Exhibit 10.1 +

CONFIDENTIAL TREATMENT REQUESTED

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

 

ROLLINS, INC.,

NORTHWEST EXTERMINATING CO., INC.

 

NW HOLDINGS, LLC

 

and

 

THE STOCKHOLDERS OF NORTHWEST EXTERMINATING CO., INC.

dated as of

 

July 24, 2017

 

 

TABLE OF CONTENTS     Page       ARTICLE I PURCHASE AND SALE 2       1.1
Purchase and Sale 2 1.2 Purchase Price 2 1.3 Closing Consideration 2 1.4 Payment
of Closing Consideration; Aggregate Closing Amount 2 1.5 Earnout Consideration 3
1.6 Aggregate Closing Amount Payment Procedures 3 1.7 Transactions to be
Effected at the Closing 3 1.8 Purchase Price Adjustment 4 1.9
Holdings’  Representative Capacity 7       ARTICLE II REPRESENTATIONS AND
WARRANTIES OF HOLDINGS AND THE COMPANY 9     2.1 Organization; Standing and
Power 9 2.2 Capitalization 9 2.3 Authority 10 2.4 Ownership and Title to
Interests 10 2.5 Subsidiaries 10 2.6 Absence of Restrictions and Conflicts 11
2.7 Compliance with Laws 11 2.8 Financial Statements; Receivables 11 2.9 Absence
of Certain Changes or Events 12 2.10 Litigation 13 2.11 Governmental
Authorization 13 2.12 Real Property 13 2.13 Title to Assets; Related Matters 14
2.14 Intellectual Property 14 2.15 Taxes 15 2.16 Employee Benefit Plans 18 2.17
Employee Matters 21 2.18 Material Contracts 22 2.19 Transactions with Affiliates
24 2.20 Environmental Matters 25 2.21 Pest Treatment 26 2.22 Clients and Vendors
27 2.23 Bankruptcy; Insolvency 27 2.24 Brokers or Finders 27 2.25 No
Restrictions 27 2.26 Insurance 28 2.27 Bank Accounts 28 2.28 Powers of Attorney
28 2.29 Foreign Corrupt Practices 28 2.30 Disclosure 28 2.31 No Other
Representations or Warranties 29

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS 

29     3.1 Power and Authority; Execution and Validity 29 3.2 Absence of
Conflicts 29 3.3 Governmental and Third Party Approvals 30 3.4 Litigation 30 3.5
Fees 30      

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 

30     4.1 Corporate Organization, Standing and Power 30 4.2 Authority 31 4.3
Litigation 31 4.4 Sufficiency of Funds 31 4.5 Brokers or Finders 31 4.6
Investment Intention 32 4.7 Independent Investigation 32      

ARTICLE V COVENANTS 

32     5.1 Normal Course 32 5.2 Conduct of Business 32 5.3 Employment 34 5.4
Access to Personnel, Books and Records Following Signing 35 5.5 Certain Tax
Matters 35 5.6 Regulatory Filings 38 5.7 Notices and Consents 39 5.8
Notification 39 5.9 Public Announcement 39 5.10 Contact with Customers and
Suppliers 40 5.11 Further Assurances 40 5.12 Continuing Nondisclosure
Requirements 40 5.13 Operating Guidelines 40 5.14 Books and Records 40      

ARTICLE VI CONDITIONS TO CLOSING 

41     6.1 Conditions to Obligations of All Parties 41 6.2 Conditions to
Obligations of Buyer 41 6.3 Conditions to Obligations of Holdings, the
Stockholders, and the Company 42 6.4 Failure of Conditions 43      

ARTICLE VII CLOSING 

43     7.1 Closing 43 7.2 Company Closing Deliveries 44 7.3 Buyer Closing
Deliveries 44

 

 

ARTICLE VIII INDEMNIFICATION  45       8.1 Indemnification 45 8.2 Survival of
Representations, Warranties and Covenants 46 8.3 Limitations on Indemnification
Obligations 47 8.4 Notices; Payment of Damages 48 8.5 Third Party Claims 49 8.7
Termite Warranty Claims 51 8.8 Exclusive Remedy 53       ARTICLE IX TERMINATION 
53     9.1 Termination 53 9.2 Procedure for Termination 53 9.3 Effect of
Termination 54       ARTICLE X MISCELLANEOUS  54     10.1 Waiver; Amendment 54
10.2 Counterparts 54 10.3 Governing Law; Waiver of Jury Trial 54 10.4 Expenses
55 10.5 Notices 55 10.6 Entire Understanding; No Third Party Beneficiaries 57
10.7 Severability 57 10.8 Interpretation 58 10.9 Assignment; Successors 58 10.10
Construction 58 10.11 Specific Performance 58 10.12 Representations of
Stockholders 59       ARTICLE XI DEFINITIONS  59

LIST OF SCHEDULES     Exhibit “A” Restructuring Exhibit “B” Goodwill Purchase
Agreement Exhibit “C” Operating Guidelines Exhibit “D” Form of Non-Competition
Agreement     Schedule 1 Holdback Requirements Schedule 2 Earnout Consideration
Requirements Schedule 3 Estimated Calculation Schedule 4 Excluded Assets
Schedule 5 Purchase Price Allocation Schedule 6 Form of Employment Agreement
Schedule 7 Form of Commercial Lease for the Company’s facilities; Base Rent
Analysis Schedule 8 Trademark License Agreement Schedule 9 Specified Indemnity
Obligations

 

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of July
24, 2017, is entered into by and among ROLLINS, INC. a Delaware corporation
(“Buyer”), NW HOLDINGS, LLC., a Georgia limited liability company (“Holdings”),
NORTHWEST EXTERMINATING CO., INC., a Georgia corporation (the “Company”), and
the stockholders of the Company listed on the signature pages hereto (each, a
“Stockholder” and collectively, the “Stockholders”).

RECITALS

 

WHEREAS, no later than immediately prior to the Closing (as defined herein),
Holdings, the Stockholders, and the Company shall affect the restructuring
described on Exhibit A to this Agreement (the “Restructuring”);

WHEREAS, as a result of the Restructuring (i) the Stockholders shall own 100% of
the equity interests in Holdings; (ii) Holdings shall own 100% of the equity
interests (“Interests”) in the Company, and (iii) the Company shall elect to be
a limited liability company pursuant to Section 14-2-1109.1 of the Georgia
Business Corporation Code and Section 14-11-212 of the Georgia Limited Liability
Company Act;

WHEREAS, the Company is engaged in the residential and commercial pest
prevention service businesses (collectively, the “Business”);

WHEREAS, Holdings desires to sell to Buyer all of the Interests in the Company,
upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, as a result of the transactions contemplated hereby, Buyer will acquire
all of the Interests, and Holdings will receive the consideration described in
Article I of this Agreement (the “Transaction”);

WHEREAS, the Manager of Holdings and the Board of Directors of the Company have
determined that the Restructuring and the Transaction are in the best interests
of Holdings and the Company;

WHEREAS, the Stockholders have executed an irrevocable written consent approving
the Restructuring and the Transaction and approving, adopting and authorizing in
all respects this Agreement; and

WHEREAS, contemporaneously with the consummation of the Transaction, [****] will
sell all of his personal goodwill related to the business and operations
conducted by the Company (the “[****] Goodwill”) under a separate Personal
Goodwill Purchase Agreement to be executed as of the Closing Date, between Buyer
and [****] (the form of which is attached hereto as Exhibit B and is referred to
as the “Goodwill Purchase Agreement”).

1

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

Article I
purchase and sale

 

1.1           Purchase and Sale. Subject to the terms and conditions set forth
herein, at the Closing, (a) Holdings shall sell, assign, transfer and deliver
the Interests to Buyer, free and clear of all Encumbrances, and (b) Buyer shall
purchase and accept the Interests from Holdings for the consideration specified
in Section 1.2.

1.2           Purchase Price. The aggregate purchase price for the Interests
shall be up to One Hundred and Thirty-nine Million Six Hundred and Fifty
Thousand Dollars ($139,650,000.00), consisting of cash in the amount of One
Hundred and Twenty Two Million One Hundred and Fifty Thousand Dollars
($122,150,000.00)(the “Cash Consideration”), plus a contingent earnout payment
of up to Seventeen Million Eight Hundred Thousand Dollars ($17,800,000.00) (the
“Earnout Consideration”; the Cash Consideration and the Earnout Consideration,
subject to adjustment pursuant to Section 1.8, are together the “Purchase
Price”).

1.3           Closing Consideration. The aggregate consideration to be paid by
Buyer at the Closing (the “Closing Consideration”) shall consist of the Cash
Consideration, minus [****] Dollars ($[****]) (the “Holdback”), and less [****]
Dollars ($[****]; the “Closing Adjustment Holdback”). The Holdback will be
withheld by the Buyer as security for Holdings, the Company, and the
Stockholders’ obligations under this Agreement, and shall be disbursed in
accordance with the terms and conditions as set forth on Schedule 1 hereto. The
Closing Adjustment Holdback shall be subject to the Post-Closing Adjustment
provisions set forth in Section 1.8(b) hereof.

1.4           Payment of Closing Consideration; Aggregate Closing Amount.

(a)           The aggregate amount to be paid by Buyer at Closing shall consist
of the cash amount equal to (i) the Closing Consideration plus (ii) the Closing
Company Cash, plus or minus (iii) the Closing Adjustment (as defined in Section
1.8(a), below), plus the Tax Reimbursement (as defined in Section 5.5(a)), and
less (iv) the Transaction Expenses (the “Aggregate Closing Amount”). The
Aggregate Closing Amount shall be paid to Holdings at Closing.

2

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

(b)          Holdings shall retain [****] Dollars ($[****]) (the “Holdings
Expense Amount”) from the Aggregate Closing Amount for the purposes of paying
fees and satisfying expenses under this Agreement, including the costs and
expenses incurred in defending against any claim for indemnification made by
Buyer under this Agreement, including the hiring of experts and legal counsel
(the “Stockholder Expenses”). Holdings will hold the Holdings Expense Amount in
an account at a financial institution (the “Holdings Expense Account”), will not
use or otherwise apply these funds for any purpose other than as set forth in
this Agreement, and will not voluntarily make these funds available to its
creditors in the event of bankruptcy. The remaining funds within the Holdings
Expense Account shall be distributed by Holdings to the Stockholders in
accordance with their respective Pro Rata Percentages, by wire transfer of
immediately available funds as designated in their respective Letters of
Transmittal.

1.5          Earnout Consideration. The Earnout Consideration shall be earned
pursuant to the requirements, and paid to the Holdings at the times, as set
forth on Schedule 2.

1.6          Aggregate Closing Amount Payment Procedures.

(a)           Holdings shall distribute the Aggregate Closing Amount, less the
Holdings Expense Amount, to the Stockholders as provided in this Section.

(b)           Prior to receiving any portion of the Aggregate Closing Amount,
each Stockholder shall deliver to Holdings a properly completed and duly
executed letter of transmittal (a “Letter of Transmittal”) which includes
payment instructions and a Form W-9/Form W-8BEN along with any such other
documents as Holdings may reasonably require (collectively, “Payment
Instructions”) and (ii) a release of the Company and Buyer (the “Release”) ((i)
and (ii) together, the “Transmittal Package”). Upon a Stockholder’s delivery of
a duly executed and completed Transmittal Package to Holdings, such Stockholder
shall be entitled to his, her, or its Pro Rata Percentage of the Aggregate
Closing Amount, less the Holdings Expense Amount.

(c)           Holdings, its designee, Buyer or the Company (as appropriate)
shall be entitled to deduct and withhold from consideration otherwise payable
pursuant to this Agreement to any Person such amounts as are required to be
deducted and withheld with respect to the making of such payment under the Code,
or any provision of state, local or foreign Tax Law. To the extent that amounts
are so withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to such Person in respect of which such deduction
and withholding was made.

1.7          Transactions to be Effected at the Closing.

(a)           At the Closing, Buyer shall deliver to Holdings, the Company
and/or the Stockholders:

3

 

(i)          to Holdings, the Aggregate Closing Amount pursuant to Section 1.4,
subject to any Closing Adjustment pursuant to Section 1.8(a), by wire transfer
of immediately available funds; and

(ii)          the Transaction Documents and all other agreements, documents,
instruments or certificates required to be delivered by Buyer at or prior to the
Closing pursuant to Section 7.3 of this Agreement.

(b)          At the Closing, Holdings, the Company, and/or the Stockholders
shall deliver to Buyer:

(i)          Evidence of transfer of the Interests, free and clear of all
Encumbrances;

(ii)         the Releases; and

(iii)        the Transaction Documents and all other agreements, documents,
instruments or certificates required to be delivered by the Company and
Stockholders at or prior to the Closing pursuant to Section 7.2 of this
Agreement.

1.8          Purchase Price Adjustment.

(a)           Closing Adjustment; Closing Statement.

(i)          At least three (3) Business Days before the Closing, the Company,
Stockholders and Buyer shall jointly determine an amount (the “Estimated Net
Asset Value”) by adjusting the Company’s unaudited, consolidated balance sheet
as of May 31, 2017 (the “Estimated Closing Balance Sheet”) to (A) accrue for
certain liabilities as agreed to by the Parties since the Company does not
accrue for expenses under the Company Accounting Policies, and (B) reflect other
substantive adjustments that are agreed to by the Parties prior to the date
hereof (the “Estimated Calculation”). The Estimated Calculation, which sets
forth the Estimated Net Asset Value, is attached as Schedule 3. Holdings and the
Stockholders represent and warrant the Estimated Closing Balance Sheet has been
prepared based upon the Company Accounting Policies adjusted for the accruals
noted in Schedule 3.

(ii)         The “Closing Adjustment” shall be an amount equal to the Actual
Closing Net Asset Value minus the Estimated Net Asset Value. If the Closing
Adjustment is a positive number (the “Excess Net Asset Value Amount”), the
Purchase Price shall be increased by the amount of the Closing Adjustment. If
the Closing Adjustment is a negative number (the “Net Asset Value Shortfall
Amount”), the Purchase Price shall be reduced by the amount of the Closing
Adjustment.

(iii)          “Net Asset Value” means: (a) the Assets of the Company, less (b)
the Liabilities of the Company, determined as of the open of business on the
Closing Date, determined in accordance with the Company Accounting Policies and
the Estimated Calculation determined in accordance with the methodology outlined
on Schedule 3. For the avoidance of doubt, all deferred revenue, including Cash
on Program and related deferred payments, and related deferred expenses will be
treated as current liabilities included in the Estimated Closing Balance Sheet
and the Actual Net Asset Value calculation.

4

 

(b)          Post-Closing Adjustment.

(i)          Within ninety (90) days after the Closing Date, Buyer, with
reasonable input and review by Holdings, shall prepare and deliver to Holdings
an unaudited draft balance sheet of the Company as of the time of Closing (the
“Closing Balance Sheet”), and a calculation of the Net Asset Value (the “Actual
Net Asset Value”) prepared in accordance with the Company Accounting Policies
and Estimated Calculations as set forth in Schedule 3, including the adjustments
set forth thereon, (the “Actual Net Asset Value Statement”).

(ii)         The post-closing adjustment shall be an amount equal to the Closing
Net Asset Value minus the Estimated Net Asset Value, with a dollar for dollar
adjustment (whether positive or negative) equal to the difference between the
Closing Net Asset Value and the Estimated Net Asset Value (the “Post-Closing
Adjustment”). If the Post-Closing Adjustment is a positive number, Buyer shall
pay to Holdings an amount equal to the Post-Closing Adjustment, plus the Closing
Adjustment Holdback. If the Post-Closing Adjustment is a negative number, the
Buyer shall retain the amount of the Post-Closing Adjustment from the Closing
Adjustment Holdback, and, to the extent that the Closing Adjustment Holdback is
insufficient to cover the entire Post-Closing Adjustment, from the Holdback to
the extent of such insufficiency.

(iii)        From the Closing Date through the date of the determination of the
final Purchase Price Adjustment provided for in this Section 1.8, Buyer shall
give Holdings and its advisors reasonable access during normal business hours to
the books and records, the accounting and other appropriate personnel and the
accountants for the Company and Buyer in order to review the Post-Closing
Adjustment, Closing Balance Sheet and Closing Net Asset Value Statement;
provided, that such access shall be in a manner that does not interfere with the
normal business operations of Buyer or the Company.

(iv)        For purposes of this subsection (b), the Parties agree to allocate
expenses for utilities, water, internet, phone and sewer charges incurred in the
operation of the business of the Company based on the number of days occurring
period to the Closing Date and beginning on and following the Closing Date
during the billing period.

(c)           Examination and Review.

(i)          Examination. After receipt of the Closing Balance Sheet and Closing
Net Asset Value Statement, Holdings shall have thirty (30) days (the “Review
Period”) to review the Closing Balance Sheet and Closing Net Asset Value
Statement. During the Review Period, Holdings shall have full access to the
books and records of the Company, the personnel of, and work papers prepared by,
Buyer and/or Buyer’s Accountants to the extent that they relate to the Closing
Balance Sheet and Closing Net Asset Value Statement and to such historical
financial information (to the extent in Buyer’s possession) relating to the
Closing Balance Sheet and Closing Net Asset Value Statement as Holdings may
reasonably request for the purpose of reviewing the Closing Net Asset Value
Statement and to prepare a Statement of Objections (defined below); provided,
that such access shall be in a manner that does not interfere with the normal
business operations of Buyer or the Company.

5

 

(ii)         Objection. On or prior to the last day of the Review Period,
Holdings may object to the Closing Balance Sheet and/or Closing Net Asset Value
Statement by delivering to Buyer a written statement setting forth Holdings’
objections in reasonable detail, specifically identifying each disputed item or
amount and the basis for Holdings’ disagreement therewith (the “Statement of
Objections”). If Holdings fails to deliver the Statement of Objections before
the expiration of the Review Period, the Closing Balance Sheet, Closing Net
Asset Value Statement and the Post-Closing Adjustment, as the case may be,
reflected in the Closing Net Asset Value Statement shall be deemed to have been
accepted by Holdings. If Holdings delivers the Statement of Objections before
the expiration of the Review Period, Buyer and Holdings shall negotiate in good
faith to resolve such objections within thirty (30) days after the delivery of
the Statement of Objections (the “Resolution Period”), and, if the same are so
resolved within the Resolution Period, the Closing Balance Sheet, Post-Closing
Adjustment, and Closing Net Asset Value Statement with such changes as may have
been previously agreed in writing by Buyer and Holdings, shall be final and
binding.

(iii)         Resolution of Disputes. If Holdings and Buyer fail to reach an
agreement with respect to all of the matters set forth in the Statement of
Objections before expiration of the Resolution Period, then any amounts
remaining in dispute (“Disputed Amounts”) shall be submitted for resolution by
the mutual agreement of Buyer and Holdings to the office of an impartial
nationally recognized firm of independent certified public accountants other
than the Company’s Accountants or Buyer’s Accountants (the “Independent
Accountant”) who, acting as experts and not arbitrators, shall resolve the
Disputed Amounts only and make any adjustments to the Closing Balance Sheet,
Post-Closing Adjustment, and the Closing Net Asset Value Statement, as the case
may be. The parties hereto agree that all adjustments shall be made without
regard to materiality. The Independent Accountant shall only decide the specific
items under dispute by the parties and their decision for each Disputed Amount
must be within the range of values assigned to each such item in the Closing
Balance Sheet, Closing Net Asset Value Statement and the Statement of
Objections.

(iv)        Fees of the Independent Accountant. The fees and expenses of the
Independent Accountant shall be paid by Holdings, on the one hand, and by Buyer,
on the other hand, based upon the percentage that the amount actually contested
but not awarded to Holdings or Buyer, respectively, bears to the aggregate
amount actually contested by Holdings and Buyer. For example, if Holdings
challenges the calculation of the Post-Closing Adjustment by an amount of One
Hundred Thousand Dollars ($100,000), but the Independent Accountant determines
that Holdings has a valid claim for only Sixty Thousand Dollars ($60,000),
Holdings shall bear forty percent (40%) of the fees and expenses of the
Independent Accountant and Buyer shall bear the other sixty percent (60%) of
such fees and expenses.

(v)         Determination by Independent Accountant. The Independent Accountant
shall make a determination as soon as practicable within thirty (30) days (or
such other time as the parties hereto shall agree in writing) after their
engagement, and their resolution of the Disputed Amounts and their adjustments
to the Closing Balance Sheet, Closing Net Asset Value Statement and/or the
Post-Closing Adjustment shall be conclusive and binding upon the parties hereto.
The Independent Accountants shall utilize the Company Accounting Policies in
making their determination.

6

 

(vi)        Payments of Post-Closing Adjustment. Except as otherwise provided
herein, any payment of the Post-Closing Adjustment, shall be due (x) within five
(5) Business Days of acceptance of the applicable Closing Balance Sheet and
Closing Net Asset Value Statement or (y) if there are Disputed Amounts, then
within five (5) Business Days of the resolution described in clause (v) above.
To the extent that the Post-Closing Adjustment is an amount payable by Holdings
to the Buyer, the Buyer shall retain such amount from the Closing Adjustment
Holdback, and, to the extent that the Closing Adjustment Holdback is
insufficient to cover the entire Post-Closing Adjustment, from the Holdback to
the extent of such insufficiency. To the extent that the Post-Closing Adjustment
is an amount payable by Buyer to Holdings, then Holdings upon receipt shall
promptly then distribute the Closing Adjustment Holdback, and the Post-Closing
Adjustment received from Buyer, to the Stockholders in accordance with their
respective Pro Rata Percentages, by wire transfer as designated in their
respective Letters of Transmittal, of immediately available funds. For the
avoidance of doubt, any funds remaining in the Closing Adjustment Holdback after
processing the Post-Closing Adjustment (as provided for above) shall be paid to
Holdings by Buyer and shall not be applied to the Holdback or reserved for other
claims.

