Exhibit 10.1

 

 

 

STOCK PURCHASE AGREEMENT

by and among

ADDUS HEALTHCARE, INC.,

MICHAEL J. MERRELL, INDIVIDUALLY, MARY E. MERRELL, INDIVIDUALLY,

MICHAEL J. MERRELL AND MARY E. MERRELL, AS TRUSTEES OF THE MERRELL REVOCABLE
TRUST UTA DATED JUNE 3, 2012, AND

MICHAEL J. MERRELL AND MARY E. MERRELL, AS TRUSTEES OF THE AMBERCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

for the capital stock of

AMBERCARE CORPORATION

Dated as of February 27, 2018

 

 

 

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TABLE OF CONTENTS

 

ARTICLE I Definitions      1  

Section 1.1

  

Definitions

     1  

Section 1.2

  

Additional Defined Terms

     9   ARTICLE II Purchase and Sale; Closing      11  

Section 2.1

  

Purchase and Sale of the Shares

     11  

Section 2.2

  

Purchase Price

     11  

Section 2.3

  

Payments at Closing

     11  

Section 2.4

  

Escrow

     12  

Section 2.5

  

Adjustment

     12  

Section 2.6

  

Excluded Assets

     14  

Section 2.7

  

No Section 338(h)(10) Election

     15   ARTICLE III Closing      15  

Section 3.1

  

Closing

     15  

Section 3.2

  

Closing Deliveries

     15   ARTICLE IV Representations and Warranties of the Sellers      17  

Section 4.1

  

Organization and Good Standing

     17  

Section 4.2

  

Authorization, Validity and Effect of Agreement

     17  

Section 4.3

  

No Conflicts; Consents

     17  

Section 4.4

  

Capitalization

     18  

Section 4.5

  

Subsidiaries

     18  

Section 4.6

  

Financial Statements

     18  

Section 4.7

  

No Undisclosed Liabilities

     19  

Section 4.8

  

Absence of Certain Developments

     19  

Section 4.9

  

Taxes

     20  

Section 4.10

  

Governmental Permits

     23  

Section 4.11

  

Compliance with Laws

     23  

Section 4.12

  

Health Care Regulatory Matters

     23  

Section 4.13

  

Legal Proceedings

     25  

Section 4.14

  

Real Property

     26  

Section 4.15

  

Personal Property

     26  

Section 4.16

  

Material Contracts

     27  

Section 4.17

  

Intellectual Property and Business Systems

     28  

Section 4.18

  

Employee Benefits

     30  

Section 4.19

  

Labor Matters

     33  

Section 4.20

  

WARN Act

     34  

Section 4.21

  

Environmental Matters

     34  

Section 4.22

  

Insurance

     34  

Section 4.23

  

Related Party Transactions

     35  

Section 4.24

  

Shareholder Investments

     35  

Section 4.25

  

Third Party Payors and Material Suppliers

     35  

Section 4.26

  

Brokers

     35  

 

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ARTICLE V Representations and Warranties of Buyer      36  

Section 5.1

  

Organization and Good Standing

     36  

Section 5.2

  

Authorization, Validity and Effect of Agreement

     36  

Section 5.3

  

No Conflict

     36  

Section 5.4

  

Brokers

     36   ARTICLE VI Covenants      36  

Section 6.1

  

Conduct of Business Prior to the Closing

     36  

Section 6.2

  

Access and Investigation

     38  

Section 6.3

  

Notice of Certain Events

     38  

Section 6.4

  

Required Approvals

     39  

Section 6.5

  

Closing Conditions

     39  

Section 6.6

  

Tax Matters

     40  

Section 6.7

  

Confidentiality; Public Announcement

     41  

Section 6.8

  

Restrictive Covenants

     41  

Section 6.9

  

Release

     43  

Section 6.10

  

Insurance for Pre-Closing Occurrences or Events

     44  

Section 6.11

  

Further Assurances

     44  

Section 6.12

  

Sale of DME Business

     44  

Section 6.13

  

No Shop

     44  

Section 6.14

  

Financial Information; Audits

     45  

Section 6.15

  

ESOP Share Sale

     45  

Section 6.16

  

Specified Matter

     45   ARTICLE VII Conditions to Closing      46  

Section 7.1

  

Conditions to Obligations of Buyer

     46  

Section 7.2

  

Conditions to Obligations of the Sellers

     47  

Section 7.3

  

Frustration of Closing Conditions

     48   ARTICLE VIII Indemnification      48  

Section 8.1

  

Indemnification by the Merrell Trust and Principals

     48  

Section 8.2

  

Indemnification by Buyer

     50  

Section 8.3

  

Notice of Claims

     50  

Section 8.4

  

Resolution of Indemnifiable Claims

     50  

Section 8.5

  

Third Party Claims

     51  

ARTICLE IX Termination

     51  

Section 9.1

  

Termination

     51  

Section 9.2

  

Effect of Termination

     52   ARTICLE X General Provisions      52  

Section 10.1

  

Expenses

     52  

Section 10.2

  

Notices

     52  

Section 10.3

  

Entire Agreement

     53  

Section 10.4

  

Interpretation

     53  

Section 10.5

  

Amendment; Waiver

     54  

Section 10.6

  

Binding Effect; Assignment

     54  

 

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Section 10.7

  

No Third-Party Beneficiaries

     54  

Section 10.8

  

Exhibits and Disclosure Schedules

     54  

Section 10.9

  

Governing Law; Jurisdiction

     54  

Section 10.10

  

Waiver of Jury Trial

     55  

Section 10.11

  

Remedies

     55  

Section 10.12

  

Severability

     55  

Section 10.13

   Counterparts      56  

EXHIBITS

 

EXHIBIT A    Form of Escrow Agreement

 

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of February 27, 2018,
is by and among Addus HealthCare, Inc., an Illinois corporation (“Buyer”), each
of Michael J. Merrell and Mary E. Merrell, individually (individually a
“Principal” and, collectively, the “Principals”), Michael J. Merrell and Mary E.
Merrell, as Trustees of the Merrell Revocable Trust UTA dated June 3, 2012 (the
“Merrell Trust”), and Michael J. Merrell and Mary E. Merrell, as Trustees of the
Ambercare Corporation Employee Stock Ownership Plan Trust (the “ESOP Trust”)
which is part of the Ambercare Corporation Employee Stock Ownership Plan (the
“ESOP”) (collectively referred to as “ESOP”), and each of the Merrell Trust and
the ESOP, a “Seller,” and collectively the “Sellers”, (and for the avoidance of
doubt, “Seller” or “Sellers” does not include the ESOP participants), the
shareholders of Ambercare Corporation, a New Mexico corporation (the “Company”).
Buyer, the Company, the Principals, and the Sellers are each, individually, a
“Party” and, collectively, the “Parties.”

WHEREAS, the Sellers own all of the issued and outstanding shares of capital
stock (the “Shares”) of the Company, a holding company for certain wholly-owned
subsidiaries operating as licensed/certified entities providing hospice care,
home health services, the sale of medical device supplies and related services,
and home care services, respectively, that collectively conduct the Business
(defined below); and

WHEREAS, the Parties desire to enter into this Agreement pursuant to which the
Sellers propose to sell to Buyer, and Buyer proposes to purchase from the
Sellers, all of the Shares, subject to the terms and conditions set forth
herein.

WHEREAS, the Company has appointed Zia Trust Inc. as an independent
transactional trustee for the ESOP (the “Independent ESOP Trustee”) in
connection with the valuation and sale of the ESOP Shares and the transactions
contemplated by this Agreement, and the Independent ESOP Trustee has advised the
Trustees of the ESOP to sign the Agreement on behalf of the ESOP.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.1    Definitions. When used in this Agreement, the following terms
shall have the meanings ascribed to them below:

“Acquired Company Entities” means the Company, Ambercare Home Health Care
Corporation, a New Mexico corporation, and Ambercare Hospice, Inc., a New Mexico
corporation.

“Affiliate” of any Person means any Person directly or indirectly controlling,
controlled by or 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.

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“Balance Sheet Date” means December 31, 2017.

“Business” means providing (a) hospice care and skilled health services;
(b) home care and unskilled home health services; and (c) the sale of medical
devices and supplies, in each case, in New Mexico to qualified individuals under
any applicable Medicare, Medicaid and other Government Programs currently in
place or that may be contracted with or adopted in the future in compliance with
applicable Health Care Laws.

“Business Day” means any day other than a Saturday, Sunday or day on which banks
in New Mexico are authorized or required by Law to be closed for business.

“Business Systems” means all software and all computer hardware, servers,
networks, platforms, peripherals, data communication lines, devices and other
information technology equipment and related systems that are owned or used by
the Company in the conduct of the Business, including without limitation the
Company-Owned Software.

“Cash and Cash Equivalents” means the aggregate amount of cash and cash
equivalents (including marketable securities and short term investments) of the
Company as determined in accordance with GAAP.

“Closing Cash Amount” means the aggregate amount of Cash and Cash Equivalents as
of the close of business on the Closing Date, plus the aggregate amount of any
checks received by the Company as of the Closing Date that have not been
deposited or cleared at such time, excluding any Restricted Cash.

“Closing Cash Deficit” the amount by which Closing Cash Amount as of the close
of business on the Closing Date is less than the Closing Cash Target amount.

“Closing Cash Surplus” means the amount by which the Closing Cash Amount as of
the close of business on the Closing Date is greater than the Closing Cash
Target amount.

“Closing Cash Target” means $10,600,000.

“Closing Indebtedness Amount” means the total amount of Indebtedness of the
Company as of immediately prior to the Closing.

“Closing Liabilities” means any debt, liability or obligation (whether direct or
indirect, absolute or contingent, accrued or unaccrued, asserted or unasserted,
liquidated or unliquidated, or due or to become due) and including all costs and
expenses thereto, but which arises from events which have occurred prior to the
Closing, other than debts, liabilities or obligations arising from events which
have occurred after the Closing and obligations to perform arising after the
Closing pursuant to contracts of the Company in force at the Closing Date.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated and the rulings issued thereunder.

“Company Intellectual Property” means any Intellectual Property that is used or
held for use by any of the Company Entities for the conduct of the business as
currently conducted and as proposed to be conducted, including without
limitation all (a) Company-Owned Software and (b) Software.

 

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“Company Entities” means the Company, Ambercare Home Health Care Corporation, a
New Mexico corporation, Ambercare Medical Supply Company, a New Mexico
corporation, and Ambercare Hospice, Inc., a New Mexico corporation.

“Contaminant” means any contaminant, pollutant, hazardous or toxic substance or
waste, petroleum or petroleum derived substance, additive or wastes, infectious
medical waste, radioactive materials, or any other compound, element or
substance in any form (including products) regulated by, or giving rise to
liability under, any Environmental Law.

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

“Encumbrance” means any lien, claim, charge, security interest, mortgage,
pledge, easement, option, conditional sale or other title retention agreement,
defect in title or other restrictions of a similar nature.

“Environmental Laws” means all applicable Laws concerning pollution or
protection of the environment and/or human health, or the use, management,
disposal, discharge, release or threatened release of any Contaminant, as such
of the foregoing are enacted and in effect on or prior to the Closing Date.

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

“Escrow Agent” means JPMorgan Chase Bank, N.A.

“Escrow Amount” means $4,050,000.

“ESOP Fairness Opinion” means an opinion of the ESOP Independent Appraiser to
the effect that, as of the date of such opinion, (a) the consideration to be
paid to the ESOP for the ESOP Shares is not less than the fair market value of
such ESOP Shares and (b) the terms of and the transactions contemplated by this
Agreement, taken as a whole, are fair to the ESOP from a financial point of
view.

“ESOP Independent Appraiser” means Seigneur Gustafson LLP, the independent
appraiser meeting the requirements of Section 401(a)(28)(C) of the Code that has
been duly engaged by the ESOP in connection with the transactions contemplated
by this Agreement.

“ESOP Shares” means Shares owned by the ESOP Trust for the benefit of the ESOP
participants.

“GAAP” means United States generally accepted accounting principles.

“Government Programs” means “federal health care programs” as defined in 42
U.S.C. §1320a-7b(f), including Medicare, state Medicaid programs, state CHIP
programs, TRICARE, Maternal and Child Health Service Block Grant, Social
Services Block Grant and any other similar or successor federal, state or local
healthcare payment programs with or sponsored, in whole or in part, by any
Governmental Authority.

 

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“Governmental Authority” means any federal, state, local or other governmental
entity or regulatory body, agency, instrumentality or commission, or court,
tribunal or judicial or arbitral body.

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

“Governmental Permits” means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental
Authority (including all Medicare and Medicaid, provider or supplier numbers,
certificates of need or public convenience, and similar licenses and
certifications) and any accreditations or certification issued by an accrediting
body, whether foreign, federal, state or local, or any other Person, necessary
for the conduct of, or relating to, the operation of the Business, including,
without limitation, any certification or accreditation relied upon in obtaining,
or required to obtain, any license, permit, franchise, approval, authorization,
consent or orders of any Governmental Authority.

“Health Care Laws” means all Laws and Governmental Orders relating to the
provision, administration, management and/or payment for health care or health
care-related products, services, professionals or facilities, participation in
and the receipt of payment from Government Programs and Third Party Payors, the
corporate practice of medicine, professional responsibility and standards of
care, institutional and professional licensure, documentation, coding and
submission of claims, physician orders, prescription drug and controlled
substance sale, use, distribution, dispensing, marketing and security, refunds
and overpayments, medical record retention, unprofessional conduct,
fee-splitting, kickbacks, rebates, inducements, referrals, billing and
submission of false or fraudulent claims, and claims processing, including,
without limitation, Medicare, Medicaid, CHIP, the TRICARE laws (10 U.S.C. §
1071, et seq.), the False Claims Act (31 U.S.C. § 3729, et seq.), the Civil
Monetary Penalties Law (42 U.S.C. § 1320a-7a), the federal anti-kickback
statutes (42 U.S.C. § 1320a 7b), the federal self-referral law (42 U.S.C.
§1395nn), criminal false claims statutes (e.g. 18 U.S.C. §§ 287 and 1001), the
Program Fraud Civil Remedies Act of 1986 (31 U.S.C. §3801, et seq.), and the
Beneficiary Inducement Statute (42 U.S.C. §1320a-7a(a)(5)).

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
the Health Information Technology for Economic and Clinical Health Act, and
their implementing regulations set forth at 45 C.F.R. Parts 160-164, as amended
from time to time.

“Income Tax” means any Tax based on or measured by reference to gross or net
income or receipts, and franchise, net worth, capital or other doing business
Taxes, including any interest, penalty or addition thereto, irrespective of
whether disputed.

“Indebtedness” means, without duplication, (a) all funded indebtedness of the
Company for borrowed money or indebtedness related thereto; (b) all obligations
of the Company for the deferred purchase price of property or assets; (c) all
obligations of the Company evidenced by notes or other similar instruments;
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property); (e) any liability
in respect of letters of credit, surety bonds or similar arrangements; (f) any
obligations under capital leases; and (g) all indebtedness of any other Person
(including indebtedness referred to in clauses (a) through (f) above) which is
directly or indirectly guaranteed by the Company, which in each instance shall
include all accrued interest thereon and applicable prepayment premiums and any
other fees, costs or expenses payable in connection therewith, including
breakage costs.

 

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“Intellectual Property” means all copyrights, trademarks, trade names, service
marks, trade dress, goodwill, social media accounts, domain names, trade
secrets, confidential information, patents, websites, computer programs, works
of authorship and other intellectual property and proprietary rights, and all
applications to register and registration of the foregoing.

“IRS” means the Internal Revenue Service.

“Knowledge of the Company” or “The Company’s Knowledge” or any derivations
thereof means facts, circumstances or occurrences that are within the actual
knowledge of Michael J. Merrell, Mary E. Merrell, Laura T. Armstrong and
Catherine Rosacker-Sharp or would be reasonably expected to be within the actual
knowledge of any such Person after their making due inquiry in the ordinary
course of their ownership of the Company or the performance of their duties and
responsibilities.

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

“Material Adverse Effect” means any event, change, development, or effect that,
individually or in the aggregate, will or would reasonably be expected to have a
materially adverse effect on the business, operations, assets (including
intangible assets), services, liabilities, operating results, employee, customer
or supplier relations, or financial condition of the Company Entities; provided,
that in no event shall any of the following, alone or in combination, be deemed
to constitute, nor shall any of the following be taken into account in
determining whether there has been or shall be, a Material Adverse Effect: any
event, change, occurrence, or effect (a) resulting from the announcement of the
execution and delivery of this Agreement or compliance with the terms and
conditions of this Agreement; (b) affecting the industry in which the Company
Entities operate generally or the United States economy generally which do not
have a disproportionate adverse impact on the Company Entities relative to other
similarly situated companies in the industry in which the Company Entities
operate; (c) that results from changes affecting general economic or financial
conditions which do not have a disproportionate adverse impact on the Company
Entities relative to other similarly situated companies in the industry in which
the Company Entities operate; (d) resulting from any natural or man-made
disaster or acts of god; or (e) resulting from changes consented to or requested
by Buyer in writing regardless of whether permitted or required by this
Agreement. For the sake of clarity, the term “Material Adverse Effect” shall
include the termination of the S corporation status of the Company other than as
a result of the Closing.

“Net Working Capital” means the excess of the current assets of the Company over
the current liabilities of the Company, determined in accordance with GAAP
except to the extent otherwise provided on Schedule 2.5(a); provided, that for
purposes of calculating the Net Working Capital hereunder, the Parties agree
that:

(a)    Net Working Capital shall be calculated without giving effect to any
changes therein relating to or resulting from the consummation of the
transactions contemplated by this Agreement, except as relates to the sale of
the assets of the Ambercare Medical Supply Company;

 

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(b)    current assets exclude (i) Closing Cash Amount, (ii) all Income Tax
assets (whether current or deferred, including rights to refunds for Income
Taxes), (iii) receivables from any Seller, any other Affiliates of the Company
or any Affiliates of any Seller, (iv) all receivables more than one hundred
twenty (120) days past due or disputed by the Company’s customer or client, and
(v) all receivables for which checks received at or prior to Closing result in
an increase in Closing Cash Amount; and

(c)    current liabilities exclude (i) any liabilities of the Company paid from
the Purchase Price and (ii) all Income Tax liabilities (whether current or
deferred).

“Net Working Capital Deficit” means the amount by which Net Working Capital as
of the close of business on the Closing Date is less than the Target Net Working
Capital amount.

“Net Working Capital Surplus” means the amount by which Net Working Capital as
of the close of business on the Closing Date is greater than the Target Net
Working Capital amount.

“Open Source Software” means any Software subject to a license or other
agreement whose terms require the distribution of source code in connection with
the distribution of the Software to which such license applies or that prohibits
the licensee from charging a fee or otherwise limit the licensee’s freedom of
action with regard to seeking compensation in connection with sublicensing or
distributing the Software to which such license applies (whether in source code
or executable code form), including the licenses commonly referred to as the
“Artistic License”, the “Mozilla Public License”, the “General Public License”,
the “Lesser General Public License” and other similar licenses applicable to
software distributed without charge to the public in source code form.

