Document:

Exhibit
10.3

 

[FORM]

 

EAGLE ROCK ENERGY PARTNERS 

LONG-TERM INCENTIVE PLAN

 

RESTRICTED UNIT AGREEMENT

FOR

NON-EMPLOYEE DIRECTORS

 

This
Restricted Unit Agreement (this “Agreement”) is made and entered into by and
between EAGLE ROCK ENERGY G&P, LLC, a Delaware limited liability company
(the “Company”),
and [                                          ]
(the “Director”).  This Agreement is entered into as of the [                      ]
(the “Date of Grant”).  Capitalized terms used in this Agreement but
not otherwise defined herein shall have the meanings ascribed to such terms in
the Plan (as defined below), unless the context requires otherwise.

 

W I T N E S S E T H:

 

WHEREAS, the Company has adopted the EAGLE ROCK
ENERGY PARTNERS LONG-TERM INCENTIVE PLAN (the “Plan”) to attract, retain and motivate
employees, officers, directors and consultants; and

 

WHEREAS, the Board of Directors of the Company (the “Board”) has
authorized the grant to non-employee members of the Board of restricted units
of EAGLE ROCK ENERGY PARTNERS, L.P., a Delaware limited partnership (the “Partnership”), as
part of their compensation for services performed for the Company, the
Partnership, or any other entity which is an affiliate (within the meaning of
such term under the Exchange Act and the rules promulgated thereunder) of
the foregoing entities (collectively, the “Partnership Entities”).

 

NOW, THEREFORE, in consideration of the
Director’s agreement to provide or to continue providing services to the
Partnership Entities, the Director and the Company agree as follows:

 

SECTION 1.         Grant.

 

The
Company hereby grants to the Director as of the Date of Grant an award of
                  
Units, subject to the terms and conditions set forth in the Plan, which is
incorporated herein by reference, and in this Agreement, including, without
limitation, those restrictions described in Section 2 (the “Restricted Units”).

 

SECTION 2.         Restricted Units.

 

The
Restricted Units are restricted in that they may be forfeited to the Company
and in that they may not, except as otherwise provided in Section 5, be
transferred or otherwise disposed of by the Director until such restrictions
are removed or expire as described in Section 4 of this Agreement.  The Company shall issue in the Director’s
name the Restricted Units and 

 

 

shall
retain the Restricted Units until the restrictions on such Restricted Units
expire or until the Restricted Units are forfeited as described in Section 4
of this Agreement.  The Director agrees
that the Company will hold the Restricted Units pursuant to the terms of this
Agreement until such time as the Restricted Units are either delivered to the
Director or forfeited pursuant to this Agreement.

 

SECTION 3.         Rights of Director; Unit Distribution Rights.

 

Effective
as of the Date of Grant, the Director shall be treated for all purposes as a
Unit holder with respect to all of the Restricted Units granted to him pursuant
to Section 1 (except that the Director shall not be treated as the owner
of the Units for federal income tax purposes until the Restricted Units vest
(unless the Director makes an election under section 83(b) of the Code, in
which case the Director shall be treated as the owner of the Units for all
purposes on the Date of Grant)) and shall, except as provided herein, have all
of the rights and obligations of a Unit holder with respect to all such
Restricted Units, including any right to vote with respect to such Restricted
Units and to receive any UDRs thereon  if, as, and when declared and paid by the
Partnership, including, without limitation, any UDRs consisting of the
distribution of special purchase or other rights.  Notwithstanding the preceding provisions of
this Section 3, the Restricted Units shall be subject to the restrictions
described herein, including, without limitation, those described in Section 2.

 

SECTION 4.         Forfeiture and Expiration of Restrictions.

 

(a)           Vesting Schedule.  Subject to the terms and conditions of this
Agreement, the restrictions described in Section 2 shall lapse and the
Restricted Units shall become vested and nonforfeitable (“Vested Units”),
provided the Director has continuously provided services to  the Partnership Entities, without
interruption, from the Date of Grant through each applicable vesting date
(each, a “Vesting Date”),
in accordance with the following schedule:

 

	
  Vesting
  Date(1)

  	
   

  	
  Cumulative Vested Percentage

  	
   

  
	
  On May 15,
  [        ]

  	
   

  	
  33

  	
  %

  
	
  On May 15,
  [        ]

  	
   

  	
  66

  	
  %

  
	
  On May 15,
  [        ]

  	
   

  	
  100

  	
  %

  

 

(b)           Termination of Service.

