Exhibit 10.1

 

Execution Version

 

STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

COMFORT SYSTEMS USA, INC.

(“Purchaser”)

 

and

 

HWWJR LC

HMWSR LC

MITCHELL FREDERICK HADDON

GARY JON WARNESS

CURTIS MICHAEL WOOD

(“Sellers”)

 

and solely for purposes of Articles IV and V,

 

HOWARD W. WEBB

and

HOWARD M. WEBB

 

DATED AS OF JULY 28, 2010

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

ARTICLE I

PURCHASE AND SALE; CLOSING

1

 

 

 

Section 1.1

 

Purchase and Sale of Stock

1

 

 

 

 

Section 1.2

 

Purchase Price

1

 

 

 

 

Section 1.3

 

Working Capital Purchase Price Adjustment

2

 

 

 

 

Section 1.4

 

Accrual Adjustment to Purchase Price

4

 

 

 

 

Section 1.5

 

Closing Date

5

 

 

 

 

Section 1.6

 

Closing Deliveries

6

 

 

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

7

 

 

 

Section 2.1

 

Organization and Qualification

7

 

 

 

 

Section 2.2

 

Capitalization

8

 

 

 

 

Section 2.3

 

Authority

8

 

 

 

 

Section 2.4

 

Consents and Approvals; No Violation

8

 

 

 

 

Section 2.5

 

Books and Records

9

 

 

 

 

Section 2.6

 

Absence of Certain Changes

9

 

 

 

 

Section 2.7

 

Absence of Undisclosed Liabilities

11

 

 

 

 

Section 2.8

 

Accounts Receivable

11

 

 

 

 

Section 2.9

 

Inventory

11

 

 

 

 

Section 2.10

 

Litigation

11

 

 

 

 

Section 2.11

 

Tax Matters

11

 

 

 

 

Section 2.12

 

Employee Benefit Plans

12

 

 

 

 

Section 2.13

 

Employment Matters

13

 

 

 

 

Section 2.14

 

Contracts

14

 

 

 

 

Section 2.15

 

Related Party Transactions

14

 

 

 

 

Section 2.16

 

Compliance with Laws

14

 

 

 

 

Section 2.17

 

Insurance

15

 

 

 

 

Section 2.18

 

Intellectual Property

15

 

 

 

 

Section 2.19

 

Environmental Matters

16

 

 

 

 

Section 2.20

 

Condition and Sufficiency of Assets

17

 

 

 

 

Section 2.21

 

Real Property

17

 

 

 

 

Section 2.22

 

Personal Property

17

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

Section 2.23

 

Brokers; Financial Advisors

18

 

 

 

 

Section 2.24

 

Bank Accounts; Powers of Attorney

18

 

 

 

 

Section 2.25

 

Indebtedness

18

 

 

 

 

Section 2.26

 

Subsidiaries and Predecessors

18

 

 

 

 

Section 2.27

 

Financial Statements

18

 

 

 

 

Section 2.28

 

WIP Schedule

19

 

 

 

 

Section 2.29

 

Customers and Suppliers

19

 

 

 

 

Section 2.30

 

No Other Representations

19

 

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

20

 

 

 

Section 3.1

 

Organization and Authority

20

 

 

 

 

Section 3.2

 

Authority

20

 

 

 

 

Section 3.3

 

Consents and Approvals

20

 

 

 

 

Section 3.4

 

SEC Reports

20

 

 

 

 

Section 3.5

 

Investment

21

 

 

 

 

Section 3.6

 

Independent Investigation

21

 

 

 

 

ARTICLE IV

COVENANTS

21

 

 

 

Section 4.1

 

Noncompetition and Nonsolicitation

21

 

 

 

 

Section 4.2

 

Confidential Information

23

 

 

 

 

Section 4.3

 

Guarantees

23

 

 

 

 

Section 4.4

 

Expenses

23

 

 

 

 

Section 4.5

 

Further Assurances

23

 

 

 

 

Section 4.6

 

Further Consents

23

 

 

 

 

Section 4.7

 

Cooperation; Access to Records

24

 

 

 

 

Section 4.8

 

Employees

24

 

 

 

 

Section 4.9

 

Accounts Receivable

24

 

 

 

 

Section 4.10

 

Covenants by Webbs

24

 

 

 

 

ARTICLE V

INDEMNIFICATION

24

 

 

 

Section 5.1

 

Waiver of Right to Indemnification

24

 

 

 

 

Section 5.2

 

Indemnification and Payment of Damages by Sellers

24

 

 

 

 

Section 5.3

 

Indemnification by Purchaser

26

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

Section 5.4

 

Notice and Defense of Third Party Claims

27

 

 

 

 

Section 5.5

 

Payment; Interest

28

 

 

 

 

Section 5.6

 

Limitations

28

 

 

 

 

Section 5.7

 

Exclusive Remedy

29

 

 

 

 

Section 5.8

 

Indemnification Obligations of Webbs

30

 

 

 

 

ARTICLE VI

TAX MATTERS

30

 

 

 

Section 6.1

 

Tax Periods Ending on or Before the Closing Date

30

 

 

 

 

Section 6.2

 

Tax Periods Beginning Before and Ending After the Closing Date

30

 

 

 

 

Section 6.3

 

Cooperation on Tax Matters

31

 

 

 

 

Section 6.4

 

Transfer Taxes

31

 

 

 

 

Section 6.5

 

No Code Section 338 Election

32

 

 

 

 

Section 6.6

 

Refunds and Tax Benefits

32

 

 

 

 

Section 6.7

 

Tax Treatment of Transactions

32

 

 

 

 

Section 6.8

 

Other Tax Matters

33

 

 

 

 

Section 6.9

 

Tax Proceedings

33

 

 

 

 

ARTICLE VII

MISCELLANEOUS

34

 

 

 

Section 7.1

 

Entire Agreement; Assignment

34

 

 

 

 

Section 7.2

 

Reformation and Severability

34

 

 

 

 

Section 7.3

 

Notices

34

 

 

 

 

Section 7.4

 

Sellers’ Percentage Interests

35

 

 

 

 

Section 7.5

 

Governing Law

36

 

 

 

 

Section 7.6

 

Gender; “Including” is Not Limiting; Descriptive Headings

36

 

 

 

 

Section 7.7

 

Parties in Interest

36

 

 

 

 

Section 7.8

 

Counterparts

36

 

 

 

 

Section 7.9

 

Incorporation by Reference

36

 

 

 

 

Section 7.10

 

Consent to Jurisdiction; Waiver of Jury Trial

36

 

 

 

 

Section 7.11

 

Construction

37

 

iii

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STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”), dated as of July 28, 2010, is
by and between Comfort Systems USA, Inc., a Delaware corporation (“Purchaser”)
and HWWJR LC, a Virginia limited liability company, HMWSR LC, a Virginia limited
liability company,  Mitchell Frederick Haddon, Gary Jon Warness, and Curtis
Michael Wood (“Sellers”), and solely for purposes of Articles IV and V, Howard
W. Webb and Howard M. Webb.  Purchaser and Sellers are sometimes individually
referred to herein as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, Sellers own all of the issued and outstanding common stock, $1.00 par
value per share, of ColonialWebb Contractors Company, a Virginia corporation
(“Colonial” or the “Company”), such stock constituting all of the issued and
outstanding capital stock (of all classes) of the Company (the “Stock”);

 

WHEREAS, Purchaser desires to purchase from Sellers, and Sellers desire to sell
to Purchaser, all of the Stock upon the terms and conditions set forth herein;

 

WHEREAS, Sellers are making certain representations, warranties, and indemnities
herein as an additional inducement to enter into this Agreement;

 

WHEREAS, as an inducement to Purchaser entering into this Agreement, Howard W.
Webb and Howard M. Webb have joined this Agreement for purposes of making the
covenants set forth in Articles IV and V;

 

WHEREAS, the Parties have agreed to the sale and purchase of the Stock pursuant
to the terms of this Agreement; and

 

WHEREAS, capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed to them in Exhibit A attached hereto.

 

NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I
PURCHASE AND SALE; CLOSING

 

SECTION 1.1               Purchase and Sale of Stock.  Subject to the terms and
conditions of this Agreement, Sellers hereby sell, convey, transfer, and deliver
to Purchaser, and Purchaser hereby purchases, all of the Stock, free and clear
of all Encumbrances.

 

SECTION 1.2               Purchase Price.  The aggregate consideration for the
Stock and the covenants made in Articles IV and V hereof (the “Purchase Price”)
shall equal Eighty-One

 

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Million Two Hundred Seventy-Two Thousand Four Hundred Ninety Dollars and No
Cents ($81,272,490.00) plus the Working Capital Adjustment, plus an Earn-Out (as
defined below).  The Purchase Price shall be subject to certain post-closing
adjustments as provided in this Agreement.  The Purchase Price shall be paid by
Purchaser to Sellers by (i) a one-time cash payment in immediately available
funds of Fifty-Seven Million Seventy-Two Thousand Four Hundred Ninety Dollars
and No Cents ($57,072,490.00) plus the Estimated Working Capital Adjustment
payable at Closing to Sellers, which cash payment shall be allocated to Sellers
in accordance with the percentage interests set forth on Schedule 1.2(a), and
(ii) the execution and delivery to Sellers of promissory notes in the aggregate
amount of Twenty Four Million Two Hundred Thousand Dollars and No Cents
($24,200,000.00) in the form attached hereto as Exhibit B (each, a “Note”). 
Further, at the times and on the terms set forth in the Earn-Out Agreement
attached as Exhibit C (the “Earn-Out Agreement”), Purchaser shall pay to Sellers
the Earn-Out, if any (as that term is defined in the Earn-Out Agreement).

 

SECTION 1.3               Working Capital Purchase Price Adjustment.

 

(a)           Prior to the Closing Date, Sellers shall deliver to Purchaser a
statement setting forth in reasonable detail Sellers’ estimate of the Working
Capital Adjustment (the “Estimated Working Capital Adjustment”), which
calculation shall be acceptable to Purchaser, acting reasonably.

 

(b)           As promptly as practicable after the Closing Date, but in no event
later than sixty (60) days following the Closing Date, Purchaser shall cause to
be prepared and delivered to Sellers (i) a balance sheet as of the Closing Date
(the “Closing Date Balance Sheet”), (ii) a calculation of gross revenues for the
twelve-month period ending on the Closing Date (the “Gross Revenue Amount”) and
(iii) a statement setting forth Purchaser’s calculation of  the Working Capital
as of the Closing Date (the “Closing Working Capital”), including supporting
schedules for each line item comprising Closing Working Capital (the
“Purchaser’s Closing Working Capital Statement” and, collectively with the items
delivered pursuant to clauses (i) and (ii) of this sentence, the “Purchaser’s
Adjustment Documents”).  In the event Sellers do not object to the Purchaser’s
Adjustment Documents by written notice of objection delivered to Purchaser
within thirty (30) days after Sellers’ receipt of the Purchaser’s Adjustment
Documents, the Purchaser’s Adjustment Documents shall be deemed final and
binding on the Parties.  A notice of objection under this Section 1.3(b) shall
specify in reasonable detail all disputed items contained in the Purchaser’s
Adjustment Documents.  During the thirty (30) day period following Purchaser’s
receipt of such notice of objection (as the same may be extended by mutual
agreement of the Parties, the “Resolution Period”), the Parties shall attempt to
resolve their differences and any resolution by them as to any disputed items
shall be final and binding.  Any items remaining in dispute at the end of the
Resolution Period shall be submitted to arbitration in accordance with
Section 1.3(d).

 

(c)           During the twenty-one (21) days following the Closing Date, the
Parties shall attempt to agree upon a reasonable accrual for the Company’s
self-insured liabilities as of the Closing Date (the “Self-Insurance Accrual”). 
If the Parties have not agreed upon the Self-Insurance Accrual by the end of
such period, the Parties shall select an independent actuary (the “Actuary”) to
calculate the amount of the Self-Insurance Accrual.  If the Parties cannot agree
on the selection of the Actuary, each Party shall have the right to request the
American Arbitration

 

2

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Association to appoint the Actuary.  The Actuary shall be a certified actuary
who has not had a material relationship with Purchaser, the Company, Sellers or
any of their respective Affiliates within the past two years.  Purchaser and
Sellers shall use their commercially reasonable efforts to cause the Actuary to
render its calculation of the Self-Insurance Accrual within twenty-one (21) days
of the selection of the Actuary.  The determination by the Actuary of the
Self-Insurance Accrual shall be provided to the arbitrator in any arbitration
pursuant to Section 1.3(d), but shall not be binding on the Parties and any
continuing dispute among the Parties as to the amount of the Self-Insurance
Accrual shall be resolved, along with any other items in dispute at the end of
the Resolution Period, by arbitration conducted pursuant to Section 1.3(d). 
Notwithstanding anything in this Agreement to the contrary, in the event that
the Self-Insurance Accrual, as agreed to by the Parties or as determined
pursuant to arbitration, is different than the amount of such accrual on the
Balance Sheet Date, only fifty percent (50%) of such excess or shortfall shall
increase Current Liabilities or decrease Current Assets, as the case may be, in
the calculation of Closing Working Capital.  The fees and expenses of the
Actuary shall be borne fifty percent (50%) by Purchaser and fifty percent (50%)
by Sellers.

 

(d)           If within ten (10) days following the end of the Resolution
Period, the Parties have been unable to agree on the selection of an independent
certified public accounting firm to serve as the arbitrator, each Party shall
have the right to request the American Arbitration Association to appoint the
arbitrator.  The arbitrator shall be an independent certified public accounting
firm that has not had a material relationship with Purchaser, the Company,
Sellers or any of their respective Affiliates within the past two years. 
Purchaser and Sellers shall use their commercially reasonable efforts to cause
the arbitrator to render a decision in accordance with this Section 1.3(d) along
with a statement of reasons therefor within thirty (30) days of the submission
of the dispute to the arbitrator, or a reasonable time thereafter.  Each Party
shall submit to the arbitrator within the first five (5) days after the
initiation of the arbitration its last best offer on the item(s) in dispute
including reasonably detailed documentation showing such Party’s calculations of
Closing Working Capital, the Gross Revenue Amount and each line item of the
Closing Date Balance Sheet that is relevant to any calculation required pursuant
to Sections 1.3, 4.9 and 5.2 of this Agreement, including without limitation,
each reserve against any liability as of the Closing Date (collectively, the
“Closing Financial Calculations”).  Upon receipt of the last best offer of both
Parties, the arbitrator shall provide the Parties with each other’s last best
offer.  The last best offers submitted by the Parties must incorporate any items
agreed upon or deemed to be agreed upon pursuant to clause (b) or (c) of this
Section 1.3.  As to each matter in dispute, the arbitrator shall determine which
of the Parties’ last best offers is more accurate and shall select that offer as
the final determination of the matter in dispute.  For the avoidance of doubt,
(i) the arbitrator may not compromise and make a determination different from
the last best offers submitted by the Parties, and (ii) a Party’s last best
offer with respect to all items in dispute in the Closing Financial Calculations
shall be deemed to be a single offer to be accepted or rejected in whole by the
arbitrator.  The decision of the arbitrator shall be final and binding on the
Parties and shall constitute an arbitral award that is final, binding and
non-appealable and upon which a judgment may be entered by a court having
jurisdiction thereover.  The fees and expenses of the arbitrator shall be paid
by Purchaser if Sellers’ last best offer is selected by the arbitrator or by the
Sellers if Purchaser’s last best offer is selected by the arbitrator.

