Exhibit 10.1+

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

STOCK PURCHASE AGREEMENT

by and among

ROLLINS, INC.,

CLARK PEST CONTROL OF STOCKTON, INC.,

THE STOCKHOLDERS OF CLARK PEST CONTROL OF STOCKTON, INC.

THE PRINCIPALS

and

THE STOCKHOLDERS’ REPRESENTATIVE

dated as of

January 7, 2019

 

 

TABLE OF CONTENTS

    Page       ARTICLE I PURCHASE AND SALE 2     1.1 Purchase and Sale 2 1.2
Purchase Price 2 1.3 Payment of Consideration at Closing; Aggregate Closing
Amount 2 1.4 Earnout Consideration 3 1.5 Effect on Shares 3 1.6 Delivery of
Certificates 3 1.7 Transactions to be Effected at the Closing 4 1.8 Purchase
Price Adjustment 4 1.9 Stockholders’  Representative 8       ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 9     2.1 Corporate Organization;
Standing and Power 9 2.2 Capitalization 10 2.3 Authority 11 2.4 Subsidiaries 11
2.5 Absence of Restrictions and Conflicts 11 2.6 Compliance with Laws 12 2.7
Financial Statements; Receivables 12 2.8 Absence of Certain Changes or Events 13
2.9 Litigation 13 2.10 Governmental Authorization 14 2.11 Real Property 14 2.12
Title to Assets; Related Matters 14 2.13 Intellectual Property 15 2.14 Taxes 16
2.15 Employee Benefit Plans 19 2.16 Employee Matters 22 2.17 Material Contracts
23 2.18 Transactions with Affiliates 25 2.19 Environmental Matters 26 2.20 Pest
Treatment 27 2.21 Clients and Vendors 28 2.22 Bankruptcy; Insolvency 28 2.23
Brokers or Finders 28 2.24 No Restrictions 29 2.25 Insurance 29 2.26 Bank
Accounts 29 2.27 Powers of Attorney 29 2.28 Foreign Corrupt Practices 30 2.29
Privacy Laws 30

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2.30 Disclosure 30       ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS
31     3.1 Power and Authority; Execution and Validity 31 3.2 Absence of
Conflicts 31 3.3 Governmental and Third Party Approvals 32 3.4 Title to
Securities 32 3.5 Litigation 32 3.6 Fees 32 3.7 No Other Representations and
Warranties 32       ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 32    
4.1 Corporate Organization, Standing and Power 33 4.2 Authority 33 4.3
Litigation 34 4.4 Sufficiency of Funds 34 4.5 Brokers or Finders 34 4.6
Investment Experience 34 4.7 Independent Investigation; Non-Reliance 34      
ARTICLE V COVENANTS 35     5.1 Normal Course 35 5.2 Conduct of Business 35 5.3
Access to Personnel, Books and Records Following Signing 37 5.4 Certain Tax
Matters 37 5.5 Regulatory Filings 41 5.6 Notices and Consents 42 5.7
Notification 42 5.8 Confidentiality; Public Announcement 42 5.9 Employee
Benefits 43 5.10 Directors and Officers Insurance 44 5.11 Further Assurances 45
      ARTICLE VI CONDITIONS TO CLOSING 45     6.1 Conditions to Obligations of
All Parties 45 6.2 Conditions to Obligations of Buyer 46 6.3 Conditions to
Obligations of Sellers and the Company 47       ARTICLE VII CLOSING 48     7.1
Closing 48 7.2 Company and Sellers Closing Deliveries 48 7.3 Buyer Closing
Deliveries 49       ARTICLE VIII INDEMNIFICATION 50     8.1 Indemnification 50
8.2 Survival of Representations, Warranties and Covenants 52 8.3 Limitations on
Indemnification Obligations 52

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8.4 Notices; Payment of Damages 54 8.5 Third Party Claims 55 8.6 Exclusive
Remedy 57 8.7 Offset 58       ARTICLE IX TERMINATION 58     9.1 Termination 58
9.2 Procedure for Termination 59 9.3 Effect of Termination 59 9.4 Buyer
Antitrust Termination Fee 59       ARTICLE X MISCELLANEOUS 60       10.1 Waiver;
Amendment 60 10.2 Counterparts 60 10.3 Governing Law; Waiver of Jury Trial 60
10.4 Expenses 61 10.5 Notices 61 10.6 Entire Understanding; No Third Party
Beneficiaries 63 10.7 Severability 63 10.8 Interpretation 63 10.9 Assignment;
Successors 64 10.10 Construction 64 10.11 Specific Performance 64 10.12 Certain
Matters Regarding Representation of the Company 64       ARTICLE XI DEFINITIONS
65

iii

 

LIST OF EXHIBITS & SCHEDULES

Exhibit A Form of Closing Note Exhibit B Form of Letter of Transmittal Exhibit C
Form of Release Exhibit D Form of Lost Certificate Affidavit Exhibit E Form of
Non-Competition Agreement     Schedule 1 Ownership of the Shares Schedule 2
Holdback Requirements Schedule 3 Earnout Consideration Requirements Schedule 4
Excluded Assets Schedule 5 Specified Indemnification Obligations Schedule 5.6
Notices and Consents Schedule 5.10 Indemnification Schedule Schedule 6
Allocation Schedule Schedule 7 Terminated Agreements Schedule 8 Indebtedness
Schedule 9 Annual Revenue Growth Schedule 10 Operating Profit Margin

iv

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of January 7, 2019 is
entered into by and among ROLLINS, INC. a Delaware corporation (“Buyer”), CLARK
PEST CONTROL OF STOCKTON, INC., a California corporation (the “Company”), the
stockholders of the Company listed on the signature pages hereto (each, a
“Seller” and collectively, the “Sellers”), the Principals (as defined below),
and JJT King, LLC (the “Stockholders’ Representative”).

RECITALS

WHEREAS, the Sellers collectively own 100% of the issued and outstanding shares
of stock (the “Shares”), of the Company, which is engaged in the residential and
commercial pest prevention service businesses (collectively, the “Business”);

WHEREAS, [****], [****], and [****] (collectively, the “Principals”) are each
the trustees of certain Sellers and each of them has a financial interest in the
Company and in the Transaction;

WHEREAS, each Seller desires to sell to Buyer the number of Shares indicated
opposite each such Seller’s name on Schedule 1 hereto and Buyer desires to
purchase from Sellers all (but not less than all) of the Shares 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 Shares, and the Sellers will receive the consideration described in
Article I of this Agreement (the “Transaction”);

WHEREAS, the Board of Directors of the Company has determined that this
Agreement and the Transaction are in the best interests of the Company;

WHEREAS, the executive committee of Buyer has determined that this Agreement and
the Transaction are in the best interests of the Company; and

WHEREAS, concurrently with the execution and delivery of this Agreement, Buyer,
through one or more Affiliates formed for the purpose thereof, will enter into
the Real Estate Purchase Agreement with Clarksons California Properties, a
California Limited Partnership (“Clarksons”) and the Distribution Purchase
Agreement with GeoTech Supply Co., LLC (“GeoTech”), each of Clarksons and
GeoTech being an Affiliate of the Company.

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:

 

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Article I
purchase and sale

1.1          Purchase and Sale. Subject to the terms and conditions set forth
herein, at the Closing, (a) Sellers shall sell, assign, transfer and deliver the
Shares to Buyer, free and clear of all Encumbrances (other than Encumbrances
pursuant to applicable securities Laws and the Company Charter Documents), and
(b) Buyer shall purchase and accept the Shares from Sellers for the
consideration specified in Section 1.2.

1.2          Purchase Price. The aggregate purchase price for the Shares shall
be Three Hundred and Sixty One Million Dollars ($361,000,000.00) (the “Cash
Consideration”), plus a contingent earnout payment of up to Fifteen Million
Dollars ($15,000,000.00) (the “Earnout Consideration”; the Cash Consideration,
subject to adjustment pursuant to Section 1.8, and the Earnout Consideration are
together the “Purchase Price”).

1.3          Delivery of Consideration; Aggregate Closing Amount.

(a)          The aggregate amount to be paid by Buyer at Closing (such amount,
the “Aggregate Closing Amount”) shall consist of: (i) the Cash Consideration,
plus or minus (ii) the Closing Adjustment (as defined in Section 1.8(a), below),
less (iii) the Transaction Expenses (to the extent not paid prior to the
Closing), less (iv) [****] Dollars ($[****]) (the “Holdback”), which shall be
withheld by the Buyer as security for the Company and the Sellers’ obligations
under the Transaction Documents and shall be paid to the Sellers, or retained by
the Buyer, as set forth on Schedule 2 hereto, and less (v) the Management Team
Payments (as defined below). The Aggregate Closing Amount shall be paid to the
Stockholders’ Representative at Closing pursuant to a one-day promissory note in
the form of Exhibit A (the “Closing Note”).

(b)          In addition to the Closing Note, at Closing, the Buyer shall
deliver, by wire transfer or other immediately available funds, [****] Dollars
($[****]) (the “Management Team Payments”) to [****] (“[****]”) and such other
members of the Company’s management team as mutually agreed in writing by [****]
and a representative of Buyer (the “Management Team”), as follows: (A) [****]
Dollars ($[****]) shall be paid to [****]; and (B) [****] Dollars ($[****])
shall be allocated and paid to other members of the Management Team as mutually
agreed in writing by [****] and a representative of Buyer.

(c)          The Stockholders’ Representative shall surrender the Closing Note
to Buyer no earlier than one (1) day following the Closing Date and, in
exchange, Buyer shall immediately distribute the Aggregate Closing Amount, less
the Stockholders’ Representative Expense Amount (defined below), by wire
transfer of immediately available funds, to the Sellers as follows: each Seller
shall be delivered an amount equal to the Per Share Closing Consideration,
multiplied by the number of Shares held by such Seller immediately prior to the
Closing Date, as set forth on the Closing Statement. Immediately upon surrender
of the Closing Note to Buyer, Buyer shall further cause the Stockholders’
Representative Expense Amount to be deposited into the Stockholder’s
Representative Expense Account.

2

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(d)          The Stockholders’ Representative shall retain [****] Dollars
($[****]) (the “Stockholders’ Representative Expense Amount”) from the Aggregate
Closing Amount otherwise distributable to Sellers in accordance with this
Agreement, for the purposes of paying fees and satisfying expenses of the
Stockholders’ Representative incurred in connection with the discharge of its
duties under this Agreement, including the costs, expenses incurred by the
Stockholders’ Representative in defending against any claim for indemnification
made by Buyer under this Agreement, including the hiring of experts and legal
counsel (the “Stockholders’ Representative Expenses”). The Stockholders’
Representative will hold the Stockholders’ Representative Expense Account in an
interest-bearing account designated for the Sellers at a financial institution
separate from its own personal funds (the “Stockholders’ Representative 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. Immediately following the
release of the remainder of the Holdback, unless otherwise indicated by the
Stockholders’ Representative, the remaining funds within the Stockholders’
Representative Expense Account, if any, including any interest thereon, shall be
distributed by the Stockholders’ Representative to the Sellers in accordance
with their respective Pro Rata Percentages, by wire transfer of immediately
available funds as designated in their respective Letters of Transmittal.

1.4          Earnout Consideration. The Earnout Consideration shall be earned
pursuant to the requirements, and paid to the Stockholders’ Representative (on
behalf of the Sellers) at the times, as set forth on Schedule 3.

1.5          Effect on Shares. As of the Closing, by virtue of the Transaction
and with respect to each Seller regardless of the delivery of a Transmittal
Package, (x) each issued and outstanding Share owned by each Seller shall be
deemed for all purposes to be transferred to Buyer, and the Buyer shall be
deemed to have received from each Seller an irrevocable power of attorney to
affect the transfer of all such Shares to Buyer and (y) all rights of the
Sellers to such surrendered Shares shall cease, except for the right to receive
the consideration payable with respect thereto pursuant to this Agreement and as
provided by applicable Laws.

1.6          Delivery of Certificates.

(a)          Prior to receiving any portion of the Aggregate Closing Amount,
each Seller shall have delivered to Buyer or its designee (i) a properly
completed and duly executed letter of transmittal, in the form of Exhibit B (a
“Letter of Transmittal”), that includes payment instructions and a Form W-9 or
Form W-8BEN; (ii) all certificate(s) that immediately prior to the Closing
represented issued and outstanding Shares owned by each such Seller (the
“Certificates”) and appropriate stock powers held of record by such holder; and
(iii) a release of the Company and Buyer by each Seller, in the form of Exhibit
C (the “Release”) ((i), (ii) and (iii) together, the “Transmittal Package”).

3

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          In the event any Certificates shall have been lost, stolen or
destroyed, then the relevant Seller shall be required to deliver in lieu of such
Certificates an affidavit of that fact, in the form of Exhibit D (the “Lost
Certificate Affidavit”), as a condition to the Stockholders’ Representative’s
disbursement to such Seller of the consideration payable to such Seller.

(c)          The Stockholders’ Representative, its designee, or Buyer (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 paid to the
applicable Governmental Authority and 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:

(i)          the Aggregate Closing Amount by delivery of the Closing Note;

(ii)         the Management Team Payments to [****] and the Management Team, as
set forth in Section 1.3(b); and

(iii)        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, the Company and the Sellers shall deliver to Buyer:

(i)          the Certificates (or a Lost Certificate Affidavit), free and clear
of all Encumbrances (other than Encumbrances pursuant to applicable securities
Laws and the Company Charter Documents), duly endorsed in blank or accompanied
by stock powers or other instruments of transfer duly executed in blank;

(ii)          the Releases; and

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

1.8          Purchase Price Adjustment.

(a)          Closing Adjustment; Closing Statement.

4

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(i)          At least three (3) Business Days before the Closing, the Company
and Sellers shall prepare and deliver to Buyer (A) a statement setting forth its
reasonable good faith estimate of Closing Working Capital as of immediately
prior to Closing (without giving effect to the Transaction) (the “Estimated
Closing Working Capital”), which statement shall contain an estimated balance
sheet of the Company as of immediately prior to the Closing Date (without giving
effect to the Transaction), a calculation of Estimated Closing Working Capital
(the “Estimated Closing Working Capital Statement”), and a certificate of the
Company that the Estimated Closing Working Capital Statement was prepared in
accordance with GAAP, applied using the same Accounting Rules used by and
applied to the Company in the preparation of the Year End Financial Statements
for the most recent fiscal year end as if such Estimated Closing Working Capital
Statement were being prepared as of a fiscal year end (except that the Estimated
Closing Working Capital Statement shall not contain footnotes and other
presentation items or other year-end adjustments that may be required by GAAP);
and (B) a statement (the “Closing Statement”) which sets forth in reasonable
detail (I) a calculation of the Aggregate Closing Amount, (II) the Per Share
Closing Consideration, and (III) the number of issued and outstanding Shares
held by each Seller as of immediately prior to the Closing Date.

