Exhibit 10.1


 


ASSET
PURCHASE AGREEMENT


 


DATED
AS OF DECEMBER 31, 2005


 


BY
AND AMONG


 


AUTOMATED
LOGIC CORPORATION


 


AUTOMATED
LOGIC CONTRACTING SERVICES, INC.


 


AND


 


COMFORT
SYSTEMS USA, INC.


 


COMFORT
SYSTEMS USA (TWIN CITIES), INC.


 


UNITED
ENVIRONMENTAL SERVICES, L.P.


 





















 


TABLE OF
CONTENTS


 


i





















 


Schedules and Exhibits


 


	
  Schedule 1.1(a)(i)

  	
   

  	
  Twin Cities’
  Machinery and Equipment

  
	
  Schedule 1.1(a)(ii)

  	
   

  	
  Twin Cities’
  Inventories

  
	
  Schedule 1.1(a)(iii)

  	
   

  	
  Twin Cities’
  Tangible Assets

  
	
  Schedule 1.1(a)(viii)

  	
   

  	
  Twin Cities’
  Contracts

  
	
  Schedule 1.1(b)

  	
   

  	
  Twin Cities’
  Retained Assets

  
	
  Schedule 1.1(f)

  	
   

  	
  Allocation
  of Twin Cities Purchase Price

  
	
  Schedule 1.2(a)(i)

  	
   

  	
  UES’s
  Machinery and Equipment

  
	
  Schedule 1.2(a)(ii)

  	
   

  	
  UES’s
  Inventories

  
	
  Schedule 1.2(a)(iii)

  	
   

  	
  UES’s
  Tangible Assets

  
	
  Schedule 1.2(a)(viii)

  	
   

  	
  UES’s
  Contracts

  
	
  Schedule 1.2(b)

  	
   

  	
  UES’s
  Retained Assets

  
	
  Schedule 1.2(f)

  	
   

  	
  Allocation
  of UES Purchase Price

  
	
  Schedule 2.2(g)

  	
   

  	
  Key
  Employees of Seller

  
	
  Schedule 3.9

  	
   

  	
  Transferring
  Employees

  
	
  Schedule 3.10

  	
   

  	
  Non-Vested
  Balances in Defined Contribution Plans

  
	
  Schedule 4.3

  	
   

  	
  Legal
  Approvals

  
	
  Schedule 4.5

  	
   

  	
  Guarantees

  
	
  Schedule 4.6

  	
   

  	
  Undisclosed
  Liabilities

  
	
  Schedule 4.7

  	
   

  	
  Changes

  
	
  Schedule 4.8(a)

  	
   

  	
  Unpaid Taxes

  
	
  Schedule 4.8(b)

  	
   

  	
  Tax Returns

  
	
  Schedule 4.9

  	
   

  	
  Inventory

  
	
  Schedule 4.10

  	
   

  	
  Receivables

  
	
  Schedule 4.11

  	
   

  	
  Leases;
  Encumbrances; Trade Names

  
	
  Schedule 4.12

  	
   

  	
  Legal
  Proceedings

  
	
  Schedule 4.13

  	
   

  	
  Contracts

  
	
  Schedule 4.14

  	
   

  	
  Governmental
  Authorizations

  
	
  Schedule 4.16

  	
   

  	
  Real
  Property

  
	
  Schedule 4.17

  	
   

  	
  Related
  Party Transactions

  
	
  Schedule 4.18

  	
   

  	
  Labor
  Relations

  
	
  Schedule 4.19(a)

  	
   

  	
  Products
  Liability

  
	
  Schedule 4.19(b)

  	
   

  	
  Warranties

  
	
  Schedule 4.19(c)

  	
   

  	
  Insurance

  
	
  Schedule 4.20

  	
   

  	
  Intellectual
  Property

  
	
  Schedule 4.21

  	
   

  	
  Benefit
  Plans

  
	
  Schedule 4.22

  	
   

  	
  Environmental
  Matters

  
	
  Schedule 4.25

  	
   

  	
  Customer
  Relations

  
	
  Schedule 5.3

  	
   

  	
  Legal
  Approvals

  



 


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  Exhibit A

  	
   

  	
  Twin Cities Assumption Agreement

  
	
  Exhibit B

  	
   

  	
  UES
  Assumption Agreement

  
	
  Exhibit C

  	
   

  	
  Transition
  Services Agreement

  
	
  Exhibit D

  	
   

  	
  General Warranty
  Bills of Sale and Instruments of Assignment

  
	
  Exhibit E

  	
   

  	
  Financial
  Statements

  
	
  Exhibit F

  	
   

  	
  Interim
  Balance Sheet

  



 





















 


ASSET
PURCHASE AGREEMENT


 


This Asset Purchase Agreement (this “Agreement”), dated as of December 31,
2005,  is among Automated Logic
Corporation, a Georgia corporation (“ALC”),
Automated Logic Contracting Services, Inc., a Delaware corporation (“Buyer”), Comfort Systems USA, Inc., a Delaware corporation (“Comfort Systems”), Comfort Systems USA
(Twin Cities), Inc., a Minnesota corporation (“Twin Cities”), and United Environmental Services, L.P., a
Texas limited partnership (“UES”).


 


Twin Cities is a wholly owned subsidiary of
Comfort Systems.  UES’s general partner
and limited partner are, respectively, Atlas-Accurate Holdings, L.L.C., a
Delaware limited liability company, and California Comfort Systems USA, Inc.,
a California corporation, each of whom is a wholly owned subsidiary of Comfort
Systems.  Buyer is a wholly owned
subsidiary of ALC.  Twin Cities is in the
business of HVAC building controls contracting and services in Minnesota (the “Twin Cities Business”), and UES is in the
business of HVAC building controls contracting and services in Texas and
Louisiana (the “UES Business”; and
collectively with the Twin Cities Business, the “Business”).


 


Twin Cities desires to sell and assign to
Buyer substantially all of Twin Cities’ Business and assets and certain of Twin
Cities’ obligations, and Buyer desires to purchase and assume such Business,
assets and obligations from Twin Cities. 
UES desires to sell and assign to Buyer substantially all of UES’s
Business and assets and certain of UES’s obligations, and Buyer desires to
purchase and assume such Business, assets and obligations from UES.


 


As used in this Agreement, “Seller” means each and both of Twin Cities
and UES, and the “Comfort Systems Group” means
each and every one of Comfort Systems, Twin Cities and UES.  As used in this Agreement, the “ALC Group” means each and both of ALC and
Buyer. Certain additional terms used in this Agreement are defined separately
in Article VII and are
integral to this Agreement.


 


The ALC Group and the Comfort Systems Group
agree as follows:


 


ARTICLE I

THE SALE AND PURCHASE TRANSACTIONS


 


1.1.                            The
Twin Cities Sale and Purchase Transaction.


 


(a)                                 Sale
and Purchase of the Twin Cities Assets. 
Subject to the conditions described in Article II,
at Closing, Twin Cities shall sell and transfer to Buyer, and Buyer shall
purchase from Twin Cities, free and clear of all Encumbrances other than
Permitted Encumbrances, all of Twin Cities’ assets and properties of every
kind, nature and description, wherever located and whether real, personal or
mixed, tangible or intangible, in electronic form or otherwise, and whether or
not having any value for accounting purposes or carried or reflected on or
specifically referred to in its books or financial statements, except for the
Twin Cities Retained Assets (collectively, the “Twin Cities Assets”). 
The Twin Cities Assets shall include the following:


 


(i)                                    all of Twin
Cities’ machinery, equipment, components, parts, tools, spare parts, supplies
and materials, including the items identified on Schedule 1.1(a)(i);


 





















 


(ii)                                all of Twin
Cities’ inventories of raw materials, work-in-process, parts, subassemblies and
finished goods, and all other materials and supplies to be used or consumed by
Twin Cities in the production of finished goods, wherever located and whether
or not obsolete or carried on Twin Cities’ books of account, including the
items identified on Schedule 1.1(a)(ii);


 


(iii)                            all of Twin
Cities’ other tangible personal property (other than the corporate seal),
including office furniture, office equipment and supplies, leasehold
improvements (other than leasehold improvements constituting leased property
under leases of Real Property disclosed on Schedule 4.16),
vehicles and computers, including all hardware and software, including the
items identified on Schedule 1.1(a)(iii),
excluding those specific assets identified on Schedule 1.1(b);


 


(iv)                              all of Twin
Cities’ fixtures on the Real Property (other than fixtures constituting leased
property under leases of Real Property disclosed on Schedule 4.16), and, to the extent not described above,
all tangible personal property that is part of the Twin Cities Business and is
located at 2611 Hamlin Avenue North, Roseville, Minnesota 55113 as of the
Closing Date (other than leased property and consigned property disclosed in
the Schedules hereto and goods in transit);


 


(v)                                  all of Twin
Cities’ investments, securities, advance payments, rental deposits, including
lease deposits for leases of Real Property disclosed on Schedule 4.16, prepaid items, claims,
deferred charges, rights of offset and credits and claims for refund (other
than Tax credits and claims for Tax refunds);


 


(vi)                              all of Twin
Cities’ notes receivable, accounts receivable and other rights to payment from
customers, including trade accounts receivable from goods shipped, products
sold or services rendered (other than notes receivable, accounts receivable and
other rights to payment from any Related Party), and the full benefit to all
security for such notes receivable, accounts receivable or rights to payment;


 


(vii)                          all of Twin
Cities’ books (other than minute books), records (other than stock records and
Tax records), manuals, documents, books of account, whether inscribed on a
tangible medium or stored in an electronic or other medium, including sales and
credit reports, client and customer lists, literature, brochures, advertising
material, maintenance records, service and warranty records, referral sources,
research and development records, production records, equipment logs, operating
guides and manuals, financial and accounting records (other than Tax records),
creative materials, advertising materials, promotional materials, studies,
reports, correspondence and other similar documents, wherever located, and
copies of all personnel records (other than personnel records that Twin Cities
is required by law to retain in its possession);


 


(viii)                      all of Twin
Cities’ rights under Contracts identified on Schedule 1.1(a)(viii),
including all of Twin Cities’ vehicle leases, and all outstanding offers and solicitations made to or by Twin
Cities identified on Schedule 1.1(a)(viii) and
all Contracts, offers and solicitations made or entered into by Twin Cities
after the date hereof and on or prior to the Closing Date and not prohibited by
the terms of this Agreement;


 


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(ix)                             all of Twin
Cities’ intangible rights and property, including goodwill and rights in and to
the name “Twin Cities” and in any other tradename, trademark, fictitious name
or service mark used in the Twin Cities Business (other than any such
tradename, trademark, fictitious name or service mark based on, or relating to,
the name “Comfort Systems”, the name “Comfort Systems USA” or the name of any
of Comfort Systems’ subsidiaries (other than Seller)) or any variant of any of
them, and all applications therefor or registrations thereof, and all other
forms of Twin Cities’ Intellectual Property, all research related to the Twin
Cities Business conducted by Twin Cities, all of Twin Cities’ development
facilities and inventions and work-in-process constituting a part thereof, and
all rights to Twin Cities’ Software, telephone numbers, facsimile numbers,
e-mail addresses, internet sites, internet addresses and domain names thereof
and other listings;


 


(x)                                 all of Twin
Cities’ Governmental Authorizations and all pending applications for issuance
or renewal thereof, in each case to the extent transferable;


 


(xi)                             all of Twin
Cities’ other assets that (A) are used by Twin Cities in connection with
the Twin Cities Business or (B) are reflected on the Closing Balance
Sheet;


 


(xii)                         all of Twin
Cities’ goodwill and the Twin Cities Business as a going concern in Minnesota
(but in no event including Twin Cities’ Affiliates’ businesses of engaging in
HVAC mechanical contracting or providing HVAC services as a core business, with
incidental sales, installation and servicing of HVAC controls); and


 


(xiii)                     all of Twin
Cities’ choses in action, causes of action and judgments, express and implied
warranties and existing and inchoate claims, rights and remedies related to any
of the foregoing.


 


If and to the extent that Comfort Systems has any interest in any of
the Twin Cities Assets, then, at Closing, Comfort Systems shall sell, transfer
and assign all of such interest to Buyer for no additional consideration.  At Closing, Comfort Systems shall execute and
deliver to Buyer a confirmatory general warranty bill of sale to such effect.


 


(b)                                 Twin
Cities Retained Assets. 
Notwithstanding anything to the contrary in this Agreement, Twin Cities
shall retain all of the following assets (collectively, the “Twin Cities Retained Assets”):  (i) all consideration to be delivered to
Twin Cities pursuant to, and all other rights of Twin Cities under, this
Agreement and the Other Agreements to which Twin Cities is a party; (ii) 
Twin Cities’ corporate seal and all of Twin Cities’ minute books, stock records
and Tax records; (iii) all of Twin Cities’ claims, choses in action,
causes of action and judgments, express and implied warranties and existing and
inchoate claims, rights and remedies related to any litigation matter
identified on Schedule 4.12
or any other Twin Cities Retained Liabilities; (iv) all of Twin Cities’
cash and cash equivalents, including bank accounts and mutual fund accounts; (v) all
of Twin Cities’ rights to the name “Comfort Systems”, the name “Comfort Systems
USA” or the name of any of Comfort Systems’ subsidiaries (other than Seller),
and all of Twin Cities’ rights to all tradenames, trademarks, fictitious names
and service marks based on, or relating to, the name “Comfort Systems”, the
name “Comfort Systems USA” or the name of any of Comfort Systems’ subsidiaries
(other than Seller); (vi) all of Twin Cities’ tax sharing and similar
agreements with Comfort Systems or any of its other subsidiaries and all of
Twin


 


3





















 


Cities’ other Contracts with Related Parties; (vii) all of Twin
Cities’ Tax credits and claims for Tax refunds; (viii) all of Twin Cities’
notes receivable, accounts receivable and other rights to payment from any
Related Party; (ix) all shares of capital stock in Twin Cities’ treasury;
(x) all of Twin Cities’ Contracts and specific assets identified on Schedule 1.1(b); (xi) all personnel
records that Twin Cities is required by law to retain in its possession; and
(xii) all of Twin Cities’ rights to insurance proceeds in respect of Retained
Liabilities.  Notwithstanding anything to
the contrary in this Agreement, none of the Twin Cities Retained Assets shall
be included in the Twin Cities Assets.


 


(c)                                  Assumption
of Liabilities.  Subject to the
conditions described in Article II,
at Closing, Buyer shall, pursuant to an Assumption Agreement substantially in
the form of Exhibit A (the “Twin Cities Assumption Agreement”), assume
and agree to pay, perform, satisfy and discharge when due, to the extent not
theretofore paid, performed, satisfied and discharged, the following known and
identifiable liabilities of Twin Cities existing on the Closing Date, except
for the Twin Cities Retained Liabilities (collectively, the “Twin Cities Assumed Liabilities”):


 


(i)                                    all of Twin
Cities’ short-term liabilities reflected in the Interim Balance Sheet in the
amounts shown thereon;


 


(ii)                                all of Twin
Cities’ short-term liabilities incurred after the Interim Balance Sheet Date in
the ordinary course of business in accordance with past practice that are
required to be reflected in the Closing Balance Sheet in accordance with GAAP,
in the amounts shown thereon, including all short-term liabilities included in
Net Asset Value and all orders from Twin Cities’ customers (other than any
Liability in respect of any such order arising from any breach or
nonperformance thereof prior to the Closing Date);


 


(iii)                            all of Twin
Cities’ liabilities set forth in the terms of the Contracts, offers and
solicitations that are identified in Section 1.1(a)(viii) (other
than any Liability under any such Contract, offer or solicitation arising from
any breach or nonperformance thereof prior to the Closing Date);


 


(iv)                              all of Twin
Cities’ liabilities under Governmental Authorizations and all pending
applications for issuance or renewal thereof that (A) are transferable to
Buyer hereunder and (B) are either (1) listed on Schedule 4.14 or 4.22 or (2) are obtained or submitted
by Twin Cities after the date hereof and on or prior to the Closing Date (other
than any Liability under any such Governmental Authorization or application
arising from any breach or nonperformance thereof prior to the Closing Date);
and


 


(v)                                  all liabilities
of Twin Cities for all transfer, documentary, sales, use and motor vehicle
taxes that result from the sale of the Twin Cities Assets pursuant to this
Agreement.


 


(d)                                 Twin
Cities Retained Liabilities. 
Notwithstanding anything to the contrary in this Agreement, Buyer is not
assuming, and shall not assume or in any way undertake to pay, perform, satisfy
or discharge, any Liabilities of Twin Cities or any Predecessor existing
before, on or after the Closing Date or arising out of any transactions entered
into, or any state of facts existing, before, on or after the Closing Date, and
whether or not related to or arising out of any


 


4





















 


of the Twin Cities Assets, except for the Twin Cities Assumed
Liabilities (the “Twin Cities Retained
Liabilities”), and Twin Cities agrees to pay, perform, satisfy and
discharge when due all Twin Cities Retained Liabilities.  Without limiting the foregoing, the term “Twin Cities Retained Liabilities” shall
include any and all:


 


(i)                                    Liabilities of
Twin Cities (A) to any Related Party, (B) for or in connection with
any dividends, distributions, redemptions or Security Rights with respect to
any security of Twin Cities, (C) to indemnify Twin Cities’ officers,
directors, employees or agents or (D) arising out of any transaction
affecting, or any obligations incurred by, Twin Cities or its officers, directors,
employees or agents, after Closing;


 


(ii)                                Liabilities
identified elsewhere in this Agreement as being the responsibility of Twin
Cities;


 


(iii)                            Liabilities of
Twin Cities and its Affiliates for any Taxes, whether or not by reason of, or
in connection with, the Contemplated Transactions (other than Liabilities for
transfer, documentary, sales, use or motor vehicle taxes that (A) result
from the sale of the Twin Cities Assets pursuant to this Agreement and (B) constitute
Twin Cities Assumed Liabilities), including (1) any Taxes arising as a
result of Twin Cities’ operation of its business or ownership of the Twin
Cities Assets prior to the Closing Date, (2) any Liability of Twin Cities
for Taxes of any person under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise, (3) any Taxes that result from the
sale of the Twin Cities Assets pursuant to this Agreement (other than
Liabilities for transfer, documentary, sales, use or motor vehicle taxes that
(y) result from the sale of the Twin Cities Assets pursuant to this Agreement
and (z) constitute Twin Cities Assumed Liabilities), and (4) any deferred
Taxes of Twin Cities of any kind;


 


(iv)                              Liabilities
under or arising out of or relating to any discontinued operations of Twin
Cities, including any remaining Liabilities of Twin Cities or any Predecessor
under any purchase and sale agreements effecting such dispositions or
agreements ancillary or related thereto;


 


(v)                                  Liabilities
attributable to Twin Cities Retained Assets, including Liabilities (A) for
Twin Cities’ checks that are outstanding on the Closing Date and (B) that (1) are
incurred after the Interim Balance Sheet Date and (2) are outside the
ordinary course of business or not in accordance with past practice;


 


(vi)                              Liabilities to,
under or with respect to any Twin Cities Plan or any Comfort Systems Plan and
the administration of any Twin Cities Plan or Comfort Systems Plan;


 


(vii)                          Liabilities of
Twin Cities (A) relating to payroll (to the extent not previously
accrued), vacation, sick leave, paid time off, Workers’ Compensation
Liabilities, unemployment benefits, disability and occupational diseases of or
with respect to any employee or former employee of Twin Cities or any
Predecessor, (B) under any employment, severance, retention, change of
control or termination agreement with any employee of Twin Cities or any
Related Party or (C) arising out of or relating to any employee grievance
of any employee or


 


5





















 


former
employee of Twin Cities, in each case whether or not the affected employee is
hired by Buyer;


 


(viii)                      Liabilities of
Twin Cities under any Contract, offer or solicitation (other than Liabilities
under Contracts, offers and solicitations that constitute Assumed Twin Cities
Liabilities);


 


(ix)                             Liabilities of
Twin Cities under any written employment agreement identified on Schedule 4.13 (other than Liabilities
under the employment agreement of Don Luhman that constitute Assumed Twin
Cities Liabilities);


 


(x)                                 Liabilities of
Twin Cities for or arising out of any Indebtedness;


 


(xi)                             Liabilities of
Twin Cities relating to Legal Proceedings that (A) exist on, or arise
after, the Closing Date and (B) relate to transactions entered into, or
any state of facts existing, on or before the Closing Date;


 


(xii)                         Liabilities of
Twin Cities (including penalties, fines, levies and assessments) arising out of
any violation or breach of, or noncompliance with, any Contracts, Governmental
Authorizations or Legal Requirements by Twin Cities or any other person acting
as agent for or on behalf of Twin Cities prior to the Closing Date;


 


(xiii)                     Liabilities of
Twin Cities:  (A) for products
liability in respect of all products (including products in work-in-process and
finished goods inventory on the Closing Date) shipped, distributed, assembled
or manufactured by, or any services provided by, Twin Cities prior to the
Closing Date (other than any such Liabilities for products liability relating
to any product assembled or manufactured by, or any service provided by, ALC or
any of its subsidiaries); (B) relating to any recalls of products
manufactured by Twin Cities prior to the Closing Date (other than any such
Liabilities relating to any product recall and resulting from any product
assembled or manufactured by ALC or any of its subsidiaries); and (C) for
all express and implied product warranties for all products shipped,
distributed, assembled or manufactured by, or any services provided by, Twin
Cities (other than any such Liabilities relating to any express or implied
product warranty for any product assembled or manufactured by, or any service
provided by, ALC or any of its subsidiaries);


 


(xiv)                       Liabilities of
Comfort Systems;


 


(xv)                           Liabilities of
Twin Cities to the extent that Twin Cities or Comfort Systems collects
insurance proceeds in respect thereof; and


 


(xvi)                       Liabilities
based on acts or omissions of Twin Cities occurring after the Closing Date.


 


Notwithstanding anything to the contrary in this Agreement, none of the
Twin Cities Retained Liabilities shall be included in the Twin Cities Assumed
Liabilities.


 


6





















 


(e)                                  Purchase
Price.  The purchase price for
the Twin Cities Assets shall be $460,000 plus the assumption of the Twin Cities
Assumed Liabilities (the “Twin Cities
Purchase Price”), as adjusted by the Purchase Price Adjustment.