“Organizational Documents” means (a) in the case of a Person that is a
corporation, its articles or certificate of incorporation and its bylaws,
regulations or similar governing instruments required by the Laws of its
jurisdiction of formation or organization; (b) in the case of a Person that is a
partnership, its articles or certificate of partnership, formation or
association, and its partnership agreement (in each case, limited, limited
liability, general or otherwise); (c) in the case of a Person that is a limited
liability company, its articles or certificate of formation or organization, and
its limited liability company agreement or operating agreement; (d) in the case
of a Person that is a trust, its declaration of trust, trust agreement,
certificates of ownership or similar governing instruments required by the Laws
of its jurisdiction of formation; and (e) in the case of a Person that is none
of a corporation, partnership (limited, limited liability, general or
otherwise), limited liability company, trust or natural person, its governing
instruments as required or contemplated by the Laws of its jurisdiction of
organization.

“Permitted Encumbrances” means any (a) Encumbrances specifically identified as
“Encumbrances” in the Disclosure Schedules at the time of execution of this
Agreement; (b) liens for Taxes not yet due or payable; (c) liens of landlords,
carriers, warehousemen, workmen, repairmen, mechanics, materialmen and similar
liens arising in the ordinary course of business and not incurred in connection
with the borrowing of money; (d) restrictions, easements, covenants,
reservations, rights of way or other similar matters of title to the Leased Real
Property of record; and (e) zoning ordinances, restrictions, prohibitions and
other requirements imposed by any Governmental Authority, all of which do not
individually or in the aggregate materially interfere with the conduct of the
business of the Company.

 

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

“Personal Information” means any information with respect to which there is a
reasonable basis to believe that the information can be used to identify an
individual, including “individually identifiable health information” as defined
in 45 C.F.R. 160.103, demographic information, and Social Security numbers.

“Proceeding” means any claim, action, suit, arbitration, inquiry, proceeding or
investigation, whether civil, criminal or administrative by or before any
Governmental Authority.

“Related Party” means any director, officer, manager, employee, member,
shareholder or other holder of equity interests of the Company or any Affiliate
or member of the immediate family of any such Person.

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate into or through
the environment (including, without limitation, ambient air (indoor or outdoor),
surface water, groundwater, land surface or subsurface strata or within any
building, structure, facility or fixture).

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

“Restricted Cash” means any (a) Cash and Cash Equivalents of the Company,
wherever and however held, where usage of such Cash and Cash Equivalents is
restricted by Law, contract (including customer deposits) or otherwise, plus
(b) Cash and Cash Equivalents equal to the amount of all outstanding checks
written on an account of the Company that have not yet cleared, plus (c) Cash
and Cash Equivalents, wherever and however held, where such amounts have been
received but additional goods or services are required to be supplied in order
for the Company to be entitled to keep such Cash and Cash Equivalents.

“Software” means all computer programs, including any and all software
implementations of algorithms, models and methodologies whether in source code
or object code form, databases and compilations, including any and all
electronic data and electronic collections of data, all documentation, including
user manuals and training materials, related to any of the foregoing and the
content and information contained on any website.

“Specified Matter” means that certain matter described in paragraph 7 of
Schedule 8.1.

“Straddle Period” means a taxable period that, to the extent it relates to the
Company, any Subsidiary or any of their Affiliates, begins before and ends after
Closing Date.

“Subsidiary” with respect to any Person, means any corporation, partnership,
joint venture, limited liability company or other legal entity of which such
Person owns, directly or indirectly, greater than 50% of the capital stock or
other equity interests that are generally entitled to vote for the election of
the board of directors or other governing body of such corporation, partnership,
joint venture, limited liability company or other legal entity or to vote as a
general partner thereof.

 

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“Target Net Working Capital” means $3,300,000.

“Tax” or “Taxes” means (a) any federal, state, local or foreign income, gross
receipts, capital, bulk, production, license, payroll, employment, excise,
severance, stamp, recording, occupation, premium, windfall profits,
environmental, customs duties, franchise, single business, profits, margin,
withholding, social security, unemployment, disability, real property, real
estate excise, mortgage, inventory, personal property, intangible property,
escheatment, unclaimed property, sales, use, ad valorem, transfer, registration,
value added, alternative or add-on minimum, estimated or other tax, fee or
assessment of any kind whatsoever, including any interest, penalties, fines,
additions to tax or additional amounts imposed by any Taxing Authority with
respect thereto; (b) any liability for payment of amounts described in clause
(a) whether as a result of transferee liability, of being a member of an
affiliated, consolidated, combined or unitary group for any taxable period
(including, without limitation, any liability pursuant to Treasury Regulations
section 1.1502-6 or any similar provision of state, local, or non-U.S. Law), by
contract or otherwise through operation of Law; and (c) any liability for the
payment of amounts described in clauses (a) or (b) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other agreement to
indemnify any other Person with respect to Taxes.

“Tax Return” means any return, report, election, notice, estimate, declaration,
request or other statement or document (including all schedules, exhibits and
other attachments thereto) with respect to Taxes, including any information
statement, claim for refund, or declaration of estimated Tax and any amendment
to any of the foregoing.

“Taxing Authority” means any Governmental Authority having jurisdiction over the
assessment, determination, collection or imposition of any Tax.

“Transaction Documents” means this Agreement, the Disclosure Schedules, the
Seller Documents, the Buyer Documents, and such other instruments or agreements
required by this Agreement to be executed and delivered hereunder.

“Transaction Expenses” means all fees and expenses incurred by the Company
and/or any Seller in connection with the transactions contemplated hereby,
including, without limitation, such fees and expenses of the Company’s and any
Seller’s legal counsel, accountants, consultants, advisers, brokers and
investment bankers as well as any payments owing under appreciation rights,
phantom equity or similar plans or any deferred compensation, retention,
severance, deferred purchase price, annual or special bonus or profit sharing
payments attributable to pre-Closing periods and all bonuses and other payments
payable by the Company to any employee of the Company as a result of the
transactions contemplated by this Agreement, plus the employer’s share of any
payroll Taxes due in connection with such payments, in addition to any expenses
related to the ESOP, including, but not limited to, any fairness opinion and the
expenses of the independent trustee.

“Transaction Expenses Amount” means an amount equal to all Transaction Expenses
that have not been paid or otherwise discharged in full as of the Closing,
regardless of whether the Company and/or any Seller has been billed for such
expenses.

“Transfer Taxes” means any excise, sales, use, documentary, transfer, value
added, stock transfer, unit transfer, and stamp Taxes, any transfer, recording,
registration, and other fees, and any similar Taxes imposed on, or incurred in
connection with, the sale of the Shares (including, for the sake of clarity, any
such Taxes arising in connection with the execution and performance of this
Agreement and the other Transaction Documents); provided that, for the avoidance
of doubt, Transfer Taxes do not include any Income Taxes.

 

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“Treasury Regulations” means the regulations promulgated under the Code by the
United States Department of the Treasury.

Section 1.2    Additional Defined Terms. For purposes of this Agreement, the
following terms have the meanings set forth in the sections indicated below:

 

Term

   Section

ACA

   4.18(d)

ADEA

   6.9(b)

Agreement

   Introduction

Allocation

   6.6(b)

Auditor

   6.15

Balance Sheet

   4.6(a)

Basket

   8.1(b)(i)

Benefit Plans

   4.18(a)

Breach

   4.12(f)

Buyer

   Introduction

Buyer Documents

   5.2

Buyer Indemnified Persons

   8.1(a)

Cap

   8.1(b)(iii)

Cash Payment

   2.2

Cash Payment Statement

   2.5(b)(i)

Claims

   6.9(a)

Claim Notice

   8.3

Closing

   3.1

Closing Date

   3.1

Company

   Introduction

Company Leases

   4.14(b)

Company-Owned Software

   4.17(f)

Company Indemnified Persons

   8.2(a)

Competing Business

   6.8(c)

Covered Area

   6.8(c)

Disclosing Party

   6.3

DME Business

   6.12

EEOC

   6.9(e)

Effective Time

   3.1

End Date

   9.1(b)

ERISA Affiliate

   4.18(c)

Escrow Agreement

   3.2(a)(ii)

 

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Term

   Section

Escrow Release Amount

   2.4

Escrow Release Date

   2.4

ESOP

   Introduction

ESOP Trust

   Introduction

Estimated Cash Payment

   2.5(a)

Estimated Cash Payment Statement

   2.5(a)

Excluded Assets

   2.6

Final Cash Payment Statement

   2.5(b)(iv)

Financial Statements

   4.6(a)

Fundamental Representations

   8.1(b)(iv)

Illustrative Allocation Schedule

   6.6(b)

Indemnified Party

   8.3

Indemnifying Party

   8.3

Independent ESOP Trustee

   Introduction

Leased Real Property

   4.14(b)

Losses

   8.1(a)

Malicious Code

   4.17(d)

Material Contracts

   4.16(a)

Material Suppliers

   4.25(b)

Merrell Trust

   Introduction

Neutral Auditor

   2.5(b)(iii)

Party(ies)

   Introduction

Pay-off Letter

   3.2(a)(iii)

Principals

   Introduction

Purchase Price

   2.2

Released Parties

   6.9(a)

Releasors

   6.9(a)

Representation Letter

   6.15

Resolution Period

   2.5(b)(ii)

Restricted Period

   6.8(a)

S Corporation Election Date

   4.9

Seller Documents

   4.2

Seller Indemnified Persons

   8.2(a)

Shares

   Introduction

StateServ Note

   2.2(h)

Tail Insurance

   6.10

Third Party Claim

   8.5

Third Party Payor(s)

   4.25(a)

Unresolved Claim

   2.4

WARN Act

   4.20

 

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ARTICLE II

PURCHASE AND SALE; CLOSING

Section 2.1    Purchase and Sale of the Shares. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing, the Sellers shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from the Sellers, legal and beneficial ownership of all of the
Shares, free and clear of any Encumbrances, for the consideration specified in
Section 2.2.

Section 2.2    Purchase Price. The aggregate purchase price for the Shares shall
consist of the Cash Payment, as defined in this Section below), subject to
adjustment as provided in Section 2.5 (the “Purchase Price”). The “Cash Payment”
means the amount equal to:

(a)    $50,600,000;

(b)    minus Closing Liabilities;

(c)    minus the Escrow Amount;

(d)    minus the Closing Indebtedness Amount, if any;

(e)    minus the unpaid Transaction Expenses Amount, if any;

(f)     plus the Net Working Capital Surplus, if any, or minus the Net Working
Capital Deficit, if any;

(g)    plus the Closing Cash Surplus, if any, or minus the Closing Cash Deficit,
if any; and

(h)    plus the principal amount shown on that certain promissory note from
StateServ in connection with the DME Business sale (“StateServ Note”); At the
Closing, the ESOP shall immediately use such portion of the Cash Payment paid to
it as is necessary to fully pay and extinguish any outstanding loan between the
ESOP and the Principals.

Section 2.3    Payments at Closing. At the Closing, Buyer shall:

(a)    pay the Cash Payment to the Sellers, by wire transfer of immediately
available funds to an account or accounts designated by the Sellers on Schedule
2.3(a);

(b)    deliver, or cause to be delivered, the Escrow Amount to the Escrow Agent
in accordance with Section 2.4, by wire transfer of immediately available funds
to the bank account identified by the Escrow Agent in writing on or before the
Closing Date;

(c)    pay the Closing Indebtedness Amount, if any, pursuant to any payoff
letters delivered to Buyer by the Sellers prior to the Closing; and

 

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(d)    pay the Transaction Expenses Amount to the Persons and accounts in the
amounts designated by the Sellers.

Section 2.4    Escrow. At the Closing, Buyer shall deliver the Escrow Amount to
the Escrow Agent to be held by the Escrow Agent pursuant to the terms of the
Escrow Agreement. On the Business Day following the eighteen (18) month
anniversary of the Closing Date (the “Escrow Release Date”), the Merrell Trust
shall be entitled to receive a positive amount (the “Escrow Release Amount”), if
any, calculated as (a) the Escrow Amount, plus (b) any interest thereon, less
(c) the aggregate dollar amount of any claims resolved prior to the Escrow
Release Date pursuant to Section 8.4, less (d) the aggregate amount of claims
for indemnification under Section 8.1 outstanding at such time (each, an
“Unresolved Claim”). From time to time, promptly after final resolution of any
Unresolved Claim, the Merrell Trust and Buyer will instruct the Escrow Agent to
disburse to the Merrell Trust or Buyer, as appropriate, amounts held by the
Escrow Agent in respect of such Unresolved Claim. At such date after the Escrow
Release Date, as all Unresolved Claims arising prior to such date are resolved,
Buyer and the Merrell Trust will jointly instruct the Escrow Agent to disburse
to the Merrell Trust the remaining Escrow Release Amount. The fees and expenses
of the Escrow Agent shall be paid fifty percent (50%) by Buyer and fifty percent
(50%) by the Merrell Trust.

Section 2.5    Adjustment.

(a)    Estimated Cash Payment Statement. The Sellers shall deliver to Buyer, not
less than three (3) Business Days prior to the Closing Date, a statement (the
“Estimated Cash Payment Statement”) in the form attached hereto as Schedule
2.5(a) which sets forth the Sellers’ good faith estimates, as of the Closing
Date, of (i) the Closing Cash Amount (ii) Closing Liabilities (iii) the Closing
Cash Surplus, if any, or the Closing Cash Deficit, if any (iv) the Closing
Indebtedness Amount, (v) the Transaction Expenses Amount, (vi) Net Working
Capital, (vii) the Net Working Capital Surplus, if any, or the Net Working
Capital Deficit, if any, (viii) StateServ Note, and (ix) based on the foregoing
amounts, the Cash Payment (the “Estimated Cash Payment”). The amounts set forth
on the Estimated Cash Payment Statement shall be used in calculating the Cash
Payment to be delivered at the Closing. The Estimated Cash Payment Statement
shall be prepared without giving effect to the consummation of the transactions
contemplated by, or any of the actions to be taken or amounts to be paid under
or in connection with, this Agreement, and shall be prepared in accordance with
GAAP, as modified by the definitions of Closing Cash Amount and Net Working
Capital contained in this Agreement and otherwise as set forth on Schedule
2.5(a). During the period between the delivery of the Estimated Cash Payment
Statement and the Closing, the Sellers shall afford Buyer and its
Representatives reasonable access during normal business hours to the books and
records, personnel and advisors of the Company to the extent reasonably required
in connection with Buyer’s review and verification of the Estimated Cash Payment
calculation, including the Company’s work papers underlying or utilized in
preparing such estimates and calculations contained in such certificate, and the
Sellers and Buyer shall consult in good faith with one another and the Sellers
shall incorporate any reasonable comments of Buyer into the Estimated Cash
Payment Statement, without prejudice to Buyer’s or the Sellers’ other rights
hereunder.

(b)    Final Cash Payment Statement.

(i)    Within ninety (90) days after the Closing Date, Buyer will prepare and
deliver to the Sellers a statement (the “Cash Payment Statement”) setting forth
Buyer’s good faith determinations, as of the Closing Date, of (A) the Closing
Cash Amount, (B) the Closing

 

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Liabilities, (C) Closing Cash Surplus, if any or the Closing Cash Deficit, if
any, (D) the Closing Indebtedness Amount, (E) the Transaction Expenses Amount,
(F) Net Working Capital, (G) the Net Working Capital Surplus, if any, or the Net
Working Capital Deficit, if any, (H) the StateServ Note, and (I) based on the
foregoing amounts, the Cash Payment. The Cash Payment Statement shall be
prepared using the same principles, practices, methodologies and policies that
are required to be used pursuant to Section 2.5(a) to prepare the Estimated Cash
Payment Statement.

(ii)    After receipt of the Cash Payment Statement, the Sellers shall have
thirty (30) days to review it. The Sellers shall deliver notice to Buyer on or
prior to the thirtieth (30th) day after receipt of the Cash Payment Statement
specifying in reasonable detail all disputed items, if any, and a summary of the
basis therefor. If the Sellers fail to deliver such notice in such thirty
(30) day period, the Sellers will have waived the right to contest the Cash
Payment Statement. If the Sellers notify Buyer of any objections to the Cash
Payment Statement in such thirty (30) day period, the Sellers and Buyer shall,
within thirty (30) days following the date of such notice(s) (the “Resolution
Period”), attempt to resolve their differences and any written resolution by
them as to any disputed amount will be final and binding for all purposes under
this Agreement.

(iii)    If at the conclusion of the Resolution Period the Sellers and Buyer
have not reached an agreement on any objections of the Sellers with respect to
the Cash Payment Statement, then all amounts and issues remaining in dispute
will be submitted by the Sellers and Buyer to PricewaterhouseCoopers LLP (the
“Neutral Auditor”) for a determination resolving such amounts and issues. Buyer
and the Merrell Trust each agree to execute, if requested by the Neutral
Auditor, a reasonable engagement letter with respect to the determination to be
made by the Neutral Auditor. All fees and expenses relating to the work, if any,
to be performed by the Neutral Auditor will be borne by Buyer and the Merrell
Trust respectively, in the proportion that the aggregate dollar amount of the
disputed items submitted to the Neutral Auditor by Buyer or the Merrell Trust
that are unsuccessfully disputed by such Party (as finally determined by the
Neutral Auditor) bears to the aggregate dollar amount of disputed items
submitted by Buyer and the Merrell Trust. Except as provided in the preceding
sentence, all other costs and expenses incurred by Buyer and the Merrell Trust
in connection with resolving any dispute hereunder before the Neutral Auditor
will be borne by the Party incurring such cost and expense. The Neutral Auditor
shall determine only those issues still in dispute at the end of the Resolution
Period, and the Neutral Auditor’s determination will be based upon and
consistent with the terms and conditions of this Agreement. The determination by
the Neutral Auditor will be based solely on presentations with respect to such
disputed items by Buyer and the Sellers to the Neutral Auditor and not on the
Neutral Auditor’s independent review. Buyer and the Sellers shall use their
commercially reasonable efforts to make their respective presentations as
promptly as practicable following submission to the Neutral Auditor of the
disputed items (but in no event later than fifteen (15) days after engagement of
the Neutral Auditor), and each of Buyer and the Sellers will be entitled, as
part of such Party’s presentation, to respond to the presentation of the other
and any questions and requests of the Neutral Auditor. In deciding any matter,
the Neutral Auditor (A) will be bound by the provisions of this
Section 2.5(b)(iii) and (B) may not assign a value to any item greater than the
greatest value for such item claimed by either Buyer or the Sellers or less than
the smallest value for such item claimed by Buyer or the Sellers.

(iv)    The Neutral Auditor’s determination will be made within forty-five
(45) days after its engagement (which engagement will be made no later than five
(5) Business Days after the end of the Resolution Period), or as soon thereafter
as possible, will be set forth in a written statement delivered to the Sellers
and Buyer and will be final, conclusive, non-appealable and binding for all
purposes hereunder. The determination of the Neutral Auditor will not be deemed
an

 

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award subject to review under the Federal Arbitration Act or any other similar
statute. The term “Final Cash Payment Statement” means the definitive Cash
Payment Statement determined in accordance with Section 2.5(b)(ii) or the
definitive Cash Payment Statement resulting from the determination made by the
Neutral Auditor in accordance with this Section 2.5(b)(iv). The Net Working
Capital Surplus, if any, the Net Working Capital Deficit, if any, the Closing
Cash Amount, Closing Indebtedness Amount, the Transaction Expenses Amount and,
based on the foregoing, the calculation of final Cash Payment, shall be set
forth on the Final Cash Payment Statement.

(v)    Within ten (10) Business Days after the Cash Payment Statement becomes
final and binding on the Parties in accordance with this Section 2.5(b):

(A)    if the Cash Payment exceeds the Estimated Cash Payment, then such excess
shall be paid by Buyer to the Sellers in cash; or

(B)    if the Estimated Cash Payment exceeds the Cash Payment, then such excess
shall be paid by the Merrell Trust to Buyer in cash, and the Principals shall
cause such payment to be made.