(ii)         The “Closing Adjustment” shall be an amount equal to the Estimated
Closing Working Capital minus the Target Working Capital. If the Closing
Adjustment is a positive number, the Cash Consideration (and thus the Purchase
Price) shall be increased by the amount of the Closing Adjustment. If the
Closing Adjustment is a negative number, the Cash Consideration (and thus the
Purchase Price) shall be reduced by the amount of the Closing Adjustment.

(b)          Post-Closing Adjustment.

(i)          Within ninety (90) days after the Closing Date, Buyer shall prepare
and deliver to the Stockholders’ Representative (A) a calculation of Closing
Working Capital (the “Closing Working Capital Statement”) and (B) a certificate
of Buyer that the Closing Working Capital Statement was prepared in accordance
with GAAP, applied using the same Accounting Rules used by and applied to the
Company in the preparation of the Year End Financial Statements for the most
recent fiscal year end as if such Closing Working Capital Statement were being
prepared and reviewed as of a fiscal year end (except that the Closing Working
Capital Statement shall not contain footnotes and other presentation items or
other year-end adjustments that may be required by GAAP).

(ii)          The post-closing adjustment shall be a dollar for dollar
adjustment (whether positive or negative) equal to the difference between the
Closing Working Capital and the Estimated Closing Working Capital (the
“Post-Closing Adjustment”) to be made in accordance with Section 1.8(c)(vi).

(c)          Examination and Review.

(i)          Examination. After receipt of the Closing Working Capital
Statement, the Stockholders’ Representative shall have thirty (30) days (the
“Review Period”) to review the Closing Working Capital Statement. During the
Review Period, the Stockholders’ Representative’s Accountants 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 Working Capital Statement and to such historical financial
information (to the extent in the possession of Buyer or any of its
Representatives) relating to the Closing Working Capital Statement as the
Stockholders’ Representative may reasonably request for the purpose of reviewing
the Closing Working Capital Statement and to prepare a Statement of Objections
(as defined below); provided, that such access shall be in a manner that does
not materially interfere with the normal business operations of Buyer or the
Company.

5

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(ii)         Objection. On or prior to the last day of the Review Period, the
Stockholders’ Representative may object to the Closing Working Capital Statement
by delivering to Buyer a written statement setting forth the Stockholders’
Representative’s objections in reasonable detail, specifically identifying each
disputed item or amount and the basis for the Stockholders’ Representative’s
disagreement therewith (the “Statement of Objections”). If the Stockholders’
Representative fails to deliver the Statement of Objections before the
expiration of the Review Period, the Closing Working Capital Statement and the
Post-Closing Adjustment reflected in the Closing Working Capital Statement shall
be deemed to have been accepted by the Stockholders’ Representative. If the
Stockholders’ Representative delivers the Statement of Objections before the
expiration of the Review Period, Buyer and the Stockholders’ Representative
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 Post-Closing
Adjustment, and Closing Working Capital Statement with such changes as may have
been previously agreed in writing by Buyer and the Stockholders’ Representative,
shall be final and binding.

(iii)        Resolution of Disputes. If the Stockholders’ Representative 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 to the office of an impartial nationally recognized firm of
independent certified public accountants mutually approved by Buyer and the
Stockholders’ Representative (such approval not to be unreasonably withheld,
conditioned or delayed) and other than the Stockholders’ Representative’s
Accountants or Buyer’s Accountants (the “Independent Accountant”). The
Independent Accountant, acting as an expert and not as an arbitrator, shall
resolve the Disputed Amounts only and make any adjustments to the Post-Closing
Adjustment and the Closing Working Capital Statement as the Independent
Accountant deems appropriate. 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 Disputed Amount in the Closing Working Capital Statement and the Statement
of Objections and must be decided using the same accounting methods, practices,
and principles that were used in the preparation of the Year End Financial
Statements.

(iv)        Fees of the Independent Accountant. The fees and expenses of the
Independent Accountant shall be paid by Sellers, on the one hand, and by Buyer,
on the other hand, based upon the percentage that the amount actually contested
but not awarded to Sellers or Buyer, respectively, bears to the aggregate amount
actually contested by Sellers and Buyer. For example, if the Stockholders’
Representative challenges the calculation of the Post-Closing Adjustment by an
amount of Twenty Five Thousand Dollars ($25,000), but the Independent Accountant
determines that the Stockholders’ Representative has a valid claim for only
Fifteen Thousand Dollars ($15,000), the Stockholders’ Representative 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.

6

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(v)         Determination by Independent Accountant. The Independent Accountant
shall make a determination as soon as practicable within ten (10) days (or such
other time as the parties hereto shall mutually agree in writing) after their
engagement, and their resolution of the Disputed Amounts and their adjustments
to the Closing Working Capital Statement and/or the Post-Closing Adjustment
shall be conclusive and binding upon the parties hereto.

(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 Closing Working Capital 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 the Sellers to the Buyer, each Seller shall
pay to Buyer its respective Pro Rata Percentage of the Post-Closing Adjustment;
provided, however, that Buyer may, but shall not be obligated to, exercise its
offset rights pursuant to Section 8.7. To the extent that the Post-Closing
Adjustment is an amount payable by Buyer to the Stockholders’ Representative on
behalf of the Sellers, then the Stockholders’ Representative upon receipt shall
promptly then distribute such Post-Closing Adjustment received from Buyer to the
Sellers in accordance with their respective Pro Rata Percentages, by wire
transfer as designated in their respective Letters of Transmittal, of
immediately available funds.

(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.

7

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

1.9          Stockholders’ Representative.

(a)          JJT King, LLC is hereby appointed as the Seller Indemnifying
Parties’ true and lawful representative, proxy, agent and attorney-in-fact to
serve as the Stockholders’ Representative with full power and authority to act
for, and on behalf of, the Seller Indemnifying Parties 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 Sellers, in
accordance with their respective Pro Rata Percentages, the amount(s) comprising
the Post-Closing Adjustment (as applicable), the remainder of the Stockholders’
Representative Expense Account, the Earnout Consideration, as applicable, (v) to
object to or accept any claims against or on behalf of the Seller Indemnifying
Parties in connection with the Post-Closing Adjustment, 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 Post-Closing Adjustment, and/or the Holdback, as
applicable, (vii) to enforce payment of any amounts payable to the Seller
Indemnified Parties on behalf of the Buyer Indemnifying Parties, in the name of
the Seller Indemnifying Parties, (viii) to receive any and all notices and other
communications to the Seller Indemnifying Parties on behalf of the Seller
Indemnifying Parties 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 the Stockholders’ Representative for the accomplishment of the
foregoing. Such agency may be changed at any time and from time to time by the
written agreement of Sellers holding more than 50% of the issued and outstanding
Shares that approved the Transaction, and shall become effective upon not less
than ten (10) calendar days’ prior written notice to Buyer. In the event that
for any reason the Stockholders’ Representative shall no longer be serving in
such capacity, including, without limitation, as a result of the death,
resignation, or incapacity of such Stockholders’ Representative, the Sellers
holding more than 50% of the issued and outstanding Shares that approved the
Transaction shall designate another Person to act as the Stockholders’
Representative. Any change in the Stockholders’ Representative pursuant to the
foregoing sentence shall become effective upon delivery of written notice of
such change to Buyer. The Stockholders’ Representative shall not receive
compensation for its services; provided, however, that should a stockholders’
representative other than JJT King, LLC be named, a majority in interests of the
Sellers may approve payment of compensation to such newly designated
stockholders’ representative, as deemed to be in the best interest of all
Sellers. The authority conferred under this Section 1.9 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 Sellers, or the occurrence of any other event.

(b)          The Stockholders’ Representative shall not be liable to the Sellers
for any act done or omitted hereunder in its capacity as Stockholders’
Representative while acting in good faith and in the absence of fraud, bad
faith, gross negligence or willful misconduct on its part. The Sellers shall,
severally and not jointly, indemnify the Stockholders’ Representative and hold
the Stockholders’ Representative 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 are actually incurred by the Stockholders’ Representative as a
result of any good faith error of judgment on the part of such Stockholders’
Representative or for any other act done or omitted in good faith by such
Stockholders’ Representative in connection with the administration of its duties
hereunder, except where such losses arise from or are the result of such
Stockholders’ Representative’s fraud, bad faith, gross negligence or willful
misconduct. Any act done or omitted by the Stockholders’ Representative in
accordance with the advice of counsel or other expert shall be conclusive
evidence of such good faith. The Seller Indemnifying Parties acknowledge and
agree that the foregoing indemnities will survive the resignation or removal of
the Stockholders’ Representative or the termination of this Agreement.

8

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(c)          Any decision, act, consent or instruction taken or given by the
Stockholders’ Representative pursuant to this Agreement shall constitute a
decision, act, consent or instruction of all Sellers and shall be final, binding
and conclusive upon each such Seller. Buyer may rely upon any such decision,
act, consent or instruction of the Stockholders’ Representative as being the
decision, act, consent or instruction of each and every Seller and shall have no
duty to inquire as to the acts and omissions of the Stockholders’
Representative. 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 the Stockholders’
Representative.

(d)          All Stockholders’ Representative Expenses will be borne and paid by
the Sellers according to their respective Pro Rata Percentage. Stockholders’
Representative Expenses will be paid to the Stockholders’ Representative from
the Stockholders’ Representative Expense Account. For the avoidance of doubt,
while this section allows the Stockholders’ Representative to be reimbursed from
the Stockholders’ Representative Account, this does not relieve Sellers from
promptly paying their respective Pro Rata Percentage of all of the Stockholders’
Representative Expenses as they are suffered or incurred in excess of the
Stockholders’ Representative Expense Amount, nor does it prevent the
Stockholders’ Representative 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 Seller.

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

Article II
Representations and Warranties of the Company

The Company represents and warrants to Buyer, and acknowledges that Buyer is
relying upon such representations and warranties in connection with its purchase
of the Shares, 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          Corporate Organization; Standing and Power.

(a)          The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of California. The Company has all
requisite corporate 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(a) 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 (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 Company Charter Documents.

9

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Each of the Company’s Subsidiaries is an entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization, registration or formation, as the case may be, set forth in
Section 2.1(b) of the Company Disclosure Schedule, except as would not
reasonably be expected to result in a Material Adverse Effect. Each of the
Company’s Subsidiaries has all requisite entity power and authority to own,
lease and operate its properties and to carry on its Business as now being
conducted, except as would not reasonably be expected to result in a Material
Adverse Effect. Each of the Company’s Subsidiaries is qualified to do business
as a foreign corporation, limited liability company, partnership or other entity
in all jurisdictions where the nature of its Business requires such
qualification, except where the failure to so qualify would not reasonably be
expected to result in a Material Adverse Effect. The Company has previously made
available to Buyer complete copies of the charter and bylaws (or equivalent
documents) for each of the Company’s Subsidiaries as currently in effect
(“Subsidiary Charter Documents”). No Subsidiary of the Company is in violation
of the provisions of its respective applicable Subsidiary Charter Documents.

(c)          Each location in which the Company or any of the Company
Subsidiaries has owned, leased or operated real property in the last six (6)
years is set forth in Section 2.1(c) of the Company Disclosure Schedule.

2.2          Capitalization. Section 2.2 of the Company Disclosure Schedule
(a) sets forth all of the holders of Capital Stock of the Company, who are the
sole registered and beneficial holders of all of the issued and outstanding
securities of any kind of the Company (voting or otherwise) and the class and
number of securities held by each holder, (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. All of the issued and outstanding shares of the
Capital Stock or other equity interests of the Company 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 (whether by exercise, conversion or otherwise)
any securities of any kind of the Company (voting or otherwise) nor are there
any commitments to issue or execute any of the foregoing. None of the
outstanding Shares has been issued in violation of any preemptive rights of any
security holder of the Company or in violation of applicable securities Laws or
any other Law of any jurisdiction applicable to such issuance.

10

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

2.3          Authority. 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 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 corporate
action on the part of the Company. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company and (assuming due
authorization, execution and delivery by each other party thereto) constitute
the legal, valid and binding obligations of the Company, enforceable against it
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).

2.4          Subsidiaries. Section 2.4 of the Company Disclosure Schedule lists
each Subsidiary of the Company. The Company owns, directly or indirectly, all of
the issued and outstanding Capital Stock or other equity interests of each of
its Subsidiaries, free and clear of all Encumbrances other than Encumbrances
related to the Indebtedness and limitations imposed by United States federal,
state, provincial and foreign securities Laws. None of the Company’s
Subsidiaries owns, directly or indirectly, any Capital Stock or other equities,
securities or interests in any corporation, limited liability company,
partnership, joint venture or other entity, whether incorporated or
unincorporated.

2.5          Absence of Restrictions and Conflicts.

(a)          Except as set forth in Section 2.5(a) of the Company Disclosure
Schedule, the execution and delivery by the Company and the Sellers of this
Agreement and the Transaction Documents do not, and the performance of its
obligations hereunder and pursuant to the Transaction Documents will not,
(i) conflict with or violate (A) the Company Charter Documents, (B) the
Subsidiary Charter Documents, (ii) assuming that all consents, approvals,
authorizations and other actions described in subsection (b) of this Section 2.5
have been obtained and all filings and obligations described in subsection
(b) of this Section 2.5 have been made, conflict with or violate any Law
applicable to the Company or any Subsidiary, or by which any property or asset
of the Company or any Subsidiary, 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 any Material
Contract, or result in the triggering of any payments or result in the creation
of an Encumbrance on any property or asset of the Company or any Subsidiary, 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.

11

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          The execution and delivery by the Company and the Sellers 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 (B) the notices and
consents referred to on Section 2.5(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.

2.6          Compliance with Laws. Except as set forth in Section 2.6 of the
Company Disclosure Schedule, as of the date hereof, neither the Company nor any
of its Subsidiaries has 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 and each of its Subsidiaries have filed all reports and have all
Licenses required to be filed with any Governmental Authority necessary to carry
on the Business of the Company and its Subsidiaries 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.

2.7          Financial Statements; Receivables.

(a)          In General. Section 2.7(a) of the Company Disclosure Schedule
contains the Company’s reviewed consolidated balance sheets and statement of
operations and statement of cash flows as of and for the fiscal year ended
December 31, 2017 (the “Year End Financial Statements”), and the Company’s
internally prepared consolidated balance sheets and statements of income and
cash flows as of and for the eleven-month period ended November 30, 2018 (the
“Interim Financial Statements,” together with the Year End Financial Statements,
the “Company Financial Statements”). Other than as described in Section 2.7(a)
of the Company Disclosure Schedule, the Company Financial Statements (including
the notes thereto in the case of the Year End Financial Statements) present
fairly, in all material respects, the financial condition of the Company as of
the respective dates thereof and the results of operations and cash flows of the
Company for the periods covered thereby, and have been prepared in accordance
with GAAP, except that Interim Financial Statements do not include notes and
other presentation items or other year-end adjustments that may be required by
GAAP.

