MPW INDUSTRIAL SERVICES GROUP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2002

[ ] 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: 0-23335
MPW INDUSTRIAL SERVICES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

OHIO 31-1567260
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
9711 LANCASTER ROAD, S.E., HEBRON, OHIO 43025
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (740) 927-8790

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
them best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of September 24, 2002, the aggregate market value of the voting stock
held by non-affiliates of the registrant (based on the closing sale price of
such stock on such date) was approximately $9,419,239.*

The number of shares of Common Stock outstanding on September 24, 2002, was
10,939,957 shares.

The Registrant's Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on December 13, 2002 is incorporated by reference in
Part III of this Form 10-K to the extent stated herein.
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* Calculated by excluding all shares that may be deemed to be beneficially owned
by executive officers and directors of the registrant, without conceding that
all such persons are "affiliates" of the registrant for purposes of the
federal securities law formatting

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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9

PART II
Item 5. Market for Common Equity and Related Stockholder Matters.... 11
Item 6. Selected Consolidated Financial Data........................ 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 7a. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 20
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure........................................ 42

PART III
Item 10. Directors and Executive Officers............................ 43
Item 11. Executive Compensation...................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 43
Item 13. Certain Relationships and Related Transactions.............. 43
Item 14. Controls and Procedures..................................... 43

PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 44
SIGNATURES............................................................ 47
CERTIFICATIONS........................................................ 48
EXHIBIT INDEX......................................................... 49

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PART I

All statements, other than statements of historical facts, included in this
Form 10-K, including, without limitation, statements made in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, including the amount and nature thereof,
potential acquisitions by the Company, trends affecting the Company's financial
condition or results of operations, and the Company's business and growth
strategies are forward-looking statements. Such statements are subject to a
number of risks and uncertainties, including risks and uncertainties identified
in "Item 1. Business -- Investment Considerations" and other general economic
and business conditions, the business opportunities (or lack thereof) that may
be presented to and pursued by the Company, changes in laws or regulations
affecting the Company's operations and other factors, many of which are beyond
the control of the Company. Also, there is always risk and uncertainty in
pursuing and defending litigation and other disputes in the course of the
Company's business. All of these risks and uncertainties could cause actual
results to differ materially from those assumed in the forward-looking
statements. These forward-looking statements reflect management's analysis,
judgment, belief or expectation only as of the date of this Form 10-K. The
Company undertakes no obligation to revise publicly these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
In addition to the disclosure contained herein, readers should carefully review
risks and uncertainties contained in other documents the Company files or has
filed from time to time with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, that are incorporated by
reference herein or are otherwise publicly available at the offices of the
Securities and Exchange Commission or at its website (http://www.sec.gov).

ITEM 1. BUSINESS

BUSINESS

MPW Industrial Services Group, Inc. and its subsidiaries (the "Company") is
a leading provider of integrated, technically-based industrial cleaning and
related facilities support services to a broad array of industries, primarily in
North America. The Company operates under three separate segments that are
integral to a wide variety of manufacturing processes. These three segments are
Industrial Cleaning and Facility Maintenance, Industrial Container Cleaning and
Industrial Process Water Purification.

Industrial Cleaning and Facility Maintenance. The Company believes that it
is a leading provider of industrial cleaning and facility maintenance in the
midwestern and southeastern United States. The Company provides industrial
cleaning of, and facility maintenance services to, critical operating equipment
for industrial customers primarily at their facilities. The typical industries
served by this segment include the automotive, utility, chemical, pulp and
paper, manufacturing and steel industries. The Company provides its industrial
cleaning and facility maintenance services on a daily recurring basis, a
project-by-project basis, as well as pursuant to longer-term arrangements. The
Company's services principally include: dry vacuuming, wet vacuuming, industrial
power washing, water blasting, ultra-high pressure water blasting, cryojetic
cleaning and chemical cleaning. These services have been provided for over 30
years. The labor support business (the "Facility Support Division") of the
Industrial Cleaning and Facility Maintenance segment provides support to
customers' ongoing maintenance of their facilities as well as cleaning services
that help customers to maximize the performance of their production processes
through effective cleaning, leading to increased efficiency and productivity in
their facilities.

Industrial Container Cleaning. The Company believes that it is a leading
container cleaner for automotive paint manufacturers in North America. The
automotive industry uses paint resin containers ("totes") in the vehicle
painting process. Totes are large portable stainless steel or aluminum
containers that are filled with paint resin and are refilled after cleaning
services are provided. The Company also provides container cleaning services to
various other industrial customers. This segment uses patented cleaning systems
to perform services from two primary processing facilities located in Detroit,
Michigan and Cleveland, Ohio.

Industrial Process Water Purification. The Company believes that it is a
leading provider of industrial process water purification trailers in the
midwestern United States on both a scheduled and emergency basis. The

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Company provides pure feed water to customers primarily in the utility,
healthcare, manufacturing and automotive industries. The Company can also
provide water purification equipment on an emergency response basis when
customers' existing water purification systems are temporarily out of service or
cannot meet the existing demand. The Company also offers purified water service
exchange, which involves the delivery and pickup of smaller tanks of
purification media and is an economical solution for small quantity
requirements.

MARKETING

The Company's marketing and sales efforts focus on increasing the volume of
current services provided to existing customers, actively cross-marketing
additional services to the existing customer base and developing new customer
relationships.

Increasing the Volume of Services Provided. The Company has full-time
account managers assigned to and stationed in customers' facilities where the
Company performs work on an on-going basis. The Company also has division
managers that serve in a similar capacity in geographic areas in which it serves
several customers. In each case, these account and division managers are
responsible for the maintenance of existing customer relationships and are in a
position to actively identify new opportunities within these facilities for
additional business. Monte R. Black and each of the leaders of the Company's
divisions are actively involved in supporting the efforts of these managers and
regularly attend meetings at customer facilities and visit work-sites within
these facilities. Account managers and division managers are provided
incentives, both short and long-term, to continue to grow their businesses and
to seek cross-marketing opportunities within the facilities they serve.

Cross-Marketing. Each of the Company's divisions has a strong management
team that is responsible for ensuring that customer relationships are built on a
foundation of high-quality, responsive service. The Company's senior management
team actively develops a thorough understanding of customers' outsourcing needs
and makes every effort to present innovative solutions to meet these needs. Once
a cross-marketing opportunity has been identified, the technical and sales
leadership of the division being marketed takes the lead in supporting the sales
effort to the customer.

Developing New Customer Relationships. The Company attempts to visit and
communicate with facilities that it does not actively serve on a recurring
basis. The Company presently has sales managers located in our offices
throughout the United States and uses these individuals to manage the majority
of these efforts. The Company supports the efforts of this sales force by
involving account, division and business unit managers in circumstances where
the Company has identified a strong opportunity to provide services. The Company
also markets its reputation and capabilities to plant management within these
facilities and to the corporate management of these companies. In these cases,
either Monte R. Black or other members of the senior management team may
participate in sales presentations.

CUSTOMERS

During fiscal 2002, the Company had sales to approximately 800 customers
with the ten largest customers representing 33.5% of revenues.

A substantial portion of the business operations are performed within
customers' facilities utilizing the Company's personnel and equipment to clean
or maintain their critical operating equipment. From these customers, the
Company typically receives most orders for services on a job-by-job basis. In
some instances, the Company maintains equipment at the locations of customers
that have issued to us blanket purchase orders for the provision of services
over an extended period. These blanket orders do not obligate the customer to
purchase a specified dollar amount of services. Blanket orders permit the
Company to be contracted to perform services when needed. These blanket orders,
in combination with the location of the Company's personnel and equipment, allow
the Company to expedite responses to a particular customer's needs and may
constitute a competitive advantage versus service providers without on-site
equipment. The Company provides services primarily at prescribed rates or based
upon competitive bidding and in some cases through direct negotiation with the
customer. In certain instances, the Company has developed an ongoing daily or
weekly presence within customers' facilities that results in a consistent level
of service revenues. However, the Company generally does

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not have any meaningful backlog of service orders and does not consider backlog
to be an important indicator of future performance.

In certain fixed-based facilities of the Company, it cleans industrial
paint containers used by automobile paint manufacturers. The customers for whom
the Company does this cleaning typically execute long-term agreements or blanket
orders that provide for consistent levels of business. In these circumstances,
the Company regularly communicates with such customers to identify and plan for
expected turnaround times and delivery schedules.

EMPLOYEES

As of June 30, 2002, the Company employed over 1,300 full-time employees.
The Company's subsidiary based in Detroit, Michigan, which is unionized,
employed approximately 80 of these employees. The Company's other employees do
not belong to unions. The Company has not experienced any work stoppages and
believes that relations with its employees are good.

SAFETY, TRAINING AND QUALITY ASSURANCE

Performance of many of the Company's services requires the use of equipment
and exposure to conditions that can be dangerous. Although the Company is
committed to a policy of operating safely and prudently, it has been and is
subject to claims by employees, customers and third parties for property damage
and personal injuries resulting from the performance of services. To minimize
these risks, the Company has adopted broad training and educational programs and
comprehensive safety policies and regulations. The Company requires that all
operational personnel complete applicable safety courses mandated by the
Occupational Safety and Health Administration, Environmental Protection Agency,
Department of Transportation and Mine Safety and Health Administration in areas
including hazard communication, protective equipment, confined space entry,
first aid, decontamination procedures and emergency response. In addition to
these mandated training courses, water blast, dry and wet vacuum and power wash
operations personnel complete an MPW-designed hands-on skill training program
prior to commencing these activities. Management regularly monitors compliance
with regulations set forth by the Occupational Safety and Health Administration
and the other regulatory authorities and is responsible for directing the
overall safety, training, quality assurance and environmental compliance
programs. In addition, most of the Company's service facilities have a
designated safety/training manager who has responsibility for overseeing safety
policies and procedures at the facility.

COMPETITION

The Company believes that the principal competitive factors are experience,
capability, customer responsiveness and price competitiveness. The Company
believes that its principal competitive advantages are technically-based
services, ongoing customer relationships, customer responsiveness and quality of
operational personnel. The Company positions itself competitively as a value
leader and not a price leader, though it remains necessary for the Company to
price its services at levels where customers will achieve cost savings versus
performing the same services themselves.

The market for industrial services is highly fragmented. There are many
competitors in each of the Company's segments, but the Company does not believe
that there is any competitor that offers the quality and range of services that
the Company can offer. Each segment competes with a number of companies in
substantially all of the regions in which they operate.

The Industrial Cleaning and Facility Maintenance segment competes with
large national or regional firms that are typically divisions or subsidiaries of
engineering, construction or other service firms and a large number of private
firms with relatively few customer relationships, and the Industrial Water
Process Purification segment competes with large national water purification
firms in its midwestern market and also with smaller regional competitors. The
Company believes it is the leading provider of container cleaning services to
the automotive paint manufacturers in North America, but competes with smaller
private companies in this market.

5

REGULATION

The Company's operations are subject to numerous rules and regulations at
the federal, state and local levels. All of the Company's operations are subject
to regulations issued by the United States Department of Labor under the
Occupational Safety and Health Act. These regulations have strict requirements
for protecting employees involved with any materials that are classified as
hazardous.