For the avoidance of doubt, in accordance with paragraph (i) above, the payment
in this Section 2.5(b)(v) shall reflect the aggregate impact of adjustments with
respect to final determination of the Closing Cash Amount, the Closing
Liabilities, the Closing Indebtedness Amount, the Transaction Expenses Amount,
StateServ Note, and Net Working Capital. All payments to the Sellers pursuant to
this Section 2.5(b)(v) shall be made by wire transfer of immediately available
funds to an account designated by the Sellers in writing. All payments to Buyer
pursuant to this Section 2.5(b)(v) shall be made by wire transfer of immediately
available funds to an account designated by Buyer in writing.

(vi)    If any payment required under Section 2.5(b)(v) is not made in full
within such ten (10) Business Day period, such payment will thereafter bear
simple interest at a rate equal to the prime rate published in the Wall Street
Journal plus four percent (4.0%) until paid in full. Nothing herein shall be
deemed to prohibit or limit the ability of Buyer to satisfy any payment
obligations of the Sellers under this Section 2.5(b) from the Escrow Amount,
which Buyer shall be entitled to recover from the Escrow Amount should it
determine in its sole discretion to proceed against the Escrow Amount with
respect to such payment obligations of the Sellers. No such claim or recovery
against the Escrow Amount shall be deemed to limit or otherwise waive Buyer’s
right to proceed directly against any Seller for such amounts.

(vii)    During the period required for the preparation and review of, and
resolution of disputes relating to, the Cash Payment Statement or the amounts
set forth on the Cash Payment Statement, the Sellers and Buyer shall each afford
the other’s accountants and other designated Representatives access during
regular business hours to the books and records as they may reasonably require
in order to review and verify the items on the Final Cash Payment Statement.

(c)    For Tax purposes, unless otherwise required by applicable Law, the
Sellers and Buyer agree to treat all payments made under this Section 2.5 as
adjustments to the Purchase Price.

Section 2.6    Excluded Assets. As of the Closing Date, to the extent not
already owned by the Sellers, the Company hereby distributes, conveys, transfers
and delivers to the Sellers, and the Sellers hereby purchase and acquire from
the Company, all right, title, and interest in and to the assets set forth on
Schedule 2.6 (the “Excluded Assets”).

 

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Section 2.7    No Section 338(h)(10) Election. Buyer and Sellers shall not make
an election under Section 338(h)(10) of the Code (and any corresponding election
under applicable state, local or foreign Tax law) with respect to the
acquisition of the Shares hereunder (collectively, the “Section 338(h)(10)
Election”). Buyer and Sellers shall file all Tax Returns consistent with not
making such Section 338(h)(10) Election.

ARTICLE III

CLOSING

Section 3.1    Closing. The consummation of the transactions contemplated by
this Agreement (the “Closing”) shall take place (other than those conditions
that by their nature can only be satisfied at the Closing, but subject to the
satisfaction or waiver of such conditions), unless another date is agreed to by
the Buyer and the Sellers, on the second Business Day following the date on
which all the conditions set forth in Article VII have been satisfied or validly
waived, at the offices of Bass, Berry & Sims PLC located at 150 Third Avenue
South, Suite 2800, Nashville, Tennessee 37201 or remotely by the electronic
transmission of documents and wire transfer of funds (except with respect to any
instruments validly transferable under applicable Law only by physical delivery)
(the date on which the Closing occurs, the “Closing Date”) effective as of 12:01
a.m. on the Closing Date (the “Effective Time”); provided, however, that if the
Closing does not occur on a day that is the first day of a calendar month, the
Closing shall be deemed to be effective for accounting purposes at 12:01 a.m. on
the first day of the calendar month in which the Closing occurs. All proceedings
to be taken and all documents to be executed and delivered by the Parties at the
Closing shall be deemed to have been taken and executed simultaneously and no
proceedings shall be deemed taken nor any documents executed or delivered until
all have been taken, executed and delivered.

Section 3.2    Closing Deliveries.

(a)    Seller Closing Deliveries. At the Closing, the Sellers shall deliver or
cause to be delivered to Buyer all of the following:

(i)    certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers) for transfer to Buyer;

(ii)    an escrow agreement in the form attached hereto as Exhibit A (the
“Escrow Agreement”), executed by the Merrell Trust and the escrow agent set
forth therein;

(iii)    a pay-off letter (the “Pay-off Letter”), executed by the holders of the
Closing Indebtedness Amount in a form acceptable to Buyer providing for, upon
the payment of all outstanding amounts owed by any of the Company Entities to
the holders of the Closing Indebtedness Amount at the Closing, the termination
of all security interests held by such holders with respect to any of the
Company Entities’ assets (including the authorization of the filing of all
necessary UCC-1 termination statements and other necessary documentation in
connection with the termination such security interests), executed by the
holders of the Closing Indebtedness Amount;

(iv)    a certificate of good standing of each of the Company Entities issued as
of a recent date by the Secretary of State of the State of New Mexico;

 

15

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(v)    a copy of the articles of incorporation of each of the Company Entities,
certified as a recent date by the Secretary of State of the State of New Mexico;

(vi)    written resignations, effective as of the Closing Date, of the officers
and directors of each of the Company Entities requested by Buyer;

(vii)    true and complete minute books and records of the Company Entities;

(viii)    evidence, in form and substance reasonably satisfactory to Buyer, of
the Tail Insurance policy contemplated by Section 6.10;

(ix)    all required third-party consents and approvals set forth in
Schedule 6.4(a);

(x)    an affidavit by or on behalf of each Seller complying with the
requirements of Treasury Regulations Section 1.1445-2(b)(2) that is reasonably
acceptable to Buyer;

(xi)    a certificate of the trustees of the ESOP certifying that, as of the
Closing, the ESOP trustee: (A) has duly authorized the transactions related to
the sale of the Company Shares held by the ESOP, (B) has determined that (i) the
Independent ESOP Trustee has determined that the amounts transferred to the ESOP
(following the consummation of the transaction) for the ESOP Shares is not less
than the fair market value of such ESOP Shares, and the transactions
contemplated by this Agreement, taken as a whole, are fair to the ESOP from a
financial point of view, and (ii) the sale of the ESOP Shares contemplated by
this Agreement will be for the exclusive purpose of providing benefits to
participants and beneficiaries of the ESOP (following the consummation of the
transaction), and (C) has taken all requisite actions (i) approving the
consummation of the transactions contemplated by this Agreement, to the extent
applicable, and (ii) as to the incumbency and signatures of the trustees of the
ESOP executing documentation in connection with the transactions contemplated
hereby;

(xii)    a copy of the ESOP Fairness Opinion;

(xiii)    a copy of the resolutions of the Company’s board of directors (or
similar governing body), certified by the secretary of the Company as having
been duly and validly adopted and being in full force and effect, terminating
the ESOP; and

(xiv)    such other deeds, bills of sale, assignments, certificates of title,
documents and other instruments of transfer and conveyance as may reasonably be
requested by Buyer, each in form and substance reasonably satisfactory to Buyer
and executed by the Sellers and/or the Company, as applicable.

(b)    Buyer’s Closing Deliveries. At the Closing, Buyer shall deliver or cause
to be delivered to the Sellers all of the following:

(i)    the payments specified in accordance with Section 2.3; and

(ii)    the Escrow Agreement, executed by Buyer and the Escrow Agent.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Except as otherwise set forth in the Disclosure Schedules, the Sellers, jointly
and severally, represent and warrant to Buyer, as of the date hereof and as of
the Closing Date, as follows:

Section 4.1    Organization and Good Standing. Each of the Company Entities is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of New Mexico and has full corporate power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on the Business as it is currently conducted. The Company
Entities are duly licensed or qualified to do business and are in good standing
in each jurisdiction in which the properties owned or leased by it or the
operation of the Business as currently conducted makes such licensing or
qualification necessary. The Sellers have provided to Buyer correct and complete
copies of the Organizational Documents of the Company Entities, together with
any amendments thereto.

Section 4.2    Authorization, Validity and Effect of Agreement. Each Seller and
each of the Company Entities has all necessary power, authority and legal
capacity to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement to be
executed by such Seller, as applicable, in connection with the consummation of
the transactions contemplated by this Agreement (collectively, the “Seller
Documents”), and to perform its obligations hereunder to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each of the Seller Documents, the performance by each of the
Company Entities and each Seller of its obligations hereunder and thereunder,
and the consummation by each of the Company Entities and each Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of each Seller and each of the Company Entities.
This Agreement and each of the Seller Documents have been duly and validly
executed and delivered by each of the Company Entities and each Seller and
(assuming the valid execution and delivery by each other party thereto)
constitute legal, valid and binding obligations of each of the Company Entities
and each Seller, each enforceable against each of the Company Entities and each
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy Laws, other similar Laws affecting creditors’ rights and general
principles of equity affecting the availability of specific performance and
other equitable remedies.

Section 4.3    No Conflicts; Consents. None of the execution and delivery by any
of the Company Entities or any Seller of this Agreement or any of the Seller
Documents, the performance by the Seller of its respective obligations hereunder
or thereunder, or consummation of the transactions contemplated hereby or
thereby will:

(a)    except as set forth on Schedule 4.3(a), with or without the giving of
notice, lapse of time or both, conflict with, result in a violation or breach of
the terms, conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or cancellation
or a loss of rights under (i) the Organizational Documents of any of the Company
Entities, (ii) any contract or agreement or Governmental Permit to which the
Company Entities or any Seller is a party or is otherwise bound, (iii) any
Governmental Order to which the Company Entities or any Seller is a party or is
otherwise bound, or (iv) any applicable Law; or

(b)    except as set forth on Schedule 4.3(b), require a consent under (i) any
contract or agreement to which the Company Entities or any Seller is a party or
is otherwise bound, or (ii) any Governmental Permit that is either binding upon
or enforceable against the Company Entities or any Seller.

 

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Section 4.4    Capitalization.

(a)    Schedule 4.4(a) sets forth the number of authorized and issued and
outstanding Shares of each class of capital stock of the Company, the name and
address of each record holder of such Shares and the number and class of Shares
held by each such record holder. The Principals are the sole trustees and
current beneficiaries of the Trust. Except as set forth on Schedule 4.4(a), the
Sellers own all of the issued and outstanding Shares of the Company, free and
clear of all Encumbrances. All of the Shares have been duly authorized and are
validly issued, fully-paid and non-assessable. The Shares were not issued in
violation of the Organizational Documents of the Company or any other agreement,
arrangement or commitment to which the Company or any Seller is a party and are
not subject to or in violation of any preemptive or similar rights of any
Person.

(b)    Schedule 4.4(b) sets forth the number of authorized and issued and
outstanding shares of each class of capital stock of the Company Entities other
than the Company, the name and address of each record holder of such shares and
the number and class of shares held by each such record holder. The Company
owns, beneficially and of record, all of the issued and outstanding shares of
each such Company Entity, free and clear of all Encumbrances. All of such shares
have been duly authorized and are validly issued, fully-paid and non-assessable.
Such shares were not issued in violation of the Organizational Documents of any
Company Entity or any other agreement, arrangement or commitment to which any
Company Entity or any Seller is a party and are not subject to or in violation
of any preemptive or similar rights of any Person.

(c)    There are no outstanding or authorized options, warrants, calls,
subscriptions, interests, convertible securities or other rights (i) to acquire
any of the Shares or other securities of the Company Entities or any securities
convertible into or exchangeable or exercisable for any Shares or other
securities of the Company Entities or (ii) which obligate the Company Entities
to issue, exchange, transfer or sell any Shares or other securities of the
Company Entities or any securities convertible into or exchangeable or
exercisable for any Shares or other securities of the Company Entities.

Section 4.5    Subsidiaries. Other than as set forth in Schedule 4.5, except for
the Company Entities, the Company does not, directly or indirectly, own any
equity, membership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership or similar interest in,
any Subsidiary.

Section 4.6    Financial Statements.

(a)    The Sellers have provided to Buyer, and attached hereto as Schedule
4.6(a), correct and complete copies of: (i) the reviewed consolidated balance
sheets of the Company Entities as of December 31, 2016, 2015 and 2014 and the
related statements of income and cash flows of the Company Entities for the
years then ended, and (ii) the unaudited consolidated balance sheet of the
Company Entities as of the Balance Sheet Date (the “Balance Sheet”) and the
related statements of income and cash flows of the Company Entities for the
twelve (12) months then ended (collectively, the “Financial Statements”). Except
as set forth in any notes thereto and except as set forth in Schedule 4.6(a),
the Financial Statements (A) were prepared from the books and records of the

 

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Company Entities, (B) except as set forth on Schedule 4.6(a), were prepared in
accordance with GAAP and applied on a consistent basis during the periods
involved, and (C) present fairly, in all material respects, the financial
condition and results of operations of the Business as of their respective dates
and for the respective periods covered thereby, subject to the absence of notes
and normal year-end adjustments. Except as set forth on Schedule 4.6(a), the
Company Entities have no Indebtedness.

(b)    The Company Entities have established and maintains a system of internal
accounting controls which the senior management of each of the Company Entities
believes to be sufficient to provide reasonable assurances that transactions,
receipts, and expenditures of the Company Entities are being executed and made
only in accordance with appropriate authorizations of management.

Section 4.7    No Undisclosed Liabilities. Except as set forth on Schedule 4.7,
no Company Entity has any liabilities, obligations or commitments of any nature
whatsoever, asserted or unasserted, known or unknown, absolute or contingent,
accrued and unaccrued, matured or unmatured or otherwise, except (a) those which
are reflected or reserved against in the Balance Sheet as of the Balance Sheet
Date, (b) those which have been incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date and (c) executory
obligations under contracts entered into in the ordinary course of business that
are to be performed in accordance with the terms of such contracts.

Section 4.8    Absence of Certain Developments. Except as set forth in Schedule
4.8, since January 1, 2017, the Business has operated in all material respects
in the usual and ordinary course consistent with past practice, and without
limiting the generality of the foregoing there has not occurred any event,
circumstance or condition that has had or that could reasonably be expected to
have a Material Adverse Effect, and each of the Company Entities have not (and
have not committed or agreed to, whether by written contract or otherwise):

(a)    amended or restated its articles of incorporation or bylaws, made any
change in its authorized or issued shares of capital stock; granted any option,
right to purchase or similar right regarding the Shares; purchased, redeemed,
retired, or acquired any such Shares; or declared or paid any dividend or other
distribution or payment in respect of its Shares (other than Tax distributions
made in the ordinary course of business);

(b)    permitted or allowed any of its assets or properties, whether tangible or
intangible, to be mortgaged, pledged or made subject to any Encumbrance, other
than Permitted Encumbrances;

(c)    materially changed its method of doing business or any material change in
accounting methods or principles or its method of application of such principles
or practices, other than write-downs or write-offs in the value of assets as
required by GAAP not exceeding $10,000 in the aggregate;

(d)    suffered a Material Adverse Effect;

(e)    instituted or settled any claim, arbitration, mediation, dispute
resolution procedure or legal Proceeding;

 

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(f)    entered into any contract or agreement relating to the payment for
capital expenditures in excess of $10,000 singularly or $25,000 in the
aggregate, unless paid prior to Closing;

(g)    waived or released, or entered into any agreement not to assert, any
material right or claim;

(h)    terminated any Material Contract;

(i)    made any loan to, or entered into any other transaction or contract with,
any Related Party;

(j)    cancelled any of its debts or waived any material claims or rights, or
sold, transferred or otherwise disposed of any material properties or assets
(real, personal or mixed, tangible or intangible), except in transactions in the
ordinary course of business;

(k)    experienced any loss, damage or destruction of or to any of its assets
not covered by insurance and already replaced, in excess of $10,000 in the
aggregate;

(l)    incurred any Indebtedness or suffered any bad debt outside the ordinary
course of business;

(m)    made or changed any material Tax election or any material Tax accounting
method or policy, filed any amended Tax Return, consented to or entered into any
closing agreement or similar agreement related to Taxes with any Governmental
Authority, or settled or compromised any Tax liability (in all cases insofar as
it affects the Assets or the Business); or

(n)    entered into any written agreement to do any of the foregoing.

Section 4.9    Taxes.

(a)    Effective as of January 1, 2014 (the “S Corporation Election Date”), (i)
the Company’s shareholders timely made a valid election for the Company to be
treated an “S corporation” (within the meaning of Section 1361 of the Code) for
federal Income Tax purposes and, to the extent applicable, for state and local
Income Tax purposes and (ii) the Company timely made valid elections for each of
the Subsidiaries to be treated as a “qualified subchapter S subsidiary” (within
the meaning of Section 1361 of the Code) for federal Income Tax purposes and, to
the extent applicable, for state and local Income Tax purposes. At all times
since the S Corporation Election Date, the Company has been treated as an “S
corporation” (within the meaning of Section 1361 of the Code) and each of the
Subsidiaries has been treated as a “qualified subchapter S subsidiary” (within
the meaning of Section 1361 of the Code), in each case, for federal and
applicable state and local Income Tax purposes and no Taxing Authority has
challenged the effectiveness of such treatment or classification.

(b)    The ESOP Trust and each other shareholder of the Company have at all
times on and after the S Corporation Election Date been eligible to be a
shareholder of an S corporation under Code Section 1361(b)(1)(B). No Person
other than the shareholders of the Company has owned any equity interest in the
Company on or after the S Corporation Election Date. None of the Company, any
Subsidiary or any shareholder of the Company has taken any action on or after
the S Corporation Election Date that could reasonably be expect to result in the
termination of the “S corporation” status of the Company or the termination of
the “qualified subchapter S subsidiary” status of any Subsidiary for federal or
any applicable state or local Income Tax purposes.

 

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(c)    Neither the Company nor any Subsidiary has, on or after the S Corporation
Election Date, (i) acquired assets from a corporation in a transaction in which
the Tax basis of the Company or any Subsidiary, as applicable, with respect to
the acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (ii) acquired the stock of any corporation that is a “qualified
subchapter S subsidiary” (other than Company’s acquisition of the Subsidiaries).

(d)    The Company and each Subsidiary have timely filed with the appropriate
Taxing Authorities all Tax Returns required to be filed by them. All such Tax
Returns were correct and complete in all material respects and were prepared in
substantial compliance with all applicable Laws. Neither the Company nor any
Subsidiary currently is the beneficiary of any extension of time within which to
file any Tax Return.

(e)    All Taxes due and payable by the Company and each Subsidiary (whether or
not shown or required to be shown on any Tax Return), have been paid. There are
no Encumbrances for Taxes (other than for Taxes not yet due or payable) on any
of the assets of the Company or any Subsidiary. The Company and each Subsidiary
have remitted to the appropriate Taxing Authorities (i) all Taxes required to
have been withheld and remitted in connection with any amounts paid or owing to
any employee, independent contractor, creditor, equity holder, or other Person
and (ii) all sales, use, ad valorem, and value added Taxes required to be
collected and remitted, and all Tax Returns required to be filed or delivered in
connection therewith (including without limitation IRS Forms W-2 and 1099) have
been properly completed and timely filed or delivered.

(f)    The books and records of the Company and each Subsidiary relating to
Taxes (including related work papers) have been adequately maintained for all
taxable periods. No federal, state or local Tax audits or administrative or
judicial Proceedings in respect of or that relate to Taxes are pending or being
conducted with respect to the Company or any Subsidiary, and neither the Company
nor any Subsidiary has received any notice from any Taxing Authority indicating
an intent to open an audit or other review. No claim has ever been made by a
Taxing Authority in a jurisdiction where the Company or any Subsidiary does not
file Tax Returns that the Company or any Subsidiary is or may be subject to
taxation by that jurisdiction. No extensions or waivers of statutes of
limitations have been given or requested with respect to any Taxes or Tax
Returns of the Company or any Subsidiary.