 

(i)            Termination due to
Death or Disability.  If, at any
time prior to the final Vesting Date, the Director ceases providing services to
the Partnership Entities by reason of the Director’s death or Disability, then all Restricted Units granted pursuant to this
Agreement that remain unvested as of the date of the Director’s termination
shall immediately become fully vested and nonforfeitable as of the date of such
termination.

 

(1) 
Grants dated between February 15 and August 14 vest on May 15 of
each year; grants dated between August 15 and February 14 vest on
November 15 of each year.

 

2

 

(ii)           Involuntary Termination
Without Cause.  If, at any
time prior to the final Vesting Date, the Director is not nominated for
election, or is not elected, as a member of the Board and such failure to
nominate or elect the Director to the Board is for a reason other than Cause
(such resulting termination of the Director’s then current term, an “Involuntary Termination”), then all Restricted Units granted pursuant to this
Agreement that have not yet vested as of the date of such Involuntary
Termination shall become null and void as of such date, shall be forfeited to
the Company and the Director shall cease to have any rights with respect
thereto; provided, that, the Board, in its sole and absolute discretion, may
decide to vest all or any portion of the Restricted Units granted pursuant to
this Agreement that remain unvested as of the date of the Director’s
Involuntary Termination.  The portion of
the Restricted Units, if any, for which restrictions do not lapse in accordance
with the foregoing shall become null and void as of the date of the
Involuntary  Termination; provided, that
the portion, if any, of the Restricted Units for which forfeiture restrictions
lapse as of such date shall survive.

 

(iii)          Other Termination.  If, at any time prior to the
final Vesting Date, the Director ceases providing services to the Partnership
Entities for any reason other than due to the Director’s death or Disability or
due to an Involuntary Termination, then all Restricted Units granted pursuant
to this Agreement that have not yet
vested as of the date of the Director’s termination  shall become null and void as of the date of such
termination, shall be forfeited to the Company and the Director shall cease to
have any rights with respect thereto; provided, however, that
the portion, if any, of the Restricted Units for which forfeiture restrictions
have lapsed as of the Director’s date of termination shall survive.

 

(c)           Termination Following a  Change
of Control.  In the event of
termination of the Director’s service relationship with the Partnership
Entities as a result of an Involuntary Termination within 2 years following a
Change of Control and prior to the final Vesting Date, all restrictions
described in Section 2 shall lapse and all Restricted Units granted
pursuant to this Agreement shall become immediately vested and nonforfeitable.

 

(d)           Definitions.  For purposes of this Agreement, the following
terms shall have the meanings set forth below:

 

(i)            Cause.  The term “Cause” means a determination made in
good faith by a majority of the Elected Directors (as defined in the
Partnership Agreement) that the Director (A) willfully and continually
failed to substantially perform the Director’s duties with the Partnership
Entities (other than a failure resulting from the Director’s incapacity due to
physical or mental illness) which failure continued for a period of at least
thirty (30) days after a written notice of demand for substantial performance
has been delivered to the Director specifying the manner in which the Director
has failed to substantially perform or (B) willfully engaged in conduct
which is demonstrably and materially injurious to the Partnership Entities,
monetarily or otherwise; provided, however, that no termination of the Director’s
services shall be for Cause as set forth in clause (B) above until (1) there
shall have been delivered to the Director a copy of a written notice setting
forth that the Director was guilty of the conduct described in clause (B) above
and specifying the particulars thereof in detail and (2) the Director
shall have 

 

3

 

been provided an opportunity to be heard by the
Board (with the assistance of the Director’s counsel if the Director so
desires).  No act or failure to act on
the part of the Director shall be considered “willful” unless the Director has
intentionally or deliberately acted or failed to act with knowledge that such
action or failure to act was likely to be materially injurious to the
Partnership Entities.  Notwithstanding
anything contained herein or in the Plan to the contrary, no failure to perform
by the Director after a notice of termination is given shall constitute Cause.