(d)           Adjustments for Tax Purposes. Any payments made pursuant to this
Section 1.8 shall be treated as an adjustment to the Purchase Price by the
parties for Tax purposes, unless otherwise required by Law.

1.9           Holdings’ Representative Capacity.

(a)            By execution of this Agreement, each Stockholder acknowledges and
agrees that, to the extent applicable, Holdings is hereby appointed as the
Stockholders’ true and lawful representative, proxy, agent and attorney-in-fact
with full power and authority to act for, and on behalf of, the Stockholders in
connection with all matters relating to the Transaction Documents and the
Transaction, including, without limitation, (i) to take such actions and to
execute and deliver such amendments, modifications, waivers and consents in
connection with this Agreement and the other Transaction Documents, (ii) to give
and receive notices and communications, (iii) to receive and accept service of
legal process in connection with any Action arising under the Transaction
Documents or in connection with the Transaction, (iv) to receive and deliver to
the Stockholders, in accordance with their respective Pro Rata Percentages, the
amount(s) comprising the Excess Net Asset Value Amount, the remainder of the
Holdings Expense Account, and the Earnout Consideration, as applicable, (v) to
object to or accept any claims in connection with the Excess Net Asset Value
Amount, the Net Asset Value Shortfall Amount, and/or the Holdback, as
applicable, (vi) to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to the Excess Net Asset Value Amount, the Net Asset
Value Shortfall Amount, and/or the Holdback, as applicable, (vii) to enforce
payment of any amounts payable to the Stockholder Indemnified Parties on behalf
of the Buyer Indemnifying Parties, (viii) to receive any and all notices and
other communications to the Stockholders on behalf of the Stockholders as
provided in Section 10.5 hereof, and (ix) to take all actions and execute such
documents as are or may be necessary or appropriate in the opinion of Holdings
for the accomplishment of the foregoing. Holdings shall not receive compensation
for its services. The authority conferred under this Section 1.8 is an agency
coupled with an interest and, to the extent permitted by applicable Law, all
authority conferred hereby is irrevocable and not subject to termination by the
undersigned or by operation of law, whether by the death or incapacity of any of
the Stockholders, or the occurrence of any other event.

7

 

(b)           Holdings shall not be liable to the Stockholders for any act done
or omitted hereunder in the absence of gross negligence or willful misconduct.
The Stockholders shall, severally and not jointly, indemnify Holdings and its
officers, directors, and/or manager(s), and hold Holdings and its officers,
directors, and/or manager(s) harmless from and against any and all Damages,
Actions, liabilities, losses, taxes, fines, penalties, costs, claims and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them as a result of any
good faith error of judgment on the part of Holdings or its officers, directors,
or manager(s) or for any other act done or omitted in good faith by such persons
in connection with the administration of their duties hereunder, except where
such losses arise from or are the result of such person’s gross negligence or
willful misconduct.

(c)           Any decision, act, consent or instruction taken or given by
Holdings pursuant to this Agreement shall constitute a decision, act, consent or
instruction of all Stockholders and shall be final, binding and conclusive upon
each such Stockholder. Buyer may rely upon any such decision, act, consent or
instruction of Holdings as being the decision, act, consent or instruction of
each and every Stockholder and shall have no duty to inquire as to the acts and
omissions of Holdings. Buyer is hereby relieved from any liability to any Person
for any acts done by them in accordance with, or otherwise with respect to any
aspect of, such decision, act, consent or instruction of Holdings.

(d)           All expenses, if any, reasonably incurred by Holdings in
connection with the performance of its duties hereunder will be borne and paid
by the Stockholders according to their respective Pro Rata Percentage. Such
expenses pursuant to this Agreement (including the hiring of legal counsel and
the incurring of reasonable legal fees and costs) (the “Holdings Expenses”) will
be paid to Holdings from the Holdings Expense Account. For the avoidance of
doubt, while this section allows Holdings to be reimbursed from the Holdings
Expense Account, this does not relieve Stockholders from promptly paying their
respective Pro Rata Percentage of all of Holdings Expenses as they are suffered
or incurred in excess of the Holdings Expense Amount, nor does it prevent
Holdings from seeking any remedies available to it at law or otherwise in
respect of the Pro Rata Percentage of any unpaid amounts due from any
Stockholder.

(e)            Notices given to Holdings in accordance with Section 10.5 shall
constitute notice to the Stockholders for all purposes under this Agreement.

(f)            Any Stockholder (whether or not then providing services to the
Buyer or any of its Affiliates, including the Company) shall be permitted to
consult with Holdings on any Buyer Indemnity Claim or adjustment to the Purchase
Price and, provided that such consultation shall not unreasonably interfere with
the obligations of such Stockholder under any written employment or consulting
agreement with the Buyer, such consultation shall not constitute a breach of any
obligation owed by such Stockholder to the Buyer or any Affiliate. For the
avoidance of doubt, asserting a position contrary to Buyer regarding a matter
herein shall not be deemed to be an unreasonable interference with the
obligations of a Stockholder under any written employment or consulting
agreement.

8

 

Article II
Representations and Warranties of HOLDINGS and the Company

Holdings or the Company, as the case may be, represents and warrants to Buyer,
and acknowledges that Buyer is relying upon such representations and warranties
in connection with its purchase of the Interests, that the statements contained
in this Article II are true and correct as of the date hereof, except as set
forth in the Company Disclosure Schedule (the “Company Disclosure Schedule”),
which disclosure shall provide an exception to, or otherwise qualify, the
representations or warranties of the Company contained in the section of this
Agreement corresponding by number to such disclosure and to any other
representation or warranty in this Agreement to which the applicability of such
disclosure is reasonably apparent on its face or if the items are expressly
cross-referenced.

2.1           Organization; Standing and Power. Holdings is a limited liability
company duly organized, validly existing and in good standing under the Laws of
the State of Georgia. Prior to the Restructuring, the Company was a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Georgia, and after the Restructuring, the Company shall be a limited
liability company duly organized, validly existing, and in good standing under
the Laws of the State of Georgia. The Company has all requisite power and
authority to own, lease and operate its properties and to carry on its Business
as it is now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect. Section 2.1 of the Company
Disclosure Schedule provides the jurisdictions in which the Company is qualified
to do business. The Company has previously furnished to Buyer a complete and
correct copy of its certificate of incorporation and bylaws, which were in
effect prior to the Restructuring, and a copy of its Articles of Organization
and Operating Agreement which will be in effect after the Restructuring (or
equivalent documents), each as amended to date (the “Company Charter
Documents”). The Company is not in violation of any of the provisions of the
applicable Company Charter Documents.

2.2           Capitalization. Section 2.2 of the Company Disclosure Schedule
(a) sets forth all of the holders of Capital Stock of the Company prior to the
Restructuring, who are the sole registered and beneficial holders of all of the
issued and outstanding securities of any kind of any of the Company (voting or
otherwise) and the class and number of securities held by each holder prior to
the Restructuring, (b) specifically identifies any options that are outstanding
or expected to be exercised or converted on or prior to the Closing Date, and
(c) identifies each such holder’s relative percentage of such security prior to
the Restructuring. After the Restructuring each holder of Capital Stock of the
Company shall have an identical ownership interest in the Capital Stock of
Holdings, and Holdings shall own 100% of the equity interests of the Company.
All of the issued and outstanding shares of the Capital Stock of the Company
(prior to the Restructuring) or Holdings (after the Restructuring) or other
equity interests of the Company (after the Restructuring) are duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Section 2.2
of the Company Disclosure Schedule, there are no other equity securities of any
kind, no options, rights, warrants, preemptive rights, calls, subscriptions,
commitments, stockholder agreements or other instruments, understandings or
contracts (whether oral or written) outstanding giving any person or entity the
right to acquire from the Company or Holdings (whether by exercise, conversion
or otherwise) any securities of any kind of the Company or Holdings (voting or
otherwise) nor are there any commitments to issue or execute any of the
foregoing. None of the outstanding Interests has been issued in violation of any
preemptive rights of any security holder of the Company or Holdings or in
violation of applicable securities Laws or any other Law of any jurisdiction
applicable to such issuance.

9

 

2.3           Authority.

(a)           Each of Holdings and the Company has all requisite corporate power
and authority to execute and deliver this Agreement and the Transaction
Documents to which it is a party and to perform its obligations hereunder and
thereunder and to consummate the Transaction and the transactions contemplated
by the Transaction Documents. The execution, delivery and performance by
Holdings and/or the Company of this Agreement and the other Transaction
Documents to which it is a party and the consummation of the Transaction and the
transactions contemplated by the Transaction Documents have been duly authorized
by all necessary entity action on the part of Holdings and the Company. This
Agreement and the other Transaction Documents have been duly executed and
delivered by Holdings and the Company and (assuming due authorization, execution
and delivery by each other party thereto) constitute the legal, valid and
binding obligations of Holdings and the Company, enforceable against each in
accordance with their respective terms, subject to (i) Laws of general
application relating to bankruptcy, insolvency, reorganization, moratorium and
the relief of debtors or similar Laws affecting creditors’ rights generally, and
(ii) the availability of specific performance, injunctive relief and other
equitable remedies (regardless of whether considered in a proceeding at Law or
in equity).

(b)           The affirmative vote (in person, by proxy or by written consent)
of the holders of a majority of the outstanding shares of voting interests of
Holdings in favor of the adoption of this Agreement, and the affirmative vote
(in person, by proxy or by written consent) of holders of the Capital Stock of
the Company (the “Stockholder Approval”) are the only votes or approval
necessary for Holdings or the Company to adopt this Agreement and approve the
Transaction. All of the Stockholders have executed an irrevocable written
consent approving the Transaction and approving, adopting and authorizing in all
respects this Agreement.

2.4           Ownership and Title to Interests. After the Restructuring,
Holdings owns 100% of the equity interests in the Company. Upon the consummation
of the Closing pursuant to this Agreement, Buyer will own 100% of the Interests
in the Company, free and clear of any Encumbrances.

2.5           Subsidiaries. The Company does not have any Subsidiaries and
except as set forth in Section 2.5 of the Company Disclosure Schedule, does not
own any equity or debt interest in any other Person.

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2.6           Absence of Restrictions and Conflicts.

(a)           Except as set forth in Section 2.6(a) of the Company Disclosure
Schedule, the execution and delivery by Holdings, the Company and the
Stockholders of this Agreement and the Transaction Documents do not, and the
performance of their obligations hereunder and pursuant to the Transaction
Documents will not, (i) conflict with or violate the Company Charter Documents,
(ii) assuming that all consents, approvals, authorizations and other actions
described in subsection (b) of this Section 2.6 have been obtained and all
filings and obligations described in subsection (b) of this Section 2.6 have
been made, conflict with or violate any Law applicable to the Company, or by
which any property or asset of the Company is bound, or (iii) require any
consent or notice or result in any violation or breach of or constitute (with or
without notice or lapse of time or both) a default (or give to others any right
of termination, amendment, acceleration or cancellation) under, or result in the
triggering of any payments or result in the creation of a lien or other
Encumbrance on any property or asset of the Company, in all cases, pursuant to,
any of the terms, conditions or provisions of any Material Contract, except,
with respect to clauses (ii) and (iii) such triggering of payments, liens,
Encumbrances, filings, notices, Permits, authorizations, consents, approvals,
violations, conflicts, breaches or defaults which would not reasonably be
expected to result in a Material Adverse Effect.

(b)          The execution and delivery by Holdings, the Company and the
Stockholders of this Agreement and the Transaction Documents and the
consummation of the Transaction does not, and the performance of its obligations
hereunder will not, require any consent, approval, order, authorization or
Permit of, or filing with or notification to, any Governmental Authority or any
third party Client, except (i) (A) for the notification requirements of the HSR
Act and the ICA (B) the notices and consents referred to on Section 2.6(a) of
the Company Disclosure Schedule, and (ii) where the failure to obtain such
consents, approvals, authorizations or Permits, or to make such filings or
notifications would not (A) prevent or materially delay consummation of the
Transaction or (B) reasonably be expected to result in a Material Adverse
Effect.

2.7           Compliance with Laws. The Company has not received written notice
that it is under investigation with respect to, or, to the Knowledge of the
Company, is otherwise now under investigation with respect to, a violation of
any applicable Law that in the aggregate, would reasonably be expected to have a
Material Adverse Effect. The Company has filed all reports and has all Licenses
required to be filed with any Governmental Authority necessary to carry on the
Business of the Company as presently conducted, except where the failure to make
such filings or obtain such Licenses would not reasonably be expected to have a
Material Adverse Effect.

2.8           Financial Statements; Receivables.

(a)           In General. Section 2.8(a) of the Company Disclosure Schedule
contains the Company’s unaudited balance sheet and statement of income as of and
for the fiscal year ended December 31, 2016 (the “Year End Financial
Statements”), and the Company’s unaudited balance sheet and statement of income
as of and for the five-month period ended May 31, 2017 (the “Interim Financial
Statements,” together with the Year End Financial Statements, the “Company
Financial Statements”). Other than as described in Section 2.8(a) of the Company
Disclosure Schedule, the Company Financial Statements have been prepared from
the books and records of the Company and present fairly, in all material
respects, the financial condition of the Company as of the respective dates
thereof and the results of income of the Company for the periods covered
thereby, and have been prepared in accordance with the Company Accounting
Policies. The Company attests that the Company Accounting Policies have been
consistently applied and the software used to produce the financial statements
has adequate controls to ensure reliability.

11

 

(b)           No Undisclosed Liabilities. The Company has no liabilities,
obligations or commitments of any kind, except for (i) liabilities disclosed in
the Company Financial Statements, (ii) liabilities incurred by the Company
subsequent to the date of the Interim Financial Statements in the ordinary
course of business, (iii) performance obligations under the executory portion of
any Contract by which the Company is bound, (iv) liabilities under this
Agreement or the Transaction, (v) liabilities as reflected in the definitions of
Indebtedness and Transaction Expenses, or (vi) liabilities included in the
calculation of Estimated Closing Net Asset Value and/or contemplated by the
adjustments thereto as described or reflected on Schedule 3.

(c)           Accounts Receivable. Section 2.8(c) of the Company Disclosure
Schedule provides an accurate and complete breakdown and aging of all accounts
receivable as of May 31, 2017. All accounts receivable reflected in the Company
Financial Statements or recorded on the books of the Company resulted from the
ordinary course of business and have been properly recorded. To the Knowledge of
the Company, all accounts receivables are good and collectible in full without
any discount (other than as set forth on the face of the invoice), setoff or
valid counterclaim (net of recovery from vendors or subcontractors), in amounts
equal to not less than the amounts thereof reflected in the Company Financial
Statements, subject to a reserve amount as shown in the Estimated Closing
Balance Sheet or as reflected on Schedule 3. The Company’s Cash on Program is
properly reflected under the category “prepayments” in the Company’s aging
schedules, and the amounts set forth thereon are correct and complete, and
properly evidence future service obligations.

(d)           No Letters of Credit, Bonds or Guarantees. Except as reflected in
the Company Financial Statements or as set forth in Section 2.8(d) of the
Company Disclosure Schedule, the Company (i) has no bonds or letters of credit
outstanding as to which the Company has any actual or contingent reimbursement
obligations; (ii) is not a party to or bound, either absolutely or on a
contingent basis, by any agreement of guarantee, indemnification, reimbursement
or any similar commitment, in each case with respect to the liabilities or
obligations of any other Person (whether accrued, absolute, or contingent); and
(iii) is not a party to any swap, hedge, derivative, or similar instrument. For
the avoidance of doubt, customer, vendor and business Contracts entered into in
the ordinary course of operating the business and confidentiality and
nondisclosure agreements of the Company are outside the scope of clause (ii) of
the immediately preceding sentence.

2.9           Absence of Certain Changes or Events. Since May 26, 2017, except
for the Restructuring or as otherwise disclosed in this Agreement (or its
exhibits or schedules) the Company has conducted the Business in the ordinary
course of business and there has not been any effect, event, development or
change that has resulted in a Material Adverse Effect, or if such effect, event,
development or change had occurred between the date hereof and the Closing,
would violate Section 5.2.

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2.10         Litigation. Except as set forth on Section 2.10 of the Company
Disclosure Schedule, there is no private or governmental Action pending before
any Governmental Authority or, to the Knowledge of the Company, threatened
against the Company or any of its properties, officers, directors or
stockholders (in their capacities as such). There is no unsatisfied or
undismissed judgment, decree or order against the Company. Except as set forth
on Section 2.10 of the Company Disclosure Schedule, the Company is not a party
(nor, to the Knowledge of the Company, threatened to become a party) to any
Action. The Company has no plans to initiate any Action against any third party.

2.11         Governmental Authorization. Except as set forth on Section 2.11 of
the Company Disclosure Schedule, the Company and/or its employees holds all
Permits (a) pursuant to which the Company currently operates or holds any
interest in any of its properties related to the Business or (b) that is
required for the operation of the Business or the holding of any such interest,
and all of such Permits are or will be, immediately prior to the Closing, in
full force and effect, except where the failure to obtain or have any such
Permits could not reasonably be expected to have a Material Adverse Effect.

2.12         Real Property.

(a)           Except for real property identified on Schedule 4 hereto, the
Company does not own any parcel of real property.

(b)           Section 2.12(b) of the Company Disclosure Schedule sets forth a
correct and complete list of the real property leased by the Company, excluding
public or self-storage units (the “Leased Real Property”), including the address
of the Leased Real Property and a list of all leases (the “Leases”) for each
such Leased Real Property.

(c)           The Company has a valid leasehold interest in the Leased Real
Property, and the Leases are in full force and effect in all material respects.
Except as set forth in Section 2.12(c) of the Company Disclosure Schedule, the
Transaction does not require landlord consent and will not result in a breach
of, or default under, any of the Leases.

(d)           No written (or, to the Knowledge of the Company, oral) notice of
default has been received or delivered by the Company under any Lease which
default has not been cured, waived or rescinded as of the date hereof.

(e)           The Company has not subleased, licensed or otherwise granted any
Person the right to use or occupy such Leased Real Property or any portion
thereof.

(f)            The improvements and fixtures in the Leased Real Property are in
normal operating condition and capable of being used for their intended
purposes, ordinary wear and tear excepted, except as would not reasonably be
expected to result in a Material Adverse Effect. The Leased Real Property
constitutes all of the real property utilized by the Company in the operation of
its Business.

13

 

2.13          Title to Assets; Related Matters.

(a)          The Company owns or has a valid leasehold interest in, all of its
tangible personal property and tangible assets, free and clear of all
Encumbrances, except Permitted Encumbrances. All equipment and other items of
tangible personal property and tangible assets of the Company (a) are in normal
operating condition and capable of being used for their intended purposes,
ordinary wear and tear excepted and (b) are usable in the ordinary course of
business, except in each of cases (a) and (b) as would not reasonably be
expected to result in a Material Adverse Effect.

(b)          The assets of the Company (other than intellectual property assets)
include all of the material assets that are adequate and sufficient to operate
the business of the Company in the same manner immediately after the Closing as
was operated by the Company on the date of this Agreement.

(c)          Section 2.13(c) of the Company Disclosure Schedule lists all leases
of personal property with a value of Twenty Five Thousand Dollars ($25,000) or
more. To the Company’s Knowledge, its tangible assets are free from material
defects (patent and latent), and are suitable for the purposes for which they
are currently being used by the Company.

(d)          There are no conditions affecting any such property or assets, or,
to the Knowledge of the Company, developments which, individually or in the
aggregate, would reasonably be expected to materially detract from the value of
such property or assets, or materially interfere with the use of any such
property or assets.

(e)           Notwithstanding anything in this Agreement to the contrary,
certain assets of the Company listed on Schedule 4 hereto shall be distributed
by the Company to Holdings or one or more of the Stockholders at or prior to
Closing (the “Excluded Assets”).

2.14         Intellectual Property. Section 2.14(a) of the Company Disclosure
Schedule identifies: (i) each registered patent that has been issued to the
Company with respect to any of the Intellectual Property; (ii) each pending
patent application or application for registration which the Company has made
with respect to any of the Intellectual Property; (iii) each registered
trademark and registered service mark owned by the Company; (iv) each trademark
and service mark owned by the Company which is the subject of a pending
application; (v) each registered domain name owned by the Company; (vi) each
registered social media account owned and/or administered by the Company; and
(vii) each license or agreement that the Company has granted to any third party
with respect to any of the foregoing items of Intellectual Property described in
clause (i) through (vi), excluding however, license agreements entered into in
the normal course of the Company’s business, including licenses granted to its
subcontractors. With respect to each item of Intellectual Property required to
be identified in Section 2.14(a) of the Company Disclosure Schedule: (i) the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or agreement prohibiting or limiting the Company’s’ use thereof; (ii) no
action, suit or proceeding is pending or, to the Knowledge of the Company,
threatened, which challenges the legality, validity, enforceability, use or
ownership of the item; and (iii) to the Knowledge of the Company, the item does
not, nor has been alleged to, violate, breach or infringe the patent, trademark,
copyright or other intellectual property rights of any other Person. Section
2.14(b) of the Company Disclosure Schedule identifies each material item of
Intellectual Property that any third party owns and that the Company uses
pursuant to a written license or agreement (other than generally commercially
available software, including off-the-shelf software subject to a shrinkwrap or
clickwrap license). With respect to each such item of Intellectual Property
required to be identified in Section 2.14(b) of the Company Disclosure Schedule:
(i) the license or agreement covering the item is legal, valid, binding and
enforceable against the Company, and in full force and effect except where the
failure to be would not have a Material Adverse Effect; (ii) the Company is not
in breach or default of the license or agreement; and (iii) the Company has not
granted any sublicense or similar right with respect to the license or
agreement. The Company is in compliance in all material respects with the
licensing obligations for the commercially available, off-the-shelf, and
shrinkwrap or clickwrap software installed on the Company’s computer systems.