(g)    Except as set forth in Schedule 4.9(g), neither the Company nor any
Subsidiary 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)
“closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local, or non-U.S. Law) executed on
or prior to the Closing Date, (iii) installment sale or open transaction
disposition transaction made on or prior to the Closing Date, (iv) prepaid
amount received on or prior to the Closing Date, (v) any election under
Section 108(i) of the Code or (vi) use of the cash method of Tax accounting
prior to the Closing.

(h)    Neither the Company nor any Subsidiary is or has been a beneficiary of or
otherwise participated in any “reportable transaction” within the meaning of
Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b)(1)
or any transaction subject to comparable provisions of state, local, or non-U.S.
Law.

 

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(i)    Neither the Company nor any Subsidiary is or has been a party to any Tax
allocation agreement, Tax sharing agreement or Tax indemnity agreement (other
than any agreement entered into in the ordinary course of business and with
respect to which Taxes is not a primary purpose), or has any current or
potential liability for the Taxes of any Person pursuant to Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local, or non-U.S. Law), as
a transferee or successor, by contract or otherwise, including without
limitation pursuant to a contractual or legal obligation to indemnify any other
Person with respect to Taxes.

(j)    None of the assets of the Company is (i) “tax-exempt use property” within
the meaning of Section 168(h) of the Code, (ii) required to be treated as being
owned by another person pursuant to the so-called “safe harbor lease” provisions
of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, or
(iii) a “section 197(f)(9) intangible” (as defined in Treasury Regulations
Section 1.197-2(h)(1)(i) and assuming for this purpose that the transition
period ends on August 10, 1993). No Seller is a “foreign person” within the
meaning of Treasury Regulations Section 1.1445-2.

(k)    Except as required for each Benefit Plan that is intended to be qualified
under Section 401(a) of the Code, no Seller nor any of the Company Entities has
requested or received any ruling from any Taxing Authority. For all material
amounts of unclaimed property, each Seller and the Company Entities have
complied in all material respects with applicable Laws relating to filing
unclaimed property reports with the appropriate Governmental Authorities.

(l)    All fees, charges, costs or expenses pursuant to Affiliate services
agreements or otherwise which are paid by the Company, any Subsidiary or any of
their Affiliates are made on an arms’ length basis within the meaning of
Section 482 of the Code and the regulations and rulings promulgated thereunder.
No claim has been asserted by any Tax Authority that the Company or any
Subsidiary is liable for any Taxes based on Section 482 of the Code or
comparable provisions of other applicable Laws.

(m)    None of the assets of any of the Company Entities is an equity interest
in another Person.

(n)    Neither the Company nor any Subsidiary is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any “excess parachute payment” within the
meaning of Section 280G of the Code (or any corresponding provision of state,
local, or non-U.S. Law) as a result of the application of Section 280G of the
Code to the consummation of the transactions contemplated by this Agreement.
No amount or benefit that could be, or has been, received by any “disqualified
individual” within the meaning of Section 280G of the Code could reasonably be
expected to be characterized as an “excess parachute payment” (as defined in
Section 280G(b)(1) of the Code) as a result of the consummation of the
transactions contemplated by this Agreement.

(o)    Neither the Company nor any Subsidiary has distributed stock of another
Person, or has had its stock distributed to another Person, in a transaction
that was purported or intended to be governed in whole or in part by Sections
355 or 361 of the Code.

 

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(p)    The Company Entities do not have an interest in any arrangement or
venture classified as a partnership for federal income tax purposes.

(q)    There is no power of attorney given by or binding on the Company or any
Subsidiary and that will survive the Closing with respect to Taxes for any
period for which the statute of limitations (including any waivers or
extensions) has not expired.

Section 4.10    Governmental Permits. Schedule 4.10 sets forth a complete list
of all Governmental Permits used in the operation of the Business or otherwise
held by the Company Entities in connection with the Business, all of which are
in full force and effect. Except as set forth on Schedule 4.10, the Company
Entities have all Governmental Permits that are necessary to own, lease, operate
and use its assets and to carry on and conduct the Business under and pursuant
to all applicable Laws. The Company Entities have complied, and are in
compliance, with all terms and conditions of the Governmental Permits in all
material respects. No Proceeding is pending or, to the Knowledge of the Company,
is threatened, nor have the Company Entities or any Seller received any notice
of any claim of default contemplating the suspension, cancellation, revocation,
withdrawal, modification, limitation or nonrenewal of any Governmental Permit.

Section 4.11    Compliance with Laws. Except as set forth on Schedule 4.11, the
Company Entities are in compliance with, and are conducting the Business in
accordance with, all applicable Laws and Governmental Orders. The Company
Entities are not, and have not been within the past five (5) years, subject to
any subpoena, civil investigative demand, demand letter, audit, inquiry, formal
or informal written request, survey or any other written notice of any alleged
default or violation of any Law or Governmental Permit applicable to it or by
which any of its properties or assets is bound.

Section 4.12    Health Care Regulatory Matters.

(a)    The Company Entities are, and since January 1, 2012 have been,
(i) qualified to participate in all third party payor programs, including all
Government Programs, in which the Company Entities participates and/or from
which the Company Entities receive reimbursement; (ii) duly enrolled and
certified in, or contracted with, all such third party payor programs, including
such Government Programs; (iii) in compliance with the applicable conditions of
participation or requirements with respect to participation in, and billing
claims to, each such third party payor program and Government Program;
(iv) timely, completely, and accurately filed all reports, data and other
information required to be filed with any Government Program or Governmental
Authority and (v) is receiving (subject to delays and adjustments in the
ordinary course of business and in compliance with Law), payment under each of
the applicable programs described in clause (a)(i) for services rendered to
qualified beneficiaries. Schedule 4.12(a) sets forth a complete list of the
Company Entities’ provider or supplier enrollment numbers with all applicable
Government Programs. No notice of any offsets against future reimbursements from
any Third Party Payor has been received by the Company Entities, nor is there
any basis therefor. All repayment obligations have been made as required by
contract or applicable Law. There are no pending appeals, adjustments,
challenges, audits, litigation or notices of intent to recoup past or present
reimbursements with respect to any Third Party Payor payments.

(b)    Except as set forth on Schedule 4.12(b), none of the Company Entities,
the Sellers or any employee, officer or director of the Company Entities, has
been served with or received since January 1, 2013 any search warrant, subpoena,
civil investigative demand, audit,

 

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record request, formal or informal written request, contact letter or other
personal contact or communication by or from any federal or state enforcement
agency alleging or suggesting any violation of any Health Care Laws;
furthermore, none of the actions described in this Section 4.12(b) is pending,
or to the Knowledge of the Company, threatened. None of the Company Entities,
the Sellers, any of the employed health care practitioners of the Company
Entities or, to the Knowledge of the Company, any of the contracted health care
practitioners of any of the Company Entities is party to a corporate integrity
agreement with the Office of Inspector General of the United States Department
of Health and Human Services, is a party to any deferred prosecution agreement
with the Department of Justice, or otherwise has any continuing reporting
obligations pursuant to any settlement agreement with any Governmental
Authority. There is no litigation or Proceeding or inquiry or investigation
pending or, to the Knowledge of the Company, threatened, with respect to the
termination or suspension of the participation by the Company Entities or any
Seller in any Government Program. None of the Company Entities, the Sellers, any
of the employed health care practitioners of the Company Entities or, to the
Knowledge of the Company, any of the contracted health care practitioners of the
Company Entities has submitted or been named by another Person as a party to, or
is involved in any arrangement that has been the subject of, a voluntary
disclosure to any Governmental Authority related to any actual or potential
violation of any Health Care Law, including without limitation any voluntary or
self-disclosure to any Governmental Authority.

(c)    None of the Company Entities, the Sellers, or any of the Company
Entities’ directors, officers or employed or contracted practitioners (i) is or
has been debarred, excluded or suspended from participating in any Government
Program, (ii) is being or has been investigated for, charged with, subject to
sanction, disciplinary action, or convicted for a felony or any other crime in
connection with any Government Program or violation of any Health Care Law, or
(iii) had an outstanding and unpaid civil monetary penalty assessed under
Section 1128A of the Social Security Act.

(d)    Each health care practitioner that is or has been employed or contracted
by the Company Entities who is required by applicable Health Care Laws to have a
license or certification in order to provide professional services (i) is, and
at all times during which such practitioner has provided any health care
services to or on behalf of any of the Company Entities has been, duly licensed
and certified in each applicable jurisdiction as required by applicable Law,
(ii) except as listed on Schedule 4.12(d), has not been sanctioned, disciplined
or had his or her license suspended, cancelled, revoked, withdrawn, or limited
by any applicable Governmental Authority, and (iii) no event has occurred, and
fact, circumstance or condition exists that reasonably may result in the denial,
loss, restriction, revocation, or rescission of any such license or
certification. Each health care practitioner is, has been, or was during the
period of time which such health care practitioner provided services to or on
behalf of the Company Entities, duly certified to participate in, and has
maintained appropriate participation in Government Programs, and no action is
pending or threatened that may result in the discipline, suspension, revocation,
or limitation by any applicable Governmental Authority of such participation.

(e)    The compensation paid to each health care practitioner who is or has
performed services on behalf of the Company Entities does not vary, and has not
varied, in any manner based on the volume or value of such practitioner’s
referrals to or business generated for the Company Entities. None of the Company
Entities, the Sellers, or any health care practitioner or employee acting on the
Company’s behalf, has paid, solicited, received, or accepted remuneration
(anything of value) in exchange for, or as an inducement to encourage, referrals
for health care items or services. None of the Company Entities, the Sellers, or
any of the Company Entities’ directors, officers, employees and health care
practitioners has or had any financial relationships with any health care entity
that does not comply with any applicable federal or state fraud and abuse Laws.

 

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(f)    Each of the Company Entities currently is, and at all times has been, in
material compliance with the applicable requirements of HIPAA. Each of the
Company Entities has commercially reasonable physical, technical, organizational
and administrative security measures and policies in place to protect all
Personal Information collected by it or on its behalf from and against
unauthorized access, use and/or disclosure. The Company Entities have in effect
with each entity acting as a Business Associate (as defined in HIPAA) of the
Company Entities an agreement that satisfies all of the requirements of 45 CFR
§§ 164.504(e) and 164.314(a), and the Company Entities are in compliance with
all such agreements in all material respects. The Company Entities have not
received any complaint or audit from any individual, Person or Governmental
Authority regarding the Company Entities’ or its agents’, employees’ or
contractors’ uses or disclosures of, or security practices or security incidents
regarding, Personal Information held, accessed or maintained by the Company
Entities in connection with the Business. There has not been any breach, as such
term is defined in 45 CFR § 164.402 (“Breach”), involving Personal Information
held, maintained or collected by or on behalf of the Company Entities in
connection with the Business or, to the Knowledge of the Company, any
non-permitted use or disclosure or security incident involving such Personal
Information. The Company Entities have not notified, either voluntarily or as
required by Law, any affected individual, any customer, any Governmental
Authority, or the media of any Breach of Personal Information held, maintained
or collected by or on behalf of the Company Entities in connection with the
Business, and the Company Entities are not currently planning to conduct any
such notification or investigating whether any such notification is required. To
the Knowledge of the Company, the Company Entities are not subject to any
pending action, Proceeding, or investigation, audit or review by a Governmental
Authority, nor, to the Knowledge of the Company, has any such suit, Proceeding,
or investigation, audit or review been threatened in writing, for (i) a
violation of any the Company Entities’ policies or any Business Associate
Agreements, (ii) a violation of any third party or entity’s privacy, personal or
confidentiality rights under any Law, or (iii) the failure of the Company
Entities’ with respect to any privacy or security audit.

Section 4.13    Legal Proceedings. There is no Proceeding or other compliance or
enforcement action before any commission or other Governmental Authority pending
or, to the Knowledge of the Company, threatened (a) against the Company
Entities, any Seller, or any of the Company Entities’ directors, officers or
employees with respect to or affecting the Company Entities’ operations,
Business or financial condition; or (b) related to the consummation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, there are no Proceedings pending or, to the Knowledge of the
Company, threatened, that, individually or in the aggregate, would reasonably be
expected to adversely affect the ability of the Company Entities or any Seller
to enter into, perform its obligations under and consummate the transactions
contemplated by this Agreement. Schedule 4.13 contains a complete and accurate
list and description (and any settlement terms) of all Proceedings filed within
the last three (3) years, or, to the Knowledge of the Company, threatened in the
last twelve (12) months: (i) by or against the Company Entities, any Seller, or
any of the Company Entities’ directors, officers or employees with respect to or
affecting the Company Entities’ operations, Business or financial condition; or
(ii) related to the consummation of the transactions contemplated by this
Agreement.

 

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Section 4.14    Real Property.

(a)    The Company Entities do not own in fee simple any real property. The
Company Entities are not party to any agreement or option to purchase any real
property.

(b)    Set forth on Schedule 4.14(b) is a true, complete and accurate list, as
of the date hereof, of all real property leases, subleases or other agreements
to which the Company Entities are a party whether as a (sub)lessor, (sub)lessee,
licensor, licensee, guarantor or otherwise (the “Company Leases”), along with
the corresponding parties to such Company Leases and the street addresses
corresponding therewith. The Company Leases have not been amended or
supplemented except as set forth on Schedule 4.14(b). There is no Person (other
than the Company) in possession of the real property subject to the Company
Leases (the “Leased Real Property”). The Company Entities’ own a valid leasehold
interest in all of the Leased Real Property, free and clear of all Encumbrances
(other than Permitted Encumbrances). Except as set forth on Schedule 4.14(b),
none of the Company Entities or any Seller leases or occupies any other real
property that is used in connection with the Business. The Sellers have
delivered to Buyer correct and complete copies of the Company Leases, together
with any material documents in connection therewith.

(c)    Except as described on Schedule 4.14(c), with respect to each Company
Lease: (i) such Company Lease is legal, valid, binding, enforceable, and in full
force and effect; (ii) such Company Lease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
immediately following the consummation of the transactions contemplated hereby;
(iii) the Company Entities have the right to quiet enjoyment of all Leased Real
Property it occupies subject to leaseholds, for the full term of each such
Company Lease and any renewal option related thereto; (iv) the Company Entities
are not and, to the Knowledge of the Company, no other party to such Company
Lease is in breach or default, nor has any event occurred which, with notice or
lapse of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder; (v) the Company Entities have not
assigned (whether collaterally or otherwise), transferred, conveyed, mortgaged
or otherwise encumbered its leasehold interest under any Company Lease;
(vi) there is no current dispute with any party under any Company Lease; and
(vii) there is no pending or, to the Knowledge of the Company, threatened
appropriation, condemnation or similar action affecting the Leased Real
Property.

(d)    To the Knowledge of the Company, there are no covenants, rights-of-way,
easements or similar restrictions affecting all or any portion of the Leased
Real Property that materially impair the ability to use any such Leased Real
Property in the operation of the Business of the Company Entities or adversely
affect or detract from the value of any of such Leased Real Property or the
ability to finance or lease any of such Leased Real Property.

(e)    Except as set forth on Schedule 4.14(e), the Leased Real Property (i) is
in compliance in all material respects with all applicable Laws (including those
pertaining to public and private restrictions, fire, safety, zoning and building
Laws and ordinances, and Laws relating to the disabled) and (ii) is adequately
maintained and in good operating condition and repair in all material respects.

Section 4.15    Personal Property. Except as set forth on Schedule 4.15, the
Company Entities have good and valid title to all items of personal property
owned by the Company Entities, and a valid and enforceable leasehold interest in
all tangible items of personal property leased by or licensed to the Company
Entities, in each case free and clear of all Encumbrances, except for

 

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Permitted Encumbrances. Except as set forth on Schedule 4.15, such equipment and
other personal property have been maintained in accordance with good business
practices, and overall are in good operating condition and repair, normal wear
and tear excepted, except where any failure would not, individually or in the
aggregate, have a Material Adverse Effect.

Section 4.16    Material Contracts.

(a)    Schedule 4.16(a) sets forth a true and complete list as of the date
hereof of all Material Contracts to which the Company Entities are a party or
are otherwise bound. As used herein, “Material Contracts” means all of the
following as of the date of this Agreement:

(i)    any contracts with any Third Party Payor pursuant to which any of the
Company Entities generated revenues through billing of third parties, revenue
guarantees or subsidy payments in excess of $50,000 in 2017;

(ii)    any contracts with any Material Supplier pursuant to which the any of
the Company Entities made payments in excess of $50,000 in 2017;

(iii)    any Company Leases;

(iv)    any loan agreements, promissory notes, indentures, bonds, security
agreements, mortgages, deeds of trust, extensions of credit or other agreements
for Indebtedness in an amount in excess of $50,000;

(v)    any employment agreement, compensation, commission, consulting,
independent contractor, severance agreement or other contract for the employment
of any officer, employee or other individual that provides for annual
compensation in excess of $75,000;

(vi)    any non-qualified deferred compensation, change in control or
“parachute” agreement, severance or other plan or arrangement for the benefit of
any officers and/or employees of any of the Company Entities;

(vii)    any contracts that obligate any of the Company Entities to act as a
guarantor or surety irrespective of the amount involved;

(viii)    any contracts providing for the indemnification of any Person outside
the ordinary course of business;

(ix)    any agreement to which any of the Company Entities is a party that is
terminable upon, requires consent in connection with, or prohibits assignment in
connection with, a change in ownership or control of the Sellers;

(x)    any agreement or contract containing any covenant or provision
prohibiting any of the Company Entities from engaging in any line or type of
business, engaging in any line or type of business in any geographical area, or
competing with any other Person, other than confidentiality and non-solicitation
agreements;

(xi)    any agreement pursuant to which any of the Company Entities manage the
operations of any other Person, and any agreement pursuant to which any of the
Company Entities have management services provided to it;

 

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(xii)    any contract pursuant to which any of the Company Entities holds any
rights or interests in any Company Intellectual Property granted by any other
Person, or pursuant to which the any of the Company Entities grants any rights
or interests in any Company Intellectual Property; and

(xiii)    any other contracts or commitments not identified above, whether in
the ordinary course of business or not, which (A) involve future payments,
performance of services or delivery of goods or materials, to or by the Business
in an amount exceeding $50,000 on an annual basis, and (B) is not terminable by
any of the Company Entities in ninety (90) days or less.

(b)    Except as set forth on Schedule 4.16(b) and as of the date hereof, each
of the Material Contracts is (i) valid and binding on the applicable Company
Entity and the other party or parties thereto, and is in full force and effect,
and (ii) enforceable against the applicable Company Entity and the other party
or parties thereto, in accordance with its terms, in each case subject to
bankruptcy, insolvency, reorganization, moratorium and similar Laws of general
application relating to or affecting creditors’ rights and to general equity
principles. Except as set forth on Schedule 4.16(b), no Material Contract will
be altered or accelerated as a result of the transactions contemplated by this
Agreement, nor will the transactions contemplated hereby cause to vest or accrue
any termination right in any Material Contract exercisable by the other party
thereto, and no party to a Material Contract is entitled to notice of, or to
consent to, the transactions contemplated hereby. As of the date hereof, none of
the Company Entities nor, to the Knowledge of the Company, any other party, is
in violation or breach of or in default under, nor, to the Knowledge of the
Company, does there exist any event, condition or omission that, with or without
the giving of notice, lapse of time or both, would result in a violation or
breach of, or constitute a default under, or would give rise to any claim for
damages or right of termination, amendment, cancellation, acceleration or loss
of benefits under, or result in the creation of any Encumbrances upon any of the
assets or properties of the Company Entities under, any Material Contract. The
Sellers have made available to Buyer a correct and complete copy of each
Material Contract.