 

(ii)           Change of Control.  The term “Change
of Control” means, the occurrence of one of the following:

 

(A)          the consummation of an agreement to acquire or a tender
offer for beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) by any “person” or “group” (within the meaning of those terms as
used in Sections 13(d) and 14(d)(2) of the Exchange Act) such that
afterwards such person or group has 40% or more of either (1) the then
outstanding common equity securities of the Partnership (the “Outstanding Equity”)
or (2) the combined voting power of the then outstanding voting securities
of the Partnership (the “Outstanding
Voting Securities”); provided, however, that for purposes of
this subclause (A), the following acquisitions shall not constitute a Change of
Control: (a) any acquisition directly from the Partnership, (b) any
acquisition by the Partnership, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Partnership or
any of its Affiliates, (d) any acquisition by any entity pursuant to a
transaction that complies with clauses (1), (2) or (3) of subclause (D) below,
or (e) any acquisition by any member of the NRG Group unless, prior to
such acquisition but following the Date of Grant, the aggregate ownership of
members of the NRG Group has been reduced to less than 20% of both the
Outstanding Equity and the Outstanding Voting Securities; or

 

(B)           the acquisition of beneficial ownership by any person or
group of 40% or more of the combined voting power of the then outstanding
voting securities of the general partner of the Partnership and/or the Company
(the “GP Outstanding Voting Securities”);
provided, however, that for purposes of this subclause (B), the following
acquisitions shall not constitute a Change of Control: (1) any acquisition
by the Partnership or any of its subsidiaries, (2) any transaction that is
subject to subclause (D) below, or (3) any acquisition of beneficial
ownership of GP Outstanding Voting Securities solely by virtue of an acquisition
of Outstanding Equity or Outstanding Voting Securities; or

 

(C)           the limited partners of the Partnership approve, in one or
a series of transactions, a plan of complete liquidation of the Partnership; or

 

(D)          the consummation of a reorganization, merger or
consolidation involving the Partnership or a sale or other disposition by the
Partnership of all or substantially all of its assets or an acquisition of
assets of another entity (a “Business
Combination”), in each case, unless following such 

 

4

 

Business Combination: (1) the Outstanding
Equity and Outstanding Voting Securities immediately prior to such Business
Combination represent or are converted into or exchanged for securities that
represent or are convertible into more than 50% of, respectively, the then
outstanding equity securities and the combined voting power of the then
outstanding voting securities, as the case may be, of the entity resulting from
such Business Combination or the resulting public parent thereof (including,
without limitation, any entity that as a result of such transaction owns the
Partnership, or all or substantially all of the assets of the Partnership
either directly or through one or more subsidiaries), as the case may be, (2) no
Person (excluding any employee benefit plan (or related trust) of the
Partnership or the entity resulting from the Business Combination or the
resulting public parent thereof, as the case may be) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
equity securities of the entity resulting from such Business Combination or the
resulting public parent thereof, as the case may be, or the combined voting
power of the then outstanding voting securities of such entity, except to the
extent that such ownership existed with respect to the Partnership prior to the
Business Combination, and (3) at least a majority of the members of the
board of directors or similar governing entity of the entity resulting from
such Business Combination or the resulting public parent thereof, as the case
may be, were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business
Combination; provided, however, that clauses (1), (2) and (3) of this
subclause (D) shall not apply if the entity resulting from the Business
Combination or the resulting public parent thereof, as the case may be, is a
limited partnership unless 100% of the combined voting power of the voting
securities of the general partner thereof is owned, directly or indirectly, by
such limited partnership; or

 

(E)           individuals who constitute the Incumbent Board cease for
any reason to constitute at least a majority of the Board.  For purposes of this Agreement, the term “Incumbent Board” means the portion
of the Board constituted of the individuals who are members of the Board as of
the Date of Grant and any other individual who becomes a director of the
Company after such date and who is either (1) an Appointed Director (as
such term is defined in the Partnership Agreement), (2) a Management
Director (as such term is defined in the Partnership Agreement), or (3) an
Elected Director (as such term is defined in the Partnership Agreement) who was
nominated to serve on the Board by a vote of at least a majority of the Elected
Directors then serving on the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal
of directors or other actual or threatened election contest or solicitation of
proxies or consents by or on behalf of a person other than the Incumbent Board.