 

3

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(e)           Upon the determination in accordance with this Section 1.3 of
Closing Working Capital and the Gross Revenue Amount, the Working Capital
Adjustment shall be recalculated.  If the final Working Capital Adjustment is
greater than the Estimated Working Capital Adjustment, Purchaser shall pay such
difference to Sellers.  If the final Working Capital Adjustment is less than the
Estimated Working Capital Adjustment, Sellers shall pay such difference to
Purchaser.  Such payment shall be made by wire transfer in immediately available
funds to an account specified in writing by the Party to whom the payment is
owed within five (5) business days after the final and binding determination of
each of Closing Working Capital and the Gross Revenue Amount.  Any amount owed
but not paid within such five (5) business day period shall bear interest at an
annual rate of six percent (6%) from the end of such period until paid.

 

(f)            From the Closing Date and until the final determination of the
purchase price adjustment pursuant to Section 1.3(e), Sellers and their
representatives shall have reasonable access during normal business hours to all
relevant books and records (including the working papers, if any, of Purchaser’s
and the Company’s auditors) and personnel of the Company in order to allow
Sellers and their representatives to review and evaluate the accuracy of
Purchaser’s Adjustment Documents.

 

SECTION 1.4               Accrual Adjustment to Purchase Price.

 

(a)           As promptly as practical after the twenty-four (24) month
anniversary of the Closing Date (the “Adjustment Date”) but in no event later
than sixty (60) days after the Adjustment Date, the Parties shall perform an
analysis (the “Accrual Analysis”) of the accruals with respect to each Material
Contract providing for design, engineering, manufacturing, distribution, sale,
lease, installation, repair, service, maintenance or construction work that has
not been fully performed as of Closing (collectively, the “WIP Projects”).  The
Accrual Analysis shall show the amount (the “Accrual Adjustment”) by which the
Company’s net earnings as of the Closing were overstated or understated by
reason of any disproportionate accruals of revenues and expenses on the WIP
Projects as of the Closing.  The Accrual Adjustment shall be calculated on a
contract-by-contract basis using the following formula:

 

Accrual Adjustment = Final Revenue Earned x

[g148731kg03i001.jpg]

- Revenue Earned @ Closing Date

 

For example, if at Closing the Company has earned $600,000 of revenues and
accrued $500,000 of expenses with respect to a particular project and upon
completion of the project, total revenues earned are $1,000,000 and total costs
are $800,000, the Accrual Adjustment with respect to that project would be
positive $25,000.  The Accrual Analysis as of the Adjustment Date shall cover
WIP Projects completed on or before such date.  The Accrual Adjustment shall be
determined on an aggregate basis netting out over and under accruals.  Any items
remaining in dispute at the end of any such sixty (60) day period shall be
submitted to arbitration in accordance with Section 1.4(b).

 

(b)           If within ten (10) days following the end of the sixty (60) day
period referenced in Section 1.4(a), the Parties have been unable to agree on
the selection of an independent certified public accounting firm to serve as the
arbitrator, each Party shall have the right to request the American Arbitration
Association to appoint the arbitrator, except that if an

 

4

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arbitrator has previously been selected or appointed pursuant to Section 1.3(d),
such arbitrator shall serve as the arbitrator under this Section 1.4(b).  The
arbitrator shall be an independent certified public accounting firm that has not
had a material relationship with Purchaser, the Company, the Sellers or any of
their respective Affiliates within the past two (2) years.  Purchaser and
Sellers shall use their commercially reasonable efforts to cause the arbitrator
to render a decision in accordance with this Section 1.4(b) along with a
statement of reasons therefor within thirty (30) days of the submission of the
dispute to the arbitrator, or a reasonable time thereafter.  Each Party shall
submit to the arbitrator within the first five (5) days after the initiation of
the arbitration its last best offer on the item(s) in dispute including
reasonably detailed documentation showing such Party’s calculation of the
Accrual Adjustment.  Upon receipt of the last best offer of both Parties, the
arbitrator shall provide the Parties with each other’s last best offer.  The
arbitrator shall determine which of the Parties’ last best offers is more
accurate and shall select that offer as the final determination of the matters
in dispute.  For the avoidance of doubt, (i) the arbitrator may not compromise
and make a determination different from the last best offers submitted by both
Parties, and (ii) the arbitrator may select the last best offer of a Party
different than the Party whose last best offer was selected in any arbitration
under Section 1.3(d).  The decision of the arbitrator shall be final and binding
on the Parties and shall constitute an arbitral award that is final, binding and
non-appealable and upon which a judgment may be entered by a court having
jurisdiction thereover.  The fees and expenses of the arbitrator shall be paid
by Purchaser if Sellers’ last best offer is selected by the arbitrator or by the
Sellers if Purchaser’s last best offer is selected by the arbitrator.

 

(c)           Upon the determination in accordance with this Section 1.4 of the
Accrual Adjustment, the Purchase Price shall be recalculated.  If the Accrual
Adjustment is negative, Sellers shall pay the absolute value thereof, if any, in
excess of $250,000 to Purchaser.  If the Accrual Adjustment is positive,
Purchaser shall pay the portion thereof, if any, in excess of $250,000 to
Sellers; provided that Purchaser shall not be required to make any payment to
Sellers to the extent that, giving effect to that payment as an expense, the
Company would thereby incur or extend an aggregate net loss on the WIP for the
period from the Closing to the Adjustment Date.  Such payment shall be made by
wire transfer in immediately available funds to an account specified in writing
by the Party to whom the payment is owed within five (5) business days after the
final and binding determination of the Accrual Adjustment.  Any amount owed but
not paid within such five (5) business day period shall bear interest at an
annual rate of six percent (6%) from the end of such period until paid.

 

(d)           From the Closing Date and until the final determination of the
purchase price adjustment pursuant to Section 1.4(c), Sellers and their
representatives shall have reasonable access during normal business hours to all
relevant books and records (including the working papers, if any, of Purchaser’s
and the Company’s auditors) and personnel of the Company in order to allow
Sellers and their representatives to perform the Accrual Analysis.

 

SECTION 1.5               Closing Date.  The closing of the transactions
contemplated by this Agreement (the “Closing”) shall take place effective at
12:01 a.m. EDT on July 28, 2010, in the offices of McGuireWoods LLP, Richmond,
Virginia, who shall hold all documents in trust until a fully executed original
is delivered to all Parties to this Agreement (or at such other place as the
Parties hereto shall mutually agree).  The date of the Closing is herein
referred to as the “Closing Date.”  The Parties contemplate that executed
versions of the documents required to be delivered

 

5

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at Closing by Purchaser and the Seller will be delivered by facsimile or e-mail
transmissions and that the originals of such documents will be delivered by
overnight courier.  Facsimile or digitally-scanned signatures on such documents
shall be given effect as originals, and the amounts payable to Sellers will be
paid upon the Parties’ receipt of all such fully executed documents.

 

SECTION 1.6               Closing Deliveries.

 

(a)           At the Closing, Sellers shall deliver to Purchaser:

 

(i)            certificates representing the Stock, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Purchaser, which
shall transfer to Purchaser good and marketable title to the Stock, free and
clear of all Encumbrances;

 

(ii)           all of the books and records of the Company;

 

(iii)          a general release in favor of the Company in the form attached
hereto as Exhibit D, executed by Sellers;

 

(iv)          evidence of any consents, including those identified on the
Disclosure Schedules, required to be obtained prior to Closing in order to
enable Purchaser or the Company, as the case may be, to continue to enjoy the
benefit of any Governmental Authorization, lease, license, Contract or other
agreement or instrument to which the Company is a party or a beneficiary and
that can, by its terms (with consent) and consistent with applicable Legal
Requirements, be so enjoyed after the consummation of the transactions
contemplated herein.  If there is in existence any such license, lease, Contract
or other agreement or instrument or Governmental Authorization that by its terms
or applicable Legal Requirements expires, terminates or is otherwise rendered
invalid upon the consummation of the transactions contemplated herein and is
required in order for the business of the Company to continue to be conducted
following the consummation of the transactions contemplated herein in the same
manner as conducted previously, Sellers shall have delivered to Purchaser an
equivalent of that license, lease, Contract or other agreement or instrument or
Governmental Authorization, effective as of and after the Closing Date and
reasonably acceptable to Purchaser;

 

(v)           a certificate, dated as of a recent date, of the State Corporation
Commission of the Commonwealth of Virginia as to the due incorporation, valid
existence and good standing of the Company;

 

(vi)          a certificate (in such form as may be reasonably requested by
counsel to Purchaser) conforming to the requirements of Treasury Regulations
1.1445-2(c)(3) and 1.897-2(h);

 

(vii)         the Earn-Out Agreement executed by Sellers;

 

(viii)        employment agreements in a form agreed upon by all Parties
executed by Mitchell Frederick Haddon, Gary Jon Warness, Curtis Michael Wood,
Randy S. Theen and Karl U. Wolpert;

 

6

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(ix)           copies of documents evidencing the issuance of Company stock in
satisfaction of the Special Equity Incentive Plan, in the form and substance
reasonably satisfactory to the Buyer;

 

(x)            a consulting agreement with Howard W. Webb, in a form agreed upon
by Buyer and Howard W. Webb, executed by Howard W. Webb;

 

(xi)           a certificate of the Secretary of the Company in the form
attached hereto as Exhibit E and

 

(xii)          such other documents as may be required by this Agreement or
reasonably requested by Purchaser.

 

(b)           At the Closing, Purchaser shall deliver to Sellers:

 

(i)            the Purchase Price in accordance with Section 1.2;

 

(ii)           the Earn-Out Agreement executed by Purchaser;

 

(iii)          employment agreements for Mitchell Frederick Haddon, Gary Jon
Warness, Curtis Michael Wood, Randy S. Theen and Karl U. Wolpert, in forms
agreed upon by all Parties, which Purchaser has caused the Company to execute;

 

(iv)          a consulting agreement with Howard W. Webb, executed by Purchaser;
and

 

(v)           such other documents as may be required by this Agreement or
reasonably requested by Sellers.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

 

As of the date hereof (unless otherwise indicated herein), each Seller hereby
individually makes the representations and warranties set forth in this
Article II to Purchaser.  Sellers have delivered to Purchaser the Disclosure
Schedules to this Agreement referred to in this Article II on the date hereof. 
The disclosures in the Disclosure Schedules relate only to the representations
and warranties in the Section of the Agreement to which they expressly relate
and not to any other representation or warranty in this Agreement unless it is
reasonably apparent from the content of such Disclosure Schedule that the
matters disclosed therein also pertain to a different representation and
warranty.  All representations and warranties made by the Sellers in this
Agreement shall survive the Closing as set forth in Section 5.6(d).

 

SECTION 2.1               Organization and Qualification.  Colonial is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia.  Colonial has no Subsidiaries or
Affiliates.  Colonial has all requisite corporate power and authority to carry
on its business as it is now being conducted and to own, lease and operate its
properties and assets as now owned, leased or operated.  True, correct and
complete copies of the articles of incorporation (certified as of a recent date
by the Clerk of the State Corporation

 

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Commission of the Commonwealth of Virginia) and bylaws of the Company, with all
amendments thereto through the date of this Agreement, have been made available
by Sellers to Purchaser.  The nature of the businesses and activities of the
Company, as currently conducted, do not require the Company to be qualified to
do business in any foreign jurisdiction, except as set forth on Schedule 2.1. 
In any jurisdiction set forth on such Schedule 2.1, the Company is duly
qualified to do business and is in good standing as a foreign corporation.

 

SECTION 2.2               Capitalization.  The authorized capital stock of the
Company consists of 150,000 shares of common stock, $1.00 par value per share,
115,902.85074 shares of which are issued and outstanding, and no shares of which
are held in treasury.  Each Seller represents severally, but not jointly, that
(i) it is the sole and exclusive record and beneficial owners and holders of,
and has good, valid and indefeasible record and beneficial title to, the Stock
set forth opposite its name on Schedule 2.2, free and clear of any Encumbrances
and (ii) immediately after the Closing, Purchaser shall be the sole and
exclusive record and beneficial holder and owner of such Stock, free and clear
of all Encumbrances.  There are no outstanding subscriptions, options,
convertible securities, rights, warrants, calls or other agreements or
commitments of any kind issued or granted by, or binding upon, the Company to
purchase or otherwise acquire any security of or equity interest in the
Company.  There are no outstanding subscriptions, options, convertible
securities, rights, warrants, calls or other agreements or commitments of any
kind obligating the Company to issue or any Sellers to sell any securities of
the Company, or irrevocable proxies or any agreements restricting the transfer
of or otherwise relating to shares of the Company’s capital stock of any class. 
All of the Stock has been duly authorized, validly issued and is fully paid and
nonassessable.  All dividends and other distributions declared prior to the date
hereof with respect to the issued and outstanding shares of capital stock (of
all classes) of the Company have been paid or distributed.

 

SECTION 2.3               Authority.  Subject to Section 2.4 below, each Seller
represents severally, but not jointly, that it has the right, power, authority
and capacity to execute and deliver this Agreement, to perform the obligations
hereunder and to consummate the transactions contemplated hereby.  This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes the legal, valid and binding agreement of each Seller enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, or similar laws affecting creditors’ rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity.

 

SECTION 2.4               Consents and Approvals; No Violation.  Except as set
forth on Schedule 2.4, with respect to Sellers and the Company no filing or
registration with, no notice to and no permit, authorization, consent or
approval of, any Person, including any Governmental Authority, is necessary for
the Sellers and the Company to execute this Agreement, and any documents
delivered by Sellers pursuant to this Agreement, and to consummate the
transactions contemplated by this Agreement.  Except as set forth on Schedule
2.4, neither the execution and delivery of this Agreement, the performance of
the obligations hereunder, nor the consummation of the transactions contemplated
hereby will, as of the Closing Date, (a) conflict with or result in any breach
of any provision of the organizational and charter documents of the Company or
any resolution adopted by the board of directors or stockholders of the Company;
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms,

 

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conditions or provisions of any Material Contract; (c) give rise to any
Encumbrance on any of the properties or assets of Sellers or the Company; or
(d) violate any Legal Requirement applicable to Sellers or the Company.

 

SECTION 2.5               Books and Records.  The books of account, minute
books, share record books and other records of the Company, all of which have
been made available to Purchaser, are true, complete and correct in all material
respects and have been maintained in accordance with sound business practices
and Legal Requirements.  The minute books of the Company contain accurate and
complete records of all corporate action taken by the shareholders and board of
directors of the Company and no meetings of the shareholders or board of
directors have been held for which minutes have not been prepared and are not
contained in such minute books.

 

SECTION 2.6               Absence of Certain Changes.  Except as set forth on
Schedule 2.6, since the Balance Sheet Date, the Company has conducted its
business only in the Ordinary Course of Business and there has not been:

 

(i)            any material adverse change, or any event, condition or
contingency that will result in a material adverse change, in the business,
operations, financial condition, prospects, properties, assets, or Liabilities
of the Company; other than as a result of (a) changes adversely affecting
general economic conditions or conditions in the industry in which the Company’s
business operates, (b) the taking of any action contemplated or required by this
Agreement, (c) the announcement or pendency of the transactions contemplated by
this Agreement, (d) a downturn in financial markets, (e) change in Legal
Requirements or accounting principles, or (f) war, terrorism or the outbreak of
hostilities (provided that the events described in (a) through (f) affect the
industry in which the Company operates generally and do not have a materially
disproportionate adverse effect on the Company).