14

 

2.15         Taxes. Except as set forth in Section 2.15 of the Company
Disclosure Schedule:

(a)           Holdings has properly elected (or will prior to the Closing
property elect) to be taxed as a Subchapter “S” Corporation by the timely filing
of correctly completed Form 2553 with the Internal Revenue Service and, as
applicable, any applicable state income tax authority (the “S Election”).

(b)          Holdings and/or the Company has properly elected (or will prior to
the Closing properly elect) to cause the Company to be treated as a ‘Qualified
Subchapter S Subsidiary’ by the timely filing of a correctly completed Form 8869
with the Internal Revenue Service, and, as applicable, any applicable state
income tax authority (the “QSub Election”).

(c)           After the filing of the QSub Election, Holdings has taken (or will
take) all actions necessary to authorize, and the Company has properly elected
to (or will property elect to), convert from a corporation to a limited
liability company pursuant to Section 14-2-1109.1 of the Georgia Business
Corporation Code and Section 14-11-212 of the Georgia Limited Liability Company
Act, and has been (or will be) issued a Certificate of Conversion by the Georgia
Secretary of State (“Certificate of Conversion”).

(d)           After the issuance of the Certificate of Conversion, the Company
shall be treated as an entity for income tax purposes that is disregarded as an
entity separate from its owner within the meaning of Treas. Reg. Section
301.7701-3.

(e)           The Company has, since the Company’s 2013 fiscal year, timely
filed (taking into account all applicable extensions) all Tax Returns required
to have been filed under applicable Laws during that time period, and the
Company has paid all Taxes required to be paid in respect of such taxable
periods by the Company. The Tax Returns filed with respect to the Company are
true, correct and complete in all material respects. All Taxes due and owing by
the Company (whether or not shown on any Tax Return) have been timely paid.

15

 

(f)          The Company has not (i) consummated or participated in, nor is
currently participating in, any transaction which was or is a “Tax shelter”
transaction as defined in Sections 6662, 6011, 6111 or 6112 of the Code,
applicable regulations thereunder or other related published guidance from the
Internal Revenue Service (“IRS”) or (ii) engaged in any transaction that could
give rise to (1) a registration obligation with respect to any Person under
Section 6111 of the Code or the regulations thereunder, (2) a list maintenance
obligation with respect to any Person under Section 6112 of the Code or the
regulations thereunder, or (3) a disclosure obligation as a “reportable
transaction” under Section 6011 of the Code or the regulations thereunder.

(g)          The Company has not received notice that the IRS or any other
Governmental Authority has asserted against the Company any deficiency or claim
for Taxes, and no issue has been raised by any Governmental Authority in any
audit that could reasonably be expected to result in a proposed deficiency of
the Company for any Pre-Closing Straddle Tax Period not so examined, other than
any such assessment or issue that has been fully resolved. No claim has ever
been made by a Governmental Authority with which the Company does not file Tax
Returns that the Company is or may be subject to taxation by that Governmental
Authority, nor, to the Knowledge of the Company, is there any reasonable factual
basis or legal basis for any such claim.

(h)           All Tax deficiencies asserted or assessed by a Governmental
Authority against the Company have been paid or finally settled with no
remaining amounts owed.

(i)            There is no pending or, to the Knowledge of the Company,
threatened action, audit, claim, assessment, reassessment, proceeding, or
investigation with respect to the Company involving: (i) the assessment or
collection of Taxes, or (ii) a claim for refund made by the Company with respect
to Taxes previously paid.

(j)            All amounts that are required to be collected or withheld by the
Company, or with respect to Taxes of the Company, have been duly collected or
withheld, and all such amounts that are required to be remitted to any
Governmental Authority have been duly remitted on a timely basis to the
appropriate Governmental Authority.

(k)           The Company (i) has not been a member of an affiliated group of
corporations (as defined in Section 1504 of the Code) (other than a group the
common parent of which is the Company) and (ii) has no liability for the Taxes
of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.

(l)            There are no outstanding waivers of any statute of limitations
with respect to the assessment, reassessment or collection of any Tax from the
Company, the filing of any Tax Returns by the Company or the payment or
remittance of any Tax or amount on account of Tax by the Company.

(m)          There are no Encumbrances for Taxes (other than Permitted
Encumbrances) due and payable upon the assets of the Company.

(n)           No assets or property of the Company constitute “tax-exempt use
property” within the meaning of Section 168(h) of the Code. No indebtedness of
the Company consists of (i) “corporate acquisition indebtedness” within the
meaning of Section 279 of the Code, or (ii) an “applicable high yield discount
obligation” within the meaning of Section 163(i) of the Code. The Company has
not participated in, or cooperated with, an international boycott within the
meaning of Section 999 of the Code.

16

 

(o)          The Company has not made or become obligated to make, nor will as a
result of any event connected with the Transaction and/or any termination of
employment related to the Transaction, make or become obligated to make, any
‘excess parachute payment’ as defined in Section 280G of the Code (without
regard to Section (b)(4) thereof).

(p)          There are no outstanding requests for extensions of time within
which to file returns and reports in respect of any Taxes owed by the Company.

(q)          Accruals or reserves for current taxes and deferred tax liabilities
as stated in the Year End Financial Statements and the Interim Financial
Statements are all in accordance with the Company Accounting Policies. With
respect to the Estimated Closing Balance Sheet, the Company Accounting Policies
were adjusted to account for accruals and reserves as shown in Schedule 3.

(r)          The Company is not a party to or bound by any tax-sharing
agreement, or similar arrangement (whether express or implied) under which it
could have any continuing liabilities after the Closing Date.

(s)          The Company has not applied for a ruling relating to Taxes from any
Governmental Authority or entered into any closing agreement with any
Governmental Authority relating to Taxes.

(t)           The Company has made available to Buyer correct and complete
copies of federal, state and local income Tax Returns that have actually been
filed on or before the Closing Date on behalf of the Company for all taxable
years ending on or after December 31, 2012.

(u)          Other than the Reorganization, neither Holdings nor the Company has
been, in the past five (5) years, a party to a transaction reported or intended
to qualify as a reorganization under Section 368 of the Code. Neither Holdings
nor the Company has been described as a “distributing corporation” or a
“controlled corporation” (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of shares that was reported or otherwise constituted a
distribution of shares under Section 355 of the Code in the two (2) years prior
to the date of this Agreement or that could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of Section 355(e)
of the Code) that includes the Transaction.

(v)          There are no joint ventures, partnerships, limited liability
companies, or other arrangements or contracts to which the Company is a party
and that could be treated as a partnership for federal income tax purposes.

(w)          Neither Holdings nor any Stockholders or any other Person related
to Holdings or any of the Stockholders (within the meaning of Section
197(f)(9)(C)) has operated any business prior to 1994 that is the same as or
similar to the business of the Company.

17

 

(x)           The Company will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any:

(i)          change in method of accounting for a taxable period ending on or
prior to the Closing Date;

(ii)         installment sale or open transaction disposition made on or prior
to the Closing Date; or

(iii)        prepaid amount received on or prior to the Closing Date.

2.16         Employee Benefit Plans.

(a)           List of Plans. Section 2.16(a) of the Company Disclosure Schedule
contains a correct and complete list of each Benefit Plan (whether or not ERISA
applies) and each other employment, consulting, bonus or other incentive
compensation, salary continuation during any absence from active employment for
disability or other reasons, pension, retirement, supplemental retirement,
supplemental pension, profit sharing, hospitalization, health, dental,
disability, insurance, sick pay, tuition assistance, club membership, employee
loan, vacation pay, paid time off, severance, deferred compensation, incentive,
fringe benefit, change in control, retention, stock option, stock purchase,
restricted stock or other compensatory plan, policy, practice, agreement or
arrangement (i) which provides benefits or compensation to employees, leased
employees, independent contractors, officers or directors; (ii) which is
currently maintained, administered, contributed to or required to be contributed
to by the Company, or (ii) to which the Company is or has been a party or has
had, or could have any Liability, including the qualified retirement plans
merged into, or consolidated under, the current 401(k) plan that is a Company
Plan (collectively, the “Company Plans”).

(b)           Plan Documentation. With respect to each Company Plan, and to the
extent applicable, the Company has made available to Buyer true, accurate and
complete copies of: (i) the current plan documents and all amendments thereto;
(ii) for the qualified retirement plans merged into, or consolidated under, the
current 401(k) plan that is a Company Plan, all of the plan documents and
amendments thereto in effect immediately before the January 1, 2016, merger or
consolidation effective date, and copies of all discrimination tests performed
in regard to such prior plans for the 2015 plan year (or the most recent plan
year for which such tests were performed); (iii) a written description of any
Company Plan that is not in writing; (iv) trust agreements, insurance and group
annuity contracts, and other funding vehicles; (v) any award certificates or
agreements issued under the Company Plan; (vi) the current summary plan
descriptions and summary of material modifications; (vii) the most recent
determination or opinion letter from the IRS; (viii) the charter or by-laws for
any fiduciary committee of the Company Plan; (ix) the investment policy
statement; (x) the most recent annual notices provided to employees (including
without limitation the participant fee disclosure issued to comply with the
regulations under ERISA Section 404, automatic enrollment notices, qualified
default investment fund notices, and Women’s Health and Cancer Rights notice);
(xi) the HIPAA privacy and security policies and procedures; (xii) the most
recent annual filings made with the IRS (other than Form 5500); and (xiii) any
other Company Plan related document reasonably requested in writing by Buyer.

18

 

(c)           Reliance on Plan Documents. Except as provided pursuant to
Sections 2.16(a) and (b), there are no other Company Plans or amendments to any
Company Plans that have been adopted, approved or implemented and that affect
any current or former employee, leased employee, independent contractor, officer
or director (or their beneficiaries) of the Company. No written or oral
statement has been made with regard to any Company Plan that was not in
accordance with the terms of such Company Plan and that could have an adverse
economic consequence to the Company or Buyer and its Affiliates.

(d)          Material Compliance. Except as otherwise set forth in Section
2.16(d) of the Company Disclosure Schedule, each of the Company Plans (including
each predecessor plan thereto) is, and has been, maintained, administered, and
operated in all material respects in accordance with its terms in compliance in
all material respects with applicable Laws including, but not limited to, the
Code and ERISA. The IRS has issued, or is deemed to have issued, a favorable
determination letter with respect to each Company Plan (including each
predecessor plan thereto) that is intended to be a “qualified plan” within the
meaning of Code Section 401(a); and, to the Company’s Knowledge, no fact or
event has occurred before or since the date of such letter or letters that could
adversely affect the qualified status of such Company Plan or any predecessor
plan thereto. In particular and without limiting the foregoing, except as set
forth in Section 2.16(d) of the Company Disclosure Schedule:

(i)          All of the qualified retirement plans merged into, or consolidated
under, the current 401(k) plan that is a Company Plan (i) at all times satisfied
the minimum coverage requirements under Code Section 410(b); and (ii) for each
plan year satisfied the actual deferral percentage test under Code Section
401(k), the average contribution percentage test under Code Section 401(m), and
the nondiscriminatory contributions requirements under Code Section 401(a)(14).

(ii)         The Company has not and, to the Company’s Knowledge, no other
Person has engaged in any transaction with respect to any Company Plan that
would be reasonably likely to subject the Company, a Company Plan fiduciary or
any other Person to any material Taxes or material penalty (civil or otherwise)
imposed by ERISA, the Code or other applicable Law;

(iii)        All Company Plans that are group health plans have been operated in
material compliance with COBRA and HIPAA;

(iv)        Each Company Plan that is a nonqualified deferred compensation plan
(as defined in Code Section 409A(d)(1)) is, and has been, exempt from, and/or in
compliance with, Code Section 409A; and no participant in such Company Plan has
become subject to (whether or not reported) the Tax imposed by Code Section
409A(a)(1)(B);

19

 

(v)         For all periods on and after January 1, 2015, the Company has
offered to all of its “full-time employees” “minimum essential coverage” that
provides “minimum value” and is “affordable” (all within the meanings given such
terms in Section 4980H of the Code). The Company has complied in all material
respects with all other requirements of the Patient Protection and Affordable
Care Act; and

(vi)        All notices and documents required by the Law to be provided to
participants and beneficiaries in each Company Plan have been provided in a
manner and at a time that materially complies with such legal requirements.

(e)           Certain Types of Plans. (i) None of the Company Plans is a
Multiemployer Plan, a multiemployer welfare plan, a multiple employer plan
within the meaning of Code Section 413(c), or a Canadian Multiemployer Plan; and
(ii) the Company has not sponsored, maintained or contributed to, or otherwise
could have any Liability with respect to, any Benefit Plan subject to Title IV
of ERISA or any Company Plan that is a Canadian Defined Benefit Plan.

(f)            Post-Employment Welfare Plans. Except as set forth in Section
2.16(f) of the Company Disclosure Schedule, no Company Plan provides health care
or other welfare benefits to former employees or beneficiaries or dependents
thereof, except for continuation coverage as required by COBRA or by applicable
state insurance Laws; and any such COBRA continuation coverage is provided only
to the extent that the former employee pays the entire “applicable premium” as
defined in COBRA.

(g)           Funding.

(i)          All contributions, premiums or other payments by the Company due or
required to be made under any Company Plan prior to the date hereof or the
Closing Date have been made as of the date hereof and as of the Closing Date, as
applicable, in accordance with the terms of each Company Plan and applicable
Law; and

(ii)         The Company does not make entries in its financial records for
Liabilities under Company Plans that have accrued but are not due; and

(iii)        There are no pending (or, to the Knowledge of the Company,
threatened) audits, investigations, examinations, actions, liens, suits, or
proceedings relating to any Company Plan other than routine claims by
individuals entitled to benefits thereunder, nor is any Company Plan the subject
of any pending (or, to the Knowledge of the Company, any threatened)
investigation or audit by any Governmental Authority or any other Person.

(h)           Acceleration of Vesting or Payments. Except as set forth in
Section 2.16(h) of the Company Disclosure Schedule, the transactions
contemplated by this Agreement will not (either alone or together with any other
event) (i) entitle any individual to any bonus, severance, retirement or other
benefit; (ii) accelerate the time of payment or vesting; (iii) require any
funding (through a grantor trust or otherwise) of compensation or benefits; (iv)
increase the amount payable or give rise to any other obligation pursuant to any
Company Plan; or (v) result in the payment of an “excess parachute payment” (as
such term is defined in Code section 280G(b)(1)) to any individual who is a
“disqualified individual” (as such term is defined in Treasury Regulation
Section 1.280G-1).

20

 

(i)            Section 2.16(i) of the Company Disclosure Schedule lists all
employees who have entered into any written incentive compensation agreements
with the Company, and accurately and completely lists the incentive payment
compensation amounts owned to each such employee.

2.17         Employee Matters.

(a)           Section 2.17(a) of the Company Disclosure Schedule contains a true
and complete list of all employees who are employed by the Company as of the
date of this Agreement.

(b)           Except as disclosed in Section 2.17(b) of the Company Disclosure
Schedule, there are no Actions pending, or, to the Knowledge of the Company,
threatened or reasonably anticipated relating to any labor and employment, wage
and hour, workplace health and safety or human rights or discrimination matters
involving any employee or independent contractor of the Company that could
materially affect the Business or Buyer’s operation of the Business
substantially in the manner being conducted. The Company is not presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to employees or contractors and no
collective bargaining agreement is being negotiated by the Company. To the
Knowledge of the Company, there are no current attempts to organize or establish
any labor union or employee association with respect to any employees or
contractors of the Company.

(c)           The Company is in compliance with all material terms and
conditions of employment contracts and independent contractor contracts, its
employment policies and procedures (a copy of which have been provided to
Buyer), and all Laws respecting employment and employment practices, including
terms and conditions of employment, layoffs, immigration, wages, hours of work,
overtime, pay equity, long service leave, workers compensation, labor relations,
workplace safety and insurance, occupational health and safety and human rights.

(d)           The Company has paid, or has accurately reflected in its books and
records, all compensation, remuneration, salaries, wages and other material
compensation, including termination and severance pay (if applicable) due up to
the Closing in respect of all current and former employees of the Company and
made certain adjustments for accrued payroll expenses as described or reflected
in the Company Accounting Policies as set forth in Schedule 3. Other than as set
forth in Section 2.17(d) of the Company Disclosure Schedule and as reflected in
Schedule 3, there are no bonuses or incentives that are payable to employees of
the Company in respect of projects or work undertaken for the period ending on
Closing.

(e)          Section 2.17(e) of the Company Disclosure Schedule sets forth
(i) any agreement providing for payments to any director, officer, employee or
independent contractor in connection with a change of control of the Company,
and (ii) any agreement as to length of termination notice greater than thirty
(30) days or severance payment required to terminate employment, other than such
as results by Law from the employment of an employee without an agreement as to
notice or severance. There are no promises of, or other legally binding
commitments to provide, increases of compensation to the employees of the
Company over or beyond those set out in such contracts of employment or Company
Plans.

21

 

(f)           Other than as set forth in Section 2.17(f) of the Company
Disclosure Schedule, to the Knowledge of the Company, none of the current
employees or independent contractors of the Company receiving annual
compensation over Fifty Thousand Dollars ($50,000) have given the Company
written notice terminating his or her employment or engagement with the Company,
or terminating his or her employment upon a sale of, or business combination
relating to, the Company or in connection with the Transaction. Other than as
set forth in Section 2.17(f) of the Company Disclosure Schedule, since May 26,
2017, the Company has not terminated any employees or independent contractors
outside of the ordinary course of business. Other than as may be determined in
connection with the Transaction, the Company has no present intention to
terminate the employment of any current employee or independent contractor of
the Company, other than in the ordinary course of business, or any group of
employees or independent contractors. To the Knowledge of the Company, no
current employee, consultant or independent contractor is a party to or is bound
by any employment agreement, patent disclosure agreement, non-competition
agreement, any other restrictive covenant or other agreement with any Person, or
subject to any judgment, decree or order of any court or administrative agency,
any of which would reasonably be expected to have a material adverse effect in
any way on (i) the performance by such Person of any of his or her duties or
responsibilities for the Company or (ii) the Business.

(g)           The Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate Governmental Authority of the
states or other jurisdictions where it is required to maintain such accounts.

(h)           The Company is now and at Closing will be in compliance in all
material respects with its employment policies and procedures (a copy of which
have been provided to Buyer), all applicable Laws and Contracts relating to
employment and employment practices, including immigration, wages, hours, meal
and rest periods, medical leave practices, occupational health and safety, and
terms and conditions of employment (including employee compensation matters and
the correct classification of employees as exempt employees and non-exempt
employees under the Fair Labor Standards Act and any other applicable Laws). The
Company has not incurred, and no circumstances exist as of the date of this
Agreement to the Company’s Knowledge, under which the Company would reasonably
be expected to incur, any material liability arising from the misclassification
of any employee as a consultant or independent contractor, or as an exempt
employee under federal or state law.

(i)            The Company’s employment policies and procedures include, without
limitation, a random drug testing requirement for all employees on a periodic
basis, and an obligation for employees to execute a restrictive covenants
agreement (a copy of which has been provided to Buyer), which, to the Knowledge
of the Company, is enforceable under Georgia law.

2.18         Material Contracts.

(a)           Section 2.18 of the Company Disclosure Schedule sets forth a
correct and complete list, all as of the date hereof, of the following Contracts
to which the Company is a party (all such Contracts, the “Material Contracts”):

22

 

(i)          any voting trust or similar agreements relating to the equity
ownership interests in Holdco or the Company to which any of the Stockholders or
the Company is a party;

(ii)          all Contracts to which the Company is a party evidencing or
governing Indebtedness;

(iii)        any Contracts relating to the making of any loan or advance by the
Company, other than payroll advances of $10,000.00 or less to any employee of
the Company;

(iv)        all Contracts to which the Company is a party relating to the Leased
Real Property;

(v)         all operating leases or licenses involving the use of any material
personal property or material asset (excluding any real property) of the Company
for which the annual rent exceeds Twenty Five Thousand Dollars ($25,000);

(vi)          all Contracts for capital expenditures or the acquisition or
construction of fixed assets requiring the payment by the Company of an amount
in excess of Twenty Five Thousand Dollars ($25,000) per Contract;

(vii)       all current Contracts with Clients and Vendors;

(viii)      any Contracts with sales or other agents, brokers, franchisees,
distributors or dealers other than in the Ordinary Course;

(ix)        any Contract that imposes any ongoing non-compete, exclusivity or
similar restriction on the Company with respect to any line of business or
geographic area in which the Company is currently engaged (excluding, for
avoidance of doubt, any employee non-solicit and/or no-hire covenants entered
into by the Company in connection with their evaluation of potential business
acquisitions or joint ventures);

(x)         any license, sublicense or royalty agreement relating to items of
Intellectual Property required to be identified in Section 2.14(a) and Section
2.14(b) of the Company Disclosure Schedule;

(xi)        any Contract that requires the Company to make payments in an amount
greater than Twenty Five Thousand Dollars ($25,000) per annum that is not
terminable without penalty upon less than six (6) months prior written notice by
the Company;

(xii)        any Contract that contains a “most favored nations” provision;

(xiii)       any Contracts or engagements awarded to the Company based on size,
socio-economic or other preferred status;

23

 

(xiv)      any employment Contract involving aggregate compensation, inclusive
of base salary, bonus and commission in excess of One Hundred Thousand Dollars
($100,000) per annum; and

(xv)       any partnership, limited liability company (other than wholly owned
entities), joint venture or other similar Contracts to which the Company is a
party (other than the Company Charter Documents).