 

(iii)          Disability.  The term “Disability” means (A) a physical or
mental impairment of sufficient severity that, in the opinion of the Board, the
Director is unable to continue performing the duties assigned to the Director
prior to such impairment or the 

 

5

 

Director’s condition entitles the Director to
disability benefits under any insurance or employee benefit plan of any
Partnership Entity, and (B) the impairment or condition is cited by the
employing Partnership Entity as the reason for the Director’s termination.

 

SECTION 5.         Limitations on Transfer.

 

The
Director agrees that he shall not dispose of (meaning, without limitation,
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of) any
Restricted Units hereby acquired prior to the applicable Vesting Dates,
including pursuant to a domestic
relations order issued by a court of competent jurisdiction, unless such
transfer is expressly approved in writing by the Committee.  Any attempted disposition of the Restricted
Units in violation of the preceding sentence shall be null and void.

 

SECTION 6.         Nontransferability of Agreement.

 

This
Agreement and all rights under this Agreement shall not be transferable by the
Director other than by will or pursuant to applicable laws of descent and distribution.  Any rights and privileges of the Director in
connection herewith shall not be transferred, assigned, pledged or hypothecated
by the Director or by any other person or persons, in any way, whether by operation
of law, or otherwise, and shall not be subject to execution, attachment,
garnishment or similar process.  In the
event of any such occurrence, the Restricted Units shall automatically be
forfeited.  Notwithstanding the foregoing, all or some of the Restricted Units or
rights under this Agreement may be transferred if such transfer is approved in
writing by the Committee.

 

SECTION 7.         Adjustment of Restricted Units.

 

The
number of Restricted Units granted to the Director pursuant to this Agreement
shall be adjusted to reflect unit splits or other changes in the capital
structure of the Partnership, all in accordance with the Plan.  All provisions of this Agreement shall be
applicable to such new or additional or different units or securities
distributed or issued pursuant to the Plan to the same extent that such
provisions are applicable to the Units with respect to which they were
distributed or issued.

 

SECTION 8.         Delivery of Vested Units.

 

Promptly
following the expiration of the restrictions on the Restricted Units as
contemplated in Section 4 of this Agreement, and subject to Section 9,
the Company shall cause to be issued and delivered to the Director or the
Director’s designee the number of Restricted Units as to which restrictions
have lapsed, free of any restrictive legend relating to the lapsed
restrictions, and shall pay to the Director any previously unpaid UDRs
distributed with respect to the Restricted Units.  Neither the value of the Restricted Units nor
the UDRs shall bear any interest owing to the passage of time.

 

SECTION 9.         Securities Act.

 

The
Company shall have the right, but not the obligation, to cause the Restricted
Units to be registered under the appropriate rules and regulations of the
SEC.  The Company shall not be required
to deliver any Units hereunder if, in the opinion of counsel for the Company,
such 

 

6

 

delivery
would violate the Securities Act of 1933 or any other applicable federal or
state securities laws or regulations.  By
accepting this grant, the Director agrees that any Units that the Director may
acquire upon vesting of this Award will not be sold or otherwise disposed of in
any manner that would constitute a violation of any applicable federal or state
securities laws.

 

SECTION 10.       Copy of Plan.

 

By
the execution of this Agreement, the Director acknowledges receipt of a copy of
the Plan.  If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any applicable
law, then such provision will be deemed to be modified to the minimum extent
necessary to render it legal, valid and enforceable; and if such provision
cannot be so modified, then this Agreement will be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties will be construed and enforced accordingly.

 

SECTION 11.       Notices.

 

Whenever
any notice is required or permitted hereunder, such notice must be in writing
and personally delivered or sent by mail. 
Any such notice required or permitted to be delivered hereunder shall be
deemed to be delivered on the date on which it is personally delivered or,
whether actually received or not, on the third business day (on which banking
institutions in the State of Texas are open) after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to the
person who is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith.  The Company or the Director may change at any
time and from time to time by written notice to the other, the address which it
or he previously specified for receiving notices.  The Company and the Director agree that any
notices shall be given to the Company or to the Director at the following
addresses:

 

	
  Company:

  	
   

  	
  Eagle
  Rock Energy G&P, LLC

  
	
   

  	
   

  	
  Attn:
  Charles C. Boettcher

  
	
   

  	
   

  	
  P.O. Box
  2968

  
	
   

  	
   

  	
  Houston,
  Texas 77252-2968

  
	
   

  	
   

  	
  Phone:
  (281) 408-1260

  
	
   

  	
   

  	
  Fax:
  (281) 715-4142

  
	
   

  	
   

  	
   

  
	
  Director:

  	
   

  	
  At
  the Director’s current address as shown in the

  
	
   

  	
   

  	
  Company’s
  records.