As part of its industrial cleaning services, the Company provides support
to customers for the management of their hazardous materials and other
contaminants generally in the form of assisting in the movement of these
materials within customers' facilities and, occasionally, assisting customers in
the logistics of transporting hazardous materials, including advising customers
on the completion of waste manifests and providing customers with information
regarding permitted disposal facilities. The Company does not transport or
dispose of these hazardous materials, and attempts to not take regulatory
responsibility for hazardous materials. The Company attempts to avoid any
regulatory responsibility by not taking title to any wastes as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976 and the Superfund Amendments
and Reauthorization Act.

As part of the Industrial Container Cleaning operations, the Company
manages some solvents used in the cleaning process. Once they are used, these
solvents are sent by licensed transporters to licensed recycling facilities. The
Company does not believe that its current activities are subject to the
regulations pertaining to hazardous waste treatment, storage or disposal
facilities or transporters of these wastes.

The Company's employees typically work within the customer's operating
facilities. These work environments generally do not expose the customer's
employees or the Company's employees to hazardous materials beyond levels
allowed by applicable regulations. The Company's employees also generally do not
perform work that requires any direct contact with harmful materials.
Occasionally, as part of the Company's support services, employees may, at a
customer's request, move hazardous materials within the customer's facility. In
addition, some of the Company's more specialized cleaning procedures may require
employees to work near hazardous materials. Before any of this type of work is
commenced, however, a complete survey of the material is performed and a health
and safety plan with respect to the material is developed and implemented.
Employees are required to perform this type of work only with the proper
protective equipment and training.

The Company maintains a full-time staff of safety and environmental
specialists to ensure that personnel operate in safe conditions and is properly
protected against harmful exposure. The staff of specialists design training
materials, develop safety and environmental policies and materials, conduct
training classes for employees regarding compliance with governmental
regulations and the Company's procedures, conduct environmental and safety
audits at work sites and monitor safety and environmental compliance at onsite
customer locations.

The Company believes that it has obtained the permits and licenses required
to perform business and believes that it is in substantial compliance with all
federal, state and local laws and regulations governing the Company's business.
To date, the Company has not been subject to any significant fines, penalties or
other liabilities under these laws and regulations. However, no assurance can be
given that future changes in these laws and regulations, or interpretations
thereof, will not have an adverse impact on the Company's operations.

INSURANCE

Much of the work the Company performs is pursuant to contracts that require
the Company to indemnify the customer for injury or damage occurring on the work
site. The terms of these indemnity agreements vary, but generally they provide
that the Company is required to indemnify the customer for losses resulting from
or incurred in connection with the Company's actions while providing services.
Liability for these indemnification claims is covered primarily by the Company's
insurance policies.

Although the Company believes that its insurance coverage is consistent
with industry practice, there are exclusions for environmental pollution and
other types of environmental damage claims. An uninsured or partially insured
claim, if successful and of sufficient magnitude, could have a material adverse
effect on the Company or its financial condition.
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INVESTMENT CONSIDERATIONS

The Company faces the competitive pressures of a highly fragmented
industry. The industrial services industry is highly competitive and
fragmented. Companies compete on the basis of the quality of services provided,
responsiveness to customers, ability to provide services, range of services
offered and price. One or more of the larger national or regional industrial
services companies, as well as numerous local industrial services companies of
varying sizes and resources, serve each of the geographic markets in which the
Company competes or will likely compete. The larger industrial services
companies may have significantly greater financial and other resources than the
Company. In addition, many smaller industrial services companies exist or are
formed to serve only one or relatively few customers. From time to time, these
or other competitors may reduce the price of their services in an effort to
expand market share or protect existing business. These practices may either
require the Company to reduce the pricing of services or lose business. The
Company expects that competition will remain high or increase in the future, and
the Company cannot be certain that it will continue to compete successfully.

The Company may be adversely affected if customers reduce their outsourcing
or use preferred vendors. The Company's business and growth strategies depend in
large part on the continuation of a trend toward outsourcing industrial
services. The decision to outsource depends upon customer perceptions that
outsourcing may provide higher quality services at a lower overall cost and
permit customers to focus on core business activities. The Company cannot be
certain that this trend will continue or not be reversed or that customers that
have outsourced functions will not decide to perform these functions themselves.
In addition, labor unions representing employees of some of the Company's
current and prospective customers have generally opposed the outsourcing trend
and sought to direct to union employees the performance of the types of services
we offer. In addition, management has identified a trend among some of customers
toward the retention of a limited number of preferred vendors to provide all or
a large part of their required facility services. The Company cannot be certain
that this trend will continue or not be reversed or, if it does continue, that
we will be selected and retained as a preferred vendor to provide these
services. Adverse developments with respect to either of these trends would have
a material adverse effect on the business, results of operations and financial
condition.

The Company would be adversely affected if key customers are lost. In
fiscal 2002, the Company's ten largest customers represented 33.5% of total
revenues. Customers may terminate or modify substantially all arrangements to
perform services for them at will and without penalty. The loss of, and failure
to replace the revenues from, one or more large customers or the loss of a
significant number of customers could have a material adverse effect on the
business, results of operations and financial condition.

The business cycles of the Company's customers could adversely affect
revenues. Many significant customers of the Company operate in industries, such
as the automotive, steel, manufacturing, pulp and paper and utilities
industries, which are subject to work stoppages and slowdowns and have
historically shown sensitivity to recessions and other adverse conditions in the
general economy. A general or regional economic downturn or a work stoppage at
one of the Company's significant customers could have a material adverse effect
on the business, results of operations and financial condition.

The Company may be adversely affected if it is unable to maintain an
adequate workforce. The Company's business is labor intensive and could be
adversely affected if the Company fails to maintain an adequate workforce. A
large majority of the workforce is comprised of hourly workers. The Company
incurs substantial expenses for recruiting and training new personnel. The
Company has historically experienced a high level of turnover, and there can be
no assurance that it will be able to successfully attract and retain employees.
As a result of a shortage in the supply of hourly workers, the Company may not
be able to maintain a labor force adequate to operate efficiently, labor
expenses may increase or the Company may have to curtail its growth strategy.

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The Company may not be able to manage its growth. In the past, the Company
has experienced periods of rapid growth, both through internal expansion of
products and services and acquisitions. The Company cannot be certain that its
systems, procedures and controls will be adequate to support its operations if
they expand. The Company's growth to date has placed, and could continue to
place, significant demands on administrative and operational resources. The
Company may not be able to grow effectively or manage any growth successfully,
and the failure to do so could have a material adverse effect on the business,
financial condition and results of operations.

The Company may not be able to successfully manage acquisitions. The
Company cannot be sure that it can add new businesses to its existing operations
without substantial costs, delays or other operational or financial problems.
Acquisitions involve a number of special risks that could materially and
adversely affect the business, financial condition and results of operations.
For example, these risks include a failure to maintain customer relationships
and the diversion of management's attention from operational matters. The
Company also could be affected by the inability to retain key personnel of the
acquired businesses and risks associated with unanticipated events or
liabilities. Customer dissatisfaction or performance problems at one of the
acquired businesses could materially and adversely affect the reputation of the
entire company.

The quarterly results fluctuate which may impact the Company's stock
price. The Company's quarterly results of operations may fluctuate as a result
of a number of factors over which the Company has no control, including
customers' budgetary constraints, the timing and duration of our customers'
planned maintenance activities and shutdowns and changes in competitors' pricing
policies. Also, some operating and fixed costs remain relatively constant
throughout the fiscal year, which when offset by differing levels of revenues,
may result in fluctuations in quarterly operating results.

A failure to retain senior management could have an adverse effect on the
Company's business. The Company's business is largely dependent upon the
efforts of the members of the senior management team, particularly Monte R.
Black, Chairman of the Board, Chief Executive Officer and Chief Operating
Officer. If this executive officer or other officers of the Company do not
continue in their present positions, or if a material number of other managers
fail to continue with the Company, the business could be adversely affected.

The concentration of voting power and legal barriers may limit takeover
opportunities. Effective control of the Company by Monte R. Black, Chairman,
Chief Executive Officer and Chief Operating Officer, as well as statutory
provisions of Ohio law and our Articles of Incorporation and Code of
Regulations, may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or changes in management of the Company, including
transactions in which shareholders might otherwise receive a premium over the
then current market price for their shares.

Voting Control

Mr. Black owns beneficially, directly and indirectly, approximately
58% of the Company's outstanding common stock. Accordingly, Mr. Black will
be able to exercise effective control over the Company's affairs, the
election of individuals to the Board of Directors and the outcome of other
matters submitted to a vote of shareholders.

Articles of Incorporation and Code of Regulations

The Company's Articles of Incorporation and Code of Regulations
include the requirement of certain supermajority votes and the
establishment of certain advance notice procedures for nomination of
candidates for election as directors and for shareholder proposals to be
considered at shareholders' meetings. The Board of Directors also has
authority to issue one or more series of preferred stock without further
shareholder approval and upon terms it determines. Issuance of preferred
stock could adversely affect holders of the common stock in the event of
liquidation or delay, defer or prevent an attempt to obtain control of the
Company by means of a tender offer, merger, proxy contest or otherwise.

8

Ohio Law

Section 1701.831 of the Ohio General Corporation Law contains
provisions that require shareholder approval of any proposed "control share
acquisition" of any Ohio corporation. Furthermore, Chapter 1704 of the Ohio
General Corporation Law contains provisions that restrict some business
combinations and other transactions between an Ohio corporation and
interested shareholders.

Environmental risks could adversely affect the Company's business. Although
the Company attempts not to take responsibility for, nor transport or dispose
of, hazardous materials generated by customers in the normal course of business,
the Company does provide support to customers for the management of their
hazardous materials. This support includes some on-site movement and packaging
of customers' hazardous materials and logistical support for customers'
transportation and disposal of hazardous materials. In addition, some of the
Company's more specialized cleaning procedures may require employees to work
near hazardous materials. In performing these services, the Company could
potentially be liable to third parties or their employees for various claims for
property damage or personal injury stemming from a release of hazardous
substances or otherwise. Personal injury claims could arise contemporaneously
with performance of the work or long after completion of the project as a result
of alleged exposure to toxic substances. A large number of these claims or one
or more claims that results in a significant liability to the Company could have
a material adverse effect on the business, results of operations and financial
condition.

The Company may be adversely affected if it expands international
operations. The Company generates a portion of revenues from services provided
outside of the United States. The Company may increase its presence outside of
the United States. Conducting business outside of the United States is subject
to various risks, including longer payment cycles, unexpected changes in
regulatory requirements and tariffs, difficulties in staffing and managing
foreign operations and greater difficulty in accounts receivable collection.

ITEM 2. PROPERTIES

FACILITIES

The Company currently services customers through its Hebron, Ohio
headquarters and over 42 branch locations in 14 states plus Canada. The Company
owns a 22,000 square foot building, which serves as its principal executive
offices, an 11,000 square foot building, which services as its main fabrication
facility, and an 8,250 square foot building, which serves as its paint and body
facility, in Hebron, Ohio; a 60,000 square foot industrial container cleaning
facility in Cleveland, Ohio; and a 40,000 square foot industrial water facility
in Sedalia, Missouri. Many of the Company's locations are leased facilities
ranging from 3,000 to 71,000 square feet at which the Company houses equipment
and maintains a small sales and administrative staff. Each industrial cleaning
branch location is equipped to perform minor equipment maintenance. The Company
leases land, office space and its maintenance and training facility in Hebron,
Ohio, consisting of approximately 48,000 square feet, its industrial water
facilities located in Newark, Ohio, consisting of approximately 32,000 square
feet and its industrial container cleaning facility located in Chesterfield,
Michigan, consisting of approximately 71,000 square feet, from related parties.
See Item 13. Certain Relationships and Related Transactions.