(c)    In the twelve (12) months immediately preceding the date hereof, none of
the other parties to any Material Contract: (i) has refused, or communicated
that it will or may refuse, to continue performing under such Material Contract;
(ii) has communicated to any Company Entity that it will or may substantially
reduce its performance under such Material Contract; (iii) has communicated to
any Company Entity that it will not or may not renew or extend its Material
Contract beyond the existing terms; or (iv) otherwise threatened or proposed any
material change in the business relationship, except as related to the sale of
the assets by the DME Business.

Section 4.17    Intellectual Property and Business Systems.

(a)    Set forth on Schedule 4.17(a) is a true and complete list of all
Intellectual Property owned by the Company Entities that is subject to any
current issuance, current registration, or currently pending application by or
with any Governmental Authority throughout the world and all Intellectual
Property held for use by the Company Entities, as of the date hereof. The
Company Entities are the sole and exclusive owner of all right, title, and
interest in and to the Intellectual Property purported to be owned by the
Company Entities, and have the valid and enforceable right to use all other
Company Intellectual Property used, held for use in or necessary for the conduct
of the Business, in each case free and clear of all Encumbrances, other than
Permitted Encumbrances. All of the Company Intellectual Property is valid and
enforceable, and all registrations of such Intellectual Property are subsisting
and in full force and effect, except as set forth on Schedule 4.17(a). The
Company Entities have taken all necessary steps to maintain and enforce the
Intellectual Property of the Company Entities.

 

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(b)    Except as set forth on Schedule 4.17(b), (i) there are no claims pending
or threatened against the Company Entities or any Seller contesting the use or
ownership or validity of any Company Intellectual Property, or alleging that the
Company Entities or any Seller is currently infringing, misappropriating or
otherwise violating the Intellectual Property of any other Person, and
(ii) there are no claims pending or threatened by the Company Entities or any
Seller against any Person alleging infringement, misappropriation or violation
of any of the Company Intellectual Property. No Seller is aware of any facts or
circumstances that could give rise to any such claims.

(c)    Except as set forth on Schedule 4.17(c), the conduct of the Business as
currently and formerly conducted, and the products, processes and services of
the Company, Entities have not infringed, misappropriated, diluted or otherwise
violated, and do not infringe, dilute, misappropriate or otherwise violate, the
Intellectual Property or other rights of any Person. To the Knowledge of the
Company, no Person has infringed, misappropriated, diluted or otherwise
violated, or is currently infringing, misappropriating, diluting or otherwise
violating, any Intellectual Property of the Company Entities.

(d)    The Company has taken all necessary actions to protect and maintain the
confidentiality, secrecy and value of the Company Intellectual Property,
confidential information and trade secrets of the Company. Neither have been
used by or disclosed to any Person except pursuant to valid non-disclosure
agreement with commercially reasonable protections of the confidential
information and trade secrets made available to such Person. There has not been
any breach by any third party of any confidentiality obligation to the Company.
All current and former employees of the Company, and all current and former
independent contractors and consultants of the Company, who have had access to
confidential or proprietary information of the Company have entered into
confidentiality agreements with the Company.

(e)    All Business Systems are free of any virus, malware, spyware or other
device or code (“Malicious Code”) that could reasonably be expected to disrupt,
disable or otherwise impair the normal operation of, or provide unauthorized
access to, any Business System, or damage, destroy or prevent access to or use
of any data or file. Each of the Company Entities has taken commercially
reasonable steps to prevent the introduction of Malicious Code into any Business
System.

(f)    The Business Systems are reasonably sufficient for the immediate and
anticipated needs of the Business as currently conducted. The Business Systems
are in sufficiently good working condition to perform all information technology
operations necessary for the conduct of the Business. There has been no
unauthorized access, use, intrusion, or breach of security, or material failure
or other adverse event affecting any Business System. The Company Entities have
taken commercially reasonable actions to protect the integrity and security of
the Business Systems and the data and other information stored or processed
thereon. The Company Entities maintain and adhere to commercially reasonable
backup and data recovery, disaster recovery, and business continuity plans,
procedures and facilities, regularly tests the foregoing, and such plans,
procedures and facilities have proven effective upon such testing.

(g)    Set forth on Schedule 4.17(g)(i), is an accurate and complete list
(including name and product description) of all Software owned or purported to
be owned, in whole or in part, by any of the Company Entities (“Company-Owned
Software”). To the extent that any Company-

 

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Owned Software has been developed or created by an employee or any consultant,
contractor, or other Person for or on behalf of any of the Company Entities,
such Company Entity has executed a valid and enforceable agreement with such
employee or Person assigning all of such Person’s rights in and to such
Company-Owned Software (copies of which have been made available to Buyer) and
thereby has obtained exclusive ownership of all Intellectual Property in such
Company-Owned Software by operation of law or by valid assignment. None of the
source code owned or purported to be owned by any of the Company Entities has
been published, disclosed or put into escrow by the Company Entities for any
reason. The Company Entities do not use any Open Source Software in any manner
or any modification or derivative work thereof. No Intellectual Property rights
owned by a third party are material to the Business as conducted or contemplated
to be conducted.

Section 4.18    Employee Benefits.

(a)    Set forth on Schedule 4.18(a) is a true, complete and correct list of all
“employee benefit plans,” as defined in Section 3(3) of ERISA, and all other
bonus, incentive compensation, deferred compensation, profit sharing, stock
option, severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan or any other
similar plan, agreement, policy or understanding (whether oral or written,
qualified or non-qualified), including deferred compensation arrangements that
are referenced in an employment agreement, and any trust, escrow or other
funding arrangement related thereto (collectively, the “Benefit Plans”),
(i) which is maintained or contributed to, for or on behalf of the current or
former employees of the Company, any ERISA Affiliate thereof or any other
individuals who provide or have provided services to the Company or any ERISA
Affiliate thereof; (ii) with respect to which the Company or any ERISA Affiliate
thereof has any expense, liability or obligation to or with respect to any
current or former officer, director, employee, service provider or the
dependents or beneficiaries thereof, regardless of whether funded; or (iii) with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA), which is sponsored, maintained or contributed to by the Company or any
ERISA Affiliate thereof or that benefits any current or former employee or
service provider of the Company or to which the Company is a party or has any
expense, liability or obligation. Neither Company, any ERISA Affiliate thereof,
nor any other Person has announced any plan or made any commitment to create or
enter into any additional plan, arrangement, agreement or policy which would
constitute a Benefit Plan if in existence on the date hereof or to amend or
modify any existing Benefit Plan.

(b)    Except as set forth on Schedule 4.18(b), each Benefit Plan has been
established, maintained and administered in accordance with its terms and is in
compliance with all applicable Laws, including ERISA and the Code. Each Benefit
Plan that is intended to be qualified under Section 401(a) of the Code has
received a timely favorable determination or opinion letter from the IRS as to
its qualified status, or is maintained pursuant to a volume submitter or
prototype document for which a favorable IRS opinion or advisory letter has been
issued which may be properly relied upon by the respective Benefit Plan. All
contributions to, and payments from, each Benefit Plan that are required to be
made in accordance with the terms and conditions thereof and applicable Laws
(including ERISA and the Code) have been timely made.

(c)    Except as set forth on Schedule 4.18(c), neither the Company nor any
ERISA Affiliate thereof maintains, contributes to, is required to contribute to,
or has any liability with respect to (i) any defined benefit pension plan or any
plan, program or arrangement subject to Title IV of ERISA, Section 302 or 303 of
ERISA or Sections 412 or 436 of the Code, (ii) any

 

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Multiemployer Plan (as defined in Section 3(37) of ERISA), (iii) any Multiple
Employer Plan (as defined in Section 413(c) of the Code), or (iv) any Multiple
Employer Welfare Arrangement (as defined in Section 3(40) of ERISA) and neither
the Company nor any ERISA Affiliate thereof has maintained, contributed to, been
required to contribute to, or had any liability with respect to any plan
described in clauses (i), (ii), (iii) or (iv) above within the last six
(6) years prior to the date of this Agreement. For purposes of this
Section 4.18, an “ERISA Affiliate” is any entity that is considered a single
employer with the Company under Section 414 of the Code.

(d)    Neither any Benefit Plan nor the Company or any ERISA Affiliate thereof
provides or has an obligation to provide medical, life insurance or other
welfare benefits to any individual (other than to beneficiaries and dependents
of active employees) at a time when he or she is not an employee of the Company
or any ERISA Affiliate thereof (other than as required under Section 4980B of
the Code or any similar Law). Each “group health plan” (within the meaning of
Code section 5000(b)(1)) maintained by the Company is in compliance in all
material respects with the applicable requirements of the Affordable Care Act
(“ACA”), all documents are in compliance in all material respects with current
ACA requirements, and there exists no basis upon which the Company would
reasonably be expected to be subject to any fine or penalty under the ACA.

(e)    Each funded Benefit Plan that is a welfare plan as defined in
Section 3(1) of ERISA, the benefits under which are not provided exclusively
from the assets of the Company or any ERISA Affiliate of the Company or through
insurance contracts, is qualified under Section 501(c)(9) or Section 501(c)(17)
of the Code; and the trusts maintained in connection with all such Benefit Plans
are exempt from tax under Section 501(a) of the Code. All Benefit Plan assets
that are not held by a regulated insurance company are invested in a separate
trust, or in a trust with one or more other similar plans under which the assets
of each plan are separately accounted for and available only to provide benefits
to employees and beneficiaries covered under the Benefit Plan and to pay
allocable administrative expenses. Each insurance contract through which
benefits under a Benefit Plan are provided provides benefits only for employees
and dependents covered under the Benefit Plan. Each Benefit Plan is maintained
by Company or any ERISA Affiliate of Company under a plan document which does
not provide for other participating employers except for Company or any ERISA
Affiliate of Company; and no Benefit Plan provides or has provided credit with
respect to service other than with Company or any ERISA Affiliate of Company.

(f)    The Sellers have made available to Buyer with respect to each Benefit
Plan, where applicable, true, complete and correct copies of (i) the current
plan document and amendments thereto (including all insurance contracts,
evidences of coverage and other related documents); (ii) the current trust
agreement or other funding arrangements (including insurance policies) and
amendments thereto; (iii) the three (3) most recent Form 5500 annual reports;
(iv) the most recent summary plan description and summaries of any material
modification thereto; (v) all material correspondence with the IRS, Department
of Labor and Pension Benefit Guaranty Corporation regarding any Benefit Plan;
(vi) all discrimination testing for each Benefit Plan for the three (3) most
recent plan years; (vii) the most recent determination or opinion letter
received from the IRS regarding the Benefit Plans; (viii) the latest financial
statements for the Benefit Plans; (ix) the testing results showing compliance
with Section 409(p) of the Code; (x) the most recent actuarial valuations, if
applicable, and latest financial statement for each of the Benefits Plans; and
(xi) any other material documents related to a Benefit Plan.

(g)    Except as set forth on Schedule 4.18(g), there is no pending or, to the
Knowledge of the Company, threatened, Proceeding relating to a Benefit Plan
(other than routine

 

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claims for benefits) or under workers’ compensation Law, and no Benefit Plan has
within the three (3) years prior to the date hereof been the subject of an
examination or audit by any Governmental Authority or the subject of an
application or filing under or is a participant in or considering being a
participant in, an amnesty, voluntary compliance, self-correction or similar
program sponsored by any Governmental Authority (including the Employee Plans
Compliance Resolution System, the Voluntary Fiduciary Correction Program or the
Delinquent Filers Voluntary Correction Program). The Seller has properly
classified individuals providing services as independent contractors or
employees, as the case may be.

(h)    Except as set forth on Schedule 4.18(h), none of the execution and
delivery of this Agreement, the performance by any Party of its obligations
hereunder or the consummation of the transactions (alone or in conjunction with
any other event, including any termination of employment on or following the
Closing Date) will (i) entitle any employee, director or other individual
providing services to the Company to any compensation or benefit,
(ii) accelerate the time of payment or vesting, or trigger any payment or
funding, of any compensation or benefit or trigger any other obligation under
any Benefit Plan, or (iii) result in any breach or violation of, or default
under, or limit the Company’s right to amend, modify or terminate any Benefit
Plan.

(i)    No Benefit Plan has engaged in any non-exempt “prohibited transaction”
(as such term is defined in Section 406 of ERISA or Section 4975 of the Code).
No fiduciary (within the meaning of Section 3(21) of ERISA) of any Benefit Plan
subject to Part 4 of Subtitle B of Title I of ERISA has committed a breach of
fiduciary duty. The Company has not, nor to the Knowledge of the Company, has
any other Person, engaged in any transaction with respect to any Benefit Plan
that would be reasonably likely to subject the Company to any Tax or penalty
(civil or otherwise) imposed by ERISA, the Code or other applicable Law. Any
transaction to which the ESOP was at any time a party involving the purchase,
sale or exchange of any security complied with the applicable requirements of
ERISA and the Code, including Section 3(18) of ERISA. The sale of the ESOP
Shares to Buyer and execution and performance of this Agreement do not create
liability with respect to any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975.

(j)    Each Benefit Plan that constitutes in any part a “nonqualified deferred
compensation plan” within the meaning of Section 409A of the Code and that is
subject to Section 409A of the Code has been operated and maintained in all
respects in operational and documentary compliance with Section 409A of the Code
and applicable guidance thereunder during the respective time periods in which
such operational or documentary compliance has been required. No Benefit Plan or
individual agreement with any employee or service provider of Seller or the
Company provides for any actual or potential obligation to reimburse or
otherwise “gross up” any Person for the interest or additional tax set forth
under Section 409A(a)(1)(B) of the Code or otherwise. The Company is not a party
to any agreement that would require the Company to make any payment that would
constitute an “excess parachute payment” for purposes of Sections 280G and 4999
of the Code.

(k)    As of the Closing, the ESOP has been terminated by the Company, and
except as set forth on Schedule 4.18(k), neither the ESOP nor the Company is
subject to any claims in respect of the ESOP, except for payment of benefits and
expenses payable in the sale of the ESOP Shares and the ordinary course of the
administration and winding up of the ESOP.

(l)    The ESOP Shares constitute “employer securities,” as defined in Code Sec.
409(l), and “qualifying employer securities”, as defined in Section 407(d)(5) of
ERISA. Each

 

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purchase and sale of ESOP Shares to or from the ESOP was determined to be in the
best interests of, and fair from a financial point of view to, the participants
and beneficiaries in the ESOP, including upon the establishment of the ESOP. At
each time ESOP Shares were purchased, the valuation of such shares was performed
by an independent appraiser within the meaning of Section 401(a)(28)(C) of the
Code. Any transaction to which the ESOP was at any time a party involving the
purchase, sale or exchange of any security complied with the applicable
requirements of ERISA and the Code, including Section 3(18) of ERISA. The sale
of the ESOP Shares to Buyer and execution and performance of this Agreement do
not create liability with respect to any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975.

(m)    The ESOP complies and has always complied in all respects with
Section 409(p) of the Code, and neither the Company nor any participant in the
ESOP is or may be subject to liability by reason of Section 4979A of the Code.
There are no items that would be considered “synthetic equity” as defined in
Section 409(p)(6)(C) of the Code or under the regulations issued thereunder. No
Company stock has been allocated to a “disqualified person” (as that term is
defined in Section 409(p)(4) of the Code) in a “nonallocation year” (as that
term is defined in Section 409(p)(3) of the Code), and there has never been an
“a “nonallocation year” for the ESOP. Except as set forth on Schedule 4.18(m),
there are no documents that provide for indemnification of the fiduciaries of
the ESOP or such fiduciaries’ financial advisors in connection with any
transactions involving the ESOP.

(n)    There are no pending elections by any participant in the ESOP to receive
distributions from the ESOP in the form of securities of the Company.

(o)    Neither the terms of the ESOP nor any provision of ERISA, the Code or any
applicable legal requirement requires that the transactions contemplated by this
Agreement be approved by the vote of the participants in the ESOP as to Company
stock allocated to their accounts or otherwise.

(p)    The Company is not a party to any agreement that would require the
Company to make any payment that would constitute an “excess parachute payment”
for purposes of Sections 280G and 4999 of the Code.

Section 4.19    Labor Matters.

(a)    Schedule 4.19(a) sets forth a true and complete list of the following
information (to the extent applicable) with respect to each employee of the
Company Entities, including each employee on leave of absence or layoff status:
(i) name; (ii) title or position (including whether full or part time); (iii)
hire date; (iv) current annual base salary rate or current hourly wage rate;
(v) commission, bonus or other incentive-based compensation; (vi) accrued,
unused paid-time off; (vii) leave status; (viii) exempt or non-exempt status
regarding the application of federal and state wage and hour Laws; and (ix) a
description of the fringe benefits provided to each such individual as of the
date hereof. No Person will have any claim for severance pay as a result of this
Agreement or the consummation of the transactions contemplated hereby.

(b)    There is no collective bargaining agreement in effect or currently being
negotiated between any of the Company Entities and any labor unions or
organizations representing any of the employees of the Company Entities. The
Company Entities have not experienced any threatened or actual organized
slowdown, work interruption, strike, work stoppage or material labor dispute by
its employees and, to the Knowledge of the Company, there is no strike, labor
dispute or union organization activity pending or threatened involving employees
of the Company Entities.

 

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(c)    The Company Entities are, and since January 1, 2013, have been, in
compliance in all material respects with all applicable Laws regarding
employment and employment practices, terms and conditions of employment, wages
and hours, anti-discrimination, work authorization and occupational health and
safety, including Laws concerning unfair labor practices within the meaning of
Section 8 of the National Labor Relations Act. All individuals who are
performing consulting or other services for the Company Entities are correctly
classified as either “independent contractors” or “employees,” as the case may
be. There is no Proceeding brought by or on behalf of any employee or former
employee of the Company Entities under the Fair Labor Standards Act, Title VII
of the Civil Rights Act of 1964, the Family and Medical Leave Act or any other
Law pending or, to the Knowledge of the Company, threatened, against any of the
Company Entities.

Section 4.20    WARN Act. Within the past two (2) years, the Company Entities
have not implemented any employee layoffs or facility closures or taken any
other action that could implicate the Worker Adjustment and Retraining
Notification Act of 1988, as amended, or any similar or related Law or
regulation (collectively, the “WARN Act”), and there has been no “employment
loss” as defined by the WARN Act within the ninety (90) days prior to the
Closing Date. No notice shall be required under the WARN Act or any similar
applicable Law in connection with this Agreement or the transactions
contemplated hereby.

Section 4.21    Environmental Matters.

(a)    Except as set forth on Schedule 4.21(a): (i) the Company Entities are in
compliance in all material respects with Environmental Laws and holds and is in
compliance in all material respects with all Governmental Permits required
pursuant to Environmental Laws; (ii) the Company Entities have not assumed,
undertaken or to Company’s Knowledge otherwise become subject to any liability
or corrective, investigatory or remedial obligation of any other Person relating
to any Environmental Laws; (iii) the Company Entities have not received any
written notice of any violation of any Environmental Laws; and (iv) the Company
Entities have not Released any Contaminant at, on, under or from any property
leased by any of the Company Entities in violation of any Environmental Laws.