(b)          No Undisclosed Liabilities. Except as set forth in Section 2.7(b)
of the Company Disclosure Schedule, the Company and its Subsidiaries have no
liabilities that would be required to be accrued on a balance sheet prepared in
accordance with GAAP except for (i) liabilities disclosed or reserved against in
the Company Financial Statements, (ii) liabilities incurred by the Company or
its Subsidiaries 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 and/or its Subsidiaries
are bound, (iv) liabilities under this Agreement or the Transaction, (v)
liabilities as reflected in the definitions of Indebtedness and Transaction
Expenses, and (vi) liabilities included in the calculation of Estimated Closing
Working Capital.

12

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(c)          Accounts Receivable. Section 2.7(c) of the Company Disclosure
Schedule provides an accurate and complete breakdown and aging of all accounts
receivable as of November 30, 2018. 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. Subject to
the recorded reserves provided consistent with prior periods and throughout the
periods involved, all billed and, to the Knowledge of the Company, all unbilled
receivables are good and collectible in full without any discount, 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.

(d)          No Letters of Credit, Bonds or Guarantees. Except as reflected in
the Company Financial Statements or as set forth in Section 2.7(d) of the
Company Disclosure Schedule, the Company and its Subsidiaries (i) have no bonds
or letters of credit outstanding as to which the Company has any actual or
contingent reimbursement obligations; (ii) are 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) are not a party to any swap, hedge,
derivative, or similar instrument. For the avoidance of doubt, customer and
vendor Contracts entered into in the ordinary course of business and
confidentiality and nondisclosure agreements of the Company and its Subsidiaries
are outside the scope of clause (ii) of the immediately preceding sentence.

2.8          Absence of Certain Changes or Events. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, since November 30, 2018, except
as disclosed in this Agreement (or its exhibits or schedules) or, after the date
hereof, otherwise approved by Buyer as and if required under the terms of this
Agreement, the Company and its Subsidiaries have 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.

2.9          Litigation. Except as set forth on Section 2.9 of the Company
Disclosure Schedule, as of the date hereof, there is no private or governmental
Action pending before any Governmental Authority or, to the Knowledge of the
Company, threatened against the Company or its Subsidiaries or, to the Knowledge
of the Company, threatened against any of its properties, officers, directors or
stockholders (in their capacities as such). There is no judgment, decree or
order against the Company or its Subsidiaries. Except as set forth on Section
2.9 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.

13

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

2.10        Governmental Authorization. Except as set forth on Section 2.10 of
the Company Disclosure Schedule, the Company holds all Permits (a) pursuant to
which the Company or its Subsidiaries currently operate or hold 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, 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.

2.11        Real Property.

(a)          The Company and its Subsidiaries do not own any parcel of real
property.

(b)          Section 2.11(b) of the Company Disclosure Schedule sets forth a
correct and complete list of the real property currently leased by the Company
or its Subsidiaries, 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 or one of its Subsidiaries 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 2.11(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 or any of its Subsidiaries
under any Lease which default has not been cured, waived or rescinded as of the
date hereof.

(e)          Neither the Company nor any of its Subsidiaries have 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 and its
Subsidiaries in the operation of its Business.

2.12        Title to Assets; Related Matters.

(a)          As of the date hereof, the Company and its Subsidiaries own or have
a valid leasehold interest in, all of their respective 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 and its Subsidiaries (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.

14

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          As of the date hereof, the tangible assets of the Company and its
Subsidiaries include all of the material tangible assets that are adequate and
sufficient to operate the business of the Company and its Subsidiaries in the
same manner immediately after the Closing as was operated by the Company and its
Subsidiaries on the date of this Agreement.

(c)          Neither the Company nor the Subsidiaries lease personal property
with a value of Twenty Five Thousand Dollars ($25,000) or more. As of the date
hereof, tangible assets leased by the Company or its Subsidiaries are free from
material patent defects, and, to the Knowledge of the Company, material latent
defects, and are reasonably suitable for the purposes for which they are
currently being used by the Company or its Subsidiaries.

(d)          There are no conditions affecting any such tangible property or
assets, or, to the Knowledge of the Company, developments currently existing
which, individually or in the aggregate, would reasonably be expected to
materially detract from the value of such tangible property or assets, or
materially interfere with the use of any such tangible 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 or its Subsidiaries to one or more of the Sellers at or prior to Closing
(the “Excluded Assets”).

2.13        Intellectual Property.

(a)          Section 2.13(a) of the Company Disclosure Schedule identifies:
(i) each registered and unexpired patent that has been issued to the Company or
its Subsidiaries with respect to any of the Intellectual Property; (ii) each
pending patent application or application for registration which the Company or
its Subsidiaries have made with respect to any of the Intellectual Property;
(iii) each currently registered trademark and currently registered service mark
owned by the Company or its Subsidiaries; (iv) each trademark and service mark
owned by the Company or its Subsidiaries which is the subject of a pending
application; (v) each common law or otherwise unregistered trademark, or service
mark owned or purportedly owned by the Company or its Subsidiaries; (vi) each
registered domain name owned by the Company or its Subsidiaries; and (vii) each
material license or agreement, that the Company or its Subsidiaries have entered
into with respect to any of the foregoing items of Intellectual Property
described in clause (i) through (vi), except for limited and non-exclusive
licenses granted in the ordinary course of business to vendors and services
providers in connection with providing services to the Company or as part of
licenses for commercially available software. With respect to each item of
Intellectual Property identified in Section 2.13(a) of the Company Disclosure
Schedule: (i) except for the License Agreement with Clark Pest Control, Inc.
dated October 19, 2000 (“Clark Pest Control License Agreement”) and the
Agreement with Clarke Environmental Mosquito Management, Inc. dated April 20,
1998, the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or agreement prohibiting or limiting the Company’s or its
Subsidiaries’ use thereof; (ii) no action, suit or proceeding is pending or has
been 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. No written
(or, to the Knowledge of the Company, oral) license, agreement, or venture has
been granted to any Person for the right to make, use, sell or offer to sell,
the patent(s) or application(s) identified in Section 2.13(a) of the Company
Disclosure Schedule.

15

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Section 2.13(b) of the Company Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that the Company or
its Subsidiaries use pursuant to a written license or agreement and is material
to the Business (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 identified in Section 2.13(b)
of the Company Disclosure Schedule: (i) the license or agreement covering the
item is legal, valid, binding and enforceable against the Company and/or its
Subsidiaries, and in full force and effect except where the failure to be would
not have a Material Adverse Effect; (ii) the Company and/or its Subsidiaries are
not in material breach or default of the license or agreement; and (iii) the
Company and its Subsidiaries have 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.

(c)          To the Knowledge of the Company, (i) the Company has neither sent
nor has it received material notices or material communications relating to an
alleged violation of the Digital Millennium Copyright Act of 1998; (ii) except
as indicated in Section 2.13(c)(ii) of the Company Disclosure Schedule, the
Company has neither sent nor has it received any material cease and desist
letters with respect to any Intellectual Property identified in Section 2.13(a)
of the Company Disclosure Schedule that has not been resolved favorably to the
Company; and (iii) the Company either owns or has the right to use copyrightable
content, including, but not limited to any advertising, marketing, Websites,
designs, photographs, manuals, brochures, instruction sheets, or any other
printed or electronic works currently used in and material to the business.

2.14        Taxes. Except as set forth in Section 2.14 of the Company Disclosure
Schedule:

(a)          The Company and its Subsidiaries have timely filed (taking into
account all applicable extensions) all Tax Returns required to have been filed
under applicable Laws and the Company and its Subsidiaries have paid all Taxes
required to be paid in respect of such taxable periods by the Company and its
Subsidiaries. The Tax Returns filed with respect to the Company and its
Subsidiaries are true, correct and complete in all material respects. The
Company and its Subsidiaries will not have any liability for Taxes for any
period ending on or before the Closing Date, or that portion of any Straddle
Period up to and including the Closing Date, with respect to the operation of
the Business, and transactions occurring, on or before the Closing Date, other
than those liabilities for Taxes reflected as reserves on the Company Financial
Statements, as otherwise incurred in the ordinary course of business after the
date of the Company Financial Statements or as a result of the transactions
contemplated by this Agreement (including the Section 338(h)(10) Election).

16

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Neither the Company nor any of its Subsidiaries have (i)
consummated or participated in, nor are 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.

(c)          The Company and its Subsidiaries have not received notice that the
IRS or any other Governmental Authority has asserted against the Company or its
Subsidiaries 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 or its Subsidiaries 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 or any of its Subsidiaries (as the
case may be) does not file Tax Returns that the Company or such Subsidiary (as
the case may be) are 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.

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

(e)          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 or its Subsidiaries involving: (i) the assessment or
collection of Taxes, or (ii) a claim for refund made by the Company or its
Subsidiaries with respect to Taxes previously paid.

(f)          All amounts that are required to be collected or withheld by the
Company or its Subsidiaries, or with respect to Taxes of the Company and its
Subsidiaries, 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.

(g)          Neither the Company nor any Subsidiary (i) has 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) or (ii) has any
liability for the Taxes of any Person (other than the Company and its
Subsidiaries) 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.

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

17

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

(j)          Neither the Company nor its Subsidiaries have participated in, or
cooperated with, an international boycott within the meaning of Section 999 of
the Code.

(k)          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 or
its Subsidiaries.

(l)          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 GAAP applied in a manner consistent with
past practices. With respect to the Interim Financial Statements, such accruals
or reserves will be adjusted in the ordinary course of business in accordance
with GAAP in a manner consistent with that used in prior taxable periods.

(m)          There are no outstanding balances of deferred gain or loss accounts
related to deferred intercompany transactions as described in Treasury
Regulation Section 1.1502-13 (or predecessor regulations) or excess loss
accounts described in Treasury Regulation Sections 1.1502-32 or 1.1502-19 (or
predecessor regulations) or similar items, of the Company or its Subsidiaries
that will be recognized or otherwise taken into account as a result of the
Transaction.

(n)          The Company and its Subsidiaries are 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.

(o)          The Company and its Subsidiaries have 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.

(p)          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 and its Subsidiaries for all
taxable years ending on or after December 31, 2014.

(q)          Neither the Company nor any of its Subsidiaries 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. The Company has not 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(i) 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.

18

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

(s)          Neither the Company nor its Subsidiaries will 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.

Notwithstanding any other provision of this Agreement, the Company is not making
and shall not be construed to have made any representation or warranty as to (i)
the amount or availability of any net operating loss, capital loss, tax credit,
tax basis or other tax attribute, or (ii) any Tax position that the Buyer or any
of its Affiliates (including the Company and any of its Subsidiaries) may take
with respect to any taxable period (or portion thereof) beginning on or after
the Closing Date.

 

2.15          Employee Benefit Plans.

(a)          List of Plans. Section 2.15(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, whether or not in writing, (i) which provides benefits or
compensation to current or former employees, leased employees, independent
contractors, officers or directors or any beneficiaries thereof; (ii) which is
currently maintained, administered, contributed to or required to be contributed
to by the Company or any Subsidiary, or (iii) to which the Company or any
Subsidiary is or has been a party or has had, or could have any liability
whether accrued, contingent or otherwise (collectively, the “Company Plans”).

19

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Plan Documentation. With respect to each Company Plan, the Company
has made available to Buyer true, accurate and complete copies of: (i) the
current plan documents and all amendments thereto; (ii) a written description of
any Company Plan that is not in writing; (iii) trust agreements, insurance and
group annuity contracts, and other funding vehicles; (iv) any award certificates
or agreements issued under the Company Plan; (v) the current summary plan
descriptions and summary of material modifications or other plan descriptions;
(vi) the most recent determination or opinion letter from the IRS; (vii) the
charter or by-laws for any fiduciary committee of the Company Plan; (viii) the
investment policy statement; (ix) 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 safe harbor 401(k) plan
notices, and Women’s Health and Cancer Rights notice); (x) the HIPAA privacy and
security policies and procedures; (xi) the most recent annual filings made with
the IRS (other than Form 5500); and (xii) any other Company Plan-related
document requested in writing by Buyer.

(c)          Reliance on Plan Documents. Except as provided pursuant to Sections
2.15(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 or any Subsidiary. 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 a material
adverse economic consequence to the Company, a Subsidiary, or Buyer and its
Affiliates.

(d)          Material Compliance. Each of the Company Plans is, and has been,
maintained, administered, and operated in all material respects in accordance
with its terms and 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 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. In particular and without
limiting the foregoing:

(i)          Neither the Company nor any Subsidiary 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
Subsidiary, 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;

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

(iii)        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);

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

20

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(v)         All notices 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 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); and (ii) neither the Company nor its
Subsidiaries have sponsored, maintained or contributed to, or otherwise could
have any liability with respect to, any Benefit Plan subject to Title IV of
ERISA.

(f)          Post-Employment Welfare Plans. 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)          Except as would not be material, all contributions (including
employee salary reduction contributions), premiums or other payments by the
Company or the Subsidiaries 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)         Except as would not be material, to the extent required in
accordance with GAAP, the Company and the Subsidiaries have made, and as of the
Closing Date will have made, appropriate entries in their financial records and
statements 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. The Transaction 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; or (iv) increase the amount payable or
give rise to any other obligation pursuant to any Company Plan.

21

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(i)           ERISA Affiliates. The Subsidiaries are, and have been, the only
ERISA Affiliates.

2.16        Employee Matters.

(a)          Section 2.16(a) of the Company Disclosure Schedule contains a true
and complete list of all employees who are employed by the Company or
Subsidiaries as of the date of this Agreement.

(b)          Except as disclosed in Section 2.16(b) of the Company Disclosure
Schedule, there are no Actions pending, or, to the Knowledge of the Company,
threatened (meaning any informal, formal, written or verbal complaint related to
an alleged violation of the law as enumerated in this section) or reasonably
anticipated relating to any labor and employment, employee benefits,
state/municipal leave, wage and hour, state wage orders (including, but not
limited to, overtime pay, rest and meal periods, itemized wage statements, and
termination pay), workers’ compensation, workplace health and safety or human
rights or discrimination or retaliation 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 has paid, or has accurately reflected in its books and
records, all compensation, remuneration, salaries, wages, bonuses, fringe
benefits, incentives, and other material compensation, including termination and
severance pay (if applicable) accruing up to the Closing in respect of all
current and former employees of the Company and its Subsidiaries. There are no
bonuses or incentives that are payable to employees of the Company in respect of
projects or work undertaken for the period prior to and ending on Closing.

(d)          There are no (i) agreements providing for payments to any director,
officer, employee or independent contractor in connection with a change of
control of the Company, or (ii) agreements 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 or its Subsidiaries over or beyond those set out in
such contracts of employment or Company Plans.