 

(ii)           any damage, destruction, or loss, whether covered by insurance or
not, materially and adversely affecting the properties or business of the
Company;

 

(iii)          other than in the Ordinary Course of Business, any increase in or
creation of compensation payable or to become payable by the Company to any of
its directors, officers, employees, or agents in any stock option, bonus
payment, service award, pension, retirement, severance, savings, insurance,
expense allowance, or other plan, agreement, or arrangement made to or with any
of them;

 

(iv)          other than in the Ordinary Course of Business and less than Fifty
Thousand Dollars and No Cents ($50,000.00) in the aggregate, any sale,
assignment, lease, transfer, license, abandonment, or other disposition by the
Company of any interest in its assets;

 

(v)           any declaration, setting aside, or payment of any dividend or
other distribution on or in respect of shares of the capital stock of the
Company, or any direct or indirect redemption, retirement, purchase, or other
acquisition by the Company of any such shares;

 

(vi)          any stock dividend, stock split, reorganization, recapitalization,
or other change of any type whatsoever in the outstanding capital stock of the
Company;

 

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(vii)         any amendment to the articles of incorporation or bylaws of the
Company;

 

(viii)        any change in the accounting methods followed by the Company not
required by GAAP;

 

(ix)           any entry into a Material Contract not in the Ordinary Course of
Business;

 

(x)            any termination or receipt of notice of termination of any
Material Contract;

 

(xi)           any payment of any obligation or Liability other than current
liabilities or obligations disclosed in the Company’s books and records and
current liabilities or obligations incurred since the date of the Year-end
Financial Statements in the Ordinary Course of Business;

 

(xii)          any waiver, cancellation, writing off, or writing down, other
than in the Ordinary Course of Business, of any rights or claims of the Company;

 

(xiii)         any material change in the manner of the Company’s billings, or
the credit terms made available by it, to any of its customers;

 

(xiv)        any failure to replenish inventories and supplies in the Ordinary
Course of Business;

 

(xv)         any distribution of property or assets by the Company other than in
the Ordinary Course of Business;

 

(xvi)        default on any material obligation or obligations that remains
uncured as of the Closing Date;

 

(xvii)       entry into any transaction not in the Ordinary Course of Business;

 

(xviii)      any entry into any new line of business or acquisition of any
business organization or division thereof;

 

(xix)         except as otherwise permitted by this Agreement or incurred in the
Ordinary Course of Business, any loan or advance of any money or other property
to, or entry into any other transaction with any Affiliate of the Company;

 

(xx)          any establishment, adoption, entry into, amendment, or termination
of any compensation plan, agreement, program, policy, trust, or fund of the
Company;

 

(xxi)         any settlement of any litigation providing for injunctive or other
equitable relief;

 

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(xxii)       any entry into any joint venture, partnership or similar
arrangement for the conduct of business;

 

(xxiii)      any new and material capital expenditures or agreements to make any
new and material capital expenditures;

 

(xxiv)     any delay or postponement of any payment of accounts payable and
other Liabilities not in the Ordinary Course of Business; or

 

(xxv)      any agreement to do any of the foregoing.

 

SECTION 2.7             Absence of Undisclosed Liabilities.  Except (i) as
reflected in the Financial Statements, (ii) incurred in the Ordinary Course of
Business, or (iii) disclosed on Schedule 2.7, since the Balance Sheet Date, the
Company does not have any Liabilities of a type required by GAAP to be
disclosed, set forth or reserved against or otherwise reflected in the Financial
Statements.

 

SECTION 2.8             Accounts Receivable.  Except to the extent of the amount
of the Company’s reserves as of the Balance Sheet Date for bad debts and
write-offs, all accounts receivable, notes receivable and employee receivables
of the Company that were reflected in the Interim Financial Statements
represented on the Balance Sheet Date legal, valid, binding and enforceable
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business.

 

SECTION 2.9             Inventory.  All of the inventory of the Company, whether
or not reflected in the Financial Statements, is of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value and are properly reflected as such on the
Financial Statements or on the accounting records of the Company as of the
Closing Date.  Except as disclosed on Schedule 2.9, since the Balance Sheet
Date, no inventory has been sold or disposed of except through sales in the
Ordinary Course of Business.

 

SECTION 2.10           Litigation.  Except as set forth on Schedule 2.10, there
are no actions, suits, claims, investigations, reviews, or other proceedings
pending, or, to the Knowledge of Sellers, threatened against the Company, or
involving any of its properties or assets, or against the Stock, at law or in
equity, before or by any Governmental Authority or other instrumentality or
Person (a “Proceeding”).  Except as set forth on Schedule 2.10, neither the
Company nor any Seller is subject to any formal or, to the Knowledge of Sellers,
informal, order, decree, consent, agreement, memorandum of understanding, or
enforcement action with any Governmental Authority.

 

SECTION 2.11           Tax Matters.  Except as disclosed on Schedule 2.11:

 

(a)           All Tax Returns required to be filed by or on behalf of the
Company have been timely filed or, where not so timely filed, are covered under
an extension that has been applied for or obtained.  Such Tax Returns were
correct and complete in all respects and have been prepared in compliance with
all applicable Legal Requirements.  All Taxes due and owing by or with respect
to the Company for the periods covered by such Tax Returns (as shown on

 

11

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such Tax Return) have been paid or are adequately reserved for on the Company’s
books and records.  With respect to the periods for which Tax Returns have not
been filed, the Company has established adequate reserves for the payment of all
Taxes.  The Company is currently not the beneficiary of any extension of time
within which to file any Tax Return.  The Company has not received any written
claim by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.

 

(b)           No deficiencies for any Taxes have been proposed, asserted, or
assessed against the Company that are not adequately provided for on the
Company’s books and records and no request for waivers of the time to assess any
such Taxes has been granted or are pending.  Except as set forth on Schedule
2.11(b), the Company is not involved in any audit examination, deficiency, or
refund litigation or material matter in controversy with respect to any Taxes. 
Notwithstanding anything herein to the contrary, Sellers shall control the
defense of all pending tax matters set forth in Schedule 2.11(b); however,
Sellers shall consult with Purchaser prior to advocating any position that could
economically impact Purchaser.  All Taxes due by the Company with respect to
completed and settled examinations or concluded litigation have been paid or
adequately reserved for.  The Company has not executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect.

 

(c)           None of the assets or properties of the Company is subject to any
Tax lien, other than such liens for Taxes that are not due and payable, that may
thereafter be paid without penalty or the validity of which are being contested
in good faith by appropriate proceedings and for which adequate provisions are
being maintained.

 

(d)           The Company has (i) collected and withheld all Taxes that it has
been required to collect or withhold in connection with any amounts paid or
owing to any employee, independent contractor, creditor, shareholder, or other
third party and (ii) has timely submitted and paid all such collected and
withheld amounts to the appropriate authorities.  The Company is in compliance
in all material respects with the back-up withholding and Tax information
reporting requirements under (i) the Code and the rules and regulations
promulgated thereunder and (ii) all other applicable Legal Requirements relating
to Taxes.

 

(e)           The Company has been a validly electing S corporation within the
meaning of Code sections 1361 and 1362 at all times since January 1, 2003, and
the Company will be an S corporation up to and including the Closing Date. 
Since the effective date of the Company’s election to be taxed in accordance
with Subchapter S of the Code, Sellers and the Company have not taken any action
or failed to take any action that would result in the Company failing to qualify
as an S corporation.

 

SECTION 2.12           Employee Benefit Plans.  The representations and
warranties of Sellers set forth in this Section 2.12 are the only
representations and warranties with respect to Benefit Plans.  Except as
disclosed on Schedule 2.12:

 

(a)           Schedule 2.12 lists each deferred compensation plan, bonus and
incentive arrangement, stock option plan, restricted stock arrangement,
“cafeteria plan” as described in Section 125 of the Code and any other “employee
welfare benefit plan” (as defined in Section 3(1) of ERISA), each “employee
pension benefit plan” (as defined in Section 3(2) of ERISA)

 

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maintained by the Company or to which the Company contributes or is required to
contribute and all other similar plans, programs and arrangements (“Benefit
Plans”).

 

(b)           No Benefit Plan provides for continuing benefits or coverage for
any participant, beneficiary or former employee after such participant’s or
former employee’s termination of employment except as may be required by
Section 4980B of the Code or ERISA.

 

(c)           All of the Benefit Plans and any related funding instruments
comply, and have complied during the applicable statute of limitations, both as
to form and operation in all material respects with the provisions of ERISA, the
Code and with all other applicable Legal Requirements.

 

(d)           The Company has never maintained or contributed to, and has not
participated in or agreed to participate in, a multi-employer plan (as defined
in Section 3(37) of ERISA), and the Company could not have any Liability under
any such multi-employer plan.

 

(e)           There are no Proceedings pending with respect to or under any
Benefit Plan other than routine claims for plan benefits, and there are no
disputes pending or, to Sellers’ Knowledge, threatened with respect to any such
plans.

 

(f)            Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment to be made by the Company or Purchaser (including, without limitation,
severance, unemployment compensation, golden parachute (as defined in
Section 280G of the Code) or otherwise) becoming due to any employee of the
Company, or (ii) increase or vest any benefits otherwise payable under any
Benefit Plan.

 

(g)           No Benefit Plan that is a nonqualified deferred compensation plan
subject to Section 409A of the Code has been materially modified (as defined
under Section 409A of the Code) on or after October 3, 2004 and all such
nonqualified deferred compensation plans (other than plans grandfathered under
Section 409A of the Code) have been operated and administered in good faith
compliance with Section 409A of the Code from the period beginning January 1,
2005 through the Closing Date.

 

SECTION 2.13           Employment Matters.

 

(a)           Except as disclosed on Schedule 2.13, the Company is not a party
to any Contracts granting benefits or rights to employees or consultants, any
collective bargaining agreement or any conciliation agreement with the
Department of Labor, the Equal Employment Opportunity Commission or any other
Governmental Authority.  There are no unfair labor practice complaints pending
against the Company before the National Labor Relations Board and no similar
claims pending before any other Governmental Authority and to the Knowledge of
Sellers, no such claims are threatened.  There is no activity or Proceeding of
any labor organization (or representative thereof) or employee group to organize
any employees of the Company, nor any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any such employees.  The
Company is in material compliance with all applicable Legal Requirements
respecting employment and employment practices and terms and conditions of
employment and wages and hours, and the Company is not engaged in any unfair
labor

 

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practices. Without limiting the foregoing, the Company is in compliance with the
Immigration Reform and Control Act of 1986 and maintains a Form I-9, as required
by such Act, in the personnel file of each employee.

 

(b)           Schedule 2.13(b) contains a true, correct and complete list of all
employees of the Company, together with each employee’s rate of compensation,
and prior bonus amounts for the years 2007, 2008, and 2009 for the top twenty
bonus recipients, and, if applicable, the amount of any unpaid bonuses, vacation
or other payments or benefits attributable to such employee as of the Balance
Sheet Date.

 

SECTION 2.14           Contracts.

 

(a)           Schedule 2.14(a) contains a listing of all Contracts in excess of
(i) Three Hundred Thousand Dollars and No Cents ($300,000.00) for the sale of
goods or services, and (ii) Five Hundred Thousand Dollars and No Cents
($500,000.00) for the purchase of goods or services (other than subcontracts and
purchase orders) to which the Company is a party or is otherwise subject or by
which the Company is bound (collectively, “Material Contracts”).

 

(b)           Except as may arise in the Ordinary Course of Business or as
expressly set forth on Schedule 2.14(a), each Material Contract is in full force
and effect and no counter-party thereto has provided written notice of its
intention not to renew such contract (where applicable) or indicated that it
will cease doing business with the Company.  Neither the Company nor, to the
Sellers’ Knowledge, any other party to any Material Contract is in breach or
violation of, or default under, or has repudiated any provision of, any Material
Contract.

 

SECTION 2.15           Related Party Transactions.  Except as set forth on
Schedule 2.15, there are no Contracts between or among the Company (whether on
its own behalf or in its capacity as trustee or custodian for the funds of any
employee benefit plan ((as defined in ERISA)) and any Seller or any Affiliate of
any Seller. The related party transactions listed on Schedule 2.15 are entered
into in amounts and on terms that reflect fair value and are for services and
goods that are reasonably necessary to conduct the business of the Company.
Except as disclosed on Schedule 2.15, no Seller or any Affiliate of any Seller
owns any asset used in, or necessary to, the business of the Company.

 

SECTION 2.16           Compliance with Laws.

 

(a)           Except as set forth on Schedule 2.16, (i) the Company is not in
default in any material respects with respect to or in violation (or since
July 31, 2008 been in violation) of any applicable material Legal Requirement
for which the applicable statute of limitations has not expired (the
consummation of the transactions contemplated by this Agreement will not
constitute such a default or violation as to the Company), (ii) the Company has
all Governmental Authorizations necessary to conduct its business as it is now
being conducted and to own, operate, use and maintain its assets in the manner
in which they are now operated and maintained, and the consummation of the
transactions contemplated by this Agreement will not constitute a violation of
the terms and conditions of any material Governmental Authorizations, (iii) all
required filings with respect to such Governmental Authorizations have been
timely made and all required applications for renewal thereof have been timely
filed in all material

 

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respects, and (iv) all such Governmental Authorizations are in full force and
effect and there are no Proceedings pending or, to Sellers’ Knowledge,
threatened that seek the revocation, cancellation, suspension or adverse
modification thereof.

 

(b)           In the conduct of the business of the Company, neither the Company
nor, to Sellers’ Knowledge, any of its directors, officers, employees, or
agents, has (i) directly or indirectly, given, or agreed to give, any illegal
gift, contribution, payment, or similar benefit to any supplier, customer,
governmental official, or employee or other Person who was, is, or may be in a
position to help or hinder the Company (or assist in connection with any actual
or proposed transaction), or made, or agreed to make, any illegal contribution,
or reimbursed any illegal political gift or contribution made by any other
Person, to any candidate for federal, state, local, or foreign public office or
(ii) established or maintained any unrecorded fund or asset or made any false
entries on any books or records for any such purpose.

 

SECTION 2.17           Insurance.

 

(a)           Schedule 2.17 contains an accurate and complete description of all
policies of property, fire and casualty, product liability, workers’
compensation, liability, and other forms of insurance owned or held by the
Company or otherwise insuring the Company or its respective assets or
businesses.  Such description provides reasonably complete details concerning
such policies, identifying among other things, (i) the issuer of each such
policy, (ii) the amount of coverage still available and outstanding under each
such policy, (iii) whether each such policy is a “claims made” or an
“occurrences” policy, and (iv) any retrospective premium adjustments.  True,
correct, and complete copies of such policies have been made available to
Purchaser.

 

(b)           Except as set forth on Schedule 2.17, neither the Company nor any
Seller has received (i) any notice of cancellation of any policy described in
paragraph (a) hereof or refusal of coverage thereunder, (ii) any notice that any
issuer of such policy has filed for protection under applicable bankruptcy or
other insolvency laws or is otherwise in the process of liquidating or has been
liquidated,  (iii) any other communication, either written or to Sellers’
Knowledge verbal, that such policies are no longer in full force or effect or
that the issuer of any such policy is no longer willing or able to perform its
obligations, or (iv) any written indication of plans to raise the premiums for
or materially alter the coverage thereunder.