(b)    None of the Company Entities or any Seller has disposed of or Released
any Contaminant on the Leased Property so as to give rise to any liabilities or
investigatory, corrective or remedial obligations under any Environmental Laws.

Section 4.22    Insurance. Schedule 4.22 sets forth a true, correct and complete
schedule which describes all insurance policies currently maintained by the
Company Entities in connection with the operation of the Business. True, correct
and complete copies of such insurance policies have been made available to
Buyer. All of such insurance policies which are now in effect (a) are valid,
outstanding and enforceable; (b) to the Knowledge of the Company, are issued by
an insurer that is financially sound and reputable; (c) provide adequate
insurance coverage for the assets and operations of the Company Entities;
(d) are sufficient for compliance with all Laws and agreements to which the
Company Entities are bound; and (e) shall continue to remain in full force and
effect up to and including the Closing Date in accordance with their respective
terms. There is no claim pending under any such policy as to which coverage has
been questioned, denied or disputed by the

 

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underwriter of such policy. All premiums due and payable under all such policies
have been paid, the Company Entities will not be liable for retroactive premiums
or similar payments, and the Company Entities are otherwise in compliance in all
material respects with the terms of such policies applicable to them. To the
Knowledge of the Company, there is no threatened termination of, or material
premium increase (other than increases that are consistent with the increases
experienced by the industry in which the Company Entities doe business) with
respect to, any such policy.

Section 4.23    Related Party Transactions. Except as set forth on Schedule
4.23: (a) no Related Party has, and no Related Party has had within the past
three (3) years, any interest in any material property or asset, tangible or
intangible, used by the Company in the conduct of the Business; (b) no Related
Party is or has, within the past three (3) years, been indebted to the Company
Entities or any Seller (other than for ordinary travel and expense advances) and
the Company Entities have not been indebted to any Related Party; and (c) no
Related Party has entered into, or has any financial interest in, any material
contract, transaction or business dealing with or involving the Company
Entities.

Section 4.24    Shareholder Investments. No Seller, or any immediate family
member of any Seller, owns, directly or indirectly, any interest or has any
investment in any corporation, business or other Person that is a competitor of
the Company Entities or that does business with the Company Entities.

Section 4.25    Third Party Payors and Material Suppliers.

(a)    Schedule 4.25(a) sets forth a true and complete list of each third party
payor, including, without limitation, each Government Program from whom payments
have been received by the Company Entities since December 31, 2016 (each, a
“Third Party Payor”).

(b)    Schedule 4.25(b) sets forth a true and complete list of each of the top
twenty (20) suppliers of the Company Entities (by volume in dollars of purchases
from such suppliers) (the “Material Suppliers”), during each of the fiscal years
ended December 31, 2017 and 2016, and the amount of purchases from each Material
Supplier during each such period.

(c)    Except as set forth in Schedule 4.25(c), during the twelve (12) months
immediately preceding the date hereof, there has been no actual or, to the
Knowledge of the Company, indicated or threatened, termination, cancellation or
material limitation of, or any material modification or adverse change in, the
business relationship or pricing between the Company Entities and any Third
Party Payor or Material Supplier.

(d)    There are no Third Party Payor contracts pursuant to which a Company
Entity receives payments but a Person or entity rather than a Company Entity is
the party thereto.

Section 4.26    Brokers. Except as set forth on Schedule 4.26, neither the
Company Entities nor any Seller or any Person acting on the Company Entities’ or
any Seller’s behalf has paid or become obligated to pay any fee or commission to
any third party broker, finder or intermediary for or on account of this
Agreement or the transactions contemplated hereby. In the event any such fee is
due, the Company Entities and the Sellers acknowledge and agree that such fee
shall be the sole responsibility of the Company Entities and the Sellers, and
Buyer will not have any responsibility therefor.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to the Sellers as follows:

Section 5.1    Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Illinois and has full corporate power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and to carry on
its business as it is currently conducted. Buyer is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business as currently
conducted makes such licensing or qualification necessary.

Section 5.2    Authorization, Validity and Effect of Agreement. Buyer has all
necessary power and authority to execute and deliver this Agreement and each
other agreement, document, instrument or certificate contemplated by this
Agreement to be executed by Buyer in connection with the consummation of the
transactions contemplated by this Agreement (collectively, the “Buyer
Documents”), and to perform its obligations hereunder to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Buyer Documents, the performance by Buyer of its obligations
hereunder and thereunder, and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement and each of the Buyer
Documents have been duly and validly executed and delivered by Buyer and
(assuming the valid execution and delivery by each other party thereto)
constitute legal, valid and binding obligations of Buyer, each enforceable
against Buyer in accordance with its terms, except as enforceability may be
limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and
general principles of equity affecting the availability of specific performance
and other equitable remedies.

Section 5.3    No Conflict. None of the execution and delivery by Buyer of this
Agreement or any of the Buyer Documents, the performance of its obligations
hereunder or thereunder, or the consummation of the transactions contemplated
hereby or thereby will give any Person the right to prevent any of the
transactions contemplated hereby or thereby pursuant to (i) any provision of
Buyer’s Organizational Documents, (ii) any Law to which Buyer or its assets are
subject, or (iii) any contract to which Buyer is a party or by which Buyer is
otherwise bound.

Section 5.4    Brokers. Neither Buyer nor any Person acting on Buyer’s behalf
has paid or become obligated to pay any fee or commission to any third party
broker, finder or intermediary for or on account of this Agreement or the
transactions contemplated hereby.

ARTICLE VI

COVENANTS

Section 6.1    Conduct of Business Prior to the Closing. Between the date of
this Agreement and the Closing, except as expressly contemplated by this
Agreement or as required by applicable Law or with the prior written consent of
Buyer (which consent shall not be unreasonably withheld, conditioned or
delayed), the Sellers shall, and shall cause the Company Entities to,
(i) conduct the Business in the ordinary course consistent with past practice
and (ii) use commercially reasonable efforts to maintain and preserve intact the
Business and current organization of the Company Entities, and to preserve the
rights, franchises, goodwill and relationships of its employees, customers,
lenders, suppliers, regulators and others having business relationships with the
Company Entities. Without limiting the generality of the foregoing, between the
date of this Agreement and the

 

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Closing, except as otherwise expressly contemplated by this Agreement or as set
forth on Schedule 6.1 or as required by applicable Law, neither the Sellers nor
the Principals shall, and shall cause the Company Entities not to, do or take
any of the following actions without the prior written consent of Buyer (which
consent shall not be unreasonably withheld, conditioned or delayed):

(a)    any action or omission that would result in a breach of any of the
representations, warranties or covenants made by the Company Entities or the
Sellers in this Agreement;

(b)    amend or propose to amend any of the Organizational Documents of the
Company Entities;

(c)    (i) issue, sell, repurchase, redeem or acquire any Shares or other equity
interests of the Company Entities, or grant or enter into any rights, warrants,
options, agreements or commitments with respect to the issuance of such Shares
or other equity interests of the Company Entities, or (ii) adjust, split,
combine, subdivide or reclassify any Shares or other equity interests of the
Company Entities;

(d)    grant any increase in the base compensation of, or pay any bonuses or
other compensation (including, without limitation, any severance or termination
pay) to, any of the employees of the Company Entities;

(e)    adopt, amend or increase the payments or benefits under any Benefit Plan;

(f)    enter into, amend, terminate, renew or assign any employment or
consulting contract, any Company Lease, or any other Material Contract;

(g)    acquire inventory, assets or other properties outside of the ordinary
course of business or in excess of $60,000 in the aggregate, including without
limitation acquire any business or Person or division thereof, whether by
merger, consolidation, the purchase of a substantial portion of the assets or
equity interests of such business or otherwise;

(h)    incur, assume or guaranty any Indebtedness or capitalized lease
obligations or make any loans, advances or capital contributions to, or
investments in, any other Person;

(i)    cancel, compromise, waive or release any right or claim (or series of
related rights and claims) involving more than $25,000;

(j)    declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or other combination thereof) in respect of any
Shares or other equity interests of the Company Entities;

(k)    make any material change in any method of financial accounting principles
or practices, in each case except for any such change required by a change in
GAAP or applicable Law;

(l)    adopt or effect a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization;

(m)    institute, settle or compromise any Proceeding pending or threatened
before any arbitrator, court or other Governmental Authority;

 

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(n)    (i) settle or compromise any Tax claim, audit or assessment, (ii) make or
change any Tax election, change any annual Tax accounting period, adopt or
change any method of Tax accounting, (iii) amend any Tax Returns or file claims
for Tax refunds, (iv) enter into any closing agreement, surrender in writing any
right to claim a Tax refund, offset or other reduction in Tax liability or
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to the Company Entities, or (v) take any other
action if such action would have the effect of increasing the Tax liability of
the Company Entities for any taxable period (or portion thereof) beginning after
the Closing Date;

(o)    enter into any material agreement, agreement in principle, letter of
intent, memorandum of understanding or similar contract with respect to any
joint venture, strategic partnership or alliance;

(p)    sell, transfer or otherwise dispose of any material assets of the Company
or material to the operation of the Business;

(q)    make any expenditures outside of the ordinary course of business;

(r)    authorize or enter into any agreement, understanding or commitment,
whether oral or written, to do any of the foregoing; or

(s)    take any action that would cause or result in the termination of the S
corporation status of the Company.

Section 6.2    Access and Investigation. Between the date of this Agreement and
the Closing, the Principals and the Sellers shall, and shall cause the Company
Entities to, (a) afford Buyer and its Representatives full and free access to
and the right to inspect all of the properties, assets, premises, books and
records, contracts and other documents and data related to the Company Entities
or the Business, such rights of access to be exercised in a manner that does not
unreasonably interfere with the operations of the Business; (b) furnish Buyer
and its Representatives with such financial, operating and other data and
information related to the Sellers as Buyer or any of its Representatives may
reasonably request; and (c) otherwise cooperate and assist with Buyer’s
investigation of the Company Entities and the Business. In addition, between the
date of this Agreement and the Closing, Buyer will be provided access to the
Company Entities’ employees, suppliers and other Persons having business
relations with the Company Entities and the Business, at such times and in the
manner mutually agreed to by Buyer and the Sellers (it being understood that the
Sellers will permit Buyer to have reasonable access to such Persons). No
investigation by Buyer or other information received by Buyer shall operate as a
waiver or otherwise affect any representation, warranty or agreement given or
made by the Company Entities or the Sellers in this Agreement.

Section 6.3    Notice of Certain Events. Between the date of this Agreement and
the Closing, Buyer, the Principals, or Sellers, as the case may be (any such
Party, the “Disclosing Party”), shall promptly notify the other Party in writing
if the Disclosing Party becomes aware of (a) any fact or condition that causes
or constitutes a breach of any of the representations and warranties of the
Disclosing Party made as of the date of this Agreement, or (b) the occurrence
after the date of this Agreement of any fact or condition that would or be
reasonably likely to cause or constitute a breach of any such representation or
warranty had that representation or warranty been made as of the time of the
occurrence of, or the Disclosing Party’s discovery of, such fact or

 

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condition. If any such fact or condition requires any change to the schedules
prepared by a Disclosing Party, such Disclosing Party shall promptly deliver to
the other Parties a supplement to such schedules specifying such change. In
addition, between the date of this Agreement and the Closing, Buyer, the
Sellers, or the Principals, as the case may be, shall promptly notify the other
Parties of the occurrence of any breach of any covenant by such Party in this
Article VI or of the occurrence of any event that may make the satisfaction of
any conditions in Article VII impossible or unlikely. No disclosure pursuant to
this Section 6.3 will prevent or cure any breach of any representation or
warranty or covenant set forth herein.

Section 6.4    Required Approvals.

(a)    As promptly as practicable after the date of this Agreement, the
Principals and the Sellers shall, and shall cause the Company Entities to, use
commercially reasonable efforts to obtain the consents required in connection
with the transactions contemplated hereby as set forth in Schedule 6.4(a).

(b)    As promptly as practicable after the date of this Agreement, the
Principals and the Sellers shall, and shall cause the Company Entities to, make,
or cause to be made, all filings required by Law to be made by the Company
Entities or the Sellers to consummate the transactions contemplated hereby.

(c)    In furtherance of the foregoing, the Parties, as applicable, will use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or desirable under applicable
Law to consummate the transactions contemplated hereby, including preparing and
filing as promptly as practicable with any Governmental Authority or other third
party all documentation to effect all necessary filings, notices, petitions,
statements, registrations, submissions of information, applications and other
documents; provided that the Parties hereto understand and agree that the
commercially reasonable efforts of any Party hereto shall not be deemed to
include (i) entering into any settlement, undertaking, consent decree,
stipulation or agreement with any Governmental Authority in connection with the
transactions contemplated hereby or (ii) divesting or otherwise holding separate
(including by establishing a trust or otherwise), or taking any other action (or
otherwise agreeing to do any of the foregoing) with respect to any of its or any
of their respective Affiliates’ businesses, assets or properties. Each of Buyer
and the Sellers shall promptly provide the other copies of material written
communications with, and shall keep one another informed as to the substance of
any meeting with, any Governmental Authority regarding the matters set forth in
this Section 6.4, subject to any confidentiality obligations and applicable Law.

(d)    If any consent, approval or authorization necessary to preserve any right
or benefit under any contract to which any of the Company Entities is a party is
not obtained prior to the Closing, the Sellers shall, subsequent to the Closing,
cooperate with Buyer in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable. If such consent, approval
or authorization cannot be obtained, the Sellers shall use reasonable best
efforts to provide Buyer with the rights and benefits of the affected contract
for the term thereof and, if Sellers provide such rights and benefits, Buyer
shall assume all obligations and burdens thereunder.

Section 6.5    Closing Conditions. From the date hereof until the Closing, each
Party hereto shall, and the Principals and the Sellers shall cause the Company
Entities to, use commercially reasonable efforts to take such actions as are
necessary to expeditiously satisfy the closing conditions set forth in Article
VII hereof.

 

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Section 6.6    Tax Matters.

(a)    Sellers will prepare, or cause to be prepared, all Tax Returns for the
Company and each of the Subsidiaries for all taxable periods ending on or prior
to the Closing Date but which are filed after the Closing Date. Such Tax Returns
shall be prepared in accordance with applicable Laws, and to the extent not
inconsistent with applicable Laws, the past practices of the Company and the
Subsidiaries, as applicable, in preparing Tax Returns. Sellers will provide
Buyer with copies of any such Tax Returns for Buyer’s review and comment at
least thirty (30) days prior to the due date thereof, giving effect to any
extensions thereto (or, in the case of Tax Returns other than with respect to
Income Taxes, a reasonably practicable amount of time, which shall not be less
than three (3) Business Days prior to the due date thereof, giving effect to any
extensions thereto), and Sellers shall incorporate any such reasonable comments
into such Tax Returns. Buyer shall prepare or cause to be prepared all Tax
Returns of the Company for any Straddle Periods. Buyer will provide Sellers with
copies of any such Tax Returns for Sellers’ review and comment at least thirty
(30) days prior to the due date thereof, giving effect to any extensions thereto
(or, in the case of Tax Returns other than with respect to Income Taxes, a
reasonably practicable amount of time, which shall not be less than three
(3) Business Days prior to the due date thereof, giving effect to any extensions
thereto), and Buyer will consider any such comments in good faith.

(b)    Any Transfer Taxes shall be borne fifty percent (50%) by Buyer and fifty
percent (50%) by the Merrell Trust. Buyer and Sellers shall cooperate in
preparing, executing and filing all necessary Tax Returns and other
documentation with respect to such Transfer Taxes. Buyer and Sellers shall use
commercially reasonable efforts (including, for instance, the delivery of resale
certificates) to minimize the occurrence of Transfer Taxes and any associated
Tax Return (or other documentation) filing requirements in connection therewith.

(c)    After the Closing, the Parties shall cooperate with each other by
furnishing any additional information and executing and delivering any
additional documents as may be reasonably requested by such Parties in their
preparation of any Tax Returns required to be filed by or with respect to the
Company or any of the Subsidiaries. Such cooperation shall include access during
normal business hours afforded to the Parties and their respective agents and
Representatives to, and reasonable retention by such Parties of, Tax records
related to the Company and the Subsidiaries.

(d)    For purposes of this Agreement, whenever it is necessary to determine the
liability for Taxes of the Company for a Straddle Period, the determination of
the Taxes of the Company for the portion of the Straddle Period ending on and
including, and the portion of the Straddle Period beginning after, the Closing
Date shall be determined by assuming that the Straddle Period consisted of two
(2) taxable years or periods, one which ended at the close of the Closing Date
and the other which began at the beginning of the day following the Closing
Date, and items of income, gain, deduction, loss or credit, and state and local
apportionment factors of the Company for the Straddle Period shall be allocated
between such two taxable years or periods on a “closing of the books basis” by
assuming that the books of the Company were closed at the close of the Closing
Date; provided, however, that (i) exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation, and
(ii) periodic Taxes such as real and personal property Taxes shall be
apportioned ratably between such periods on a daily basis.

 

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(e)    For Tax purposes, unless otherwise required by applicable Law, the
Parties agree to treat all payments made under any indemnity provisions
contained in this Agreement as adjustments to the Purchase Price.

Section 6.7    Confidentiality; Public Announcement.

(a)    Confidentiality. From and after the Closing, the Sellers and the
Principals shall, and shall cause their respective Affiliates and
Representatives to, hold in confidence any and all information, whether written
or oral, concerning Buyer, the Company or the Business, except to the extent
that the Sellers or the Principals can show that such information (i) is
generally available to and known by the public through no fault of the Sellers,
the Principals, or any of their respective Affiliates or Representatives; or
(ii) is lawfully acquired by the Sellers, the Principals, or any of their
respective Affiliates or Representatives from and after the Closing from sources
which are not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation. If the Sellers, the Principals, or any of
their respective Affiliates or Representatives are compelled to disclose any
information by judicial or administrative process or by other requirements of
Law, such Parties shall promptly notify Buyer in writing and shall disclose only
that portion of such information which such Parties are advised by their counsel
in writing is legally required to be disclosed; provided that the Sellers or the
Principals shall use best efforts to obtain an appropriate protective order or
other reasonable assurance that confidential treatment will be accorded such
information.

(b)    Public Announcement. Except as required by Law or the applicable rules of
any stock exchange, no Party will issue any report, statement or release to the
public with respect to this Agreement or the transactions contemplated hereby
without the prior written approval of the other Parties hereto.

Section 6.8    Restrictive Covenants. In consideration of the Purchase Price
received by the Sellers under this Agreement, the Merrell Trust and the
Principals hereby covenant and agree as follows:

(a)    During the period commencing on the Closing Date and ending on the six
(6) year anniversary of the Closing Date (the “Restricted Period”), neither the
Merrell Trust nor any Principal shall, directly or indirectly, do any of the
following:

(i)    engage or invest in, own, manage, operate, finance, control, be employed
by, render services or advice or other aid to, or be connected or associated
with in any capacity, including without limitation as an individual, partner,
shareholder, manager, officer, director, employee, principal, agent, consultant,
advisor, developer or trustee, any Person or enterprise that engages in, or
plans to become engaged in, any Competing Business within the Covered Area;

(ii)    induce or solicit, or attempt to induce or solicit, any Person that is,
or was during the two (2) year period ending on the Closing Date, a customer,
supplier or business relation of the Company Entities or the Business to cease
doing business with Buyer, the Company Entities or Business or any of their
respective successors or Affiliates, in any way interfere with the relationship
between or among Buyer, the Company Entities, the Business or any of their
respective successors or Affiliates and any such customer, supplier or business
relation, or solicit the business of any such customer, supplier or business
relation for any Competing Business.