22

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(e)          Other than as set forth in Section 2.16(e) of the Company
Disclosure Schedule, none of the full time current employees or independent
contractors of the Company or its Subsidiaries receiving annual compensation
over Twenty Five Thousand Dollars ($25,000) 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 2.16(e) of the Company Disclosure Schedule, since December
31, 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 key employee or independent
contractor of the Company or its Subsidiaries, 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.

(f)          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.

(g)          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, sick leave pay, 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, 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.

2.17        Material Contracts.

(a)          Section 2.17 of the Company Disclosure Schedule sets forth a
correct and complete list of the following Contracts to which the Company or any
of its Subsidiaries is currently a party (other than Company Plans set forth on
Section 2.15(a) of the Company Disclosure Schedule) (all such Contracts, the
“Material Contracts”):

(i)          any voting trust or other agreements affecting the voting rights of
holders of the Capital Stock of the Company to which any of the Sellers or the
Company is a party other than the Company Charter Documents and the Subsidiary
Charter Documents;

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

(iii)        any Contracts relating to the making of any loan or advance by the
Company or any of its Subsidiaries;

23

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(iv)        all Contracts to which the Company or any of its Subsidiaries 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 or Intellectual
Property) of the Company and its Subsidiaries for which the annual rent exceeds
Fifty Thousand Dollars ($50,000);

(vi)        all Contracts for capital expenditures or the acquisition or
construction of fixed assets requiring the payment by the Company or any
Subsidiary of an amount in excess of Fifty Thousand Dollars ($50,000) per
Contract;

(vii)       all current Contracts with Clients and Vendors;

(viii)      any Contracts with sales agents 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 or any of its Subsidiaries with respect to
any line of business or geographic area in which the Company or any Subsidiary
is currently engaged (excluding, for avoidance of doubt, any employee
non-solicit and/or no-hire covenants entered into by the Company or any of its
Subsidiaries in the ordinary course of business);

(x)          any license, sublicense or royalty agreement relating to items of
Intellectual Property required to be identified in Section 2.13(a) and Section
2.13(b) of the Company Disclosure Schedule;

(xi)         any Contract that requires the Company or its Subsidiaries to make
payments in an amount greater than Fifty Thousand Dollars ($50,000) per annum
that is not terminable without penalty upon less than six (6) months prior
written notice by the Company or its Subsidiaries;

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

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

(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 or any
Subsidiary is a party.

24

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Complete copies of each Material Contract, including all material
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 or any of its Subsidiaries, as applicable, subject
only to the effect, if any, of (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). Except as set forth
in Section 2.17 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 or any of its
Subsidiaries, as applicable, under any Material Contract and otherwise has no
Knowledge of any such breach by the Company or any of its Subsidiaries, as
applicable, 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 default by the Company or any of its Subsidiaries), nor any 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 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 2.5(a) of the Company Disclosure
Schedule as are required thereunder in connection with the Transaction. As of
the date hereof, 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.

2.18        Transactions with Affiliates. Other than as set forth in Section
2.18 of the Company Disclosure Schedule, there are no loans, leases, royalty
agreements or other continuing transactions with continuing obligations between
the Company or its Subsidiaries 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. 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 or its Subsidiaries in the conduct of the
Business or, other than as set forth in Section 2.18 of the Company Disclosure
Schedule, 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 or stockholder.

25

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

2.19          Environmental Matters.

(a)          Except as would not reasonably be expected to result in a Material
Adverse Effect, the Company and its Subsidiaries are, and at all times during
the previous five (5) years have been, in compliance 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
Permits issued pursuant to Environmental Law for the ownership of its properties
and assets and the operation of its business as presently conducted, including
Permits relating to the Handling and Discharge of Hazardous Substances; and
(iv) all applicable writs, orders, judgments, injunctions, 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 Permits 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)          Except as would not reasonably be expected to result in a Material
Adverse Effect, neither the Company nor its Subsidiaries have 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 or its Subsidiaries (other than in
the ordinary course of business in compliance in all material respects with
applicable Environmental Laws) for which the Company or any of its Subsidiaries
may be liable; 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 or its Subsidiaries 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 material violation
of any applicable Environmental Laws for which the Company would reasonably be
liable or responsible.

26

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(d)          Section 2.19 of the Company Disclosure Schedule identifies the real
property currently or previously owned or leased by the Company or its
Subsidiaries which have involved the Handling or Discharge of Hazardous
Substances for which the Company or any of its Subsidiaries may reasonably be
liable.

(e)          This Section 2.19 contains the complete set of representations and
warranties offered by the Company pursuant to or related to Environmental Law.

2.20        Pest Treatment; Termite Matters.

(a)          Except as would not reasonably be expected to result in a Material
Adverse Effect, the Company and its Subsidiaries are in 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 and its Subsidiaries
now) applicable to the pest control segment of the Business. The Company and its
Subsidiaries have no material claims pending under any of the Company’s or
Subsidiaries’ pest control warranties or guarantees, and except as set forth on
Section 2.20(a) of the Company Disclosure Schedule, neither the Company nor its
Subsidiaries have received notice of any such material claims and, to the
Company’s Knowledge, no such material claims are threatened. Since January 1,
2014, neither the Company nor its Subsidiaries have received any written
communication from any Governmental Authority or manufacturer that alleges that
the Company or its Subsidiaries are not in material compliance with any such
federal, state, or local laws, rules or regulations or manufacturer treatments
and protocols.

(b)          To the Company’s Knowledge:

(i)          Company and its Subsidiaries are 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 and its Subsidiaries
now) relating 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 and its Subsidiaries have no claims pending under any
of the Company’s or Subsidiaries’ termite warranties or guarantees;

27

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(iv)        Neither the Company nor its Subsidiaries have received notice of any
such claims and no such claims are threatened;

(v)         No default exists under any customer contract and no event has
occurred which, but for the lapse of time or the giving of notice, or both,
would be such a default;

(vi)        All obligations of Company arising under the termite control
customer contracts up to and including the date hereof, both monetary and
non-monetary, have been satisfied;

(vii)       Except as set forth in Section 2.20 of the Company Disclosure
Schedule, since January 1, 2014, 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, 2014, neither the Company nor its Subsidiaries have
received any written communication from any Governmental Authority or
manufacturer that alleges that the Company or its Subsidiaries are not in
compliance with any such federal, state, provincial or local laws, rules or
regulations or manufacturer treatments and protocols.

2.21        Clients and Vendors. Section 2.21 of the Company Disclosure Schedule
contains a complete list of the names of the top 20 Clients and top 20 Vendors,
including the amount of revenue recorded for such Clients and the payments made
to such Vendors for the fiscal year ended December 31, 2017. To the Knowledge of
the Company, no event has occurred that has adversely affected, or would
reasonably be expected to adversely affect, the Company’s or its Subsidiaries’
relations with any Client or Vendor. Except as set forth in Section 2.21 of the
Company Disclosure Schedule, 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 its Subsidiaries or to
materially decrease its usage or supply of the Company’s or its Subsidiaries’
services or products.

2.22        Bankruptcy; Insolvency. Neither the Company nor its Subsidiaries
have (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.

2.23        Brokers or Finders. Except as otherwise set forth in Section 2.23 of
the Company Disclosure Schedule, neither the Company nor its Subsidiaries have
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.

28

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

2.24        No Restrictions. Except as set forth on Section 2.24 of the Company
Disclosure Schedule and other than Restrictions (as defined below) which do not
and will not materially affect the conduct of the Business, neither the Company
nor its Subsidiaries are a party to, and no asset or property of the Company or
its Subsidiaries are 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 or its Subsidiaries 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 or its Subsidiaries may sell, license,
market, distribute or support any products or provide services; or restricting
the markets, customers or industries that the Company or its Subsidiaries may
address in operating the Business; or restricting the prices which the Company
or its Subsidiaries may charge for its products or services), or includes any
grants by the Company or its Subsidiaries of exclusive rights or licenses.

2.25        Insurance. Section 2.25 of the Company Disclosure Schedule contains
a complete and accurate list and description of all insurance policies which are
owned by the Company or its Subsidiaries or which name the Company or its
Subsidiaries 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 and its Subsidiaries
are 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.

2.26        Bank Accounts. Section 2.26 of the Company Disclosure Schedule sets
forth (i) the name of each Person with whom the Company or its Subsidiaries
maintain 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.

2.27        Powers of Attorney. No power of attorney has been granted by the
Company or its Subsidiaries that is currently in effect. Neither the Company nor
its Subsidiaries have 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 or its Subsidiaries.

29

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

2.28        Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor, to the Knowledge of the Company, any other Person associated
with or acting for or on behalf of the Company or its Subsidiaries, has directly
or indirectly taken any action that would cause the Company or any of its
Subsidiaries to be in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended (“FCPA”). Neither the Company nor any of its
Subsidiaries, nor, to the Knowledge of the Company, any other Person associated
with or acting for or on behalf of the Company or any of its Subsidiaries, 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 (x) to obtain
preferential treatment in securing business, (y) to pay for preferential
treatment for business secured, (z) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any of its
Subsidiaries, 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 or any of its Subsidiaries. All payments to agents, consultants and
others made by the Company and its Subsidiaries have been in payment of bona
fide fees and commissions.

2.29        Privacy Laws. Except for such noncompliance or default that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect, the Company and each of its Subsidiaries have complied
with, and are not in default under, any applicable Laws related to data
protection or privacy; the Fair Credit Reporting Act; the Telephone Consumer
Protection Act (TCPA) (47 U.S.C. § 227), and the rules, regulations and guidance
promulgated thereunder issued by the Federal Communications Commission (47
C.F.R. pts. 64, 68); the Telemarketing and Consumer Fraud and Abuse Prevention
Act (15 U.S.C. §§ 6101–08), as implemented by the Telemarketing Sales Rule
issued by the Federal Trade Commission (16 C.F.R. pt. 310); and all Laws that
apply to outbound telemarketing or other telephone contact, including text or
SMS messages, to landline or wireless numbers. This includes, without
limitation, ensuring any call made using an automatic telephone dialing system
or artificial or prerecorded voice is made with prior express consent, or prior
express written consent, of the called party, whichever is applicable, if
required by applicable Laws. Neither the Company nor any of its Subsidiaries has
received any written notice from any Governmental Authority asserting that the
Company or any of its Subsidiaries is in violation of or default with respect to
any of the foregoing, except for such noncompliance or default that would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

2.30        Disclosure.

(a)          No representation or warranty of the Company in this Agreement and
no statement in the Company Disclosure Schedule omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.

(b)          No notice given pursuant to Section 5.7 hereof will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.

(c)          Except for the representations and warranties expressly contained
in this Article II (as modified by the Company Disclosure Schedule) and
certificates delivered by the Company under Section 7.2(a) of this Agreement,
the Company has not made, and does not make, any other representations or
warranties, whether written or oral, express or implied, in connection with this
Agreement, the Transaction or the other transactions contemplated hereby.

30

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Article III
Representations and Warranties of Sellers

Each Seller, 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 Shares, that the statements contained in
this Article III are true and correct as of the date hereof, except as set forth
in the Sellers’ Disclosure Schedule delivered to Buyer concurrently with the
execution and delivery of this Agreement (the “Sellers’ Disclosure Schedule”),
which disclosure shall provide an exception to, or otherwise qualify, the
representations or warranties of the Sellers 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 Seller 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. Each Seller’s execution, delivery and performance of this Agreement
have been duly authorized and no other actions or proceedings on the part of
each Seller are necessary to authorize this Agreement and the Transaction. This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes the valid and binding obligation of each Seller, enforceable against
each Seller in accordance with its terms, subject to the effect, if any, of
(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).

3.2          Absence of Conflicts. The execution and delivery by such Seller of
this Agreement, the performance by such Seller of its obligations hereunder and
the consummation by such Seller of the Transaction will not (a) result in any
violation or breach of any agreement or, to the Seller’s Knowledge, any
Governmental Authority’s requirement, (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 Seller is a party or by which such Seller’s
properties or assets are bound, (c) assuming that the filings and consents
referred to in Section 2.5 and Section 5.6 of this Agreement are made or
obtained, result in any violation of any requirements of Law or any court order
applicable to such Seller or its respective properties or assets, except, with
respect to clauses (b) and (c), such triggering of payments, violations,
breaches, defaults, creation or loss of rights which would not reasonably be
expected to have a Material Adverse Effect.

31

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

3.3          Governmental and Third Party Approvals. Except for the notices and
consents listed on Section 3.3 of the Sellers’ Disclosure Schedule and those
regulatory approvals of Buyer and Company referenced in Section 5.6 of this
Agreement, to the Seller’s Knowledge, there is no requirement applicable to such
Seller 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 Seller of this Agreement, the due performance by
such Seller of its respective obligations hereunder or the lawful consummation
by such Seller of the Transaction, except for consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect.

3.4          Title to Securities. Such Seller holds of record, owns
beneficially, and has good and marketable title to all of those securities
listed opposite such Seller’s name on Schedule 1, free and clear of all
Encumbrances, other than Encumbrances imposed by United States federal, state,
provincial and foreign securities Laws, and has full and unrestricted power to
transfer such securities to Buyer. Other than this Agreement and as set forth in
Section 3.4 of the Sellers’ Disclosure Schedule, no Seller’s securities are
subject to any purchase option, call option, right of first refusal, preemptive
right, subscription right or any similar right, any voting trust agreement or
any other similar agreement, including any agreement restricting or otherwise
relating to the voting, dividend rights or disposition of such securities. Upon
the sale, transfer and delivery of the securities to Buyer pursuant to this
Agreement, Buyer will acquire all interests of such Seller in and to all of
Seller’s Capital Stock, free and clear of any Encumbrances, other than
Encumbrances related to the limitations imposed by United States federal, state,
provincial and foreign securities Laws.

3.5          Litigation. There are no Actions pending or, to the Seller’s
Knowledge, threatened against such Seller or to which such Seller is a party
(a) that relate to this Agreement or any action taken or to be taken by such
Seller 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 have a Material Adverse Effect.

3.6          Fees. Such Seller has not paid or become obligated to pay any fee
or commission to any broker, finder or other intermediary in connection with the
Transaction.

3.7          No Other Representations and Warranties. Except for the
representations and warranties expressly contained in this Article III (as
modified by the Sellers’ Disclosure Schedule), no Seller has made, and no Seller
makes, any other representations or warranties, whether written or oral, express
or implied, in connection with this Agreement, the Transaction or the other
transactions contemplated hereby.

Article IV
Representations and Warranties of Buyer

Buyer represents and warrants to the Company and Sellers, and acknowledges that
the Company and Sellers 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.

32

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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 adversely affect the ability of Buyer to perform its
obligations under this Agreement and the other Transaction Documents and
consummate the Transaction and the other transactions contemplated by the other
Transaction Documents.

4.2          Authority.

(a)          Buyer has all requisite corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents and to perform
its obligations hereunder and thereunder 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 adversely affect the ability of Buyer to perform its obligations
under this Agreement and the other Transaction Documents and would not prevent,
or materially alter or delay the consummation of the Transaction and the
transaction contemplated by the other Transaction Documents.