ITEM 3. LEGAL PROCEEDINGS

Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the Company,
individually or collectively, is expected to have a material adverse effect on
the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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EXECUTIVE OFFICERS OF THE COMPANY

The Company furnishes the following information concerning the executive
officers of the Company. Executive officers are elected annually by, and serve
at the pleasure of, the Board of Directors.

Monte R. Black (age 52). Mr. Black originally founded the Company in 1972
and has served as Chief Executive Officer and Chairman of the Board of Directors
since that time.

James P. Mock (age 57). Mr. Mock joined the Company in October 1996 as
Vice President and General Manager of the Northern Region, Industrial Cleaning.
In July 1997, Mr. Mock was appointed Vice President and General Manager of
Industrial Cleaning and Facility Maintenance. From 1984 until joining the
Company, Mr. Mock served in various general management and executive positions
for a leading environmental services company and its successors.

Richard R. Kahle (age 38). Mr. Kahle joined the Company in September 2000
and was appointed Vice President, Chief Financial Officer and Treasurer. In July
of 2001, Mr. Kahle was appointed Secretary. Prior to joining the Company, Mr.
Kahle served in the following capacities for Banc One Corporation, a bank
holding company, from January 1997 until September 2000: (i) senior vice
president -- finance, consumer lending division; (ii) manager of financial
planning and analysis -- consumer lending division; (iii) national accounting
director; (iv) director of financial reporting; and (v) corporate accounting
manager. Before joining Banc One Corporation, from December 1994 until December
1996, Mr. Kahle was the manager of financial accounting for Clopay Corporation,
a manufacturing company, and from August 1990 until December 1994, Mr. Kahle was
the supervisor of financial reporting for Borden, Incorporated, a manufacturer
of chemicals, packaged foods, housewares and consumer adhesives. Prior to
joining Borden, Incorporated, Mr. Kahle was employed by Deloitte & Touche, a
public accounting firm.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded on the Nasdaq National Market
("NASDAQ") under the symbol "MPWG". As of September 24, 2002, the Company had
approximately 86 shareholders of record. The following table sets forth, for the
periods indicated, the range of high and low closing prices for the Company's
Common Stock as reported on NASDAQ:

The Company anticipates that all future earnings will be retained to
finance operations and for the growth and development of the business.
Accordingly, the Company does not currently anticipate paying cash dividends on
its Common Stock. The payment of any future dividends will be subject to the
discretion of the Board of Directors and will depend on the results of
operations, financial condition, contractual restrictions, restrictions imposed
by applicable law and other factors that the Board of Directors deem relevant.
The Company's credit facility contains covenants that prohibit the payment of
cash dividends.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following information should be read in conjunction with the
Consolidated Financial Statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Form 10-K.

- ---------------

(1) Represents compensation expense related to the Company's obligation to
repurchase securities issued under some of its stock option plans. This
obligation terminated with the Company's initial public offering in fiscal
1998 (the "Offering").

(2) The provision for income taxes prior to the Offering reflects the treatment
of a subsidiary of the Company as an S Corporation.

(3) Represents historical information adjusted only to reflect the recording of
income taxes as if all subsidiaries of the Company had been taxed as a C
Corporation prior to the Offering.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with "Item 1.
Business -- Investment Considerations", the Consolidated Financial Statements
and related notes included elsewhere in this Form 10-K.

OVERVIEW

Sale of the Industrial Products and Services Group. On June 4, 2001 the
Company closed on the sale of the Industrial Products and Services ("Filter")
group to CLARCOR Inc., a filter manufacturer. Under the terms of the agreement,
the purchase price was approximately $31.0 million, subject to final closing
adjustments. In the quarter ended March 31, 2002, the Company finalized
negotiations related to the sale of the Filter group. The final purchase price,
after closing adjustments was $29.3 million. Discontinued operations for fiscal
2001 includes a pre-tax operating charge of $1.8 million primarily related to
asset write-downs and other costs associated with the sale of the Filter group
and a net loss on sale of $6.8 million (net of related tax benefits of $1.3
million).

Income from discontinued operations for fiscal 2002 consists solely of a
tax benefit related to a reduction in the valuation allowance against the
Company's deferred tax asset for capital loss carry-forwards associated with the
sale of the Filter group. These tax benefits resulted from fiscal 2002
developments related to the finalization of the Company's fiscal 2001 income tax
return.

Management. Ira Kane, President and Chief Operating Officer of the Company
resigned in June 2001, to pursue new leadership challenges elsewhere. In
addition, C. Douglas Rockwell, Vice President, General Manager of Industrial
Process Water Purification and Industrial Container Cleaning resigned in August
2001.

Special Charges. During the third quarter of fiscal year 2001, the Company
recorded special charges of $9.2 million ($5.5 million net of tax), of which
$6.6 million was non-cash. These charges are classified in selling, general and
administrative expense in the Company's fiscal 2001 statement of operations. The
following table sets forth the major components of the charge:

13

The $4.5 million charge for accounts receivable/bad debt included $3.5
million related to an increase in the bad debt reserve as a result of bankruptcy
filings by several customers, as well as $1.0 million related to write-offs of
certain other non-trade receivables. Goodwill and other asset write-downs of
$1.6 million includes a $0.8 million impairment charge for goodwill and a $0.8
million charge for the abandonment of certain capital projects and other assets.
The goodwill impairment charge related to the Company's restructuring plan
documented in the third quarter of fiscal 2001 resulted from the sale of its
Straightline Optical Services business in accordance with the provisions of
Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
certain costs incurred in a restructuring) and Staff Accounting Bulletin No.
100, Restructuring and Impairment Charges. When the business was sold, the
goodwill was impaired as the goodwill did not benefit any of the Company's other
operations. Workers compensation, financing fees and other of $3.1 million
primarily consisted of adverse workers compensation claim developments and
retroactive premiums and claims assessments, financing fees associated with the
amended revolving credit facility and severance charges. A portion of the
severance payments were paid during fiscal 2001 and the remaining portion was
paid during fiscal 2002.

Privatization of Company. On August 22, 2000, the Company announced that a
Special Committee of its Board of Directors had reached an agreement in
principle with the Company's Chairman and Chief Executive Officer, Monte R.
Black, pursuant to which Mr. Black would acquire the Company in a cash merger at
$8.25 per share plus an additional amount if the sale of the Filter group
generated proceeds in excess of targeted amounts. On September 27, 2000, the
Company announced that Mr. Black had withdrawn his previously announced proposal
to acquire the Company. Mr. Black advised the Company's Special Committee, which
had been evaluating the proposal, that he withdrew the proposal primarily
because he perceived uncertainty in the Company's core businesses due to
sluggish customer demand from certain industries. Mr. Black also expected that
the higher than anticipated level of current Company indebtedness, when added to
the debt to be incurred to finance the privatization transaction, would
adversely impact the Company if the privatization transaction were completed.
See Note 3 to the Consolidated Financial Statements included elsewhere in this
Form 10-K.

Operating results for fiscal 2001 were negatively impacted by charges for
severance costs related to the resignation of certain officers.

Recapitalization of Pentagon. On July 18, 2000, the Company sold a
majority of its equity interest in Pentagon to Baird Capital Partners. The
Company retained approximately a 22% interest in the capital stock of Pentagon.
See Note 4 to the Consolidated Financial Statements.

In connection with this transaction, the Company received payments totaling
$22.8 million, which were used to repay a portion of its debt. The June 30, 2000
financial statements include a $4.3 million accrued loss on sale of subsidiary,
net of related tax benefits, to reduce the investment in Pentagon to
approximately 22% of Pentagon's equity upon completion of the recapitalization
transaction. As a result of the reduction in ownership of Pentagon's capital
stock, the remaining investment in Pentagon has been accounted for using the
equity method of accounting.

The third quarter of fiscal 2001 includes a non-cash tax charge of $2.9
million for a valuation allowance against the Company's net deferred tax assets
related to the capital loss carry-forward from the sale of Pentagon. The
provision for income taxes for fiscal 2002 includes a non-recurring benefit of
$0.2 million related to a reduction in the Company's valuation allowance against
the Company's deferred tax asset for capital loss carry-forwards associated with
the Company's July 2001 sale of Pentagon stock. The reduction in the valuation
allowance resulted from 2002 developments related to the finalization of the
Company's fiscal 2001 income tax return.

Income from continuing operations before equity in earnings (loss) of
affiliate for the fiscal year ended June 30, 2000 includes the results of
Pentagon. See Note 4 to the Consolidated Financial Statements.

The Company's investment and proportionate share of earnings (loss) in
Pentagon are classified in the fiscal 2002 and 2001 financial statements as
"investment in affiliate" and "equity in earnings of affiliate," respectively. A
significant amount of Pentagon's total assets represent goodwill. Under the
equity method of accounting, the

14

Company's recorded investment in Pentagon would be affected if Pentagon were to
record an impairment charge under the provisions of SFAS No. 142.

Subsequent to June 30, 2002, the Company invested approximately $365,000 in
Pentagon and has a remaining investment commitment of approximately $73,000.

GENERAL

The Company primarily derives revenues from services under time and
materials, fixed price and unit price contracts. The Company recognizes revenues
from these contracts based on performance and efforts expended and records
revenues from non-contract activities as it performs services or sells goods.

Cost of services includes all direct labor, material, subcontractor and
other costs related to the performance of the Company's services. Cost of
services also includes all costs associated with operating equipment, including
depreciation.

Selling, general and administrative expenses include management salaries,
clerical and administrative overhead, professional services, costs associated
with marketing and sales efforts, costs associated with information systems,
depreciation and amortization of intangibles.

Depreciation is calculated using the straight-line method over the
estimated useful lives of property and equipment. Goodwill and other intangibles
are amortized on a straight-line basis over periods not exceeding 25 years.

RESULTS OF OPERATIONS

The following table sets forth revenue and income (loss) from operations by
segment for continuing operations for the fiscal years ended June 30, 2002, 2001
and 2000. The fiscal 2000 results of operations are presented with and without
the results of Pentagon. Corporate expenses are fully allocated to the segments.
Corporate support services that are attributable to the operating segments are
allocated based on each segment's percentage of total revenues. General
corporate expenses are allocated to each segment equally.

- ---------------

(1) Other consists of the results of Pentagon.

15

FISCAL 2002 COMPARED TO FISCAL 2001

Basis of Presentation. The Company's analysis of fiscal 2002 compared to
fiscal 2001 and 2000 utilizes actual information as presented above that has
been adjusted to reflect the Filter group as a discontinued operation.

Historically, the Company recorded salvage value on all property and
equipment. While the Company has ceased assigning salvage value to property and
equipment, except for land and buildings, there was approximately $4.1 million
in salvage value recorded for all property and equipment, other than land and
buildings. In fiscal 2002, the Company began depreciating the aggregate salvage
value of approximately $4.1 million over the remaining useful life of each
respective asset. This change in estimate resulted in an increase in
depreciation expense of $1.8 million for fiscal 2002 and will continue to impact
the Company's depreciation expense over the next several fiscal years.

Revenues. Revenues decreased to $92.2 million in fiscal 2002 from $98.7
million in fiscal 2001. The decrease is primarily due to the uncertainty in the
economy which has caused many of the Company's customers, primarily in the
Industrial Cleaning and Facility Maintenance segment, to postpone or cancel work
which they otherwise have done in the past as well as the highly competitive
environment in which the Company operates.