 


(f)                                    Allocation
of Twin Cities Purchase Price. 
The Twin Cities Purchase Price shall be allocated among the Twin Cities
Assets in accordance with the allocation set forth in IRS Form 8594
attached as Schedule 1.1(f).  Twin Cities shall timely and properly
prepare, execute, file and deliver any and all documents, forms and
authorizations (including powers of attorney) as Buyer may reasonably request
in order to prepare and report such allocation (including any amendments
thereto) to taxing authorities.  Buyer
shall prepare and deliver a final IRS Form 8594 to Twin Cities within
ninety (90) days after the Closing Date. 
Buyer and Twin Cities shall report the federal, state and local income
and other tax consequences of the purchase and sale of the Twin Cities Assets
contemplated hereby, including those required by Section 1060 of the IRC
and IRS Form 8594, in a manner consistent with such allocation and shall
not take any position inconsistent therewith upon examination of any Tax
Return, in any refund claim, in any litigation, or otherwise.  Any Purchase Price Adjustment allocated to
the Twin Cities Purchase Price shall be allocated by Buyer among the Twin
Cities Assets consistent with the allocation set forth in Schedule 1.1(f) and shall be
binding upon Twin Cities and Buyer.


 


(g)                                 Passage
of Title.  Title to all Twin
Cities Assets shall pass from Twin Cities to Buyer at Closing, subject to the
terms and conditions of this Agreement. 
Buyer assumes no risk of loss to the Twin Cities Assets prior to
Closing.


 


(h)                                 Certain
Consents.  Nothing in this
Agreement shall be construed as an attempt to assign any Contract or
Governmental Authorization (i) which is included in the Twin Cities Assets
and (ii) under which all the remedies for the enforcement thereof enjoyed
by Twin Cities would not, as a matter of law, pass to Buyer as an incident of
the assignments provided for by this Agreement without a Legal Approval or
Consent.  If any such Legal Approval or
Consent is not obtained prior to Closing, then Twin Cities shall, at the
request and under the direction of Buyer, in the name of Twin Cities or
otherwise as Buyer shall specify, take all action (including the appointment of
Buyer as attorney-in-fact for Twin Cities) and do or cause to be done all such
things as shall in the reasonable opinion of Buyer be reasonably necessary (i) to
assure that the rights of Twin Cities under such Contracts and Governmental
Authorizations shall be preserved for the benefit of Buyer, (ii) to
facilitate receipt of the consideration to be received by Twin Cities in and
under every such Contract and Governmental Authorization, which consideration
shall be held for the exclusive benefit of, and shall be delivered to, Buyer,
and (iii) continue to use its commercially reasonable efforts to obtain
such Legal Approvals and Consents as soon as reasonably possible after Closing.


 


(i)                                    Interpretation.  Notwithstanding anything to the contrary in
this Agreement, the provisions of this Section 1.1, together with the
provisions of this Agreement giving effect to the Purchase Price Adjustment,
shall not be interpreted or construed in any manner that would result in (A) any
duplication of benefits or obligations or (B) any unjust enrichment, in
each case for either the ALC Group or the Comfort Systems Group.


 


7





















 


1.2.                            The
UES Sale and Purchase Transaction.


 


(a)                                 Sale
and Purchase of the UES Assets.  Subject
to the conditions described in Article II,
at Closing, UES shall sell and transfer to Buyer, and Buyer shall purchase from
UES, free and clear of all Encumbrances other than the Permitted Encumbrances,
all of UES’s assets and properties of every kind, nature and description,
wherever located and whether real, personal or mixed, tangible or intangible,
in electronic form or otherwise, and whether or not having any value for
accounting purposes or carried or reflected on or specifically referred to in
its books or financial statements, except for the UES Retained Assets
(collectively, the “UES Assets”).  The UES Assets shall include the following:


 


(i)                                    all of UES’s
machinery, equipment, components, parts, tools, spare parts, supplies and
materials, including the items identified on Schedule 1.2(a)(i);


 


(ii)                                all of UES’s
inventories of raw materials, work-in-process, parts, subassemblies and
finished goods, and all other materials and supplies to be used or consumed by
UES in the production of finished goods, wherever located and whether or not
obsolete or carried on UES’s books of account, including the items identified
on Schedule 1.2(a)(ii);


 


(iii)                            all of UES’s
other tangible personal property, including office furniture, office equipment
and supplies, leasehold improvements (other than leasehold improvements
constituting leased property under leases of Real Property disclosed on Schedule 4.16), vehicles and
computers, including all hardware and software, including the items identified
on Schedule 1.2(a)(iii),
excluding those specific assets identified on Schedule 1.2(b);


 


(iv)                              all of UES’s
fixtures on the Real Property (other than fixtures constituting leased property
under leases of Real Property disclosed on Schedule 4.16),
and, to the extent not described above, all tangible personal property that is
part of the UES Business and is located at 4107 New West Drive, Pasadena, Texas
77507 and 85 IH 10 North, Suite 112, Beaumont, Texas  77707 as of the Closing Date (other than
leased property and consigned property disclosed in the Schedules hereto and
goods in transit);


 


(v)                                  all of UES’s
investments, securities, advance payments, rental deposits, including lease
deposits for leases of Real Property disclosed on Schedule 4.16, prepaid items, claims, deferred charges,
rights of offset and credits and claims for refund (other than Tax credits and
claims for Tax refunds);


 


(vi)                              all of UES’s
notes receivable, accounts receivable and other rights to payment from customers,
including trade accounts receivable from goods shipped, products sold or
services rendered (other than notes receivable, accounts receivable and other
rights to payment from any Related Party), and the full benefit to all security
for such notes receivable, accounts receivable or rights to payment;


 


(vii)                          all of UES’s
books (other than minute books), records (other than partnership interest
records and Tax records), manuals, documents, books of account, whether
inscribed on a tangible medium or stored in an electronic or other medium,
including sales and credit reports, client and customer lists, literature,
brochures, advertising material, maintenance records, service and warranty
records, referral sources, research and development records, production records,
equipment logs, operating guides and manuals, financial and accounting


 


8





















 


records
(other than Tax records), creative materials, advertising materials,
promotional materials, studies, reports, correspondence and other similar
documents, wherever located, and copies of all personnel records (other than
personnel records that UES is required by law to retain in its possession);


 


(viii)                      all of UES’s
rights under Contracts identified on Schedule 1.2(a)(viii),
including all of UES’s vehicle leases, and
all outstanding offers and solicitations made to or by UES identified on Schedule 1.2(a)(viii) and all
Contracts, offers and solicitations made or entered into by UES after the date
hereof and on or prior to the Closing Date and not prohibited by the terms of
this Agreement;


 


(ix)                             all of UES’s
intangible rights and property, including goodwill and rights in and to the
name “United Environmental Services” and in any other tradename, trademark,
fictitious name or service mark used in the UES Business (other than any such
tradename, trademark, fictitious name or service mark based on, or relating to,
the name “Comfort Systems”, the name “Comfort Systems USA” or the name of any
of Comfort Systems’ subsidiaries (other than Seller)) or any variant of any of
them, and all applications therefor or registrations thereof, and all other
forms of UES’s Intellectual Property, all research related to the UES Business
conducted by UES, all of UES’s development facilities and inventions and
work-in-process constituting a part thereof, and all rights to UES’s Software,
telephone numbers, facsimile numbers, e-mail addresses, internet sites,
internet addresses and domain names thereof and other listings;


 


(x)                                 all of UES’s
Governmental Authorizations and all pending applications for issuance or
renewal thereof, in each case to the extent transferable;


 


(xi)                             UES’s claim in
connection with services performed by UES at Houston Intercontinental Airport
(the “HIA Claim”);


 


(xii)                         all of UES’s
other assets that (A) are used by UES in connection with the UES Business
or (B) are reflected on the Closing Balance Sheet; and


 


(xiii)                     all of UES’s
goodwill and the UES Business as a going concern in Texas and Louisiana (but in
no event including UES’s Affiliates’ businesses of engaging in HVAC mechanical
contracting or providing HVAC services as a core business, with incidental
sales, installation and servicing of HVAC controls); and


 


(xiv)                       all of UES’s
choses in action, causes of action and judgments, express and implied
warranties and existing and inchoate claims, rights and remedies related to any
of the foregoing.


 


If and to the extent that Comfort Systems has any interest in any of
the UES Assets, then, at Closing, Comfort Systems shall sell, transfer and
assign all of such interests to Buyer for no additional consideration.  At Closing, Comfort Systems shall execute and
deliver to Buyer a confirmatory general warranty bill of sale to such effect.


 


(b)                                 UES
Retained Assets.  Notwithstanding
anything to the contrary in this Agreement, UES shall retain all of the
following assets (collectively, the “UES
Retained


 


9





















 


Assets”):  (i) all consideration to be delivered to
UES pursuant to, and all other rights of UES under, this Agreement and the
Other Agreements to which UES is a party; (ii) UES’s minute books,
partnership interest records and Tax records; (iii) all of UES’s claims,
choses in action, causes of action and judgments, express and implied warranties
and existing and inchoate claims, rights and remedies related to any litigation
matter identified on Schedule 4.12
or any other UES Retained Liabilities; (iv) cash and cash equivalents,
including bank accounts and mutual fund accounts; (v) all of UES’s rights
to the name “Comfort Systems”, the name “Comfort Systems USA” or the name of
any of Comfort Systems’ subsidiaries (other than Seller), and all of UES’s
rights to all tradenames, trademarks, fictitious names and service marks based
on, or relating to, the name “Comfort Systems”, the name “Comfort Systems USA”
or the name of any of Comfort Systems’ subsidiaries (other than Seller); (vi) all
of UES’s tax sharing and similar agreements with Comfort Systems or any of its
other subsidiaries and all of UES’s other Contracts with Related Parties; (vii) all
of UES’s Tax credits and claims for Tax refunds; (viii) all of UES’s notes
receivable, accounts receivable and other rights to payment from any Related
Party; (ix) all partnership interests in UES’s treasury; (x) all of UES’s
Contracts and specific assets identified on Schedule 1.2(b);
(xi) all personnel records that UES is required by law to retain in its
possession; and (xii) all of UES’s rights to insurance proceeds in respect of
Retained Liabilities.  Notwithstanding
anything to the contrary in this Agreement, none of the UES Retained Assets
shall be included in the UES Assets.


 


(c)                                  Assumption
of Liabilities.  Subject to the
conditions described in Article II,
at Closing, Buyer shall, pursuant to an Assumption Agreement substantially in
the form of Exhibit B (the “UES Assumption Agreement”), assume and
agree to pay, perform, satisfy and discharge when due, to the extent not
theretofore paid, performed, satisfied and discharged, the following known and
identifiable liabilities of UES existing on the Closing Date, except the UES
Retained Liabilities (collectively, the “UES
Assumed Liabilities”):


 


(i)                                    all of UES’s
short-term liabilities reflected in the Interim Balance Sheet in the amounts
shown thereon;


 


(ii)                                all of UES’
short-term liabilities incurred after the Interim Balance Sheet Date in the
ordinary course of business in accordance with past practice that are required
to be reflected in the Closing Balance Sheet in accordance with GAAP, in the
amounts shown thereon, including all short-term liabilities included in Net
Asset Value and all orders from UES’s customers (other than any Liability in
respect of any such order arising from any breach or nonperformance thereof
prior to the Closing Date;


 


(iii)                            all of UES’s
liabilities set forth in the terms of the Contracts, offers and solicitations
that are identified in Section 1.2(a)(viii) (other
than any Liability under any such Contract, offer or solicitation arising from
any breach or nonperformance thereof prior to the Closing Date);


 


(iv)                              all of UES’s
liabilities under Governmental Authorizations and all pending applications for
issuance or renewal thereof that (A) are transferable to Buyer hereunder
and (B) are either (1) listed on Schedule 4.14
or 4.22 or (2) are obtained
or submitted by UES after the date hereof and prior to the Closing Date (other
than any Liability under any such


 


10





















 


Governmental
Authorization or application arising from any breach or nonperformance thereof
prior to the Closing Date);


 


(v)                                  all liabilities
of UES and its Affiliates for all transfer, documentary, sales, use and motor
vehicle taxes that result from the sale of the UES Assets pursuant to this
Agreement; and


 


(vi)                              liabilities relating
to the HIA Claim but only to the extent such liabilities are less than
offsetting amounts received with respect to such claim (i.e., only to the
extent Buyer’s participation in the HIA Claim results in a net cash recovery
for Buyer).


 


(d)                                 UES
Retained Liabilities. 
Notwithstanding anything to the contrary in this Agreement, Buyer is not
assuming, and shall not assume or in any way undertake to pay, perform, satisfy
or discharge, any Liabilities of UES or any Predecessor existing before, on or
after the Closing Date or arising out of any transactions entered into, or any
state of facts existing, before, on or after the Closing Date, and whether or
not related to or arising out of any of the UES Assets, except the UES Assumed
Liabilities (the “UES Retained Liabilities”),
and UES agrees to pay, perform, satisfy and discharge when due all UES Retained
Liabilities.  Without limiting the
foregoing, the term “UES Retained Liabilities”
shall include any and all:


 


(i)                                    Liabilities of
UES (A) to any Related Party, (B) for or in connection with any
dividends, distributions, redemptions, or Security Rights with respect to any
security of UES, (C) to indemnify UES’s officers, directors, employees or
agents or (D) arising out of any transaction affecting, or any obligations
incurred by, UES or its officers, directors, employees or agents after Closing;


 


(ii)                                Liabilities
identified elsewhere in this Agreement as being the responsibility of UES;


 


(iii)                            Liabilities of
UES and its Affiliates for any Taxes, whether or not by reason of, or in
connection with, the Contemplated Transactions (other than Liabilities for
transfer, documentary, sales, use or motor vehicle taxes that (A) result
from the sale of the UES Assets pursuant to this Agreement and (B) constitute
UES Assumed Liabilities), including (1) any Taxes arising as a result of
UES’s operation of its business or ownership of the UES Assets prior to the
Closing Date, (2) any Liability of UES for Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise,
(3) any Taxes that result from the sale of the UES Assets pursuant to this
Agreement (other than Liabilities for transfer, documentary, sales, use and motor
vehicle taxes that (y) result from the sale of the UES Assets pursuant to this
Agreement and (z) constitute UES Assumed Liabilities), and (4) any
deferred Taxes of UES of any kind;


 


(iv)                              Liabilities
under or arising out of or relating to any discontinued operations of UES,
including any remaining Liabilities of UES or any Predecessor under any
purchase and sale agreements effecting such dispositions or agreements
ancillary or related thereto;


 


11





















 


(v)                                  Liabilities
attributable to UES Retained Assets, including Liabilities (A) for UES’s
checks that are outstanding on the Closing Date and (B) that (1) are
incurred after the Interim Balance Sheet Date and (2) are outside the
ordinary course of business or not in accordance with past practice;


 


(vi)                              Liabilities to,
under or with respect to any UES Plan or any Comfort Systems Plan and the
administration of any UES Plan or Comfort Systems Plan, including all
Liabilities of UES to pay a Health and Life Insurance Continuance Allowance
following the retirement of employees, or to provide any other continuation of
group benefits following the retirement of employees, as described in Schedule 4.21;


 


(vii)                          Liabilities of
UES (A) relating to payroll (to the extent not previously accrued),
vacation, sick leave, paid time off, Workers’ Compensation Liabilities,
unemployment benefits, disability and occupational diseases of or with respect
to any employee or former employee of UES or any Predecessor, (B) under
any employment, severance, retention, change of control or termination
agreement with any employee of UES or any Related Party or (C) arising out
of or relating to any employee grievance of any employee or former employee of
UES, in each case whether or not the affected employee is hired by Buyer;


 


(viii)                      Liabilities of
UES under any Contract, offer or solicitation (other than Liabilities under
Contracts, offers and solicitations that constitute Assumed UES Liabilities);


 


(ix)                             Liabilities of
UES under any written employment agreement identified on Schedule 4.13 (other than Liabilities
under the employment agreement of Wayne Gary that constitute Assumed UES
Liabilities);


 


(x)                                 Liabilities of
UES for or arising out of any Indebtedness;


 


(xi)                             Liabilities of
UES relating to Legal Proceedings that (A) exist on, or arise after, the
Closing Date and (B) relate to transactions entered into, or any state of
facts existing, on or before the Closing Date (other than any such Liabilities
related to the contract and work performed in connection with the HIA claim if
and to the extent such Liabilities are equal to or less than the amount
received by Buyer as a result of the HIA claim);


 


(xii)                         Liabilities of
UES (including penalties, fines, levies and assessments) arising out of any
violation or breach of, or noncompliance with, any Contracts, Governmental
Authorizations or Legal Requirements by UES or any other person acting as agent
for or on behalf of UES prior to the Closing Date;


 


(xiii)                     Liabilities of
UES:  (A) for products liability in
respect of all products (including products in work-in-process and finished
goods inventory on the Closing Date) shipped, distributed, assembled or
manufactured by, or any services provided by, UES prior to the Closing Date
(other than any such Liabilities for products liability relating to any product
assembled or manufactured by, or any service provided by, ALC or any of its
subsidiaries); (B) relating to any recalls of products manufactured by UES
prior to the Closing Date (other than any such Liabilities relating to any
product recall and resulting from any product assembled or manufactured by ALC
or any of its subsidiaries); and (C) for all express and implied product
warranties for all products shipped, distributed, assembled or manufactured by,
or any services


 


12





















 


provided
by, UES, including the Bush Airport claim identified on Schedule 4.19(b) but not
including claims for offset in the pending dispute with respect thereto (other
than any such Liabilities relating to any express or implied product warranty
for any product assembled or manufactured by, or any service provided by, ALC
or any of its subsidiaries);


 


(xiv)                       Liabilities of
Comfort Systems;


 


(xv)                           Liabilities of
UES to the extent that UES or Comfort Systems collects insurance proceeds in
respect thereof;


 


(xvi)                       Liabilities
based on acts or omissions of UES occurring after the Closing Date; and


 


(xvii)                   Liabilities of
UES related to the HIA Claim.


 


Notwithstanding anything to the contrary in this Agreement, none of the
UES Retained Liabilities shall be included in the UES Assumed Liabilities.


 


(e)                                  Purchase
Price.  The purchase price for
the UES Assets shall be $23,540,000 plus the assumption of the UES Assumed
Liabilities (the “UES Purchase Price”),
as adjusted by the Purchase Price Adjustment.


 


(f)                                    Allocation
of UES Purchase Price.  The UES
Purchase Price shall be allocated among the UES Assets in accordance with the
allocation set forth in IRS Form 8594 attached as Schedule 1.2(f).  UES shall timely and properly prepare,
execute, file and deliver any and all documents, forms and authorizations
(including powers of attorney) as Buyer may reasonably request in order to
prepare and report such allocation (including any amendments thereto) to Taxing
authorities.  Buyer shall prepare and
deliver a final IRS Form 8594 to UES within ninety (90) days after the
Closing Date.  Buyer and UES shall report
the federal, state and local income and other tax consequences of the purchase
and sale of the UES Assets contemplated hereby, including those required by Section 1060
of the IRC and IRS Form 8594, in a manner consistent with such allocation
and shall not take any position inconsistent therewith upon examination of any
tax return, in any refund claim, in any litigation, or otherwise.  Any Purchase Price Adjustment allocated to
the UES Purchase Price shall be allocated by Buyer among the UES Assets
consistent with the allocation set forth in Schedule 1.2(f) and
shall be binding upon UES.


 


(g)                                 Passage
of Title.  Title to all UES
Assets shall pass from UES to Buyer at Closing, subject to the terms and
conditions of this Agreement.  Buyer
assumes no risk of loss to the UES Assets prior to Closing.


 


(h)                                 Certain
Consents.  Nothing in this
Agreement shall be construed as an attempt to assign any Contract or
Governmental Authorization (i) which is included in the UES Assets and (ii) under
which all the remedies for the enforcement thereof enjoyed by UES would not, as
a matter of law, pass to Buyer as an incident of the assignments provided for
by this Agreement without a Legal Approval or Consent.  If any such Legal Approval or Consent is not
obtained prior to Closing, then UES shall, at the request and under the
direction of Buyer, in the name of UES or otherwise as Buyer shall specify,
take all action (including the appointment of Buyer as attorney-in-fact for
UES) and do or cause to be done all such things as shall in the reasonable


 


13





















 


opinion of Buyer be reasonably necessary (i) to assure that the
rights of UES under such Contracts and Governmental Authorizations shall be
preserved for the benefit of Buyer, (ii) to facilitate receipt of the
consideration to be received by UES in and under every such Contract and
Governmental Authorization, which consideration shall be held for the exclusive
benefit of, and shall be delivered to, Buyer, and (iii) continue to use
its commercially reasonable efforts to obtain such Legal Approvals and Consents
as soon as reasonably possible after Closing.


 


(i)                                    Interpretation.  Notwithstanding anything to the contrary in
this Agreement, the provisions of this Section 1.2, together with the
provisions of this Agreement giving effect to the Purchase Price Adjustment,
shall not be interpreted or construed in any manner that would result in (A) any
duplication of benefits or obligations or (B) any unjust enrichment, in
each case for either the ALC Group or the Comfort Systems Group.


 


1.3.                            Payment
of Twin Cities Purchase Price and UES Purchase Price.


 


(a)                                 Payment
of Purchase Price at Closing.  At
Closing, Buyer (i) shall pay to Comfort Systems cash in an amount equal to
the cash portion of the Purchase Price $24
million in the aggregate, minus the Holdback and a mutually agreed
good faith estimate of the Purchase Price Adjustment equal to $400,000, and (ii) shall
assume the Assumed Liabilities pursuant to the Assumption Agreements.


 


(b)                                 Purchase
Price Adjustment.  Within five
Business Days after the Purchase Price Adjustment is finally determined, Buyer
or Seller, as the case may be, shall pay (i) the Purchase Price
Adjustment, net of the estimate used at Closing, and (ii) Interest on the
Purchase Price Adjustment, net of the estimate used at Closing, from the
Closing Date until the date of payment thereof, by wire transfer of federal
funds to an account designated by Comfort Systems or ALC, as the case may be,
within three Business Days after the Purchase Price Adjustment is finally
determined.


 


(c)                                  Holdback.  Buyer shall withhold from the Purchase Price
an amount equal to $200,000 of the
Purchase Price (the “Holdback”).  Buyer may offset and recoup against the
Holdback any amounts due by the Comfort Systems Group to the ALC Group
hereunder, including the Comfort Systems Group’s indemnification obligations under
Article VI and Seller’s
obligations to pay the Purchase Price Adjustments, if any.  Buyer shall deliver the Holdback, less any
claims for offset or recoupment, on December 31, 2006, plus Interest from
and after the Closing Date to the date of payment, to accounts to be designated
by Comfort Systems within three Business Days prior to payment.  Any offset or recoupment against the Holdback
shall be allocated between the Twin Cities Purchase Price and the UES Purchase
Price by reference to the source of such offset or recoupment.