(b)           Complete copies of each Material Contract, including all
amendments, modifications, and supplements thereof, have been made available to
Buyer. As of the date hereof, each Material Contract is valid, binding and
enforceable in all material respects in accordance with its respective terms
with respect to the Company. Except as set forth in Section 2.18 of the Company
Disclosure Schedule, the Company has not been informed by the counterparty in
writing (or, to the Knowledge of the Company, orally) of any claim of material
breach by the Company under any Material Contract, and otherwise has no
Knowledge of any such material breach by the Company under any Material Contract
(and, to the Knowledge of the Company, no condition exists that, with notice or
lapse of time or both, would constitute a material breach by the Company), nor
any breach or default which would give the other party the right to terminate or
modify such Material Contract or would accelerate any material obligation or
material payment by the Company nor, to the Knowledge of the Company, is any
other party to any Material Contract in breach or default thereunder. On or
prior to the Effective Time, the Company shall have delivered all necessary
notices to, and used its reasonable commercial efforts to have obtained all
necessary consents from, all parties to any Material Contracts listed on Section
2.6(a) of the Company Disclosure Schedule as are required thereunder in
connection with the Transaction. None of the Material Contracts is currently
being renegotiated outside the ordinary course of business. To the Knowledge of
the Company, solely with respect to Material Contracts with Clients, no party to
any of such Material Contracts has made, asserted or has any defense, setoff or
counterclaim under its Material Contract or has exercised any option granted to
it to cancel, terminate or shorten the term of its Material Contract, in each
case due to performance. No counterparty to a Material Contract has repudiated
or, to the Knowledge of the Company, threatened to repudiate any provision of
any Material Contract.

2.19        Transactions with Affiliates. Other than as set forth in Section
2.19 of the Company Disclosure Schedule, there are no loans, leases, royalty
agreements or other continuing transactions between the Company and any of its
present directors or officers or, to the Company’s Knowledge, former directors
or officers or current or former employees (other than ordinary course
proprietary information, invention assignment, non-competition or
non-solicitation agreements that restrict the ability of such employee to
compete with or solicit from the Company), consultants, representatives or
stockholders or any member of any director, officer, employee, consultant,
representative or stockholder’s family. Other than as set forth in Section 2.19
of the Company Disclosure Schedule, to the Company’s Knowledge, none of its
present directors, officers, employees, consultants or stockholders has any
material interest in any entity that does business with the Company (other than
any interest in less than 5% of the stock of any publicly-traded corporation),
has any material interest in any entity which competes with the Business, has
any material interest in any property, asset or right used by the Company in the
conduct of the Business or has any contractual relationship (whether written or
oral) with the Company other than such relationships that result solely from
being a Company director, officer, employee, consultant and/or stockholder, as
the case may be.

24

 

2.20         Environmental Matters.

(a)           The Company is, and at all times in the previous five (5) years
has been, in compliance in all material respects with all Environmental Laws
governing its Business, operations, properties and assets, including, without
limitation: (i) all requirements relating to the Discharge and Handling of
Hazardous Substances; (ii) all requirements relating to notice, record keeping
and reporting; (iii) all requirements relating to obtaining and maintaining
Licenses for the ownership of its properties and assets and the operation of its
business as presently conducted, including Licenses relating to the Handling and
Discharge of Hazardous Substances; and (iv) all applicable writs, orders,
judgments, injunctions, governmental communications, decrees, informational
requests or demands issued pursuant to, or arising under, any Environmental
Laws.

(b)          There are no (and there is no basis for any) non-compliance orders,
warning letters, notices of violation (collectively, “Notices”), claims, suits,
actions, judgments, penalties, fines, or administrative or judicial
investigations or proceedings (collectively, “Proceedings”) pending or
threatened against or involving the Company, or its business, operations,
properties or assets, issued by any Governmental Authority or third party with
respect to any Environmental Laws or Licenses issued to the Company thereunder
in connection with, related to or arising out of the ownership by the Company of
its properties or assets or the operation of its business, which have not been
resolved to the satisfaction of the issuing Governmental Authority or third
party in a manner that would not impose any material obligation, burden or
continuing material liability on the Company in the event that the Transaction
is consummated, or which could have a Material Adverse Effect on the Company,
including, without limitation: (i) Notices or Proceedings related to the Company
being a potentially responsible party for a federal or state or provincial
environmental cleanup site or for corrective action under any applicable
Environmental Laws; (ii) Notices or Proceedings relating to the Company being
responsible to undertake any response or remedial actions or clean-up actions of
any kind; or (iii) Notices or Proceedings related to the Company being liable
under any Environmental Laws for personal injury, property damage, natural
resource damage, or clean up obligations.

(c)          The Company has not Handled or Discharged, nor allowed or arranged
for any third party to Handle or Discharge, Hazardous Substances to, at or upon:
(i) any location other than a site lawfully permitted to receive such Hazardous
Substances; (ii) any real property currently or previously owned or leased by
the Company (other than in the ordinary course of business in compliance in all
material respects with applicable Environmental Laws); or (iii) any site which,
pursuant to any Environmental Laws, (x) has been placed on the National
Priorities List or its state equivalent, or (y) the Environmental Protection
Agency or the relevant state agency or other Governmental Authority has notified
the Company that such Governmental Authority has proposed or is proposing to
place on the National Priorities List or its state equivalent. There has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge, or any Hazardous Substance on, into or beneath the surface of, or
adjacent to, any real property currently or previously owned or leased by the
Company in an amount requiring a notice or report to be made to a Governmental
Authority or in violation of any applicable Environmental Laws.

25

 

(d)           Section 2.20 of the Company Disclosure Schedule identifies the
operations and activities, and locations thereof, which have been conducted or
are being conducted by the Company on any real property currently or previously
owned or leased by the Company which have involved the Handling or Discharge of
Hazardous Substances.

2.21         Pest Treatment; Termite Matters.

(a)          The Company is in material compliance with all Laws and
manufacturer treatments and protocols applicable to it, its Business and
operations (as conducted by the Company now), applicable to the pest control
segment of the Business. No Action is pending against the Company under any of
the Company’s pest control warranties or guarantees, and except as set forth on
Section 2.21(a) of the Company Disclosure Schedule, the Company has not received
notice of any such threatened Action and, to the Company’s Knowledge, no such
claims have been threatened against the Company since January 1, 2013. Since
January 1, 2007, the Company has not received any written communication from any
Governmental Authority or manufacturer that alleges that the Company is not in
compliance with any applicable Laws or manufacturer treatments and protocols
applicable to the pest control segment of the Business.

(b)          To the Company’s Knowledge:

(i)          Company is in material compliance with all statutes, laws,
ordinances, rules, orders and regulations of federal, state and local
governments and manufacturer treatments and protocols applicable to it, its
Business and operations (as conducted by the Company now) applicable to the
termite control segment of the Business;

(ii)         All services for termite control customers have been performed
pursuant to written contracts with the customers and in accordance with the
Company’s normal operating policies;

(iii)        The Company has no claims pending under any of the Company’s
termite warranties or guarantees;

(iv)        The Company has not have received notice of any claims under any of
the Company’s termite warranties or guarantees which have not been, to the
Company’s Knowledge, satisfactorily resolved as of the date hereof;

(v)         No default exists under any termite control customer contract which,
but for the lapse of time or the giving of notice, or both, would be such a
default;

(vi)        All obligations of the Company arising under the termite control
customer contracts up to and including the date hereof, both monetary and
non-monetary, have been satisfied, other than any routine or customary services
to be provided in the future in accordance with the terms of such contracts;

26

 

(vii)       Except as set out in Section 2.21 of the Company Disclosure
Schedule, since January 1, 2007, the Company has not had a termite related claim
not covered by or in excess of coverage provided to the Company by any existing
general liability insurance, including termite coverage, carried by the Company;
and

(viii)      Since January 1, 2007, the Company has not received any written
communication from any Governmental Authority or manufacturer that alleges that
the Company is not in compliance with any such federal, state, provincial or
local laws, rules or regulations or manufacturer treatments and protocols
applicable to the termite control segment of the Business.

For the avoidance of doubt, any Damages for Termite Warranty Claims that occur
from and after the Closing shall be governed solely by the provisions of Section
8.7 hereof.

 

2.22         Clients and Vendors. Section 2.22 of the Company Disclosure
Schedule contains a complete list of the names of the Clients and Vendors,
including the amount of revenue recorded for such Clients and the payments made
to such Vendors for the Company’s fiscal year ended December 31, 2016. To the
Knowledge of the Company, no event has occurred that has, in any material
respect, adversely affected, or would reasonably be expected to adversely
affect, the Company’s relations with any Client or Vendor, since January 1,
2016. Except as set forth in Section 2.22 of the Company Disclosure Schedule,
since January 1, 2016 through the date hereof, no Client or Vendor has
cancelled, terminated or, to the Knowledge of the Company, made any threat to
cancel or otherwise terminate any of its Contracts with the Company or to
materially decrease its usage or supply of the Company’s services or products.

2.23         Bankruptcy; Insolvency. The Company has not (i) instituted
proceedings under any applicable bankruptcy Law, (ii) had a bankruptcy
proceeding filed against it, (iii) filed a petition or answer of consent seeking
reorganization under any bankruptcy or any similar Law or similar statute,
(iv) consented to the filing of any such petition, (v) had appointed a custodian
of it or any of its assets or property, (vi) made a general assignment for the
benefit of creditors, (vii) admitted in writing its inability to pay its debts
generally as they become due, (viii) become insolvent, (ix) failed generally to
pay its debts as they become due, or (x) taken any corporate action in
furtherance of or to facilitate, conditionally or otherwise, any of the
foregoing.

2.24         Brokers or Finders. Except as otherwise set forth in Section 2.24
of the Company Disclosure Schedule, the Company has not incurred, nor will
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for any fee, compensation or commission or any similar charges to
any Person in connection with this Agreement or the Transaction.

2.25         No Restrictions. Except as set forth on Section 2.25 of the Company
Disclosure Schedule, the Company is not a party to, and no asset or property of
the Company is bound or affected by, any judgment, injunction, order, decree,
contract, covenant or agreement (non-compete or otherwise, and whether written
or oral) (each, a “Restriction”) that restricts or prohibits, or purports to
restrict or prohibit, the Company from freely engaging in the Business or from
competing anywhere in the world (including any Contracts, covenants or
agreements (whether written or oral) restricting the geographic area in which
the Company may engage in the Business; or restricting the markets, customers or
industries that the Company may address in operating the Business; or
restricting the prices which the Company may charge for its products or
services), or includes any grants by the Company of exclusive rights or
licenses, in each case other than Restrictions which do not and will not
materially affect the conduct of the Business.

27

 

2.26         Insurance. Section 2.26 of the Company Disclosure Schedule contains
a complete and accurate list and description of all insurance policies which are
owned by the Company or which name the Company as an insured and which pertain
to the assets, operations, or employees of the Business (collectively,
“Insurance Policies”). As of the date of the execution of this Agreement, all
such Insurance Policies are, to the Company’s Knowledge, in full force and
effect, the Company is in material compliance with the terms of such policies
and the Company has not received written notice of termination or non-renewal of
such policies or written notice that consummation of the Transaction will result
in termination thereof.

2.27         Bank Accounts. Section 2.27 of the Company Disclosure Schedule sets
forth (i) the name of each Person with whom the Company maintains an account or
safety deposit box, (ii) the address where each such account or safety deposit
box is maintained, and (iii) the names of all Persons authorized to draw thereon
or to have access thereto.

2.28         Powers of Attorney. No power of attorney has been granted by the
Company that is currently in effect. The Company has not given any irrevocable
power of attorney (other than such powers of attorney given in the ordinary
course of business with respect to routine matters or as may be necessary or
desirable in connection with the consummation of the Transaction) to any Person
for any purpose whatsoever with respect to the Company.

2.29        Foreign Corrupt Practices. Neither the Company nor, to its
Knowledge, any other Person associated with or acting for or on behalf of the
Company, has directly or indirectly taken any action that would cause the
Company to be in violation of the United States Foreign Corrupt Practices Act of
1977, as amended (“FCPA”). Neither the Company nor, to its Knowledge, any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (i) made any contribution, gift, bribe, rebate, payoff, influence
payment, kick-back, or other similar payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
preferential treatment in securing business, to pay for preferential treatment
for business secured, to obtain special concessions or for special concessions
already obtained, for or in respect of the Company, or in violation of any
applicable Laws, or (ii) established or maintained any fund or asset that has
not been recorded, or made any false or fictitious entries to disguise any such
payment, in the books and records of the Company o. All payments to agents,
consultants and others made by the Company have been in payment of bona fide
fees and commissions.

2.30        Disclosure. There is no substantive fact known by Holdings, Company
or any Stockholder (other than general economic or industry conditions) that
would reasonably be expected to have a material adverse effect on the business,
prospects, financial conditions, or results of operations of the Company that
has not been set forth in this Agreement or the Company Disclosure Schedules.

28

 

2.31        No Other Representations or Warranties. Except for the
representations and warranties contained in Articles II and Article III
(including the related portions of the Disclosure Schedules), none of the
Stockholders, the Company, Holdings, their respective Representatives or any
other Person has made or makes any other express or implied representation or
warranty, either written or oral, on behalf of the Stockholders, the Company or
Holdings.

Article III
Representations and Warranties of Stockholders

 

Each Stockholder, severally and not jointly, hereby represents and warrants to
Buyer, and acknowledges that Buyer is relying upon such representations and
warranties in connection with its purchase of the Interests, that the statements
contained in this Article III are true and correct as of the date hereof, except
as set forth in the Stockholders’ Disclosure Schedule delivered to Buyer
concurrently with the execution and delivery of this Agreement (the
“Stockholders’ Disclosure Schedule”), which disclosure shall provide an
exception to, or otherwise qualify, the representations or warranties of the
Stockholders contained in the section of this Agreement corresponding by number
to such disclosure and to any other representation or warranty in this Agreement
to which the applicability of such disclosure is reasonably apparent on its face
or if the items are expressly cross-referenced.

3.1          Power and Authority; Execution and Validity. Each Stockholder has
full power, authority and the requisite capacity necessary to enter into,
deliver and perform its obligations pursuant to this Agreement and to consummate
the Transaction and to execute and deliver the other Transaction Documents,
perform its obligations hereunder and thereunder and consummate the Transaction
and transactions contemplated by the Transaction Documents. Each Stockholder’s
execution, delivery and performance of this Agreement and the Transaction
Documents have been duly authorized and no other actions or proceedings on the
part of each Stockholder are necessary to authorize this Agreement and the
Transaction. This Agreement has been duly and validly executed and delivered by
each Stockholder and constitutes the valid and binding obligation of each
Stockholder, enforceable against each Stockholder in accordance with its terms.
Upon the execution and delivery thereof by each Stockholder, each of the
Transaction Documents (to the extent such documents purport to create binding
obligations on the part of such Stockholder) will constitute a valid and binding
obligation of each Stockholder, enforceable against such Stockholder in
accordance with its terms.

3.2          Absence of Conflicts. The execution and delivery by such
Stockholder of this Agreement and the Transaction Documents, the performance by
such Stockholder of his, her, or its obligations hereunder and thereunder and
the consummation by such Stockholder of the Transaction and transactions
contemplated by the Transaction Documents will not (a) result in any violation
or breach of any agreement or, to the Stockholder’s Knowledge, any Law,
(b) result in any violation or breach of, or constitute a default under, or
constitute an event creating rights of acceleration, prepayment, termination,
amendment, suspension, revocation or cancellation or a loss of rights under, any
term or provision of any note, bond, mortgage, indenture, lease, franchise,
Permit, License, Contract or other instrument or document to which such
Stockholder is a party or by which such Stockholder’s properties or assets are
bound, (c) assuming that the filings and consents referred to in Section 2.6 and
Section 5.7 of this Agreement are made or obtained, result in any violation of
any requirements of Law or any court order applicable to such Stockholder or its
respective properties or assets or (d) result in the creation of, or impose on
such Stockholder any obligation to create, any Encumbrance upon his or her
interest (direct or indirect) in the Company.

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3.3          Governmental and Third Party Approvals. Except for the notices and
consents listed on Section 3.3 of the Stockholders’ Disclosure Schedule and
those regulatory approvals of Buyer and Company referenced in Section 5.7 of
this Agreement, to the Stockholder’s Knowledge, there is no requirement
applicable to such Stockholder to obtain any consent of, or to make or effect
any declaration, filing or registration with, any Governmental Authority or
other Person for the valid execution and delivery by such Stockholder of this
Agreement and the Transaction Documents, the due performance by such Stockholder
of its respective obligations hereunder and thereunder or the lawful
consummation by such Stockholder of the Transaction and transactions
contemplated by the Transaction Documents.

3.4          Litigation. There are no Actions pending or, to the Stockholder’s
Knowledge, threatened against such Stockholder or to which such Stockholder is a
party (a) that relate to this Agreement or any action taken or to be taken by
such Stockholder in connection therewith, or which seek to enjoin or obtain
monetary Damages in respect of, this Agreement or (b) that would reasonably be
expected to adversely affect the ability of such Stockholder to perform its
obligations under and consummate the Transaction.

3.5          Fees. Such Stockholder has not paid or become obligated to pay any
fee or commission to any broker, finder or other intermediary in connection with
the Transaction or the transactions contemplated by the Transaction Documents.

Article IV
Representations and Warranties of Buyer

 

Buyer represents and warrants to Stockholders and Holdings, and acknowledges
that Stockholders and Holdings are relying upon such representations and
warranties in connection with the Transaction and the consummation thereof, and
that the statements contained in this Article IV are true and correct as of the
date hereof.

4.1          Corporate Organization, Standing and Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Buyer has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect.

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4.2          Authority.

(a)          Buyer has all requisite corporate power and authority to enter into
this Agreement and the other Transaction Documents and to consummate the
Transaction and the transactions contemplated by the Transaction Documents. The
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the Transaction and the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate
action on the part of Buyer. This Agreement and the other Transaction Documents
have been duly executed and delivered by Buyer and (assuming due authorization,
execution and delivery by each other party thereto) constitute valid and binding
obligations of Buyer, enforceable against Buyer, in accordance with their terms
subject to (i) Laws of general application relating to bankruptcy, insolvency,
reorganization, moratorium and the relief of debtors or similar Laws affecting
creditors’ rights generally, and (ii) the availability of specific performance,
injunctive relief and other equitable remedies (regardless of whether considered
in a proceeding at Law or in equity).

(b)          The execution and delivery of this Agreement and the other
Transaction Documents by Buyer do not, and the consummation of the Transaction
and the transactions contemplated by the Transaction Documents will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under any
provision of the Buyer Charter Documents.

(c)           No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or any other Person is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement and the other Transaction Documents or the
consummation of the Transaction or the transactions contemplated by the
Transaction Documents, except for (i) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities Laws and the HSR Act, and (ii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect and would not prevent, or
materially alter or delay the Transaction.

4.3           Litigation. There is no Action pending before any Governmental
Authority or, to the Knowledge of Buyer, threatened (including allegations that
could form the basis for future Action), against Buyer or any of its properties,
officers, directors or stockholders (in their capacities as such), or any
judgment, decree or order against Buyer, in each case that could reasonably be
expected to have a Material Adverse Effect or materially alter or delay the
Transaction.

4.4           Sufficiency of Funds; Solvency. Buyer has sufficient immediately
available funds to pay the Purchase Price pursuant to this Agreement.
Immediately after giving effect to the Transaction, Buyer shall be solvent and
shall: (a) be able to pay its debts as they become due; (b) own property that
has a fair saleable value greater than the amounts required to pay its debts
(including a reasonable estimate of the amount of all contingent liabilities);
and (c) have adequate capital to carry on its business. In connection with the
Transaction, Buyer has not incurred, nor plans to incur, debts beyond its
ability to pay as they become absolute and mature.

4.5          Brokers or Finders. Buyer has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by Buyer, any liability
for brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with this Agreement or the Transaction.

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4.6           Investment Intention. Buyer is acquiring the Interests for its own
account, not as a nominee or agent, for investment purposes only and not with a
view to the resale or distribution (as such term is used in Section 2(11) of the
Securities Act) of any part thereof. Buyer has no present intention of selling,
granting any participation in or otherwise distributing any of the Interests.
Buyer does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation in the Interests to such person
or to any third party. Buyer understands that the Interests have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.