 

(c)           The reserves and accruals relating to the Company’s insurance
program, including the loss reserves, are reasonable good faith estimates of the
expected liabilities related thereto.

 

SECTION 2.18           Intellectual Property.

 

(a)           Schedule 2.18 sets forth a list of (i) all applied for and/or
registered Intellectual Property owned by the Company and/or used in its
business and (ii) all agreements under which the Company is licensed or
otherwise permitted, or licenses or otherwise permits a third party, to use
Intellectual Property used in its businesses. The Company has purchased and
maintained valid licenses for all of the material software used on Company
computers and has maintained reasonable evidence of such purchases.

 

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(b)           The Company directly or indirectly owns, or is licensed or
otherwise possesses valid rights to use, all Intellectual Property used in its
business as currently conducted, and no Person is challenging, or to Sellers’
Knowledge, infringing or otherwise violating the Intellectual Property of the
Company.  The conduct by the Company of its business as of the Closing Date does
not infringe upon or otherwise violate the Intellectual Property of any other
Person, and neither the Company nor any Seller has received any notice of any
claim of any such infringement or violation.

 

SECTION 2.19           Environmental Matters.  The representations and
warranties of Sellers set forth in this Section 2.19 are the only
representations and warranties of Sellers with respect to Environmental
Matters.  Except as set forth on Schedule 2.19:

 

(a)           Since January 1, 2003 (the “Period of Sellers’ Ownership”), the
Company has not committed a violation of any applicable Environmental Laws in
connection with its ownership, use, maintenance or operation of the Business
Facilities.

 

(b)           During the Period of Sellers’ Ownership of the Company, the
Company has not released any Materials of Environmental Concern on, under, or
about any Business Facility in quantities or concentrations that require
Remediation under applicable Environmental Laws, and the Company has not
received any notice of any release or threatened release of Materials of
Environmental Concern, or of any Remediation obligation under Environmental Laws
or Environmental Permits, relating to its ownership, use, maintenance, or
operation of any Business Facility.

 

(c)           To Sellers’ actual knowledge without any investigation, prior to
the Period of Seller’s Ownership of the Company, no Materials of Environmental
Concern were released on, under or about the Business Facilities owned by the
Company in quantities or concentrations that require Remediation under
applicable Environmental Laws.  All documents in the Company’s possession
relating to the purchase of the Business Facilities owned by the Company and
involving environmental matters have been made available to Purchaser.

 

(d)           The Company is not subject to any consent order, compliance order,
or administrative order relating to or issued under any Environmental Law, or
any other known, pending, or, to Sellers’ Knowledge, threatened Environmental
Claims.

 

(e)           During the Period of Sellers’ Ownership of the Company, no
Materials of Environmental Concern generated from any Business Facility, or for
which the Company or any of its current or former Subsidiaries arranged for
disposal, have been treated, stored, disposed of, or released at a location that
has been nominated or identified as a facility that is subject to an existing or
potential claim under Environmental Laws.

 

(f)            During the Period of Sellers’ Ownership, the Company has not
voluntarily undertaken Remediation of any Business Facility or other site, or
entered into any agreement for the payment of costs associated with such
activity, and there are no obligations, undertakings, or Liabilities arising out
of or relating to Environmental Laws that the Company has agreed to or assumed,
by contract or otherwise.

 

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(g)           The Company has filed and/or maintained all notices,
notifications, financial assurance, environmental management plans, worker
protection plans, applications, or other documents or instruments that are
required to be maintained or filed by the Company for the operation of its
business or the ownership or operation of any Business Facility.

 

SECTION 2.20           Condition and Sufficiency of Assets.  Except as set forth
on Schedule 2.20, the buildings, plants, structures, and equipment leased or
owned by the Company are in good operating condition and repair, and are
adequate for the uses to which they are being put, reasonable wear and tear
excepted, and none of such buildings, plants, structures, or equipment is in
need of maintenance, repairs, or replacement except for ordinary, routine
maintenance, repair or replacement in the Ordinary Course of Business.  The
building, plants, structures, and equipment leased or owned by the Company are
sufficient for the continued conduct of its business after the Closing in
substantially the same manner as conducted prior to the Closing.

 

SECTION 2.21           Real Property.  Sellers have previously made available to
Purchaser true, correct and complete copies of all Contracts relating to
leasehold interests, license interests or other interests granting rights in any
real property, to which the Company is a party or by which the Company or any of
its real property is in any way bound or affected, together with all amendments
and supplements thereto and modifications thereof.  All such Contracts,
amendments, supplements, and modifications are legally valid and binding on the
Company and in full force and effect.  The Company is not, and to the Knowledge
of Sellers, no other party to any such Contract is, in breach or violation of,
or in default under, any such Contract.  The Company does not purport to have
any leasehold or other interest in real property except as described on Schedule
2.21.  No leasehold or other interest of the Company in real property is or, to
the Knowledge of Sellers, will be subject or subordinate to any Encumbrance,
except as described on Schedule 2.21 and except for (a) mortgages or security
interests shown as securing specified Liabilities with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) liens for current Taxes not yet due, (c) zoning laws and
other land use restrictions, (d) those arising or existing by virtue of the
terms of any lease or other Contract creating the Company’s leasehold or other
interest in any such real property, or otherwise arising by, through or under
any landlord or other party thereto, and (e) other Encumbrances, if any that do
not materially impair the present use of the subject property by the Company
(collectively, “Permitted Encumbrances”).  None of the rights of the Company
under any such leasehold or other interest in real property will be materially
impaired by the consummation of the transactions contemplated by this Agreement,
and all of such rights will be enforceable by the Company after the Closing
without the consent or agreement of any other Person, except for consents and
agreements specifically described on Schedule 2.21. The Company is the owner of
its headquarters located in Richmond, Virginia.

 

SECTION 2.22           Personal Property.  Sellers have listed on Schedule 2.22
all equipment and other tangible personal property that (i) is owned or used by
the Company and covered by any lease to which the Company is a party and
(ii) has a book value of at least Ten Thousand Dollars and No Cents
($10,000.00).  Sellers have previously made available to Purchaser true, correct
and complete copies of all leases pertaining to the property listed on Schedule
2.22.  Neither the Company, nor to the Sellers’ Knowledge, any other party to
such Contract is in breach or violation of, or default under, or has repudiated
any provision of, any such Contract.  No interest of the Company in tangible
personal property is subject or subordinate to any

 

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Encumbrance (other than Permitted Encumbrances) except as described on Schedule
2.22.

 

SECTION 2.23           Brokers; Financial Advisors.  Except as set forth in
Schedule 2.23, neither the Company nor any Seller has employed any investment
bank, financial advisor, broker or finder or incurred any liability for any
investment bank, financial advisory, brokerage or finders’ fees or commission in
connection with the transactions contemplated hereby. The Company does not and
will not have any liability for fees or expenses in connection with such brokers
or financial advisors as listed on Schedule 2.23.

 

SECTION 2.24           Bank Accounts; Powers of Attorney.  Sellers have set
forth on Schedule 2.24: (i) the name of each bank, savings and loan, credit
union or other financial institution in which the Company has any account,
certificate of deposit or other investment or safe deposit box, the style and
number of each such account or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and (ii) the name of each
Person holding a general or special power of attorney from the Company and a
summary of the terms thereof.

 

SECTION 2.25           Indebtedness.  The Company does not have any Indebtedness
other than as set forth on Schedule 2.25.

 

SECTION 2.26           Subsidiaries and Predecessors.  Schedule 2.26 sets forth
a list of all names of all predecessors of the Company, all names under which
the Company does business, and any other entity from which the Company
previously acquired significant assets.  Except as set forth on Schedule 2.26,
the Company does not own any interest in any other entity.  The Company has no
Subsidiaries.

 

SECTION 2.27           Financial Statements.  Complete and correct copies of the
following financial statements are attached as Schedule 2.27(a):

 

(a)           the balance sheets of the Company as of December 31, 2009 and the
related statements of operations, shareholders’ equity and cash flow for the
one-year period ended December 31, 2009, together with the related notes and
schedules (such balance sheets, the related statements of operations,
shareholders’ equity and cash flows and the related notes and schedules are
referred to herein as the Year-end Financial Statements (the “Year-end Financial
Statements”); and

 

(b)           the balance sheets of the Company as of June 30, 2010 (the
“Balance Sheet Date”) and the related statements of operations, shareholders’
equity and cash flow for the six-month period ended June 30, 2010, together with
the related notes and schedules (such balance sheets, the related statements of
operations, shareholders’ equity and cash flows and the related notes and
schedules are referred to herein as the Interim Financial Statements (the
“Interim Financial Statements”).  The Year-end Financial Statements and the
Interim Financial Statements are collectively referred to herein as the
Financial Statements (the “Financial Statements”).”

 

The Financial Statements have been prepared from, and are consistent with, the
accounting books and records of the Company in conformity with GAAP applied on a
basis consistent with the Company’s accounting practices (which are not
inconsistent with GAAP),

 

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and present fairly the financial position and results of operations of the
Company as of the dates of such statements and for the periods covered thereby,
provided however, that the Interim Financial Statements do not contain notes and
do not include customary year-end adjustments that in the aggregate are not
material except for those adjustments listed on Schedule 2.27(b).

 

SECTION 2.28           WIP Schedule.  The Company has delivered to Purchaser a
work in progress schedule for each of its construction Contracts which is a
Material Contract as of [June 30, 2010], attached as Schedule 2.28, (the “WIP
Schedule”).  The WIP Schedule, in the aggregate, fairly represents, in all
material respects and includes the total estimated contract costs (taking into
account man-hours required, project duration, cost of labor and materials,
including any escalation thereof, subcontractor costs, and other elements of
contract costs), estimated gross profits earned (in dollar and in percentage),
job number, job name, current contract price, estimated total cost, total cost
to date, amounts billed to date, over/under billings, estimated gross profit and
estimated gross profit percentage (including loss, if any).

 

SECTION 2.29           Customers and Suppliers.  Schedule 2.29 sets forth a
complete and accurate list of (i) the Company’s ten largest customers (measured
by aggregate billings) during the fiscal year ended on the date of the balance
sheet included in the Year-end Financial Statements, indicating the existing
Contracts with each such customer by product or service provided and (ii) the
Company’s ten (10) largest suppliers of materials, products, or services
(measured by the aggregate amount purchased by the Company) during the fiscal
year ended on the date of the balance sheet included in the Year-end Financial
Statements, indicating the Contracts for continued supply from each such
supplier, if any.

 

SECTION 2.30           No Other Representations.  EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER SELLERS NOR ANY OTHER PERSON
MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY ON BEHALF OF SELLERS,
AND SELLERS DISCLAIM ANY SUCH REPRESENTATION OR WARRANTY, WHETHER BY SELLERS OR
ANY OF THEIR RESPECTIVE OFFICERS, SHAREHOLDERS, DIRECTORS, EMPLOYEES, AGENTS,
MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE EXECUTION
AND DELIVERY OF THIS AGREEMENT OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR AS TO THE COMPANY’S BUSINESS, ASSETS OR OPERATIONS,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PURCHASER, ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO THE FOREGOING.  EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER EXPRESSLY UNDERSTANDS AND
AGREES THAT SELLERS HAVE NOT MADE AND DO NOT AND WILL NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE QUALITY, PHYSICAL CONDITION,
EXPENSES, LEGAL STATUS, VALUE, UTILITY OR POTENTIAL OF THE COMPANY’S ASSETS, ITS
BUSINESS, OR ANY OTHER MATTER OR THING AFFECTING OR RELATING TO THE COMPANY’S
ASSETS, ITS BUSINESS OR THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF HABITABILITY, SUITABILITY, MERCHANTABILITY AND/OR A FITNESS FOR A
PARTICULAR PURPOSE) WHICH MIGHT BE PERTINENT IN CONSIDERING WHETHER TO PURCHASE
THE STOCK OR TO MAKE AND ENTER

 

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INTO THIS AGREEMENT.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

As of the date hereof (unless otherwise indicated herein), Purchaser hereby
makes the representations and warranties set forth in this Article III to
Sellers.  All representations and warranties made by the Purchaser in this
Agreement shall survive the Closing and terminate as set forth in
Section 5.6(d).

 

SECTION 3.1             Organization and Authority.  Purchaser is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to enter
into and carry out its obligations under this Agreement.

 

SECTION 3.2             Authority.  The execution and delivery of this
Agreement, the performance of the obligations hereunder, and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by Purchaser’s board of directors, and no further corporate actions or
proceedings on the part of Purchaser or its shareholders are necessary to
authorize the execution and delivery of this Agreement, the performance of its
obligations hereunder, or the consummation of the transactions contemplated
hereby.  This Agreement has been duly executed and delivered by Purchaser and
constitutes the legal, valid, and binding agreement of Purchaser enforceable
against Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, or similar laws affecting creditors’
rights generally and to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity.

 

SECTION 3.3             Consents and Approvals.  Except as set forth on Schedule
3.3, with respect to Purchaser no filing or registration with, and no permit,
authorization, consent or approval of, any party, including any Governmental
Authority, is necessary for Purchaser to execute this Agreement and consummate
the transactions contemplated by this Agreement.  Except as set forth on
Schedule 3.3, neither the execution and delivery of this Agreement, the
performance of the obligations hereunder, nor the consummation of the
transactions contemplated hereby will, as of the Closing Date, (a) conflict with
or result in any breach of any provision of the certificate of incorporation and
bylaws of Purchaser or any resolution adopted by the board of directors or
stockholders of Purchaser; (b) result in a material violation or breach of, or
constitute (with or without due notice or lapse of time or both) a material
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions, or provisions of any Contract to which
Purchaser is a party or by which any of its properties or assets may be bound;
or (c) violate any Legal Requirement applicable to Purchaser.

 

SECTION 3.4             SEC Reports.  Purchaser’s Annual Report on Form 10-K
filed with the United States Securities and Exchange Commission and the
financial statements therein (i) have been prepared from, and are consistent
with, the accounting books and records of the Purchaser in conformity with GAAP
applied on a basis consistent with the Purchaser’s accounting practices (which
are not inconsistent with GAAP) and (ii) present fairly the financial position
and results of operations of the Company as of the date of such statements and
for the periods covered

 

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thereby.

 

SECTION 3.5             Investment.  Purchaser is acquiring the Stock for its
own account, for the purpose of investment and not with a view to, or for sale
in connection with, any distribution thereof as such term is used in connection
with the registration provisions of the Securities Act.  Purchaser acknowledges
that the Stock is not registered under the Securities Act, any applicable state
securities Legal Requirements or any applicable foreign securities Legal
Requirements, and that the Stock may not be transferred or sold except pursuant
to the registration provisions of the Securities Act or applicable foreign
securities Legal Requirements or pursuant to an applicable exemption therefrom
and pursuant to applicable state securities Legal Requirements.  Purchaser
(either alone or together with its Representatives) has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Stock and is capable of bearing
the economic risk of such investment.

 

SECTION 3.6             Independent Investigation.  Purchaser hereby
acknowledges and agrees that it has made its own inquiry and investigation into,
and, based thereon, has formed an independent judgment concerning the Stock and
the Company.