33

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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 adversely affect the ability of Buyer to perform its obligations
under this Agreement and the other Transaction Documents and consummate the
Transaction and the other transactions contemplated by the other Transaction
Documents or materially alter or delay the Transaction.

4.4          Sufficiency of Funds. On the date hereof and on the Closing Date,
Buyer has and will have sufficient immediately available funds to pay the
Purchase Price pursuant to this Agreement.

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.

4.6          Investment Experience. Buyer has knowledge and experience in
financial and business matters and is capable of evaluating the merits and risks
of the Transaction and the other transactions contemplated herein. Without
derogating from any of the above, Buyer is able to fend for itself and can bear
the economic risk of the Transaction and the other transaction contemplated
herein.

4.7          Independent Investigation; Non-Reliance.

(a)          Buyer acknowledges that it and its Representatives have been
permitted access to those books and records, facilities, equipment, tax returns,
contracts, insurance policies (or summaries thereof) and other properties and
assets of the Company and its Subsidiaries, which the Company posted in the
virtual dataroom or otherwise provided to Buyer or any of its Representatives,
and that it and its Representatives have had the opportunity to meet with
Company and its Subsidiaries personnel to discuss the business of the Company
and its Subsidiaries.

(b)          Buyer acknowledges and agrees that, except for the representations
and warranties expressly set forth in this Agreement, (i) neither the Sellers
nor the Company make, and none has made, any representations or warranties
whatsoever relating to the Sellers, the Company, its Subsidiaries or any of
their respective Affiliates, and Buyer is not relying on any representation or
warranty except for those expressly set forth in Article II and Article III,
(ii) any data, financial information, memorandum, presentations or any other
materials or information provided, addressed or made available to Buyer or
anyone on its behalf are not and shall not be deemed to be or include
representations or warranties unless any such materials or information is
subject to any expression representation or warranty set forth in Article II or
Article III and (iii) notwithstanding the foregoing, neither the Company nor any
Seller make any representations or warranties relating to any projections,
estimates, predictions or prospects (or the assumptions used in their
preparation) provided, addressed or made available to Buyer or anyone on its
behalf.

34

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Article V
Covenants

5.1          Normal Course. From the date hereof until the earlier of the
Closing Date and the termination of this Agreement, the Company and its
Subsidiaries shall, except as otherwise expressly contemplated by this Agreement
or as consented to by Buyer in writing, use its commercially reasonable efforts
to (a)(i) maintain, in all material respects, its current 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 and its
Subsidiaries 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 and its Subsidiaries to fulfill their
obligations in the ordinary course of business.

5.2          Conduct of Business. From the date hereof until the earlier of the
Closing Date and the termination of this Agreement, the Company and its
Subsidiaries shall not, except as directly or indirectly contemplated by this
Agreement, do, or propose to do, any of the following without the prior written
consent of Buyer, which consent shall not be unreasonably withheld:

(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 and its Subsidiaries to fulfill their 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;

(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 material
properties or assets, except in the ordinary course of business and other than
the distribution of the Excluded Assets;

35

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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) in the ordinary course of business or (C) to satisfy a
contractual commitment existing prior to the date of this Agreement; (ii) grant
any severance or termination pay to, or enter into or amend any employment or
severance agreements with, any employees or officers, other than (A) in the
ordinary course of business or (B) 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; or
(iv) establish, adopt, enter into or amend (except as may be required by Law) or
increase any benefits under any Company Plan, other than in the ordinary course
of business;

(f)          Amend any of the Company Charter Documents or Subsidiary 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 and
for advances for employee reimbursable expenses, 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, to defend or protect
its properties or assets, or to enforce the terms of this Agreement;

(i)          Enter into any material intellectual property license agreement
other than in the ordinary course of business;

(j)          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;

(k)          Accelerate the collection of any Accounts Receivable;

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

(m)          Create, incur, assume or otherwise become liable for any
indebtedness (other than the obligation to reimburse employees for travel and
business expenses or indebtedness incurred in connection with the purchase of
goods and services in the ordinary course of business consistent with past
practices) 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;

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

36

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(o)          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; or

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

Nothing contained in this Agreement shall give Buyer, directly or indirectly,
the right to control or direct the Company’s operations prior to the Effective
Time. Prior to the Effective Time, the Company shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its business, assets and operations

5.3          Access to Personnel, Books and Records Following Signing. Subject
to Section 5.11, from the date hereof until the earlier of the Closing and the
termination of this Agreement, the Company shall permit Buyer and its
Representatives, upon reasonable notice, (i) to have reasonable access to, and
examine and make copies of, all books and records of the Company and its
Subsidiaries and (ii) to have reasonable access to Company personnel, in both
cases for purposes of consummating the Transaction and the other transactions
contemplated hereby; provided, however, that (a) 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 that would
constitute a waiver of the attorney-client or other privilege, (c) the Company
will not be required to disclose personnel information that would violate
privacy rights of its employees or independent contractors, (d) Buyer and its
Affiliates and Representatives will not have any discussions with any of the
Company’s or its Subsidiaries’ customers, suppliers or vendors without the prior
written consent of the Company, and (e) 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 and other Antitrust Laws, or the provisions of
any agreement to which the Company or any of its Subsidiaries is a party.

5.4          Certain Tax Matters.

(a)          Section 338(h)(10) Election; Allocation of Purchase Price.

(i)          The Buyer and the Sellers shall join in the making of a timely
election under Section 338(h)(10) of the Code and other requirements of law with
respect to the purchase and sale of the Shares (the “Section 338(h)(10)
Election”). The parties understand and agree that the acquisition of the Shares
shall be treated as an asset sale for federal income tax purposes as a result of
the Section 338(h)(10) Election. Accordingly, the deemed Purchase Price shall be
allocated among the Company’s assets, and the Non-Compete Agreements as required
by the Code and set forth in a purchase price schedule prepared by the Buyer in
accordance with the methods and principles set forth on Schedule 6 hereto and
reasonably acceptable to the Stockholders’ Representative (the “Allocation
Schedule”). The Sellers shall pay any income tax imposed on the Company
attributable to the making of the Section 338(h)(10) Election, including (i) any
tax imposed under Code Section 1374, (ii) any tax imposed under Treasury
Regulation Section 1.338(h)(10)-1(d)(2), (iii) any depreciation recapture or
other such tax, or (iv) any state, local or non – U.S. Taxes imposed on the
Company’s deemed gain.

37

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(ii)         Within ninety (90) days of the Closing Date, the Buyer shall
deliver to the Stockholders’ Representative executed original IRS Forms 8023 (or
successor form) (together with any schedules or attachments thereto) for the
purpose of making the Section 338(h)(10) Election for federal income tax
purposes. The Buyer shall be responsible for the preparation and filing of all
forms and documents required to effectuate the Section 338(h)(10) Election. In
addition to the Form 8023, the Sellers shall execute (or cause to be executed)
and deliver to the Buyer such additional documents or forms as are reasonably
requested by the Buyer to complete properly the Section 338(h)(10) Election at
least thirty (30) days prior to the date such Section 338(h)(10) Election is
required to be filed. The Buyer and the Sellers shall file all income Tax
Returns and statements, forms and schedules in connection therewith in a manner
consistent with the Section 338(h)(10) Election and shall take no position
contrary thereto unless required to do so by applicable requirements of Law.

(iii)        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 the
Stockholders’ Representative regarding any proposed revision to the Allocation
Schedule, the parties shall in good faith use commercially reasonable efforts to
agree on such revision.

(iv)        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.

(b)          Tax Periods Ending on or Before the Closing Date. Stockholders’
Representative 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 and its Subsidiaries’
past practice (as applicable), all income Tax Returns with respect to the
Company and its Subsidiaries 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”). The
Stockholders’ Representative 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 Stockholders’
Representative at least five (5) Business Days prior to the due date of such
returns and Stockholders’ Representative shall consider in good faith all
changes to such returns reasonably requested by the Buyer.

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

38

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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 and
its Subsidiaries’ past practice (as applicable), any Tax Returns of the Company
for taxable periods ending on or prior to the Closing Date for non-income Tax
Returns and 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 Tax Returns
to the Stockholders’ Representative for review at least thirty (30) Business
Days prior to the due date hereof. The Stockholders’ Representative 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 the
Stockholders’ Representative 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 or its Subsidiaries (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). Sellers shall
not be responsible for any Taxes payable with respect to the portion of any
Straddle Period commencing after the Closing Date.

(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.

(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 5.4(d)
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.

39

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(i)          Buyer and the Stockholders’ Representative 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 5.4 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 the
Stockholders’ Representative, on behalf of the Sellers, agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company and its
Subsidiaries 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 the Stockholders’ Representative, 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 the Stockholders’
Representative, as the case may be, shall allow the other to take possession of
such books and records.

(ii)         Buyer and the Stockholders’ Representative 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.

(f)          Prior Period Tax Treatment. Neither Buyer, the Company nor any of
its Subsidiaries 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 Prior Period (including Prior Periods described under
Section 5.4(a) and (b)) without the prior written consent of the Stockholders’
Representative. In addition, neither Buyer, the Company nor any of its
Subsidiaries shall cause the Company or any of its Subsidiaries to elect to
waive any carryback of net operating losses under Section 172(b)(3) of the Code
(or any analogous or similar state, local or non-U.S. law) on any Tax Return of
the Company and its Subsidiaries in respect losses, if any, attributable to a
Prior Period.

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

40

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

5.5          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 apprised 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 the Stockholders’ Representative 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, the Stockholders’
Representative, the Sellers or the Company in connection with the Transaction.

(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
the Stockholders’ Representative 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 5.5(b).

41

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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 and Sellers on the other hand, shall
not, and shall cause its Subsidiaries and 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.

5.6          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, all of which are listed on
Schedule 5.6 hereto.

5.7          Notification. From the date hereof until the Closing Date, if the
Company becomes aware of any material 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. Notwithstanding the foregoing, the delivery of any such
written notice 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.

5.8          Confidentiality; Public Announcement. From and after the execution
of this Agreement, each of Buyer, Company, Stockholders’ Representative, the
Principals and each Seller shall, and shall cause each of their respective
Affiliates to, hold, and shall use their reasonable best efforts to cause their
respective Representatives to hold, in confidence any and all information,
whether written or oral, concerning the Transaction, this Agreement and the
transactions contemplated in the Transaction Documents (the “Confidential
Information”), except to the extent that the Buyer, Company, Stockholders’
Representative or Seller, as applicable, disclosing such Confidential
Information (the “Disclosing Party”) can show that such Confidential Information
(a) is generally available to and known by the public through no fault of the
Disclosing Party, any of its Affiliates or their respective Representatives; or
(b) was lawfully acquired by such Disclosing Party, any of its Affiliates or
their respective Representatives from and after the Closing from sources which
are not prohibited from disclosing such Confidential Information by a legal,
contractual or fiduciary obligation. If the Disclosing Party or any of its
Affiliates or their respective Representatives are compelled to disclose any
Confidential Information by judicial or administrative process or by other
requirements of Law, the Disclosing Party shall promptly notify the other
parties hereto in writing and shall disclose only that portion of such
Confidential Information which the Disclosing Party is advised by its counsel in
writing is legally required to be disclosed, provided that the Disclosing Party
shall use reasonable best efforts to obtain an appropriate protective order or
other reasonable assurance that confidential treatment will be accorded such
Confidential Information. Notwithstanding the foregoing, the parties acknowledge
and agree (i) that the Buyer has or will, as required by applicable Law, make
any such filings or issue any such notices required in connection with the
Transaction and the consummation of the transactions described in the
Transaction Documents, including without limitation, notices and filings
required by the HSR Act and other Antitrust Laws; and (ii) that the Buyer may
issue a public announcement of the Transaction, provided, however, that prior to
making such announcement, Buyer shall deliver a draft of such announcement to
the Stockholders’ Representative and shall give the Stockholders’ Representative
reasonable opportunity to comment thereon and shall use reasonable efforts to
incorporate such comments therein.

42

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

5.9          Employee Benefits.

(a)          Unless otherwise agreed between [****] and [****], Buyer agrees
that each employee of the Company and its Subsidiaries who continues employment
with Buyer or any of its Affiliates after the Closing Date (a “Continuing
Employee”) shall be provided, for a period extending until the earlier of the
termination of such Continuing Employee’s employment with such entities or the
first anniversary of the Closing Date, with (i) base salary or wage rate (as
applicable) and target annual incentive opportunity not less than the base
salary or wage rate (as applicable) and target annual incentive opportunity
provided by the Company or such Subsidiary to the Continuing Employee
immediately prior to the Closing, and (ii) benefits that are not materially less
favorable, in the aggregate, than the benefits provided by the Company or such
Subsidiary to the Continuing Employee immediately prior to the Closing. Nothing
in this Agreement (i) shall require Buyer or any of its Affiliates to continue
to employ any particular Company employee following the Closing Date, or (ii)
shall be construed to prohibit Buyer or any of its Affiliates from amending or
terminating any Company Plan.

(b)          Buyer shall ensure that, as of the Closing Date, each Continuing
Employee receives full credit (for all purposes, including eligibility to
participate, vesting, vacation entitlement and severance benefits, but excluding
benefit accrual) for service with the Company and its Subsidiaries (or
predecessor employers to the extent the Company provides such past service
credit under its employee benefit plans) under each of the comparable employee
benefit plans, programs and policies of Buyer and its Affiliates in which such
Continuing Employee becomes a participant; provided, however, that no such
service recognition shall result in any duplication of benefits. As of the
Closing Date, Buyer shall, or shall cause the relevant Affiliate to, credit to
Continuing Employees the amount of vacation time that such employees had accrued
under any applicable Company Plan as of the Closing Date. With respect to each
health or welfare benefit plan maintained by Buyer or any of its Affiliates for
the benefit of any Continuing Employees, Buyer shall (i) cause to be waived any
eligibility waiting periods, any evidence of insurability requirements and the
application of any pre-existing condition limitations under such plan, and (ii)
cause each Continuing Employee to be given credit under such plan for all
amounts paid by such Continuing Employee under any similar Company Plan for the
plan year that includes the Closing Date for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the applicable plan maintained by
Buyer or any of its Affiliates for the plan year in which the Closing Date
occurs.

43

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(c)          Buyer shall, or shall cause the relevant Affiliate to, assume and
honor in accordance with their terms all deferred compensation plans, agreements
and arrangements, severance and separation pay plans, agreements and
arrangements, and written employment, severance, retention, incentive, change in
control and termination agreements (including any change in control provisions
therein) set forth in Section 2.15(a) of the Company Disclosure Schedule
applicable to employees of the Company and its Subsidiaries, in the same manner
and to the same extent that the Company or such Subsidiary would be required to
perform and honor such plans, agreements and arrangements if the transactions
contemplated by this Agreement had not been consummated.