  

 

SECTION 12.       General Provisions.

 

(a)           Administration.  This Agreement shall at all times
be subject to the terms and conditions of the Plan.  The Committee shall have sole and complete
discretion with respect to all matters reserved to it by the Plan and decisions
of the Committee with respect thereto and with respect to this Agreement shall
be final and binding upon the Director and the Company.  In the event of any conflict between the
terms and conditions of this Agreement and the Plan, the provisions of the Plan
shall control.

 

7

 

(b)           Continuation of Service.  This Agreement shall not be
construed to confer upon the Director any right to continue in the service of
the Partnership Entities.

 

(c)           Governing Law.  This Agreement shall be
interpreted and administered under the laws of the State of Texas, without
giving effect to any conflict of laws provisions.

 

(d)           Amendments.  This Agreement may be amended only
by a written agreement executed by the Company and the Director, except that
the Committee may unilaterally waive any conditions or rights under, amend any
terms of, or alter this Agreement provided no such change (other than pursuant
to Section 4(c) or 7(c) of the Plan) materially reduces the
rights or benefits of the Director with respect to the Restricted Units without
his consent.

 

(e)           Binding Effect.  This
Agreement shall be binding upon and inure to the benefit of any successor or
successors of the Company and upon any person lawfully claiming under the
Director.

 

(f)            Entire Agreement.  This Agreement constitutes the
entire agreement of the parties with regard to this subject matter hereof, and
contains all the covenants, promises, representations, warranties and
agreements between the parties with respect to the Restricted Units granted
hereby.  Without limiting the scope of
the preceding sentence, all prior understandings and agreements, if any, among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect.

 

(g)           No Liability for Good Faith Determinations.  Neither the
Partnership Entities, nor the members of the Committee or the Board, nor any
officer of the Company, shall be liable for any act, omission or determination
taken or made in good faith with respect to this Agreement or the Restricted
Units granted hereunder.

 

(h)           No Guarantee of Interests.  The Board and the Partnership
Entities do not guarantee the Units from loss or depreciation.

 

(i)            Insider Trading Policy. 
The terms of the Company’s Insider Trading Policy with respect to Units
are incorporated herein by reference.

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]

 

8

 

IN WITNESS WHEREOF, the Company has caused
this Agreement to be executed by its officer thereunto duly authorized, and the
Director has set his hand as to the date and year first above written.

 

	
   

  	
  EAGLE
  ROCK ENERGY G&P, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Director

  

 

9Exhibit
10.1

 

Execution
Version

 

STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

COMFORT SYSTEMS USA, INC.

(“Purchaser”)

 

and

 

HWWJR LC

HMWSR LC

MITCHELL FREDERICK HADDON

GARY JON WARNESS

CURTIS MICHAEL WOOD

(“Sellers”)

 

and solely for purposes of Articles IV and V,

 

HOWARD W. WEBB

and

HOWARD M. WEBB

 

DATED
AS OF JULY 28, 2010

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  PURCHASE AND SALE; CLOSING

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Purchase
  and Sale of Stock

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.2

  	
   

  	
  Purchase
  Price

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.3

  	
   

  	
  Working
  Capital Purchase Price Adjustment

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.4

  	
   

  	
  Accrual
  Adjustment to Purchase Price

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.5

  	
   

  	
  Closing
  Date

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.6

  	
   

  	
  Closing
  Deliveries

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Organization
  and Qualification

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2

  	
   

  	
  Capitalization

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3

  	
   

  	
  Authority

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4

  	
   

  	
  Consents
  and Approvals; No Violation

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.5

  	
   

  	
  Books
  and Records

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.6

  	
   

  	
  Absence
  of Certain Changes

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.7

  	
   