4.7           Independent Investigation. Buyer has conducted its own independent
investigation, review and analysis of the Company and the Business, and
acknowledges that it has been provided adequate access to the personnel,
properties, assets, premises, books and records, and other documents and data of
the Company for such purpose. Buyer acknowledges and agrees that in making its
decision to enter into this Agreement and consummate the Transaction, Buyer has
relied solely upon its own investigation and the express representations and
warranties of the Company, Holdings and the Stockholders set forth in Articles
II and III of this Agreement (including the information set forth in the Company
and Stockholder Disclosure Schedules identified therein).

Article V
Covenants

5.1           Normal Course. From the date hereof until the Closing Date, the
Company shall, except as otherwise expressly contemplated by this Agreement
(including the Disclosure Schedules herein) or as consented to by Buyer in
writing, use its commercially reasonable efforts to (a)(i) maintain, in all
material respects, its business organization and the Business, (ii) preserve its
goodwill and the confidentiality of its business know-how, and (iii)  preserve
its present material business relationships; and (b) conduct the Business in the
ordinary course of business; provided, however, that the foregoing
notwithstanding, the Company may use all available cash to repay any
Indebtedness or make cash distributions at or prior to the Closing so long as
such distributions do not impair the ability of the Company to fulfill its
obligations in the ordinary course of business.

5.2          Conduct of Business. From the date hereof until the Closing Date,
the Company shall not, except as directly or indirectly contemplated by this
Agreement or the Company Disclosure Schedules, do, or propose to do, any of the
following without the prior written consent of Buyer:

(a)           Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any Capital Stock of the
Company (except to the extent such distributions do not impair the ability of
the Company to fulfill its obligations in the ordinary course of business
pursuant to Section 5.1), or split, combine or reclassify any Capital Stock of
the Company or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for Capital Stock of the Company, or
purchase or otherwise acquire, directly or indirectly, any of the Company’s
Capital Stock;

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(b)          Issue, deliver, sell or authorize, propose or commit to the
issuance, delivery or sale of, any of the Company’s Capital Stock, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;

(c)          Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership or
other business organization or division;

(d)          Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the ordinary course of business;

(e)          (i) Increase or agree to increase the compensation (including
salary, bonus, benefits or other remuneration) payable or to become payable to
any director, officer, consultant, agent, or employee, other than (A) as
required by Law, (B) pay raises in the ordinary course of business or (C) to
satisfy a contractual commitment existing prior to the date of this Agreement;
(ii) grant any material severance or termination pay to, or enter into or amend
any employment or severance agreements with, any employees or officers, other
than the payment of severance or termination pay in accordance with any existing
contractual commitments or the terms of any Company Plan, which commitment or
Company Plan is affirmatively disclosed in this Agreement; (iii) enter into any
collective bargaining agreement; (iv) establish, adopt, enter into or amend
(except as may be required by Law) or increase any benefits under any Company
Plan; or (v) forgive any indebtedness of any employee to the Company of more
than One Thousand Dollars ($1,000);

(f)           Other than to accomplish the Reorganization, amend any of the
Company Charter Documents;

(g)          Make any loans to any Person or guarantee any debt securities of
others (other than as a result of the endorsement of checks for collection, for
advances for employee reimbursable expenses or for employee payroll advances, in
each case in the ordinary course of business consistent with past practice);

(h)          Initiate any litigation or arbitration proceeding other than in the
ordinary course of business consistent with past practice or to enforce the
terms of this Agreement;

(i)            Enter into any Contract that would be a Material Contract if it
had been in effect on the date of this Agreement, other than a Material Contract
on normal and customary terms consistent with past practice;

(j)            Modify, amend or terminate any Material Contract (other than any
modification or amendment in the ordinary course of business), or waive, release
or assign any rights or claims, or commit any act or fail to take any action
that would result in a material breach of such Material Contract;

(k)           Forgive or compromise any Accounts Receivable outside the ordinary
course of business;

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(l)            Make or rescind any Tax election other than in connection with
the Reorganization, or settle or compromise any Tax liability or amend any Tax
Return;

(m)          Make or commit to make any capital expenditure in excess of Twenty
Five Thousand Dollars ($25,000) individually or One Hundred Thousand Dollars
($100,000) in the aggregate;

(n)           Enter into any new license for any Intellectual Property to or
from any third party other than in the ordinary course of business;

(o)          Fail to timely pay accounts payable and other obligations other
than (i) in the ordinary course of business or (ii) matters contested in good
faith;

(p)           Accelerate the collection of any Accounts Receivable;

(q)          Mortgage or pledge any of its material property or assets or
subject any such assets to any Encumbrance (other than Permitted Encumbrances);

(r)            Create, incur, assume or otherwise become liable for any
Indebtedness in an aggregate amount in excess of Twenty Five Thousand Dollars
($25,000), or guarantee or endorse any obligation or the net worth of any
Person;

(s)           Create, incur, assume or otherwise become liable for any
contingent liability as guarantor or otherwise with respect to the obligations
of others;

(t)            Pay, discharge or satisfy any Indebtedness, obligation or
liability, absolute, accrued, contingent or otherwise, that is not yet due, in
an amount in excess of Twenty Five Thousand Dollars ($25,000);

(u)           Adopt a plan of complete or partial liquidation or resolution as
providing for or authorizing such a liquidation or dissolution, merger,
consolidation, restructuring, recapitalization or reorganization, except in
connection with the Reorganization; or

(v)          Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (u) above.

5.3           Employment. Subject to compliance with Buyer’s human resources
criteria, all employees of the Company shall be retained after the Closing Date
on substantially the same terms and conditions on which they are presently
employed for the remainder of calendar year 2017, and shall thereafter be
provided an opportunity for continued employment with the Buyer or the Company.

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5.4           Access to Personnel, Books and Records Following Signing. Subject
to Section 5.11, from the date hereof until the Closing, the Company shall
permit Buyer and its representatives, at Buyer’s sole cost and expense and upon
reasonable written notice, (i) to have reasonable access to, and examine and
make copies of, all books and records of the Company and (ii) to have reasonable
access to Company personnel, in both cases in order for Buyer to have the
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of the Company; provided, however, (a) that Buyer and its
representatives shall schedule such access and visits through a designated
officer of the Company, (b) the Company will not be required to take any action
to the extent such action is not permitted by Law or that would constitute a
waiver of the attorney-client or other privilege and (c) the Company need not
supply Buyer or its representatives with any information which, in the
reasonable judgment of the Company, is under a contractual or legal obligation
not to supply, including, without limitation, the HSR Act, the Competition Act
and other Antitrust Laws, or the provisions of any agreement to which the
Company is a party. The access granted to Buyer under this section shall not
unreasonably interfere with the Company’s normal operation of its business and
shall not survive termination of this Agreement.

5.5           Certain Tax Matters.

(a)           Asset Sale Treatment; Allocation of Purchase Price; Tax
Reimbursement.

(i)          Since the Company will be treated as a disregarded entity for
income tax purposes following the Reorganization, the parties understand and
agree that the acquisition of all the Interests shall be treated, for income tax
purposes, as a sale by Holdings and as the purchase by the Buyer of all the
assets of the Company. Accordingly, the deemed Purchase Price shall be allocated
among the Company’s assets, and the Non-Compete Agreements as required by the
Code and Treasury Regulation 1.1060-1(c)(2) and as set forth on Schedule 6
hereto (the “Allocation Schedule”). Holdings and Stockholders shall pay any
income tax imposed on Holdings or the Company attributable to the deemed asset
sale treatment, including, without limitation, (i) any tax imposed under Code
Section 1374, (ii) any depreciation recapture or other such tax, or (iii) any
state, local or non - U.S. Taxes imposed on Holding’s deemed gain. Provided,
however, the Buyer shall remit to Holdings, on behalf of the Stockholders,
one-half of the incremental income tax cost borne by the Stockholders as a
result of the deemed asset sale (i.e., taxes that are in excess of the taxes
that would have been borne by the Stockholders solely from a stock sale
transaction without deemed asset sale treatment; the “Tax Reimbursement”);
provided, further, that in no event shall the Tax Reimbursement be greater than
Five Hundred Thousand Dollars ($500,000).

(ii)          The parties will revise the Allocation Schedule from time to time
to the extent necessary to reflect any indemnification payment made hereunder or
any other post-Closing payment made pursuant to or in connection with this
Agreement. In the event of any disagreement between the Buyer and Holdings
regarding any proposed revision to the Allocation Schedule, the parties shall in
good faith use commercially reasonable efforts to agree on such revision.

(iii)          Each of the parties agrees to (a) prepare and timely file all
applicable income Tax Returns in a manner consistent with the Allocation
Schedule as finalized and (b) act in accordance with the Allocation Schedule for
purposes of all income Taxes.

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(b)           Tax Periods Ending on or Before the Closing Date. Holdings shall
cause to be prepared, and file, or cause to be filed, on a timely basis and in a
manner consistent with the Company’s past practice (as applicable), all Tax
Returns with respect to the Company for taxable periods ending on or prior to
the Closing Date (collectively, the “Prior Periods” and each, a “Prior Period”)
and required to be filed thereafter (the “Prior Period Tax Returns”). Holdings
shall provide a draft copy of such Prior Period Tax Returns to the Buyer for
review at least thirty (30) Business Days prior to the due date thereof. The
Buyer shall provide comments to Holdings at least ten (10) Business Days prior
to the due date of such returns and Holdings shall consider the changes to such
returns reasonably requested by the Buyer in good faith (unless Holdings is
advised in writing by the accounting firm that has prepared the Tax Returns that
such changes (i) are contrary to applicable Law, or (ii) are inconsistent with
tax positions most recently taken in the Tax Returns of the Company). For the
avoidance of doubt, Buyer shall have no right to review or comment upon any tax
returns of Holdings or the Stockholders.          

(c)           Tax Periods Beginning Before and Ending After the Closing Date.

(i)          Buyer shall prepare, or cause to be prepared, and file, or cause to
be filed, on a timely basis and in a manner consistent with the Company’s past
practice (as applicable), any Tax Returns of the Company for taxable periods
that begin before the Closing Date and end after the Closing Date (collectively,
the “Straddle Periods” and each, a “Straddle Period”). Buyer shall provide a
draft copy of such Straddle Period Returns to Holdings for review at least
thirty (30) Business Days prior to the due date hereof. Holdings shall provide
comments to Buyer at least five (5) Business Days prior to the due date of such
returns and Buyer shall make all changes reasonably requested by Holdings in
good faith (unless Buyer is advised in writing by its independent outside tax
consultant that such changes (i) are contrary to applicable Law, or (ii) are
inconsistent with tax positions most recently taken in the Tax Returns of the
Company (as applicable) and will, or are likely to, have a material adverse
effect on Buyer or any of its Affiliates in any taxable period ending after the
Closing Date). Stockholders shall not be responsible for any Taxes payable with
respect to the portion of any Straddle Period commencing after the Closing Date.

Notwithstanding any other provisions to the contrary in this Agreement, the
parties agree that all Transaction Expenses shall be taken into account as
losses or deductions for the Pre-Closing Straddle Tax Period, on the Prior
Period Tax Returns, or on such earlier Tax Returns for any Pre-Closing Tax
Periods as applicable and to the extent permitted by applicable Law, and each of
Buyer and Holdings agrees to prepare the Tax Returns described in this Section
5.5, or cause the Tax Returns described in this Section 5.5 to be prepared, in a
manner consistent with such intent.

(ii)          For purposes of this Agreement:

(1)          In the case of any gross receipts, sales and use, goods and
services, harmonized sales, provincial sales, income, or similar Taxes that are
payable with respect to a Straddle Period, the portion of such Taxes allocable
to (A) the portion of the Straddle Period ending on the Closing Date (the
“Pre-Closing Straddle Tax Period”) and (B) the portion of the Straddle Period
beginning on the day next succeeding the Closing Date (the “Post-Closing
Straddle Tax Period”) shall be determined on the basis of a deemed closing at
the end of the Closing Date of the books and records of the Company.

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(2)          In the case of any Taxes other than gross receipts, sales and use,
goods and services, harmonized sales, provincial sales, income, or similar Taxes
that are payable with respect to a Straddle Period, the portion of such Taxes
allocable to the Pre-Closing Straddle Tax Period shall be equal to the product
of all such Taxes multiplied by a fraction the numerator of which is the number
of days in the Straddle Period from the commencement of the Straddle Period
through and including the Closing Date and the denominator of which is the
number of days in the entire Straddle Period; provided, however, that
appropriate adjustments shall be made to reflect Taxes that can be identified
and specifically allocated as occurring on or prior to the Closing Date or
occurring after the Closing Date. Notwithstanding the foregoing, Section 5.5(c)
will exclusively govern the allocation of Taxes described therein.

(3)          Buyer shall be responsible for any Taxes with respect to the
Post-Closing Straddle Tax Period.

(d)           Cooperation on Tax Matters.

(i)          Buyer and Holdings shall cooperate fully, as and to the extent
reasonably requested by any Party, in connection with the filing of Tax Returns
pursuant to this Section 5.5 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 reasonably
relevant to any such audit, litigation, or other proceeding and making their
respective employees, outside consultants and advisors available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Buyer and Holdings, on behalf of the Stockholders,
agree (A) to 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 Buyer or Holdings, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any
Governmental Authority, and (B) to give the other reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other so requests, Buyer or Holdings, as the case may be, shall allow the
other to take possession of such books and records.

(ii)         Buyer and Holdings further agree, upon request, to use commercially
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 Transaction).

(e)           Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the Transaction (including any transfer or
similar tax imposed by any Governmental Authority) shall be paid by the Buyer.
The party required by applicable Law to do so will file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the other parties will join in the execution of any such Tax
Returns and other documentation.

37

 

(f)           Pre-Closing Tax Period Treatment. Neither Buyer nor the Company
shall amend, refile or otherwise modify any Tax election or Tax Return or grant
an extension or waiver for the assessment or reassessment of Taxes with respect
to any Pre-Closing Tax Period without the prior written consent of Holdings,
which consent may be provided or withheld in the sole discretion of Holdings.

(g)           Indemnification and Tax Contests. Buyer’s and the Stockholders’
payment and indemnification obligations with respect to the covenants in this
Section 5.5 together with the procedures to be observed in connection with any
Tax contest, shall be governed by Article VIII.

5.6           Regulatory Filings. Each of Buyer and the Company promptly shall
cooperate and use commercially reasonable efforts to duly make all filings and
submissions necessary, proper or advisable under the HSR Act or any other
applicable antitrust or noncompetition Laws or regulations (“Antitrust Laws”),
no later than five (5) Business Days from the date hereof, and to obtain any
required approval of any Governmental Authority with jurisdiction over the
Transaction; provided, however, notwithstanding anything to the contrary herein,
failure by any Party to make the filing within such five (5) Business Day period
shall not constitute a breach of this Agreement. Each of Buyer and the Company
shall furnish to the appropriate Governmental Authority all information required
for any application or other filing to be made pursuant to any applicable Law in
connection with the Transaction. Each of Buyer and the Company shall cooperate
with the other in promptly filing any other necessary applications, reports or
other documents with any Governmental Authority having jurisdiction with respect
to this Agreement and the Transaction, and in seeking necessary consultation
with and prompt favorable action by such Governmental Authority.

(a)           Each of Buyer and the Company shall, as promptly as practicable,
comply with any additional requests for information that arise following the
notifications and related documentation required under the HSR Act filed and
submitted pursuant to this Agreement, including requests for production of
documents and production of witnesses for interviews or depositions by any
Governmental Authorities. The Parties shall keep each other appraised of the
status of any communications with, and any inquiries or requests for additional
information from, any Governmental Authority with respect to the Transaction.
Each of Buyer, on the one hand, and Holdings and the Company, on the other hand,
shall diligently assist and cooperate with the other in preparing and filing all
documents required to be submitted to any Governmental Authorities in connection
with the Transaction and in obtaining any Governmental Authority or third party
consents, waivers, authorizations or approvals which may be required to be
obtained by Buyer, Holdings, the Stockholders or the Company in connection with
the Transaction.

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(b)           Buyer and its Affiliates shall take, or cause to be taken, any and
all actions and do, or cause to be done, any and all things necessary, proper or
advisable to avoid, eliminate and resolve each and every impediment and obtain
all approvals under the Antitrust Laws in connection with the consummation of
the Transaction, as promptly as practicable. Without limiting the foregoing,
such actions include: (i) proposing, negotiating, committing to and/or
effecting, by consent decree, hold separate order, or otherwise, the sale,
divestiture, transfer, license, disposition or hold separate of such assets,
properties, or businesses of Buyer or its Affiliates or of the Business to be
acquired pursuant to this Agreement as are required to be divested to avoid the
entry of any decree, judgment, injunction (permanent or preliminary) or any
other order that would materially delay or prevent the consummation of the
Transaction as promptly as practicable; (ii) terminating, modifying or assigning
existing relationships, contracts or obligations of Buyer or its Affiliates or
those relating to the Business to be acquired pursuant to this Agreement; (iii)
changing or modifying any course of conduct regarding future operations of Buyer
or its Affiliates or the Business to be acquired pursuant to this Agreement, or
(iv) otherwise taking or committing to take any other action that would limit
Buyer or its Affiliates’ freedom of action with respect to, or their ability to
retain, one or more of their respective operations, divisions, businesses,
product lines, customers, assets or rights or interests, or their freedom of
action with respect to the Business to be acquired pursuant to this Agreement;
and (v) taking any and all actions to contest and defend any claim, cause of
action or proceeding instituted or threatened challenging the Transaction as
violating any Antitrust Laws, including any injunction (whether temporary,
preliminary or permanent). Buyer shall, and shall cause its Affiliates to, keep
Holdings and Company fully informed of all matters, discussions and activities
relating to any of the matters described in or contemplated by clauses (i)
through (v) of this Section 5.7(b).

(c)           Without limiting any other obligation under this Agreement, during
the period from the date of this Agreement until the Closing Date, each of
Buyer, on the one hand, and the Company, Holdings and Stockholders on the other
hand, shall not, and shall cause their respective Affiliates not to, take or
agree to take any action that would reasonably be expected to prevent the
parties from obtaining any Governmental Authority or third party consents in
connection with the Transaction, or to prevent or materially delay or impede the
consummation of the Transaction.

5.7           Notices and Consents. Each of the parties shall give any notices
to, make any filings with, and use their best efforts to obtain any
authorizations, consents and approvals of Governmental Authorities and third
parties which are required to be given, made or obtained by such party in
connection with consummation of the Transaction.

5.8           Notification. From the date hereof until the Closing Date, if the
Company becomes aware of any variances from the representations and warranties
contained in Article II that would cause the condition set forth in Section
6.2(a) not to be satisfied, the Company shall disclose to Buyer in writing such
variances in the form of updated Company Disclosure Schedules. Notwithstanding
the foregoing, the delivery of any such updated Company Disclosure Schedules
will not be deemed to have cured any misrepresentation or breach of warranty
that otherwise might have existed hereunder by reason of such variance or
inaccuracy for purposes of Buyer Indemnified Parties’ rights to indemnification
following the Closing pursuant to, and in accordance with, the terms of Article
VIII below.

5.9           Public Announcement. The parties acknowledge and agree that the
Buyer will be required by applicable securities Laws to issue a public
announcement of the Transaction, provided, however, that prior to making such
announcement, Buyer shall deliver a draft of such announcement to Holdings and
shall give Holdings reasonable opportunity to comment thereon and shall use
reasonable efforts to incorporate such comments therein.

39

 

5.10        Contact with Customers and Suppliers. Prior to the Closing, Buyer
and its representatives may contact and communicate with the customers, service
providers and suppliers of the Company in connection with the Transaction after
prior consultation with, and written approval of, Holdings.

5.11        Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the Transaction.

5.12        Continuing Nondisclosure Requirements. Buyer agrees to be bound by
the Non-Disclosure Agreement between the parties dated May 31, 2017 (the “NDA”).
The NDA shall govern all access to documents, records and information of the
Company provided to Buyer before and after execution of this Agreement and shall
expressly survive any termination of this Agreement, provided that, the NDA
shall terminate immediately and be of no further effect after the Closing.

5.13        Operating Guidelines. From and after the Closing Date and until that
date which is the third (3rd) anniversary of the Closing Date, the Company and
the Buyer shall use reasonable efforts to cause the Company to operate in
accordance with the Operating Guidelines attached hereto as Exhibit C (the
“Operating Guidelines”). The intent of this covenant is to memorialize general
guidelines for operating the Company during the time period that Earn-out
Payments to Stockholders are potentially payable.

5.14        Books and Records. For a period of seven years from and after the
Closing Date, (i) Buyer shall use reasonable efforts not to dispose of or
destroy any of the material books and records of the Business relating to
periods prior to the Closing (“Books and Records”) without first offering to
turn over possession thereof to Holdings, at Holdings’ expense, by written
notice to Holdings within a reasonable period of time prior to the proposed date
of such disposition or destruction; (ii) Buyer shall allow Holdings and its
agents reasonable access to and to copy, for any proper purpose, such as a tax
or regulatory filing, all Books and Records, at Holdings’ expense; provided,
however, that Holdings shall use reasonable efforts to ensure that such access
or copying shall be had or done in such a manner so as not to unduly interfere
with the normal conduct of the businesses of Buyer; and (iii) Buyer shall use
reasonable efforts to assist Holdings in locating and obtaining any Books and
Records. Notwithstanding the foregoing, (A) nothing herein shall require Buyer
to disclose any information to Holdings if such disclosure would jeopardize any
attorney-client or other legal privilege available to Buyer or contravene any
applicable Law and (B) to the extent that any Books and Records or other
information are withheld from Holdings pursuant to clause (A) above because
disclosure thereof would jeopardize any attorney-client privilege or other legal
privilege, Buyer shall use its commercially reasonable efforts to make
alternative arrangements, at Holdings’ expense, to provide to Holdings any
factual information contained in such Books and Records or other information in
a manner that would not jeopardize any such privilege.