 


1.4.                            Purchase
Price Adjustment.  The Purchase
Price shall be adjusted after Closing as follows:


 


(a)                                 Net
Asset Value Adjustment.  If the Net
Asset Value at the close of business on the Closing Date is less than
$2,700,000, then the Purchase Price shall be reduced dollar-for-dollar by the
amount of the deficiency.  If the Net
Asset Value at the close of business on the Closing Date is greater than
$2,700,000, then the Purchase Price shall be increased dollar-for-dollar


 


14





















 


by the amount of the excess.  “Net Asset Value” means the total of (i) the
book value (net of accumulated depreciation, amortization, depletion and like
items) of (A) all of the tangible Assets and (B) all of the aggregate
current assets included in the Assets, minus (B) the aggregate
amount of the Assumed Liabilities, in each case without duplication and
determined solely by reference to the Closing Balance Sheet.  Notwithstanding the foregoing, no Purchase
Price Adjustment of less than $20,000 shall be made on the basis of Net Asset
Value.


 


(b)                                 Allocation
of Purchase Price Adjustment; Preservation of Rights.  The Purchase Price Adjustment shall be
allocated between the Twin Cities Purchase Price and UES Purchase Price by
reference to the sources of such adjustment in the consolidating Closing
Balance Sheet.  For purposes of making
such allocation, 3% of the amount in Section 1.4(a) shall
be deemed to be allocated to Twin Cities and 97% of the amount in Section 1.4(a) shall be deemed
to be allocated to UES.  The Purchase
Price Adjustment shall be without prejudice to (i) the ALC Group’s rights
of indemnification under Article VI
for any breach by Seller of the representations and warranties contained in Article IV (without unjust enrichment
for any duplicate damages) or (ii) the Comfort Systems Group’s rights of
indemnification under Article VI
for any breach by Buyer of the representations and warranties contained in Article V (without unjust enrichment
for any duplicate damages).


 


1.5.                            Closing
Balance Sheet.


 


(a)                                 Preparation
of Closing Balance Sheet.  After Closing,
Seller shall have reasonable access to the books and records of the Business
and all relevant personnel responsible for such books and records for the purpose
of closing the books for the Business at December 31, 2005. After Closing,
Buyer shall prepare consolidating and consolidated statements of the Assets and
the Assumed Liabilities as of the close of business on the Closing Date
(collectively, the “Closing Balance Sheet”).  The Closing Balance Sheet shall be prepared
in accordance with GAAP applied on a basis consistent with the Interim Balance
Sheet, except that:  (i) only the
Assets and the Assumed Liabilities shall be included, and no Retained Assets or
Retained Liabilities shall be included; (ii) no item shall be excluded due
to a lack of materiality, (iii) inventory shall be stated on a basis
consistent with past practice, but in no event shall the aggregate value for
inventory exceed the aggregate fair market value for inventory; (iv) $290,000
of the HIA Claim shall be recorded as an asset, and no other assets or
liabilities related to the HIA Claim, shall be included; (v) percentage of
completion liability (cost in excess of billings less billings in excess of
costs, such net amount herein “POC Liability”)
shall be recorded as a current liability; (vi) other year-end or period
end accruals in accordance with GAAP shall be recorded; (vii) all accruals
in respect of liabilities existing at the Closing Date to be paid after Closing
by Buyer shall be recorded (including the estimate of $25,000 in legal fees
with respect to the HIA Claim); and (viii) all accruals in respect of
liabilities existing at the Closing Date to be paid before, at or after Closing
by Seller shall be excluded (including the accruals with respect to bad debt,
warranty claims, paid time off, etc.). 
If the Interim Balance Sheet is not presented in accordance with GAAP
and the foregoing exceptions in all respects, the Closing Balance Sheet shall
nevertheless properly reflect GAAP and the foregoing exceptions in all respects
so that the Purchase Price Adjustment shall take into account the effect of any
non-GAAP treatment and the absence of the above exceptions in the Interim
Balance Sheet.  Buyer may conduct a
physical count of the inventory of Seller within 15 days of Closing.  Buyer shall give Comfort Systems and its
accountants at least two Business Days’ prior written notice of such inventory
count, and


 


15





















 


Comfort Systems and its accountants may observe such inventory
count.  Such inventory count shall be
used to prepare the Closing Balance Sheet. 
Within 10 days of Closing, Seller will make available to Buyer all books
and records of Seller as of December 31, 2005 necessary to assist Buyer in
the preparation of the Closing Balance Sheet.


 


(b)                                 Delivery
of Closing Balance Sheet.  Buyer
shall deliver the Closing Balance Sheet to Comfort Systems within 30 days after
the Closing Date.  During the period of
30 days after Comfort Systems’ receipt of the Closing Balance Sheet (the “Objection Period”), Buyer (i) shall
provide Comfort Systems with complete access to (and, upon Comfort Systems’
reasonable request, copies of), all relevant papers, documents and information
used by Buyer in preparing the Closing Balance Sheet and (ii) shall
promptly respond in reasonable detail to reasonable inquiries by Seller with
respect to such papers, documents and information.  If, during the Objection Period, Seller does
not deliver to Buyer (A) a written notice stating in reasonable detail
Seller’s objection to Buyer’s calculation of the Purchase Price Adjustment and
the basis for such objection and (B) a signed statement that includes
Seller’s calculation of the Purchase Price Adjustment  (collectively, the “Objection Notice”), then the Closing Balance Sheet delivered
by Buyer to Comfort Systems shall be conclusive and binding on the parties for
purposes of determining the Purchase Price Adjustment.


 


(c)                                  Arbitration.  If, during the Objection Period, Seller
delivers to Buyer the Objection Notice, then Buyer and Seller will use
reasonable efforts to agree upon the calculation of the Purchase Price
Adjustment.  If Buyer and Seller fail to
agree upon the calculation of the Purchase Price Adjustment within 30 days of
Buyer’s receipt of the Objection Notice, then Buyer and Seller shall submit the
matter to KPMG in Atlanta, Georgia (the “Independent
Accountant”), for resolution applying the principles, policies and
practices set forth in Sections 1.4(a), 1.4(b) and 1.5(a). 
If the determination of the Purchase Price Adjustment is submitted to
the Independent Accountant for resolution, each of Buyer and Seller (i) shall
promptly furnish or cause to be furnished to the Independent Accountant such
work papers and other documents and information relating to the Closing Balance
Sheet and its calculation of the Purchase Price Adjustment as the Independent
Accountants may request and are available to such party or its agents and (ii) shall
be afforded the opportunity to present to, and discuss with, the Independent
Accountants any material relating to the Closing Balance Sheet and its
calculation of the Purchase Price Adjustment. 
Within 60 days following the submission of such matter to the
Independent Accountants, the Independent Accountants shall resolve the dispute
based on the principles, policies and practices set forth in Sections 1.4(a), 1.4(b) and 1.5(a). 
The fees and expenses of the Independent Accountants shall be split
evenly between Buyer and Seller.


 


1.6.                            Separate
Transactions.  The transactions
in each of Sections 1.1 and 1.2 are independent, separate and discrete
and are not integrated or combined as one or the same transaction.  Use of combined terms in this Agreement, such
as “Buyer”, “Seller”, “Assets”, “Assumed Liabilities” and “Purchase Price”, are
for convenience only in order to reduce time, costs and paper and shall have no
substantive effect on the separateness of such transactions.  Such transactions shall be treated and
reported separately for tax and accounting purposes, asset conveyance
documentation, and all other matters in this Agreement.


 


16





















 


ARTICLE II

CLOSING; CONDITIONS TO CLOSING; TERMINATION


 


2.1.                            Closing.  The parties shall consummate the purchase and
sale of the Assets, the assumption of the Assumed Liabilities, and the
consummation of the other Contemplated Transactions (the “Closing”) on the earlier of (a) December 31,
2005 and (b) the third Business Day after the date on which the conditions
set forth in Sections 2.2 and 2.3 are satisfied; provided, however, that
the Closing may occur at such other date, time and place as Buyer and Seller
may agree.  Closing shall be effective,
and all references herein to “Closing” and “Closing Date” shall mean, 11:59 p.m.
EST on the Closing Date.  The
transactions in each of Sections 1.1 and
1.2, although independent,
separate and discrete, must be closed simultaneously or neither such
transaction shall close.  The rights and
obligations of the parties if there is no Closing are set forth in Section 2.5.


 


2.2.                            Conditions
Precedent to Obligation of the ALC Group.  The obligation of the ALC Group to proceed
with the Closing is subject to the fulfillment prior to or at Closing of the
conditions set forth in this Section 2.2.  Any one or more of these conditions may be
waived, in whole or in part, by the ALC Group at the ALC Group’s sole option.


 


(a)                                 Representations
and  Warranties.  The representations and warranties of the
Comfort Systems Group contained in Article IV
that contain no express materiality qualifier shall be accurate and complete,
individually and collectively, in all material respects (i) as of the date
of this Agreement and (ii) as of the Closing Date as if made on the
Closing Date (except to the extent that any such representation or warranty
refers to a specific earlier date).  The
representations and warranties of the Comfort Systems Group contained in Article IV that contain an express
materiality qualifier shall be accurate and complete, individually and
collectively, in all respects (A) as of the date of this Agreement and (B) as
of the Closing Date as if made on the Closing Date (except to the extent that
any such representation or warranty refers to a specific earlier date).


 


(b)                                 Agreements.  The Comfort Systems Group shall have complied
with and performed, individually and collectively, in all material respects all
of the covenants and agreements in this Agreement that are required by this Agreement
to be complied with or performed by the Comfort Systems Group on or before the
Closing Date.


 


(c)                                  Litigation.  No Legal Requirement shall be in effect that (i) prohibits,
or threatens to prohibit, the Contemplated Transactions or (ii) would
limit or adversely affect Buyer’s acquisition of the Assets or assumption of
the Assumed Liabilities.  No Legal
Proceeding shall be pending or threatened that (A) challenges the
lawfulness of the Contemplated Transactions, (B) seeks to prevent or delay
any of the Contemplated Transactions or (C) seeks relief by reason of the
Contemplated Transactions or that, if determined adversely to the Comfort
Systems Group, would constitute a material breach of any of the representations
and warranties of the Comfort Systems Group contained in Article IV.  Neither the Comfort Systems Group nor the ALC
Group shall have received any claim by any person (written or oral) asserting
that any person other than Seller (1) is the legal or beneficial owner of,
or has the right to acquire or obtain the legal or beneficial ownership of, the
Assets, (2) has any Encumbrance (other than


 


17





















 


Permitted Encumbrances) on the Assets or (3) is entitled to all or
any portion of the Purchase Price.


 


(d)                                 No
Material Adverse Change.  Between the date of this Agreement and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage, in the Business, Assets, financial condition or results of
operation (financial or otherwise) of Seller.


 


(e)                                  Closing
Certificate.  The Comfort Systems Group shall have
delivered a certificate, dated as of the Closing Date, certifying to the
fulfillment of the conditions set forth in clauses Sections 2.2(a), 2.2(b), 2.2(c) and 2.2(d), and the contents of such
certificate (i) shall constitute a representation and warranty of the
Comfort Systems Group as of the Closing Date and (ii) shall be deemed to
have been relied upon by the ALC Group and fully incorporated in this
Agreement.


 


(f)                                    Legal
Approvals.  Each party to this Agreement shall have
received all Legal Approvals reasonably necessary to consummate the
Contemplated Transactions.


 


(g)                                 Arrangements
with  Certain
Employees.  Buyer shall
have entered into written employment agreements with the key employees of
Seller identified on Schedule 2.2(g) satisfactory
to Buyer in its sole discretion pursuant to which any then existing employment
agreement with such employees shall have terminated, except that (i) Comfort
Systems shall have paid, or made arrangements to pay, to Don Luhman all amounts
required to be paid under section 2(b)(iv) of his employment
agreement with Twin Cities as a result of the consummation of the Contemplated
Transactions and (ii) Comfort Systems shall have paid, or made arrangements
to pay, to Wayne Gary all amounts required to be paid under section 2(b)(iv) of
his employment agreement with UES as a result of the consummation of the
Contemplated Transactions.


 


(h)                                 Transition
Services  Agreement.  Comfort Systems shall have executed and
delivered to ALC Transition Services Agreements in the forms attached as Exhibit C.


 


(i)                                    Estoppel
Certificates.  Buyer shall have received from each lessor of
Real Property leased by Seller an estoppel certificate in form and substance
reasonably satisfactory to Buyer.


 


(j)                                    Closing
Documents.  The ALC Group shall also have received the
documents referred to in Section 2.4(a),
and all such documents shall be in form and substance reasonably satisfactory
to the ALC Group.


 


2.3.                            Conditions
Precedent to Obligation of the Comfort Systems Group.  The obligation of the Comfort Systems Group
to proceed with the Closing is subject to the fulfillment prior to or at
Closing of the conditions set forth in this Section 2.3.  Any one or more of these conditions may be
waived, in whole or in part, by the Comfort Systems Group at the Comfort
Systems Group’s sole option.


 


(a)                                 Representations
and  Warranties.  The representations and warranties of the ALC
Group contained in Article V
that contain no express materiality qualifier shall be accurate and


 


18





















 


complete, individually and collectively, in all material respects (i) as
of the date of this Agreement and (ii) as of the Closing Date as if made
on the Closing Date (except to the extent that any such representation or
warranty refers to a specific earlier date). The representations and warranties
of the ALC Group contained in Article V
that contain an express materiality qualifier shall be accurate and complete,
individually and collectively, in all respects (A) as of the date of this
Agreement and (B) as of the Closing Date as if made on the Closing Date
(except to the extent that any such representation or warranty refers to a
specific earlier date).


 


(b)                                 Agreements.  The ALC Group shall have complied with and
performed, individually and collectively, in all material respects all of the
covenants and agreements in this Agreement that are required by this Agreement
to be complied with or performed by the ALC Group on or before the Closing
Date.


 


(c)                                  Litigation.  No Legal Requirement shall be in effect that (i) prohibits,
or threatens to prohibit, the Contemplated Transactions or (ii) would
limit or adversely affect Seller’s assignment of the Assets or the Assumed
Liabilities.  No Legal Proceeding shall
be pending or threatened that (A) challenges the lawfulness of the
Contemplated Transactions, (B) seeks to prevent or delay any of the
Contemplated Transactions or (C) seeks relief by reason of the
Contemplated Transactions or that, if determined adversely to the ALC Group,
would constitute a material breach of any of the representations and warranties
of the ALC Group contained in Article V.


 


(d)                                 Closing
Certificate.  The ALC Group shall have delivered a
certificate, dated as of the Closing Date, certifying to the fulfillment of the
conditions set forth in Sections 2.3(a), 2.3(b) and
2.3(c), and the contents of such
certificate (i) shall constitute a representation and warranty of the ALC
Group as of the Closing Date and (ii) shall be deemed to have been relied
upon by the Comfort Systems Group and fully incorporated in this Agreement.


 


(e)                                  Legal
Approvals.  Each party to this Agreement shall have
received all Legal Approvals reasonably necessary to consummate the Contemplated
Transactions.


 


(f)                                    Arrangements
with  Certain
Employees.  The written
employment agreements with the key employees of Seller identified on Schedule 2.2(g) shall have
terminated, except that (i) Comfort Systems shall have paid, or made
arrangements to pay, to Don Luhman all amounts required to be paid under section 2(b)(iv) of
his employment agreement with Twin Cities as a result of the consummation of
the Contemplated Transactions, (ii) Comfort Systems shall have paid, or
made arrangements to pay, to Wayne Gary all amounts required to be paid under section 2(b)(iv) of
his employment agreement with UES as a result of the consummation of the
Contemplated Transactions, and (iii) Comfort Systems shall have received
from each employee party to any such employment agreement a release of all
claims in respect of such employment agreement, and each such release shall be
in form and substance satisfactory to Comfort Systems.


 


(g)                                 Transition
Services  Agreement.  ALC shall have executed and delivered to
Comfort Systems Transition Services Agreements in the forms attached as Exhibit C.


 


19





















 


(h)                                 Closing
Documents.  The Comfort Systems Group shall also have
received the documents referred to in Section 2.4(b),
and all such documents shall be in form and substance satisfactory to the
Comfort Systems Group.


 


2.4.                            Deliveries
and Proceedings at Closing.


 


(a)                                 Deliveries
by  the
Comfort Systems Group.  At Closing, the
Comfort Systems Group shall deliver to the ALC Group the following documents
(each as applicable to Twin Cities, UES and Buyer, as the case may be):


 


(i)                                    general
warranty bills of sale and instruments of assignment to the Assets in forms
attached as Exhibit D, duly
executed by Twin Cities, UES or Comfort Systems, as the case may be;


 


(ii)                                assignments of
all transferable or assignable licenses, Governmental Authorizations and
warranties relating to the Assets and of any trademarks, trade names, patents
and other Intellectual Property;


 


(iii)                            title
certificates to any motor vehicles (other than leased motor vehicles) included
in the Assets, duly executed by
Seller (together with any other transfer forms necessary to transfer title to
such vehicles);


 


(iv)                              such other
deeds, bills of sale, assignments, certificates of title, documents and other
instruments of transfer and conveyance as may reasonably be requested by Buyer,
executed by Seller;


 


(v)                                  certificates of
the appropriate public officials, dated not more than 10 days prior to the
Closing Date, to the effect that Seller is a validly existing corporation or
limited partnership in good standing in its state of incorporation or
formation, as the case may be;


 


(vi)                              incumbency and
specimen signature certificates, dated as of the Closing Date, signed by
officers of Seller and certified by the secretary of Seller;


 


(vii)                          correct and
complete copies of (A) the Governing Documents (other than the bylaws) of
Seller as of the Closing Date, certified by the Secretary of State of its state
of incorporation or formation, as the case may be, and (B) the bylaws of
Seller as of the Closing Date, certified by the secretary of Seller;


 


(viii)                      certificate of
the secretary of Seller (A) setting forth all resolutions of the Board of
Directors or general partner of Seller, as the case may be, and of the
stockholders or partners of Seller, as the case may be, authorizing the
execution and delivery of this Agreement and the performance by Seller of the
Contemplated Transactions, certified by the secretary of Seller, and (B) stating
that the Governing Documents of Seller delivered under Section 2.4(a)(vii) were in
effect on the date of adoption of those resolutions, the date of execution of
this Agreement and the Closing Date;


 


20





















 


(ix)                             all amendments
to UES’s Governing Documents necessary to change UES’s current name to a name
sufficiently dissimilar to UES’s current name to, in Buyer’s reasonable
judgment, avoid confusion; and


 


(x)                                 such other
agreements and documents as Buyer may reasonably request in order to consummate
the Contemplated Transactions.


 


(b)                                 Deliveries
by  the
ALC Group.  At Closing, the
ALC Group shall deliver to the Comfort Systems Group the following documents
(each as applicable to Twin Cities, UES and Buyer, as the case may be):


 


(i)                                    a wire transfer
of federal funds in accordance with Section 1.3
according to wire transfer instructions delivered by Comfort Systems (with
accompanying federal tax identification number) to Buyer in writing at least
two Business Days prior to the Closing Date;


 


(ii)                                the Assumption
Agreements;


 


(iii)                            certificates of
the appropriate public officials, dated not more than 10 days prior to the
Closing Date, to the effect that Buyer is a validly existing corporation in
good standing in its state of formation;


 


(iv)                              incumbency and
specimen signature certificates, dated as of the Closing Date, signed by
officers of Buyer and certified by the secretary of Buyer;


 


(v)                                  correct and
complete copies of (A) the Governing Documents (other than the bylaws) of
Buyer as of the Closing Date, certified by the Secretary of State of its state
of formation, and (B) the bylaws of Buyer as of the Closing Date,
certified by the secretary of Buyer;


 


(vi)                              certificate of
the secretary of Buyer (A) stating that Buyer is authorized and empowered
to consummate the Contemplated Transactions, and (B) stating that the
Governing Documents of Buyer delivered under Section 2.4(b)(v) were
in effect on the date the Contemplated Transactions were authorized, the date
of execution of this Agreement and the Closing Date; and


 


(vii)                          such other
agreements and documents as Buyer may reasonably request in order to consummate
the Contemplated Transactions.


 


2.5.                            Termination
Prior to Closing.


 


(a)                                 Events
of Termination.  This Agreement may be terminated in writing
at any time prior to the Closing by:  (i) the
mutual consent of Buyer and Seller; (ii) Buyer, if any of the conditions
specified in Section 2.2
shall not have been fulfilled (or if satisfaction becomes impossible) on or
before December 31, 2005 and shall not have been waived by Buyer; (iii) Seller,
if any of the conditions specified in Section 2.3
shall not have been fulfilled (or if satisfaction becomes impossible) on or
before December 31, 2005 and shall not have been waived by Seller; (iv) Buyer,
if a material breach of this Agreement has been committed by Seller, including
a material breach that led to the failure of any of the conditions identified
in


 


21





















 


Section 2.2,
and such material breach has not been waived by Buyer; (v) Seller, if a
material breach of this Agreement has been committed by Buyer, including a
material breach that led to the failure of any of the conditions identified in Section 2.3, and such material breach
has not been waived by Seller.


 


(b)                                 Consequences
of  Termination.  If this Agreement is terminated by mutual
consent of Buyer and Seller pursuant to clause (i) of Section 2.5(a), then no party shall
have any obligation to any other party as a result of such termination.  If Buyer or Seller terminates this Agreement
pursuant to clause (ii) or (iii) of Section 2.5(a),
then no party shall have any obligation to any other party as a result of such
termination.  If Buyer or Seller
terminates this Agreement pursuant to clause (iv) or (v) of Section 2.5(a), then Buyer or Seller,
as the case may be, shall be liable to the other parties for any material
breach of this Agreement by Buyer or Seller, as the case may be, which led to
such termination.  Each party shall also
be entitled to any other remedy to which it may be entitled at law or in
equity, including injunctive relief and specific performance, in the event of a
termination of this Agreement pursuant to clause (iv) or (v) of Section 2.5(a).  If the Closing does not occur on or before December 31,
2005, and a material breach of this Agreement by Buyer or Seller was not the
cause of the failure to consummate the Contemplated Transactions by such date,
then no party shall have any liability to the other parties under this
Agreement, and this Agreement shall terminate. 
All rights and obligations of the parties set forth in Sections 3.3, 3.4, 6.2, 6.3 and 8.1
shall survive termination of this Agreement.


 


2.6.                            Casualty
Damage.  Notwithstanding anything
else in this Agreement to the contrary, if prior to Closing the Assets (or any
portion thereof) are damaged by flood, fire or any other cause, the reasonable
estimate of the losses (including business interruption losses) would be more
than $250,000, or which reasonably would be expected to interrupt Business for
more than seven days, then either party may, at its option, declare this
Agreement null and void.  If prior to
Closing the Assets (or any portion thereof) are damaged by flood, fire or any
other cause, the reasonable estimate of losses (including business interruption
losses) would be $250,000 or less, or which would not reasonably be expected to
interrupt Business for more than seven days, then such event shall not excuse
Buyer from its obligations under this Agreement, but the Purchase Price shall
be reduced by an amount equal to the amount of such loss, with respect to which
the parties shall agree to a reasonable estimate at Closing with a
reconciliation and payment based on actual losses 90 days after the Closing
Date.