 

ARTICLE IV
COVENANTS

 

SECTION 4.1             Noncompetition and Nonsolicitation.

 

(a)           Except as provided in Schedule 4.1, after the Closing and, with
respect to Howard M. Webb, Howard W. Webb and Mitchell Frederick Haddon, until
five (5) years after the Closing Date and, with respect to Gary Jon Warness and
Curtis Michael Wood, until three (3) years after the Closing Date (each, a
“Noncompete Term”), the Sellers who are individuals and Howard W. Webb and
Howard M. Webb, individually (each, a “Seller Individual”) shall not conduct, or
be an Affiliate of, any business engaged in the business of HVAC, plumbing, or
mechanical construction contracting, or provide service or sales representation
related thereto, within Virginia, within two hundred (200) miles of Richmond or
Norfolk, Virginia, or within one hundred (100) miles of anywhere else the
Company regularly does business unless a Seller Individual is performing such
otherwise prohibited work for or on behalf of Purchaser.  “Regularly does
business” shall mean locations where (i) the Company has contracted to and/or
performed services with a value in excess of $50,000 within one (1) year prior
to the Closing Date, or (ii) the Company has submitted a bid to perform services
with a value in excess of $50,000 on three (3) or more occasions within one
(1) year prior to the Closing Date. All distances shall be calculated according
to driving distance.  Notwithstanding the foregoing provisions of this
paragraph, the Seller Individuals, together with their Affiliates, may be a
passive investor owning, in the aggregate, no more than two percent (2%) of the
outstanding equity securities of any corporation the equity securities of which
are listed on a national securities exchange and with which such Seller
Individuals or their Affiliates have no other connection whatsoever.

 

(b)           Unless otherwise required by law or expressly authorized in
writing by the Company, the Seller Individuals shall not, and the Seller
Individuals shall use their commercially reasonable efforts to cause each of
their Affiliates not to, disclose to any Person not in the

 

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employ of the Company any information concerning the business conducted by the
Company prior to the Closing Date not rightfully in the public domain,
including, without limitation, lists of customers or suppliers, pricing
strategies, business files and records, trade secrets, and financial
information.

 

(c)           During their respective Noncompete Terms, the Seller Individuals
shall not, and the Seller Individuals shall use their commercially reasonable
efforts to cause each of their Affiliates not to, directly or indirectly solicit
the employment or services of, or cause or attempt to cause to leave the
employment or services of, any employee of the Company employed on the date
hereof who continues his or her employment with the Company after the date
hereof.

 

(d)           During their respective Noncompete Terms, the Seller Individuals
shall not, and the Seller Individuals shall use their commercially reasonable
efforts to cause each of their Affiliates not to, engage or participate in any
effort or act to induce any customer, supplier, associate, employee, sales agent
or independent contractor of the Company to take any action disadvantageous to
the Company.

 

(e)           The Seller Individuals acknowledge that the damages that would be
suffered by the Company and Purchaser as a result of any breach of the
provisions of this Section 4.1 may not be calculable and that an award of a
monetary judgment for such a breach would be an inadequate remedy. 
Consequently, the Company and Purchaser shall have the right, in addition to any
other rights they may have, to obtain, in any court of competent jurisdiction,
injunctive relief to restrain any breach or threatened breach of any provision
of this Section 4.1 or otherwise to specifically enforce any of the provisions
hereof.  This remedy is in addition to monetary damages for any Damages directly
or indirectly suffered by the Company or Purchaser and reasonable attorneys’
fees.

 

(f)            The Parties intend that each of the covenants in Sections 4.1(a),
(b), (c) and (d) shall be deemed to be a separate covenant and, in the event
that one or more of the covenants are deemed unenforceable in whole or in part,
the other covenants shall remain fully valid and enforceable.

 

(g)           The covenants of the Seller Individuals contained in this
Section 4.1 are independent of any covenants of the Company or Purchaser
contained herein or in any other document or instrument delivered in connection
herewith or pursuant hereto, and any breach by the Company or Purchaser of any
such covenant shall not justify any breach by the Seller Individuals of their
covenants under this Section 4.1.

 

(h)           In consideration of the covenants of the Seller Individuals
contained in this Section 4.l, Purchaser shall pay each Seller Individual at
Closing the amounts listed on Schedule 4.1(h),  which amounts shall be deducted
from the cash purchase price payable to such Seller Individual; provided,
however, that the Parties agree that such amounts shall not be deemed to
represent Purchaser’s damages in the event that the covenants of the Seller
Individuals contained in this Section 4.1 are breached;

 

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(i)            It is specifically agreed that the respective Noncompete Terms
stated at the beginning of this Section 4.1 as they apply to each Seller
Individual, during which the agreements and covenants of the Seller Individuals
made in this Section 4.1 shall be effective, shall be computed by excluding from
such computation any time during which such Seller Individual is in violation of
any provision of this Section 4.1.

 

SECTION 4.2             Confidential Information.  Except in response to legal
process (where Sellers have, to the extent permitted by law, promptly notified
the Company so that it may seek appropriate relief), Sellers shall not divulge,
furnish, or make accessible to anyone or use in any way any confidential or
secret knowledge or information of the Company, including, without limitation,
trade secrets, confidential or secret designs, processes, formulae, plans,
devices, or material (whether or not patented or patentable) directly or
indirectly useful in any aspect of the business of the Company, any customer or
supplier lists of the Company, any confidential or secret development or
research work of the Company or any other confidential information or secret
aspects of the business of the Company including with respect to the
transactions contemplated by this Agreement and the Agreement itself.  Sellers
acknowledge that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company, and that any disclosure or other use of such
knowledge or information other than for the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company and Purchaser.

 

SECTION 4.3             Guarantees.  On or before the one hundred twentieth
(120th) day following the Closing, Purchaser will, with Sellers’ full disclosure
and cooperation, cause the Company to obtain a full release of any guarantees of
any Sellers set forth on Schedule 4.3, and from and after the Closing the
Purchaser agrees to indemnify, defend, and hold the Sellers harmless from and
against any claims of any Person made with respect to any of such guarantees to
the extent (but only to the extent) such claims relate to the failure of the
Company or the Purchaser to perform their obligations after the Closing Date.

 

SECTION 4.4             Expenses.  Except for the exceptions set forth on
Schedule 4.4, each Party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated herein, including all fees and
expenses of its Representatives.  Sellers shall be responsible for all expenses
incurred by the Company prior to the Closing in connection with the transactions
contemplated herein.

 

SECTION 4.5             Further Assurances.  From time to time after the
Closing, at a Party’s reasonable request but without further consideration, the
other Party will execute and deliver such other instruments of conveyance and
transfer and take such other action as the other Party may reasonably require to
more effectively vest good and marketable title to the Stock in the Purchaser
and to carry out the intent of this Agreement.

 

SECTION 4.6             Further Consents.  If the transfer of the Stock to
Purchaser at the Closing without the consent or approval of a third person would
constitute a breach of any Contract or other obligation to which the Company is
a party or by which the Company or any of its properties are bound or create in
any other Person the right to declare a default in respect of, or to cancel or
terminate, any such Contract or other obligation or any Governmental

 

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Authorization, license, permit, franchise, or other right of the Company, and if
such consent or approval (or an effective waiver thereof) is not obtained prior
to the Closing, then Purchaser shall have the right by an instrument executed in
writing and delivered to Sellers at the Closing to cause the transfer of the
Stock not to carry with it an assignment of the item or items that necessitate
such consent or approval until such consent or approval (or an effective waiver
thereof) shall have been obtained.  In such an event, Sellers will continue
after Closing to use their commercially reasonable efforts promptly to obtain
such consents and approvals, or effective waivers thereof, and will cooperate
with Purchaser in any reasonable arrangement designed to provide Purchaser with
the benefit of the Company’s rights thereunder.

 

SECTION 4.7             Cooperation; Access to Records.  The Parties shall
reasonably cooperate with each other and provide each other reasonable access to
books, records, and personnel for the purpose of preparing Tax Returns and
defending any Tax claim or audit.

 

SECTION 4.8             Employees.  Sellers, the Company, and their respective
Affiliates have not and will not take any actions inconsistent with maintaining
the availability of the services of the Company’s employees following the
Closing.

 

SECTION 4.9             Accounts Receivable.  Purchaser hereby covenants and
agrees to use its reasonable best efforts to cause the Company (i) to collect
all outstanding accounts receivable, notes receivable and employee receivables
of the Company as of the Closing Date (the “Accounts Receivable”) during the
24-month period following the Closing Date and (ii) to bill and collect all
retainage of the Company as of the Closing Date during the 36-month period
following the Closing Date.  In the event that during the 36-month period
following the Closing Date, Purchaser or the Company receives payment with
respect to any receivable that was written off in full as of the Closing Date
and such payment exceeds $35,000, Purchaser shall, within fifteen (15) days
thereafter, pay the amount thereof to Sellers in accordance with their
respective percentage interests set forth on Schedule 1.2(a).  Any amount owed
but not paid within such fifteen (15) business day period shall bear interest at
an annual rate of six percent (6%) from the end of such period until paid.

 

SECTION 4.10           Covenants by Webbs.  Howard W. Webb and Howard M. Webb
each join in the covenants set forth in Sections 4.2 through 4.9 and shall have
the same rights and obligations thereunder as if they were Sellers.

 

ARTICLE V
INDEMNIFICATION

 

SECTION 5.1             Waiver of Right to Indemnification.  The waiver of any
condition based on the accuracy of any representation or warranty (as may be
modified by any Disclosure Schedule), or on the performance of or compliance
with any covenant or obligation, will not affect the right to indemnification in
accordance with the provisions of this Article V, unless such waiver shall
expressly state that it includes a waiver of rights to indemnification under
this Article V.

 

SECTION 5.2             Indemnification and Payment of Damages by Sellers.  From
and after the Closing, Sellers will indemnify, defend, and hold harmless
Purchaser, the Company, and

 

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their respective Representatives and Affiliates (collectively, the “Purchaser
Indemnified Persons”) from, against, and in respect of any and all Damages
sustained or incurred by any Purchaser Indemnified Person to the extent relating
to, resulting from, or arising out of:

 

(a)           any breach of or inaccuracy in any representation or warranty made
by Sellers in Article II of this Agreement and its accompanying schedules:

 

(b)           any breach or nonfulfillment by any Seller or Seller Individual of
any covenant or obligation of any Seller in this Agreement or any certificate
delivered hereunder;

 

(c)           any claim by Harris Williams & Co., or without limitation, any
other Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such
Person with any Seller or the Company (or any of their respective
Representatives) in connection with any of the transactions contemplated in this
Agreement;

 

(d)           any payments, claims or Proceedings resulting from, arising out
of, relating to, or caused by any Liability of the Company for any Taxes of the
Company with respect to any Tax year or portion thereof ending on or before the
Closing Date (or for any Tax year beginning before and ending after the Closing
Date to the extent allocable (determined in a manner consistent with Section 6.2
hereof) to the portion of such period beginning before and ending on the Closing
Date) and to the extent such Taxes are not reflected in the reserve for Tax
Liability on the Company’s books and records;

 

(e)           any claims or Proceedings resulting from, arising out of, relating
to or caused by any Liability of any Seller related to Sellers’
relationship/arrangements under the Special Equity Incentive Plan;

 

(f)            net of reserves reflected in the Closing Balance Sheet, the
collectability within the 36-month period following the Closing Date of the
unbilled retainage of the Company as of the Closing Date; provided that this
indemnity shall not apply to retainage, or any portion thereof, to the extent it
is the subject of dispute (other than arising out of an ability to pay) between
the Company and the customer and provided, further, that any such retainage that
is reimbursed by Sellers to Purchaser under this Section 5.2(f) shall, at the
request of Sellers, be assigned by Purchaser to Sellers; or

 

(g)           net of reserves for bad debts and write-offs reflected in the
Closing Date Balance Sheet, the collectability within the 24-month period
following the Closing Date of the Accounts Receivable as of the Closing Date;
provided that any such receivables that are reimbursed by Sellers to Purchaser
under this Section 5.2(g) shall, at the request of Sellers, be assigned to
Sellers.

 

To the extent that Sellers become obligated to make any monetary payment to
Purchaser, Purchaser retains a reasonable right of offset in the principal of
the Note.  The right of offset is limited to a reasonable estimate of damages
and will be applied to payments otherwise due under the Note in the inverse
order of maturity, such that later due payments will be offset first. Interest
will continue to accrue on any offset from the Note that later proves to be
unneeded.

 

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With respect to indemnification matters not involving Proceedings brought or
asserted by third parties, within ten (10) days after receipt of written
notification from the Purchaser Indemnified Persons supported by reasonable
documentation setting forth the nature of the circumstances entitling the
Purchaser Indemnified Persons to indemnity hereunder, Sellers, at no cost or
expense to the Purchaser Indemnified Persons, shall diligently commence
resolution of such matters in a manner reasonably acceptable to the Purchaser
Indemnified Persons and shall diligently and timely prosecute such resolution to
completion.  If Sellers, within ten (10) days after their receipt of such notice
(or such shorter time as may be necessary under the circumstances), fail to
diligently commence resolution of such matters in a manner reasonably acceptable
to the Purchaser Indemnified Persons, the Purchaser Indemnified Persons shall
have the right to undertake all appropriate and reasonable actions to resolve or
otherwise address such matters at the sole expense of Sellers.  If Sellers
dispute any Liability in connection with such claim, Sellers shall pay any
undisputed part of such Liability and Purchaser and Sellers shall have thirty
(30) days to resolve any remaining dispute.  If litigation or any other
Proceeding is commenced between Sellers and any Purchaser Indemnified Person,
the prevailing party in such litigation or other Proceeding shall be entitled to
recover all reasonable costs and expenses incurred in connection with such
litigation or other Proceeding, including, without limitation, attorneys’ fees. 
If litigation or any other Proceeding is commenced or threatened by any third
party for which the Purchaser Indemnified Persons are entitled to
indemnification under this Section 5.2, the provisions of Section 5.4 shall
control.  Any payments owed by Sellers to the Purchaser Indemnified Persons
under this Section 5.2 may, at Sellers’ election, be satisfied by a reduction in
the principal amount of the Note, with such reduction being applied to principal
payments otherwise due under the Note in the inverse order of maturity, such
that later due payments will be offset first.