(d)          To the extent requested by Buyer in writing delivered to at least
five (5) Business Days prior to the Closing Date, the Company shall take all
actions necessary to terminate any or all Benefit Plans, including each Benefit
Plan intended to qualify as a cash or deferred arrangement under Section 401(k)
of the Code, effective no later than the day immediately preceding the Closing
Date.

(e)          As soon as is reasonably practicable after Closing, Buyer shall
cause the Buyer’s 401(k) plan to accept complying rollovers from the Company’s
employees of their accounts under the Company’s 401(k) plan into the Buyer’s
401(k) plan.

5.10        Directors and Officers Insurance.

(a)          Subject to the Company purchasing the D&O Tail Insurance (as
defined below), for a period of seven (7) years following the Closing, Buyer or
its successor shall cause the Company to fulfill and honor the obligations of
the Company and its Subsidiaries pursuant to applicable Law, pursuant to any
indemnification provisions under the Company Charter Documents or the Subsidiary
Charter Documents and pursuant to the indemnification agreements set forth in
Schedule 5.10 hereto (the “Indemnification Schedule”) that contain any
indemnification, reimbursement, advancement of expenses, hold harmless and
exculpation from liability provisions, in any case, with each individual who is
a party to such agreements, and that at any time on or prior to the Closing Date
was a director, officer or other covered person of the Company and its
Subsidiaries (such directors, officers and other covered persons being herein
called the “Company Indemnitees”), in each case subject to applicable Law,
insofar as such provisions relate to the Company Indemnitees, regardless of
whether any proceeding relating thereto is commenced before or after the
Closing. The rights of each Company Indemnitee under this Section 5.10 shall be
enforceable by each such Company Indemnitee or his or her heirs, and they shall
be intended third party beneficiaries of this Section 5.10. If any claim is made
against or involves any Company Indemnitee on or prior to the seventh (7th)
anniversary of the Closing, the provisions of this Section 5.10 shall continue
in effect with respect to such claim until the final disposition thereof.
Notwithstanding the foregoing, the obligations of Buyer and the Company
(following the Closing) (i) shall be subject to any limitation imposed by
applicable Law, and (ii) shall not release any Company Indemnitee from his or
her obligations pursuant to this Agreement, nor shall such Company Indemnitee
have any right of contribution, indemnification or right of advancement from
Buyer, the Company or their respective Subsidiaries or successors with respect
to any particular amount of Damages recoverable by any of the Buyer Indemnified
Parties against such Company Indemnitee in his or her capacity as a Seller
Indemnifying Party pursuant to this Agreement. After the Closing and for a
period of seven (7) years following the Closing, Buyer shall not make any change
to the Company Charter Documents or the Subsidiary Charter Documents in a manner
that will cancel or derogate from the rights of the Company Indemnitees under
this Section 5.10(a).

44

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          The Company shall purchase, prior to or concurrent with the
Closing, a prepaid directors’ and officers’ liability insurance policy or
policies (i.e., “tail coverage”) for acts or omissions occurring prior to the
Closing that will remain in effect for a period of seven (7) years after the
Closing (the “D&O Tail Insurance”). Any cost and expenses related to the
acquisition of such insurance shall be considered part of the Transaction
Expenses. Buyer shall, and shall cause the Company to, cooperate in good faith
with the Company Indemnitees to use the tail coverage with respect to claims
relating to acts or omissions occurring prior to the Closing; provided, however,
that nothing herein shall require the Company or Buyer or any of its Affiliates
to incur any cost or expense (with respect to the Company, following the
Closing). After the Closing, neither Buyer nor any of its Affiliates, including,
from and after the Closing, the Company, will cancel the D&O Tail Insurance.

(c)          Each of Buyer and the Company Indemnitees shall reasonably
cooperate, and cause their respective Affiliates to reasonably cooperate, in the
defense of any action requiring indemnification under this Section 5.10 and
shall provide access to properties and individuals as reasonably requested and
furnish or cause to be furnished records, information and testimony as may
reasonably be requested.

(d)          The obligations of Buyer and the Company under this Section 5.10
shall not be terminated or modified in such a manner as to adversely affect any
Company Indemnitee without the written consent of such Company Indemnitee.

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.

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:

45

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

(c)          No Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Governmental Order which is in effect and has the effect
of making the Transaction illegal, otherwise restraining or prohibiting
consummation of such Transaction or causing the Transaction to be rescinded
following completion thereof.

(d)          The Company shall have received all consents, authorizations,
orders and approvals from the Governmental Authorities referred to in Section
5.6 and Buyer shall have received all consents, authorizations, orders and
approvals from the Governmental Authorities referred to in Section 5.6 in each
case, in form and substance reasonably satisfactory to Buyer and the
Stockholders’ Representative, respectively, and no such consent, authorization,
order and approval shall have been revoked.

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 of the Company
set forth in Article II, the representations and warranties of the Sellers 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
as so qualified, in all respects) 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 or time, the
accuracy of which shall be determined as of such specified date or time in all
respects); provided, however, that if the representations and warranties made by
the Company were not true and correct in all respects on and as of the date
hereof, the Company still will be deemed to have satisfied the condition in this
Section 6.2(a) as long as the Company cures all inaccuracies existing as of the
date hereof such that all such representations and warranties are true and
correct in all respects as of the Closing.

(b)          The Company and the Sellers shall have duly performed and complied
in all material respects with all agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date; provided, that, with respect to agreements, covenants and
conditions that are qualified by materiality, the Company and the Sellers shall
have performed such agreements, covenants and conditions, as so qualified, in
all respects.

46

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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 and its Subsidiaries from the
secretary of state or similar Governmental Authority of the jurisdiction under
the Laws in which the Company and its Subsidiaries are organized.

(e)          Sellers shall have delivered, or caused to be delivered, to Buyer
stock certificates evidencing the Shares (or Lost Certificate Affidavits), free
and clear of Encumbrances (other than Encumbrances pursuant to applicable
securities Laws and the Company Charter Documents), accompanied by stock powers.

(f)          [****] shall have entered into an employment agreement with Buyer
which shall be reasonably acceptable to [****] and the Buyer and which shall
have the following basic terms and conditions: three (3) year employment term,
annual base salary of [****] Dollars ($[****]) and a benefit package consistent
with similarly situated employees of Buyer.

(g)          Each of [****], [****], [****], [****], [****], and [****]shall
have entered into employment agreements with Buyer which shall be reasonably
acceptable to them and Buyer (the “Employment Agreements”).

(h)          The termination of the agreements listed on Schedule 7.

(i)          The Indebtedness listed on Schedule 8 shall have been repaid and
the associated Encumbrances shall have been released.

(j)          The distribution of the Excluded Assets.

(k)          The execution and delivery of the Real Estate Purchase Agreement
and the closing of the transactions contemplated therein.

(l)          The execution and delivery of the Distribution Purchase Agreement
and the closing of the transactions contemplated therein.

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

47

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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 as so qualified, in all respects) 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 or time (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of such specified date or time in
all respects); provided, however, that if the representations and warranties
made by Buyer were not true and correct in all respects on and as of the date
hereof, Buyer still will be deemed to have satisfied the condition in this
Section 6.3(a) as long as Buyer cures all inaccuracies existing as of the date
hereof such that all such representations and warranties are true and correct in
all respects as of the Closing.

(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 Sellers.

(d)          The execution and delivery of the Real Estate Purchase Agreement
and the closing of the transactions contemplated therein.

(e)          The execution and delivery of the Distribution Purchase Agreement
and the closing of the transactions contemplated therein.

Article VII
Closing

7.1          Closing. Subject to the terms and conditions of this Agreement, the
purchase and sale of the Shares contemplated hereby shall take place at a
closing (the “Closing”) to be held at 10:00 a.m., Eastern Standard time, no
later than 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 the Company, or at such other time or on such
other date or at such other place as Sellers and Buyer may mutually agree upon
in writing (the day on which the Closing takes place being the “Closing Date”;
12:01:01 AM on the Closing Date being the “Effective Time”).

7.2          Company and Sellers Closing Deliveries. At the Closing, the Company
and Sellers 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 President and/or Chief Executive Officer of the Company,
certifying that the conditions set forth in Section 6.1(b) and 6.2(a)-(b) have
been satisfied;

48

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          evidence reasonably satisfactory to Buyer of the repayment in full
of all Indebtedness 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 equity plans in effect;

(d)          a non-foreign affidavit dated as of the Closing Date, sworn under
penalty of perjury and in form and substance required under the Treasury
Regulations issued pursuant to Code Section 1445 stating that none of the
Sellers is a “foreign person” as defined in Code Section 1445;

(e)          written resignations of all officers and directors of the Company
and its Subsidiaries;

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

(g)          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;

(h)          certificates of trust from each of the trustees of Sellers
certifying that each Seller is a valid and existing trust and that the trustees
of such trusts have the authority to execute, deliver and perform this Agreement
and the other Transaction Documents and the consummation of the Transaction and
the transactions contemplated by the Transaction Documents;

(i)          each Seller’s executed Transmittal Package (including the Release);

(j)          executed Employment Agreements; and

(k)          possession of the books and records of the Company.

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

(a)          the Closing Note pursuant to Section 1.3;

(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;

49

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(c)          Buyer’s executed counterpart to the Non-Competition Agreements; and

(d)          Evidence that, subject to compliance with Buyer’s employment
policies, procedures, and requirements, each of [****], [****] and [****] shall
have been offered continued employment with the Company for the period during
which the Company’s revenue may be counted toward Earnout Consideration (as
described in Schedule 3), for which they shall be offered compensation
commensurate with their employment compensation arrangements in existence on the
date of this Agreement.

Article VIII
Indemnification

8.1          Indemnification.

(a)          From and after the Closing, and subject to the provisions of
Section 8.2 and Section 8.3, the Sellers and the Principals (collectively, the
“Seller Indemnifying Parties”) shall, jointly and severally, indemnify and hold
harmless Buyer, the Company, and their respective Affiliates and their and their
respective Affiliates’ shareholders, members, directors, managers, officers,
employees, independent contractors, and agents (other than, in the case of the
Company, any of the Sellers) (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 the Company or any Seller of any of the
representations and warranties set forth in this Agreement; (B) breach of any
covenant to be performed by the Company under this Agreement at or prior to the
Closing; (C) breach of any covenant by any Seller under this Agreement or any
other Transaction Document; (D) a breach of any covenant by any Principal under
this Agreement or any other Transaction Document; (E) 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; (F) Fraud on the
part of Sellers, the Principals, or, prior to the Closing, the Company, or, with
respect to the Real Estate Purchase Agreement, Clarksons, or, with respect to
the Distribution Purchase Agreement, GeoTech; (G) any claim by any former or
other equity interest owner of the Company for any transaction prior to the
Closing involving Company Capital Stock or other equity interests of the
Company, (H) costs and expenses of the Company incurred but not paid in
connection with the Transaction prior to Closing and not taken into account in
calculating the Closing Working Capital amount; (I) any breach by the
Stockholders’ Representative of its obligations to the Sellers pursuant to this
Agreement, or any claim by any Seller arising out of the performance (or lack of
performance) of the duties and responsibilities of the Stockholders’
Representative under this Agreement; (J) any breach by any of Sellers,
Principals or Clarksons of the representations and warranties set forth in the
Real Estate Purchase Agreement; (K) any breach by any of Sellers, Principals or
GeoTech of the representations and warranties set forth in the Distribution
Purchase Agreement; (L) any Escheatment Liabilities attributable to any period
prior to the Closing; and (M) any items listed on Schedule 5 hereto (“Specified
Indemnification Obligations”).

50

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          Subject to the provisions of Section 8.2 and Section 8.3, each
Seller 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 Seller of his, her or its representations and warranties set
forth in Article III; or (B) a breach of any covenant of such Seller under this
Agreement.

(c)          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 Sellers and their Affiliates, and their
stockholders, directors, officers, employees and agents (the “Seller 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 Seller
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, or (C) Fraud on the part of Buyer.

(d)          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 Sellers and their respective Affiliates on
their Tax returns unless otherwise required by a Governmental Authority.

(e)          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.”

(f)          Notwithstanding anything in this Agreement to the contrary, the
Sellers shall not have any liability hereunder for any Damages arising as a
result of a failure of the Section 338(h)(10) Election to be effective, other
than as a result of Sellers’ failure to comply with the covenants set forth in
Section 5.4(a) hereof.

(g)          In no event will any of the Seller Indemnifying Parties make a
claim of any kind against the Company for contribution or otherwise with respect
to any Damages for which any of the Seller Indemnifying Parties are responsible
pursuant to this Section 8.1.

(h)          The Seller Indemnifying Parties shall not be liable under this
Article VIII for any Damages based upon or arising out of any inaccuracy in or
breach of any of the representations or warranties of Sellers contained in this
Agreement if Buyer had Knowledge of such inaccuracy or breach prior to the
Closing and failed to bring such inaccuracy or breach to Sellers’ attention.

51

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

8.2          Survival of Representations, Warranties and Covenants.

(a)          The Indemnifying Parties’ liability for Damages resulting from the
breach of any covenant, to the extent to be performed pre-Closing under this
Agreement, the Real Estate Purchase Agreement, the Distribution Purchase
Agreement, or breach of any representations or warranties under this Agreement,
the Real Estate Purchase Agreement, or the Distribution Purchase agreement shall
survive the Closing and continue until that date that is eighteen (18) months
following the Closing Date.

(b)          Notwithstanding Section 8.2(a), claims for indemnification based on
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 2.14 (Taxes); Section 2.15 (Employee Benefit
Plans); Section 2.19 (Environmental); Section 2.23 (Brokers or Finders); Section
3.1 (Power and Authority; Execution and Validity); Section 3.4 (Title to
Securities); Section 4.1 (Corporate Organization, Standing and Power); Section
4.2 (Authority); Escheatment Liabilities; Specified Indemnity Obligations;
claims for indemnification under Section 8.1(a)(E), (G), (H), and (I); claims
for indemnification under Section 3.01, Section 3.02, Section 3.03, Section
3.04, Section 4.01, and Section 4.02 of the Distribution Purchase Agreement, and
claims for indemnification under Section 3.1, Section 3.2, Section 3.11, and
Section 3.13 of the Real Estate Purchase Agreement shall survive through and
until that date that is sixty (60) days after the legal statute of limitations
for claims related to such matters has expired (the “Statute of Limitation
Claims”).

(c)          Notwithstanding Section 8.2(a), claims for indemnification based on
Fraud shall survive through and until that date that is the earlier of (i) eight
(8) years following the Closing Date and (ii) the date the legal statute of
limitations for claims related to such matters has expired.

(d)          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 or waived by the beneficiaries thereof.