40

 

Article VI
Conditions to Closing

6.1           Conditions to Obligations of All Parties. The obligations of each
party to consummate the Transaction shall be subject to the fulfillment, at or
prior to the Closing, of each of the following conditions:

(a)           The filings of Buyer and the Company pursuant to the HSR Act or
any other Antitrust Laws shall have been made and the applicable waiting period
and any extensions thereof shall have expired or been terminated.

(b)           The Restructuring shall have occurred, and the S Election, the
QSub Election, and the Certificate of Conversion shall have been filed and/or
obtained.

(c)           The transaction contemplated by the Goodwill Purchase Agreement
shall have completed simultaneously with the Closing hereunder in accordance
with the terms therein.

(d)           Since the date of this Agreement, there shall not have occurred
any Material Adverse Effect.

6.2           Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the Transaction shall be subject to the fulfillment or Buyer’s
waiver, at or prior to the Closing, of each of the following conditions:

(a)           Except for representations and warranties that by their terms
speak only as of a specified date, the representations and warranties made by
the Company and Holdings set forth in Article II, the representations and
warranties made by the Stockholders set forth in Article III, and any
certificate or other writing delivered pursuant hereto shall be true and correct
in all respects (in the case of any representation or warranty qualified by
materiality or Material Adverse Effect) or in all material respects (in the case
of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of that specified date in all
respects).

(b)           Stockholders, Holdings and the Company shall have duly performed
in all material respects the obligations and agreements contained in this
Agreement that are required to be performed by the Stockholders, Holdings or the
Company at or before the Closing.

(c)           The Transaction Documents (other than this Agreement) shall have
been executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Buyer.

(d)           The Company shall have delivered to Buyer a good standing
certificate (or its equivalent) for the Company from the secretary of state or
similar Governmental Authority of the jurisdiction under the Laws in which the
Company is organized.

41

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

(e)           Holdings shall have delivered, or caused to be delivered, to Buyer
an instrument or instruments reflecting a transfer of the Interests free and
clear of Encumbrances.

(f)            Each of [****],[****], and [****] shall have entered into
employment agreements with Buyer in the form attached hereto as Schedule 6.

(g)           The Goodwill Purchase Agreement shall have been executed by
[****].

(h)           The Stockholders, or one or more entities affiliated with the
Stockholders, shall have entered into new leases for each of the Company’s
facilities identified in the Company Disclosure Schedules in the form attached
hereto as, and for the rental amounts set forth on, Schedule 7;

(i)            The Company and Northwest Heating and Cooling, LLC shall have
entered into a limited license agreement for the Northwest brand and logo in the
form attached hereto as Schedule 8;

(j)            The Company shall have been released from any and all guarantees
of any Stockholders, Affiliates, or other third party loan obligations
(including, guarantees executed by the Company in favor of Wells Fargo and
Affinity Bank); and

(k)           The Buyer shall have been added as a named insured to the
Company’s insurance policies listed in Section 2.26 of the Company’s Disclosure
Schedule.

(l)            The Company, Holdings and the Stockholders shall have delivered
to Buyer such other documents or instruments as Buyer reasonably requests and
are reasonably necessary to consummate the Transaction.

6.3           Conditions to Obligations of Holdings, the Stockholders, and the
Company. The obligations of Holdings, the Stockholders, and the Company to
consummate the Transaction shall be subject to the fulfillment or waiver, at or
prior to the Closing, of each of the following conditions:

(a)           Except for representations and warranties that by their terms
speak only as of a specified date, the representations and warranties of Buyer
contained in Article IV of this Agreement and any certificate or other writing
delivered pursuant hereto shall be true and correct in all respects (in the case
of any representation or warranty qualified by materiality or Material Adverse
Effect) or in all material respects (in the case of any representation or
warranty not qualified by materiality or Material Adverse Effect) on and as of
the date hereof and on and as of the Closing Date with the same effect as though
made at and as of such date (except those representations and warranties that
address matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects).

42

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

(b)           Buyer shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or
complied with by it prior to or on the Closing Date.

(c)           The Transaction Documents (other than this Agreement) shall have
been executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Stockholders.

(d)           Buyer shall have delivered the Aggregate Closing Amount to
Holdings in accordance with Section 1.5.

(e)           Buyer shall have entered into employment agreements with [****],
[****], and [****] in the form attached hereto as Schedule 6.

(f)            The Goodwill Purchase Agreement shall have been executed by the
Buyer.

(g)           Buyer shall have entered into new leases for each of the Company’s
facilities identified in the Company Disclosure Schedules with the Stockholders,
or one or more entities affiliated with the Stockholders, in the form attached
hereto as Schedule 8; and

(h)           Buyer shall have delivered to the Stockholders and/or the Company
such other documents or instruments as Stockholders and/or the Company
reasonably request and are reasonably necessary to consummate the Transaction.

6.4           Failure of Conditions. Neither the Stockholders, Company or Buyer
may rely on the failure of any condition set forth in this Article VI to be
satisfied if such failure was caused by such Party’s failure to act in good
faith or to use commercially reasonable efforts to cause the Closing to occur.

 

Article VII
Closing

7.1           Closing. Subject to the terms and conditions of this Agreement,
the purchase and sale of the Interests contemplated hereby shall take place at a
closing (the “Closing”) to be held at 10:00 a.m., Eastern Standard time, on
August 1, 2017 or thereafter as promptly as practicable (and in any event,
within three (3) Business Days) after satisfaction or waiver of the conditions
to Closing set forth in Article VI have been satisfied or waived (other than
conditions which, by their nature, are to be satisfied on the Closing Date), at
the offices of Barnes & Thornburg, LLP, 2475 Piedmont Road, Suite 1700, Atlanta,
Georgia, or at such other time or on such other date or at such other place as
Stockholders and Buyer may mutually agree upon in writing (the day on which the
Closing takes place being the “Closing Date”; 12:01am on the Closing Date being
the “Effective Time”).

43

 

7.2           Company Closing Deliveries. At the Closing, the Company shall
deliver, or cause to be delivered, to Buyer the following, any of which, if not
fulfilled may be waived by Buyer:

(a)           a certificate, in form and substance reasonably satisfactory to
Buyer, executed by the Chief Executive Officer of the Company, certifying that
the conditions set forth in Sections 6.1(b), 6.1(d), and 6.2(a)-(b) have been
satisfied;

(b)           evidence reasonably satisfactory to Buyer of the repayment in full
of all Indebtedness (including all Indebtedness of Affiliates) and the
termination and release in full of all Encumbrances relating to such
Indebtedness;

(c)           evidence reasonably acceptable to Buyer that, effective as of the
Effective Time, the Company has terminated any arrangements, commitments,
contracts, agreements, equity plans or other binding obligations by which the
Company may be bound to issue additional shares of stock or other equity
interests, if any, and whether now or hereafter in effect;

(d)           written resignations of all officers and directors of the Company;

(e)           each Stockholder’s executed counterparts to the non-competition
agreement, in the form of Exhibit D (the “Non-Competition Agreements”);

(f)            a certificate of the Secretary of the Company certifying that
attached thereto are true and complete copies of all resolutions adopted by the
board of directors and stockholders of the Company authorizing the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the consummation of the Transaction and the transactions contemplated by the
Transaction Documents, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the Transaction
and the transactions contemplated by the Transaction Documents; and

(g)           possession of the books and records, intellectual property and
related documentation and records of the Company.

7.3           Buyer Closing Deliveries. At the Closing, Buyer shall deliver, or
cause to be delivered, the following:

(a)           payment (or evidence of payment, as applicable) of the Closing
Consideration pursuant to Section 1.3 and Section 1.5;

(b)           a certificate, in form and substance reasonably satisfactory to
the Company, executed by an authorized officer of Buyer, certifying that the
conditions set forth in Section 6.3(a)-(b) have been satisfied;

44

 

(c)           a certificate of the Secretary of Buyer certifying that attached
thereto are true and complete copies of all resolutions adopted by the executive
committee of the board of directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the other Transaction Documents and the
consummation of the Transaction and the transactions contemplated by the
Transaction Documents, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the Transaction
and the transactions contemplated by the Transaction Documents; and

(d)           Buyer’s executed counterpart to the Transaction Documents.

Article VIII
Indemnification

8.1           Indemnification.

(a)           (i) From and after the Closing, and subject to the provisions of
Section 8.2 and Section 8.3, Holdings and the Stockholders (the “Stockholder
Indemnifying Parties”) shall jointly and severally, indemnify and hold harmless
Buyer and its Affiliates, and their stockholders, directors, officers, employees
and agents (the “Buyer Indemnified Parties”) against, and reimburse them for,
any Damages (including reasonable out-of-pocket legal fees and expenses, and the
reasonable out-of-pocket costs of investigation incurred in defending against or
settling such liability, damage, loss, cost or expense or claim therefor and,
subject to Section 8.5, any amounts paid in settlement thereof) imposed on or
reasonably incurred by the Buyer Indemnified Parties as a result of (A) a breach
by Holdings or the Company of any of the representations and warranties set
forth in Article II of this Agreement; (B) breach of any covenant of Holdings,
the Stockholders (collectively) or the Company under this Agreement; (C) all
Taxes for any Prior Period or for the Pre-Closing Straddle Tax Period, except to
the extent any such Taxes were deducted in the calculation of the Purchase
Price; (D) Fraud on the part of Stockholders, Holdings or the Company; (E) any
claim by any former or other equity interest owner of the Company for any
transaction prior to the Closing Date involving Company Capital Stock or other
equity interests of the Company, (F) costs and expenses of the Company incurred
but not paid in connection with the Transaction prior to Closing and not
included in the Estimated Closing Balance Sheet or the Closing Balance Sheet;
(G) any items listed on Schedule 9 hereto (“Specified Indemnity Obligations”);
and (H) any breach by Holdings of its obligations to the Stockholders pursuant
to this Agreement, or any claim by any Stockholder arising out of the
performance (or lack of performance) of the duties and responsibilities of
Holdings under this Agreement.

(ii)         Subject to the provisions of Section 8.2 and Section 8.3, each
Stockholder severally, but not jointly, will indemnify and hold harmless Buyer
Indemnified Parties, and will reimburse Buyer Indemnified Parties, for all
Damages (including reasonable out-of-pocket legal fees and expenses, and the
reasonable out-of-pocket costs of investigation incurred in defending against or
settling such liability, damage, loss, cost or expense or claim therefor and,
subject to Section 8.5, any amounts paid in settlement thereof) imposed on or
reasonably incurred by the Buyer Indemnified Parties as a result of: (A) a
breach by such Stockholder of his, her or its representations and warranties set
forth in Article III of this Agreement; or (B) a breach of any covenant of such
Stockholder (individually) under this Agreement.

45

 

(b)           From and after the Closing, and subject to the provisions of
Section 8.2 and Section 8.3, the Buyer (the “Buyer Indemnifying Party”) shall
indemnify and hold harmless Stockholders and their Affiliates, and their
stockholders, directors, officers, employees and agents (the “Stockholder
Indemnified Parties”) against, and reimburse them for, any Damages (including
reasonable out-of-pocket legal fees and expenses, and the reasonable
out-of-pocket costs of investigation incurred in defending against or settling
such liability, damage, loss, cost or expense or claim therefor and, subject to
Section 8.5, any amounts paid in settlement thereof) imposed on or reasonably
incurred by the Stockholder Indemnified Parties as a result of (A) a breach of
any representations or warranties on the part of Buyer under this Agreement,
(B) a breach of any covenant of Buyer under this Agreement, (C) any Third Party
Claim or Damages resulting from the operation of the Business on or after the
Closing Date by Buyer or (D) Fraud on the part of Buyer. Provided, however, that
no Stockholder Indemnified Party shall be entitled to the indemnity provided in
Section 8.1(b)(C) above if such Third Party Claim or Damage is attributable, in
whole or in part, to a breach of a representation, warranty, or covenant or
condition of this Agreement by Holdings, the Company, or a Stockholder.

(c)           Any payments made to any party pursuant to this Article VIII shall
constitute an adjustment of the Purchase Price for Tax purposes and shall be
treated as such by Buyer and the Stockholders and their respective Affiliates on
their Tax returns unless otherwise required by a Governmental Authority.

(d)           A party making a claim for indemnification under this Article VIII
shall be, for the purposes of this Agreement, referred to as an “Indemnified
Party” and a party against whom such claims are asserted under this Article VIII
shall be, for purposes of this Agreement, referred to as an “Indemnifying
Party.”

8.2           Survival of Representations, Warranties and Covenants. The
Indemnifying Parties’ liability for Damages resulting from the breach of any
covenant, to the extent to be performed pre-Closing under this Agreement, or
breach of any representations or warranties under this Agreement, shall
terminate eighteen (18) months following the Closing Date and, thereafter, shall
cease to be of any force or effect, with the exception of the foregoing:

(a)           claims for indemnification based on breaches of representations
and warranties in connection with Section 2.15 (Taxes), Section 2.16 (Employee
Plans); Section 2.20 (Environmental), and any Specified Indemnity Obligation
shall terminate and shall cease to be of any force or effect sixty (60) days
after the applicable statute of limitations for claims related to the particular
matter has expired (the “Statute of Limitation Claims”); and

(b)           claims for indemnification based on the following: breaches of
representations and warranties in connection with Section 2.1 (Corporate
Organization, Standing and Power), Section 2.2 (Capitalization), Section 2.3
(Authority), Section 2.4 (Ownership and Title to Interests); Section 2.24
(Brokers or Finders), Section 3.1 (Power and Authority; Execution and Validity);
Section 4.1 (Corporate Organization, Standing and Power); Section 4.2
(Authority); and Fraud shall terminate on the ten (10)-year anniversary of the
Closing (collectively, the “Ten-Year Claims”).

46

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

The Statute of Limitation Claims and Ten-Year Claims are collectively the
“Surviving Claims.” Unless otherwise specified herein, to the extent that any
covenants in this Agreement describe performance by the parties hereto from and
after the Closing, such covenants shall survive the Closing until such covenants
are fully performed by the applicable party, waived by the beneficiaries thereof
or terminate as provided for herein.

8.3           Limitations on Indemnification Obligations. The rights of an
Indemnified Party to indemnification pursuant to the provisions of Section 8.1
are subject to the following limitations:

(a)           Stockholder Indemnifying Parties shall have no liability under
Section 8.1(a)(i)(A) for Damages resulting from (i) any individual claim unless
the Damages from such individual claim exceed [****] dollars ($[****]) (the
“Threshold”), and (ii) unless the cumulative amount of Damages for which the
Stockholder Indemnifying Parties would, but for this provision, be liable to the
Buyer Indemnified Party exceeds [****] Dollars ($[****]) (the “Basket”), in
which case, such Buyer Indemnified Party shall be entitled to indemnification
only for Damages in excess of the Basket. For the avoidance of doubt,
Stockholder Indemnifying Parties shall not have any liability under Section
8.1(a)(i)(A) unless and until the amount of an individual claim for Damages
equals or exceeds the Threshold. Once a claim exceeds the Threshold, then, to
the extent that cumulative Damages exceed the Basket, the Buyer Indemnified
Parties would be entitled to recover the full amount of Damages in excess of the
Basket.

(b)           The Stockholder Indemnifying Parties shall not in the aggregate be
liable for any Damages in excess of [****] Dollars ($[****]) (the “Cap”);
provided, however, with respect to Damages arising out of the Surviving Claims,
the Stockholder Indemnifying Parties shall not in the aggregate be liable for
any Damages in excess of the actual Purchase Price paid to Holdings under this
Agreement.

(c)           The Stockholder Indemnifying Parties shall not be liable for any
Damages to the extent that such Damages have been reserved for on the Closing
Balance Sheet and taken into account in calculating the Closing Net Asset Value
amount or have been actually recovered by the Buyer Indemnified Party from
another Person including, without limitation, as a result of the Buyer
Indemnified Party receiving compensation for such Damages pursuant to any policy
of insurance maintained by the Buyer Indemnified Party, the Company or a tail
policy purchased by the Stockholder Indemnifying Parties. The Buyer Indemnified
Party shall use commercially reasonable efforts to pursue insurance coverage for
Damages so long as such action does not result in a material premium increase
for its insurance or negatively change the insurability of Buyer’s activities
(whether in terms of coverable risks or otherwise).

47

 

(d)           Each Indemnified Party hereunder shall take, and cause its
Affiliates to take, commercially reasonable steps to mitigate and limit any
Damages upon becoming aware of any event or circumstance that would be
reasonably expected to, or does, give rise thereto.

(e)           No Indemnified Party shall be entitled to recover any amount due
hereunder more than once in respect of the same Damages, including by reason of
the state of facts giving rise to such Damages constituting a breach of more
than one representation, warranty or covenant.

(f)           No Indemnified Party shall be entitled to recover any special,
punitive, exemplary, incidental or indirect damages, damages for lost value,
loss of business or lost profits, costs, expenses, punitive, exemplary,
incidental or indirect damages, damages for lost value, loss of business or lost
profits.

(g)           No Stockholder Indemnifying Party shall be liable to the extent
that any Damages sustained or incurred by a Buyer Indemnified Party were accrued
and reflected on the statement setting forth the Closing Net Asset Value
Statement and/or the Closing Balance Sheet.

(h)           No Indemnifying Party shall be liable under this Article VIII for
any Damages resulting from or relating to any breach of any representation or
warranty in this Agreement if the Indemnified Party had Knowledge of such breach
prior to the date hereof.

(i)            Stockholder Indemnifying Parties and Buyer Indemnifying Party
acknowledge and agree they have not relied upon the accuracy or completeness of
any express or implied representation, warranty, statement or information of any
nature made or provided by or on behalf of the other party, except for the
representations and warranties expressly set forth in this Agreement.

(j)            No claim for indemnification may be asserted against any
Indemnifying Party for breach of any representation, warranty, covenant or
agreement contained herein, unless the written notice required by Section 8.4 is
received by such Indemnifying Party on or prior to the date on which the
survival period with respect to such representation, warranty, covenant or
agreement which is alleged to have been breached, terminates.

8.4           Notices; Payment of Damages.

(a)           In the event that any Indemnified Party has determined that it has
incurred or sustained Damages or that it reasonably anticipates that it will
incur or sustain Damages, the Indemnified Party shall, within ten (10) Business
Days of making any such determination, deliver to Holdings or the Buyer, as the
case may be, a certificate signed by the Indemnified Party (a “Damages
Certificate”) (i) stating that the Indemnified Party has incurred or sustained
Damages or reasonably anticipates that it could incur or sustain Damages and
(ii) specifying in reasonable detail the individual items of Damages included
and the basis for such anticipated liability.

48

 

(b)           The Indemnifying Party shall have thirty (30) calendar days
following his, her or its receipt of a Damages Certificate to object to any
claim or claims made in a Damages Certificate. In the event that the
Indemnifying Party is the Stockholder Indemnifying Party and Holdings has not
objected within such thirty (30) calendar day period to a Damages Certificate
presented by Buyer, then the Buyer shall retain a portion of the Holdback that
is equal to the amount set forth in such Damages Certificate and the Holdback
shall be reduced by such amount. In the event that the Indemnifying Party is the
Buyer Indemnifying Party and Buyer has not objected within such thirty (30)
calendar day period to a Damages Certificate presented by Holdings, then Buyer
shall remit to Holdings the amount set forth in such Damages Certificate via
wire transfer of immediately available funds. In the event that the Indemnifying
Party so objects within such thirty (30) calendar day period, such objection
must be in the form of a certificate signed by the Indemnifying Party and
delivered to the Indemnified Party (an “Objection Certificate”), which
certificate shall set forth the item(s) of Damages in the Damages Certificate to
which the Indemnifying Party is objecting and a reasonable basis for each such
objection.

(c)           For a period of fifteen (15) calendar days after the delivery of
an Objection Certificate, the Indemnified Party and Indemnifying Party shall
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims as are objected to therein. If such an agreement
is reached as to all or any portion of the Damages that are subject to the
Objection Certificate, then a memorandum setting forth such agreement shall be
prepared and signed by both parties. If no such agreement can be reached after
good faith negotiation, either party may file a claim in the Cobb County
Superior Court, Georgia, provided that, the claim(s) raised in the Damages
Certificate must be filed within one (1) year of delivery of the Objection
Certificate or such claim(s) for indemnification are of no further force or
effect.

8.5          Third Party Claims.

(a)           In the event an Indemnified Party becomes aware of a third party
claim that the Indemnified Party reasonably believes may result in a demand for
indemnification hereunder (a “Third Party Claim”), the Indemnified Party shall
notify the Indemnifying Party of such claim as soon as reasonably practicable
and, in any event, within ten (10) calendar days after the Indemnified Party has
received notice or otherwise learns of the assertion of such Third Party Claim,
and the Indemnifying Party shall be entitled (but not required), at the expense
of such Indemnifying Party, to participate in the defense and handling of such
claim.