 

SECTION 5.3             Indemnification by Purchaser.  From and after the
Closing, Purchaser will indemnify, defend, and hold harmless each Seller and his
Representatives and Affiliates (collectively, the “Seller Indemnified Persons”)
from, against and in respect of any and all Damages sustained or incurred by any
Seller Indemnified Person to the extent relating to, resulting from or arising
out of:

 

(a)           any breach of or inaccuracy in any representation or warranty made
by Purchaser in Article III of this Agreement;

 

(b)           any breach or nonfulfillment by Purchaser of any covenant or
obligation of Purchaser (or the Company after Closing, as applicable) in this
Agreement; or

 

(c)           any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Purchaser (or any of its
Representatives) in connection with any of the transactions contemplated herein;
or

 

With respect to matters not involving Proceedings brought or asserted by third
parties, within ten (10) days after receipt of written notification from the
Seller Indemnified Persons supported by reasonable documentation setting forth
the nature of the circumstances entitling the Seller Indemnified Persons to
indemnity hereunder, Purchaser, at no cost or expense to the Seller Indemnified
Persons, shall diligently commence resolution of such matters in a manner

 

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reasonably acceptable to the Seller Indemnified Persons and shall diligently and
timely prosecute such resolution to completion.  If Purchaser, within ten
(10) days after its receipt of such notice (or such shorter time as may be
necessary under the circumstances), fails to diligently commence resolution of
such matters in a manner reasonably acceptable to the Seller Indemnified
Persons, the Seller Indemnified Persons shall have the right to undertake all
appropriate and reasonable actions to resolve or otherwise address such matters
at the sole expense of Purchaser to the extent such matters are subject to
indemnification under this Section 5.3.  If Purchaser disputes its Liability in
connection with such claim, it shall pay any undisputed part of such Liability
and Sellers and Purchaser shall have thirty (30) days to resolve any remaining
dispute.  If litigation or any other Proceeding is commenced between Purchaser
and any Seller Indemnified Person, the prevailing party in such litigation or
other Proceeding shall be entitled to recover all reasonable costs and expenses
incurred in connection with such litigation or other Proceeding, including,
without limitation, attorneys’ fees.  If litigation or any other Proceeding is
commenced or threatened by any third party for which the Seller Indemnified
Persons are entitled to indemnification under this Section 5.3, the provisions
of Section 5.4 shall control.

 

SECTION 5.4             Notice and Defense of Third Party Claims.  If any
Proceeding (including any Proceeding relating to Taxes) shall be brought or
asserted under this Article against an indemnified party or any successor
thereto (the “Indemnified Person”) in respect of which indemnity may be sought
under this Article from an indemnifying person or any successor thereto (the
“Indemnifying Person”), the Indemnified Person shall give prompt written notice
of such Proceeding to the Indemnifying Person; provided that failure of an
Indemnified Person to give prompt written notice of any claim shall not release,
waive or otherwise affect the Indemnifying Person’s obligations with respect
thereto except to the extent that the Indemnifying Person is adversely affected
in its ability to defend against such claim or is otherwise prejudiced thereby. 
The Indemnifying Person shall have the right to assume the defense and
reasonable control thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Person and the payment of all expenses so long
as the Indemnifying Person gives written notice to the Indemnified Person within
fifteen (15) days after the Indemnified Person has given the Indemnifying Person
notice of the Proceeding that the Indemnifying Person will indemnify the
Indemnified Person from and against the entirety of any and all Damages that the
Indemnified Person may suffer resulting from, arising out of, relating to or
caused by the Proceeding.  In no event shall any Indemnified Person be required
to make any expenditure or bring any cause of action to enforce the Indemnifying
Person’s obligations and Liability under and pursuant to the indemnifications
set forth in this Article.  The Indemnified Person shall have the right to
employ separate counsel in any of the foregoing Proceedings and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Person unless the Indemnified Person has been
advised in writing by counsel that there exist actual or potential conflicts of
interest that make representation of the Indemnifying Person and the Indemnified
Person by the same counsel inappropriate.  The Indemnified Person’s right to
participate in the defense or response to any Proceeding should not be deemed to
limit or otherwise modify its obligations under this Article.  In the event that
the Indemnifying Person, within five (5) days after notice of any such
Proceeding, fails to assume the defense thereof, the Indemnified Person shall
have the right to undertake the defense, compromise or settlement of such
Proceeding for the account and at the expense of the Indemnifying Person,
subject to the right of the Indemnifying Person to assume the defense and
reasonable control of such Proceeding with counsel reasonably satisfactory to
the Indemnified Person at any time prior to the settlement,

 

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compromise or final determination thereof. If the Indemnifying Person assumes
the defense of a Proceeding, the Indemnifying Person shall not, without the
Indemnified Person’s prior written consent, settle or compromise any Proceeding
or consent to the entry of any judgment with respect to any Proceeding unless
such settlement, compromise or judgment; (i) requires solely the payment of
money damages by the Indemnifying Person and such damages are paid by the
Indemnifying Person, (ii) includes as an unconditional term thereof the release
by the claimant or the plaintiff of the Indemnified Person from all liability in
respect of such Proceeding, (iii) involves no finding or admission of any
liability of the Indemnified Person or violation of any Legal Requirement or the
rights of any Person, and (iv) does not provide for any injunction or place any
restriction on the operation of the Business or any Indemnified Person.  The
Indemnified Person shall not be entitled to recovery from the Indemnifying
Person with respect to any compromise or settlement of any Proceeding effected
by the Indemnified Person without the consent (which may not be unreasonably
withheld) of the Indemnifying Person; provided that failure of the Indemnifying
Person to respond to a request for consent within twenty (20) days following
receipt of written notice thereof shall be deemed to constitute consent.

 

SECTION 5.5             Payment; Interest.  The Indemnifying Party shall make
any payment required to be made under this Article in cash promptly after the
date (the “Payment Due Date”) that is the later of (i) the date such payment
obligation becomes undisputed or resolved by a non-appealable judicial
determination, and (ii) the date the Indemnifying Person receives written demand
therefor from the Indemnified Person accompanied by reasonable documentation. 
Any amounts required to be paid by an Indemnifying Party under this Article that
are not paid within thirty (30) business days of the Payment Due Date shall
thereafter be deemed delinquent, and the Indemnifying Party shall pay to the
Indemnified Party immediately upon demand, interest at the rate of six percent
(6%) per annum, not to exceed the maximum non-usurious rate allowed by
applicable law, from the date such payment becomes delinquent to the date of
payment of such delinquent sums.

 

SECTION 5.6             Limitations.  Notwithstanding anything to the contrary
contained in this Agreement or in any certificate, schedule, statement, document
or instrument furnished hereunder, Sellers’ and Purchaser’s obligations of
indemnification are limited as set forth in this Section 5.6.

 

(a)           Basket.  The Parties shall not be entitled to indemnification
pursuant to this Agreement unless and until the aggregate of all Damages with
respect to any such indemnification matters exceeds the amount set forth on
Schedule 5.6 (the “Basket Amount”), in which event the Party or person seeking
indemnity may recover all Damages incurred in excess of the Basket Amount from
the first dollar above the Basket Amount.  With respect to Sellers, the Basket
Amount shall be allocated among them in accordance with their respective
percentage interests as set forth on Schedule 1.2(a).

 

(b)           Cap.  Sellers’ liability for Damages pursuant to this Article V
shall not exceed, in the aggregate, the amount set forth on Schedule 5.6, which
cap shall be allocated among Sellers in accordance with their respective
percentage interests as set forth on Schedule 1.2(a).

 

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(c)           Per-Claim Threshold.  No representation or warranty made in
Article II or III shall be deemed to be breached and no claim for
indemnification therefore may be made unless the Damages resulting from or
arising out of any individual circumstance or occurrence exceed the amount set
forth on Schedule 5.6 (the “Per Claim Threshold”).  If such Damages exceed the
Per Claim Threshold, the full amount thereof (after taking into account the
limitations set forth in Sections 5.6(e), (f), (g) and (h)) shall be taken into
account in determining whether, and the extent to which, the Basket Amount has
been met and, if the Basket Amount has been met, shall be subject to
indemnification under this Article except to the extent limited by this
Section 5.6.

 

(d)           Survival.  The representations and warranties of the Parties
contained in this Agreement shall survive the Closing Date for twenty-one (21)
months; provided, however, that the representations and warranties contained in
Sections 2.1, 2.2, 2.3, 2.11, 2.23, 2.25 (only with respect to Indebtedness for
borrowed money), 3.1, 3.2 and 3.3 shall survive until the expiration of the
applicable statute of limitations thereto, at which time they shall expire (as
applicable, the “Survival Date”); and provided further that a claim for
indemnification pursuant to Section 5.2(a) or Section 5.3(a) shall survive the
applicable Survival Date if written notice, given in good faith, of the specific
claim (including appropriate details) thereof is given to Sellers or Purchaser,
as the case may be, on or before the applicable Survival Date.

 

(e)           Insurance; Tax Effect.  The amount of Damages that the Purchaser
Indemnified Persons shall be entitled to recover under Section 5.2 shall be
determined (i) net of any amounts paid by any third-party insurance carrier to
the indemnified party with respect to such Damages and (ii) after taking into
account any Tax benefit realized by the Purchaser Indemnified Persons with
regard to such Damages.

 

(f)            Change in Accounting or Law.  No Party shall be liable for
Damages suffered by an indemnified person to the extent such Damages arose from
(i) a change in accounting policy or practice made after the Closing that is
required by GAAP or any change in Law or (ii) any legislation not in force on
the Closing Date.

 

(g)           Actions of Indemnified Persons.  No Party shall be liable for
Damages suffered by an indemnified person to the extent such Damages result from
a failure on the part of any indemnified person or its Affiliates to exercise
good faith in not jeopardizing or prejudicing the interests of the indemnifying
person or otherwise arises out of any action wrongfully taken or omitted to be
taken by an indemnified person or its Affiliates.

 

(h)           Incidental or Consequential Damages.  Neither Purchaser nor
Sellers shall be liable for any incidental or consequential Damages, except if
such Damages are awarded in a third-party claim for which such Party has an
indemnification obligation.

 

(i)            Exceptions.  Notwithstanding the foregoing, the limitations set
forth in subsections (a), (b) and (c) of this Section 5.6 shall not apply to
claims made pursuant to, or as a result of a breach of the payment obligations
under, Sections 1.3, 1.4, 4.9, 5.2(c), 5.2(d), 5.2(f) and 5.2(g) of this
Agreement.

 

SECTION 5.7             Exclusive Remedy.  Except with respect to claims of, or
causes of

 

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action arising from, fraud or criminal misconduct, and subject to a Party’s
right to seek injunctive relief, as appropriate, to enforce any covenant made by
another Party hereunder, and except for any additional remedies provided to
Sellers and Purchaser under the Note and the Earn-Out Agreement following the
Closing, the indemnification provided in this Article V shall constitute the
exclusive remedy with respect to (i) a breach of the representation, warranties,
covenants and agreements contained in this Agreement, (ii) any events,
circumstances or conditions that are the subject of the representations,
warranties, covenants and agreements contained in this Agreement, (iii) any
other events, circumstances or conditions relating to the ownership or operation
of the Company or its business prior to the Closing and whether any claims or
causes of action asserted with respect to such matters are brought in contract,
tort or any other legal theory whatsoever.

 

SECTION 5.8             Indemnification Obligations of Webbs.  Howard W. Webb
guarantees the performance by HWWJR LC of its obligations under this Article V
and, in doing so, shall be entitled to all of the rights and defenses that HWWJR
LC may have.  Howard M. Webb guarantees the performance by HMWSR LC of its
obligations under this Article V and, in doing so, shall be entitled to all of
the rights and defenses that HMWSR LC may have.

 

ARTICLE VI
TAX MATTERS

 

SECTION 6.1             Tax Periods Ending on or Before the Closing Date.  At
the Company’s expense, Sellers shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company for all periods ending on or
prior to the Closing Date that are filed after the Closing Date, including but
not limited to, any short-period Tax return resulting from the transactions
contemplated herein.  Such Tax Returns shall be prepared in a manner consistent
with the prior practice of the Company.  Sellers shall provide copies of such
Tax Returns to Purchaser and its authorized representatives for review at least
thirty (30) days prior to the due date and shall make such revisions to such Tax
Returns as are reasonably requested by Purchaser.  To the extent permitted by
law, Sellers shall include any income, gain, loss, deduction, or other items for
such periods on their Tax Returns in a manner consistent with the Schedule K-1s
prepared by (or caused to be prepared by) Sellers for such periods.  Any Tax
deduction associated with the Special Equity Incentive Plan prior to Closing
will inure to the benefit of Sellers.

 

SECTION 6.2             Tax Periods Beginning Before and Ending After the
Closing Date.  Purchaser shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company for Tax periods that begin before the
Closing Date and end after the Closing Date (“Straddle Period”).  Any Tax Return
for any Straddle Period shall be prepared in a manner and utilizing judgments
consistent with the Company’s prior practice, unless such practices, manner or
judgments are unreasonable or improper.  Purchaser shall provide Sellers and
their authorized representatives with copies of such Tax Returns at least thirty
(30) days prior to the due date and shall make such revisions to such Tax
Returns as are reasonably requested by Sellers.  Sellers shall pay to Purchaser
within thirty (30) days of the receipt of a request by Purchaser, accompanied by
supporting documentation, an amount equal to the excess of (a) the portion of
such Taxes that relates to the portion of such Tax period ending on the Closing
Date over (b) the Taxes reflected in any reserve for Tax Liability contained in
the Company’s books and records.

 

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For purposes of this Section 6.2, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Straddle Period, the portion of such Tax
that relates to the portion of such Straddle Period ending on the Closing Date
shall be (i) in the case of any Taxes (including real property Taxes and other
property Taxes) other than Taxes based upon or related to income or receipts (or
imposed in connection with any sale or other transfer or assignment of property
or any other specifically identifiable transaction or event), be deemed to be
the amount of such Tax for the entire Straddle Period multiplied by a fraction,
the numerator of which is the number of days in the Straddle Period ending on
the Closing Date and the denominator of which is the number of days in the
entire Straddle Period, and (ii) in the case of any Tax based upon or related to
income or receipts (including franchise Taxes) or imposed in connection with any
sale or other transfer or assignment of property or any other specifically
identifiable transaction or event, the Tax payable by Seller shall be deemed
equal to the amount that would be payable if the relevant Straddle Period ended
on the Closing Date based on an interim closing of the books as of the end of
the Closing Date.  All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company.

 

SECTION 6.3             Cooperation on Tax Matters.

 

(a)           Purchaser, the Company, and Sellers shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Article VI and any audit, litigation or
other Proceeding with respect to Taxes.  Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
Proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  The Company and Purchaser shall (i) retain all books and records
with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Purchaser or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or
Purchaser, as the case may be, shall allow the Sellers to take possession of
such books and records.

 

(b)           Purchaser and Sellers further agree, upon request, to use their
reasonable efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).

 

(c)           Purchaser and Sellers further agree, upon request, to provide the
other party with all information that either party may be required to report
pursuant to Section 6043A of the Code and the Treasury Regulations promulgated
thereunder.

 

SECTION 6.4             Transfer Taxes.  All transfer, documentary, filing,
recordation and other similar Taxes (including all real estate transfer Taxes
and conveyance and recording fees, if any), that may be imposed upon, or payable
or collectible or incurred in connection with, this Agreement and the
transactions contemplated hereby shall be borne fifty percent (50%) by

 

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Purchaser and fifty percent (50%) by Sellers, and the Party required by
applicable law shall file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, filing, recordation, and other
similar Taxes, and, if required by applicable law, the other Parties shall, and
shall cause their Affiliates to, join in the execution of any such Tax Returns
and other documentation.  The expense of such filings shall be paid fifty
percent (50%) by Purchaser and fifty percent (50%) by Sellers.

 

SECTION 6.5             No Code Section 338 Election. Neither Purchaser nor the
Company shall make any election under Code §338 with respect to the transactions
contemplated by this Agreement.

