliates, and who are responsible for or contribute to
the management, growth and profitability of the business of the Company or any
of Affiliates, are eligible to be granted Stock Options under the Plan
("Eligible Persons").

5.    STOCK OPTIONS.

      Any Stock Option granted under the Plan shall be in the form attached
hereto as Annex "A", which is incorporated herein and made a part of the Plan,
with such changes as the Committee may from time to time approve which are
consistent with the Plan. None of the Stock Options granted under the Plan shall
be "incentive stock options" within the meaning of Section 422 of the Code.

      The grant of a Stock Option shall occur on the date the Committee selects
a Senior Executive of the Company or any of its Affiliates to receive any grant
of a Stock Option, determines the number of shares of Stock to be subject to
such Stock Option to be granted to such Senior Executive, and specifies the
terms and provisions of said Stock Option. Such selection shall be evidenced in
the records of the Company whether in the minutes of the meetings of the
Committee or by their consent in writing. The Company shall notify an Optionee
of any grant of a Stock Option, and a written option agreement or agreements
shall be duly executed and delivered by the Company to the Optionee.

      Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:



                                       4


      a.    Option Price. The option price per share of Stock purchasable under
a Stock Option shall be the Fair Market Value per share of Stock on the grant
date.

      b.    Option Term. The term of each Stock Option shall be ten (10) years
from its date of grant, unless earlier terminated.

      c.    Exercisability. Except as otherwise provided herein, each Stock
Option shall be exercisable during its term only if such Stock Option has
vested, and only after the first (1st) anniversary of its date of grant.

      d.    Vesting. Each Stock Option shall have assigned to it by the
Committee a vesting price (the "Vesting Price") which will be used to provide
for accelerated vesting so that such Stock Option will vest immediately if, on
or before the close of business on the fourth (4th) anniversary of its date of
grant, the Fair Market Value of the Common Stock shall have been equal to or
greater than the Vesting Price with respect to such Stock Option for ten (10)
trading days in any period of thirty (30) consecutive trading days. Any Stock
Option that has not vested on or before the close of business on the fourth
(4th) anniversary of its date of grant shall vest at the close of business on
the business day immediately preceding the eighth (8th) anniversary of its date
of grant, if such Option has not previously terminated.

      e.    Method of Exercise. Subject to the provisions of this Section 5 of
the Plan, Stock Options may be exercised, in whole or in part, by giving written
notice of exercise to the Company specifying the number of shares of Stock
subject to the Stock Option to be purchased.

      The option price of Stock to be purchased upon exercise of any Option
shall be paid in full:

      (1)   in cash (by certified or bank check or such other instrument as the
Company may accept),

      (2)   in the discretion of the Committee, in the form of unrestricted
Stock already owned by the Optionee for six (6) months or more and based on the
Fair Market Value of the Stock on the date the Stock Option is exercised,

      (3)   in any other form approved in the discretion of the Committee, or

      (4)   by any combination thereof.

      In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
purchase price, and, if requested, the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Company may enter
into agreements for coordinated procedures with one or more brokerage firms.

      No shares of Stock shall be issued until full payment therefor has been
made. The Optionee shall have all of the rights of a stockholder of the Company
holding the Stock that is subject to such Stock Option (including, if
applicable, the right to vote the share and the right to



                                       5


receive dividends), only when the Optionee has given written notice of exercise,
has paid in full for such shares and, if requested, has given the representation
described in Section 9a of the Plan.

      f.    Non-transferability of Stock Options. No Stock Option shall be
transferable by the Optionee other than:

            (1)   pursuant to a beneficiary designation satisfactory to the
Committee, or

            (2)   by will or by the laws of descent and distribution.