 


2.7.                            Fulfillment
of Conditions and Agreements Prior to Closing; Legal Approvals and Consents.  Each party shall cooperate with the others
and use commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable, including making or obtaining any and all Legal Approvals and
Consents, to consummate and make effective the Contemplated Transactions,
including making all filings under applicable Legal Requirements; provided,
however, that neither the ALC Group nor the Comfort Systems Group shall have
any obligation to incur any Liability or pay funds in connection therewith.


 


22





















 


ARTICLE III.

CERTAIN COVENANTS


 


3.1.                            Conduct
of Business Pending the Closing. 
Between the date of this Agreement and the Closing Date, unless Buyer
otherwise consents in writing, the Comfort Systems Group shall conduct the
affairs of Seller as follows:


 


(a)                                 Ordinary
Course; Compliance.  Seller shall conduct the Business only in the
ordinary course and consistent with past practice.  Seller shall maintain the Assets and Assumed
Liabilities consistent with past practice and shall comply in a timely fashion
with the provisions of all Contracts, Governmental Authorizations and Legal
Requirements.  Seller shall use
commercially reasonable efforts to keep their business organizations intact,
keep available the services of their present employees and preserve the
goodwill of their suppliers, customers and others having business relations
with them.  Seller (i) shall
maintain in full force and effect the policies of insurance disclosed on Schedule 4.19(c), subject only to
variations required by the ordinary operations of the Business or (ii) shall
obtain prior to the lapse of any such policy substantially similar coverage
with insurers of recognized standing.


 


(b)                                 Transactions.  Seller shall not: (i) enter into or
amend any Contract or Governmental Authorization, the performance of which may
extend beyond the Closing, except (A) in the ordinary course of business
and consistent with past practice or (B) with Buyer’s approval; (ii) enter
into or amend any employment or consulting Contract that is not terminable at
will and without penalty or continuing obligation; (iii) fail to pay any
Tax or any other Liability or charge when due, other than charges contested in
good faith by appropriate proceedings and brought to the attention of Buyer; (iv) make,
change or revoke any Tax election or make any agreement or settlement with any
Taxing authority; (v) take any action, or omit to take any action, that
will cause a breach or termination of any Contract or Governmental
Authorization, other than termination by fulfillment of its terms in the
ordinary course of business; (vi) allow the levels of raw materials,
parts, supplies or other materials included in the inventories to vary
materially from the levels customarily maintained; (vii) accelerate
collections of trade accounts receivable outside of customary practices; (viii) enter
into any compromise or settlement of any litigation, proceeding or governmental
investigation relating to the Business; or (ix) take any action that is
likely to result in the occurrence of any event described in Section 4.7 or cause the breach or
inaccuracy of any representation and warranty in Article IV as of the date of this Agreement or on the
Closing Date.  Seller shall confer with
Buyer prior to implementing operational decisions of a material nature, and
shall otherwise report periodically to Buyer concerning the status of Seller’s
business, operations and finances.


 


(c)                                  Access,
Information  and
Documents.  Seller shall give to the ALC Group and to the
ALC Group’s employees, representatives and agents (including accountants,
actuaries, financial advisors, attorneys, environmental consultants and
engineers) access during normal business hours to all of the properties, books,
Tax Returns, Contracts, commitments, records, officers, other personnel and
accountants (including independent public accountants and their audit
workpapers concerning Seller) of Seller. 
Seller shall furnish to the ALC Group copies of all such documents, and
all such information, with respect to the properties, Liabilities, financial
position and performance and affairs of Seller and the Business as the ALC
Group may reasonably request.  In
addition, the ALC Group shall have the right to have the Real Property


 


23





















 


and tangible personal property of Seller inspected by the ALC Group, at
the ALC Group’s sole cost and expense, for purposes of determining the physical
condition and legal characteristics of the Real Property and such tangible
personal property.


 


3.2.                            Certain
Tax Matters.


 


(a)                                 Payment
of  Taxes
on  the
Sale of the Assets.  Except as provided in the immediately
succeeding sentence, the Comfort Systems Group shall pay in a timely manner all
Taxes resulting from or payable in connection with the sale of the Assets
pursuant to this Agreement, regardless of the person on whom such Taxes are
imposed by Legal Requirements.  All
transfer, documentary, sales, use and motor vehicle taxes incurred in
connection with consummation of the Contemplated Transactions shall be paid by
the ALC Group, and such payment shall be made when due, and the ALC Group will,
at its own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes.  Without the
prior written consent of Buyer or Seller, as the case may be, neither Buyer nor
Seller shall make or change any Tax election or undertake any action that would
have the effect of increasing the Tax liability of the other party for any Tax
period ending after the Closing Date.


 


(b)                                 Tax
Allocation  Agreements; Wage Reporting.  Any agreement among Seller and Comfort
Systems and its other Affiliates regarding allocation or payment of Taxes shall
be deemed terminated at and as of the Closing Date.  At Buyer’s request, Seller shall agree to
utilize the standard or, if Buyer so elects, the alternate procedure set forth
in the IRS Revenue Procedure 96-30 for wage reporting purposes.


 


(c)                                  Mutual
Cooperation.  The ALC Group and the Comfort Systems Group
shall each assist the other as may reasonably be requested by any of them with
the preparation of any Tax Return, any Tax audit, or any judicial or administrative
proceedings relating to any Tax.  In
addition, each party shall retain and provide the other with any records or
information that may be relevant to such Tax Return, Tax audit, proceeding or
determination.  The party requesting
assistance under this Section 3.2(c) shall
reimburse the party providing assistance for direct expenses incurred in
providing such assistance.


 


3.3.                            Publicity.  No party shall (i) issue any press
release or otherwise make any announcements to the public or the employees of
Seller regarding this Agreement or the Contemplated Transactions without
consulting with the other party, or (ii) disclose the amount of the
Purchase Price without the prior written consent of the other party, in each
case except as required by any applicable Legal Requirements.  Unless required by applicable Legal
Requirements, each party shall keep this Agreement and its contents strictly
confidential.  Seller and Buyer shall
consult concerning the means by which the employees, customers, suppliers and
others having dealings with Seller will be informed of the Contemplated
Transactions, and Buyer shall have the right to be present for, and to speak
at, information meetings with the employees of Seller.


 


3.4.                            Confidentiality;
Privilege.  From and after the
date hereof, each party shall maintain in confidence, and each party shall
cause its agents, representatives and Affiliates to maintain in confidence, and
no party shall use to the detriment or competitive disadvantage of any other
party or its Affiliates, any and all information (including all Confidential
Information,


 


24





















 


information of a proprietary nature and all trade secrets under
applicable state law) exchanged in connection with this Agreement or the
Contemplated Transactions.  The foregoing
covenants shall not apply:  (a) to
any party with respect to information that (i) is already known to such
party or to others not bound by a duty of confidentiality, (ii) becomes
publicly available through no fault of such party or (iii) is
independently acquired or developed by such party without violating any of its
obligations under this Agreement; (b) to the extent necessary or
appropriate to permit any party to make any filing, or obtain any Consent or
Legal Approval, required for the consummation of the Contemplated Transactions;
or (c) to the extent necessary to permit any party to comply with
applicable law or with required legal process in any Legal Proceeding.  If a party is compelled in any Legal Proceeding
(other than between the parties hereto), or is requested by a Governmental Body
having regulatory jurisdiction over the Contemplated Transactions, to make any
disclosure that is prohibited or otherwise constrained by this Section 3.4, such party shall provide
the other party with prompt notice of such compulsion or request so that the
other party may seek an appropriate protective order or other appropriate
remedy or waive compliance with the provisions of this Section 3.4.


 


3.5.                            Notification.  Between the date of this Agreement and the
Closing Date, the Comfort Systems Group shall promptly notify the ALC Group in
writing if the Comfort Systems Group becomes aware of any fact or condition
that causes or constitutes, or would cause or constitute, a breach of any of
representations and warranties contained in Article IV,
or would cause a breach had such representation and warranty been made at the
time of such occurrence.  The Comfort
Systems Group also shall promptly notify the ALC Group of the occurrence of any
breach of any covenant of the Comfort Systems Group in this Agreement or of the
occurrence of any event that may make the satisfaction of the conditions in Article II impossible or
unlikely.  Between the date of this
Agreement and the Closing Date, the ALC Group shall promptly notify the Comfort
Systems Group in writing if the ALC Group becomes aware of any fact or
condition that causes or constitutes, or would cause or constitute, a breach of
any of representations and warranties contained in Article V, or would cause a breach had such
representation and warranty been made at the time of such occurrence.  The ALC Group also shall promptly notify the
Comfort Systems Group of the occurrence of any breach of any covenant of the
ALC Group in this Agreement or of the occurrence of any event that may make the
satisfaction of the conditions in Article II
impossible or unlikely.


 


3.6.                            Exclusivity.  Until Closing or such time as this Agreement
is terminated, the Comfort Systems Group shall not directly or indirectly
solicit, initiate, or encourage or consider any inquiries or proposals relating
to, or discuss or negotiate with or provide any non-public information to any
person (other than the ALC Group) with respect to, any transaction involving
the sale of the Assets, the Business or Seller, or any of the capital stock of
Seller, or any merger, consolidation, business combination or similar
transaction involving Seller.


 


3.7.                            Certain
Transitional Matters.


 


(a)                                 Collection
of  Accounts
Receivables.  From and after the Closing, Buyer shall have
the right and authority to collect for Buyer’s own account all Receivables and
other items included in the Assets and transferred to Buyer hereunder.  Buyer shall use commercially reasonable
efforts (excluding litigation and assignment to a collection agency) to collect
the Receivables within the time periods identified in Section 6.2(e).  Buyer shall respond reasonably


 


25





















 


to all reasonable requests by Seller for information concerning the
status of Receivables collection in the aggregate within such time periods.


 


(b)                                 Endorsement
of  Checks.  From and after the Closing, Buyer shall have
the right and authority to retain and endorse without recourse the name of
Seller on any check or any other evidences of Indebtedness received by Buyer on
account of any of the Business and Assets transferred to Buyer hereunder.


 


(c)                                  Remit
Funds. 
From and after the Closing, Seller shall promptly transfer and deliver
to Buyer any cash or other property that (i) is included in the Assets
transferred to Buyer hereunder and (ii) is received by Seller.


 


(d)                                 Assumed
Liabilities  Controlled
by  Buyer.  Subject to Seller’s rights under Article VI, from and after the
Closing, Buyer shall have complete control over the payment, settlement or
other disposition of, or any dispute involving, any Assumed Liability, and
Buyer shall have the right to conduct and control all negotiations and
proceedings with respect thereto.  From
and after Closing, Seller (i) shall notify Buyer promptly of any claim
made with respect to any Assumed Liability and (ii) shall not voluntarily
make any payment of, or settle or offer to settle, or consent to any compromise
with respect to, any such Assumed Liability, except (A) as otherwise
permitted by Article VI or (B) with the prior written consent of
Buyer.  Subject to Seller’s rights under Article VI, Seller shall cooperate with Buyer in connection with any
negotiations or proceedings involving any Assumed Liability.


 


(e)                                  Insurance.  For a period of two years following the
Closing, the Comfort Systems Group shall, to the extent that the coverage under
its commercial liability and property insurance policies currently extend to
include the Business for periods prior to the Closing, (i) take no action
to eliminate or reduce such coverage, other than normal elimination or
reduction of coverage as such occurs by virtue of the filing of claims in the
ordinary course under such insurance policies and (ii) pay when due any
premiums under such policies for periods, including retrospective or
retroactive premium adjustments.


 


(f)                                    Assistance.  If, at any time after Closing, any further
action is necessary to carry out the purposes of this Agreement, each party
will take such further action (including the execution and delivery of such
further instruments and documents) as any other party may reasonably request,
all at the sole cost and expense of the requesting party (unless the requesting
party is entitled to indemnification under Article VI).  Each party will cooperate with the other
parties and their respective counsel in the contest or defense of, and make
available its personnel and provide any testimony and access to its books and
records in connection with, any Legal Proceeding involving or relating to (a) any
Contemplated Transaction or (b) any action, activity, circumstance,
condition, conduct, event, fact, failure to act, incident, occurrence, plan,
practice, situation, status or transaction on or before the Closing Date
involving Seller or the Business.  After
the Closing, no party will take any action that is designed or intended to have
the effect of discouraging any lessor, employee, regulatory authority,
licensor, customer, supplier or other business associate of Seller from
maintaining the same business relationship with Buyer after the Closing as it
maintained with Seller prior to Closing. 
From and after the Closing, Seller will refer to Buyer all inquiries
relating to the Business.


 


26





















 


3.8.                            Severance,
Change of Control and Termination Payments.  Seller shall (a) pay, perform, satisfy
and discharge any and all severance payments and other Liabilities with respect
to employees of Seller that result from the transfer of the Assets hereunder
and the employment by Buyer of those employees, whether or not described as a “change
of control”, “termination” “sale by Comfort Systems or its subsidiaries of all
the capital stock of or partnership interests in Seller” or otherwise, and (b) indemnify
and hold harmless Buyer and its directors, officers and Affiliates from and
against any and all Damages that any of the aforesaid may suffer or incur by
reason of or relating to any Liabilities referred to in clause (a) above.


 


3.9.                            Seller’s
Employees.  Except as
contemplated by written employment agreements signed by Buyer on or before the
Closing Date, Buyer shall offer employment to all Employees identified in Schedule 3.9 (all of such employees
accepting employment with Buyer as of the Closing, the “Transferring Employees”).  Seller (a) shall use reasonable efforts
to cooperate with Buyer in the dissemination of such offers of employment,
together with any appropriate related documentation such as applications for
employment, tax and benefit forms and the like, and (b) shall provide
Buyer with reasonable assistance in the collection thereof.  All amounts in respect of paid time off that
are due to Seller’s employees as of the Closing Date shall be paid in full by
Seller on or before the Closing Date.


 


3.10.                     Benefit Plan
Matters.  As of the Closing Date,
each of the Transferring Employees who has an account balance in any defined
contribution plan (the “Defined Contribution
Plans”) maintained by Seller (a) shall be entitled to receive a
distribution of his or her vested account balance in accordance with the terms
of the Defined Contribution Plans; (b) shall be permitted to rollover his
or her “eligible rollover distribution” (as defined under Section 402(C)(4) of
the IRC) to a qualified retirement plan established or maintained by Buyer that
contains a cash or deferred arrangement under Section 401(k) of the
IRC.  Schedule 3.10
identifies each Transferring Employee and his or her non-vested account balance
as of November 30, 2005.  Seller
will notify each employee of his or her approximate non-vested account balance
prior to Closing, and will inform each Transferring Employee with unvested
amounts that the unvested amount will be transferred to Buyer for disbursement
to each such Employee after such amount is finally determined following the
Closing.  As soon as practicable
following the Closing, but in any event on or before January 31, 2006,
Seller will determine the final aggregate unvested amounts for the Transferring
Employees and will transfer an equivalent amount of funds to Buyer, who will
disburse them to Employees in any manner it reasonably chooses.  Seller will notify each Transferring Employee
of his or her final non-vested account balance when the final aggregate
unvested amounts for the Transferring Employees is determined.  As of the Closing Date, the Transferring
Employees shall cease to be eligible to make or receive contributions under the
Defined Contribution Plans of Seller; provided, however, that any contribution
required to be made with respect to the participation of the Transferring
Employees in such Defined Contribution Plans on or immediately prior to the
Closing Date shall be made by Seller as soon as administratively feasible
following the Closing Date, in accordance with Seller’s standard administrative
practice for such Defined Contribution Plans. 
Effective as of the Closing Date, the Transferring Employees shall
receive the benefits identified in the Transition Services Agreement pursuant
to the terms thereof.  Seller shall
retain all liability for any and all welfare benefit plans of Seller or Comfort
Systems (all of which are intended to be included in Retained Liabilities),
including plans, programs and arrangements which provide medical and dental
coverage and life and accident insurance, disability insurance


 


27





















 


for the Transferring Employees (or their eligible dependents) prior to
the Closing Date (for this purpose, a claim shall be deemed to be incurred on
the date on which medical or other treatment or service was rendered and not
the date of inception of an illness or injury or the date on which a claim for
treatment or service is submitted). 
After Closing, the Comfort Systems Group shall, in the ordinary course
of business and in accordance with the terms of the Presidents’ Bonus Plan of
Comfort Systems, pay all bonuses payable to Don Luhman and Wayne Gary pursuant
to the Presidents’ Bonus Plan of Comfort Systems in respect of fiscal year
ended December 31, 2005.


 


3.11.                     Product
Liability and Product Warranties.


 


(a)                                 Products
Liability.  Except as set forth in the immediately
succeeding sentence, Seller shall be liable for all express and implied
products liability for all products shipped, distributed, assembled or sold by,
or any services provided by, Seller prior to the Closing Date.  The ALC Group shall be liable for all express
and implied products liability for all products shipped, distributed, assembled
or sold by, or any services provided by, Seller prior to the Closing Date to
the extent such products liability results from any product assembled or
manufactured, or any service provided by, ALC or any of its subsidiaries.


 


(b)                                 Products
and Service Warranties.  Except as set
forth in the last sentence of this Section 3.11(b),
Buyer shall, at Seller’s cost and expense, be responsible for all express
product and services warranty obligations made by Seller prior to Closing
(excluding OEM warranties) in excess of the product and services warranty
reserve on the Closing Balance Sheet; provided, however, that Buyer:  (i) shall invoice Seller at Buyer’s cost
for parts and materials used, and at Buyer’s usual and customary rate for
services provided, in satisfying such product and services warranty
obligations; and (ii) shall not invoice Buyer for any such parts,
materials or services unless at such time the aggregate amount owing by Seller
to Buyer in respect of such parts and services equals or exceeds $5,000.  Upon receipt by Seller from Buyer of any
invoice in respect of parts, materials and services furnished in accordance
with the immediately preceding sentence, Buyer shall promptly pay to Seller the
amount of such invoice.  The ALC Group
shall, at it’s own cost and expense, be responsible for (A) all express
OEM product and services warranty obligations made by Seller prior to Closing
and (B) all other express product and services warranty obligations made
by Seller prior to Closing if such warranty obligations result directly from
any product assembled or manufactured by, or any service provided by, ALC or
any of its subsidiaries.


 


3.12.                     Restrictive
Covenants.


 


(a)                                 Noncompetition.  For a period of five years from and after the
Closing Date, no member of the Comfort Systems Group or their Affiliates shall,
directly or indirectly, own, manage, operate, join or control, or participate
in the ownership, management, operation or control of, or be connected as a
stockholder, partner or otherwise with, any business that at any relevant time
during such period directly or indirectly engages in the Business in the states
of Minnesota, Texas or Louisiana.  “Business” for purposes of this Section 3.12 is restricted to
manufacturing, distributing, marketing or servicing HVAC controls as a core
business, and shall not include engaging in HVAC mechanical contracting or
providing HVAC services as a core business with incidental sales, installation
and servicing of HVAC controls.


 


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(b)                                 Restrictions
on Hiring.  For a period of two years from and after the
Closing Date, no member of the Comfort Systems Group or their Affiliates shall
directly or indirectly:  hire, retain or
attempt to hire or retain any employee or independent contractor of Buyer in
the Business in the states of Minnesota, Texas or Louisiana, or in any way
interfere with the relationship between Buyer and any of its employees or
independent contractors in the Business in the states of Minnesota, Texas or
Louisiana.


 


(c)                                  Enforcement.  The restrictive covenant contained in this Section 3.12 is a covenant
independent of any other provision of this Agreement and the existence of any
claim that any member of the Comfort System Group or their Affiliates may
allege against Buyer, whether based on this Agreement or otherwise, shall not prevent
the enforcement of this covenant.  The
Comfort System Group agree that Buyer’s remedies at law for any breach or
threat of breach by the Comfort System Group of any of the provisions of this Section 3.12 will be inadequate, and
that Buyer shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Section 3.12
and to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which Buyer may be entitled at law or equity.  In the event of litigation regarding the
covenant not to compete, the prevailing party in such litigation shall, in
addition to any other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its reasonable legal
fees and out of pocket costs incurred by such party in enforcing or defending
its rights hereunder.  The length of time
for which this covenant not to compete shall be in force shall not include any
period of violation or any other period required for litigation during which
Buyer seeks to enforce this covenant. 
Should any provision of this Section 3.12
be adjudged to any extent invalid by any competent tribunal, such provision
shall be deemed modified to the extent necessary to make it enforceable.


 


3.13.                     Internet
Sites.  Within 30 days after Closing, Seller shall remove
all information from internet sites owned or used by it relating to any names
that are included in the Assets.  In
addition, for a period of one year after Closing, Seller shall include in its internet
sites a link to Buyer’s internet sites in respect of such names.  Within 30 days
after Closing, Buyer shall remove all information from internet sites owned or
used by Buyer relating to any names of Comfort Systems or its subsidiaries that
are not included in the Assets.  In
addition, for a period of one year after Closing, Buyer shall include in its
internet sites a link to Seller’s internet sites in respect of such names.


 


3.14.                     Retention of
Records.  After the Closing Date,
Buyer shall retain for a period of five years after the Closing Date those
records of Seller delivered to Buyer. 
Buyer also shall provide Seller reasonable access thereto, during normal
business hours and on at least three days’ prior written notice, for any
reasonable purpose that (a) relates to the Business conducted by Seller on
or prior to the Closing Date, this Agreement or the Contemplated Transactions
and (b) is specified in such notice, including to enable Seller to prepare
financial statements or Tax Returns and to deal with Tax audits,
indemnification claims and litigation. 
After the Closing Date, Seller shall provide Buyer and its
representatives reasonable access to records that relate to the Business,
during normal business hours and on at least three days’ prior written notice,
for any reasonable purpose related to the Business specified by Buyer in such
notice.


 


3.15.                     Use of Name.  Seller grants to Buyer the non-exclusive
license to use the names “Comfort Systems USA, Inc.”, “Comfort Systems”
and any derivative or other names currently


 


29





















 


used by Seller that are not owned by Seller (the “Comfort System Names”) for 180 days after
the Closing Date, as or as part of any trade name, corporate name, domain name,
trademark, service mark, logo, design or other source indicator appearing on
the Assets prior to the Closing Date. 
Buyer shall use reasonable best efforts to remove, redact, strike
through or cover the Comfort Systems Names from the Assets as soon as
practicable, and in any event within 180 days after the Closing Date, although
Buyer may continue to use the Comfort Systems Names in a neutral, non-trademark
sense to communicate the historical affiliation of Seller.