 

SECTION 6.6             Refunds and Tax Benefits.  To the extent not reflected
in the Closing Date Balance Sheet, any Tax refunds that are received by
Purchaser or the Company, and any amounts credited against Tax to which
Purchaser or the Company become entitled, that relate to Tax periods or portions
thereof ending on or before the Closing Date, allocated in a manner consistent
with Section 5.2(d), shall be for the account of Sellers, and Purchaser shall
pay over to Sellers any such Tax refund or the amount of any such credit within
five (5) business days after receipt or entitlement thereto.  In addition, to
the extent that a claim for Tax refund or a proceeding results in a payment or
credit against Tax by a taxing authority to Purchaser or the Company of any
amount accrued on the Closing Balance Sheet, Purchaser shall pay such amount to
Sellers within five business days after receipt or entitlement thereto. 
Notwithstanding the foregoing, Purchaser shall receive the tax benefit relating
to tax deductible goodwill on the books as of Closing.

 

SECTION 6.7             Tax Treatment of Transactions. The Parties acknowledge
and agree that the purchase and sale of the Stock as contemplated by this
Agreement will be treated as a “stock purchase” transaction for federal and
state income tax purposes and no election will be made by the Parties pursuant
to Code §338(h)(10) or §338(g).  The acquisition of the Stock by Purchaser will
terminate the Company’s S election pursuant to Code §1361(b)(1)(B) and
§1362(d)(2) and result in an “S Termination Year” for the Company (as defined in
Code §1362(e)(4)).  The S Termination Year will be divided into two short tax
years — the “S Short Year” (as defined in Code §1362(e)(1)(A)) that ends on the
day immediately before the Closing Date, and the C Short Year (as defined in
Code §1362(e)(1)(B)) that begins on the Closing Date.  Because more than 50% of
the Stock is being transferred to Purchaser in the S Termination Year, the
Company will utilize the “closing of the books” method to calculate and report
its Taxes for the S Short Year and the C Short Year as required by Code
§1362(e)(6)(D).  Howard W. Webb has transferred  17,840.14926 of his Shares to
Mitchell Frederick Haddon, Gary Jon Warness, and Curtis Michael Wood
(collectively, the “Company Executives”) before the Closing Date in satisfaction
of the Company’s obligation under the Special Equity Incentive Plan to make
payment to the Company Executives.  Because this transfer has occurred prior to
the last day of the S Short Year, any deduction that inures to the Company
pursuant to Code §83 and Treasury Regulations §1.83-6(d)(1) or other applicable
provision of the Code will inure to the Company during its S Short Year and be
passed through to its S shareholders.  Purchaser agrees that this deduction will
be reflected on the Company’s tax return for its S Short Year and passed through
to its S shareholders as of the last day of the S Short Year.  The employees’
portion of the Company’s required tax withholding obligation that results from
the transfer of Stock by Howard W. Webb to the Company Executives as described
above has been satisfied by each Company Executive

 

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executing and delivering to the Company a promissory note in the amount of his
required tax withholding, such promissory note to being due and payable in full
at the time of the sale of his Stock to Purchaser.  The promissory notes will be
paid by Purchaser paying to the Company Executives a “net” amount of the
Purchase Price allocable to their Stock (reduced by the amount of their
promissory notes) and by Purchaser depositing with the Company the amounts
required to satisfy the promissory notes.  Purchaser agrees that Howard W. Webb
and Howard M. Webb will have no liability for such tax withholdings.  In
addition, as permitted by Rev. Proc. 2004-53, Sellers will prepare the IRS W-2
Forms for the Company Executives reflecting that the Company has paid this
compensation to the Company Executives while it was an S corporation and the S
corporation shareholders will receive 100% of the deduction for such
compensation.  Because the Company Executives have become shareholders of the
Company before the Closing Date, pursuant to Treasury Regulations
§1.1377-1(a) the appropriate pro rata shares of the deduction resulting from the
Special Equity Incentive Plan award will be allocated by the Company among
Howard W. Webb, Howard M. Webb and the Company Executives.  The Company will
make appropriate tax withholdings for tax purposes as required by applicable
law, and such withholdings will be properly taken into account for purposes of
the Working Capital Adjustment pursuant to Section 1.3.  Purchaser agrees to
take no action that is inconsistent with the foregoing tax treatment of these
transactions.

 

SECTION 6.8             Other Tax Matters. Without the prior written consent of
the other Party, no Party or its Affiliates shall make or change any election,
change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment relating to the Company, surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment relating to the Company, or take any other similar
action relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent, or other action would have the effect of increasing the Tax liability
of the Company for any prior or subsequent Tax periods or portions thereof
whether before or after the Closing Date.  Notwithstanding the foregoing, the
Parties agree that the Company, as permitted by Revenue Procedure 2008-52,
Section 6, will change to a permissible accounting method for the purpose of
taking on its final S tax return the amortization deduction for good will of the
Company that should have been taken in prior tax years of the Company.

 

SECTION 6.9             Tax Proceedings. In the case of any audit, examination
or other proceeding with respect to Taxes (a “Tax Proceeding”) for which Sellers
are or may be liable pursuant to this Agreement, Sellers may, upon written
notice to Purchaser (such written notice to be provided within thirty (30) days
after notice of the Tax Proceeding has been given to Sellers, or any of them),
assume and control the defense of such Tax Proceeding at their own cost and
expense.  If Sellers elect to assume the defense of any such Tax Proceeding,
notwithstanding anything to the contrary contained herein, Sellers shall not
enter into any settlement with respect to any such Tax Proceeding (if such
settlement would affect the Company or Purchaser) without Purchaser’s prior
written consent and, at its own cost and expense, Purchaser shall have the right
to also participate in the defense of such Tax Proceeding, and Sellers will
fully cooperate with Purchaser’s participation.  Sellers shall keep Purchaser
informed of all material developments and events relating to such Tax Proceeding
(including promptly forwarding copies to Purchaser of any related correspondence
sent to any Governmental Authority).  In connection with the

 

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contest of any Tax Proceeding that relates to (i) any taxable period beginning
on or after the Closing Date; (ii) any Tax Proceeding that Sellers have the
ability to control but do not timely elect to control pursuant to this
Section 6.9; and (iii) any Tax claim that would reasonably be expected to have a
material adverse effect on the Company or Purchaser for any taxable periods
ending after the Closing Date, such Tax Proceeding shall be controlled by
Purchaser, and Sellers agree to cooperate fully with Purchaser in pursuing such
contest but at Purchaser’s sole expense, except as expressly provided herein to
the contrary.

 

ARTICLE VII
MISCELLANEOUS

 

SECTION 7.1             Entire Agreement; Assignment.  This Agreement, including
the Disclosure Schedules and exhibits hereto, the documents, instruments and
schedules referred to herein and all other documents dated as of the date hereof
and on the Closing, including but not limited to the Earn-out Agreement and the
Notes, constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, including but not limited to the letter
agreement dated May 14, 2010 by and between the Parties.  This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, however, that Purchaser may
assign its rights under this Agreement to (i) any Affiliate of Purchaser, or
(ii) its lenders as collateral, provided further, however, that in no event
shall any such assignment relieve Purchaser of its obligations hereunder.

 

SECTION 7.2             Reformation and Severability.  The provisions of this
Agreement shall be separable and a determination that any provision of this
Agreement is invalid, illegal, unenforceable or void shall not affect the
validity, legality or enforceability of any other provision of this Agreement. 
In case any provision of this Agreement shall be invalid, illegal, unenforceable
or void, it shall, to the extent possible, be modified and/or interpreted in
such manner as to be valid, legal and enforceable, but so as to most nearly
retain the intent of the Parties, and if such modification is not possible, such
provision shall be severed from this Agreement, and in either case, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.  Any court of
competent jurisdiction is authorized and directed by the parties to enforce any
otherwise invalid, illegal or unenforceable provision in part, to modify it, to
enforce it only to a degree and not fully, or otherwise to enforce that
provision only in a manner and to an extent, or for a shorter period of time,
that renders the provision valid or enforceable.  The intent of the parties is
that this Agreement be enforceable and enforced to the maximum extent possible
after excising (or deeming excised) all invalid or unenforceable provisions,
whether or not the remaining provisions are grammatically correct.

 

SECTION 7.3             Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile (with receipt confirmed)
or by registered or certified mail (postage prepaid, return receipt requested)
as follows:

 

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if to Purchaser:

 

Comfort Systems USA, Inc.

Office of the General Counsel

675 Bering, Suite 400

Houston, TX 77057

(713) 830-9659 (fax)

 

and if to Sellers:

 

Howard W. Webb

3313 Caracal Drive

Ft. Pierce, FL 34949

 

Howard M. Webb

16 Harbour Isle Drive West

Ph 4 Bldg 16

Ft. Pierce, FL 34949

 

Mitchell Frederick Haddon

c/o ColonialWebb Contractors Company

2820 Ackley Avenue

Richmond, VA 23228

 

Gary Jon Warness

c/o ColonialWebb Contractors Company

2820 Ackley Avenue

Richmond, VA 23228

 

Curtis Michael Wood

c/o ColonialWebb Contractors Company

2820 Ackley Avenue

Richmond, VA 23228

 

With a copy (that shall not constitute legal notice) to:

 

Thomas P. Rohman, Esq.

McGuireWoods LLP

One James Center

901 E. Cary Street

Richmond, VA 23219

 

or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).

 

SECTION 7.4             Sellers’ Percentage Interests.  The Parties hereby agree
that any liabilities of Sellers, whether pursuant to Article V or otherwise, for
jointly made representations,

 

35

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warranties or covenants shall be apportioned in accordance with the respective
percentage interests of each Seller as set forth on Schedule 1.2(a).

 

SECTION 7.5             Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the COMMONWEALTH of VIRGINIA, without
regard to principles of conflicts of law thereof.

 

SECTION 7.6             Gender; “Including” is Not Limiting; Descriptive
Headings.  The masculine and neuter genders used in this Agreement each includes
the masculine, feminine and neuter genders, and the singular number includes the
plural, each where appropriate, and vice versa.  Wherever the term “including”
or a similar term is used in this Agreement, it shall be read as if it were
written “including by way of example only and without in any way limiting the
generality of the clause or concept referred to.”  The descriptive headings are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

 

SECTION 7.7             Parties in Interest.  This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.

 

SECTION 7.8             Counterparts.  This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.  Facsimile or scanned and emailed (i.e., Portable Document Format
(pdf)) transmission of any signed original document or retransmission of any
signed facsimile or scanned and emailed (pdf) transmission shall constitute
enforceable original documents and will be deemed the same as delivery of an
original.  At the request of any party, the parties will confirm facsimile or
scanned and emailed transmission by signing a duplicate original document.

 

SECTION 7.9             Incorporation by Reference.  Any and all schedules
(including the Disclosure Schedules), exhibits, annexes, statements, reports,
certificates or other documents or instruments referred to herein or attached
hereto are incorporated herein by reference hereto as though fully set forth at
the point referred to in the Agreement.

 

SECTION 7.10           Consent to Jurisdiction; Waiver of Jury Trial.  The
Parties hereto irrevocably submit to the jurisdiction of the United States
District Court for the Eastern District of Virginia, and/or any state court of
the State of Virginia located in Henrico County, Virginia, in any action, suit
or proceeding brought by or against such party in connection with, arising from
or relating to this Agreement, the transactions contemplated hereby and any
document contemplated herein or otherwise relating hereto, and each party hereby
waives and further agrees not to assert as a defense in any such suit, action or
proceeding any claim that such party is not personally subject to the
jurisdiction of any such courts, that the venue of the suit, action or
proceeding is brought in an inconvenient forum or that this Agreement or the
subject matter hereof may not be enforced in or by such courts.  THE PARTIES
HEREBY WAIVE IRREVOCABLY ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN
CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED

 

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HEREBY OR ANY DOCUMENT CONTEMPLATED HEREIN OR OTHERWISE RELATED HERETO.

 

SECTION 7.11           Construction.  The Parties have participated jointly in
the negotiation and drafting of this Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of this
Agreement, and the Parties agree to mutually negotiate and draft any amendments
necessary to conform the Agreement to the original intent of the Parties.

 

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day and year first above written.

 

 

 

COMFORT SYSTEMS USA, INC.

 

 

 

 

 

By:

/s/ William George

 

 

William George

 

Its:

E.V.P.

 

 

 

 

 

 

 

SELLERS:

 

 

 

HWWJR LC

 

 

 

By:

/s/ Howard W. Webb

 

 

Howard W. Webb

 

Its:

Sole Manager and Member

 

 

 

 

HMWSR LC

 

 

 

By:

/s/ Howard M. Webb

 

 

Howard M. Webb

 

Its:

Sole Manager and Member

 

 

 

 

 

 

/s/ Mitchell F. Haddon

 

 

Mitchell Frederick Haddon, individually

 

 

 

 

 

 

 

 

/s/ Gary Jon Warness

 

 

Gary Jon Warness, individually

 

 

 

 

 

 

 

 

/s/ Curtis M. Wood

 

 

Curtis Michael Wood, individually

 

 

 

 

 

 

 

 

/s/ Howard W. Webb

 

 

Howard W. Webb, individually, solely with respect to Articles IV and V

 

Signature Page SPA

 

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

 

 

 

/s/ Howard M. Webb

 

 

Howard M. Webb, individually, solely with respect to Articles IV and V

 

Signature Page SPA

 

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EXHIBIT A

DEFINITIONS

 

“Accounts Receivable” has the meaning given to it in Section 4.9.

 

“Accrual Adjustment” has the meaning given to it in Section 1.4(a).

 

“Accrual Analysis” has the meaning given to it in Section 1.4(a).

 

“Actuary” has the meaning given to it in Section 1.3(c).

 

“Adjustment Date” has the meaning given to it in Section 1.4(a).

 

“Affiliate” as used in this Agreement means, with respect to (i) any Person
that, directly or indirectly, controls, is controlled by or is under common
control with, such Person in question, (ii) any officer, director or shareholder
of such Person in question, or member of the immediate family of such officer,
director or shareholder and (iii) any Person that, directly or indirectly,
controls, is controlled by or is under common control with, any officer,
director or shareholder of such Person in question or member of the immediate
family of such officer, director or shareholder.  For the purposes of the
definition of Affiliate, “control” (including, with correlative meaning, the
terms “controlled by” and “under common control with”) as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

 

“Agreement” has the meaning given to it in the preamble to this Agreement.

 

“Balance Sheet Date” has the meaning given to it in Section 2.27(b).

 

“Basket Amount” has the meaning given to it in Section 5.6(a).

 

“Benefit Plans” has the meaning given to it in Section 2.12(a).

 

“Business Facility” means any real property that the Company currently leases,
owns, manages or operates, and any real property that the Company has leased,
owned, managed or operated during the Period of Sellers’ Ownership.

 

“Closing” has the meaning given to it in Section 1.5.

 

“Closing Date” has the meaning given to it in Section 1.5.

 

“Closing Date Balance Sheet” has the meaning given to it in Section 1.3(b).

 

“Closing Financial Calculations” has the meaning given to it in Section 1.3(d).

 

“Closing Working Capital” has the meaning given to it in Section 1.3(b).

 

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“Code” means the Internal Revenue Code of 1986, as amended.

 

“Colonial” has the meaning given to it in the Recitals to this Agreement.

 

“Company” has the meaning given to it in the Recitals to this Agreement.

 

“Company Executives” has the meaning given to it in Section 6.7.

 

“Contract” means, with respect to any Person, any legally binding agreement,
contract, obligation, promise, commitment, arrangement, understanding or
undertaking or any agreement, contract, obligation, promise, commitment,
arrangement, understanding or undertaking that is reasonably believed to be
commercially necessary to perform even if not legally binding.