(b)           The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as the following
conditions are reasonably satisfied: (i) the Indemnifying Party notifies the
Indemnified Party in writing within thirty (30) calendar days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against any
Damages the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or similar equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith and reasonable judgment of the Indemnified
Parties, likely to establish a precedential custom or practice that could have a
material adverse effect on the continuing business interests of the Indemnified
Party, and (v) the Indemnifying Party conducts the defense of the Third Party
Claim in a commercially reasonable manner. The Indemnifying Party will not
consent to the entry of a judgment or enter into any settlement agreement
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld, conditioned or delayed), unless such judgment or
settlement includes a full release of the Indemnified Party in respect of all
indemnifiable Damages resulting therefrom, related thereto or arising therefrom.

49

 

(c)           In the event any of the conditions in Section 8.5(b) above is, in
the reasonable and good faith determination of the Indemnified Party,
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it may deem reasonably appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly for the reasonable costs of defending
against the Third Party Claim (including reasonable legal fees and expenses)
upon the resolution of any such Third Party Claim, and (iii) the Indemnifying
Party will remain responsible for any Damages the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article VIII.

(d)           Control of Tax Claims. Notwithstanding anything to the contrary
contained in this Section 8.5:

(i)          Holdings shall control and resolve any Tax audit or administrative
or court proceeding relating to Taxes (each a “Tax Claim”) solely attributable
to a Prior Period, including selection of counsel and selection of a forum for
such Tax Claim, at Holdings and the Stockholders’ cost and expense; provided,
however, that the Buyer shall have the right, at its own expense, to participate
in, and consult with the Stockholders regarding any such Tax Claim. Holdings may
not settle, compromise or resolve any such Tax Claim without the consent of
Buyer, which consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, in the event that Buyer determines, in its good
faith and reasonable judgment, that the settlement of such Tax Claim is likely
to establish a precedential custom, practice, or precedent adverse to the
continuing business interests of Buyer, then Buyer, and not Holdings, be
entitled to control and resolve and any such Tax Claim, and Holdings shall have
the right, at its own expense, to participate in, and consult with Buyer
regarding any such Tax Claim, and Buyer may not settle, compromise or resolve
any such Tax Claim without the consent of Holdings, which consent shall not be
unreasonably withheld, conditioned or delayed.

(ii)         Holdings shall have the right to participate jointly with the Buyer
in representing the interests of the Company in any Tax Claim relating to a
Straddle Period, if and to the extent that such period includes any Pre-Closing
Taxable Period, at Holdings and/or the Stockholders’ cost and expense. Any
settlement or other disposition of any Tax Claim relating to a Straddle Period
may only be made with the consent of Holdings and Buyer, which consent shall not
be unreasonably withheld, conditioned or delayed, except that Buyer may, without
the written consent of Holdings, enter into such an agreement provided that
Buyer shall have agreed in writing to accept responsibility and liability for
the payment of such Taxes and to forego any indemnification under this Agreement
with respect to such Taxes. Buyer shall have sole control over any Tax Claim
relating to a taxable period that begins after the Closing Date.

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CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

(iii)        The parties will keep each other reasonably informed as to matters
related to any Tax Claim for which indemnification may be sought hereunder
including, without limitation, any settlement negotiations.

(e)           Refunds or overpayments of Tax (including accruals of Taxes for
any Prior Period under Section 5.5(b) or any Pre-Closing Straddle Tax Period
under Section 5.5(c)) relating to all taxable periods ending on or prior to the
Closing Date or any Pre-Closing Straddle Tax Period shall be the property of
Holdings, but only to the extent that such refunds or overpayments are not
attributable to (i) net operating loss or other carrybacks from periods ending
after the Closing Date, or (ii) refunds or overpayments reflected in the
calculation of the Purchase Price or Closing Net Asset Value. Buyer shall pay
any such refunds to Holdings, in immediately available funds within five (5)
Business Days of its receiving such refund from the appropriate Governmental
Authority.

(f)           The Indemnified Party shall reasonably cooperate with the
Indemnifying Party in any defense, compromise or settlement, subject to this
Section 8.5 including, without limitation, by making available all pertinent
books, records and other information and personnel under its control to the
Indemnifying Party at commercially reasonable rates and costs.

(g)           Notwithstanding anything to the contrary contained in this
Section 8.5, Buyer shall have the sole right to control and make all decisions
regarding any Third Party Claim involving a material past, current or future
Company Client or Vendor, or involving a claim relating to termite damage
claims; provided, however, that in the event the Stockholders are responsible
and have agreed to indemnify Buyer for such Third Party Claim, (i) Buyer, the
Company and Stockholders shall cooperate in the defense, compromise or
settlement thereof, (ii) the Stockholders shall have the right (but not the
obligation) to participate in the defense, compromise or settlement thereof at
the Stockholders’ expense, and (iii) any compromise or settlement by Buyer shall
be approved by Holdings (which approval shall not be unreasonably withheld,
conditioned or delayed).

8.6           Except to the extent that the Damages resulted from Fraud (which
may be satisfied in any manner available to a Buyer Indemnified Party), recovery
by Buyer Indemnified Parties for Damages pursuant to this Agreement shall first
reduce the Holdback, and second, to the extent the Holdback is insufficient to
pay any remaining sums due and owing which are not subject to the Cap, then the
Stockholders shall be required to pay all of such additional sums due and owing
to the Buyer Indemnified Parties by wire transfer of immediately available funds
within five (5) Business Days after the date of such notice.

8.7          Termite Warranty Claims. Notwithstanding anything in this Agreement
to the contrary, Termite Warranty Claims shall be subject to the following
terms, conditions, covenants, and conditions:

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CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

(a)           Stockholders and Holdings shall have no liability for Damages
resulting from a Termite Warranty Claim unless the Damages from such claim
exceed [****] dollars ($[****]) (the “Termite Claim Threshold”), but once the
Termite Claim Threshold is exceeded for a claim, the Stockholders and Holdings
shall be responsible for all Damages for such claim.

(b)           For all Termite Warranty Claims, Buyer agrees to resolve such
claims using the Company’s current procedures and processes for evaluating,
escalating, notifying and resolving a Termite Warranty Claim including notifying
the Company’s construction team to evaluate and/or repair any termite damage
promptly.

(c)           Buyer shall give notice to Holdings within ten (10) days of
becoming aware of any Termite Warranty Claim that does, or might reasonably be
expected to, exceed the Termite Claim Threshold. Thereafter, Holdings shall have
five (5) Business Days from its receipt of the initial notice in which to notify
Buyer to (i) resolve and satisfy such claim by instructing Buyer to have the
Company’s construction team repair any termite damage associated with the
Termite Warranty Claim, at normal rates charged for such construction service
and actual cost of the materials used, and/or (ii) make a claim under the
insurance policy to provide coverage for the termite damage. In the event that
Holdings does not provide notification to Buyer as provided in the immediately
preceding sentence, Buyer may address such Termite Warranty Claim as it
determines in its commercially reasonable judgment.

 (d)           Buyer shall be obligated to continue to maintain and continue the
Company’s insurance coverage for Termite Warranty Claims through the expiration
of the current policy term, and shall use its reasonable commercial efforts to
continue such coverage thereafter until the first (1st) anniversary of the
Closing Date.

(e)           In the event that a Termite Warranty Claim shall exceed the
Termite Claim Threshold and Holdings does not agree to fully cover the costs of
the repair or actions to be taken by the Company, or Buyer reasonably believes
it is in the best interest of Company to submit a claim, the Buyer will, submit
a claim against the Company’s insurance coverage, and any recovery shall reduce
the Damages for which Stockholders and Holdings are responsible.

(f)           The obligations of Holdings, the Stockholders and its
representatives for Termite Warranty Claims for a termite customer of the
Company shall terminate and be of no further force or effect upon: (i) the
performance of the Company or Buyer of an annual termite inspection for such
customer after the Closing; and (ii) the receipt of the Company or Buyer of a
renewal payment from such customer after the Closing, but in no event later than
the one (1) year anniversary of the Closing.

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8.8           Exclusive Remedy. Absent Fraud, the indemnification provisions
contained in this Article VIII shall be the sole and exclusive remedy following
the Closing as to all Damages any Indemnified Party may incur arising from or
relating to this Agreement or the Transaction (it being understood that nothing
in this Section 8.6 or elsewhere in this Agreement shall affect the parties’
rights to specific performance or other equitable remedies with respect to the
covenants in this Agreement to be performed at or after the Closing).

Article IX
Termination

9.1           Termination. This Agreement may be terminated at any time prior to
the Closing:

(a)           by mutual written consent of Buyer and Holdings, on behalf of the
Stockholders, as duly authorized by the Boards of Directors of Buyer and the
Company;

(b)           by the Company or Buyer, at any time after September 30, 2017 if
the Closing shall have not occurred by such date (the “Termination Date”)
provided, however, that in each case, the right to terminate this Agreement
under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any material obligation required to be performed as part of the Closing
under this Agreement has been the cause of the failure of the Closing of the
Transaction to occur on or prior to such date;

(c)           by the Company or Buyer, if any court of competent jurisdiction or
any Governmental Authority shall have issued a final order restraining,
enjoining or otherwise prohibiting the consummation of the Transaction and such
order is or shall have become final and non-appealable;

(d)           by Buyer, upon written notice to Holdings, in the event of any
material breach by the Company or a Stockholder of any of their respective
agreements, representations or warranties contained herein or in any Transaction
Document and the failure of the Company or such Stockholder, as applicable, to
cure such breach within twenty (20) days after receipt of written notice from
Buyer requesting such breach to be cured; provided, however, that the Buyer is
not then in material breach of this Agreement so as to cause any conditions set
forth in Article VI not to be satisfied; or

(e)           by the Company and Stockholders, upon written notice to Buyer, in
the event of any material breach by Buyer of any of its agreements,
representations or warranties contained herein or in any Transaction Document
and the failure of Buyer to cure such breach within twenty (20) days after
receipt of written notice from the Company requesting such breach to be cured;
provided, however, that the Company and Stockholders are not then in material
breach of this Agreement so as to cause any conditions set forth in Article VI
not to be satisfied.

9.2           Procedure for Termination. Any party desiring to terminate this
Agreement pursuant to Section 9.1 shall give written notice of such termination
to the other parties to this Agreement.

53

 

9.3           Effect of Termination. In the event of termination of this
Agreement in accordance with the provisions of this Article IX, this Agreement
shall forthwith become void and no party to this Agreement shall have any
liability or further obligation arising under this Agreement to any other party
hereto; provided, however, that nothing in this Section 9.3 shall relieve any
party from liability for its willful breach of this Agreement; provided,
further, that nothing herein shall prejudice any rights, claims or causes of
action that may have accrued hereunder or with respect hereto prior to the date
of such termination arising from any party’s willful breach of this Agreement.
For the avoidance of doubt, the NDA between the parties shall remain in full
force and effect pursuant to Section 5.12 of this Agreement.

Article X
Miscellaneous

10.1         Waiver; Amendment. Prior to the Closing Date, any provision of this
Agreement may be (a) waived by the party benefited by the provision or
(b) amended or modified at any time by an agreement in writing among the parties
hereto executed in the same manner as this Agreement.

10.2        Counterparts. This Agreement may be executed in one or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

10.3        Governing Law; Waiver of Jury Trial.

(a)           This Agreement shall be governed by, and interpreted in accordance
with, the laws of the State of Georgia applicable to contracts made and to be
performed entirely within such State, without giving effect to any choice or
conflict of Law provision or rule.

(b)           Each of the parties hereby irrevocably submits to the jurisdiction
of the Superior Court of Cobb County, Georgia solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the Transaction, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said court or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such court, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and agree that mailing of process
or other papers in connection with any such action or proceeding in the manner
provided in Section 10.5 hereof or in such other manner as may be permitted by
applicable law shall be valid and sufficient service thereof.

54

 

(c)           EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTION. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
IT THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND
(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3(c).

10.4         Expenses. Each party hereto shall be responsible for any costs or
expenses incurred by it in connection with this Agreement and the Transaction,
including fees and expenses related to the negotiation, execution and delivery
of this Agreement and the other agreements contemplated hereby and of its own
counsel, accountants and other professional advisors.

10.5         Notices. Any notice, request, demand or other communication shall
be deemed to have been duly given (as the case may be) upon the earliest of
(a) the date it is actually received by facsimile or email, (b) the Business Day
after the day on which it is delivered by hand, (c) the Business Day after the
day on which it is properly deposited with Federal Express (or a comparable
overnight delivery service) and delivery is specified for the next Business Day,
or (d) the third Business Day after the day on which it is deposited in the
United States certified or registered mail, return receipt requested, postage
prepaid, in each case addressed to such party at its mailing or email address
set forth below or such other address as such party may specify by notice to the
parties hereto.

55

 

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

If to the Company, then to:

Northwest Exterminating Co., LLC
830 Kennesaw Avenue

Marietta, Georgia 30060
Attention: [****]
 

With a copy to:

Gregory, Doyle, Calhoun & Rogers, LLC
49 Atlanta St.

Marietta, Georgia 30060

Facsimile: (770) 426-6155

Attn: H. Scott Gregory, Jr.,

 

If to the Stockholders, then to Holdings at:

 

NW HOLDINGS, LLC

286 Freyer Drive

Marietta, GA 30060

Attention: [****]

 

With a copy to:

 

Gregory, Doyle, Calhoun & Rogers, LLC
49 Atlanta St.

Marietta, Georgia 30060

Facsimile: (770) 426-6155

Attn: H. Scott Gregory, Jr.,

56

 

If to Buyer to:

Rollins, Inc.
2170 Piedmont Road NE
Atlanta, GA 30324
Attention: Eddie Northen, Chief Financial Officer and Treasurer
Facsimile: 404-888-2731

With a copy to:

Barnes & Thornburg LLP
3475 Piedmont Road, Suite 1700
Atlanta, GA 30305
Attention: Stuart Johnson
Facsimile: 404-264-4033

10.6         Entire Understanding; No Third Party Beneficiaries. This Agreement,
including all exhibits, schedules and annexes thereto, and the Transaction
Documents, represent the entire understanding of the parties hereto and thereto
with respect to the subject matter thereof, and this Agreement supersedes any
and all other oral or written agreements heretofore made. Nothing in this
Agreement, expressed or implied, is intended to confer upon any Person, other
than the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

10.7         Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. In all such cases, the parties shall use
their reasonable best efforts to substitute a valid, legal and enforceable
provision which, insofar as practicable, implements the original purposes and
intent of this Agreement.

57

 

10.8         Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or the Disclosure Schedules, such reference shall be to a
Section of, or Exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and will not affect the meaning or interpretation and are not part of this
Agreement. Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.” Whenever the words “as of the date hereof” are used in this
Agreement, they shall be deemed to mean the day and year first above written.
Words in the singular shall be held to include the plural and vice versa, case
sensitive words shall include the meaning of the defined term unless the context
otherwise requires or unless otherwise specified and words of one gender shall
be held to include the other gender as the context requires. The terms “hereof,”
“herein,” and “herewith” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Exhibits to this Agreement). The word “or” shall not be exclusive. All pronouns
and any variations thereof refer to the masculine, feminine or neuter, single or
plural, as the context may require. All references to any period of days shall
be deemed to be to the relevant number of calendar days unless otherwise
specified, and all references to “year” or “years” mean and refer to calendar
year(s).

10.9         Assignment; Successors. No party may assign either this Agreement
or any of its rights, interests or obligations hereunder without the prior
written approval of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

10.10       Construction. The parties hereby expressly waive the application of
any Law, regulation, holding or rule of construction providing that ambiguities
in this Agreement will be construed against the party based on having drafted
such agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual agreement, and this
Agreement shall not be deemed to have been prepared by any single party.

10.11       Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the obligations of the parties under
this Agreement and the Transaction Documents, including Holdings’ obligation to
sell the Interests to Buyer, and Buyer’s obligation to purchase the Interests
from Holdings, shall be enforceable by a decree of specific performance issued
by any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith, without posting any bond or
other undertaking. Such remedies shall, however, be cumulative and not exclusive
and shall be in addition to any other remedies which any party may have under
this Agreement or otherwise. Each of the parties agrees that it will not oppose
the granting of an injunction, specific performance and/or other equitable
relief on the basis that any other party has an adequate remedy at Law or that
any award of specific performance is not an appropriate remedy for any reason at
Law or in equity. Any party seeking an injunction to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
shall not be required to provide any bond or other security in connection with
such order or injunction.

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10.12       Representations of Stockholders. Buyer, on its own behalf and on
behalf of all its current and future Affiliates (including, without limitation,
the Company), agrees that, following the Closing, Gregory, Doyle, Calhoun &
Rogers, LLC may serve as counsel to Stockholders, Holdings and their respective
Affiliates, in connection with any and all matters, whether or not related to
this Agreement and the consummation of the Transaction, including any
litigation, claim, or obligation arising out of or relating to this Agreement or
the Transaction, notwithstanding any representation by Gregory, Doyle, Calhoun &
Rogers, LLC of the Company prior to the Closing Date. Buyer, on its own behalf
and on behalf of all of its current and future Affiliates (including, without
limitation, the Company), hereby (a) waive any claim they have or may have that
Gregory, Doyle, Calhoun & Rogers, LLC has a conflict of interest or is otherwise
prohibited from engaging in such representation and (b) agree that, in the event
a dispute arises after the Closing between Buyer, the Company, Stockholders,
Holdings or any Affiliate of any of them, Gregory, Doyle, Calhoun & Rogers, LLC
may represent Stockholders, Holdings or any of their Affiliates, even though
Gregory, Doyle, Calhoun & Rogers, LLC may have represented the Company in a
matter substantially relating to such dispute. Buyer, on its own behalf and on
behalf of all of its current and future Affiliates (including, without
limitation, the Company) also further agree that, as to all communications among
Gregory, Doyle, Calhoun & Rogers, LLC and the Company, Stockholders and/or
Holdings, or their Affiliates and/or representatives, that relate in any way to
this Agreement, the Transaction or any litigation or disputes among the parties
to this Agreement arising from events or circumstances prior to the Closing
Date, the attorney-client privilege, attorney work-product protection, and
expectation of client confidence arising from Gregory, Doyle, Calhoun & Rogers,
LLC’s representation of the Company prior to the Closing in connection with this
Agreement and the Transaction, and all information and documents covered by such
privilege or protection, shall belong to and be controlled by Stockholders and
may be waived only by Holdings, and not the Company, and shall not pass to or be
claimed or used by Buyer or the Company. Notwithstanding the foregoing, in the
event that a dispute arises among Buyer, the Company and a third party other
than Stockholders after the Closing, the Company may assert (but may not waive)
the attorney-client privilege to prevent disclosure of confidential
communications by any legal counsel that represented the Company prior to
Closing to such third-party; provided, however, that the Company may not waive
such privilege without the prior written consent of Holdings.

Article XI
Definitions

The following terms have the meanings specified or referred to in this Article
XI:

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

“Affiliate” of a Person means any other Person who has any familial relationship
with, or that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person. The
term “control” (including the terms “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

“Aggregate Closing Amount” has the meaning set forth in Section 1.4(a).

“Agreement” has the meaning set forth in the preamble.

“Antitrust Laws” has the meaning set forth in Section 5.6(a).

59

 

“Assets” means the trial balance accounts that make up the asset accounts listed
on Schedule 5. The amounts in each account shall be determined in accordance
with the Company Accounting Policies, consistently applied by the Company in
accordance with past practice.

“Basket” has the meaning set forth in Section 8.3(a).

“Benefit Plan” means an “employee benefit plan,” as defined in Section 3(3) of
ERISA.

“Books and Records” has the meaning set forth in Section 5.15.

“Business” has the meaning set forth in the recitals.

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in the city of New York, New York are authorized or
required by Law to be closed for business.

“Buyer” has the meaning set forth in the preamble.

“Buyer Charter Documents” has the meaning set forth in Section 4.1.

“Buyer Indemnified Parties” has the meaning set forth in Section 8.1(a).

“Buyer Indemnifying Party” has the meaning set forth in Section 8.1(c).

“Capital Stock” of any Person means any and all shares of, conversion and other
rights to purchase, including warrants or options (whether or not currently
exercisable), and participations or other equivalents of or interests in
(however designated), in the equity (including, without limitation, common
stock, preferred stock and limited liability company, partnership and joint
venture interests) of such Person.

“Certificate of Conversion” has the meaning set forth in Section 2.15(c).

“Clients” means the top twenty (20) clients of the Company on a consolidated
basis as determined by the amount of net revenue recognized during the year
ended December 31, 2016.

“Closing” has the meaning set forth in Section 7.1.

“Closing Adjustment” has the meaning set forth in Section 1.8(a)(ii).

“Closing Adjustment Holdback” has the meaning set forth in Section 1.3.

“Closing Balance Sheet” has the meaning set forth in Section 1.8(b)(i).

“Closing Company Cash” shall mean the actual amount of the Company’s Cash at
Closing as reflected on the Closing Balance Sheet.

“Closing Consideration” has the meaning set forth in Section 1.3.

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“Closing Date” has the meaning set forth in Section 7.1.

“Closing Net Asset Value Statement” has the meaning set forth in Section
1.8(b)(i).

“COBRA” means the health care continuation requirements of ERISA Section 601 et
seq. and Code Section 4980.

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

“Company” has the meaning set forth in the preamble.

“Company Accounting Policies” means the Company’s collective system of
accounting policies, procedures, methods, controls and practices applied on a
basis consistent with those used in preparation of the Company’s monthly,
quarterly and year-end financial statements. For the avoidance of doubt, the
Company’s accounting policies are not in accordance with GAAP and, for purposes
of illustration, do not include accruals or GAAP adjustments for revenue
recognition, deferred revenues, reserves for warranty, bad debts, or inventory
obsolescence, vacation pay, sick pay and similar expenses that might be required
in preparation of financial statements in accordance with GAAP.