Cost of Services. Cost of services decreased to $68.6 million in fiscal
2002 from $72.2 million in fiscal 2001. Cost of services as a percentage of
revenue increased to 74.5% in fiscal 2002 from 73.1% in fiscal 2001. This
increase was primarily driven by additional depreciation expense of $1.6 million
in the current year as a result of the change in estimate related to salvage
value discussed above, partially offset by less reliance on sub-contract
services and the Company's profit enhancement initiatives, particularly related
to supplies and maintenance costs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $17.8 million in fiscal 2002 from $29.2
million in fiscal 2001. Fiscal 2002 includes $0.2 million of depreciation as a
result of the change in estimate related to salvage value discussed above.
Fiscal 2001 includes the $9.2 million of special charges previously discussed
and a $0.6 million charge for severance related to the resignation of certain
officers of the Company. Excluding the items discussed above, selling, general
and administrative expense as a percentage of revenue decreased to 19.0% in
fiscal 2002 compared to 19.6% in fiscal 2001. This decrease was primarily the
result of reduced personnel and related costs.

Income (Loss) from Operations. Income from operations was $5.8 million in
fiscal 2002 compared with an operating loss of $(2.6) million for fiscal 2001.
Income (loss) from operations for each segment in fiscal 2001 was negatively
impacted by the $9.2 million of special charges. Excluding the additional
depreciation expense of $1.8 million in fiscal 2002 and the special charges of
$9.2 million and severance charge of $0.6 million in fiscal 2001, income from
operations was $7.6 million and $7.2 million, respectively. As a percentage of
revenue, income from operations, excluding the items discussed above, increased
to 8.3% in fiscal 2002 from 7.3% in fiscal 2001. While revenues have been
impacted by the uncertainty in the economy, the Company has maintained its
margins primarily by relying less on sub-contract services in the Industrial
Cleaning and Facility Maintenance segment and implementing profit enhancement
initiatives, particularly related to supplies and maintenance costs.

Interest Expense. Interest expense decreased to $2.6 million in fiscal
2002 from $3.0 million in fiscal 2001. The decrease was primarily due to lower
average outstanding borrowings during fiscal 2002 as a result of the proceeds
from the sale of the Filter group and the recapitalization of Pentagon being
used to repay a portion of the Company's debt.

Provision for Income Taxes. The provision for income taxes for fiscal 2002
and 2001 reflects an effective rate of 38% and 12%, respectively. The provision
for income taxes for fiscal 2002 includes a non-recurring benefit of $0.2
million related to a reduction in the Company's valuation allowance against the
Company's deferred tax asset for capital loss carry-forwards associated with the
Company's July 2001 sale of Pentagon stock. The reduction in the valuation
allowance resulted from 2002 developments related to the finalization of the
Company's fiscal 2001 income tax return. Excluding this non-recurring benefit,
the Company's effective income tax rate for fiscal 2002 was 44%. The provision
for income taxes for fiscal 2001 includes a $2.9 million charge for a valuation
allowance against the Company's net deferred tax assets related to the capital
loss carry-forward from
16

the sale of Pentagon. Excluding the valuation allowance, the Company's effective
income tax rate for fiscal 2001 was 40%.

FISCAL 2001 COMPARED TO FISCAL 2000

Basis of Presentation. The Company's analysis of fiscal 2001 compared to
fiscal 2000 utilizes actual information as presented above that has been
adjusted to reflect the Filter group as a discontinued operation. The
information presented above also excludes the operating results of Pentagon,
which has been accounted for under the equity method of accounting for the years
ended June 30, 2002 and 2001. Pentagon accounted for $30.9 million of revenues
and $1.2 million of income from operations for fiscal 2000.

Revenues. Revenues decreased to $98.7 million in fiscal 2001 from $135.0
million in fiscal 2000. This decrease was primarily the result of the sale of
Pentagon in July 2000. Excluding the results of Pentagon, total revenues
decreased $5.4 million, or 5.2%, in fiscal 2001. The decrease was primarily due
to the slowdown in the economy and its impact on many of the customers and
industries that the Company serves.

Cost of Services. Cost of services decreased to $72.2 million in fiscal
2001 from $91.7 million in fiscal 2000. Excluding Pentagon, cost of services as
a percentage of revenues increased to 73.1% in fiscal 2001 from 69.5% in fiscal
2000. This increase was due primarily to higher fuel and labor costs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $29.2 million in fiscal 2001 from $29.6
million in fiscal 2000. Excluding Pentagon in fiscal 2000 and the special
charges of $9.2 million in fiscal 2001, selling, general and administrative
expenses increased $0.8 million in fiscal 2001 from fiscal 2000. As a percentage
of revenue, selling, general and administrative expenses excluding the special
charges in 2001 and Pentagon in fiscal 2000 increased to 20.2% in fiscal 2001
compared to 18.4% in fiscal 2000.

Income (Loss) from Operations. The loss from operations was $2.6 million
for fiscal 2001 compared with operating income of $13.7 million for fiscal 2000.
Excluding the special charges of $9.2 million in fiscal 2001 and the results of
Pentagon in fiscal 2000, operating income was $6.6 million and $12.6 million for
fiscal 2001 and 2000 respectively. As a percentage of revenue, income from
operations excluding special charges in fiscal 2001 and Pentagon in fiscal 2000
decreased to 6.7% in fiscal 2001 compared with 12.1% in the prior year. The
decrease in operating income was due primarily to the loss of higher margin
accounts in the Industrial Cleaning and Facility Maintenance segment that
occurred during the second half of fiscal 2000 due to aggressive competitor
pricing, continued sluggish customer demand in certain industries and higher
costs.

Interest Expense, Net. Interest expense decreased to $3.0 million in
fiscal 2001 from $4.8 million in fiscal 2000. The decrease was primarily the
result of lower average outstanding borrowings due to the proceeds from the
recapitalization of Pentagon and the sale of the Filter group.

Provision for Income Taxes. The provision for income taxes in fiscal 2001
reflects an effective rate of 12% compared to an effective rate of 40% in fiscal
2000. The fiscal 2001 provision for income taxes includes a $2.9 million charge
for a valuation allowance against the Company's net deferred tax assets related
to the capital loss carry-forward from the sale of Pentagon.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that are reflective of
the Company's significant judgments and uncertainties that could potentially
result in materially different results under different assumptions and
conditions. The following accounting policies are considered the most critical
to the Company, in that they are the primary areas subject to the use of
estimates, assumptions and judgments in the preparation of the consolidated
financial statements of the Company.

Revenue and Cost Recognition. The Company primarily derives its revenues
from services under time and materials, fixed price and unit price contracts.
Revenues from these contracts are recorded based on performance and efforts
expended. Contract costs include all direct labor, material, per diem,
subcontract and other direct and indirect project costs related to contract
performance. Cost of services also includes all costs associated with

17

operating equipment, including depreciation. Revenues derived from non-contract
activities are recorded as services are performed or goods are sold.

Allowance for Doubtful Accounts. The Company's allowance for doubtful
accounts is estimated to cover the risk of loss related to the Company's
accounts receivable. The allowance for doubtful accounts is maintained at a
level that the Company considers appropriate based on historical experience and
other factors that affect collectibility. The Company evaluates the
collectibility of accounts receivable based on a combination of factors. In
circumstances where the Company is aware of a specific customer's inability to
meet its financial obligations, the Company records a specific reserve for bad
debts against amounts due to reduce the net recognized receivable to the amount
the Company reasonably believes will be collected. For all other customers, the
Company records reserves for bad debts based on the age of the receivables and
historical bad debt percentages. While the Company believes its allowance for
doubtful accounts is adequate, changes in major customers' ability to meet
financial obligations or higher than expected defaults could cause the Company
to lower its estimates of recoverability by a material amount.

Insurance Risk. The Company is self-insured for workers' compensation
liability costs up to certain retention levels and purchases private insurance
for claims in excess of those retention levels. The Company records its
self-insurance liability based on claims filed and an estimate of claims
incurred but not yet reported. These liabilities are based on estimates and,
while management believes that the reserve is adequate, the ultimate liability
may be in excess of or less than the amounts recorded.

Property and Equipment. Property and equipment is recorded at cost and
includes expenditures which substantially increase the useful lives of the
asset. Maintenance and repairs that do not improve or extend the useful life of
the respective assets are expensed as incurred. Depreciation is provided over
the estimated useful lives of the respective assets using the straight-line
method.

Depreciation on the Company's property and equipment has been computed
based on the following useful lives:

Long-lived, Intangible Assets and Goodwill. The Company assesses the
impairment of identifiable intangibles, long-lived assets and goodwill as events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. If future undiscounted cash flows are believed insufficient
to recover the remaining carrying value of the asset, the carrying value is
written down to fair value in the period the impairment is identified.

CONTRACTUAL OBLIGATIONS

As of June 30, 2002, the Company had the following contractual obligations
(in thousands):

Subsequent to June 30, 2002, the Company entered into a non-cancelable
operating lease with a third party to lease an aircraft. The lease is for a
one-year term with two additional one-year renewal options. The rent

18

commitments under this lease are $129,000 in 2003 and $12,000 in 2004. The
aircraft may be purchased at the end of the lease for $794,000 if the renewal
options are not exercised.

RELATED PARTY TRANSACTIONS

The Company rents certain land, buildings and equipment from entities
controlled by its principal shareholder and Chief Executive Officer under
long-term lease agreements. Total payments related to these leases were $1.6
million, $1.4 million and $1.4 million for fiscal 2002, 2001 and 2000,
respectively.

The Company provides, from time to time, certain fabrication-type services
to Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable sanitation
services company wholly-owned by the Company's principal shareholder. The
Company bills Pro-Kleen for services it renders. The amount of such billings for
fiscal years 2002, 2001 and 2000 were approximately $182,000, $62,000, and
$61,000, respectively. These billings represent reimbursement for the use of
parts and supplies and the use of certain of the Company's employees on certain
projects as requested by Pro-Kleen. These reimbursements by Pro-Kleen are
generally treated as an offset to supplies and maintenance or labor expense.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2002, the Company had cash of $0.2 million and working
capital of $7.5 million. Cash provided by operating activities was $15.9 million
for the year ended June 30, 2002, while cash used for capital investments was
$11.3 million.

In June 2002, the Company entered into a new credit agreement with its
principal banks (the "Credit Facility"). The Credit Facility provides the
Company with $35.0 million of revolving credit availability for a three-year
period and a $6.0 million three-year term loan to be repaid in quarterly
installments of $0.3 million. The Credit Facility is subject to two one-year
extensions by the banks at the request of the Company.

The Credit Facility is secured by substantially all of the Company's
assets. Under the terms of the Credit Facility, the entire $41.0 million is
available for general corporate purposes, including working capital, capital
expenditures and acquisitions. Borrowings under the Credit Facility currently
bear interest at the Eurodollar market rate plus 2.25%. The Company also pays a
commitment fee of .45% for unused portions of the Credit Facility. The interest
rate is subject to change based on interest rate formulas tied to the ratio of
consolidated funded debt to earnings before interest, taxes, depreciation and
amortization. Availability of borrowing is subject to the maintenance of a
minimum level of tangible net worth, certain levels of debt service coverage and
maintenance of a specific ratio of funded debt to earnings before interest,
taxes, depreciation and amortization. As of June 30, 2002, outstanding
borrowings under the credit facility were $27.1 million. The weighted average
interest rate for the Credit Facility was approximately 8% for the year ended
June 30, 2002.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations and changes the criteria to recognize intangible
assets apart from goodwill and is effective for any business combination that is
completed after June 30, 2001. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2003. Application of
the non-amortization provision of the Statement is expected to result in an
increase in net income of approximately $0.3 million, or $0.03 per share, per
year.