            All Stock Options shall be exercisable, during the Optionee's
lifetime, only by the Optionee or by the guardian or legal representative of the
Optionee, it being understood that the terms "holder" and "Optionee" include the
guardian and legal representative of the Optionee named in the option agreement
and any person to whom an option is transferred by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order. The
Committee may establish such procedures as it deems appropriate for an Optionee
to designate a beneficiary to whom any amounts payable in the event of the
Optionee's death are to be paid or by whom any rights of the Optionee, after the
Optionee's death, may be exercised.

      g.    Termination by Death, Disability, Retirement or by the Company
Without Cause. If the Optionee's employment terminates by reason of death,
Disability or Retirement, or if such employment is terminated by the Company
without Cause, in each case prior to the vesting of a Stock Option held by the
Optionee, the following provisions shall apply:

            (1)   if termination occurs by death or Disability, or by the
Company without Cause, such Stock Options shall be exercisable only within
ninety (90) days of such termination, and only if such Stock Options are then
vested;

            (2)   if termination occurs by Retirement or other "voluntary quit,"
such Stock Options shall terminate immediately; and

      h.    Termination by the Company for Cause. If the Optionee's employment
is terminated by the Company for Cause prior to the vesting of a Stock Option,
such Stock Options shall terminate immediately.

      i.    Termination After Vesting. If the Optionee's employment is
terminated for any reason after a Stock Option has vested, such Stock Options
shall be exercisable only within ninety (90) days of such termination,

      j.    Change in Control Cash Out. Notwithstanding any other provision of
the Plan, upon the occurrence of a Change of Control all outstanding Stock
Options shall immediately vest and become fully exercisable, and during the
ninety (90) day period from and after such Change in Control (the "Exercise
Period"), the Optionee shall have the right, in lieu of the payment of the
exercise price for the shares of Stock being purchased under the Stock Option
and by giving notice to the Company, to elect (within the Exercise Period) to
surrender all or part of the Stock Option to the Company and to receive cash,
within ninety (90) days of such notice, in an amount equal to the amount by
which the Change in Control Price per share of Stock on the date of such
election shall exceed the exercise price per share of Stock under the Stock
Option (the "Spread"), multiplied by



                                       6


the number of shares of Stock granted under the Stock Option as to which the
right granted under this Section 5j of the Plan shall have been exercised.

6.    CHANGE IN CONTROL PROVISIONS.

      a.    Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control, any Stock Options outstanding
as of the date such Change in Control is determined to have occurred, and not
then vested and exercisable, shall become vested and exercisable to the full
extent of the original grant, provided that such accelerated vesting shall occur
only if the Optionee is an active full-time employee of the Company or any of
its Affiliates as of such date.

      b.    Definition of Change in Control. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:

                  (i)   the acquisition (other than by the Company or by an
            employee benefit plan or related trust sponsored or maintained by
            the Company), directly or indirectly, in one or more transactions,
            by any person or by any group of persons, within the meaning of
            Section 13(d) or 14(d) of the Exchange Act of beneficial ownership
            (within the meaning of Rule 13d-3 of the Exchange Act) of
            twenty-five percent or more of either the outstanding shares of
            common stock or the combined voting power of the Company's
            outstanding voting securities entitled to vote generally, if the
            acquisition was not previously approved by the existing directors;

                  (ii)  the acquisition (other than by the Company or by an
            employee benefit plan or related trust sponsored or maintained by
            the Company), directly or indirectly, in one or more transactions,
            by any such person or by any group of persons of beneficial
            ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
            fifty percent or more of either the outstanding shares of common
            stock or the combined voting power of the Company's outstanding
            voting securities entitled to vote generally, whether or not the
            acquisition was approved by the existing directors, other than an
            acquisition that complies with clause (x) and (y) of paragraph
            (iii);

                  (iii) consummation of a reorganization, merger or
            consolidation of the Company or the sale or other disposition of all
            or substantially all of the Company's assets unless, immediately
            following such event, (x) all or substantially all of the
            stockholders of the Company immediately prior to such event own,
            directly or indirectly, seventy-five percent or more of the then
            outstanding voting securities entitled to vote generally of the
            resulting corporation (including without limitation, a corporation
            which as a result of such event owns the Company or all or
            substantially all of the Company's assets either directly or through
            one or more subsidiaries) in substantially the same proportions as
            their ownership of the Company's outstanding voting securities
            entitled to vote generally immediately prior to such event and (y)
            the securities of the surviving or resulting corporation received or
            retained by the stockholders of the Company is publicly traded;