 

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(b)    During the Restricted Period, neither the Merrell Trust nor any Principal
shall, directly or indirectly or by assisting others, induce or solicit, or
attempt to induce or solicit, any employee or independent contractor of Buyer,
the Company Entities, the Business or any of their respective successors or
Affiliates who was an employee or independent contractor of the Company Entities
or the Business at any time during the two (2) year period ending on the Closing
Date to leave the employ or service of Buyer, the Company Entities, the Business
or any of their respective successors or Affiliates, in any way interfere with
the relationship between or among Buyer, the Company Entities, the Business or
any of their respective successors or Affiliates and any such employee or
independent contractor, or solicit, offer employment to, otherwise attempt to
hire, employ or otherwise engage as an employee, independent contractor or
otherwise, any such employee or independent contractor.

(c)    As used herein, the term “Competing Business” shall mean the business of
providing: (i) hospice care and skilled health services and (ii) home care and
unskilled home health services. As used herein, the term “Covered Area” shall
mean the States of New Mexico.

(d)    The Company, the Merrell Trust, and each Principal acknowledge and agree
that: (i) the duration, scope and geographic area of the covenants contained in
this Section 6.8 are fair, reasonable and necessary in order to protect the
goodwill and legitimate business interests of the Company and Buyer and to
prevent any unfair advantage conferred upon the Merrell Trust or the Principals;
(ii) that adequate consideration has been received by the Merrell Trust and the
Principals for such obligations, and that these obligations do not prevent the
Merrell Trust or the Principals from earning a livelihood; (iii) Buyer would not
have entered into this Agreement or made the payments to the Merrell Trust
hereunder unless the Merrell Trust and the Principals agreed to be subject to
all of the restrictions set forth in this Section 6.8; and (iv) the Merrell
Trust and the Principals have been represented by counsel of their choosing in
the negotiation of this Agreement, including this Section 6.8, and that the
Merrell Trust and the Principals are voluntarily agreeing to this Section 6.8.
If, however, any of the covenants set forth in this Section 6.8 are held to be
invalid or unenforceable, the remainder of such covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
If it is determined by a court of competent jurisdiction that any of the
restrictive covenants, or any part thereof, are unenforceable because of the
duration of such provision, the geographical area covered thereby, or any other
determination of unreasonableness of the provision, the court making such
determination shall have the power to reduce the duration, area or scope of such
provision and, in its reduced form, such provision shall then be enforceable and
shall be enforced.

(e)    In the event of a breach by the Merrell Trust or any Principal of any
covenant set forth in this Section 6.8, the Restricted Period with respect to
the Merrell Trust or such Principal, as applicable, will be extended by the
period of the duration of such breach.

(f)    The Company, the Merrell Trust, and each Principal acknowledge that a
breach by such Party of any of the covenants set forth in Section 6.8 of this
Agreement cannot be reasonably or adequately compensated in damages in an action
at law, and that Buyer will be entitled to, among other remedies, and without
posting any bond or other undertaking, injunctive relief, which may include, but
will not be limited to: (i) restraining such Party from engaging in any action
that would constitute or cause a breach or violation of this Section 6.8, (ii)
obtaining specific performance to compel such Party to perform his or its
obligations and covenants hereunder, and (iii) obtaining damages available
either at law or in equity.

 

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Section 6.9    Release.

(a)    Each Seller and Principal, for itself or himself and its or his heirs,
personal representatives, successors and assigns (collectively, the
“Releasors”), hereby forever fully and irrevocably releases and discharges the
Company Entities, Buyer, and Buyer’s Affiliates, and each of their respective
predecessors, successors, assigns, divisions, direct or indirect Subsidiaries
and past and present equityholders, members, managers, directors, officers,
employees, agents, attorneys and other Representatives, including their employee
benefit plans and programs, administrators, and fiduciaries (collectively, the
“Released Parties”), from any and all actions, suits, claims, demands, debts,
agreements, obligations, promises, judgments, or liabilities of any kind
whatsoever in law or equity and causes of action of every kind and nature, or
otherwise (including claims for damages, costs, expenses, and attorneys’,
brokers’ and accountants fees and expenses) arising out of or related to events,
facts, conditions or circumstances existing or arising prior to the Closing
Date, which the Releasors can, shall or may have against the Released Parties,
whether known or unknown, suspected or unsuspected, unanticipated as well as
anticipated (collectively, the “Claims”), and hereby irrevocably agree to
refrain from, directly or indirectly, asserting any Claim or demand or
commencing (or causing to be commenced) any suit, action or Proceeding of any
kind, in any court or before any tribunal, against any Released Party based upon
any Claim. Notwithstanding the preceding sentence and the following subsections
of this Section 6.9, “Claims” does not include, and the provisions of this
Section 6.9 shall not release or otherwise diminish, the obligations of any
Party set forth in or arising under any provisions of this Agreement or any
other Transaction Document.

(b)    The released Claims include, without limitation, any and all Claims under
federal, state or local Laws pertaining to employment, including the Age
Discrimination in Employment Act (the “ADEA”), Title VII of the Civil Rights Act
of 1964, as amended, 42 U.S.C. Section 2000e et seq., the Fair Labor Standards
Act, as amended, 29 U.S.C. Section 201 et seq., the Americans with Disabilities
Act, as amended, 42 U.S.C. Section 12101 et seq., the Reconstruction Era Civil
Rights Act, as amended, 42 U.S.C. Section 1981 et seq., the Rehabilitation Act
of 1973, as amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave
Act of 1992, 29 U.S.C. Section 2601 et seq., and any and all state or local Laws
regarding employment discrimination and/or federal, state or local Laws of any
type or description regarding employment, including, but not limited to, any
Claims arising from or derivative of any Seller’s employment with the Company
Entities, as well as any and all Claims under state contract or tort Law or
otherwise.

(c)    For the purpose of implementing a full and complete release of Claims,
each Seller and Principal understands and agrees that the release in this
Section 6.9 is intended to include all Claims, if any, which such Party may have
or which such Party does not now know or suspect to exist in such Party’s favor
against Buyer and/or any of the Released Parties, subject to the limitations set
forth in Section 6.9(a). By signing this Agreement, each Seller and Principal
hereby discharges and extinguishes those Claims, subject to the limitations set
forth in Section 6.9(a). Accordingly, each Seller and Principal expressly waives
all rights afforded by any statute or regulation in any applicable jurisdiction
prohibiting, limiting, or restricting the waiver of unknown Claims. Each Seller
and Principal makes this waiver with full knowledge of such Party’s rights and
specific intent to release both such Party’s known and unknown Claims.

(d)    In exchange for the payments that the Sellers are receiving pursuant to
this Agreement, each Seller and Principal acknowledges and agrees that (i) prior
to signing this Agreement, such Party read and understood each and every
provision of this release; (ii) such Party has been advised to consult with an
attorney concerning the legal consequences of this release; (iii)

 

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such Party knowingly and voluntarily signed this release with complete
understanding of all relevant facts, and such Party has not been forced,
coerced, fraudulently induced or pressured in any manner whatsoever to sign this
release; and (iv) such Party is not waiving, releasing, or otherwise discharging
any Claims under the ADEA that may arise after the date such Party signs this
release.

(e)    In exchange for releasing any Claims as described above, each Seller and
Principal is receiving certain payments or benefits to which such Party is not
otherwise entitled. Each Seller and Principal is not releasing any Claims that
cannot be released under applicable Law. This release will not prevent any
Seller or Principal from filing a charge with the Equal Employment Opportunity
Commission (the “EEOC”) or participating in any investigation conducted by the
EEOC; provided, however, that claims by any Seller or Principal for personal
relief in connection with such a charge or investigation (such as reinstatement
or monetary damages) hereby are barred.

(f)    Each Seller and Principal represents that such Party has not filed any
action, complaint, charge, grievance or arbitration against any of the Released
Parties.

Section 6.10    Insurance for Pre-Closing Occurrences or Events. As of the
Closing, the Company will obtain Tail Insurance with a reporting period not less
than the greater of (a) three (3) years or (b) the applicable statute of
limitations for actions covered by Company’s insurance policies, without any
lapse in coverage. The premium and other costs of the Tail Insurance shall be
Transaction Expenses paid by the Sellers. For purposes of this Agreement, “Tail
Insurance” shall be deemed to mean the extended reporting period endorsements or
similar coverage reasonably acceptable to Buyer from an insurer reasonably
acceptable to Buyer that will provide insurance coverage for all events that
occurred in the period prior to the Closing Date if such events or occurrences
would give rise to a claim under any currently existing general and professional
liability insurance policies, regardless of whether such events or occurrences
are known or unknown to the Sellers as of the Closing Date.

Section 6.11    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 transactions contemplated by this
Agreement.

Section 6.12    Sale of DME Business. Prior to the Closing, the Principals and
the Sellers shall cause the Company to sell its durable medical equipment
business (the “DME Business”) by either (i) selling all the outstanding equity
interests of Ambercare Medical Supply Company or (ii) selling substantially all
of the assets of Ambercare Medical Supply Company. The sale of the DME Business
shall be consummated pursuant to a definitive purchase agreement, such purchase
agreement being acceptable to Buyer it its sole discretion.

Section 6.13    No Shop. Unless and until this Agreement is terminated pursuant
to Article IX, none of the Acquired Company Entities nor any of the Principals
or the Sellers shall, directly or indirectly, through any officer, director,
manager, employee, agent, intermediary, Affiliate or otherwise, (a) solicit,
initiate or encourage submission of proposals or offers from any Person relating
to any purchase of an interest in any of the Acquired Company Entities or any of
the assets of the Acquired Company Entities or any transaction, in each case,
that would adversely affect the consummation of the transactions contemplated by
this Agreement, (b) participate in any discussions or negotiations regarding, or
furnish to any other Person, any information with respect to, or otherwise
respond to, cooperate or encourage, any effort or attempt by any other Person to
purchase

 

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any interest the Acquired Company Entities or any of the assets of any of the
Acquired Company Entities or any transaction, in each case, that would adversely
affect the consummation of the transactions contemplated by this Agreement or
(c) approve or undertake any of the foregoing transactions. If any of the
Acquired Company Entities or any of the Principals or the Sellers receives an
offer or proposal relating to any purchase of an interest in any of the Acquired
Company Entities or the assets of any of the Acquired Company Entities, such
Company or such Principal or Seller shall promptly notify the Buyer of the
receipt of such offer.

Section 6.14    Financial Information; Audits. Upon the request of the Buyer
made to the Principals or the Sellers, the Principals or the Sellers shall
provide to the Buyer copies of, or shall provide the Buyer reasonable access to,
such factual information as may be reasonably and timely requested by the Buyer,
and in the possession or control of the Principals or the Sellers or their
respective Affiliates or accountants, to enable the Buyer’s parent (and/or its
Affiliates) to file its or their Current Reports on Form 8-K, Quarterly Reports
on Form 10-Q and Annual Reports on Form 10-K, in each case, including all
amendments thereto, if, as and when such filing may be required by the United
States Securities and Exchange Commission. After the Closing, the Principals and
the Sellers shall allow an independent public accounting firm retained by the
Buyer at Buyer’s expense (the “Auditor”) to conduct an audit of the financial
statements of each of the Company Entities for their most recently completed
three fiscal years and shall cooperate with the Auditor in the conduct of such
audit. In addition, after the Closing (but not more than 10 Business Days after
the Buyer’s request therefor made to the Sellers), the Sellers agree to provide
to the Auditor a letter of representation in form and substance reasonably
satisfactory to the Buyer (the “Representation Letter”) and, if requested by the
Auditor, historical financial statements for each of the Company Entities,
including income and balance sheet data for such Company and opinions. Without
limiting the foregoing, after the Closing: (a) the Buyer or the Auditor may
audit the operating statements of each of the Company Entities, and the
Principals or the Sellers shall provide such documentation as the Buyer or the
Auditor may reasonably request in order to complete such audit, and (ii) the
Sellers shall furnish to the Buyer such financial and other information as may
be reasonably required by the Buyer’s parent to make any filings with the United
States Securities and Exchange Commission or other Governmental Entity.

Section 6.15    ESOP Share Sale. At Closing, all ESOP Shares will be sold to the
Buyer, and the Company will have taken all actions necessary to terminate the
ESOP.

Section 6.16    Specified Matter. Prior to the Closing, the Sellers shall keep
Buyer reasonably informed regarding the progress and substantive aspects of the
Specified Matter, including providing Buyer with all written materials received
or submitted in relation to the Specified Matter and periodic updates on the
status of the Specified Matter, including promptly informing Buyer of any
material changes or developments, keeping Buyer apprised of any potential Losses
relating to or arising from the Specified Matter and providing Buyer with other
such information regarding the Specified Matter that Buyer may request. Prior to
the Closing, Buyer shall have the right to review and provide comments on any
written materials submitted in relation to the Specified Matter and participate
in any discussions or meetings (in person or otherwise) with any Governmental
Authority in relation to the Specified Matter.

 

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ARTICLE VII

CONDITIONS TO CLOSING

Section 7.1    Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions (any
of which may be waived in writing, in whole or in part, by Buyer):

(a)    Representations and Warranties. Each of the representations and
warranties of the Sellers set forth in Article IV (without giving effect to any
limitation or qualification on any representation or warranty indicated by the
words “Material Adverse Effect” or “material” and excluding Section 4.4
(Capitalization)) must have been accurate in all respects as of the Closing Date
(except that those representations and warranties that address matters only as
of a particular date must have been accurate in all respects as of such date),
except where the failure of such representations and warranties to be so
accurate in all respects, individually or in the aggregate, does not constitute
a Material Adverse Effect and each of the representations and warranties of the
Sellers set forth in Section 4.4 (Capitalization) must have been accurate in all
material respects as of the Closing Date.

(b)    Covenants.

(i)    The covenants and obligations that any Seller or Principal is required to
perform or to comply with pursuant to Section 6.2 (Access and Investigation),
Section 6.4 (Approvals), Section 6.6 (Tax Matters), and Section 6.10 (Insurance
for Pre-Closing Occurrences or Events) of this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.

(ii)    All of the covenants and obligations (other than those covenants and
obligations described in Schedule 7.1(b)(i)) that any Seller or Principal is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all respects,
except where the failure to so perform or comply, individually or in the
aggregate, does not constitute a Material Adverse Effect.

(c)    Seller’s Certificate. The Sellers must have delivered a certificate,
dated as of the Closing Date and duly executed by the Sellers, as to the
satisfaction of each of the conditions set forth in Section 7.1(a) and
Section 7.1(b).

(d)    Third Party Consents and Notices. All approvals, consents, waivers and
estoppels of and notices to third parties (including any Governmental
Authorities) specified on Schedule 6.4(a) must have been obtained and be in form
and substance reasonably satisfactory to Buyer.

(e)    Encumbrances. All Encumbrances (i) on the Shares, if any, must have been
released at or prior to the Closing; and (ii) (other than Permitted
Encumbrances) on the assets of the Company Entities must have been released at
or prior to the Closing, except where the failure to so release all such
Encumbrances on the assets of the Company Entities, individually or in the
aggregate, does not constitute a Material Adverse Effect.

 

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(f)    No Material Adverse Effect. There must not have been any Material Adverse
Effect since the date of this Agreement.

(g)    No Action or Proceeding. No Governmental Order of any Governmental
Authority restraining, enjoining or otherwise preventing or delaying the
consummation of this Agreement or the transactions contemplated hereby shall be
outstanding, and no Proceeding or investigation by or before, or otherwise
involving, any Governmental Authority shall be threatened or pending against the
Buyer, the Company or any Seller, which seeks to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or which seeks
damages in connection with the transactions contemplated hereby.

(h)    No Conflict. Neither the consummation nor the performance of the
transactions contemplated hereby will, directly or indirectly (with or without
notice or lapse of time), contravene, or conflict with, or result in a violation
of any applicable Law or Governmental Order.

(i)    Closing Deliveries. Each Seller must have caused the documents and
instruments required by Section 3.2(a) to be delivered (or tendered subject only
to Closing) to Buyer.

(j)    Sale of DME Business. The sale of the DME Business shall have been
consummated pursuant to a definitive purchase agreement, such purchase agreement
being acceptable to Buyer it its sole discretion.

(k)    ESOP Termination. The ESOP shall be terminated immediately prior to the
Closing, and the ESOP Shares sold to Buyer at the Closing.

Section 7.2    Conditions to Obligations of the Sellers. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of each of the following
conditions (any of which may be waived in writing, in whole or in part, by the
Sellers):

(a)    Representations and Warranties. Each of the representations and
warranties of Buyer set forth in Article V (without giving effect to any
limitation or qualification on any representation or warranty indicated by the
words “Material Adverse Effect” or “material”) must have been accurate in all
material respects as of the Closing Date (except that those representations and
warranties that address matters only as of a particular date must have been
accurate in all material respects as of such date).

(b)    Covenants. All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects.

(c)    No Action or Proceeding. No Governmental Order of any Governmental
Authority restraining, enjoining or otherwise preventing or delaying the
consummation of this Agreement or the transactions contemplated hereby shall be
outstanding, and no Proceeding or investigation by or before, or otherwise
involving, any Governmental Authority shall be threatened or pending against any
of Buyer, the Company or any Seller, which seeks to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or which seeks
damages in connection with the transactions contemplated hereby.

 

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(d)    Closing Deliveries. Buyer must have caused the documents and instruments
required by Section 3.2(b) to be delivered (or tendered subject only to Closing)
to the Sellers.

Section 7.3    Frustration of Closing Conditions. Neither Party may rely on the
failure of any condition set forth in this Article VII, if such failure was
caused by such Party’s failure to comply with any provision of this Agreement.

ARTICLE VIII

INDEMNIFICATION

Section 8.1    Indemnification by the Merrell Trust and Principals.

(a)    Subject to the limitations set forth in this Article VIII, the Merrell
Trust and the Principals shall, jointly and severally, indemnify, reimburse,
defend and hold harmless Buyer and its officers, directors, managers,
shareholders, members, employees, agents and Affiliates (collectively, the
“Buyer Indemnified Persons”) from and against any and all losses, liabilities,
deficiencies, obligations, amounts paid in settlement, claims, demands,
judgments, damages, fines, suits, actions, costs and expenses (including
reasonable attorneys’ fees) (collectively, “Losses”) incurred by them arising
from or in connection with:

(i)    any breach or inaccuracy of any representation or warranty of any Seller
contained in this Agreement or any other Transaction Document, including any
breach of any such representation or warranty alleged by a third party;

(ii)    any breach of or failure to perform any covenant or obligation of any
Seller or Principal contained in this Agreement or any other Transaction
Document;

(iii)    any Closing Liabilities, Transaction Expenses or Indebtedness not
deducted in calculating the Cash Payment;

(iv)    (A) any Taxes imposed upon or payable by the Company or any Subsidiary
for any taxable period, or portion thereof, ending on prior to the Closing Date
(including, without limitation, any Taxes attributable to the portion of any
Straddle Period ending on and including the Closing Date, as determined pursuant
to Section 6.6(d)); (B) any Taxes of any Seller for any taxable period; (C) any
Transfer Taxes for which Sellers are liable pursuant to Section 6.6(b); (D) the
lost benefit of any credit, deduction or loss for Tax purposes which would have
been available to reduce or otherwise offset Taxes of Buyer or any Affiliate
thereof but for a breach of any representation or warranty made in Section 4.9;
(E) any Taxes arising by reason of the Company or any Subsidiary being a member
of any “affiliated group” (within the meaning of Section 1504(a) of the Code) on
or prior to the Closing Date, including pursuant to Treasury Regulations
Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or
similar provision of state, local or non-U.S. Law); and (F) any and all Taxes of
any Person (other than the Company or the Subsidiaries) imposed on the Company
or any Subsidiary as a transferee or successor, by contract or pursuant to any
Laws, which Taxes relate to an event or transaction occurring before the
Closing; and

(v)    any matter set forth on Schedule 8.1.