 


3.16.                     Third Party
Guaranty Arrangements.  Buyer will
use reasonable efforts to replace all Third Party Guaranty Arrangements
existing on the Closing Date within 45 days after the Closing Date.  If Buyer is unable to replace any Third Party
Guaranty Arrangement existing on the Closing Date, then Buyer will pay to
Comfort Systems a pro rated portion of the premium payable in respect of such
Third Party Guaranty Arrangement for each job secured thereby, based on the
percentage of such job that remains to be completed after the Closing Date.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES 

OF THE COMFORT SYSTEMS GROUP


 


The Comfort Systems Group jointly and
severally represents and warrants to the ALC Group as set forth in this Article IV.  All Schedule disclosures in this Article IV shall separately disclose
such matters for each of Twin Cities and UES.


 


4.1.                            Organization;
Qualification.  Twin Cities is a
corporation duly organized, validly existing and in good standing under the
laws of Minnesota.  UES is a limited
partnership duly organized, validly existing and in good standing under the
laws of Texas.  Seller has the power and
authority (a) to own or lease, and operate, its properties, (b) to
enter into this Agreement and the Other Agreements to which it is or is to
become a party, (c) to perform its obligations under this Agreement and
such Other Agreements and (d) to carry on its business as now
conducted.  Twin Cities is duly qualified
and in good standing as a foreign corporation and is duly authorized to
transact business in each jurisdiction where the character of the properties
owned or leased by it or the nature of the activities conducted by it make such
qualification and good standing necessary. 
UES is duly qualified and in good standing as a foreign limited partnership
and is duly authorized to transact business in each jurisdiction where the
character of the properties owned or leased by it or the nature of the
activities conducted by it make such qualification and good standing necessary.


 


4.2.                            Authorization;
Enforceability.  This Agreement
and each Other Agreement to which the Comfort Systems Group is a party have
been duly executed and delivered by the Comfort Systems Group and constitute
the legal, valid and binding obligations of the Comfort Systems Group,
enforceable against the Comfort Systems Group in accordance with their
respective terms.  Each Other Agreement
to which the Comfort Systems Group is to become a party, when executed and
delivered by the Comfort Systems Group, shall constitute the legal, valid and
binding obligation of the Comfort Systems Group, enforceable against the
Comfort Systems Group in accordance with its terms.  The Comfort Systems Group has duly and
validly authorized this Agreement and the Other Agreements to which it is or is
to become a party and all of the Contemplated Transactions to be taken by it.


 


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4.3.                            No
Violation of Laws or Agreements; Legal Approvals; Consents.  The execution, delivery and performance by
the Comfort Systems Group of this Agreement and the Other Agreements and the
consummation of the Contemplated Transactions do not and will not directly or
indirectly (with or without notice or the lapse of time or both) (i) conflict
with or violate any provision of the Governing Documents of the Comfort Systems
Group or the resolutions adopted by the Board of Directors or other governing
body of the Comfort Systems Group, (ii) conflict with or violate any Legal
Requirement applicable to the Comfort Systems Group, (iii) violate, or
result in a breach, default or acceleration under, or give rise to any penalty
or any right of termination or modification or any other remedy under, any
Contract to which any member of the Comfort Systems Group is a party or by
which any member of the Comfort Systems Group is bound, any Governmental
Authorization held by Seller or any other Asset, or (iv) accelerate any
Assumed Liability.  Except as disclosed
on Schedule 4.3, the Comfort
Systems Group is not required to make, give or obtain any Legal Approvals or
Consents in connection with the execution, delivery or performance by the ALC
Group of this Agreement or any Other Agreement or the consummation by the ALC
Group of the Contemplated Transactions.


 


4.4.                            Subsidiaries
and Investments; SPEs.  The Assets do
not contain any shares of capital stock of, or other equity interest in, any
Subsidiary or SPE.


 


4.5.                            Records;
Financial Information; Guarantees; Long Term Contracts.


 


(a)                                 Records;
Compliance.  The books of account and related records of
Seller reflect accurately and in reasonable detail the material Assets and
Assumed Liabilities.  The books of
account of Seller represent actual, bona fide transactions and have been
maintained in accordance with sound business practices, including adequate
internal controls.  The minute books of
Seller contain accurate and complete records of all meetings held of, and
corporate or partnership action taken by, the stockholders, the Board of
Directors of Seller and committees of the Board of Directors, or partners, as
the case may be, of Seller.  No meeting
of stockholders, the Board of Directors of Seller or committees of the Board of
Directors, or of the partners, as the case may be, of Seller has been held for
which minutes have not been prepared and are not contained in the minute books
of Seller.  All minute books of Seller
have been made available to Buyer.


 


(b)                                 Financial
Statements.  Attached as Exhibit E
are the unaudited consolidated balance sheets and income statements
for each of Twin Cities and UES at December 31, 2002, December 31,
2003 and December 31, 2004, and for the years then ended, and the
unaudited interim consolidated balance sheets and income statements for each of
Twin Cities and UES at September 30, 2005, and for the periods then ended
(collectively, the “Financial Statements”).  The
Financial Statements (i) are accurate, correct and complete in all
material respects in accordance with the books of account and records of
Seller, (ii) have been prepared in accordance with GAAP on a consistent
basis throughout the indicated periods, except that they do not contain
footnotes and the interim financial statements contain no year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse), and (iii) fairly present in all material respects the consolidated
financial condition, assets and liabilities and results of operation of Twin
Cities or UES, as the case may be, at the dates and for the relevant periods
indicated in accordance with GAAP on a basis consistently applied.  All


 


31





















 


references in this Agreement to “Interim
Balance Sheet Date” mean September 30, 2005, and all references
in this Agreement to the “Interim Balance
Sheet” mean the respective balance sheets of Twin Cities and UES
dated September 30, 2005 attached as Exhibit F.


 


(c)                                  Guarantees,
Etc. 
Schedule 4.5
identifies all outstanding guarantees, letters of comfort, letters of
assurance, letters of credit, performance bonds, assurance bonds, surety
agreements, indemnity agreements and any other legally binding forms of
assurance or guaranty in connection with the Business, whether or not issued by
Seller, Comfort Systems, any other Related Party or any other person (“Third-Party Guaranty Arrangements”).


 


(d)                                 Long
Term Contracts. All long term customer Contracts of Seller are
identified on Schedule 4.13
and accounted for in the Financial Statements using the percentage of
completion method of accounting on a basis consistently applied using costs
based on work actually completed.  Seller
has delivered to Buyer Seller’s POC schedule as of November 30, 2005 (“Seller’s
POC Schedule”), which
contains complete work in progress information for each customer as of such
date.  Seller’s POC Schedule, in the aggregate,
fairly represents as of November 30, 2005, in all material respects, 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), earned revenues to
such date, estimated gross profits (in dollars and percentages) and actual
gross profit recognized to such date (in dollars).  Seller’s POC Schedule also includes with
respect to contracts as of such date, the following information:  job number, job name, contract price, dollar
amount of pending change orders, total estimated contract price, actual
billings to date, costs to date and total estimated contract costs.  Except as disclosed on Seller’s POC Schedule or
in the Financial Statements, no member of the Comfort Systems Group has been
notified of or is aware of any dispute over amounts billed by Seller or of any
intention to hold back amounts in excess of contractually permitted
holdbacks.  During the past two years,
Seller has not changed the accounting methodology, standards or assumptions
that it uses in connection with the completion method of accounting for long
term customer Contracts or determining its POC Liability.  All reasonably foreseeable losses on all long
term customer Contracts are fully provided for in the Financial
Statements.  Except as set forth on
Seller’s POC Schedule, all reasonably foreseeable losses on all long term
customer Contracts are fully provided for in the Financial Statements.  The net of (a) billings for work not yet
performed and (b) work performed but not yet billed, is fairly and
accurately presented as of November 30, 2005 on Seller’s POC Schedule.


 


4.6.                            Undisclosed
Liabilities.  Seller has no
material Liabilities except:  (i) those
reflected or reserved against on the Interim Balance Sheet and those disclosed
in the footnotes to the Financial Statements; (ii) those not required
under GAAP to be reflected or reserved against in the Interim Balance Sheet
that are expressly quantified and set forth in the Contracts and Governmental
Authorizations (other than for breach or non-performance); (iii) those
disclosed on Schedule 4.6;
and (iv) those that have arisen in the ordinary course of business of
Seller after the Interim Balance Sheet Date (“Post-Balance
Sheet Liabilities”).  All
Post-Balance Sheet Liabilities are materially consistent in amount and
character with past practice and experience. 
No Post-Balance Sheet Liability has had or could reasonably be expected
to have a material adverse effect on the Business, Assets, financial condition
or results of operation of Buyer.  No
material Post-Balance Sheet Liability is a result of a breach by the Comfort
Systems Group of


 


32





















 


contract or warranty, a tort or infringement, or violation by the
Comfort Systems Group of any property rights or Legal Requirements.


 


4.7.                            No
Changes.  Since the Interim
Balance Sheet Date, Seller has conducted the Business only in the ordinary
course, consistent with past practice. 
During the past 12 months, except as expressly disclosed on Schedule 4.7, there has been no:


 


(i)                                    material
change in the Business, financial condition or results of operations of Seller;


 


(ii)                                material
damage or destruction to the Assets, whether or not covered by insurance (other
than inventory and supply damage offset by fully collectible freight claims
against common carriers for the fair value thereof);


 


(iii)                            strike,
labor union organizing attempts or other labor trouble at Seller;


 


(iv)                              declaration
or payment of any non-cash dividend, or other non-cash distribution, redemption
or purchase of shares;


 


(v)                                  increase
in the salary, wage or bonus of any employee of Seller (other than routine
increases in the salaries, wages and bonuses of non-executive employees in the
ordinary course of business consistent with past practice), or payment of any
bonuses to any employee of Seller;


 


(vi)                              asset
acquisition or expenditure, including capital expenditure, in excess of $50,000
in the aggregate by Seller, other than the purchase of inventory in the
ordinary course of business;


 


(vii)                          change
in any method of accounting by Seller;


 


(viii)                      payment by
Seller to, or transaction by Seller with, any Related Party (including any
transfer of any non-cash assets to any Related Party), which payment or
transaction is not specifically disclosed on Schedule 4.17;


 


(x)                                 disposition
by Seller of any asset (other than inventory in the ordinary course of
business) for more than $50,000 in the aggregate or for less than fair market
value;


 


(xi)                             payment,
prepayment or discharge by Seller of any Liability other than in the ordinary
course of business, or any failure to pay any material Liability when due;


 


(xii)                         write-offs
or write-downs of any assets of Seller in excess of $25,000 in the aggregate;


 


(xiii)                     creation or
incurrence by Seller of any material Indebtedness or Encumbrance other than in
the ordinary course of Business consistent with past practice;


 


(xiv)                       termination
of any material customer Contract; or


 


33





















 


(xv)                           agreement
or commitment to do any of the foregoing.


 


4.8.                            Taxes.


 


(a)                                 Tax
Returns; Payment.  The Comfort Systems Group has filed on a
timely basis all Tax Returns that are or were required to be filed by or with
respect to Seller under applicable Legal Requirements.  All such Tax Returns were correct and
complete in all respects and have been prepared in accordance with applicable
Legal Requirements.  The Comfort Systems
Group has paid all Taxes of Seller that have become due for all periods covered
by the Tax Returns or otherwise, or pursuant to any assessment received by the
Comfort Systems Group, except such Taxes, if any, as are listed on Schedule 4.8(a) and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP and the Comfort Systems Group’s past custom and practice)
have been provided on each balance sheet of Seller.  No unresolved claim has been made by a Taxing
authority of a jurisdiction where Seller does not file Tax Returns that it is
or may be subject to taxation by such jurisdiction.  There are no liens for Taxes on any of the
Assets that arose in connection with any failure (or alleged failure) to pay
any Tax.  Seller has no Liability for the
Taxes of any person (other than Seller) (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract, or (iv) otherwise.


 


(b)                                 Delivery
of  Tax
Returns  and
Information  Regarding
Audits  and
Potential  Audits.  Seller has delivered or made available to
Buyer copies of, and Schedule 4.8(b) contains
a complete and accurate list of, all Tax Returns of Seller filed since December 31,
2003.  Schedule 4.8(b) contains
a complete and accurate list of all Tax Returns of Seller that have been
audited or are currently under audit and accurately describes any deficiencies
or other amounts that were paid or are currently being contested.  All deficiencies proposed as a result of such
audits have been paid, reserved against, settled or are being contested in good
faith by appropriate proceedings as described on Schedule 4.8(b). 
Seller has delivered, or made available to Buyer, copies of any
examination reports, statements or deficiencies or similar items with respect
to such audits.  Except as set forth on Schedule 4.8(b), there is no pending,
or, to the knowledge of the Comfort Systems Group, threatened or anticipated,
assessment of any additional Tax against Seller for any taxable period for
which Tax Returns have been filed.  Schedule 4.8(b) contains a
complete and accurate list of all Tax Returns for which the applicable statute
of limitations has not run.  Except as
described on Schedule 4.8(b) Seller
has not waived any statute of limitations in respect of any Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.


 


(c)                                  Withholding.  Seller has withheld and paid all material
Taxes required under applicable Legal Requirements to have been withheld and
paid by Seller in connection with any amounts paid or owing by Seller to any
employee, independent contractor, creditor, stockholder or other person, and
all IRS Forms W-2 and 1099 required with respect thereto have been properly and
timely filed.


 


(d)                                 Other
Matters.  Seller has made no payment, is not obligated
to make any payment, and is not a party to any agreement that under any
circumstances could obligate it to make any payment, that will not be
deductible under Section 162(m) of the IRC or would constitute, separately
or in the aggregate, any “excess parachute payment” under Section 280G


 


34





















 


of the IRC.  Seller has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning
of Section 6662 of the IRC.


 


4.9.                            Inventory.  The inventory included in the Assets is
valued on the books and records of Seller and in the Financial Statements
consistent with past practice and has, in the aggregate, a value that is not
less than the aggregate fair market value for such inventory.  Except as reserved in the Financial
Statements, all of the finished goods inventory included in the Assets is in
good, merchantable and usable condition and is salable in the ordinary course
of business within a reasonable time and at normal profit margins.  Except as reserved in the Financial
Statements, all of the parts, raw materials and work-in-process inventory
included in the Assets can reasonably be expected to be consumed in the
ordinary course of business within a reasonable period of time.  Except as reserved in the Financial
Statements, none of the inventory included in the Assets is obsolete,
slow-moving, has been consigned by Seller to others, or is on consignment to
Seller from, or is owned by, others. The quantities of each item of inventory
included in the Assets (whether raw materials, parts, work-in-process or
finished goods) are not excessive, but are reasonable in the present
circumstances of Seller.  All of the
inventory included in the Assets is identified on and located at the locations
identified on Schedule 4.9.  inventory shall be stated on a basis
consistent with past practice, but in no event shall the aggregate value for
inventory exceed the aggregate fair market value for inventory;


 


4.10.                     Receivables.  Schedule 4.10
identifies each trade and other account receivable of Seller included in the
Assets (collectively, “Receivables”)
outstanding as of November 30, 2005 on an aged basis by account
debtor.  All Receivables, whether
reflected on the Interim Balance Sheet, disclosed on Schedule 4.10 or created after the Interim Balance
Sheet Date, arose from bona fide sale or service transactions of Seller.  Except as set forth on Schedule 4.10, no portion of any
Receivable is subject to any counterclaim, defense or set-off, or is otherwise
in dispute.  All of the Receivables (a) are
collectible in the ordinary course of business and (b) will be fully
collected without setoff (i) in the case of Receivables designated as
retainage, within 18 months after the Closing Date and (ii) in the case of
all other Receivables, within one year after the Closing Date, in each case
subject to Buyer using commercially reasonable efforts (excluding litigation
and assignment to a collection agency) to collect the Receivables.


 


4.11.                     Condition of
Assets; Title; Business.  The
buildings, plants, structures, furniture, fixtures, machinery, equipment,
tools, improvements and other tangible personal property owned or used by
Seller and included in the Assets are (a) in all important functional
respects, structurally sound and in good operating condition and repair,
ordinary wear and tear excepted, (b) adequate for the uses to which they
are being put and (c) sufficient for the continued conduct of the Business
after Closing in substantially the same manner as conducted prior to the
Closing.  None of the Assets is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost. 
Seller has good, marketable and exclusive title to all of the Assets,
except those under lease identified in Schedule 4.13.  All of the Assets (i) are reflected on
the Interim Balance Sheet, (ii) are not, under GAAP, required to be
reflected thereon or (iii) have been acquired after the Interim Balance
Sheet Date in the ordinary course of business. 
The Assets, together with the services to be provided by the Transition
Services Agreement, include all assets and services that are currently used in
the operation of the Business.  Seller
does not own or lease any material assets not used in the Business.  None of the


 


35





















 


Assets is subject to any Encumbrance other than the Encumbrances
identified on Schedule 4.11
(“Permitted Encumbrances”).  All of the Assets (including tooling and dies
used in the Business) are located at the locations identified on Schedules 4.9, 4.11 or 4.16.  Any
trade names used in the Business are identified on Schedule 4.11. 
Seller’s fiscal year ends on December 31.  Seller is engaged in the Business and no
other business.  Twin Cities installs and
services HVAC controls only in Minnesota, and UES installs and services HVAC
controls only in Texas and Louisiana. 
Since December 31, 2000, Seller has not (A) discontinued any
operations, (B) ceased doing business, (C) sold all or substantially
all of its operating assets, (D) operated a business not related to the
Business or (E) been involved in any merger, consolidation, combination,
amalgamation, liquidation, division, dissolution proceedings, bankruptcy or
moratorium proceeding.


 


4.12.                     Legal
Proceedings.  Except as disclosed
on Schedule 4.12, no Legal
Proceeding is pending or, to the knowledge of the Comfort Systems Group, threatened
against Seller.  Except as disclosed on Schedule 4.12, Seller does not have
pending any Legal Proceeding against any Third Party.  Seller has delivered to Buyer copies of all
pleadings, correspondence, and other documents relating to each Legal Proceeding
identified on Schedule 4.12.  To the knowledge of the Comfort Systems
Group, no event has occurred or circumstance exists that is reasonably likely
to give rise to or serve as a basis for the commencement of any material Legal
Proceeding against Seller.


 


4.13.                     Contracts;
Compliance.


 


(a)                                 Contracts.  Disclosed on Schedule 4.13
is a brief description of each Contract (other than this Agreement
and the Other Agreements), and all amendments thereto, that:  (i) is material to the Business or the
Assets or both; (ii) involves the purchase, sale or lease of any asset,
materials, supplies, inventory, services or goods in excess of $100,000; (iii) is
a reseller agreement, (iv) has an unexpired term of more than six months
from the date of this Agreement, taking into account the effect of any renewal
options; (v) relates to the borrowing or lending of any money (including
conditional sales agreements) or guarantee or surety of any obligation, or
otherwise evidences Indebtedness; (vi) limits the right of Seller (or,
after Closing, Buyer) to compete in any line of business or otherwise restricts
any right Seller (or, after Closing, Buyer) may have; (vii) is an
employment or non-customer consulting Contract involving payment of
compensation and benefits in excess of $25,000 per year; (viii) is a
contract with a labor union or other employee representative of a group of
employees relating to wages, hours and other conditions of employment; (ix) is
a contract providing for payments to or by any person based on sales, purchases
or profits, other than direct payments for goods; (x) is a contract not
denominated in U.S. dollars; (xi) is a written warranty, guaranty and/or other
similar undertaking with respect to contractual performance extended by Seller
other than in the ordinary course of business; (xii) is a lease, license,
rental, occupancy or conditional sales agreement; (xiii) is a joint venture,
partnership or other agreement involving the sharing of profits, losses, costs
or liabilities; (xiv) is a barter or similar agreement; (xv) is a power of
attorney; (xvi) is an agreement that expressly provides for the undertaking by
Seller for consequential damages (not including (A) claims for delay or (B) express
liquidated damages in customer contracts); (xvii) is an agreement pursuant to
which Seller has agreed to indemnify or exonerate any officer, director or
employee of Seller with respect to any matter; (xviii) if terminated would have
a material adverse effect on the Business; (xix) is a financial guarantee or
financial surety agreement;


 


36





















 


(xx) is an agreement for the disposition of any material business or
product line of Seller or any material assets of Seller; (xxi) is a sales or
manufacturer’s representative agreement or distributor agreement; (xxii) is
with a Governmental Body; (xxiii) a Contract related to the acquisition of
Seller or the Business; or (xxiv) was not entered into by Seller in the
ordinary course of business.  Schedules 4.13 separately identifies all
outstanding material offers and solicitations made to or by Seller for customer
projects in excess of $100,000.  True and
complete copies of all Contracts (that are in writing) have been delivered to
Buyer.


 


(b)                                 Compliance.  Each Contract is a legal, valid and binding
obligation of Seller and is in full force and effect.  Except as disclosed on Schedule 4.13, no Legal Approval or
Consent is needed in order for the Contracts to continue in full force and
effect under the same terms and conditions currently in effect following
consummation of the Contemplated Transactions. 
To the knowledge of the Comfort Systems Group, each Contract is a legal,
valid and binding obligation of each other party to such Contract.  To the knowledge of the Comfort Systems Group,
no Contract will, upon completion or performance thereof, have a material
adverse effect on the Business, Assets, financial condition or results of
operation of Seller.  Each of Seller and,
to the knowledge of the Comfort Systems Group, each other party to each
Contract, has performed all obligations required to be performed by it under
such Contract and is not in breach or default under such Contract.  To the knowledge of the Comfort Systems
Group, no event has occurred, and no condition or state of facts exists (or
would exist upon the giving of notice or the lapse of time or both), under any
Contract that (A) would become or cause a material breach, default or
event of default under such Contract, (B) would give to any person the
right to terminate, or cause an acceleration of any material Liability under,
such Contract or (C) would cause any customer or distributor to terminate
or not renew such Contract.  Seller is
not currently renegotiating any material Contract other than in the ordinary
course of business.  Seller has not
received any notice of actual, alleged, possible or potential default,
violation, cancellation, non-renewal or price increase or sales or production
allocation with respect to any material customer Contract.


 


4.14.                     Governmental
Authorizations.  Schedules 4.14 and 4.22 identify all material Governmental
Authorizations that are required under applicable Legal Requirements to conduct
and operate the Business in the manner currently conducted and to own, operate
and use the Assets in the manner in which they are currently owned, operated
and used.  Each such Governmental
Authorization is valid, subsisting and in full force and effect; and no appeals
or other Legal Proceedings are pending or threatened with respect to the
issuance, terms or conditions of any such Governmental Authorization.  Seller is in full compliance in all material
respects with, and has fulfilled and performed its obligations in all material
respects under, each such Governmental Authorization.