  	
  Absence
  of Undisclosed Liabilities

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.8

  	
   

  	
  Accounts
  Receivable

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.9

  	
   

  	
  Inventory

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.10

  	
   

  	
  Litigation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.11

  	
   

  	
  Tax
  Matters

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.12

  	
   

  	
  Employee
  Benefit Plans

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.13

  	
   

  	
  Employment
  Matters

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.14

  	
   

  	
  Contracts

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.15

  	
   

  	
  Related
  Party Transactions

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.16

  	
   

  	
  Compliance
  with Laws

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.17

  	
   

  	
  Insurance

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.18

  	
   

  	
  Intellectual
  Property

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.19

  	
   

  	
  Environmental
  Matters

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.20

  	
   

  	
  Condition
  and Sufficiency of Assets

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.21

  	
   

  	
  Real
  Property

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.22

  	
   

  	
  Personal
  Property

  	
  17

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.23

  	
   

  	
  Brokers;
  Financial Advisors

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.24

  	
   

  	
  Bank
  Accounts; Powers of Attorney

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.25

  	
   

  	
  Indebtedness

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.26

  	
   

  	
  Subsidiaries
  and Predecessors

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.27

  	
   

  	
  Financial
  Statements

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.28

  	
   

  	
  WIP
  Schedule

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.29

  	
   

  	
  Customers
  and Suppliers

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.30

  	
   

  	
  No
  Other Representations

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS
  AND WARRANTIES OF PURCHASER

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Organization
  and Authority

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.2

  	
   

  	
  Authority

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.3

  	
   

  	
  Consents
  and Approvals

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.4

  	
   

  	
  SEC
  Reports

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.5

  	
   

  	
  Investment

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.6

  	
   

  	
  Independent
  Investigation

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  COVENANTS

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Noncompetition
  and Nonsolicitation

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2

  	
   

  	
  Confidential
  Information

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3

  	
   

  	
  Guarantees

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.4

  	
   

  	
  Expenses

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.5

  	
   

  	
  Further
  Assurances

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.6

  	
   

  	
  Further
  Consents

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.7

  	
   

  	
  Cooperation;
  Access to Records

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.8

  	
   

  	
  Employees

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.9

  	
   

  	
  Accounts
  Receivable

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.10

  	
   

  	
  Covenants
  by Webbs

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  INDEMNIFICATION

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Waiver
  of Right to Indemnification

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2

  	
   

  	
  Indemnification
  and Payment of Damages by Sellers

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3

  	
   

  	
  Indemnification
  by Purchaser

  	
  26

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4

  	
   

  	
  Notice
  and Defense of Third Party Claims

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5

  	
   

  	
  Payment;
  Interest

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6

  	
   

  	
  Limitations

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.7

  	
   

  	
  Exclusive
  Remedy

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.8

  	
   

  	
  Indemnification
  Obligations of Webbs

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TAX
  MATTERS

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Tax
  Periods Ending on or Before the Closing Date

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2

  	
   

  	
  Tax
  Periods Beginning Before and Ending After the Closing Date

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3

  	
   

  	
  Cooperation
  on Tax Matters

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4

  	
   

  	
  Transfer
  Taxes

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5

  	
   

  	
  No
  Code Section 338 Election

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6

  	
   

  	
  Refunds
  and Tax Benefits

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.7

  	
   

  	
  Tax
  Treatment of Transactions

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.8

  	
   

  	
  Other
  Tax Matters

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.9

  	
   

  	
  Tax
  Proceedings

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Entire
  Agreement; Assignment

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.2

  	
   

  	
  Reformation
  and Severability

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.3

  	
   

  	
  Notices

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.4

  	
   

  	
  Sellers’
  Percentage Interests

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.5

  	
   

  	
  Governing
  Law

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.6

  	
   

  	
  Gender;
  “Including” is Not Limiting; Descriptive Headings

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.7

  	
   

  	
  Parties
  in Interest

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.8

  	
   

  	
  Counterparts

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.9

  	
   

  	
  Incorporation
  by Reference

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.10

  	
   

  	
  Consent
  to Jurisdiction; Waiver of Jury Trial

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.11

  	
   

  	
  Construction

  	
  37

  

 

iii

 

STOCK PURCHASE AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

PURCHASE AND SALE; CLOSING

 

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

 

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

 

 

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

 

SECTION 1.3               Working Capital Purchase Price
Adjustment.