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:

52

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(a)          The Seller Indemnifying Parties shall have no liability under
Section 8.1(a)(A), (J), and (K) for Damages resulting from (i) any individual
claim unless the Damages from such individual claim exceed [****] dollars
($[****]) (the “Threshold”), and (ii) unless the cumulative amount of Damages
for which the Seller Indemnifying Parties would, but for this provision, be
liable to the Buyer Indemnified Parties exceeds [****] Dollars ($[****]) (the
“Basket”), in which case, such Buyer Indemnified Parties shall be entitled to
indemnification only for Damages in excess of the Basket. For the avoidance of
doubt, the Seller Indemnifying Parties shall not have any liability under
Section 8.1(a)(A), (J), and (K) 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 Seller Indemnifying Parties and Sellers shall not in the
aggregate be liable for any Damages in excess of [****] Dollars ($[****]) (the
“Cap”); provided, however, with respect to Damages arising out of the Statute of
Limitations Claims (except for Specified Indemnity Obligations and claims for
indemnification under Section 3.1, Section 3.2, Section 3.11, and Section 3.13
of the Real Estate Purchase Agreement) or Fraud, the Seller Indemnifying Parties
shall not in the aggregate be liable for any Damages in excess of the actual
Purchase Price paid to Sellers under this Agreement; provided, further that with
respect to Damages arising out of Specified Indemnity Obligations the Seller
Indemnifying Parties and Sellers shall not in the aggregate be liable for any
Damages in excess of [****] Dollars ($[****]) and with respect to Damages
arising out of claims for indemnification under Section 3.1, Section 3.2,
Section 3.11, and Section 3.13 of the Real Estate Purchase Agreement the Seller
Indemnifying Parties and Sellers shall not in the aggregate be liable for any
Damages in excess of [****] Dollars ($[****]).

(c)          In any event in which indemnification is sought for Damages
pursuant to Section 8.1(a) or Section 8.1(b), indemnification for such Damages
shall firstly be sought from the Holdback and, if such Damages are not limited
by the Cap pursuant to Section 8.3(b) and the Holdback has been fully exhausted,
shall be sought directly from the Indemnifying Parties, subject to the
limitations and other provisions set forth in this ARTICLE VIII.

(d)          The Seller Indemnifying Parties and Sellers shall not be liable for
any Damages to the extent that such Damages (i) arise out of changes after the
Closing Date in any Laws or GAAP that retroactively applies to the Company or
any of its Subsidiaries, (ii) are duplicative of any amounts that have
previously been recovered under this Agreement or the other Transaction
Documents, (iii) have been taken into account in calculating the Closing Working
Capital amount or (iv) 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. Notwithstanding
anything to the contrary in the Transaction Documents and subject to such other
limitations set forth in the Transaction Documents, in no event shall the Seller
Indemnifying Parties and Sellers be liable, in the aggregate, for any Damages
arising out of any indemnity obligations under the Transaction Documents in
excess of the actual Purchase Price paid to Sellers under this Agreement. The
amount of any Damages of an Indemnified Person shall be calculated net of (A)
any insurance proceeds actually received by such Indemnified Party on account of
such Damages (less any increase in any insurance policy premium that is incurred
as a result of making a claim for such insurance proceeds) and/or (B) any
non-recoverable indemnification or contribution amounts actually paid to such
Indemnified Party by any third party on account of such Damages. The Buyer
Indemnified Party shall use commercially reasonable efforts to pursue insurance
coverage for Damages.

53

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(e)          Each Indemnified Party shall use its commercially reasonable best
efforts to mitigate any Damages subject to indemnification obligations under
this Agreement or the other Transaction Documents.

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 the Indemnifying Party, 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.

(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 Seller Indemnifying Party and the Stockholders’
Representative has not objected within such thirty (30) calendar day period to a
Damages Certificate presented by Buyer, then Buyer may 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 the
Stockholders’ Representative, then Buyer shall remit to the Stockholders’
Representative 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 demand arbitration of the matter unless
the amount of the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter shall be settled by arbitration conducted by one arbitrator mutually
agreeable to the parties. In the event that within forty-five (45) calendar days
after submission of any dispute to arbitrators the parties cannot mutually agree
on one arbitrator, the parties shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator(s) shall
set a limited time period and establish procedures designed to reduce the cost
and time for discovery while allowing the parties an opportunity, adequate in
the sole judgment of the arbitrator or a majority of the three arbitrators, as
the case may be, to discover relevant information from the opposing parties
about the subject matter of the dispute. The arbitrator or a majority of the
three arbitrators, as the case may be, shall rule upon motions to compel or
limit discovery and shall have the authority to impose sanctions, including
reasonable legal fees and costs, to the same extent as a competent court of law
or equity, should the arbitrator or a majority of the three arbitrators, as the
case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the three
arbitrators, as the case may be, as to the validity and amount of any claim
objected to in such Objection Certificate shall be binding and conclusive upon
the parties. Such decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the award, judgment,
decree or order awarded by the arbitrator(s).

54

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(d)          Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in
Sacramento, California, under the rules then in effect of the American
Arbitration Association. The payment of all fees and expenses of the parties to
any such arbitration, as well as the fees of the arbitrator(s) and the
administrative fee of the American Arbitration Association, shall be payable by
the parties on a 50/50 basis; provided, however, that if the arbitrator’s
decision includes a determination that the Indemnified Party had no reasonable
basis for asserting that it had incurred or sustained Damages, then the
Indemnified Party shall bear all costs and expenses incurred by the parties in
such arbitration. Notwithstanding anything to the contrary herein, in any event
in which the arbitrator decides in favor of a Seller Indemnifying Party or a
Seller in a Fraud claim brought by the Buyer Indemnified Parties against a
Seller Indemnifying Party or a Seller, then the Buyer Indemnified Parties shall
bear all costs and expenses incurred by the parties in such arbitration.

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, but not to determine or conduct,
the defense of such claim; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party is thereby prejudiced.

55

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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 (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 the
entirety of 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 other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Parties, likely to
establish a precedential custom or practice adverse to 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.

(c)          Subject to the limitations set forth in this Article VIII, in the
event any of the conditions in Section 8.5(b) above is or becomes 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 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. Notwithstanding the foregoing, except with
the prior written consent of the Stockholders’ Representative (in the event
indemnification is being sought under Section 8.1(a)), the responsible Seller
(in the event indemnification is being sought under Section 8.1(b) and only from
such responsible Seller) or Buyer (in the event indemnification is being sought
under Section 8.1(c)), a judgment or settlement entered into with respect to a
Third Party Claim (i) shall not be determinative of the amount of Damages
relating to such matter or that such Damages are indemnifiable pursuant hereto,
(ii) shall not subject any Indemnifying Party to any equitable remedies and
(iii) shall include a full and unconditional written release by the third party
claimants of the Indemnifying Parties of all liability in respect of such claim.

56

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(d)          Notwithstanding anything to the contrary contained in this
Section 8.5, the Stockholders’ Representative with respect to income Tax
Contests for any Prior Period, and Buyer with respect to any non-income Tax
Contest and any Tax Contest for any Straddle Period, in each case shall have the
sole right to control and make all decisions regarding interests with respect
thereto, including selection of counsel and selection of a forum for such
contest; provided, however, that in the event such audit or proceeding relates
to Taxes for which the party not controlling such audit is responsible under
Section 8.1, (i) Buyer, the Company and the party not controlling the Tax
Contest shall cooperate in the conduct of any audit or proceeding relating to
such period, (ii) the Stockholders’ Representative shall have the right (but not
the obligation) to participate in such audit or proceeding at such party’s
expense, (iii) neither party shall enter into any agreement with the relevant
Governmental Authority pertaining to such Taxes without the written consent of
the other party (which consent shall not be unreasonably withheld, conditioned
or delayed), and (iv) Buyer may, without the written consent of the
Stockholders’ Representative, decide to 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. The parties will keep each other
reasonably informed as to matters related to any audit or judicial or
administrative proceedings involving Taxes 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 5.4(a) or any Pre-Closing Straddle Tax Period under
Section 5.4(b)) 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 the
Sellers, 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 Working Capital. Buyer shall pay
any refunds or overpayments that are the property of the Sellers to the
Stockholders’ Representative for distribution to the Sellers, in immediately
available funds and in accordance with each Seller’s Pro Rata Percentage within
thirty (30) 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.

(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 customer or vendor, or involving a claim relating to termite damage
claims; provided, however, that in the event the Sellers are responsible and
have agreed to indemnify Buyer for such Third Party Claim, (i) Buyer, the
Company and Sellers shall cooperate in the defense, compromise or settlement
thereof, (ii) the Sellers shall have the right (but not the obligation) to
participate in the defense, compromise or settlement thereof at the Sellers’
expense, and (iii) any compromise or settlement by Buyer shall be approved by
the Stockholders’ Representative (which approval shall not be unreasonably
withheld, conditioned or delayed).

8.6          Exclusive Remedy. The indemnification provisions contained in this
Article VIII are intended to provide 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).

57

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

8.7          Offset. If Damages incurred by Buyer are not limited by the Cap
pursuant to Section 8.3(b) and the Holdback has been fully exhausted, Buyer, on
behalf of each Buyer Indemnified Party, may (but shall not be required to),
effect indemnification against any Seller under this Article VIII, withhold and
offset against (or otherwise recoup from) any sums payable to any Seller (or to
the Stockholders’ Representative on such Seller’s (or Sellers’) behalf) under
this Agreement, including without limitation the Holdback and the Earnout
Consideration payable to the Sellers. Any sums withheld will operate as a
discharge, to the extent of the amount withheld, of the payment obligations
against which offset is effected; provided, however, that if such offset, in
whole or in part, is ultimately determined by a court of competent jurisdiction
to be unjustified, any amount improperly offset will be due and owing by Buyer
within five (5) Business Days following such determination. The exercise of a
right of offset by Buyer good faith will not constitute a default by Buyer of
the payment obligation against which offset is effected.

Article IX
Termination

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

(a)          by mutual written consent of the President or Chief Financial
Officer of Buyer and the Stockholders’ Representative, on behalf of the Sellers,
as duly authorized by the board of directors of the Company;

(b)          by the Company or Buyer, at any time after June 15, 2019 if the
Closing shall not have occurred by such date and the condition in Section 6.1(a)
has not been fulfilled 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
obligation under this Agreement has been the cause of, or resulted in, 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 the Stockholders’ Representative,
in the event of any material breach by the Company or a Seller of any of their
respective agreements, representations or warranties contained herein or in any
Transaction Document and the failure of the Company or such Seller, as
applicable, to cure such breach within thirty (30) 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

58

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(e)          by the Company and Sellers, 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 thirty (30) days after receipt of written
notice from the Company requesting such breach to be cured; provided, however,
that the Company and Sellers are not then in material breach of this Agreement
so as to cause any conditions set forth in Article II or Article III,
respectively, 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.

9.3          Effect of Termination. In the event of termination of this
Agreement in accordance with the provisions of this Article IX, this Agreement,
other than the provisions of Section 10.4 which shall expressly survive such
termination, 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.

9.4          Buyer Antitrust Termination Fee.

(a)          If Seller or Buyer terminates this Agreement pursuant to (i)
Section 9.1(b) or (ii) Section 9.1(c), and in the case of (i) or (ii), all of
the conditions under Section 6.1 have been satisfied or waived other than (A)
the conditions set forth in Section 6.1(a) and (B) any such conditions which by
their nature cannot be satisfied until the Closing Date, then Buyer shall pay or
cause to be paid to Seller a fee of [****] Dollars ($[****]) by wire transfer of
same-day funds no later than five (5) Business Days after such termination (the
“Buyer Antitrust Termination Fee”). In no event shall Buyer be required to pay
the Buyer Antitrust Termination Fee on more than one occasion.

(b)          Buyer and each Seller acknowledge and agree that the Buyer
Antitrust Termination Fee is not a penalty, but constitutes liquidated damages
in a reasonable amount that will compensate Sellers in circumstances in which
the Buyer Antitrust Termination Fee is payable. Notwithstanding anything to the
contrary in this Agreement, Sellers’ right to receive payment of the Buyer
Antitrust Termination Fee pursuant to this Section 9.4 shall be the sole and
exclusive remedy of Sellers or any of their Affiliates against Buyer or any of
its Affiliates or any of their respective stockholders, partners, members, or
Representatives for any and all losses that may be suffered resulting from a
failure of the transactions contemplated by this Agreement, and upon payment of
the Buyer Antitrust Termination Fee in accordance with this Section 9.4, none of
the Buyer or any of its Affiliates or any of their respective stockholders,
partners, members, or Representatives shall have any further liability or
obligation relating to or arising out of this Agreement or any of the
Transaction Documents or the transactions contemplated by this Agreement or any
of the Transaction Documents.

59

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Article X
Miscellaneous

10.1        Waiver; Amendment. Prior to the Closing Date, any provision of this
Agreement may be (a) waived in writing 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. No action or
course of conduct shall constitute a waiver of any of the terms and conditions
hereof, unless such waiver is specified in writing, and then only to the extent
so specified.

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 Delaware 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 any state or federal court located in San Francisco, California 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.

60

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(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).

(d)          In the event of a dispute or action to enforce the terms of this
Agreement, all reasonable costs and expenses incurred in connection therewith,
including all reasonable attorneys’ fees and costs, shall be paid to the
Prevailing Party by the non-Prevailing Party.  “Prevailing Party” means that
party who obtains substantially the relief sought, whether by compromise,
settlement or judgment. Notwithstanding the foregoing, if a written offer of
compromise or settlement made by either party is not accepted by the other party
within thirty (30) days after receipt and the party not accepting such offer
fails to obtain a more favorable judgment, the non-accepting party shall not be
entitled to recover its costs of suit and reasonable attorney’s fees and costs
(even if it is the Prevailing Party) and shall be obligated to pay the costs of
suit and reasonable attorney’s fees and costs incurred by the offering party.

10.4        Expenses. Except as otherwise expressly provided herein, 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; provided, however, that upon and at the Closing,
Buyer shall be responsible for reimbursing the Sellers for (i) up to [****]
Dollars ($[****]) in attorneys’ fees and related expenses payable in connection
with the parties’ response filings or submissions under the HSR Act if the
parties do not receive a ‘second request’ from applicable governmental agencies
under the HSR Act; or (ii) up to [****] Dollars ($[****]) in attorneys’ fees and
related expenses payable in connection with the parties’ response filings or
submissions under the HSR Act if the parties do receive a ‘second request’ from
applicable governmental agencies under the HSR Act.

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.