 

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(b)    Notwithstanding the foregoing, the Merrell Trust and the Principals’
obligations to indemnify any Buyer Indemnified Person for Losses incurred by
such Buyer Indemnified Person under Section 8.1(a)(i) are subject to the
following limitations:

(i)    the Merrell Trust and the Principals’ indemnity obligations shall not
accrue until the aggregate amount of Losses exceeds One Hundred Fifty Thousand
Dollars ($150,000) (the “Basket”) (at which point it being understood that the
Merrell Trust and Principals shall be liable for the full amount of the Losses,
including the Basket amount);

(ii)    the aggregate amount required to be paid or indemnified by both the
Merrell Trust and the Principals shall not exceed the Escrow Amount (the “Cap”);
and

(iii)    notwithstanding the foregoing, neither the Basket nor the Cap shall
apply to claims (A) for breaches of Section 4.1 (Organization and Good
Standing), Section 4.2 (Authorization, Validity and Effect of Agreement),
Section 4.3 (No Conflicts; Consents), Section 4.4 (Capitalization), Section 4.7
(No Undisclosed Liabilities), Section 4.9 (Taxes), Section 4.11 (Compliance with
Laws), Section 4.12 (Health Care Regulatory Matters), Section 4.18 (Employee
Benefits), and Section 4.26 (Brokers) (collectively, the “Fundamental
Representations”), (B) for any fraud; provided, however, that the aggregate
amount required to be paid for all claims for breaches of this Agreement other
than for claims arising out of or related to fraud shall not exceed the Purchase
Price; or (C) for any Losses arising from or in connection with the Specified
Matter.

(c)    The indemnification provided for in Section 8.1(a)(i) shall terminate on
the Escrow Release Date (and no claims shall be made by Buyer under
Section 8.1(a)(i) thereafter), provided that the indemnification provided for in
Section 8.1(a)(i) as it relates to claims for breaches of the Fundamental
Representations shall terminate upon the expiration of the statute of
limitations related thereto. The indemnification by the Merrell Trust and the
Principals shall continue as to any Losses of which a Buyer Indemnified Person
has given a Claim Notice to the Merrell Trust and the Principals on or prior to
the date such indemnification would otherwise terminate in accordance with this
Section 8.1(c), as to which the obligation of the Merrell Trust and the
Principals shall continue solely with respect to the specific matters in such
Claim Notice until the liability of the Merrell Trust and the Principals shall
have been determined pursuant to this Article VIII, and the Merrell Trust and
the Principals shall have reimbursed the Buyer Indemnified Persons for the full
amount of such Losses that are payable with respect to such Claim Notice in
accordance with this Article VIII.

(d)    It is understood and agreed by the Parties that any Losses payable by the
Merrell Trust or the Principals pursuant to this Article VIII shall first be
paid out of the Escrow Amount to the extent funds are available therefor.

(e)    The Parties agree that, with the exception of breaches of the covenants
set forth in Sections 6.7 or 6.8, equitable remedies, and fraud, Buyer’s
exclusive remedy for any and all Losses incurred by Buyer in connection with or
arising from any of the items listed in Section 8.1(a)(i) through and including
(v) is the indemnification provisions set forth in this Article VIII.

(f)    Only for purposes of determining the amount of any Loss under this
Article VIII, any representation or warranty made by the Sellers that is
qualified in scope as to materiality (including material adverse effect) shall
be deemed to be made or given without such qualification.

 

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(g)    The Merrell Trust and the Principals agree that if Buyer Indemnified
Persons are entitled to indemnity, reimbursement of Losses or defense under
Schedule 8.1(a)(v) with respect to Item No. 1 on Schedule 8.1 (the “ESOP
Indemnity”), the Merrell Trust and the Principals, in their individual
capacities or in their capacities as trustees of the ESOP, shall not be entitled
to indemnification by the Company, the Buyer or the ESOP under any agreement by
and between one or more of the parties, including by not limited to the document
or documents set forth on Schedule 4.18(m).

Section 8.2    Indemnification by Buyer.

(a)    Subject to the limitations set forth in this Article VIII, Buyer shall
indemnify, defend and hold harmless the Sellers and their respective officers,
directors, managers, shareholders, members, employees, agents and Affiliates
(collectively, the “Seller Indemnified Persons”) from and against any and all
Losses incurred by them arising from or in connection with:

(i)    the breach of any representation or warranty of Buyer contained in this
Agreement or any other Transaction Document; and

(ii)    the breach of any covenant or obligation of Buyer contained in this
Agreement or any other Transaction Document.

(b)    The indemnification provided for in Section 8.2(a)(i) shall terminate on
the eighteen (18) month anniversary of the Closing Date (and no claims shall be
made by any Seller Indemnified Person under Section 8.2(a)(i) thereafter),
provided that the indemnification provided for in Section 8.2(a)(i) as it
relates to Section 5.2 (Authorization, Validity and Effect of Agreement) shall
terminate upon the expiration of the statute of limitations related thereto. The
indemnification by Buyer shall continue as to any Losses of which any Seller
Indemnified Person has validly given a Claim Notice to Buyer in accordance with
the requirements of Section 8.3 on or prior to the date such indemnification
would otherwise terminate in accordance with this Section 8.2(b), as to which
the obligation of Buyer shall continue solely with respect to the specific
matters in such Claim Notice until the liability of Buyer shall have been
determined pursuant to this Article VIII, and Buyer shall have reimbursed the
Seller Indemnified Persons for the full amount of such Losses that are payable
with respect to such Claim Notice in accordance with this Article VIII.

Section 8.3    Notice of Claims. Any Person seeking or intending to seek
indemnification hereunder (an “Indemnified Party”) shall give promptly to the
Party or Parties obligated to provide indemnification to such Indemnified Party
(each, the “Indemnifying Party”) a written notice (a “Claim Notice”) describing
in reasonable detail the facts giving rise to the claim for indemnification
hereunder and, to the extent reasonably ascertainable, a good faith estimate of
the dollar amount of such claim. The failure to give a Claim Notice as provided
in this Section 8.3 shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent it shall have been materially prejudiced by such
failure.

Section 8.4    Resolution of Indemnifiable Claims. After the giving of any Claim
Notice pursuant to Section 8.3, the amount of indemnification to which an
Indemnified Party shall be entitled under this Article VIII shall be determined:
(i) by the written agreement between the Indemnified Party and the Indemnifying
Party; (ii) by a final judgment or decree of any court of competent jurisdiction
after all appeals have been adjudicated or the time periods to file appeals have
expired; or (iii) by any other means to which the Indemnified Party and the
Indemnifying Party shall

 

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agree. The judgment or decree of a court shall be deemed final when the time for
appeal, if any, shall have expired and no appeal shall have been taken or when
all appeals taken shall have been finally determined. Once a Loss is payable
pursuant to this Section 8.4, the Indemnifying Party shall satisfy its
obligations by wire transfer of immediately available funds to an account
designated in writing by the Indemnified Party; provided that, in the event that
Sellers are required to indemnify any Buyer Indemnified Person, such payment
shall be satisfied according to the following priority of recourse: (A) first,
by withdrawals of the Escrow Amount in accordance with Section 2.4 and the terms
and conditions of the Escrow Agreement, (B) second, after the Escrow Amount has
been reduced to zero (0), by the Sellers, jointly and severally.

Section 8.5    Third Party Claims. Any Indemnified Party seeking or intending to
seek indemnification under this Agreement in respect of, arising out of or
involving any claim, action, demand or Proceeding made by any Person who is not
a Party or Affiliate thereof (a “Third Party Claim”) against the Indemnified
Party shall promptly give a Claim Notice to the Indemnifying Party with respect
to the Third Party Claim. Thereafter, the Indemnified Party shall promptly
deliver to the Indemnifying Party, after the Indemnified Party’s receipt
thereof, copies of all notices, pleadings, demands and documents received by the
Indemnified Party or its Affiliates or Representatives relating to the Third
Party Claim. The failure to give notice and information as provided in this
Section 8.5 shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent it shall have been materially prejudiced by such
failure.

ARTICLE IX

TERMINATION

Section 9.1    Termination. By written notice given prior to the Closing,
subject to Section 10.2, this Agreement may be terminated as follows:

(a)    by the mutual written consent of the Sellers and Buyer;

(b)    by Buyer or the Sellers upon written notice to the other, if the
transactions contemplated by this Agreement have not been consummated on or
prior to September 30, 2018 (the “End Date”); provided, however, that the
termination rights under this Section 9.1(b) shall not be available to any party
whose material breach of this Agreement has been the cause of, or resulted in,
the failure of the transactions contemplated by this Agreement to be consummated
by such time.

(c)    by either Buyer or the Sellers, upon written notice to the other, if a
Court or Governmental Authority shall have issued an Order or taken any other
action that is final and non-appealable and that restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated by this Agreement;
provided, however, that the right to terminate this Agreement pursuant to this
Section 9.1(c) is not available to any party whose breach of any provision of
this Agreement results in or causes such Order or other action or such party is
not in compliance with its obligations under Section 6.11;

(d)    by Buyer, if Buyer is not in material breach of its obligations under
this Agreement, if (i) the Sellers, the Principals, or any of the Company
Entities have breached or failed to perform any of their covenants or other
agreements contained in this Agreement to be complied with by them such that the
closing condition set forth in Section 7.1(b) would not be satisfied or
(ii) there exists a breach of any representation or warranty of the Sellers or
the Company Entities contained in this Agreement such that the closing condition
set forth in Section 7.1(a) would not be

 

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satisfied, and in the case of both (i) and (ii) above, such breach or failure to
perform is not cured within thirty (30) days after receipt by the Sellers or the
Principals of written notice thereof or is incapable of being cured by the
Sellers or the Principals by the End Date; or

(e)    by the Sellers, if none of the Company Entities or the Sellers are in
material breach of its obligations under this Agreement, if (i) Buyer has
breached or failed to perform any of its covenants or other agreements contained
in this Agreement to be complied with by Buyer such that the closing condition
set forth in Section 7.2(b) would not be satisfied or (ii) there exists a breach
of any representation or warranty of Buyer contained in this Agreement such that
the closing condition set forth in Section 7.2(a) would not be satisfied, and in
the case of both (i) and (ii) above, such breach or failure to perform is not
cured within thirty (30) days after receipt by Buyer of written notice thereof
or is incapable of being cured by Buyer by the End Date

Section 9.2    Effect of Termination. Each Party’s right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 9.1,
all obligations of the Parties under this Agreement will terminate, except that
the obligations in Section 6.7, this Article IX and Article X will survive;
provided, however, that termination of this Agreement will not preclude a Party
from bringing a claim against the other Party hereto for a breach arising prior
to such termination pursuant to the terms and conditions set forth herein.

ARTICLE X

GENERAL PROVISIONS

Section 10.1    Expenses. Except as expressly set forth herein, whether or not
the Closing occurs, each Party will pay all fees and expenses incurred by such
Party in connection with the negotiation and preparation of this Agreement and
the transactions contemplated hereby, including the fees, expenses and
disbursements of its counsel, financial advisors and accountants. For the
avoidance of doubt, all expenses incurred by the Sellers or the Company in
connection with this Agreement and the transactions contemplated hereby shall be
the obligation of the Sellers (jointly and severally), and not the obligation of
the Company or Buyer.

Section 10.2    Notices. All notices, requests, consents, claims, demands,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been duly given: (a) when delivered by hand (with written
confirmation of receipt); (b) when received by the addressee if sent by a
nationally recognized overnight courier (return receipt requested); (c) on the
date sent by facsimile or email of a .pdf document (with confirmation of
transmission) if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the recipient; or
(d) on the third (3rd) day after the date mailed, by certified or registered
mail, postage prepaid, return receipt requested. Such communications must be
sent to the respective Parties

 

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at the following addresses (or to such other address(es) or facsimile number(s)
as a Party may designate by notice to the other Parties in accordance with this
Section 10.2):

If to Sellers and Principals:

Michael and Mary Merrell

420 N. Main

Belen, NM 87002

Email: mmerrell@eprnm.com

with a copy (which shall not constitute notice) to:

Modrall Sperling

PO Box 2168

Albuquerque, NM 87103

Attn: Karen L. Kahn, Esq.

Email: karen.kahn@modrall.com

Facsimile: (505) 449-2098

and

Laura T. Armstrong

PO Box 25146

Albuquerque, NM 87193

Email: cpalta@msn.com

If to Buyer:

c/o Addus HealthCare, Inc.

6801 Gaylord Parkway

Suite 110

Attn: Brian Poff, Chief Financial Officer

Email:bpoff@addus.com

with a copy (which shall not constitute notice) to:

Bass, Berry & Sims PLC

150 Third Ave. South, Suite 2800

Nashville, Tennessee 37201

Attn: David Cox

Email: dcox@bassberry.com

Facsimile: (615) 742-2864

Section 10.3    Entire Agreement. This Agreement and the other Transaction
Documents constitute the entire agreement of the Parties with respect to the
subject matter contained herein and therein, and shall supersede all prior and
contemporaneous understandings and agreements, both written and oral, with
respect to the subject matter hereof and thereof. In the event of any
inconsistency between the provisions of this Agreement, and the Exhibits and
Disclosure Schedules (other than an exception expressly set forth as such in the
Disclosure Schedules), this Agreement shall control.

Section 10.4    Interpretation. For purposes of this Agreement: (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation;” (b) the

 

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word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,”
“hereto” and “hereunder” refer to this Agreement as a whole. Unless the context
otherwise requires, references herein: (i) to Articles, Sections, Schedules,
Annexes and Exhibits mean the Articles and Sections of, and Schedules, Annexes
and Exhibits attached to, this Agreement; (ii) to an agreement, instrument or
other document means such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted by the
provisions thereof; and (iii) to a statute means such statute as amended from
time to time and includes any successor legislation thereto and any regulations
promulgated thereunder. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the
drafting Party. The Schedules, Annexes and Exhibits referred to herein shall be
construed with, and as an integral part of, this Agreement to the same extent as
if they were set forth verbatim herein.

Section 10.5    Amendment; Waiver. This Agreement may be amended only by a
written instrument duly executed by Buyer and the Sellers. Any term or condition
of this Agreement may be waived at any time by the Party entitled to the benefit
thereof. Any such waiver must be in writing and must be duly executed by such
Party. All rights and remedies of the Parties hereto are cumulative and not
alternative. No failure or delay by any Party in exercising any right, power or
privilege under this Agreement or the other Transaction Documents will operate
as a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. A waiver on one occasion shall not be deemed to be a waiver
of the same or any other breach, provision or requirement on any other occasion.

Section 10.6    Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and permitted assigns. Neither this Agreement nor any right hereunder or part
hereof may be assigned by any Party without the prior written consent of the
other Parties hereto, except that Buyer may assign this Agreement and its rights
hereunder to an Affiliate of Buyer without the prior written consent of the
Sellers, provided that no such assignment will relieve Buyer from any of its
obligations hereunder.

Section 10.7    No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the Parties hereto and their respective successors and permitted
assigns and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.

Section 10.8    Exhibits and Disclosure Schedules. All Exhibits and Disclosure
Schedules or other documents expressly incorporated into this Agreement are
hereby incorporated into this Agreement and are hereby made a part hereof as if
set out in full in this Agreement. Neither the specification of any dollar
amount in any representation or warranty contained in this Agreement nor the
inclusion of any specific item in any section or paragraph of the Schedules is
intended to imply that such amount, or higher or lower amounts, or the item so
included or other items, are or are not material, or are or are not in the
ordinary course of business, and no Party shall use the fact of the setting
forth of any such amount or the inclusion of any such item in any dispute or
controversy between the Parties as to whether any obligation, item or matter not
described herein or included in any section or paragraph of the Schedules is or
is not material for purposes of this Agreement, or is or is not in the ordinary
course of business.

Section 10.9    Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware, without
giving effect to any choice

 

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of law or conflict of law rules or provisions (whether of the State of Delaware
or otherwise) that would cause the application of the Laws of any jurisdiction
other than the State of Delaware. Each Party hereby irrevocably submits in any
suit, action or Proceeding arising out of or related to this Agreement or any of
the transactions contemplated hereby to the jurisdiction of any state or federal
court located in the State of Delaware, and irrevocably waives any immunity from
the jurisdiction of such courts and any claim of improper venue, forum non
conveniens or any similar objection which it might otherwise be entitled to
raise in any such suit, action or Proceeding.

Section 10.10    Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED
HERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT THE PARTIES TO THIS AGREEMENT
MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

Section 10.11    Remedies.

(a)    The Parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm or damage would
be caused for which monetary damages would not be an adequate remedy.
Accordingly, it is hereby agreed that the Parties hereto shall be entitled to an
injunction or injunctions to prevent or restrain breaches or threatened breaches
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which a Party is entitled at law
or in equity, and the Parties hereby waive any requirement for the posting of
bond or similar collateral in connection therewith. Each of the Parties agrees
that it will not oppose the granting of an injunction, specific performance and
other equitable relief when expressly available pursuant to the terms of this
Agreement on the basis that (i) there is adequate remedy at law or (ii) an award
of specific performance is not an appropriate remedy for any reason at law or in
equity.

(b)    In the event of any controversy, claim or action being filed or
instituted between the Parties to enforce the terms and conditions of this
Agreement, or arising from the breach of any provision hereof or in connection
with the indemnity provisions contained herein, the prevailing Party in any
final non-appealable action shall receive from the other Party or Parties all
costs, damages, and expenses, including reasonable attorneys’ fees (including,
but not limited to, fees on appeal), incurred by the prevailing Party.

Section 10.12    Severability. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other terms and provisions of this Agreement shall remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to the Parties. Upon
such determination that any term or provision is invalid, illegal or incapable
of being enforced, the Parties

 

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hereto shall negotiate in good faith to amend or otherwise modify this Agreement
so as to effect the original intent of the Parties as closely as possible in a
mutually acceptable manner such that the transactions contemplated hereby are
fulfilled to the fullest extent possible.

Section 10.13    Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same agreement. A signed copy of this
Agreement delivered by facsimile, email or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned Parties have caused this Agreement to be
executed as of the date first set forth above.

 

BUYER: ADDUS HEALTHCARE, INC.

By:  

/s/ Brian Poff

Name:   Brian Poff Title:   Executive Vice President and Chief Financial Officer

 

Signature Page to Stock Purchase Agreement

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PRINCIPALS:

/s/ Michael J. Merrell

MICHAEL J. MERRELL, individually

/s/ Mary E. Merrell

MARY E. MERRELL, individually SELLERS: AMBERCARE CORPORATION EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST By:  

/s/ Michael J. Merrell

  Michael J. Merrell, Trustee By:  

/s/ Mary E. Merrell

  Mary E. Merrell, Trustee MERRELL REVOCABLE TRUST UTA DATED JUNE 3, 2012 By:  

/s/ Michael J. Merrell

  Michael J. Merrell, Trustee By:  

/s/ Mary E. Merrell

  Mary E. Merrell, Trustee

Signature Page to Stock Purchase Agreement

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EXHIBIT A

Form of Escrow Agreement

Attached