 

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

 

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

 

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

 

2

 

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

 

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

 

3

 

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

 

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

 

SECTION 1.4               Accrual Adjustment to Purchase
Price.

 

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

 

	
  Accrual Adjustment = Final Revenue Earned x

  	
  

  	
  -
  Revenue Earned @ Closing Date

  

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

5

 

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

 

SECTION 1.6               Closing Deliveries.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 2.13           Employment Matters.

 

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

 

13

 

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

 

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

 

SECTION 2.14           Contracts.

 

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

 

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

 

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

 

SECTION 2.16           Compliance with Laws.

 

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

 

14

 

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

 

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

 

SECTION 2.17           Insurance.

 

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

 

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

 

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

 

SECTION 2.18           Intellectual Property.

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

19

 

INTO THIS AGREEMENT.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

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

 

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

 

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

 

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

 

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

 

20

 

thereby.

 

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

 

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

 

ARTICLE IV

COVENANTS

 

SECTION 4.1             Noncompetition and
Nonsolicitation.

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

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

 

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

 

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

 

ARTICLE V

INDEMNIFICATION

 

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

 

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

 

24

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

ARTICLE VI

TAX MATTERS

 

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

 

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

 

30

 

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

 

SECTION 6.3             Cooperation on Tax Matters.

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

32

 

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

 

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

 

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

 

33

 

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

 

ARTICLE VII

MISCELLANEOUS

 

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

 

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

 

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

 

34

 

if
to Purchaser:

 

Comfort
Systems USA, Inc.

Office
of the General Counsel

675
Bering, Suite 400

Houston,
TX 77057

(713)
830-9659 (fax)

 

and
if to Sellers:

 

Howard
W. Webb

3313
Caracal Drive

Ft.
Pierce, FL 34949

 

Howard
M. Webb

16
Harbour Isle Drive West

Ph
4 Bldg 16

Ft.
Pierce, FL 34949

 

Mitchell
Frederick Haddon

c/o
ColonialWebb Contractors Company

2820
Ackley Avenue

Richmond,
VA 23228

 

Gary
Jon Warness

c/o
ColonialWebb Contractors Company

2820
Ackley Avenue

Richmond,
VA 23228

 

Curtis
Michael Wood

c/o
ColonialWebb Contractors Company

2820
Ackley Avenue

Richmond,
VA 23228

 

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

 

Thomas
P. Rohman, Esq.

McGuireWoods
LLP

One
James Center

901
E. Cary Street

Richmond,
VA 23219

 

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

 

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

 

35

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

36

 

HEREBY OR ANY DOCUMENT CONTEMPLATED HEREIN OR
OTHERWISE RELATED HERETO.

 

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

 

[Remainder of page intentionally left blank.]

 

37

 

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

 

 

	
   

  	
  COMFORT
  SYSTEMS USA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  William George

  
	
   

  	
   

  	
  William
  George

  
	
   

  	
  Its:

  	
  E.V.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SELLERS:

  
	
   

  	
   

  
	
   

  	
  HWWJR
  LC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Howard W. Webb

  
	
   

  	
   

  	
  Howard
  W. Webb

  
	
   

  	
  Its:

  	
  Sole
  Manager and Member

  
	
   

  	
   

  	
   

  
	
   

  	
  HMWSR
  LC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Howard M. Webb

  
	
   

  	
   

  	
  Howard
  M. Webb

  
	
   

  	
  Its:

  	
  Sole
  Manager and Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Mitchell F. Haddon

  
	
   

  	
   

  	
  Mitchell
  Frederick Haddon, individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Gary Jon Warness

  
	
   

  	
   

  	
  Gary
  Jon Warness, individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Curtis M. Wood

  
	
   

  	
   

  	
  Curtis
  Michael Wood, individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Howard W. Webb

  
	
   

  	
   

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

  
				

 

Signature Page SPA

 

 

	
   

  	
   

  	
  /s/
  Howard M. Webb

  
	
   

  	
   

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

  

 

Signature
Page SPA

 

 

EXHIBIT A

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-2

 

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

 

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

 

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

 

A-3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-8

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