The Company will adopt SFAS No. 142 in first quarter of fiscal 2003, but
has not yet determined the impact, if any, of performing the impairment tests on
goodwill and indefinite lived intangible assets.

19

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement establishes a single
accounting model for the impairment or disposal of long-lived assets. SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. The Company
will adopt SFAS No. 144 in the first quarter of fiscal 2003 and does not expect
the adoption of this statement to have a material impact on the Company's
consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including certain costs incurred in a restructuring). SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 15, 2002.
Management does not expect adoption of this Statement to have a material impact
on the Company's consolidated financial statements.

INFLATION

The effects of inflation on operations were not significant during the
periods presented in the Consolidated Financial Statements.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks from transactions that are
entered into during the normal course of business. The Company has not entered
into derivative financial instruments for trading purposes. The Company's
primary market risk exposure relates to interest rate risk. The Credit Facility
is subject to a variable rate of interest based on the prime or Eurodollar rate.
The Company has hedged its exposure to changes in interest rates by fixing its
rate of interest on $20.0 million of its variable rate credit facility through
two interest rate swap agreements. Assuming borrowings at June 30, 2002 and
2001, a one hundred basis point change in interest rates would impact net
interest expense by approximately $0.1 million in each year.

20

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
MPW Industrial Services Group, Inc.

We have audited the accompanying consolidated balance sheets of MPW
Industrial Services Group, Inc. and subsidiaries as of June 30, 2002 and 2001,
and the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended June 30,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosure in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MPW Industrial
Services Group, Inc. and subsidiaries at June 30, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States.

/s/ ERNST & YOUNG LLP

Columbus, Ohio
August 6, 2002

21

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

The accompanying notes are an integral part of these consolidated financial
statements.
22

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE DATA)

The accompanying notes are an integral part of these consolidated financial
statements.
23

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
24

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
25

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS MPW Industrial Services
Group, Inc. and its subsidiaries (the "Company") provide technically-based
services, including industrial cleaning and facility maintenance, industrial
container cleaning and industrial process water purification. Such services are
primarily provided at customer facilities. The Company serves customers in
numerous industries including automotive, utility, chemical, pulp and paper,
manufacturing and steel primarily throughout the United States and Canada.

As a result of the Company's sale of the Industrial Filtration Products and
Services ("Filter") group, the financial data related to the Filter group is
accounted for as a discontinued operation for all periods presented. See Note 2.

Effective July 18, 2000, the Company completed a recapitalization
transaction that resulted in the recapitalization of Pentagon Technologies
Group, Inc. ("Pentagon") and reduced the Company's retained interest in the
capital stock of Pentagon to approximately 22%. See Note 4.

The accompanying consolidated financial statements include the accounts of
the Company and all of its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.

REVENUE AND COST RECOGNITION The Company primarily derives its revenues
from services under time and materials, fixed price and unit price contracts.
Revenues from these contracts are recorded based on performance and efforts
expended. Contract costs include all direct labor, material, per diem,
subcontract and other direct and indirect project costs related to contract
performance. Cost of services also includes all costs associated with operating
equipment, including depreciation. Revenues derived from non-contract activities
are recorded as services are performed or goods are sold.

ALLOWANCE FOR DOUBTFUL ACCOUNTS The Company's allowance for doubtful
accounts is estimated to cover the risk of loss related to the Company's
accounts receivable. The allowance for doubtful accounts is maintained at a
level that the Company considers appropriate based on historical experience and
other factors that affect collectibility. The Company evaluates the
collectibility of accounts receivable based on a combination of factors. In
circumstances where the Company is aware of a specific customer's inability to
meet its financial obligations, the Company records a specific reserve for bad
debts against amounts due to reduce the net recognized receivable to the amount
the Company reasonably believes will be collected. For all other customers, the
Company records reserves for bad debts based on the age of the receivables and
historical bad debt percentages.

INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT Property and equipment is recorded at cost and
includes expenditures which substantially increase the useful lives of the
asset. Maintenance and repairs that do not improve or extend the useful life of
the respective assets are expensed as incurred. Depreciation is calculated using
the straight-line method over the estimated useful lives of the respective
assets.

Historically, the Company recorded salvage value on all property and
equipment. While the Company has ceased assigning salvage value to property and
equipment, except for land and buildings, there was approximately $4.1 million
in salvage value recorded for all property and equipment, other than land and
buildings. In fiscal 2002, the Company began depreciating the aggregate salvage
value of approximately $4.1 million over the remaining useful life of each
respective asset. This change in estimate resulted in an increase in
depreciation expense of $1.8 million for fiscal 2002.

26

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Depreciation on the Company's property and equipment has been computed
based on the following useful lives:

INTANGIBLES, NET Intangibles, net include costs in excess of net assets of
acquired businesses ("goodwill") of $11.5 million and $11.9 million and other
intangible assets of $7.6 million and $8.2 million as of June 30, 2002 and 2001,
respectively. Goodwill, resulting primarily from certain acquisitions accounted
for using the purchase method of accounting, is amortized on a straight-line
basis over periods not exceeding 25 years. Other intangible assets include
patents, covenants not-to-compete and customer lists and are amortized on a
straight-line basis over periods ranging from 5 to 20 years. Accumulated
amortization of intangibles as of June 30, 2002 and 2001 was $4.8 million and
$3.5 million, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS, IDENTIFIABLE INTANGIBLE ASSETS AND
GOODWILL The recoverability of long-lived assets, identifiable intangibles and
goodwill is evaluated whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable, and if future
undiscounted cash flows are believed insufficient to recover the remaining
carrying value of the asset, the carrying value is written down to fair value in
the period the impairment is identified.

In fiscal 2001, the Company's Industrial Cleaning and Facility Maintenance
segment recorded a $0.8 million goodwill impairment charge in selling, general
and administrative expense. The goodwill impairment charge related to the
Company's restructuring plan documented in the third quarter of fiscal 2001
related to the sale of its Straightline Optical Services ("SOS") business in
accordance with the provisions of Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including certain costs incurred in a restructuring) and
Staff Accounting Bulletin No. 100, Restructuring and Impairment Charges. When
the business was sold, the goodwill was impaired as the goodwill did not benefit
any of the Company's other operations. The fiscal 2001 year-to-date revenues of
SOS prior to the sale were $0.7 million.

OTHER CURRENT ASSETS AND OTHER CURRENT LIABILITIES Total other current
liabilities of $5.8 million as of June 30, 2002 includes $2.4 million related to
workers compensation and $0.8 million of income taxes payable. Total other
current liabilities of $8.2 million as of June 30, 2001 includes $2.0 million
related to workers compensation and $1.6 million related to items remaining to
be paid as a result of the sale of the Filter group. Total other current assets
of $3.7 million as of June 30, 2001 includes income taxes refundable of $3.4
million.

INSURANCE RISK The Company is self-insured for workers' compensation
liability costs up to certain retention levels and purchases private insurance
for claims in excess of those retention levels. The Company records its
self-insurance liability based on claims filed and an estimate of claims
incurred but not yet reported.

In fiscal 2001, the Company recorded a $1.3 million charge in selling,
general and administrative expenses primarily consisting of adverse workers
compensation claim developments and retroactive premiums and claims assessments.

FINANCIAL INSTRUMENTS Financial instruments consist primarily of cash,
accounts receivable, accounts payable and long-term debt. The carrying value of
all financial instruments at June 30, 2002 and 2001 approximated their fair
value.

27

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

INCOME TAXES The Company follows Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. This accounting standard
requires that the liability method be used in accounting for income taxes. Under
this accounting method, deferred tax assets and liabilities are determined based
on the differences between the financial reporting basis and the tax basis of
assets and liabilities and are measured using the enacted tax rates and laws
that apply in the periods in which the deferred tax asset or liability is
expected to be realized or settled.

COMPREHENSIVE INCOME Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, requires that an enterprise report the change in
its equity during the period from non-owner sources as other comprehensive
income. The Company has evaluated the statement and determined that the only
items in addition to net income (loss) that would be included in comprehensive
income (loss) are the foreign currency translation adjustment and the
mark-to-market on interest rate swaps. Comprehensive income (loss) for the years
ended June 30, 2002, 2001 and 2000 was $2.4 million, $(15.8) million and $2.6
million, respectively.

STATEMENT OF CASH FLOWS Cash paid (received) for income taxes for fiscal
2002, 2001 and 2000 was ($3.6) million, ($0.3) million and $2.8 million,
respectively. Cash paid for interest was $2.5 million, $5.4 million and $6.8
million for fiscal 2002, 2001 and 2000, respectively.

USE OF ESTIMATES The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the accompanying consolidated financial statements. Actual results
could differ from those estimates.

RECLASSIFICATIONS Certain amounts presented as of and for the years ended
June 30, 2001 and June 30, 2000 have been reclassified to conform to the June
30, 2002 presentation.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS Effective July 1, 2000, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS
No. 137 and SFAS No. 138. SFAS No. 133 requires recognition of derivatives as
either assets or liabilities on the balance sheet at fair value. The impact on
the Company's consolidated financial statements was not material.

Effective for the quarter ending June 30, 2001, the Company adopted the
Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 101, Revenue Recognition in Financial Statements. The objective of
SAB No. 101 is to provide further guidance on revenue recognition issues in the
absence of authoritative literature addressing a specific arrangement or a
specific industry. The impact on the Company's consolidated financial statements
was not material.

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations and changes the criteria to recognize intangible
assets apart from goodwill and is effective for any business combination that is
completed after June 30, 2001. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2003. Application of
the non-amortization provision of the Statement is expected to result in an
increase in net income of approximately $0.3 million, or $0.03 per share, per
year.

The Company will adopt SFAS No. 142 in the first quarter of fiscal 2003,
but has not yet determined the impact, if any, of performing the transitional
impairment tests on goodwill and indefinite lived intangible assets.

28

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement establishes a single
accounting model for the impairment or disposal of long-lived assets. SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. The Company
will adopt SFAS No. 144 in the first quarter of fiscal 2003 and does not expect
the adoption of this statement to have a material impact on the Company's
consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including certain costs incurred in a restructuring). SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 15, 2002.
Management does not expect adoption of this Statement to have a material impact
on the Company's consolidated financial statements.

NOTE 2. DISCONTINUED OPERATIONS

On June 4, 2001 the Company closed on the sale of the Industrial Products
and Services ("Filter") group to CLARCOR Inc., a filter manufacturer. Under the
terms of the agreement, the purchase price was approximately $31.0 million,
subject to final closing adjustments. In the quarter ended March 31, 2002, the
Company finalized negotiations related to the sale of the Filter group. The
final purchase price, after closing adjustments was $29.3 million.

Income from discontinued operations for fiscal 2002 consists solely of a
tax benefit related to a reduction in the valuation allowance against the
Company's deferred tax asset for capital loss carry-forwards associated with the
sale of the Filter group. These tax benefits resulted from fiscal 2002
developments related to the finalization of the Company's fiscal 2001 income tax
return.