                                       7


                  (iv)  approval by the stockholders of the complete liquidation
            or dissolution of the Company; or

                  (v)   a greater than one-third change in the composition of
            the Board of Directors within 24 months if not approved by a
            majority of the pre-existing directors.

      c.    Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of:

            (1)   the highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock Exchange Composite Tape
or other national securities exchange on which such shares are listed or on
Nasdaq, as applicable, during the ninety (90) day period prior to and including
the date of a Change in Control, and or

            (2)   if the Change in Control is the result of a tender or exchange
offer or a Business Combination, the highest price per share of Stock paid in
such tender or exchange offer or Business Combination; provided, however, that
in the case of a Stock Option which:

                  (a)   is held by an Optionee who is an officer of the Company
and is subject to Section 16(b) of the Exchange Act, and

                  (b)   was granted within two hundred and forty (240) days of
the Change in Control, then the Change in Control Price for such Stock Option
shall be the Fair Market Value of the Stock on the date such Stock Option is
exercised or canceled. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
non-cash consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of the Board.

7.    TERM, AMENDMENT AND TERMINATION.

      The Plan will terminate on December 11, 2011. Stock Options outstanding as
of December 11, 2011 shall not be affected or impaired by the termination of the
Plan.

      The Committee shall have authority to amend the Plan without the approval
of the Company's stockholders to take into account changes in law and tax and
accounting rules, including Rule 16b-3 and Section 162(m) of the Code; provided
that no amendment shall be made without the Optionee's consent which would
impair the rights of an Optionee under a Stock Option theretofore granted.

8.    UNFUNDED STATUS OF PLAN.

      It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Stock or make payments; provided, however, that, unless the Committee
otherwise determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.



                                       8


9.    GENERAL PROVISIONS.

      a.    The Committee may require each person purchasing shares pursuant to
a Stock Option to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.

      Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Stock under the Plan prior to
fulfillment of all of the following conditions:

            (1)   the listing or approval for listing

            (2)   any registration or other qualification

            (3)   the obtaining of any other consent, approval, or permit from
any state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.

      b.    Nothing contained in the Plan shall prevent the Company or any of
its Affiliates from adopting other or additional compensation arrangements for
any Optionee.

      c.    The adoption of the Plan shall not confer upon any Optionee any
right to continued employment, nor shall it interfere in any way with the right
of the Company or any of its Affiliates to terminate the employment of any
Optionee with or without cause at any time whatsoever absent a written
employment contract to the contrary.

      d.    No later than the date as of which an amount first becomes
includable in the gross income of the Optionee for federal income tax purposes
with respect to any Stock Option under the Plan, and prior to the delivery of
any shares of Stock to any Optionee, the Optionee shall pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld by the Company with respect to such amount. In the discretion of the
Committee, withholding obligations may be settled with Stock in an amount having
a Fair Market Value not exceeding the minimum withholding tax payable by the
Optionee with respect to the income recognized, including Stock that is subject
to the Stock Option that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and any of its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Optionee. The Committee shall establish such procedures as
it deems appropriate, including the making of irrevocable elections, for the
settlement of withholding obligations with Stock.

      e.    In the case of a grant of a Stock Option to any employee of a
Company Affiliate, the Company, may, if the Committee so directs, issue or
transfer the shares of Stock covered by the Stock Option to the Affiliate, for
such lawful consideration as the Committee may specify, upon the condition or
understanding that the Affiliate will transfer the shares of Stock to that
Optionee in accordance with the terms of the Stock Option specified by the
Committee pursuant to the provisions of the Plan.



                                       9


      f.    The Plan and all Stock Options made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
California, without reference to principles of conflict of law.

10.   EFFECTIVE DATE OF PLAN.

      Subject to approval by the stockholders of the Company, the Plan shall be
effective on December 11, 2001.



                                       10

Data Provided by Refinitiv. Minimum 15 minutes delayed.