 


4.15.                     Compliance
with Legal Requirements.  Seller
is and has been in full compliance in all material respects with all Legal
Requirements applicable to Seller and the Business.  To the knowledge of the Comfort Systems Group,
no event has occurred or condition or state of facts exists that (with or
without notice or lapse of time or both) (a) may constitute or result in a
violation by Seller of, or a failure by Seller to comply with, any Legal
Requirement, or (b) may give rise to any Liability on the part of Seller
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature (including any Environmental Remedial Action).  Seller has not received any notice or other
communication (whether oral or written) from any


 


37





















 


Governmental Body or any other person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with, any
Legal Requirement or (ii) any actual, alleged, possible, or potential
Liability on the part of Seller to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature (including any Environmental
Remedial Action).


 


4.16.                     Real
Property.  Schedule 4.16 (a) discloses all
real properties currently occupied, used or leased by Seller or in which Seller
has an interest (such real properties, including buildings, structures,
fixtures, improvements, leaseholds, privileges, rights, easements,
hereditaments, appurtenances and related rights of every nature, collectively,
the “Real Property”) and (b) identifies
the record title holder of all Real Property. 
Seller owns no real property. 
Seller has the right to quiet enjoyment of all Real Property in which it
holds a leasehold interest for the full term, including all renewal rights, of
the leasehold interest.  Schedule 4.16 identifies each lease
agreement, and all amendments and supplements thereto, for each parcel of Real
Property.  The use and operation of all
Real Property conform in all material respects to all applicable building, zoning,
safety and subdivision laws, Environmental Laws and other Legal Requirements
and all restrictive covenants and restrictions and conditions affecting
title.  Seller has not received any
written or oral notice of assessments for public improvements against any Real
Property or any written or oral notice or Order by any Governmental Body,
insurance company or board of fire underwriters or other body exercising
similar functions that (i) relates to violations of building, safety or
fire ordinances or regulations, (ii) claims any defect or deficiency with
respect to any Real Property or (iii) requests the performance of any
repairs, alterations or other work to or in any Real Property or in any streets
bounding the Real Property.


 


4.17.                     Transactions
With Related Parties.  No Related
Party is or has been during the past year a party to any material transaction,
agreement or understanding with Seller, except for (a) arrangements
disclosed on Schedule 4.17
and (b) transfer of cash made from Seller to any Related Party in the
ordinary course of business.  Schedule 4.17 separately identifies (i) all
services that Comfort Systems or its Affiliates provide to the Business, (ii) all
assets that Comfort Systems or its Affiliates own or lease that are used in the
Business and (iii) all outstanding Liabilities of Comfort Systems or its
Affiliates that are related to the Business. 
Schedule 4.17
discloses the components of any management fees paid by Seller to Comfort
Systems or its Affiliates since January 1, 2004.  Except as disclosed on Schedule 4.17, no Related Party (A) uses
any of the Assets except directly in connection with the Business, (B) owns
or has any interest in any of the Assets or any other asset used in the
Business, (C) is a party to any Contract, (D) has any financial
interest in the Business or (E) engages in any business with Seller.  Except as disclosed on Schedule 4.17, no Related Party has
any claim of any nature, including any inchoate claim, against any of the
Assets or the Business.


 


4.18.                     Labor
Relations.  Seller has complied
in all material respects with all Legal Requirements relating to employment
practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits and other requirements,
the payment of social security and similar Taxes and occupational safety and
health.  No employee of Seller is
represented by a union or other labor organization, and Seller is not aware of
any union organizing activities.  No
representation election, arbitration proceeding, grievance, picketing, labor
strike, dispute, slowdown, lockout, stoppage or other labor trouble is
pending or, to the knowledge of the Comfort Systems Group, threatened against
Seller.  No complaint against Seller is
pending or, to the knowledge of the Comfort Systems Group,


 


38





















 


threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any similar state or local agency.  Except as disclosed on Schedule 4.18, as of the Interim
Balance Sheet Date, Seller has no contingent Liability for sick leave, vacation
time, severance or occupational disease pay not fully reserved on the Interim
Balance Sheet.  Schedule 4.18 contains a complete and
accurate list of the following for each employee or director of Seller,
including each employee on leave of absence or layoff status:  employer; name; job title; vacation accrued;
and service credited for purposes of vesting and eligibility to participate
under any Seller Plan.  Except as
disclosed on Schedule 4.18,
Seller has not made a commitment to increase the salaries, bonuses or other
benefits and compensation of the employees employed in the Business.  Schedule 4.18
separately discloses all employment or retention agreements that would obligate
Seller to make any form of severance or termination payment on stipulated
conditions, including discharge after a change of control.


 


4.19.                     Products
Liability; Product Warranties; Insurance.


 


(a)                                 Product
Liability.  Seller has no products liability relating to
any product manufactured, distributed or sold by Seller that does not relate to
any product assembled or manufactured by, or any services provided by, ALC or
any of its subsidiaries.  Schedule 4.19(a) identifies a
claims history for products liability against Seller during the past five
years.  Schedule 4.19(a) separately
discloses all products that Seller currently sells or previously sold that
contain asbestos or silica or other potentially hazardous or toxic materials.


 


(b)                                 Products
and Service Warranties.  Schedule 4.19(b) discloses and
describes the terms of all of Seller’s outstanding product and service
warranties for products sold or serviced prior to the Closing Date.  Schedule 4.19(b) discloses
all currently outstanding product or service warranty claims that have not been
resolved to the customer’s complete satisfaction.  During the past three years, Seller has not
satisfied any material products warranty or service claims by its customers in
excess of the stated express warranties. 
Schedule 4.19(b) discloses
the product warranty claims experience of Seller for the past three years.


 


(c)                                  Insurance.  Schedule 4.19(c) discloses
all insurance policies with respect to which Seller is the owner, insured or beneficiary.  Schedule 4.19(c) discloses
all self-insurance arrangements by Seller and all obligations by Seller to
Third Parties with respect to insurance. 
Seller has complied with all of the terms and conditions of the
insurance policies identified on Schedule 4.19(c) and
has given notice to the insurer of all claims that may be covered thereby.  Seller has paid all premiums due under each
such insurance policy and will not have any Liability after the Closing for
retrospective or retroactive premium adjustments or other experienced-based
liability.  No notice of cancellation has
been received with respect to any insurance policy identified in Schedule 4.19(c).  Schedule 4.19(c) contains
a summary of the loss experience under each liability policy of Seller for the
past five years and separately for all claims that were self insured.  Schedule 4.19(c) discloses
the manner in which Seller provides coverage for workers’ compensation.


 


4.20.                     Intellectual
Property Rights.


 


(a)                                 Identification;
Validity; Etc.  Schedule 4.20
discloses all of the trademark and service mark rights, applications and
registrations, trade names, fictitious names, service marks,


 


39





















 


logos and brand names, copyrights, copyright applications, and licenses
of any of the foregoing, that (a) are owned or used by Seller in the
Business and (b) are material to the Business.  Seller has no patents or patent
applications.  Schedule 4.20 also discloses Seller’s telephone
numbers, facsimile numbers, yellow pages and other advertising, e-mail
addresses, internet sites containing Business product information and all
domain names owned by or for the benefit of Seller.  Seller has the entire right, title and
interest in and to, or has the exclusive perpetual royalty-free right to use, (i) the
intellectual property rights disclosed on Schedule 4.20
and (ii) all other processes, know-how, show-how, formulae, trade secrets,
inventions, discoveries, improvements, blueprints, specifications, drawings,
designs, moral rights, Software, technical documentation of the Software, and
other proprietary rights that are material to the Business (all of the items
described in clauses (i) and (ii) above, collectively, “Intellectual Property”).  Schedule 4.20
separately discloses all Intellectual Property under license to Seller and all
other Contracts relating to Intellectual Property owned, used or leased by
Seller.  To the knowledge of the Comfort
Systems Group, the Intellectual Property is valid and not the subject of any
interference, opposition, reexamination or cancellation.  To the knowledge of the Comfort Systems
Group, no person is infringing upon, nor has any person misappropriated, any
Intellectual Property.


 


(b)                                 Trademarks;
Copyrights; Trade Secrets.  All of the issued
registered trademarks and copyrights identified on Schedule 4.20 are currently in compliance with all
Legal Requirements (including payment of filing, examination, and maintenance
fees, proofs of working or use, the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.  Seller has taken reasonable precautions to
protect the secrecy, confidentiality and value of the trade secrets.


 


4.21.                     Employee
Benefits.


 


(a)                                 Seller
Plans.  Schedule 4.21
discloses all written and unwritten Benefit Plans (other than Multiemployer
Plans), whether or not funded and whether or not terminated, (i) which are
maintained or sponsored by Seller, (ii) with respect to which Seller has
or may have Liability or is obligated to contribute, (iii) which cover any
of the current or former employees of Seller or their beneficiaries, (iv) in
which any current or former employees of Seller or their beneficiaries
participated or were entitled to participate or (v) under which any
current or former employees of Seller or their beneficiaries accrue or have
accrued any rights (each, a “Seller Plan”).


 


(b)                                 Seller
Group Matters;  Funding.  Neither Seller, nor any corporation or other
trade or business that may be aggregated with Seller under Sections 414(b),
(c), (m) or (o) of the IRC (the “Seller Group”),
has any obligation to contribute to, or any direct or indirect Liability with
respect to, any Benefit Plan of the type described in Sections 4063 and 4064 of
ERISA or Section 414(c) of the IRC. 
Seller does not have, and, after the Closing, Buyer will not have, any
Liability with respect to any Benefit Plan of any other member of Seller Group
that is not a Seller Plan, whether as a result of delinquent contributions,
distress terminations, fraudulent transfers, failure to pay premiums to the
PBGC, withdrawal liability or otherwise.


 


(c)                                  Compliance.  All Seller Plans and all related trusts,
insurance contracts and funds have been created, maintained, funded and
administered in compliance in all material respects


 


40





















 


with all applicable Legal Requirements and the underlying or applicable
plan document, trust agreement, insurance policy or other writing.  No Seller Plan is, or is proposed to be,
under audit or investigation.  No
completed audit of any Seller Plan has resulted in the imposition of any Tax,
fine or penalty.  There are no actions or
proceedings (other than routine claims for benefits) pending, threatened or
anticipated with respect to Seller Plans.


 


(d)                                 Qualified
Plans. 
Schedule 4.21
separately discloses each Seller Plan that purports or is intended to be a
qualified plan under Section 401(a) of the IRC and exempt from United
States federal income Tax under Section 501(a) of the IRC (a “Qualified Plan”).  A determination letter (or opinion or
notification letter, if applicable) has been received from the IRS that each
Qualified Plan is qualified under Section 401(a) of the IRC and
exempt from federal income Tax under Section 501(a) of the IRC.  No Qualified Plan has been amended since the
date of the most recent IRS letter.  No
member of the Seller Group or, the knowledge of the Comfort Systems Group, any
fiduciary of any Qualified Plan or any agent of any member of the Seller Group
or any fiduciary of any Qualified Plan, has done or failed to do anything that
would adversely affect the qualified status of a Qualified Plan or the
qualified status of any related trust.


 


(e)                                  Defined
Benefit  Plans.  No Seller
Plan is a defined benefit plan as defined in Section 3(35) of ERISA (a “Defined Benefit Plan”).


 


(f)                                    Multiemployer
Plans. 
No Seller Plan is a multiemployer plan within the meaning of Section 3(37)
or Section 4001(a)(4) of ERISA (a “Multiemployer
Plan”).  No member of Seller
Group has withdrawn from any Multiemployer Plan or incurred any withdrawal
liability to or under any Multiemployer Plan. 
No Seller Plan covers any employees of any member of Seller Group in any
foreign country or territory.


 


(g)                                 Prohibited
Transactions; Fiduciary
Duties; Post-Retirement  Benefits.  No prohibited transaction (within the meaning
of Section 406 of ERISA and Section 4975 of the IRC) with respect to
any Seller Plan exists or has occurred that could subject Seller to any
material Liability or Tax under Part 5 of Title I of ERISA or Section 4975
of the IRC.  No member of Seller Group
or, to the knowledge of the Comfort Systems Group, any administrator or
fiduciary of any Seller Plan or any agent of any member of the Seller Group or
any fiduciary of any Seller Plan, has engaged in any transaction or acted or
failed to act in a manner that will subject Seller to any material Liability
for a breach of fiduciary or other duty under ERISA or any other applicable
Legal Requirements.  With the exception
of the requirements of Section 4980B of the IRC, no post-retirement
benefits are provided under any Seller Plan that is a welfare benefit plan as
described in Section 3(1) of ERISA.


 


4.22.                     Environmental
Matters.  Except as disclosed in Schedule 4.22:


 


(a)                                 Governmental
Authorizations.  Schedule 4.22
identifies all Governmental Authorizations that are required by, or issued
under, any applicable Environmental Law for the use or operation of the Real
Property and Assets and the operation of the Business.


 


(b)                                 Compliance.  Seller is in compliance in all material
respects with all Environmental Laws relating to or otherwise affecting the Business
and the ownership or operation of the Real Property and Assets.  Seller has been in consistent compliance in
all


 


41





















 


material respects with all Environmental laws relating to or otherwise
affecting the Business and the ownership or operation of the Real Property and
Assets.  To the knowledge of the Comfort
Systems Group, there are no pending or proposed new Environmental Laws that
might adversely affect the Business, Real Property or Assets either before or
after Closing.


 


(c)                                  Environmental
Liability.  Seller is not subject to any Environmental
Liability, and Buyer will not after the Closing suffer or incur any
Environmental Liability, based on any facts, circumstances or conditions
relating to the Assets or the Business and existing on or prior to the Closing
Date.  Without limiting the foregoing,
Seller is not subject to any Environmental Liability, and Buyer will not after
Closing suffer or incur any Environmental Liability, as a result of the action
or inaction of any person, including:  (i) the
violation of, or failure to comply with, any Environmental Law by Seller, any
Predecessor or any other person for whose conduct Seller is or may be held
responsible; (ii) the ownership or operation of the Real Property and the
Assets, or any condition at the Real Property; (iii) the Release,
threatened Release or presence of any Regulated Material at, on or under any
Real Property; (iv) any Hazardous Activity conducted by Seller, any
Predecessor or by any other person for whose conduct Seller is or may be held
responsible; (v) any Release by Seller, any Predecessor or any other
person acting as agent for or on behalf of Seller on any other property; (vi) any
Environmental Remedial Action required to be taken by Seller or any
Predecessor; or (vii) the treatment, storage, transportation or disposal
of any Regulated Material at any facility, or the arrangement for treatment,
storage, transportation or disposal of any Regulated Material at any facility,
from which there is a Release or threatened Release of Regulated Material.


 


(d)                                 Treatment,
Disposal &  Releases.  Neither Seller nor any other person has
treated, stored, recycled or disposed of any Regulated Material on any Real
Property or any part of the Facilities in violation of any Environmental Law or
in a manner that could result in any Environmental Liability.  There is and has been no Release or threat of
Release of any Regulated Material to the Environment at, on or under or related
to any Real Property or Facility in violation of any Environmental Law or that
could give rise to an Environmental Liability. 
There is no Regulated Material present in the Environment at, on or
under any Real Property in violation of any Environmental Law or that could
give rise to any Environmental Liability.


 


(e)                                  Transactions
with Listed Hazardous  Sites.  Neither Seller nor any Predecessor has
arranged for the treatment or disposal of any Regulated Material generated at
the Facilities or Assets or related to the Business, or arranged for the
transportation of any such Regulated Material for treatment or disposal, at any
Listed Hazardous Site.


 


(f)                                    Status
of Real Property.  None of the Real Property is listed, or to
the knowledge of the Comfort Systems Group, proposed for listing, on (i) the
National Priorities List under CERCLA, (ii) CERCLIS or (iii) any list
established by a Governmental Body of sites potentially requiring Environmental
Remedial Action.


 


(g)                                 Existing
Claims; Certain Regulated Materials; Storage  Tanks.  Seller has not received any request for
information, notice of claim, demand or other notification or communication
that Seller is or may be potentially responsible with respect to any
Environmental Liability, Environmental Remedial Action or any threatened or
actual Release of any Regulated Material. 
There has been no past, and there is no pending or, to the knowledge of


 


42





















 


the Comfort Systems Group, contemplated, claim by or against Seller
under any Environmental Law.  Seller has
not entered into any agreement with any person regarding any Environmental Law,
Environmental Remedial Action or other Environmental Liability or expense.


 


(h)                                 Storage
Tanks. 
All storage tanks located on the Real Property, whether underground or
aboveground, are disclosed on Schedule 4.22.  All tanks and associated piping have been
maintained, inspected and tested in compliance with applicable Environmental
Laws, are in sound condition and are not leaking and have not leaked.  All storage tanks on the Real Property which
were previously removed from service have been properly closed in compliance
with all applicable Environmental Laws, and with respect to each such tank,
testing and observations confirm that there were no Releases requiring Environmental
Remedial Actions, or that any required Environmental Remedial Actions have been
completed.


 


(i)                                    PCBs
and Asbestos Containing  Materials.  There is no PCB Equipment at the Real
Property.  There is no Regulated Asbestos
Containing Material at the Real Property.


 


4.23.                     Asbestos or
Silica Activity.  Neither Seller
nor, to the knowledge of the Comfort Systems Group, any Predecessor has
possessed, purchased, sold, brokered, owned, leased, used, manufactured,
fabricated, controlled, handled, encapsulated, disposed of, remediated, or
transported any asbestos or silica or any products, assets, materials, supplies
or other property (including personal property, real property and fixtures)
containing asbestos or silica (any one of the foregoing, an “Asbestos or Silica Activity”).  Neither Seller nor, to the knowledge of the
Comfort Systems Group, any Predecessor has engaged, directed or instructed by
any means or methods, including by contract, subcontract, independent
contractor, respondeat superior, arrangement or custom, any person to conduct
any Asbestos or Silica Activity.


 


4.24.                     Certain
Payments.  During the past five
years, neither Seller nor any director, officer, agent or employee of Seller,
nor any other person associated with or acting for or on behalf of Seller, has
directly or indirectly:  (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any person, private or public, regardless of form, whether in
money, property or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions, or in respect of special concessions already
obtained, for Seller or any Affiliate of Seller or (iv) in violation of
any applicable Legal Requirements; or (b) established or maintained any
fund or asset that has not been recorded in the books and records of
Seller.  Seller has at all times been in
compliance with all Legal Requirements relating to export control and trade embargoes.


 


4.25.                     Customer
Relations.  There exists no
condition or state of facts or circumstances involving Seller’s customers,
suppliers, distributors or sales representatives that Seller can reasonably
foresee could materially adversely affect the Business or the Assets after the
Closing Date.  Except as disclosed on Schedule 4.25, no customer or
distributor has, during the past year, (a) informed Seller of the
intention of such customer or distributor to cease doing business with Seller, (b) refused
to honor a purchase commitment from Seller or (c) advised Seller or its
Affiliates that such customer or supplier may cease doing business with Seller,
or may reduce the volume of business that it does with Seller, if it is
acquired by Buyer or any of its Affiliates.


 


43





















 


4.26.                     Finders’
Fees; No Existing Discussions. 
Neither Seller nor any of its officers, directors or employees has
employed any broker or finder or incurred any Liability for any brokerage fee,
commission or finders’ fee in connection with any of the Contemplated
Transactions.  Seller is not engaged,
directly or indirectly, in any discussions or negotiations with any person with
respect to any proposal to acquire, in any manner, the Assets.


 


4.27.                     Disclosure.  None of the representations or warranties of
Seller contained in this Article IV
and none of the information contained in the Schedules referred to in this Article IV is false or misleading in
any material respect or omits to state a fact necessary to make the statements
in this Article IV or in the
Schedules to this Article IV
not misleading in any material respect.


 


ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE ALC GROUP 


 


The ALC Group jointly and severally
represents and warrants to the Comfort Systems Group as set forth in this Article V.


 


5.1.                            Organization;
Qualification.  ALC is a
corporation duly organized, validly existing and in good standing under the
laws of Georgia.  Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware.  Each member of the ALC Group
has the power and authority (a) to own or lease, and operate, its
properties, (b) to enter into this Agreement and the Other Agreements to
which it is or is to become a party, (c) to perform its obligations under
this Agreement and such Other Agreements and (d) to carry on its business
as now conducted.  Buyer is duly
qualified and in good standing as a foreign corporation and is duly authorized
to transact business in each jurisdiction where the character of the properties
owned or leased by it or the nature of the activities conducted by it make such
qualification and good standing necessary.


 


5.2.                            Authorization;
Enforceability.  This Agreement
and each Other Agreement to which the ALC Group is a party have been duly
executed and delivered by the ALC Group, and constitute the legal, valid and
binding obligations of the ALC Group, enforceable against the ALC Group in
accordance with their respective terms. 
Each Other Agreement to which the ALC Group is to become a party, when
executed and delivered by the ALC Group, shall constitute the legal, valid and
binding obligation of the ALC Group, enforceable against the ALC Group in
accordance with its terms.  The ALC Group
has duly authorized this Agreement and the Other Agreements to which it is or
is to become a party and all of the Contemplated Transactions to be taken by
it.


 


5.3.                            No
Violation of Laws or Agreements; Legal Approvals; Consents.  The execution, delivery and performance by
the ALC Group of this Agreement and the Other Agreements and the consummation
of the Contemplated Transactions do not and will not directly or indirectly
(with or without notice or the lapse of time or both) (i) conflict with or
violate any provision of the Governing Documents of the ALC Group or the
resolutions adopted by the Board of Directors or other governing body of the
ALC Group, (ii) conflict with or violate any Legal Requirement applicable
to the ALC Group, or (iii) violate, or result in a breach, default or
acceleration under, or give rise to any penalty or any right of termination or


 


44





















 


modification or any other remedy under, any Contract to which any
member of the ALC Group is a party or by which any member of the ALC Group is
bound.  Except as disclosed on Schedule 5.3, the ALC Group is not
required to make, give or obtain any Legal Approvals or Consents in connection
with the execution, delivery or performance by the ALC Group of this Agreement
or any Other Agreement or the consummation by the ALC Group of the Contemplated
Transactions.


 


5.4.                            Finders’
Fees.  Neither the ALC Group nor
any of its officers, directors or employees has employed any broker or finder
or incurred any Liability for any brokerage fee, commission or finders’ fee in
connection with any of the Contemplated Transactions.


 


ARTICLE VI

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION


 


6.1.                            Survival
of Representations and Warranties. 
All representations, warranties, covenants and obligations made by any
party in this Agreement are several and independent legal obligations and shall
survive the Closing for the periods specified in Section 6.4(c). 
Any limitation or qualification set forth in any one representation or
warranty in Articles IV or V shall not limit or qualify any other
representation or warranty in Articles IV
or V.  Each representation and warranty included in Articles IV and V is independent and shall be interpreted without regard to
any other representation or warranty included in Articles IV or V.  The right to indemnification under this Article VI or any other remedy based
on the breach or inaccuracy of any representation or warranty in Article IV or V, or breach of, or noncompliance with,
any covenant or obligation in this Agreement, will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to any such
representation, warranty, covenant or obligation.  The waiver by either party of any condition
at Closing or the breach or inaccuracy of any representation or warranty, or
breach of, or noncompliance with, any covenant or obligation in this Agreement,
will not affect the right of such party to indemnification, payment of Damages
or other remedy based on such breach, inaccuracy or noncompliance.  The Purchase Price Adjustment shall not
adversely affect any rights of the ALC Group Indemnitees or the Comfort Systems
Group Indemnitees under this Article VI.