 

“Current Assets” as used in the definition of Working Capital shall mean all
current assets of the Company determined in accordance with GAAP applied on a
basis consistent with the Company’s accounting practices (which are not
inconsistent with GAAP), plus all retention receivables even if not payable
within one year plus the full principal amount of, and accrued interest through
the Closing Date under, that certain Confession of Judgment Promissory Note from
Dick Corporation in the principal amount of $2,446,596.60.

 

“Current Liabilities” as used in the definition of Working Capital shall mean
all current liabilities of the Company determined in accordance with GAAP
applied on a basis consistent with the Company’s accounting practices (which are
not inconsistent with GAAP), plus (i) all Indebtedness (whether short or
long-term), if any, that exceeds Five Million Four Hundred Thousand Dollars and
No Cents ($5,400,000.00) and plus (ii) any amounts that are calculated to be
payable in the future but that are calculated on profits for periods prior to
Closing, including a calculation for the partial year of 2010 in accordance with
past practices, that are attributable to the Company’s Special Equity Incentive
Plan, if any, and minus (iii) an amount (not to exceed $570,000) equal to the
accrued liability as of December 31, 2009 for unvested deferred compensation
obligations to Karl U. Wolpert under the Company’s Key Employee Non-Tax
Qualified, Deferred Compensation Plan.

 

“Damages” includes damages, losses, shortages, Liabilities (including, without
limitation, STRICT LIABILITY), payments, obligations, penalties, claims, causes
of action, litigation, demands, judgments, suits, Proceedings, Encumbrances,
Taxes, orders or other determinations by any Governmental Authority, dues,
assessments, fines, costs, disbursements or expenses (including, without
limitation, fees, disbursements and expenses of attorneys, accountants and other
professional advisors and of expert witnesses, costs of investigation, testing,
sampling, monitoring and preparation) or amounts paid in settlement of any kind
or nature whatsoever incurred by an Indemnified Person.

 

“Disclosure Schedules” means the disclosure schedules delivered by Sellers to
Purchaser concurrently with the execution and delivery of this Agreement.

 

“Earn Out” has the meaning given to it in the Earn-Out Agreement.

 

“Earn-Out Agreement” has the meaning given to it in Section 1.2.

 

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“Encumbrance” means any charge, claim, community or other marital property
interest, condition, equitable interest, encumbrance, lien, license, option,
pledge, security interest, right of first offer or refusal, mortgage, right of
way, easement, encroachments, servitude or restriction or covenant of any kind,
including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.

 

“Environmental Claim(s)” means any claim; litigation; demand; action; cause of
action; suit; loss; cost, including attorneys’ fees, diminution in value, and
expert’s fees; damage; punitive damage; fine, penalty, expense, liability
(including STRICT LIABILITY), criminal liability, judgment, governmental or
private investigation and testing; notification of status of being potentially
responsible for clean-up of any facility or for being in violation or in
potential violation of any Requirement of Environmental Law; Proceeding; consent
or administrative orders, agreements or decrees; lien; personal injury or death
of any person; or property damage, whether threatened, sought, brought or
imposed, that is related to or seeks to recover Damages under applicable
Environmental Laws related to, or that seeks to impose liability under
applicable Environmental Laws for:  (i) improper use or treatment of wetlands or
other protected land or wildlife; (ii) noise; (iii) radioactive materials
(including naturally occurring radioactive materials); (iv) explosives;
(v) pollution, contamination, preservation, protection, decontamination,
remediation or clean-up of the air, surface water, groundwater, soil or
protected lands related to Materials of Environmental Concern; (vi) exposure of
persons or property to Materials of Environmental Concern and the effects
thereof; (vii) the release or threatened release (into the indoor or outdoor
environment), generation, extraction, mining, beneficiating, manufacture,
processing, distribution in commerce, use, transfer, transportation, treatment,
storage, disposal or Remediation of Materials of Environmental Concern;
(viii) injury to or death of or threat to the health or safety of any person or
persons caused directly or indirectly by Materials of Environmental Concern;
(ix) destruction caused directly or indirectly by Materials of Environmental
Concern or the release or threatened release of any Materials of Environmental
Concern on any property (whether real or personal); (x) the implementation of
spill prevention and/or disaster plans relating to Materials of Environmental
Concern; (xi) violation of or noncompliance with Environmental Laws;
(xii) community right-to-know and other disclosure laws; or (xiii) maintaining,
disclosing or reporting information to Governmental Authorities or any other
third person under any applicable Environmental Laws.  The term, “Environmental
Claim” also includes, without limitation, any Damages incurred in reasonable or
necessary testing to determine whether Remediation is required under
Requirements of Environmental Law or for breach or violation of any Requirements
of Environmental Laws; monitoring or responding to efforts to require
Remediation under Requirements of Environmental Law and any claim based upon any
asserted or actual breach or violation of any Requirements of Environmental Law.

 

“Environmental Laws” means any and all treaties, statutes, laws, rules,
regulations, ordinances, orders, consent agreements, orders on consent, or
guidance documents now or hereafter in effect of any applicable international,
federal, state or local executive, legislative, judicial, regulatory, or
administrative agency, board, tribunal, or authority or any associated judicial
or administrative decision that relate in any manner to health, the environment,
pollution, the emission, discharge, release, treatment, storage, disposal,
management, or response to Materials of Environmental Concern, a community’s
right to know, or worker protection.

 

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“Environmental Permit” means all permits, licenses, certificates, registrations,
identification numbers, applications, consents, approvals, variances, notices of
intent, and exemptions necessary for the ownership, use and/or operation of any
Business Facility to comply with Environmental Laws.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Estimated Working Capital Adjustment” has the meaning given to it in
Section 1.3(a).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Final Revenue Earned” means the total revenue received with respect to a WIP
Project that has been completed.  The Final Revenue Earned includes all change
orders, regardless of the date the WIP Project was sold, performed or recorded.

 

“Final Total Costs” means the total costs accrued by the Company with respect to
a WIP Project that has been completed.

 

“Financial Statements” has the meaning given to in Section 2.27(b).

 

“GAAP” means United States generally accepted accounting principles as in effect
from time to time.

 

“Governmental Authority” means any foreign governmental authority, the United
States of America, any State of the United States of America, any local or
municipal authority and any political subdivision of any of the foregoing, any
multi-national organization or body, any agency, department, division,
commission, board, bureau, court or other authority of any of the foregoing, or
any quasi-governmental or private body (including, without limitation, any board
of arbitration or similar entity) exercising, or purporting to exercise, any
executive, legislative, judicial, administrative, police, regulatory or taxing
authority or power of any nature.

 

“Governmental Authorization” means any permit, Environmental Permit, license,
franchise, approval, certificate, consent, ratification, permission,
confirmation, endorsement, waiver, certification, privilege, right,
registration, qualification or other similar authorization issued, granted,
given or otherwise made available by or under the authority of any Governmental
Authority with applicable jurisdiction or pursuant to any applicable Legal
Requirement.

 

“Gross Revenue Amount” has the meaning given to it in Section 1.3(b).

 

“Indebtedness” means all obligations of the Company (i) for borrowed money;
(ii) evidenced by bonds, debentures, notes or other similar instruments
(including, without limitation, any seller notes issued in connection with any
acquisition undertaken by the Company); (iii) under any capitalized lease
liabilities; (iv) for the deferred purchase price of property, goods or services
(other than trade payables or accruals incurred in the Ordinary Course of
Business), (v) for Contracts relating to interest rate protection, swap and
collar agreements, (vi) in the nature of guarantees of the obligations described
in clauses (i) through

 

A-4

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(vi) above of any other Person; and (vii) for any accrued interest, prepayment
premiums or penalties or other fees, costs or expenses related to any of the
foregoing, in each case determined in accordance with GAAP applied on a basis
consistent with the Company’s accounting practices (which are not inconsistent
with GAAP).

 

“Indemnified Person” has the meaning given to it in Section 5.4.

 

“Indemnifying Person” has the meaning given to it in Section 5.4.

 

“Intellectual Property” means all names, trade names, fictitious business names,
brand names, registered and unregistered trademarks, service marks and
applications, all patents and patent applications, all copyrights in both
published and unpublished works, and all inventions, processes, formulas,
patterns, designs, know-how, trade secrets, software, technical information,
process technology, plans, drawings, and blueprints, in all cases that are used
by the Company in its business.

 

“Interim Financial Statements” has the meaning given to it in Section 2.27(b).

 

“Knowledge” has the following meaning:  Sellers shall be deemed to have
“knowledge” of or to have “known” a particular fact or other matter if (i) such
individual (including the sole manager of a Seller, if applicable) is actually
aware of such fact or other matter or (ii) a reasonably prudent business person
would be expected to have discovered or otherwise become aware of such fact or
other matter.  Buyer shall be deemed to have “knowledge” of or to have “known” a
particular fact or other matter if any individual who is serving as a director,
officer, manager, general partner or senior operational personnel (or in any
similar capacity) of such Person has knowledge of such fact or other matter
after reasonable investigation.  For purposes of clause (ii) of the next
preceding sentence, “Knowledge” with respect to any Seller (A) shall take into
account the scope of the individual’s duties and will be satisfied by reasonable
inquiry of the persons within the Company who are responsible for the subject
matter of the representation and warranty or other matter involved and (B) shall
not require that any Person make any inquiry of persons who are not employed by
the Company or check any records not within the possession of the Company.

 

“Legal Requirement” means any law (including Environmental Laws), statute,
standard, code, resolution, promulgation, ordinance, decree, requirement, order,
judgment, writ, injunction, treaty, proclamation, convention, rule or regulation
(or interpretation of any of the foregoing) of, and the terms of any
Governmental Authorization issued by, any Governmental Authority with applicable
jurisdiction or any license, franchise, permit or similar right granted under
any of the foregoing, or any other similar provision having the force or effect
of law.

 

“Liability” means any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, STRICT, joint, several or secondary liability), regardless of whether
such debt, obligation, duty or liability would be required to be disclosed on a
balance sheet.

 

“Material Contracts” has the meaning given to it in Section 2.14(a).

 

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“Materials of Environmental Concern” means:  (i) those substances included
within the statutory and/or regulatory definitions or listings of “hazardous
substance,” “medical waste,” “special waste,” “solid waste,” “hazardous waste,”
“extremely hazardous substance,” “regulated substance,” “hazardous materials,”
“toxic substances,” or “contaminant” under any applicable Environmental Law;
(ii) any material, waste or substance which is or contains:  (A) petroleum, oil
or a fraction thereof, (B) explosives, (C) radioactive materials (including
naturally occurring radioactive materials), or (D) solid wastes that pose
imminent and substantial endangerment to health or the environment; and
(iii) such other substances, materials, or wastes that are classified or
regulated under any applicable Environmental Law.  To the extent that the laws
or regulations of any applicable state or local jurisdiction establish a meaning
for any term defined herein through reference to applicable federal
Environmental Laws which is broader than the meaning under such federal
Environmental Laws, such broader meaning shall apply in any such state or local
jurisdiction.

 

“Noncompete Term” has the meaning given to it in Section 4.1(a).

 

“Note” has the meaning given to it in Section 1.2.

 

“Ordinary Course of Business” shall mean an action taken by any Person in the
ordinary course of such Person’s business which is consistent with past customs
and practices of such Person (including past practice with respect to quantity,
amount, magnitude and frequency, standard employment and payroll practice with
respect to management of working capital) which is taken in the ordinary course
of the normal day-to-day operations of such Person.

 

“Party” has the meaning given to it in the Preamble.

 

“Payment Due Date” has the meaning given to it in Section 5.5.

 

“Per Claim Threshold” has the meaning given to it in Section 5.6(c).

 

“Period of Sellers’ Ownership” has the meaning given to it in Section 2.19(a).

 

“Permitted Encumbrances” has the meaning given to it in Section 2.21.

 

“Person” means any individual, entity or Governmental Authority.

 

“Proceeding” has the meaning given to it in Section 2.10.

 

“Purchase Price” has the meaning given it in Section 1.2.

 

“Purchaser” has the meaning given to it in the preamble to this Agreement.

 

“Purchaser Indemnified Persons” has the meaning given to it in Section 5.2.

 

“Purchaser’s Adjustment Documents” has the meaning given to it in
Section 1.3(b).

 

“Purchaser’s Closing Working Capital Statement” has the meaning given to it in
Section 1.3(b).

 

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“Remediation” means (i) any removal or remedial action necessary to comply with
and ensure compliance with requirements of Environmental Laws and (ii) the
taking of all reasonably necessary precautions required under applicable
Environmental Laws to protect against and/or respond to, remove or remediate or
monitor the release or threatened release of Materials of Environmental Concern
at, on, in, about, under, within or near the air, soil, surface water,
groundwater or soil vapor at any Business Facility or any public domain affected
by the business of the Company.

 

“Representative” means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

 

“Resolution Period” has the meaning given to it in Section 1.3(b).

 

“S Short Year” has the meaning referenced in Section 6.7.

 

“S Termination Year” has the meaning referenced in Section 6.7.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Self-Insurance Accrual” has the meaning given to it in Section 1.3(c).

 

“Seller Indemnified Persons” has the meaning given to it in Section 5.3.

 

“Seller Individual” has the meaning given to it in Section 4.1(a).

 

“Sellers” has the meaning given to it in the preamble to this Agreement.

 

“Special Equity Incentive Plan” means (i) the Special Equity Incentive Plan
dated as of January 1, 2005, as amended, and (ii) any other Company equity plan
that existed as of or prior to Closing which obligated the Company to pay
compensation after Closing that was based on earnings prior to Closing.

 

“Stock” has the meaning given to it in the Recitals to this Agreement.

 

“Straddle Period” has the meaning given to it in Section 6.2.

 

“Subsidiary” shall mean, when used with reference to a particular Person, any
corporation, at least twenty percent (20%) of the outstanding voting securities
of which is owned or controlled directly or indirectly by such Person, or if
less than twenty percent (20%) of such voting securities are so owned or
controlled, any corporation in regard to which such Person possesses, directly
or indirectly, the power to direct or cause the direction of management and
policies of such corporation.  Any partnership, joint venture or other
enterprise shall be a Subsidiary of a particular Person if that Person has,
directly or indirectly, a twenty percent (20%) or greater equity interest or in
regard to which such Person possesses, directly or indirectly, the power to
direct or cause the direction of management and policies of such entity.

 

“Survival Date” has the meaning given to it in Section 5.6(d).

 

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“Tax” or “Taxes” means any federal, state or local income, gross receipts,
payroll, employment, excise, occupation, premium, franchise, withholding, real
property, personal property, sales or use tax, including any interest, penalty
or addition thereto.

 

“Tax Proceeding” has the meaning given to it in Section 6.9.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“WIP Projects” has the meaning set forth in Section 1.4(a).

 

“WIP Schedule” has the meaning given to it in Section 2.28.

 

“Working Capital” means the excess of Current Assets over Current Liabilities.

 

“Working Capital Adjustment” means an amount (which may be positive or negative)
equal to Working Capital on the Closing Date minus six percent (6%) of the
Company’s gross revenues for the twelve-month period ending on the Closing Date.

 

“Year-end Financial Statements” has the meaning given to it in Section 2.27(a).

 

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