Discontinued operations include Filter group net sales that totaled $58.4
million and $58.6 million for fiscal years 2001 and 2000, respectively.
Discontinued operations for fiscal 2001 includes a pre-tax operating charge of
$1.8 million primarily related to asset write-downs and other costs associated
with the sale of the Filter group and a net loss on sale of $6.8 million (net of
related tax benefits of $1.3 million). Interest expense is charged to
discontinued operations based on intercompany account balances at the Company's
effective external borrowing rate. Interest expense included in discontinued
operations was $2.3 million and $1.6 million for fiscal 2001 and 2000,
respectively. Net income (loss) from discontinued operations was reported net of
income tax expense (benefit) of $(1.2) million and $1.0 million for the fiscal
years 2001 and 2000, respectively.

NOTE 3. PRIVATIZATION OF COMPANY

On August 22, 2000, the Company announced that a Special Committee of its
Board of Directors had reached an agreement in principle with the Company's
Chairman and Chief Executive Officer, Monte R. Black, pursuant to which Mr.
Black would acquire the Company in a cash merger at $8.25 per share plus an
additional amount if the sale of the Filter group generated proceeds in excess
of targeted amounts. On September 27, 2000, the Company announced that Mr. Black
had withdrawn his previously announced proposal to acquire the Company. Mr.
Black advised the Company's Special Committee, which had been evaluating the
proposal, that he withdrew the proposal primarily because he perceived
uncertainty in the Company's core businesses due to sluggish customer demand
from certain industries. Mr. Black also expected that the higher than
anticipated level of current Company indebtedness, when added to the debt to be
incurred to finance the privatization transaction, would adversely impact the
Company if the privatization transaction were completed.

29

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4. RECAPITALIZATION OF PENTAGON

On July 18, 2000, the Company closed a transaction related to its then
subsidiary, Pentagon Technologies Group, Inc. ("Pentagon"), pursuant to a
Recapitalization Agreement, dated as of April 25, 2000, by and among Pentagon,
the Company, MPW Management Services Corp., Pentagon Merger Sub, Inc., Baird
Capital Partners III Limited Partnership, BCP III Special Affiliates Limited
Partnership and BCP III Affiliates Fund Limited Partnership, as amended (the
"Recapitalization Agreement"). Pursuant to the Recapitalization Agreement, Baird
Capital Partners and certain of its affiliates ("BCP") invested in Pentagon, the
Company sold a majority of its equity interest in Pentagon to BCP and Pentagon's
indebtedness to the Company was repaid. The Company retained an approximately
22% interest in the capital stock of Pentagon.

In connection with this transaction, the Company received $22.8 million
($22.6 million net of Pentagon cash), which was used to repay a portion of its
debt. The June 30, 2000 financial statements include a $4.3 million accrued loss
on sale of subsidiary, net of related tax benefits, to reduce the investment in
Pentagon to approximately 22% of Pentagon's equity upon completion of the
recapitalization transaction. As a result of the reduction in the Company's
ownership of Pentagon's capital stock, beginning in the first quarter of fiscal
2001, the Company has accounted for its remaining investment in Pentagon under
the equity method of accounting.

The Company's third quarter of fiscal 2001 includes a non-cash tax charge
in continuing operations of $2.9 million for a valuation allowance against the
Company's net deferred tax assets related to the capital loss carry-forward from
the sale of Pentagon. The provision for income taxes for fiscal 2002 includes a
non-recurring benefit of $0.2 million related to a reduction in the Company's
valuation allowance against the Company's deferred tax asset for capital loss
carry-forwards associated with the Company's July 2001 sale of Pentagon stock.
The reduction in the valuation allowance resulted from 2002 developments related
to the finalization of the Company's fiscal 2001 income tax return.

The Company's investment and proportionate share of earnings (loss) in
Pentagon are classified in the fiscal 2002 and 2001 financial statements as
"investment in affiliate" and "equity in earnings of affiliate," respectively. A
significant amount of Pentagon's total assets represent goodwill. Under the
equity method of accounting, the Company's recorded investment in Pentagon would
be affected if Pentagon were to record an impairment charge under the provisions
of SFAS No. 142.

Subsequent to June 30, 2002, the Company invested approximately $365,000 in
Pentagon and has a remaining investment commitment of approximately $73,000.

Summarized operating data for Pentagon is presented in the following table:

Summarized balance sheet data for Pentagon is presented in the following
table:

30

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5. ACQUISITIONS

INDUSTRIAL SERVICES On January 4, 2000, the Company purchased substantially
all of the assets of Industrial Services, Inc. ("Industrial Services") for an
aggregate cash consideration of $4.5 million of which $3.8 million was paid in
cash, net of cash acquired. The acquisition has been accounted for using the
purchase method of accounting. The accompanying financial statements include the
results of operations of Industrial Services from the acquisition date.

THERMAL COATING On August 10, 1999, effective April 1, 1999, the Company
purchased substantially all of the assets of Thermal Coating, Inc. ("Thermal
Coating") for an aggregate consideration of $3.4 million of which $2.3 million
was paid in cash, net of cash acquired. The consideration included the issuance
of preferred stock of Pentagon, representing 1% of the equity in Pentagon and
the issuance of a $1.0 million promissory note which was subsequently paid off
in full in connection with the recapitalization of Pentagon. The acquisition has
been accounted for using the purchase method of accounting. The accompanying
financial statements include the results of operations of Thermal Coating from
the effective acquisition date through June 30, 2000.

The terms of certain of the Company's acquisition agreements provide for
additional consideration to be paid based on the achievement of certain
objectives. Such additional consideration is paid in cash, common stock of the
Company, or a combination thereof, and is capitalized as an intangible asset.
During the fiscal years ended June 30, 2002, 2001 and 2000, the Company paid
additional consideration of $0.4 million, $2.7 million and $3.6 million (of
which $0.5 million related to the issuance of 54,484 shares of the Company's
common stock), respectively.

The pro forma results of operations giving effect to the above acquisitions
as if such acquisitions had occurred at the beginning of fiscal year 2000 would
not be materially different from actual results of operations.

NOTE 6. ACCOUNTS RECEIVABLE

Accounts receivable is summarized as follows:

The following is a summary of activity in the allowance for doubtful
accounts:

In fiscal 2001, the Company recorded a $4.5 million charge in selling,
general and administrative expense related to accounts receivable and other
non-trade receivables. The $4.5 million charge included $3.5 million

31

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

related to an increase in the allowance for doubtful accounts as a result of
bankruptcy filings by several customers, as well as $1.0 million related to
write-offs of certain other non-trade receivables. The account write-offs for
the year ended June 30, 2002 include the write-offs of the $3.5 million of trade
receivables reserved for during the year ended June 30, 2001.

The other decrease in fiscal 2001 is a result of the recapitalization of
Pentagon discussed in Note 4.

NOTE 7. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

NOTE 8. LONG TERM DEBT

Long-term debt is summarized as follows:

In June 2002, the Company entered into a new credit agreement with its
principal banks (the "Credit Facility"). The Credit Facility provides the
Company with $35.0 million of revolving credit availability for a three-year
period and a $6.0 million three-year term loan to be repaid in quarterly
installments of $0.3 million. The Credit Facility is subject to two one-year
extensions by the banks at the request of the Company.

The Credit Facility is secured by substantially all of the Company's
assets. Under the terms of the Credit Facility, the entire $41.0 million is
available for general corporate purposes, including working capital, capital
expenditures and acquisitions. Borrowings under the Credit Facility currently
bear interest at the Eurodollar market rate plus 2.25%. The Company also pays a
commitment fee of .45% for unused portions of the Credit Facility. The interest
rate is subject to change based on interest rate formulas tied to the ratio of
consolidated funded debt to earnings before interest, taxes, depreciation and
amortization. Availability of borrowing is subject to the maintenance of a
minimum level of tangible net worth, certain levels of debt service coverage and

32

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

maintenance of a specific ratio of funded debt to earnings before interest,
taxes, depreciation and amortization. The Credit Facility also contains
covenants that prohibit the payment of cash dividends. As of June 30, 2002,
outstanding borrowings under the credit facility were $27.1 million.

The Credit Facility expires on June 15, 2005, at which time the principal
balance outstanding, together with all accrued interest will become immediately
due and payable. There were $3.8 million and $2.8 million of letters of credit
outstanding under the credit facility at June 30, 2002 and 2001, respectively.
The weighted average interest rate for the Credit Facility was approximately 8%
for the year ended June 30, 2002.

The Company has two pay-fixed interest rate swap agreements as a hedge
against the interest rate risk associated with borrowing at a variable rate. The
objective of the hedge is to eliminate the variability of cash flows related to
interest rate payments on $20.0 million of variable rate debt. The swap
agreements have a notional amount of $10.0 million each and effectively lock in
a portion of the Company's variable rate revolving credit liability at fixed
rates of 7.93% and 7.98%, respectively. These swap agreements mature in June
2003 and are accounted for as cash flow hedges, as defined under SFAS No. 133.
The Company adjusts the pay-fixed interest rate swaps to current market values
through other comprehensive income (loss). The Company anticipates that these
contracts will continue to be effective. The gain/(loss) deferred in accumulated
comprehensive income (loss) will be recognized immediately in earnings if the
contracts are no longer effective or the forecasted transactions are not
expected to occur.

A liability of $0.5 million ($0.3 million net of tax) has been recognized
in the consolidated financial statements at June 30, 2002 for the mark-to-market
adjustment on the interest rate swap contracts with the offsetting net of tax
amount recorded in accumulated other comprehensive loss.

The Company has several other notes payable with a total outstanding
balance of $294,000 at June 30, 2002. Payments on the notes payable are made
monthly or quarterly with maturity dates no later than fiscal 2005.

The aggregate maturities of long-term debt for the five years ending June
30 are: 2003, $1.4 million; 2004, $1.3 million; 2005, $24.7 million; 2006 and
thereafter, $0.

NOTE 9. LEASE COMMITMENTS

The Company leases certain land, buildings and equipment under
non-cancelable operating leases with third parties and with entities controlled
by its principal shareholder and Chief Executive Officer. See Note 14.

The aggregate minimum rent commitment under non-cancelable operating leases
for the five years ending June 30 are: 2003, $2.3 million; 2004, $1.7 million;
2005, $0.9 million; 2006, $0.4 million; 2007, $0.3 million.

Rental expense related to all operating leases was approximately $2.8
million, $2.9 million and $4.6 million for fiscal 2002, 2001 and 2000,
respectively.

Subsequent to June 30, 2002, the Company entered into a non-cancelable
operating lease with a third party to lease an aircraft. The lease is for a
one-year term with two additional one-year renewal options. The rent commitments
under this lease are $129,000 in 2003 and $12,000 in 2004. The aircraft may be
purchased at the end of the lease for $794,000 if the renewal options are not
exercised.

33

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 10. INCOME TAXES

The components of the provision (benefit) for income taxes are as follows:

The provision (benefit) for income taxes is recorded in the statements of
operations as follows:

Differences arising between the provision (benefit) for income taxes
related to continuing operations and the amount computed by applying the
statutory federal income tax rate to income (loss) from continuing operations
before income taxes are as follows:

34

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The significant components of the Company's deferred tax assets and
liabilities are as follows:

The income tax provision for continuing operations for fiscal 2002 includes
a non-recurring benefit of $0.2 million related to a reduction in the Company's
valuation allowance against the Company's deferred tax asset for capital loss
carry-forwards associated with the Company's July 2000 sale of Pentagon stock.
The reduction in the valuation allowance resulted from 2002 developments related
to the finalization of the Company's fiscal 2001 income tax return.