61

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

If to the Company (prior to Closing), then to:

Clark Pest Control of Stockton, Inc.
555 N. Guild Avenue

Lodi, California 95240
Attention: [****] and [****]
Facsimile: [****]
Email: [****] and [****]

 

With a copy to:

Kroloff, Belcher, Smart, Perry & Christopherson
7540 Shoreline Drive

Stockton, CA 95219

Attention: Gary Christopherson and Allison Cherry Lafferty

Facsimile: (209) 478-0354
Emails: gchristopherson@kroloff.com and alafferty@kroloff.com

 

O’Melveny & Myers LLP

2765 Sand Hill Road

Menlo Park, CA 94025

Attention: Einat Meisel

Email: emeisel@omm.com

If to the Stockholders or Principals, then to the Stockholders’ Representative
at:

JJT King, LLC

16 Pine Street

Lodi, CA 95240
Attention: [****]

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
Email: enorthen@rollins.com

62

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

With a copy to:

Barnes & Thornburg LLP
3475 Piedmont Road, Suite 1700
Atlanta, GA 30305
Attention: Stuart Johnson
Facsimile: 404-264-4033
Email: stuart.johnson@btlaw.com

10.6        Entire Understanding; No Third Party Beneficiaries. This Agreement,
including all representations and warranties, 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.

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).

63

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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 Sellers’ obligation to
sell the Shares to Buyer, and Buyer’s obligation to purchase the Shares from
Sellers, 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 and each party hereto waives any defenses in any actions for
specific performance, including the defense that money damages would be
adequate. 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.

10.12      Certain Matters Regarding Representation of the Company. O’Melveny &
Myers LLP (“OMM”) and Kroloff, Belcher, Smart, Perry & Christopherson
(“Kroloff”) have acted as counsel for the Company in connection with this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby (the “Acquisition Engagements”) and in that connection not as
counsel for any other person, including without limitation, Buyer or any of its
Affiliates.

(a)          From and after the Closing, all communications between the Company
and OMM or Kroloff in the course of the Acquisition Engagements shall be deemed
to be attorney-client confidences that belong solely to Sellers and not to the
Company. Accordingly, Buyer, on behalf of itself and its Affiliates, shall not
have access to any such communications, or to the files of OMM and Kroloff
relating to the Acquisition Engagements, whether or not the Closing shall have
occurred. Without limiting the generality of the foregoing, upon and after the
Closing, (i) Sellers, OMM and Kroloff shall be the sole holders of the
attorney-client privilege with respect to the Acquisition Engagements, and
neither the Company nor Buyer nor Buyer’s Affiliates shall be a holder thereof,
(ii) to the extent that files of OMM or Kroloff in respect of the Acquisition
Engagements constitute property of the client, only the Sellers shall hold such
property rights, and (iii) OMM and Kroloff shall have no duty whatsoever to
reveal or disclose any such attorney-client communications or files to the
Company, Buyer or Buyer’s Affiliates by reason of any attorney-client
relationship between OMM or Kroloff, on the one hand, and the Company, on the
other hand, or otherwise.

64

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

(b)          If Sellers so desire, and without the need for any consent or
waiver by the Company, Buyer or any of Buyer’s Affiliates, OMM and Kroloff shall
be permitted to represent the Sellers after the Closing in connection with any
matter, including without limitation anything related to the transactions
contemplated by this Agreement or the other Transaction Documents or any
disagreement or dispute relating thereto. Without limiting the generality of the
foregoing, after the Closing, OMM and Kroloff shall be permitted to represent
Sellers, any of their agents and affiliates (including the Stockholders’
Representative), or any one or more of them, in connection with any negotiation,
transaction or dispute (“dispute” includes litigation, arbitration or other
adversary proceeding) with Buyer, the Company or any of their agents or
Affiliates under or relating to this Agreement or the other Transaction
Documents, any transaction contemplated by this Agreement or the other
Transaction Documents, and any related matter, such as claims for
indemnification and disputes involving employment or noncompetition or other
agreements entered into in connection with this Agreement.

(c)          Sellers, the Company and Buyer, on behalf of Buyer and its
Affiliates, consent to the foregoing arrangements in this Section 10.12 and
waive any actual or potential conflict of interest that may be involved in
connection with any representation by OMM or Kroloff permitted hereunder.

Article XI
Definitions

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

“Accounting Rules” 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 Financial Statements. 

“Acquisition Engagements” has the meaning set forth in Section 10.12.

“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.

65

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Aggregate Closing Amount” has the meaning set forth in Section 1.3(a).

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

“Allocation Schedule” has the meaning set forth in Section 5.4(a)(i).

“Antitrust Laws” has the meaning set forth in Section 5.5.

“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.

“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 Antitrust Termination Fee” has the meaning set forth in Section 9.4(a).

“Buyer Charter Documents” means the certificate of incorporation and bylaws (or
equivalent documents) of the Buyer, each as amended to date.

“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).

“Buyer’s Accountants” means Grant Thornton LLP.

“Cap” has the meaning set forth in Section 8.3(b).

“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.

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

“Clark Pest Control License Agreement” has the meaning set forth in Section
2.13.

66

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Clarksons” has the meaning set forth in the Recitals hereto.

“Clients” means the top twenty (20) clients of the Company and its Subsidiaries
on a consolidated basis as determined by the amount of net revenue recognized
during the year ended December 31, 2017.

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

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

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

“Closing Note” has the meaning set forth in Section 1.3(a).

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

“Closing Working Capital” means Net Working Capital without giving effect to the
consummation of the Transaction (including any and all effects of any purchase
accounting adjustments), determined as of the open of business on the Closing
Date.

“Closing Working Capital Statement” has the meaning set forth in 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 Charter Documents” has the meaning set forth in Section 2.1(a).

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

“Company Indemnitees” has the meaning set forth in Section 5.10.

“Company Financial Statements” has the meaning set forth in Section 2.7(a).

“Company Plans” has the meaning set forth in Section 2.15(a).

“Company’s Accountants” means Gatto, Pope & Walwick, LLP.

“Confidential Information” has the meaning set forth in Section 5.8.

“Continuing Employee” has the meaning set forth in Section 5.9.

67

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“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.

“Current Assets” means cash and cash equivalents, accounts receivable, inventory
and prepaid expenses, but excluding (a) the portion of any accounts receivable
reserved for bad debt, (b) the portion of any prepaid expense of which Buyer
will not receive the benefit following the Closing, (c) a reserve for old,
obsolete or unusable uniforms, (d) customer deposits, (e) deferred Tax assets
and (f) receivables from any of the Company’s Affiliates, directors, employees,
officers or stockholders and any of their respective Affiliates, determined in
accordance with GAAP applied using the same Accounting Rules that were used in
the preparation of the Company Financial Statements for the most recent fiscal
year end as if such accounts were being prepared and audited as of a fiscal year
end.

“Current Liabilities” means accounts payable, accrued vacation and sick time,
accrued payroll, payroll taxes payable, accrued Taxes, and the Company’s Termite
Indemnity Program Reserve, but excluding payables to any of the Company’s
Affiliates, directors, employees, officers or stockholders and any of their
respective Affiliates, deferred Tax liabilities and the current portion of long
term debt, determined in accordance with GAAP applied using the same Accounting
Rules that were used in the preparation of the Company Financial Statements for
the most recent fiscal year end as if such accounts were being prepared and
audited as of a fiscal year end.

“D&O Tail Insurance” has the meaning set forth in Section 5.10(b).

“Damages” means any actual damage, loss, assessment, levy, fine, charge, claim,
direct liability, demand, payment, judgment, settlement, penalty, cost or
expense.

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

“Discharge” or “Discharged” 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.

“Disclosing Party” has the meaning set forth in Section 5.8.

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

“Distribution Purchase Agreement” means the Asset Purchase Agreement entered
into as of even date hereof by and between an Affiliate of Buyer and GeoTech.

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

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

68

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Employment Agreements” has the meaning set forth in Section 6.2(g).

“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,
ordinances or judicial or administrative interpretations thereof, or similar
laws of foreign jurisdictions where the Company and its Subsidiaries conduct
business, currently in existence any of which govern or relate to pollution,
protection of the environment, public health and safety (as relates to the
exposure to Hazardous Substances), 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, 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. § 5101 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.

“Escheatment Law” means any Law relating to unclaimed property that require such
property to be held and escheated or transferred to a Governmental Authority
after a specified period of time or on a specified date.

69

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Escheatment Liabilities” means (A) any and all Damages arising under or related
to any Escheatment Law and (B) any obligation to pay or transfer to any Person
any unclaimed property.

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

“Estimated Closing Working Capital Statement” has the meaning set forth in
Section 1.8(a)(i).

“Excluded Assets” has the meaning set forth in Section 2.12(e).

“FCPA” has the meaning set forth in Section 2.28.

“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
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.

“Fully Diluted Shares” means an amount equal to the sum of (a) the total number
of Shares outstanding immediately prior to the Closing Date; plus (b) the total
number of Shares that would be issuable immediately prior to the Closing Date
upon exercise in full of all issued and outstanding options.

“GAAP” means United States generally accepted accounting principles in effect
from time to time; provided, however, that it is expressly understood and agreed
that (i) where GAAP permits alternative methods or treatments, the Company’s
choice of an acceptable treatment or calculation, as reflected in the Company
Financial Statements, shall be the method or treatment used for all purposes
under this Agreement; and (ii) Buyer’s election to utilize another acceptable
GAAP treatment following the Closing shall not be the basis for (a) calculating
any Post-Closing Adjustment under Section 1.8(b), (b) determining compliance
with or claiming the breach of any representation or warranty by the Company or
the Sellers hereunder, (c) determining any claim for indemnity, or (d)
determining whether an Earnout Payments have been earned.

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

“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.

70

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

“Handling” or “Handled” 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.

“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 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 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.

“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.

“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 Effective Time, (a) all
obligations of the Company or its Subsidiaries for borrowed money, (b) other
indebtedness of the Company or its Subsidiaries 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 or its Subsidiaries 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 or any of its Subsidiaries is liable, other than ordinary course trade
payables, (e) all payment obligations under any interest rate swap agreements or
interest rate hedge agreements to which the Company or any of its Subsidiaries
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 Effective Time, any letters of credit, surety bonds, bids, performance bonds
or similar obligations, (h) all accrued but unpaid severance obligations of the
Company and its Subsidiaries, and (i) debt or obligations related to the
purchase, redemption or retirement of stock of the Company and its Subsidiaries.

71

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Indemnification Schedule” has the meaning set forth in Section 8.1(e).

“Indemnified Party” has the meaning set forth in Section 5.10.

“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).

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

“Insurance Policies” has the meaning set forth in Section 2.25.

“Intellectual Property” means all industrial property rights, 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 such rights in or to: (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.

“Interim Financial Statements” has the meaning set forth in Section 2.7(a).

72

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“IRS” has the meaning set forth in Section 2.14(b).

“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, after reasonable inquiry, of any of [****],
[****], [****], or any member of the board of directors of the Company. With
regard to Buyer, this shall mean the actual knowledge, after reasonable inquiry,
of any of [****], [****], [****], [****], or [****].

“Kroloff” has the meaning set forth in Section 10.12.

“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 2.11(b).

“Leases” has the meaning set forth in Section 2.11(b).

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

“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.

“Lost Certificate Affidavit” has the meaning set forth in Section 1.6(c).

“Management Team” has the meaning set forth in Section 1.3(c).

“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 and its
Subsidiaries, taken as a whole, or (b) the ability of Sellers 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. 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 and its
Subsidiaries conduct their business, (c) changes or proposed changes in GAAP,
(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 or its Subsidiaries at the request or with the
consent of Buyer, (h) any matters expressly set forth in the Company Disclosure
Schedule as of the date of this Agreement, or (i) any matter adversely affecting
Buyer or Buyer’s ability to consummate the Transaction on a timely 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 and its Subsidiaries, taken as a
whole, compared to other participants in the industry in which the Company and
its Subsidiaries conduct their businesses.

73

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“Material Contracts” has the meaning set forth in Section 2.17(a).

“[****]” has the meaning set forth in Section 1.3(c).

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

“Net Working Capital” means Current Assets minus Current Liabilities, calculated
in accordance with GAAP, consistently applied and as applied to the Company as
of immediately prior to the Closing, without giving effect to the consummation
of the Transaction (including any and all effects of any purchase accounting
adjustments).

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

“Notices” has the meaning set forth in Section 2.19(b).

“OMM” has the meaning set forth in Section 10.12.

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

“Per Share Closing Consideration” means an amount equal to (a) the Aggregate
Closing Amount, less the Stockholders’ Representative Expense Amount divided by
(b) the number of Fully Diluted Shares.

“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.

74

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“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
5.4(c)(ii).

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

“Prevailing Party” has the meaning set forth in 10.3(c).

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

“Prior Period Tax Returns” has the meaning set forth in Section 5.4(b).

“Prior Period” has the meaning set forth in Section 5.4(b).

“Proceedings” has the meaning set forth in Section 2.19(b).

“Pro Rata Percentage” means, for each Seller, a percentage calculated by
dividing (i) the total number of Shares held by such Seller 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.

“Real Estate Purchase Agreement” means the Real Estate Purchase Agreement
entered into as of even date hereof by and between an Affiliate of Buyer and
Clarksons California Properties, a California Limited Partnership.

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

75

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“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 2.24.

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

“Section 338(h)(10) Election” has the meaning set forth in Section 5.4(a)(i).

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

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

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

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

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

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

“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(b).

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

“Stockholders’ Representative” has the meaning set forth in the preamble.

“Stockholders’ Representative Expense Account” has the meaning set forth in
Section 1.3(b).

“Stockholders’ Representative Expense Amount” has the meaning set forth in
Section 1.3(b).

“Stockholders’ Representative Expenses” has the meaning set forth in Section
1.3(b).

“Straddle Period” has the meaning set forth in Section 5.4(c)(i).

“Subsidiary” or “Subsidiaries” means Clark Pest Control of Nevada, LLC and Wings
Over Oregon, LLC.

“Subsidiary Charter Documents” has the meaning set forth in Section 2.1(b).

“Target Working Capital” means [****] Dollars ($[****]).

76

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

“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 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.

“Third Party Claim” has the meaning set forth in Section 8.5(a).

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

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

“Transaction Documents” means this Agreement, the Real Estate Purchase Agreement
and the Distribution Purchase Agreement.

“Transaction Expenses” means (a) any fees, costs, expenses of, or payments made
by, the Company or any of its Subsidiaries 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 or any of its
Subsidiaries 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 and its Subsidiaries 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, any of its Subsidiaries or the Sellers 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
Net Working Capital.

77

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

“Vendors” means all production and equipment vendors and subcontractors of the
Company and its Subsidiaries 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, 2017.

“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.

“Year End Financial Statements” has the meaning set forth in Section 2.7(a).

[SIGNATURE PAGES FOLLOW]

78

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

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

 

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

  CLARK PEST CONTROL OF STOCKTON, INC.       By:_______________________________
  Name:  [****]   Title:  [****]       STOCKHOLDERS’ REPRESENTATIVE       JJT
King, LLC       By:_______________________________   Name:  [****]   Title:
Manager

 

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

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

 

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS
EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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

  PRINCIPALS:       __________________________________   [****]      
__________________________________   [****]      
__________________________________   [****]