 


6.2.                            Indemnification
by the Comfort Systems Group. 
Subject to the limitations set forth in Section 6.4,
the Comfort Systems Group shall jointly and severally indemnify, defend, save
and hold harmless the ALC Group and its officers, directors, employees, agents
and Affiliates (each, an “ALC Group
Indemnitee”) from and against, and shall reimburse the ALC Group
Indemnitees for, all Damages directly or indirectly asserted against, imposed
upon, or incurred or required to be paid by, any ALC Group Indemnitee
(collectively, “ALC Group Damages”)
and resulting from or in connection with:


 


(a)                                 any
breach or inaccuracy of any representation or warranty made by the Comfort
Systems Group in this Agreement (without giving effect to any supplement to the
Schedules) (other than any representation or warranty in the last sentence of Section 4.10) or in any certificate
or document delivered by the Comfort Systems Group in connection with this


 


45





















 


Agreement or any Other Agreement to which the Comfort Systems Group is
or is to become a party;


 


(b)                                 any
breach or nonperformance of any covenant or obligation made by the Comfort
Systems Group in connection with this Agreement or any Other Agreement to which
the Comfort Systems Group is or is to become a party;


 


(c)                                  any
Environmental Liability related to or arising as a result of the actions of any
person other than Seller occurring prior to the Closing Date or during the
current term of Seller’s lease of such property as in effect on the Closing
Date, at or with respect to the Real Property located in Roseville, Minnesota
or the Real Property located in Beaumont, Texas, in each case if and to the
extent such Environmental Liability is not the responsibility of the landlord
of such Real Property;


 


(d)                                 any
Liability (i) arising out of any member of the Comfort Systems Group being
a member of a controlled group or affiliated group or combined group of
corporations of which Seller, Comforts Systems, their Affiliates or any other
person are or were a part on or prior to the Closing Date, including those
Liabilities imposed by Chapter 6 of Subtitle A of the IRC (Consolidated
Returns), ERISA Section 4201(a) (Multiemployer Withdrawal Liability),
ERISA Section 4062(a) (Single Employer Termination Liability), IRC Section 412(c)(11)
and ERISA Section 302(c)(11) (Funding Liability), ERISA Section 4971(e) (Funding
Excise Taxes) and ERISA Section 4007(e) (PBGC Premiums) and (ii) imposed
upon the ALC Group based on theories, claims or judgments that the ALC Group is a successor or
successor-in-interest;


 


(e)                                  any
Liability relating to the failure to collect in the aggregate the full amount
of (i) all Receivables designated as retainage within 18 months after the
Closing Date and (ii) all other Receivables within one year after the
Closing Date, in each case provided that the ALC Group has used commercially
reasonable efforts (excluding litigation and assignment to a collection agency)
to collect the Receivables (all such Liabilities, the “Receivables Damages”); and


 


(f)                                    all
Retained Liabilities not otherwise incorporated in this Section 6.2.


 


6.3.                            Indemnification
by the ALC Group.  Subject to the
limitations set forth in Section 6.4,
the ALC Group shall jointly and severally indemnify, defend, save and hold
harmless the Comfort Systems Group and its officers, directors, employees,
agents and Affiliates (each, a “Comfort
Systems Group Indemnitee”) from and against, and shall reimburse the
Comfort Systems Group Indemnitees for, all Damages directly or indirectly
asserted against, imposed upon, or incurred or required to be paid by, any
Comfort Systems Group Indemnitee (collectively, “Comfort Systems Group Damages”) and resulting from or in connection
with:


 


(a)                                 any
breach or inaccuracy of any representation or warranty made by the ALC Group in
this Agreement (without giving effect to any supplement to the Schedules) or in
any certificate or document delivered by the ALC Group in connection with this
Agreement or any Other Agreement to which the ALC Group is or is to become a
party;


 


46





















 


(b)                                 any
breach or nonperformance of any covenant or obligation made by the ALC Group in
connection with this Agreement or any Other Agreement to which the ALC Group is
or is to become a party;


 


(c)                                  all
Assumed Liabilities not otherwise incorporated in this Section 6.3.


 


6.4.                            Limitation
of Liability.  Notwithstanding
the foregoing provisions of this Article VI,
the Comfort Systems Group’s obligations after Closing to indemnify the ALC
Group Indemnitees under Section 6.2(a),
and the ALC Group’s obligations after Closing to indemnify the Comfort Systems
Group Indemnitees under Section 6.3(a),
shall be subject to all of the following limitations:


 


(a)                                 Threshold.  No indemnification of any ALC Group
Indemnitee shall be made under Section 6.2(a) until
the aggregate amount of the ALC Group Damages (other than Receivables Damages)
exceeds $400,000, and thereafter indemnification of the ALC Group Indemnitees
under Section 6.2(a) shall
be made under this Agreement to the full extent of all ALC Group Damages (other
than the Receivables Damages) including the amount up to $400,000. No
indemnification of any Comfort Systems Group Indemnitee shall be made under Section 6.3(a) until the
aggregate amount of the Comfort Systems Group Damages exceeds $ 400,000, and
thereafter indemnification of the Comfort Systems Group Indemnitees under Section 6.3(a) shall be made
under this Agreement to the full extent of all Comfort Systems Group Damages,
including the amount up to $400,000. 


 


(b)                                 Ceiling.  No indemnification of any ALC Group
Indemnitee shall be made under Section 6.2(a) to
the extent that the ALC Group Damages (other than the Receivables Damages)
exceed in the aggregate 75% of the Purchase Price.  No indemnification of any Comfort Systems
Group Indemnitee shall be made under Section 6.3(a) to
the extent that the Comfort Systems Group Damages exceed in the aggregate 75%
of the Purchase Price.


 


(c)                                  Time
Period.  Any claim for indemnification made under Section 6.2(a) or 6.3(a) for Damages sustained by
reason of a breach or inaccuracy of any representation or warranty in Section 4.1 (Organization;
Qualification), 4.2
(Authorization; Enforceability), 5.1 (Organization;
Qualification) or 5.2 (Authorization;
Enforceability) shall be limited to Damages claimed in a written notice
delivered prior to the expiration of the applicable federal and state statutes
of limitations related to such matters. 
Any claim for indemnification made under Section 6.2(a) for Damages sustained by reason of
a breach or inaccuracy of any representation or warranty (A) as to title
to Assets or (B) in Section 4.8 (Taxes)
or 4.23 (Asbestos and Silica
Activity) shall not be limited as to time. 
Any claim for indemnification made under Section 6.2(a) for Damages sustained by reason of
a breach or inaccuracy of any representation or warranty in Section 4.22 (Environmental) shall be
limited to Damages claimed in a written notice delivered within ten years after
the Closing Date.  Any claim for
indemnification made under Section 6.2(a) or
6.3(a) for Damages sustained
by reason of a breach or inaccuracy of any representation or warranty shall be
limited to Damages claimed in a written notice delivered within two years after
the Closing Date.


 


(d)                                 Fraud.  The limitations set forth in Sections 6.4(a), 6.4(b) and 6.4(c) shall not apply to Damages arising out of fraud.


 


47





















 


(e)                                  Receivables
Damages.  With respect to the indemnification
provisions of Section 6.2(e),
the parties agree that to the extent that any ALC Group Indemnitee:


 


(i)                                    collects all or
any portion of any Receivable that has been written off by Seller prior to the
Closing Date, then the amount so collected shall be credited against any
indemnification amounts owed by the Comfort Systems Group to the ALC Group
Indemnitees under this Article VI;


 


(ii)                                receives an
indemnification payment for Receivables Damages in respect of any Receivable,
such ALC Group Indemnitee shall assign to the Comfort Systems Group all rights
to such Receivable, as well as any associated Encumbrances; and


 


(iii)                            collects all or
any portion of any Receivable for which Seller has previously indemnified such
ALC Group Indemnitee or any other ALC Group Indemnitee, such ALC Group
Indemnitee shall promptly remit the amount so collected to the Comfort Systems
Group.


 


6.5.                            Notice
of Claims.  If any ALC Group
Indemnitee or any Comfort Systems Group Indemnitee (each, an “Indemnified Party”) believes that it has
suffered or incurred, or will suffer or incur, any Damage for which it is
entitled to indemnification under this Article VI,
then such Indemnified Party shall notify each party from whom indemnification
is being claimed (each, an “Indemnifying
Party”), and such notice shall specify the factual basis of the
claim in reasonable detail in light of the circumstances then existing.  If any Legal Proceeding is instituted by or
against a Third Party with respect to which any Indemnified Party intends to
claim any Damages, then such Indemnified Party shall notify each Indemnifying
Party of such action or suit.  The
failure of an Indemnified Party to give any notice required by this Section 6.5 shall not affect any of
such Indemnified Party’s rights under this Article VI
or otherwise, except and to the extent that such failure is actually
prejudicial to the rights or obligations of any Indemnifying Party.


 


6.6.                            Third
Party Claims.


 


(a)                                 Notice.  Promptly after receipt by an Indemnified
Party of notice of the assertion of a Third Party claim against it, such
Indemnified Party shall give notice to each Indemnifying Party of the assertion
of such Third Party claim; provided, however, that the failure to notify any
Indemnifying Party will not relieve such Indemnifying Party of any liability
that it may have to such Indemnified Party, except to the extent that such
Indemnifying Party demonstrates that the defense of such Third Party claim is
prejudiced by such Indemnified Party’s failure to give such notice.


 


(b)                                 Assumption
of  Defense.  If an Indemnified Party gives notice to an
Indemnifying Party pursuant to Section 6.6(a) of
the assertion of a Third Party claim, then such Indemnifying Party shall be
entitled (i) to participate in the defense of such Third Party claim or (ii) to
assume the defense of such Third Party claim with counsel reasonably
satisfactory to such Indemnified Party unless: 
(A) in the case of clause (ii), such Indemnifying Party is also a
person against whom the Third Party claim is made and such Indemnified Party
determines in good faith that joint representation would be inappropriate
because such Indemnifying Party has been


 


48





















 


reasonably advised by counsel that (1) one or more legal defense
are available to it that are different from or additional to those available to
such Indemnifying Party or (2) representation by such Indemnifying Party
is inappropriate in light of an actual or potential conflict of interest
between them; or (B) such Indemnifying Party fails to provide reasonable
assurance to such Indemnified Party of its financial capacity to defend, and
provide indemnification hereunder with respect to, such Third Party claim.  After notice from such Indemnifying Party to
such Indemnified Party of its election to assume the defense of such Third
Party claim, such Indemnifying Party shall not, so long as it diligently
conducts such defense, be liable to such Indemnified Party under this Article VI for any fees of other
counsel or any other expenses with respect to the defense of such Third Party
claim, in each case subsequently incurred by such Indemnified Party in
connection with the defense of such Third Party claim, other than reasonable
costs of investigation.  If an
Indemnifying Party assumes the defense of a Third Party claim, no compromise or
settlement of such Third Party claim may be effected by such Indemnifying Party
without the applicable Indemnified Party’s consent, unless (x) there is no finding
or admission of any violation of a Legal Requirement or the rights of any
person; (y) the sole relief provided is monetary damages that are paid in full
by such Indemnifying Party; and (z) such Indemnified Party shall have no
liability with respect to any compromise or settlement of such Third Party
claims effected without its consent.  If
notice is given to an Indemnifying Party of the assertion of any Third Party
claim and the applicable Indemnifying Party does not, within 20 Business Days
after receipt of such notice from such Indemnified Party, give notice to such
Indemnified Party of its election to assume the defense of such Third Party
claim, then such Indemnifying Party will be bound by any determination made in
such Third Party claim or any compromise or settlement effected by such
Indemnified Party.


 


(c)                                  Jurisdiction.  Notwithstanding the provisions of Section 8.7, each of the ALC Group
and the Comfort Systems Group hereby (i) consents to the nonexclusive
jurisdiction of any court in which a proceeding in respect of a Third Party
claim is brought against any Indemnified Party for purposes of any claim that
such Indemnified Party may have under this Agreement with respect to such
proceeding or the matters alleged therein and (ii) agrees that process may
be served on the ALC Group or the Comfort Systems Group, as the case may be,
with respect to such a claim anywhere in the world.


 


(d)                                 Cooperation.  With respect to any Third Party claim subject
to indemnification under this Article VI,
(i) each of the Indemnified Party and the Indemnifying Party shall keep
the other person fully informed of the status of such Third Party claim and any
related proceedings at all stages thereof where such person is not represented
by its own counsel, and (ii) the parties agree (each at its own expense)
to render to each other such assistance as they may reasonably require of each
other and to cooperate in good faith with each other in order to ensure the
proper and adequate defense of any Third Party claim.


 


(e)                                  Confidential
Information; Privilege.  With respect to any Third Party claim subject
to indemnification under this Article VI,
the parties agree to cooperate in such a manner as to preserve in full (to the
extent possible) the confidentiality of all Confidential Information and the
attorney-client and work-product privileges. 
In connection therewith, each party agrees that (i) it will use its
commercially reasonable efforts, in respect of any Third Party claim in which
it has assumed or participated in the defense, to avoid production of
Confidential Information (consistent with applicable law and rules of
procedure), and (ii) all communications


 


49





















 


between any party hereto and counsel responsible for or participating
in the defense of any Third Party claim shall, to the extent possible, be made
so as to preserve any applicable attorney-client or work-product privilege.


 


6.7.                            Exclusive
Remedy.  After the Closing, the
parties’ sole and exclusive recourse against each other for any Damages or
claim of Damages arising out of or relating to any breach of any
representation, warranty, covenant or agreement set forth in this Agreement,
any Other Agreement or any other certificate or document delivered in
connection herewith or therewith, except for any claim of fraud, shall be
expressly limited to the provisions of this Agreement.


 


ARTICLE VII

DEFINITIONS; CONSTRUCTION


 


7.1.                            Definitions.  The following terms have the meanings
specified below or are defined in the Sections referred to below.  All accounting terms not specifically defined
in this Agreement shall be construed in accordance with GAAP.


 


“ALC”
is defined on page one of this Agreement.


 


“ALC Group”
is defined on page one of this Agreement.


 


“ALC Group Damages”
is defined in Section 6.2.


 


“ALC Group Indemnitee”
is defined in Section 6.2.


 


“Buyer”
is defined on page one of this Agreement.


 


“Affiliate”
means, with respect to any person, any other person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such person. 
For purposes of this definition, the term “control” means the
possession, directly or indirectly, of more than 50% percent of the voting
power of a person.


 


“Agreement”
means this Asset Purchase Agreement, as it may be amended from time to time.


 


“Asbestos or Silica
Activity” is defined in Section 4.23.


 


“Assets”
means, collectively, the Twin Cities Assets and the UES Assets.


 


“Assumed Liabilities”
means, collectively, the Twin Cities Assumed Liabilities and the UES Assumed
Liabilities.


 


“Assumption Agreement”
means, collectively, the Twin Cities Assumption Agreement and UES Assumption
Agreement.


 


“Benefit Plan”
means any “employee benefit plan” within the meaning of Section 3(3) of
ERISA, and any other written or unwritten profit sharing, pension, savings,
deferred compensation, fringe benefit, insurance, medical, medical
reimbursement, life, disability,


 


50





















 


accident, post-retirement health or welfare benefit, stock option,
stock purchase, sick pay, vacation, employment, severance, termination or other
plan, agreement, Contract, policy, trust fund or arrangement for the benefit of
employees.


 


“Business”
is defined on page one of this Agreement.


 


“Business Day”
means any day other than (a) Saturday or Sunday or (b) any other day
on which banks in New York, New York or Houston, Texas are permitted or
required by law to be closed.


 


“Buyer”
is defined on page one of this Agreement.


 


“CERCLA”
means the Comprehensive Environmental Response Compensation and Liability Act
of 1980, 42 U.S.C. § 9601 et  seq., as amended.


 


“CERCLIS”
means the Comprehensive Environmental Response Compensation Liability
Information System List under CERCLA.


 


“Closing”
is defined in Section 2.1.


 


“Closing Balance
Sheet” is defined in Section 1.5(a).


 


“Closing Date”
means the date on which the Closing occurs.


 


“Comfort Systems”
is defined on page one of this Agreement.


 


“Comfort Systems
Group” is defined on page one of this Agreement.


 


“Comfort Systems Name”
is defined in Section 3.16.


 


“Comfort Systems
Group Damages” is defined Section 6.3.


 


“Comfort Systems
Group Indemnitee” is defined in Section 6.3.


 


“Comfort Systems Plan”
means any Seller Plan (a) which is maintained or sponsored by Comfort
Systems, (b) with respect to which Comfort Systems has or may have
Liability or is obligated to contribute, (c) which covers any of the
current or former employees of Comfort Systems or their beneficiaries, (d) in
which any current or former employees of Comfort Systems or their beneficiaries
participated or were entitled to participate or (e) under which any
current or former employees of Comfort Systems or their beneficiaries accrue or
have accrued any rights.


 


“Confidential
Information” means all of the following information
that (a) is disclosed or exchanged in connection with the Contemplated
Transactions or (b) is owned or possessed by Seller: (i) all
information that is a trade secret under applicable trade secret or other law; (ii) all
information concerning product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer


 


51





















 


requirements, price lists, market studies, business plans, computer
hardware, Software and computer software and database technologies, systems,
structures and architectures; (iii) all information concerning the
business and affairs of the disclosing party (which includes historical and
current financial statements, financial projections and budgets, tax returns
and accountants’ materials, historical, current and projected sales, capital
spending budgets and plans, business plans, strategic plans, marketing and
advertising plans, publications, client and customer lists and files,
contracts, the names and backgrounds of key personnel and personnel training
techniques and materials, however documented), and all information obtained
from review of the disclosing party’s documents or property or discussions with
the disclosing party regardless of the form of the communication; (iv) all
proprietary information of Seller; and (v) all notes, analyses,
compilations, studies, summaries and other material prepared by the receiving
party to the extent containing or based, in whole or in part, upon any
information included in the foregoing; provided, however, that the term “Confidential
Information” shall not, with respect to any party, include any information that
(A) is already known to such party or to others not bound by a duty of
confidentiality, (B) information that is or becomes publicly available
through no fault of such party or (C) is independently acquired or
developed by such party without violating any of its obligations under this
Agreement.


 


“Consent”
means any registration, filing, declaration, application, rights of first
refusal or notice to or with any person and any consent, approval, permit,
qualification, waiver, waiting period, authorization, or action of or by any
person other than a Governmental Body, including any consent, approval, waiver,
authorization or other action required under any Contract.


 


“Contemplated
Transactions” means the sale and purchase of the
Assets, the assumption of the Assumed Liabilities, and the other transactions
contemplated by this Agreement and the Other Agreements.


 


“Contract”
means any agreement, contract, lease (relating to real or personal property),
license, indenture, mortgage, instrument, commitment, purchase or sale orders,
consensual obligation, promise or obligation or other arrangement or
understanding, oral or written, formal or informal, express or implied, whether
or not legally binding, to which Seller is a party or by which it or its assets
may be affected.


 


“Damage”
means any loss, demand, claim, allegation, assertion, action or cause of
action, assessment, damage (including incidental and consequential damages),
deficiency, cost, expense, diminution of value, fine, penalty, judgment, award
or settlement, whether or not involving a Third Party claim, including
reasonable legal fees, interest, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing.


 


“Defined Benefit Plan”
is defined in Section 4.21(e).


 


“Defined Contribution
Plans” is defined in Section 3.9.


 


“Employee” means
all of Seller’s employees who are actively employed primarily in connection
with the Business, including those employees who are on temporary leave for
purposes of jury duty, vacation, military duty, disability, workers’
compensation or sick leave.


 


52





















 


“Encumbrance”
means any debt, mortgage, deed of trust, community or marital property
interest, equitable interest, pledge, security interest, encumbrance, option,
right of first option or refusal, agreement of sale, adverse claim, easement,
lien, lease, assessment, restrictive covenant, encroachment, right-of-way,
servitude, restriction on use or any other burden, charge or restriction of any
kind or nature whatsoever, legal or equitable, or any item similar or related
to the foregoing.


 


“Environment”
means soil, land, surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.


 


“Environmental Law”
means all Legal Requirements that relate to (a) the protection of the
Environment, natural resources or public or employee health and safety or (b) the
production, generation, use, storage, treatment, processing, transportation,
disposal or Release of Regulated Materials, including common law trespass,
nuisance, property damage and similar common law theories.


 


“Environmental
Liabilities” means, with respect to any person, any
Liability of such person arising under any Environmental Law, including those
consisting of or relating to any:  (a) duty
imposed by, breach of, or noncompliance with, any Environmental Law; (b) environmental,
health or safety matters or conditions (including on-site or off-site
contamination, occupational safety and health and regulation of Regulated
Materials); (c) Environmental Remedial Action undertaken by any person; (d) bodily
injury (including illness, disability and death, and regardless of when any
such bodily injury occurred, was incurred, or manifested itself), property
damage (including trespass, nuisance, wrongful eviction, and deprivation of the
use of real or personal property), or other Damage of any other person
(including any employee or former employee of such person); (e) any injury
to, destruction of, or loss of natural resources, or costs of any natural
resource damage assessments; (f) Hazardous Activity conducted by such
person; and (g) the presence or Release of any Regulated Material at or on
any property.


 


“Environmental
Remedial Action” means any and all actions required (a) to
investigate, clean up, remediate, remove, treat, contain or in any other way
address any Regulated Materials in the Environment, (b) to prevent the Release
or threat of Release, or minimize the further Release, of Regulated Materials
so they do not migrate or endanger public health or welfare or the indoor or
outdoor Environment, and (c) to perform pre-remedial studies and
investigations and post-remedial monitoring, maintenance and care.  The term “Environmental Remedial Action”
includes any action which constitutes a “removal”, “remedial action” or “response”
as defined by Section 101 of CERCLA, 42 U.S.C. §9601(23), (24), and (25),
Minn. Stat. §§ 115B.02(16), (17), and (18) and the Solid Waste Disposal
Act, Tex. Health & Safety Code Ann. §§ 361.401(5), (6), and (7).


 


“ERISA”
means the U.S. Employee Retirement Income Security Act of 1974, as amended, and
the applicable rulings and regulations under that statute.


 


“Exchange Act”
means the U.S. Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations promulgated thereunder.