Income from discontinued operations for fiscal 2002 consists solely of a
tax benefit related to a reduction in the valuation allowance against the
Company's deferred tax asset for capital loss carry-forwards associated with the
sale of the Filter group. These tax benefits resulted from fiscal 2002
developments related to the finalization of the Company's fiscal 2001 income tax
return.

The income tax benefit for continuing operations for the year ended June
30, 2001 includes a non-cash charge of $2.9 million for a valuation allowance
against the Company's net deferred tax asset related to the capital loss
carry-forward from the sale of Pentagon.

At June 30, 2002, the Company has $9.0 million of capital loss
carry-forwards. These capital loss carry-forwards expire in 2006 and may only be
utilized to offset capital gains. At June 30, 2002, a full valuation allowance
has been provided for these capital loss carry-forwards.

NOTE 11. EMPLOYEE BENEFITS

The Company sponsors a Savings Plan, which qualifies for tax-deferred
contributions under Section 401(k) of the Internal Revenue Code (the "401(k)
Plan"), that covers substantially all employees of the Company who are over 21
years of age with at least one year of continuous service. Employees covered by
collective bargaining agreements are excluded from the 401(k) Plan.
Contributions by eligible employees are matched at a rate of 50% of the first 6%
of the employee's contributed earnings. Additional discretionary contributions
may be made to the

35

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

401(k) Plan by the Company. Matching contributions approximated $0.3 million,
$0.4 million and $0.5 million for fiscal 2002, 2001 and 2000, respectively.

NOTE 12. STOCK OPTION PLANS

1991 STOCK OPTION PLAN The Company's 1991 Stock Option Plan (the "1991
Plan") provided for the granting of up to 200,000 stock options to key
management personnel. Effective with the Company's initial public offering in
fiscal 1998 ("the Offering"), no additional options will be granted under the
1991 Plan and the Company's repurchase obligation upon exercise of stock options
was terminated. As of June 30, 2002, all stock options under the 1991 Stock
Option Plan had expired.

1994 STOCK OPTION PLAN The Company's 1994 Stock Option Plan (the "1994
Plan") provided for the granting of up to 1,000,000 stock options to key
management personnel. Effective with the Offering in fiscal 1998, no additional
options will be granted under the 1994 Plan and the Company's repurchase
obligation upon exercise of stock options was terminated. As of June 30, 2002,
733,300 options were outstanding at a weighted average exercise price of $2.41
per share.

1997 STOCK OPTION PLAN On November 15, 1997, the Company adopted the 1997
Stock Option Plan (the "1997 Plan"), which provides for the granting of up to
1,200,000 stock options to officers, key employees, consultants and directors of
the Company. Any options granted that lapse or are cancelled are available for
re-grant under the terms of the 1997 Plan. Stock option grants may be in the
form of incentive stock options, non-qualified options, or a combination
thereof. The exercise price of the stock options granted will be determined by
the Compensation Committee of the Board of Directors of the Company which, in
the case of incentive stock options, shall be equal to or greater than the
market value per share on the date of grant and, in the case of non-qualified
options shall not be less than 85% of the market value per share at the date of
grant. The stock options vest over a period of time determined by the
Compensation Committee and expire after ten years from the date of grant.
Non-employee directors shall be granted 2,000 non-qualified options at the first
annual shareholders meeting subsequent to the adoption of the 1997 Plan at which
he or she is elected a director, and 1,000 options shall be granted at each
subsequent annual shareholders meeting at which he or she is re-elected as a
director. The non-employee director option grants vest after one full year from
the date of grant and expire ten years from the date of grant. On December 14,
2001 the Company granted options for 459,000 shares of Common Stock to members
of the Board of Directors and certain employees. The options vest 25% annually
for the next 4 years and have an exercise price of $1.85 per share. Options
covering 1,272,750 shares of common stock have been granted, of which 261,900
options have been cancelled. At June 30, 2002 there were 1,009,250 options
outstanding at a weighted average exercise price of $6.42 per share.

36

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The following table summarizes stock option activity at June 30, 2002:

The following table summarizes information about stock options outstanding
at June 30, 2002:

The Company has adopted the disclosure only provision of Statement of
Financial Accounting Standard No. 123 ("SFAS No. 123"), Accounting for
Stock-Based Compensation, but has elected to continue to measure compensation
expense in accordance with Accounting Principles Board Opinion No. 25 ("APB No.
25"), Accounting for Stock Issued to Employees, and related interpretations
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123 requires use of option valuation models that were not
developed for use in valuing employee stock options.

Pro forma information disclosures regarding net income (loss) and earnings
(loss) per share are required by SFAS No. 123 and have been determined as if the
Company had accounted for its employee stock options under the fair value method
of that Statement. Since the 1991 and 1994 Plans contained repurchase obligation
provisions prior to the Offering, the pro forma information regarding
pre-Offering net income and earnings per share related to the 1991 and 1994
Plans under SFAS No. 123 would not be materially different from reported amounts
under APB No. 25. For purposes of determining the required pro forma information
for fiscal 2002, 2001 and 2000, the fair value of options granted in fiscal 2002
and 2001 (no options were granted in fiscal 2000) under the 1997 Plan were
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rate of 5.75% for
both years, dividend yield of 0.0%

37

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

for both years, volatility factor of the expected market price of the Company's
common stock of 30% for both years and a weighted average expected life of the
options of 5 years for both years. The weighted average estimated fair value of
options granted during fiscal 2002 and 2001 was $0.69 and $0.47 per share,
respectively. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period. Had
compensation expense for the Company's stock option plans been determined based
on the fair value at the dates of grant and re-measurement consistent with the
methods prescribed by SFAS No. 123, the Company's proforma net income (loss) and
earnings (loss) per share for fiscal 2002, 2001 and 2000 would have been as
follows:

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

38

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share data):

Options to purchase 1,738,550, 691,250 and 773,350 shares of common stock
at a weighted average price of $4.74, $9.86 and $10.07 per share, respectively,
were outstanding during fiscal 2002, 2001 and 2000, respectively, but were not
included in the computation of diluted earnings per share because the options
exercise price was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive. Options to purchase 770,300
shares of common stock at a weighted average price of $2.43 per share were
outstanding during fiscal 2001 but were not included in the computation of
diluted earnings per share because the Company reported a net loss for the
fiscal year ended June 30, 2001 and, therefore, the effect would be
antidilutive.

NOTE 14. RELATED PARTY TRANSACTIONS

The Company rents certain land, buildings and equipment from entities
controlled by its principal shareholder and Chief Executive Officer under
long-term lease agreements. Total payments related to these leases were $1.6
million, $1.4 million and $1.4 million for fiscal 2002, 2001 and 2000,
respectively.

The Company provides, from time to time, certain fabrication-type services
to Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable sanitation
services company wholly-owned by the Company's principal shareholder. The
Company bills Pro-Kleen for services it renders. The amount of such billings for
fiscal years 2002,

39

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2001 and 2000 were approximately $182,000, $62,000, and $61,000, respectively.
These billings represent reimbursement for the use of parts and supplies and the
use of certain of the Company's employees on certain projects as requested by
Pro-Kleen. These reimbursements by Pro-Kleen are generally treated as an offset
to supplies and maintenance or labor expense.

NOTE 15. COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and lawsuits in the ordinary
course of its business. In the opinion of management, the outcome of all claims
and lawsuits, which is not clearly determinable at the present time, is either
adequately covered by insurance, or will not, in the aggregate, have a material
adverse effect upon the financial position or the results of future operations
of the Company.

NOTE 16. SEGMENT REPORTING

The Company operates under three separate segments that are integral to a
wide variety of manufacturing processes. These three segments are Industrial
Cleaning and Facility Maintenance, Industrial Container Cleaning and Industrial
Process Water Purification. A discussion of each segment is set forth below.

Industrial Cleaning and Facility Maintenance Segment. The Company provides
industrial cleaning of, and facility maintenance services to, critical operating
equipment for industrial customers primarily at their facilities. The typical
industries served by this segment include the automotive, utility, chemical,
pulp and paper, manufacturing and steel industries. The Company provides its
industrial cleaning and facility maintenance services on a daily recurring
basis, a project-by-project basis, as well as pursuant to longer-term
arrangements. The Company's services principally include: dry vacuuming, wet
vacuuming, industrial power washing, water blasting, ultra-high pressure water
blasting, cryojetic cleaning and chemical cleaning. These services have been
provided for over 30 years. The labor support business (the "Facility Support
Division") of the Industrial Cleaning and Facility Maintenance segment provides
support to customers' ongoing maintenance of their facilities as well as
cleaning services that help customers to maximize the performance of their
production processes through effective cleaning, leading to increased efficiency
and productivity in their facilities.

Industrial Container Cleaning Segment. The Company believes that it is a
leading container cleaner for automotive paint manufacturers in North America.
The automotive industry uses paint resin containers ("totes") in the vehicle
painting process. Totes are large portable stainless steel or aluminum
containers that are filled with paint resin and are refilled after cleaning
services are provided. The Company also provides container cleaning services to
various other industrial customers. This segment uses patented cleaning systems
to perform services from two primary processing facilities located in Detroit,
Michigan and Cleveland, Ohio.

Industrial Process Water Purification Segment. The Company provides pure
feed water to customers primarily in the utility, steel, manufacturing and
automotive industries. The Company can also provide water purification equipment
on an emergency response basis when customers' existing water purification
systems are temporarily out of service or cannot meet the existing demand. The
Company also offers purified water service exchange, which involves the delivery
and pickup of smaller tanks of purification media and are an economical solution
for small quantity requirements.

The performance of each segment is evaluated by key Company executives
based primarily on the operating income of each segment. The accounting policies
of the operating segments are the same as those outlined in Note 1 of the
Consolidated Financial Statements. All material intercompany transactions and
balances have been eliminated in consolidation. Corporate expenses are fully
allocated to the segments. Corporate support services that are attributable to
the operating segments are allocated based on each segment's percentage of total
revenues. General corporate expenses are allocated to each segment equally.

40

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Summarized financial information for the Company's reportable segments is
shown in the following table:

- ---------------

(1) Other represents the results of Pentagon for the year ended June 30, 2000
and the results associated with discontinued operations for the years ended
June 30, 2001 and 2000.

(2) Other consists of corporate assets and capital expenditures for the year
ended June 30, 2002; assets and capital expenditures related to discontinued
operations for the year ended June 30, 2001; and assets and capital
expenditures related to corporate, Pentagon and discontinued operations for
the year ended June 30, 2000.

41

MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

- ---------------

(1) The quarter ended March 31, 2001 includes the effect of special charges.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None

42

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The information required by Item 10 of Form 10-K with respect to
identification of directors is incorporated by reference from the information
contained in the section captioned "Election of Directors" in MPW's Definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on December
13, 2002 (the "Proxy Statement"), a copy of which will be filed with the
Securities and Exchange Commission before the meeting date. For information with
respect to the executive officers of the Company, see "Executive Officers of the
Company" in Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Executive
Compensation and Other Information" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Stock
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Certain
Relationships and Related Transactions" in the Proxy Statement.

ITEM 14. CONTROLS AND PROCEDURES

Not applicable.