“Company Cash” shall mean the sum of all cash and cash equivalents of the
Company excluding all restricted cash (including all cash posted to support
letters of credit and deposits with third parties (including landlords)), which
amount shall be (i) reduced by issued but uncleared checks and drafts of the
Company and (ii) increased by uncleared checks and drafts deposited for the
account of the Company.

“Company Charter Documents” has the meaning set forth in Section 2.1(a).

“Company Disclosure Schedule” has the meaning set forth in Article II.

“Company Financial Statements” has the meaning set forth in Section 2.8(a).

“Company Plans” has the meaning set forth in Section 2.16(a).

“Company’s Accountants” means Bennett Thrasher, LLP.

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether
written or oral.

“Damages” means any actual damage, loss, assessment, levy, fine, charge, claim,
direct liability, demand, payment, judgment, settlement, penalty, cost or
expense with the exception of any special, punitive, exemplary, incidental or
indirect damages, damages for lost value, loss of business or lost profits,
costs, expenses, punitive, exemplary, incidental or indirect damages, damages
for lost value, loss of business or lost profits.

“Damages Certificate” has the meaning set forth in Section 8.4(a).

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“Discharge” means any manner of spilling, leaking, dumping, discharging,
releasing or emitting, as any of such terms may further be defined in any
Environmental Law, into any medium including, without limitation, ground water,
surface water, soil or air.

“Disputed Amounts” has the meaning set forth in Section 1.8(c)(iii).

“Dollars or $” means the lawful currency of the United States.

“Effective Time” has the meaning set forth in Section 7.1.

“Encumbrance” means any priority, lien, pledge, hypothecation, claim, charge,
mortgage, security interest, encumbrance, prior assignment, option, right of
first refusal, preemptive right, community property interest or restriction of
any nature whatsoever (including any restriction on the voting of any security,
any restriction on the transfer of any security or other asset, any restriction
on the receipt of any income derived from any asset, any restriction on the use
of any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).

“Environmental Laws” means all federal, state, regional or local statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings, and
changes or ordinances or judicial or administrative interpretations thereof, or
similar laws of foreign jurisdictions where the Company conduct business,
currently in existence any of which govern or relate to pollution, protection of
the environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings and
changes or ordinances, or judicial or administrative interpretations thereof,
including, without limitation: the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq. (collectively,
“CERCLA”); the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. §§ 6901 et seq. (collectively, “RCRA”); the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. § 1801 et seq.; the Federal
Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977,
33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended,
15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. §§ 11001 et seq. (“EPCRA”); the Clean Air Act of 1966, as
amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.
(“OSHA”); and the Federal Insecticide, Fungicide, and Rodenticide Act, as
amended, 7 U.S.C. §§ 136-136y (“FIFRA”).

“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means all employers (whether or not incorporated) that would
be treated together with the Company or any of its Affiliates as a “single
employer” within the meaning of Section 414 of the Code or Section 4001 of
ERISA.

62

 

“Estimated Calculation” has the meaning set forth in Section 1.8(a)(i).

“Estimated Closing Balance Sheet” has the meaning set forth in Section
1.8(a)(i).

“Estimated Closing Net Asset Value” has the meaning set forth in Section
1.8(a)(i).

“Estimated Net Asset Value” has the meaning set forth in Section 1.8(a)(i).

“Excess Net Asset Value Amount” has the meaning set forth in Section 1.8(a)(ii).

“Excluded Assets” has the meaning set forth in Section 2.13(e).

“FCPA” has the meaning set forth in Section 2.29.

“Fraud” means, with respect to a party, its actual and intentional fraud with
respect to the making of any of the representations and warranties made
in Article II, Article III and Article IV (as applicable); provided, however,
that such actual and intentional fraud shall only be deemed to have been
committed by a party if: any of the persons included in the definition of the
Company’s Knowledge (in the case of the Company) had actual knowledge (as
opposed to imputed or constructive knowledge, which shall not be considered)
that the subject representation or warranty (as qualified by the Schedules
hereto) was false when made.  The parties expressly agree that claims of fraud,
gross negligence or misrepresentation with respect to any matter other than the
representations and warranties set forth in this Agreement are excluded from the
remedies available to either party with respect to this Agreement or
the Transaction, to the fullest extent permitted by Law. For the avoidance of
doubt, fraud does not include mere negligence or gross negligence.

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

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

“Handle” means any manner of generating, accumulating, storing, treating,
disposing of, transporting, transferring, labeling, handling, manufacturing or
using, as any of such terms may further be defined in any Environmental Law, of
any Hazardous Substances or Waste.

63

 

“Hazardous Substances” shall be construed broadly to include any toxic or
hazardous substance, material, or waste, and any other contaminant, pollutant or
constituent thereof, whether liquid, solid, semi-solid, sludge and/or gaseous,
including without limitation, chemicals, compounds, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires investigation or
remediation under any Environmental Laws or which are or become regulated,
listed or controlled by, under or pursuant to any Environmental Laws, including,
without limitation, RCRA, CERCLA, the Hazardous Materials Transportation Act,
the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, FIFRA,
EPCRA and OSHA, or any similar state or other statute, or any future amendments
to, or regulations implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law, regulation,
code, rule order, or decree, including under Canada’s Workplace Hazardous
Materials Information System (“WHMIS”).

“HIPAA” means the provisions of the Health Portability and Accountability Act of
1996 relating to privacy and security, as set forth in 45 C.F.R. part 160 and
part 164, Subparts A, C and E.

“Holdback” has the meaning set forth in Section 1.3.

“Holdings” has the meaning set forth in the preamble.

“Holdings Expense Account” has the meaning set forth in Section 1.4(b).

“Holdings Expense Amount” has the meaning set forth in Section 1.4(b).

“Holdings Expenses” has the meaning set forth in Section 1.09(d).

“HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” means, without duplication, as of the Closing Time, (a) all
obligations of the Company for borrowed money, (b) other indebtedness of the
Company evidenced by notes, bonds, debentures or other debt instruments, (c)
indebtedness of the types described in clauses (a) and (b) guaranteed, directly
or indirectly, in any manner by the Company through an agreement to supply funds
to, or in any other manner, invest in, the debtor, or to purchase indebtedness,
primarily for the purpose of enabling the debtor to make payment of the
indebtedness or to insure the owners of indebtedness against loss, (d)
indebtedness for the deferred purchase price of property or services with
respect to which the Company is liable, other than Ordinary Course trade
payables and deferred revenues (also referred to on the Company’s balance sheet
as “cash on program”), (e) all payment obligations under any interest rate swap
agreements or interest rate hedge agreements to which the Company is party, (f)
any interest owed with respect to the indebtedness referred to above and
prepayment premiums or fees which would be payable if such indebtedness were
paid in full at Closing, (g) only to the extent drawn as of the Closing Time,
any letters of credit, surety bonds, bids, performance bonds or similar
obligations, (h) all accrued but unpaid severance obligations of the Company an,
and (i) debt or obligations related to the purchase, redemption or retirement of
stock of the Company.

“Indemnified Party” has the meaning set forth in Section 8.1(e).

64

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

“Indemnifying Party” has the meaning set forth in Section 8.1(e).

“Independent Accountant” has the meaning set forth in Section 1.8(c)(iii).

“Insurance Policies” has the meaning set forth in Section 2.26.

“Intellectual Property” means all intellectual property and industrial property
rights and assets, and all rights, interests and protections that are associated
with, similar to, or required for the exercise of, any of the foregoing, however
arising, pursuant to the Laws of any jurisdiction throughout the world, whether
registered or unregistered, including any and all: (a) trademarks, service
marks, trade names, brand names, logos, trade dress, design rights and other
similar designations of source, sponsorship, association or origin, together
with the goodwill connected with the use of and symbolized by, and all
registrations, applications and renewals for, any of the foregoing; (b) internet
domain names, whether or not trademarks, registered in any top-level domain by
any authorized private registrar or Governmental Authority, web addresses, web
pages, websites and related content, accounts with Twitter, Facebook and other
social media companies and the content found thereon and related thereto, and
URLs; (c) works of authorship, expressions, designs and design registrations,
whether or not copyrightable, including copyrights, author, performer, moral and
neighboring rights, and all registrations, applications for registration and
renewals of such copyrights; (d) inventions, discoveries, trade secrets,
business and technical information and know-how, databases, data collections and
other confidential and proprietary information and all rights therein;
(e) patents (including all reissues, divisionals, provisionals, continuations
and continuations-in-part, re-examinations, renewals, substitutions and
extensions thereof), patent applications, and other patent rights and any other
Governmental Authority-issued indicia of invention ownership (including
inventor’s certificates, petty patents and patent utility models); (f) software
and firmware, including data files, source code, object code, application
programming interfaces, architecture, files, records, schematics, computerized
databases and other related specifications and documentation; and (g) industrial
designs.

“Interests” has the meaning set forth in the Recitals.

“Interim Financial Statements” has the meaning set forth in Section 2.8(a).

“IRS” has the meaning set forth in Section 2.15(f).

“Knowledge,” “Know” and “Known” and similar phrases with respect to any Person
(other than the Company) shall mean actual knowledge of such Person of the
particular fact, including after reasonable inquiry of (i) employees of such
Person who are reasonably likely to have knowledge of the particular fact and
(ii) such Person’s files and records that are reasonably likely to contain
information relating to such particular fact. With regard to the Company, this
shall mean the actual knowledge of any of [****], [****] and [****]. With regard
to Buyer, this shall mean the actual knowledge of any of [****], [****], [****],
or [****].

65

 

“Law” means any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any Governmental Authority.

“Leased Real Property” has the meaning set forth in Section 2.12(b).

“Leases” has the meaning set forth in Section 2.12(b).

“Letter of Transmittal” has the meaning set forth in Section 1.6(b).

“Liabilities” means the trial balance accounts related to liabilities listed on
Schedule 3. The amounts in each account shall be determined in accordance with
the Company Accounting Policies consistently applied by the Company and in
accordance with the Estimated Closing Balance Sheet Calculation and related
adjustments described on Schedule 3.

“Licenses” means all licenses, permits (including environmental, construction
and operation permits), franchises, certificates, approvals, exemptions,
classifications, registrations and other similar documents and authorizations
issued by any Governmental Authority, and applications therefor.

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise) or assets of the Company, taken as a whole,
or (b) the ability of Stockholders to consummate the Transaction on a timely
basis; provided, however, that “Material Adverse Effect” shall not include any
event, occurrence, fact, condition or change, directly or indirectly, arising
out of or attributable to: (a) changes in conditions in the U.S., Canadian or
global economy, capital or financial markets generally, including changes in
interest or exchange rates, (b) changes in general legal, tax, regulatory,
political or business conditions that, in each case, generally affect the
geographic regions or industries in which the Company conducts the Business, (c)
changes or proposed changes in United States generally accepted accounting
principles, (d) the negotiation, execution, announcement or performance of this
Agreement or the Transaction, including the impact thereof on relationships,
contractual or otherwise, with customers, suppliers, distributors, landlords,
tenants, lenders, investors or employees, (e) acts of war, armed hostilities,
sabotage or terrorism, or any escalation or worsening of any such acts of war,
armed hostilities, sabotage or terrorism threatened or underway as of the date
of this Agreement, (f) earthquakes, hurricanes or other natural disasters, (g)
any action taken by the Company at the request or with the consent of Buyer, or
(h) any matters expressly set forth in the Company Disclosure Schedule as of the
date of this Agreement, basis; provided, however, that any effect, event,
development or change referred to in clauses (a), (b), (c), (e) or (f)
immediately above shall be taken into account in determining whether a Material
Adverse Effect has occurred or would reasonably be expected to occur to the
extent that such event, change or effect has a disproportionate effect on the
Company, taken as a whole, compared to other participants in the industry in
which the Company conducts the Business.

“Material Contracts” has the meaning set forth in Section 2.18(a).

66

 

“Multiemployer Plan” has the meaning set forth in Sections 3(37) and 4001(a)(3)
of ERISA.

“Net Asset Value” has the meaning set forth in Section 1.8(a)(iii).

“Net Asset Value Shortfall Amount” has the meaning set forth in Section
1.8(a)(ii).

“Non-Competition Agreement” has the meaning set forth in Section 7.2(e).

“Notices” has the meaning set forth in Section 2.20(b).

“Objection Certificate” has the meaning set forth on Section 8.4(b).

“Operating Guidelines” has the meaning set forth in Section 5.13.

“Payment Instructions” has the meaning set forth in Section 1.6(b).

“Permits” means all consents, permits, licenses, grant, franchises, approvals,
authorizations, registrations, certificates, variances and similar rights
obtained, or required to be obtained from any federal, provincial, territorial,
county or local governmental entity or any other Governmental Authority.

“Permitted Encumbrances” shall mean (i) Encumbrances for Taxes that are not yet
due and payable or that are being contested in good faith, (ii) non-exclusive
licenses granted by the Company in connection with the sales of products of the
Business in the ordinary course of business, (iii) mechanics’, carriers’,
workers’, repairers’, and other similar Encumbrances imposed by Law arising or
incurred in the ordinary course of business for obligations that are not yet
past due, (iv) Encumbrances on leases of real property or granted to a landlord
pursuant to a Lease arising from the provisions of such leases, (v) pledges or
deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance, and other social security legislation,
(vi) zoning regulations and restrictive covenants and easements that do not
detract in any material respect from the value of the Company’s leasehold
estates and do not materially and adversely affect, impair or interfere with the
use by the Company of any property affected thereby, (vii) utility easements,
rights of way, restrictions, covenants, claims, subleases or similar items to
serve or serving leased real property, (viii) liens securing rental payments
under capital lease or operating lease arrangements, (ix) matters of public
record; and (x) any encumbrances effecting the landlords or ground lessors
underlying interests in any of the Leases and/or the Leased Real Property from
time to time.

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity.

“Post-Closing Adjustment” has the meaning set forth in Section 1.8(b)(ii).

“Post-Closing Straddle Tax Period” has the meaning set forth in Section
5.5(b)(ii).

67

 

“Pre-Closing Straddle Tax Period” has the meaning set forth in Section
5.5(b)(ii).

“Pre-Closing Tax Period” means any Prior Period and any Pre-Closing Straddle Tax
Period.

“Prior Period Tax Returns” has the meaning set forth in Section 5.5(a).

“Prior Period” has the meaning set forth in Section 5.5(a).

“Proceedings” has the meaning set forth in Section 2.20(b).

“Pro Rata Percentage” means, for each Stockholder, a percentage calculated by
dividing (i) the total number of shares of Holdings held by such Stockholder
immediately prior to the Closing Date, by (ii) the total number of Fully Diluted
Shares.

“Purchase Price” has the meaning set forth in Section 1.2.

“QSub Election” has the meaning set forth in Section 2.15(b).

“Release” has the meaning set forth in Section 1.6(b).

“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, financial advisors, counsel, accountants and
other agents of such Person.

“Resolution Period” has the meaning set forth in Section 1.8(c)(ii).

“Restriction” has the meaning set forth in Section 2.25.

“Restructuring” has the meaning set forth in the Recitals.

“Review Period” has the meaning set forth in Section 1.8(c)(i).

“S Election” has the meaning set forth in Section 2.15(a).

“Statement of Objections” has the meaning set forth in Section 1.8(c)(ii).

“Stockholder” has the meaning set forth in the preamble.

“Stockholder Expenses” has the meaning set forth in Section 1.4(b).

“Stockholder Indemnified Parties” has the meaning set forth in Section 8.1(c).

“Stockholder Indemnifying Parties” has the meaning set forth in Section 8.1(a).

“Stockholders’ Disclosure Schedule” has the meaning set forth in Article III.

“Specified Indemnity Obligations” has the meaning set forth in Section 8.1(a).

68

 

“Statement of Objections” has the meaning set forth in Section 1.8(c)(ii).

“Statute of Limitations Claims” has the meaning set forth in Section 8.2(a).

“Stockholder Approval” has the meaning set forth in Section 2.3(b).

“Straddle Period” has the meaning set forth in Section 5.5(b)(i).

“Subsidiary” means any Person of which (i) a majority of the outstanding share
capital, voting securities or other equity interests are owned, directly or
indirectly, by the Company or (ii) the Company is entitled, directly or
indirectly, to appoint a majority of the board of directors, board of managers
or comparable body of such Person.

“Surviving Claims” has the meaning set forth in Section 8.2(b).

“Taxes” means all (a) taxes, charges, withholdings, fees, levies, premiums,
imposts, duties, governmental contributions or other charges of any kind
whatsoever, whether direct or indirect, imposed by any Governmental Authority
including, without limitation, those levied on, measured by or referred to as
income, net income, gross income, receipts, capital, windfall profit, severance,
property (real or intangible or personal), production, sales, provincial sales,
retail sales, harmonized sales, value-added, goods and services, use, business
occupation, license, excise, registration, franchise, employment, payroll
(including social security contributions, employment insurance, health taxes,
and Canada, Quebec, Ontario and other government pension plan contributions),
deductions at source, workers’ compensation, withholding, alternative or add-on
minimum, intangibles, ad valorem, transfer, gains, stamp, customs, duties,
estimated, transaction, title, capital, paid-up capital, profits, premium,
recording, inventory and merchandise, business privilege, federal highway use,
commercial rent or environmental tax, and any liability under unclaimed
property, escheat, or similar Laws), (b) interest, penalties, fines, additions
to tax or additional amounts imposed by any Governmental Authority in connection
with (i) any item described in clause (a) or (ii) the failure to comply with any
requirement imposed with respect to any Tax Return, and (iii) liability in
respect of any items described in clause (a) and/or (b) payable by reason of
contract, assumption, transferee, successor or similar liability, operation of
law (including pursuant to Treasury Regulations Section 1.1502-6 (or any
predecessor or successor thereof or any analogous or similar state, local, or
foreign Law)) or otherwise.

“Tax Return” means any report, return, declaration, designation, election,
undertaking, wavier, notice, filing, information return, statement, form
certificate or any other document or materials relating to Taxes, including any
related or supporting information with respect to any such documents or
materials, filed or to be filed with any Governmental Authority in connection
with the determination, assessment, collection or administration of Taxes
(including TD F90-22.1), including, without limitation, any schedule or
attachment thereto or amendment thereof, and estimated returns and reports of
every kind with respect to Taxes.

“Ten-Year Claims” has the meaning set forth in Section 8.2(b).

“Termination Date” has the meaning set forth in Section 9.1(b).

69

 

“Termite Claim Threshold” has the meaning set forth in Section 8.7(a).

“Termite Warranty Claim” means a claim by a customer of the Company under a
written warranty or guarantee for termite treatment services, which warranty or
guarantee was issued by the Company prior to the Closing Date.

“Third Party Claim” has the meaning set forth in Section 8.6(a).

“Transaction” has the meaning set forth in the recitals.

“Transaction Documents” means this Agreement, the Non-Competition Agreement(s),
the employment agreements referenced in Section 6.2(f), the leases referenced in
Section 6.2(h), the license agreement referenced in Section 6.2(j), and the
Goodwill Purchase Agreement in Exhibit B.

“Transaction Expenses” means (a) any fees, costs, expenses of, or payments made
by, the Company related to any transaction bonus, change of control payment or
other compensatory payments made to any current or former employee or other
service provider of the Company solely as a result of the execution of this
Agreement or the consummation of the Transaction (but excluding, for the
avoidance of doubt, any such arrangements that are implemented by Buyer), (b)
all employment Taxes imposed on the Company resulting from any and all payments
made pursuant to the foregoing subsection (a) and (c) any legal, accounting,
financial advisory and other third party advisory or consulting fees and other
expenses incurred by the Company or the Stockholders in connection with the
Transaction and other related matters to the extent incurred, whether or not
paid as of the Closing and not otherwise included in Working Capital.

“Transmittal Package” has the meaning set forth in Section 1.6(b).

“Threshold” has the meaning set forth in Section 8.3(a).

“Vendors” means all production and equipment vendors and subcontractors of the
Company as to which expenses in excess of One Hundred Thousand Dollars
($100,000) either were incurred to such vendors and subcontractors during the
Company’s fiscal year ended December 31, 2016.

“Waste” shall be construed broadly to include agricultural wastes, biomedical
wastes, biological wastes, bulky wastes, construction and demolition debris,
garbage, household wastes, industrial solid wastes, liquid wastes, recyclable
materials, sludge solid wastes, special wastes, used oils, white goods, and yard
trash as those are defined under any other statute, law, regulation, order,
code, rule or decree.

“Welfare Plan” means an “employee welfare benefit plan” as defined in Section
3(l) of ERISA.

“Year End Financial Statements” has the meaning set forth in Section 2.8(a).

[SIGNATURE PAGES FOLLOW] 

70

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written. 

  ROLLINS, INC.         By:  /s/ John Wilson   Name: John Wilson  
Title:  President

 

 

 

 

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

  COMPANY:       NORTHWEST EXTERMINATING CO., INC.   By:     Name: [****]  
Title:           HOLDINGS:         NW HOLDINGS, LLC       By: 
                                                                      Name:
[****]   Title:

 

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH
BRACKETS (“[****]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

  COMPANY STOCKHOLDERS:         [****]           [****]           [****]        
  [****]           [****]