 


53





















 


“Facility”
means any real property, leasehold, or other real property interest currently
or formerly owned, leased, controlled, used or operated by Seller or any
Predecessor and any building, plant, structure or equipment (including motor
vehicles, tank cars, and rolling stock) currently or formerly owned, leased,
used or operated by Seller, including the Real Property.


 


“FASB”
means the U.S. Financial Accounting Standards Board or its successor.


 


“Financial Statements”
is defined in Section 4.5(b).


 


“GAAP”
means U.S. generally accepted accounting principles.


 


“Governing Documents”
means, with respect to any person who is not a natural person, the certificate
or articles of incorporation, bylaws, deed of trust, formation or governing
agreement and other charter, organic, organization or governing documents or instruments
of such person relating to the creation, formation, organization, management or
operation of such person or relating to the rights, duties and obligations of
the equity holders of such person.


 


“Governmental
Authorization” means any permit, certificate, license,
franchise, privilege, approval, registration and authorization required under,
or otherwise made available by or under the authority of, any applicable Legal
Requirement.


 


“Governmental Body”
means any nation, state, county, city, town, borough, village, district or
other jurisdiction, court, tribunal, government, quasi-governmental authority
of any nature, department, commission, board, bureau, agency, official or other
regulatory, administrative or governmental authority or instrumentality
(federal, state, local or other political subdivision) or any body similar or
related to the foregoing.


 


“Hazardous Activity”
means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer,
transportation, treatment or use (including any withdrawal or other use of
groundwater) of Regulated Materials in, on, under, about, or from any Facility
or any part of any Facility into the Environment, and any other act, business,
operation, or thing that increases the danger, or risk of danger, or poses a
risk of harm to persons or property on or off any Facility, or that may
adversely affect the value of any Facility or Seller.


 


“HIA Claim”
is defined in Section 1.2(a)(xi).


 


“Holdback”
is defined in Section 1.3(c).


 


“Indebtedness”
means, with respect to any person:  (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by notes, bonds (including surety or performance bonds),
debentures or similar instruments; and (c) all obligations to pay the
deferred purchase price of property (other than trade payables), including
obligations under any installment sale agreement, deferred purchase price, or
earnout payment in connection with any business acquired (regardless of whether
such acquisitions were of stock or assets or were pursuant to a merger or
reorganization or other similar transaction).


 


“Indemnified Party” is
defined in Section 6.5.


 


54





















 


“Indemnifying Party”
is defined in Section 6.5.


 


“Intellectual
Property” is defined in Section 4.20.


 


“Interest”
applicable to any amount means interest on such amount until paid at an annual
rate equal to the sum of (a) the prime rate as reported by the Wall Street
Journal, plus (b) 2%, compounded annually on the basis of a 360-day
year consisting of 12 thirty-day months, such rate to change simultaneously
with changes in such prime rate.


 


“Interim Balance
Sheet” is defined in Section 4.5(b).


 


“Interim Balance
Sheet Date” is defined in Section 4.5(b).


 


“IRC”
means the U.S. Internal Revenue Code of 1986, as amended, and the applicable
rulings and regulations under that statute.


 


“IRS”
means the U.S. Internal Revenue Service and, to the extent applicable, the
United States Department of the Treasury.


 


“Legal Approval”
means any registration, filing, declaration, application, rights of first
refusal or notice to or with any person and any consent, approval, permit,
qualification, waiver, waiting period, authorization, Order or action of or by
any Governmental Body, including any consent, approval, waiver, authorization
or other action required under any Contract or Governmental Authorization.


 


“Legal Proceeding”
means any action, arbitration, audit, hearing, investigation, litigation or
suit (whether civil, criminal, administrative, investigative, or informal,
public or private) or Order commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.


 


“Legal Requirement”
means any applicable federal, state, municipal, local (or other political
subdivision) or administrative law, constitution, statute, code, ordinance,
rule, regulation, requirement, standard, policy or guidance having the force of
law, treaty, judgment or Order of any kind or nature whatsoever.


 


“Liability”
means, with respect to any person, any and all debt, liability or obligation of
such person of any nature, kind, character or description whatsoever, whether
or not due or to become due, known or unknown, accrued, unaccrued, fixed,
absolute, matured, liquidated, asserted, conditional, secondary, potential,
determined, determinable or contingent, executory, liquidated or unliquidated,
secured or unsecured, joint or several, vested or unvested and whether or not
incurred directly by such person or by any Predecessor of such person, whether
or not required to be accrued on the financial statements of such person and
whether or not arising out of any act, omission, transaction, circumstance,
sale of goods or service, setoff, recoupment, counterclaim or otherwise.


 


“Listed Hazardous
Site” means any site or facility listed or proposed
for listing on the National Priority List established pursuant to CERCLA or on
any list established by another Governmental Body of sites potentially
requiring Environmental Remedial Action.


 


55





















 


“Multiemployer Plan”
is defined in Section 4.21(f).


 


“Net Asset Value”
is defined in Section 1.4(a).


 


“Occupational Safety
and Health Law” means any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any governmental program designed to provide
safe and healthful working conditions.


 


“Order”
means any order, award, decision, injunction, judgment, ruling, writ,
assessment, decree, determination, subpoena, stipulation or verdict entered,
issued, made, or rendered by any court, administrative agency or other
Governmental Body or by any arbitrator.


 


“Other Agreement”
means any other agreement or document contemplated by this Agreement to be
executed and delivered in connection with the transactions contemplated by this
Agreement on or before the Closing, including all conveyance documents and
instruments.


 


“PBGC”
means the U.S. Pension Benefit Guaranty Corporation.


 


“PCB Equipment”
means PCB equipment as defined in 40 C.F.R Part 761.


 


“Permitted
Encumbrance” is defined in Section 4.11.


 


“person”
means and includes a natural person, a corporation, an association, a
partnership, a limited liability company, a trust, a joint venture, an
unincorporated organization, a business, a Governmental Body or any other legal
entity.


 


“POC Liability”
is defined in Section 1.5(a).


 


“Post-Balance Sheet
Liability” is defined in Section 4.6.


 


“Predecessor”
means any person that may be a predecessor entity or entities to Seller by any
legal means, including (a) pursuant to any Legal Requirement, whether by
statutory merger, de facto merger, consolidation, combination, division, dissolution,
reorganization or otherwise or (b) based on any theory or doctrine of
successor liability, whether by statute or at common law.


 


“Purchase Price”
means, collectively, the Twin Cities Purchase Price and the UES Purchase Price.


 


“Purchase Price Adjustment”
means the post-closing adjustment to the Purchase Price set forth in Section 1.4.


 


“Qualified Plan”
is defined in Section 4.21(d).


 


“Real Property”
is defined in Section 4.16.


 


“Receivables”
is defined in Section 4.10.


 


56





















 


“Regulated Asbestos
Containing Material” means regulated asbestos
containing material as defined by 40 C.F.R. §61.141.


 


“Regulated Material”
means:  (a) any hazardous substance
as defined by any Environmental Law; (b) any petroleum or petroleum
product, oil or waste oil; (c) any asbestos or polychlorinated byphenyls; (d) any
hazardous material, toxic substance, toxic pollutant, solid waste, municipal
waste, industrial waste, hazardous waste, flammable material, radioactive
material, pollutant or contaminant or words of similar meaning and regulatory
effect under any applicable Environmental Law; (e) any other chemical,
material, or substance to which the exposure, or of which the discharge,
emission, disposal or Release, is prohibited, limited or regulated under any
applicable Environmental Law; and (f) any mixture, solution, derivative or
synthetic substitute of the foregoing.


 


“Related Party”
means (a) Comfort Systems, (b) any Affiliate of Comfort Systems,
other than Seller and (c) any officer, director or partner of Comfort
Systems or any of its Affiliates.


 


“Release”
means any spill, leak, emission, discharge, deposit, disposal, escape, leach,
dump or other release of any Regulated Material into the Environment, whether
intentional or unintentional, including the abandonment or discarding of
barrels, containers and other receptacles containing any Regulated Material.


 


“Retained Liabilities”
means, collectively, the Twin Cities Retained
Liabilities and the UES Retained Liabilities.


 


“SEC”
means U.S. Securities and Exchange Commission.


 


“Security Right”
means, with respect to any security, any option, warrant, subscription right,
preemptive right, conversion right, exchange right, proxy, put, call, demand,
plan, commitment, agreement, understanding or arrangement of any kind relating
to such security, whether issued or unissued, or any other security convertible
into or exchangeable for any such security.


 


“Seller”
is defined on page one of this Agreement.


 


“Seller Group”
is defined in Section 4.21(b).


 


“Seller Plan”
is defined in Section 4.21(a).


 


“Seller’s POC
Schedule” is defined in Section 4.5(d).


 


“Software”
means all computer software programs and applications and subsequent versions
thereof, including source code, object, executable or binary code, objects,
comments, screens, user interfaces, report formats, templates, menus, buttons
and icons and all files, data, materials, manuals, design notes and other items
and documentation related thereto or associated therewith.


 


“SOX” means
the Sarbanes-Oxley Act of 2002.


 


57





















 


“SPE”
means any entity that (a) has a limited business purpose or (b) conducts
business solely for the benefit of one entity, including a “variable interest
entity” as defined in FASB Interpretation No. 46 Consolidation of Variable
Business Entities.


 


“Subsidiary”
means any corporation, partnership, joint venture, limited liability company or
other person (a) in which Seller owns, directly or indirectly, more than
20% of the outstanding voting securities or equity interests or (b) of
which Seller has, directly or indirectly, the power to direct the business and
policies.  For purposes of this
definition, the term “indirectly” includes ownership, control or direction
through multi-tiered ownership structures (including foreign ownership and
venture arrangements), through SPEs, by contract or otherwise.


 


“Tax”
any income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental, windfall profit, customs,
vehicle, airplane, boat, vessel or other title or registration, capital stock,
franchise, employees’ income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative, add-on minimum and other tax,
fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any
interest, penalty, addition or additional amount thereon imposed, assessed or
collected by or under the authority of any Governmental Body or payable under
any tax-sharing agreement or any other Contract.


 


“Tax Return”
means any return (including any information return), report, statement,
schedule, notice, form, declaration, claim for refund or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of, or compliance with, any Legal
Requirement relating to any Tax.


 


“Third
Party” means any person or entity other than Buyer, Seller and their
respective Affiliates.


 


“Third-Party Guaranty
Arrangements” is defined in Section 4.5(c).


 


“Transferring
Employees” is defined in Section 3.9.


 


“Treasury Regulation”
means regulations by the U.S. Department of Treasury promulgated under the IRC.


 


“Twin Cities”
is defined on page one of this Agreement.


 


“Twin Cities Assets”
is defined in Section 1.1(a).


 


“Twin Cities Assumed
Liabilities” is defined in Section 1.1(c).


 


“Twin Cities
Assumption Agreement” is defined in Section 1.1(c).


 


“Twin Cities Plan”
means any Seller Plan (a) which is maintained or sponsored by Twin Cities,
(b) with respect to which Twin Cities has or may have Liability or is
obligated to


 


58





















 


contribute, (c) which covers any of the current or former
employees of Twin Cities or their beneficiaries, (d) in which any current
or former employees of Twin Cities or their beneficiaries participated or were
entitled to participate or (e) under which any current or former employees
of Twin Cities or their beneficiaries accrue or have accrued any rights.


 


“Twin Cities Purchase
Price” is defined in Section 1.1(e).


 


“Twin Cities Retained
Assets” is defined in Section 1.1(b).


 


“Twin Cities Retained
Liabilities” is defined in Section 1.1(d).


 


“UES”
is defined on page one of this Agreement.


 


“UES Assets”
is defined in Section 1.2(a).


 


“UES Assumed
Liabilities” is defined in Section 1.2(c).


 


“UES Assumption
Agreement” is defined in Section 1.2(c).


 


“UES Plan”
means any Seller Plan (a) which is maintained or sponsored by UES, (b) with
respect to which UES has or may have Liability or is obligated to contribute, (c) which
covers any of the current or former employees of UES or their beneficiaries, (d) in
which any current or former employees of UES or their beneficiaries
participated or were entitled to participate or (e) under which any
current or former employees of UES or their beneficiaries accrue or have
accrued any rights.


 


“UES Purchase Price”
is defined in Section 1.2(e).


 


“UES Retained Assets”
is defined in Section 1.2(b).


 


“UES Retained
Liabilities” is defined in Section 1.2(d).


 


“Workers’
Compensation Liabilities” means all Liability for or
arising out of workers compensation from and after the date of first injury,
exposure, incidence, event or other occurrence, regardless of when claims,
expenses or medical assistance therefrom are made or incurred.  All claims of Workers’ Compensation Liability
based on reoccurrences of a previous matter shall relate back to the original
injury, exposure, incidence, event or other occurrence.


 


“Welfare Plans”
is defined in Section 3.9.


 


7.2.                            Construction.  As used in this Agreement, unless a clear
contrary intention applies:  (a) references
to “Article” or “Section” are to an article or section of this
Agreement, and references to “hereunder,” “hereof,” “hereto,” and words of
similar import are references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof; (b) references
to the singular number include the plural number, and vice versa, and
references to any gender include each other gender; (c) all “Exhibits” and
“Schedules” referred to in this Agreement are to Exhibits and Schedules
attached to this Agreement and are incorporated into this Agreement by
reference and made a part of this Agreement; (d) ”include”, “includes” and


 


59





















 


“including” are deemed to be followed by “without limitation” whether
or not they are in fact followed by such words or words of like import; (e) with
respect to the determination of any period of time, “from” means “from and
including” and “to” means “to but excluding”; (f) the headings of the
various Articles, Sections and other subdivisions of this Agreement are for
convenience of reference only and shall not modify, define or limit any of the
terms or provisions of this Agreement; (g) ”knowledge” of a person means
the actual knowledge of such person and the knowledge that a prudent individual
could be expected to discover or otherwise become aware of in the course of
conducting a reasonable inquiry of the individuals having responsibility for
the subject of the inquiry; (h) reference to any agreement, document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof and shall
include all addenda, exhibits and schedules thereto; and (i) reference to
any Legal Requirement means such Legal Requirement as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time
to time, including rules and regulations promulgated thereunder, and
reference to any section or other provision of any Legal Requirement means
that provision of such Legal Requirement from time to time in effect and
constituting the substantive amendment, modification, codification, replacement
or reenactment of such section or other provision.


 


ARTICLE VIII

MISCELLANEOUS


 


8.1.                            Costs
and Expenses.  Subject to Section 1.5(c), each of the ALC Group
and the Comfort Systems Group shall pay its respective expenses, brokers’ fees
and commissions.  All transfer,
documentary, sales, use and motor vehicle taxes incurred as a result of the
transfer of the Assets shall be paid by Buyer. 
If this Agreement is terminated, the obligation of each party to pay its
own fees and expenses will be subject to any rights of such party arising from
a breach of this Agreement by another party.


 


8.2.                            Proration
of Expenses.  All accrued
expenses associated with the Real Property included in the Assets, such as
electricity, gas, water, sewer, telephone, property Taxes, security services
and similar items, shall be prorated between Buyer and Seller as of the Closing
Date (in accordance with local custom, in the case of real property
taxes).  Buyer and Seller shall settle
such amounts within 60 days after Closing.


 


8.3.                            Bulk
Sales.  The parties hereto waive
compliance with the provisions of any bulk sales law applicable to the
Contemplated Transactions.


 


8.4.                            Further
Assurances.  After Closing,
without further consideration, each party shall execute and deliver such
additional documents and instruments as any other party may reasonably request
for the purpose of carrying out this Agreement.


 


8.5.                            Notices.  All notices given or made in connection with
this Agreement shall be in writing. 
Delivery of written notices will be effective:  (i) on the fourth Business Day after the
date of mailing, if delivered by registered or certified mail, postage prepaid;
(ii) upon delivery, if sent by hand delivery; (iii) upon delivery, if
sent by prepaid courier, with a record of receipt; or (iv) on the next day
after the date of dispatch, if sent by telecopy.  All deliveries shall be made to the following
addresses:


 


60





















 


	
  (i)

  	
  if to the ALC Group or any member thereof,
  to:

  
	
   

  	
   

  
	
   

  	
  Automated Logic Corporation

  
	
   

  	
  One Carrier Place

  
	
   

  	
  Farmington, CT 06032

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Telecopy: (860) 674-3262

  
	
   

  	
   

  
	
   

  	
  with a required copy to:

  
	
   

  	
  Kirkpatrick & Lockhart Nicholson
  Graham LLP

  
	
   

  	
  Henry W. Oliver Building

  
	
   

  	
  535 Smithfield Street

  
	
   

  	
  Pittsburgh, PA 15222-2312

  
	
   

  	
  Attn: David L. Forney, Esq.

  
	
   

  	
  Telecopy: 412-355-6501

  
	
   

  	
   

  
	
  (ii)

  	
  if to the Comfort Systems Group or any
  member thereof, to:

  
	
   

  	
   

  
	
   

  	
  Comfort Systems, USA

  
	
   

  	
  777 Post Oak Boulevard, Suite 500

  
	
   

  	
  Houston, TX 77056

  
	
   

  	
  Attention: Chief Financial Officer

  
	
   

  	
  Telecopy: (713) 830-9659

  
	
   

  	
   

  
	
   

  	
  with a required copy to:

  
	
   

  	
   

  
	
   

  	
  Ropes & Gray LLP

  
	
   

  	
  One International Place

  
	
   

  	
  Boston, MA 02110

  
	
   

  	
  Attention: Collin J. Beecroft, Esq.

  
	
   

  	
  Telecopy: (617) 951-7050

  



 


Either party may change the address to which notices (or copies) to it
shall be addressed by giving notice of that change to the other parties in
accordance with this Section 8.5.


 


8.6.                            Currency.  All currency references in this Agreement are
to United States dollars.


 


8.7.                            Jurisdiction;
Service of Process.  Any action
or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement, the Other Agreements or any Contemplated
Transaction may be brought against any party in the state and federal courts in
the State of Delaware.  Each party
consents to the jurisdiction of these courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to
convenience of forum or venue laid in such courts.  Each party agrees that all claims in respect
of any proceeding arising out of this Agreement, the Other Agreements or any
Contemplated Transaction shall be heard and determined only in any such court
and agrees not to bring any such proceeding in any other court.  The parties agree that either or both of them
may file a copy of this paragraph with any court as written evidence of the
knowing, voluntary and bargained


 


61





















 


agreement between the parties irrevocably to waive any objections to
venue or to convenience of forum.  Process
in any such proceeding referred to in the first sentence of this section may
be served on any party anywhere in the world.


 


8.8.                            Enforcement.  Each of Buyer and Seller acknowledges and
agrees that the other party would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by Buyer or Seller, as the
case may be, could not be adequately compensated in all cases by monetary
damages alone.  Accordingly, in addition
to any other right or remedy to which Buyer or Seller may be entitled, at law
or in equity, it shall be entitled to enforce any provision of this Agreement
by a decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the
provisions of this Agreement, without posting any bond or other undertaking.


 


8.9.                            Disclosure
Schedules.  The statements in the
Schedules, and those in any supplement thereto, relate only to the provisions
in the Section of this Agreement to which they expressly relate and not to
any other provision in this Agreement. 
If there is any inconsistency between the statements in this Agreement
and those in the Schedules (other than an exception expressly set forth as such
in the Schedules with respect to a specifically identified representation or
warranty), the statements in this Agreement will control.


 


8.10.                     Consideration;
Recitals; Governing Law.  The
parties acknowledge the mutual receipt and sufficiency of valuable
consideration for the formation of the legally binding contract represented by
this Agreement, which consideration includes all of the representations,
warranties, covenants and obligations contained in this Agreement.  The recitals set forth beginning on page one
of this Agreement are incorporated into this Agreement and made a part of this
Agreement.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to its conflict of laws doctrines.


 


8.11.                     Amendment and
Waiver; Cumulative Effect.  To be
effective, any amendment of this Agreement must be in writing and signed by all
the parties and any waiver must be in writing and signed by the party against
whom enforcement of the same is sought. 
Neither the failure of any party to exercise any right, power or remedy
provided under this Agreement or to insist upon compliance by any other party
with its obligations under this Agreement, nor any custom or practice of the
parties at variance with the terms of this Agreement, shall constitute a waiver
by such party of its right to exercise any such right, power or remedy or to
demand such compliance.  To the maximum
extent permitted by applicable law, (a) no waiver that may be given by a
party will be applicable except in the specific instance for which it is given
and (b) no notice to or demand on any party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.


 


8.12.                     Entire
Agreement; No Third-Party Beneficiaries.  This Agreement and the Schedules and Exhibits
set forth a complete and exclusive statement of the promises, covenants,
agreements, conditions and undertakings between the parties with respect to the
subject matter of this Agreement.  This
Agreement supersedes all prior or contemporaneous agreements and
understandings, negotiations, inducements or conditions, express or implied,
oral or written,


 


62





















 


between the parties.  Except for
the provisions of Sections 6.2
and 6.3 relating to ALC Group
Indemnitees and Comfort Systems Group Indemnitees, this Agreement is not
intended to confer upon any person other than the parties any rights or
remedies under this Agreement.


 


8.13.                     Severability.  If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced under any applicable Legal Requirement in any
particular respect or under any particular circumstances, then, so long as the
economic or legal substance of the Contemplated Transactions is not affected in
any manner materially adverse to any party, (a) such term or provision
shall nevertheless remain in full force and effect in all other respects and
under all other circumstances, and (b) all other terms, conditions and
provisions of this Agreement shall remain in full force and effect.  Upon determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner so that
the Contemplated Transactions are fulfilled to the fullest extent possible.


 


8.14.                     Counterparts.  This Agreement may be executed in more than
one counterparts, each of which shall be deemed to be an original but all of
which together shall be deemed to be one and the same instrument.  The exchange of copies of this Agreement and
of signature pages by facsimile transmission shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes.  Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.


 


[The remainder of this page intentionally
left blank.]


 


63





















 


The parties, each intending to be legally
bound by this Agreement, have executed this Agreement as of the first date
identified in the first sentence to this Agreement.


 


	
   

  	
  AUTOMATED LOGIC

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin
  Applebaum

  	
   

  
	
   

  	
   

  	
  Title: Authorized Representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AUTOMATED LOGIC

  CONTRACTING SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin
  Applebaum

  	
   

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMFORT SYSTEMS USA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William
  George

  	
   

  
	
   

  	
   

  	
  Title: 
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMFORT SYSTEMS USA (TWIN CITIES), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William
  George

  	
   

  
	
   

  	
   

  	
  Title: 
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UNITED ENVIRONMENTAL

  SERVICES, LP, by its General Partner,

  Atlas-Accurate Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William
  George

  	
   

  
	
   

  	
   

  	
  Title: 
  Vice President

  



 


64