43

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following consolidated financial statements of
the Company and its subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated Balance Sheets as of June 30, 2002 and 2001
Consolidated Statements of Operations for the Years Ended
June 30, 2002, 2001 and 2000
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended June 30, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the Years Ended
June 30, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
(a)(2) All schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are either not required under the
related instructions, are inapplicable and therefore have
been omitted, or the required information is provided in the
Consolidated Financial Statements of the Company and its
subsidiaries or Notes thereto.
(a)(3) Exhibits
The following Exhibits are included in this Annual Report on
Form 10-K:
3(a) Amended and Restated Articles of Incorporation of the
Company effective November 4, 1999 (filed as Exhibit 3(a) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, and incorporated herein by
reference)
3(b) Amended and Restated Code of Regulations of the Company
effective November 4, 1999 (filed as Exhibit 3(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, and incorporated herein by
reference)
10(a) Amended and Restated 1997 Stock Option Plan (filed as
exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1998, and incorporated
herein by reference)*
10(b) Lease for Hebron, Ohio facility (filed as exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(c) Lease for Newark, Ohio facility (filed as exhibit 10(c) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(d) First Lease Amendment for Chesterfield, Michigan facility
(filed as exhibit 10(d) to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997, and
incorporated herein by reference)
10(e) Aircraft Purchase Agreement (filed as exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(f) Aircraft Lease (filed as exhibit 10(f) to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, and incorporated herein by reference)
10(g) Form of Severance Agreement by and between MPW Industrial
Services Group, Inc. and Executive Officers (filed as
Exhibit 10(e) to the Company's Registration Statement on
form S-1 (Registration No. 333-36887) originally filed with
the Securities and Exchange Commission on October 1, 1997
(the 'Registration Statement') and incorporated herein by
reference)*
10(h) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and Directors (filed as
Exhibit 10(f) to the Company's Registration Statement and
incorporated herein by reference)*

44

10(i) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and persons who are a
Director and an Officer (filed as Exhibit 10(g) to the
Company's Registration Statement and incorporated herein by
reference)*
10(j) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and Executive Officers
(filed as Exhibit 10(h) to the Company's Registration
Statement and incorporated herein by reference)*
10(k) Lease for Newark, Ohio additional facility (filed as Exhibit
10(k) to the Company's Annual Report on Form 10-K for the
year ended June 30, 1999, and incorporated herein by
reference)
10(l) Lease for Hebron, Ohio land
10(m) Credit Agreement, dated as of October 20, 1999, among the
Company and its subsidiaries, Bank One, NA, National City
Bank, LaSalle Bank, National Association, SunTrust Bank,
Central Florida, N.A., and Banc One Capital Markets, Inc.
(filed as Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, and
incorporated herein by reference)
10(n) Recapitalization Agreement, dated April 25, 2000, by and
among the Company, Pentagon Technologies Group, Inc., MPW
Management Services Corp., Pentagon Merger Sub, Inc., Baird
Capital Partners III Limited Partnership, BCP III Special
Affiliates Limited Partnerships and BCP III Affiliates Fund
Limited Partnership (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed on August 3, 2000, and
incorporated herein by reference)
10(o) Amendment No. 1 to Recapitalization Agreement, dated as of
July 17, 2000, by and among the Company, Pentagon
Technologies Group, Inc., MPW Management Services Corp.,
Pentagon Merger Sub, Inc., Baird Capital Partners III
Limited Partnership, BCP III Special Affiliates Limited
Partnerships, BCP III Affiliates Fund Limited Partnership,
PPM America Private Equity Fund, L.P., Old Hickory Fund I,
LLC, and Antares Capital Corporation (filed as Exhibit 2.2
to the Company's Current Report on Form 8-K filed on August
3, 2000, and incorporated herein by reference)
10(p) First Amendment to Credit Agreement and Other Loan
Documents, dated as of July 17, 2000, among the Company and
its subsidiaries, Bank One, NA, National City Bank, LaSalle
Bank, National Association, SunTrust Bank, Central Florida,
N.A., and Banc One Capital Markets, Inc. (filed as Exhibit
4(b) to the Company's Annual Report on Form 10-K for the
year ended June 30, 2000, and incorporated herein by
reference)
10(q) Second Amendment to Credit Agreement, dated as of November
10, 2000, among the Company and its subsidiaries, Bank One,
NA, National City Bank, LaSalle Bank, National Association,
and SunTrust Bank (filed as Exhibit 4(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 31, 2000, and incorporated herein by reference)
10(r) Stock Purchase Agreement, dated as of May 10, 2001, by and
among MPW Industrial Services Group, Inc., MPW Management
Services Corp., CLARCOR Filtration Products, Inc. and
CLARCOR Inc. (filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, and incorporated herein by reference)
10(s) Third Amendment to Credit Agreement, dated as of May 11,
2001, among the Company and its subsidiaries, Bank One, NA,
National City Bank, LaSalle Bank, National Association, and
SunTrust Bank (filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, and incorporated herein by reference)
10(t) Severance Agreement by and between MPW Industrial Services
Group, Inc. and Ira Kane. (filed as Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the year ended June
30, 2001 and incorporated herein by reference)
10(u) Lease for Rockport, Indiana facility
10(v) Lease for Chesterfield, Michigan additional facility

45

10(w) Credit Agreement, dated June 18, 2002, among the Company and its subsidiaries, Bank One, NA and
National City Bank
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
99(a) Certification of Chief Executive Officer
99(b) Certification of Chief Financial Officer

- ---------------

* Indicates a management contract or compensatory plan or arrangement required
to be filed pursuant to Item 14 of Form 10-K.

(c) The response to this portion of Item 15 is included as Exhibits to this
report.

46

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
September, 2002.

MPW INDUSTRIAL SERVICES GROUP, INC.

By: /s/ RICHARD R. KAHLE
------------------------------------
Richard R. Kahle
Vice President, Chief Financial
Officer, Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities indicated and on September 27, 2002.

* The undersigned, pursuant to certain Powers of Attorney executed by each of
the directors and officers noted above and previously filed or filed herewith
contemporaneously with the Securities and Exchange Commission, by signing his
name hereto, does hereby sign and execute this report on behalf of each of the
persons noted above, in the capacities indicated.

By: /s/ RICHARD R. KAHLE
------------------------------------
Attorney-in-Fact

Dated: September 27, 2002

47

CERTIFICATIONS

I, Monte R. Black, certify that:

1. I have reviewed this annual report on Form 10-K of MPW Industrial
Services Group, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.

Date: September 27, 2002

/s/ MONTE R. BLACK
--------------------------------------
Monte R. Black
Chairman of the Board of Directors and
Chief Executive Officer

I, Richard R. Kahle, certify that:

1. I have reviewed this annual report on Form 10-K of MPW Industrial
Services Group, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.

Date: September 27, 2002

/s/ RICHARD R. KAHLE
--------------------------------------
Richard R. Kahle
Vice President, Chief Financial
Officer, Secretary and Treasurer

48

EXHIBIT INDEX

3(a) Amended and Restated Articles of Incorporation of the
Company effective November 4, 1999 (filed as Exhibit 3(a) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, and incorporated herein by
reference)
3(b) Amended and Restated Code of Regulations of the Company
effective November 4, 1999 (filed as Exhibit 3(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, and incorporated herein by
reference)
10(a) Amended and Restated 1997 Stock Option Plan (filed as
exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1998, and incorporated
herein by reference)*
10(b) Lease for Hebron, Ohio facility (filed as exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(c) Lease for Newark, Ohio facility (filed as exhibit 10(c) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(d) First Lease Amendment for Chesterfield, Michigan facility
(filed as exhibit 10(d) to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997, and
incorporated herein by reference)
10(e) Aircraft Purchase Agreement (filed as exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, and incorporated herein by
reference)
10(f) Aircraft Lease (filed as exhibit 10(f) to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, and incorporated herein by reference)
10(g) Form of Severance Agreement by and between MPW Industrial
Services Group, Inc. and Executive Officers (filed as
Exhibit 10(e) to the Company's Registration Statement on
form S-1 (Registration No. 333-36887) originally filed with
the Securities and Exchange Commission on October 1, 1997
(the 'Registration Statement') and incorporated herein by
reference)*
10(h) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and Directors (filed as
Exhibit 10(f) to the Company's Registration Statement and
incorporated herein by reference)*
10(i) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and persons who are a
Director and an Officer (filed as Exhibit 10(g) to the
Company's Registration Statement and incorporated herein by
reference)*
10(j) Form of Indemnification Agreement by and between MPW
Industrial Services Group, Inc. and Executive Officers
(filed as Exhibit 10(h) to the Company's Registration
Statement and incorporated herein by reference)*
10(k) Lease for Newark, Ohio additional facility (filed as Exhibit
10(k) to the Company's Annual Report on Form 10-K for the
year ended June 30, 1999, and incorporated herein by
reference)
10(l) Lease for Hebron, Ohio land
10(m) Credit Agreement, dated as of October 20, 1999, among the
Company and its subsidiaries, Bank One, NA, National City
Bank, LaSalle Bank, National Association, SunTrust Bank,
Central Florida, N.A., and Banc One Capital Markets, Inc.
(filed as Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, and
incorporated herein by reference)
10(n) Recapitalization Agreement, dated April 25, 2000, by and
among the Company, Pentagon Technologies Group, Inc., MPW
Management Services Corp., Pentagon Merger Sub, Inc., Baird
Capital Partners III Limited Partnership, BCP III Special
Affiliates Limited Partnerships and BCP III Affiliates Fund
Limited Partnership (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed on August 3, 2000, and
incorporated herein by reference)

49

10(o) Amendment No. 1 to Recapitalization Agreement, dated as of
July 17, 2000, by and among the Company, Pentagon
Technologies Group, Inc., MPW Management Services Corp.,
Pentagon Merger Sub, Inc., Baird Capital Partners III
Limited Partnership, BCP III Special Affiliates Limited
Partnerships, BCP III Affiliates Fund Limited Partnership,
PPM America Private Equity Fund, L.P., Old Hickory Fund I,
LLC, and Antares Capital Corporation (filed as Exhibit 2.2
to the Company's Current Report on Form 8-K filed on August
3, 2000, and incorporated herein by reference)
10(p) First Amendment to Credit Agreement and Other Loan
Documents, dated as of July 17, 2000, among the Company and
its subsidiaries, Bank One, NA, National City Bank, LaSalle
Bank, National Association, SunTrust Bank, Central Florida,
N.A., and Banc One Capital Markets, Inc. (filed as Exhibit
4(b) to the Company's Annual Report on Form 10-K for the
year ended June 30, 2000, and incorporated herein by
reference)
10(q) Second Amendment to Credit Agreement, dated as of November
10, 2000, among the Company and its subsidiaries, Bank One,
NA, National City Bank, LaSalle Bank, National Association,
and SunTrust Bank (filed as Exhibit 4(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 31, 2000, and incorporated herein by reference)
10(r) Stock Purchase Agreement, dated as of May 10, 2001, by and
among MPW Industrial Services Group, Inc., MPW Management
Services Corp., CLARCOR Filtration Products, Inc. and
CLARCOR Inc. (filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, and incorporated herein by reference)
10(s) Third Amendment to Credit Agreement, dated as of May 11,
2001, among the Company and its subsidiaries, Bank One, NA,
National City Bank, LaSalle Bank, National Association, and
SunTrust Bank (filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, and incorporated herein by reference)
10(t) Severance Agreement by and between MPW Industrial Services
Group, Inc. and Ira Kane. (filed as Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the year ended June
30, 2001 and incorporated herein by reference)
10(u) Lease for Rockport, Indiana facility
10(v) Lease for Chesterfield, Michigan additional facility
10(w) Credit Agreement, dated June 18, 2002, among the Company and
its subsidiaries, Bank One, NA and National City Bank
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
99(a) Certification of Chief Executive Officer
99(b) Certification of Chief Financial Officer