EXHIBIT 10.3
NOTE MODIFICATION AGREEMENT
THIS NOTE MODIFICATION AGREEMENT is entered into effective as of August 8,
2000, and is binding on Xxxx Xxxxxxxxx (the "Holder"), and all of his assignees,
successors in interest and any other person or entity claiming by or through any
of them. Reference is hereby made to (i) each of those four certain Convertible
Subordinated Note(s) due November 15, 2001, each in the original principal
amount of $7,437,500 made by the Comfort Systems USA, Inc., a Delaware
corporation (the "Company"), in favor of the Holder, each as amended effective
as of July 1, 1999 (each individually a "Note", and collectively, the "Notes"),
and (ii) the Agreement and Plan of Merger dated November 15, 1998 by and among
the Company, XX00 Xxxxxxxxxxx Corp., a Delaware corporation, Xxxxxxxxx & Son,
Inc., an Indiana corporation ("S&S") and the Holder (the "Merger Agreement").
WHEREAS, the Company has notified the holder pursuant to the Merger
Agreement of certain liabilities (the "Potential Liabilities") to which S&S is
or may be liable and which relate to the fire protection activities of the
Company with GTE North, Incorporated and its affiliates ("GTE") prior to the
date of the Merger Agreement; and
WHEREAS, the parties to such dispute have indicated that they are willing
to settle all civil liabilities with respect to such matter upon the payment by
S&S a cash settlement (the "Settlement Amount") to GTE; and
WHEREAS, payment of the Settlement Amount would constitute Damages under
the Merger Agreement; and
WHEREAS, pursuant to the Merger Agreement the Company is entitled to
offset Damages as set forth therein against amounts payable pursuant to the
Notes; and
WHEREAS, the civil liabilities satisfied and released as consideration for
the Settlement Amount do not necessarily comprise all of the Potential
Liabilities; and
WHEREAS, the Holder and the Company desire to document and clarify the
note modification required to effectuate such right of offset,
NOW THEREFORE, the Holder and the Company hereby agree as follows:
1. Holder hereby represents that he is the holder of the Notes free and
clear of all liens and obligations, that he has not transferred or
alienated his interest in the Notes, and that he has full power to
enter into this Agreement and thereby modify the Notes.
2. Holder acknowledges and agrees that, if and when the Company pays the
Settlement Amount, the Company may offset such payment by reducing the
principal of each Note by an amount equal to the Settlement Amount
minus the Indemnification Threshold divided by four. Such amounts
shall be taken from the principal amounts due and payable on January
1, 2001. The offset and reduction shall be effective as of the date
that the Company actually pays the Settlement Amount.
3. To the extent that the Company has additional, valid Damages with
respect to the Potential Liabilities, such Damages shall be gathered
and itemized by the Company and reported to Holder by the Company.
Such offset amounts, once determined, shall be taken from the
principal amounts due and payable on January 1, 2001. The offset and
reduction shall be effective as of the date that the Company delivers
a final itemized accounting to the Holder pursuant to this Agreement.
Except for the offsets and reductions specifically set forth under this
Agreement, each of the Notes, as amended, are hereby reaffirmed in all respects.
COMFORT SYSTEMS USA, INC.
/s/ Xxxxxxx Xxxxx /s/ Xxxx Xxxxxxxxx
XXXXXXX XXXXX XXXX XXXXXXXXX
CHIEF EXECUTIVE OFFICER
