EXHIBIT 10.22

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

Concentra Operating Corporation, a Nevada corporation

 

Island Acquisition Corp.,

 

a Delaware corporation and a wholly owned subsidiary of Buyer

 

and

 

Beech Street Corporation, a Delaware corporation

 

Dated: August 2, 2005

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TABLE OF CONTENTS

 

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ARTICLE I THE MERGER    1

1.1

   The Merger    1

1.2

   Effective Time of the Merger    1 ARTICLE II BUYER AND THE SURVIVING
CORPORATION    1

2.1

   Articles of Incorporation of the Surviving Corporation    1

2.2

   Bylaws of the Surviving Corporation    2

2.3

   Directors and Officers of the Surviving Corporation    2 ARTICLE III EXCHANGE
OF SHARES    2

3.1

   Disposition of Constituent Corporation Shares    2

3.2

   Treatment of Stock Options and Warrants    3

3.3

   Exchange of Beech Shares    3

3.4

   No Further Rights in Beech Shares    4

3.5

   The Purchase Price    4

3.6

   Closing    4

3.7

   Supplementary Action    5

3.8

   Tax Withholding    6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER    6

4.1

   Organization    6

4.2

   Authority Relative to this Agreement    6

4.3

   Consents and Approvals; No Violations    7

4.4

   Buyer Sub    7

4.5

   Financial Capacity    7 ARTICLE V REPRESENTATIONS AND WARRANTIES OF BEECH   
8

5.1

   Organization    8

5.2

   Capitalization    8

5.3

   Authority Relative to this Agreement    8

5.4

   Consents and Approvals; No Violations    9

5.5

   Financial Statements    9

5.6

   Absence of Certain Changes or Events    10

5.7

   Litigation    10

5.8

   Contracts    11

 

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5.9

   Employee Benefit Plans    11

5.10

   Intellectual Property    13

5.11

   Owned Property; Beech Facilities    14

5.12

   Environmental Matters    14

5.13

   Permits    15

5.14

   Violations/Condemnation    15

5.15

   Taxes    16

5.16

   Labor Matters    17

5.17

   Health Care Matters    18

5.18

   Interested Party Transactions    19

5.19

   Insurance    19

5.20

   Title to Assets    19

5.21

   Receivables    20

5.22

   Customers and Suppliers    20

5.23

   Compliance with Laws    20

5.24

   Federal Healthcare Programs    21

5.25

   Exclusion    21

5.26

   Billing    21

5.27

   Licenses    21

5.28

   Deferred Payments and Letter of Credit Obligations    22 ARTICLE VI CONDUCT
OF BUSINESS PENDING THE MERGER    22

6.1

   Conduct of Business Pending the Merger    22

6.2

   Conduct of Business of Buyer Sub    23

6.3

   Compensation Plans    23

6.4

   Legal Conditions to Merger    24

6.5

   Notification; Updates to Disclosure Schedule    24

6.6

   Bank Accounts    25

6.7

   No Solicitation    25

6.8

   Financial Statements; Financing Assistance    26

6.9

   Debt Payment    27 ARTICLE VII ADDITIONAL AGREEMENTS    27

7.1

   Access and Information    27

7.2

   Stock Options, Warrants, Convertible Securities and Other Agreements    28

 

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7.3

   Director and Officer Indemnification; Change of Control    28

7.4

   Public Announcements    28

7.5

   Expenses    28

7.6

   Additional Agreements    29

7.7

   Confidentiality    29 ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER
   30

8.1

   Conditions to Both Beech’s and Buyer’s Obligation to Effect the Merger    30

8.2

   Conditions to Obligation of the Companies to Effect the Merger    30 ARTICLE
IX TERMINATION, AMENDMENT AND WAIVER    31

9.1

   Termination    31

9.2

   Effect of Termination    31

9.3

   Amendment    32

9.4

   Waiver    32 ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION    32

10.1

   Survival; Indemnification    32

10.2

   Indemnification by Buyer and the Surviving Corporation    35

10.3

   Procedure    35

10.4

   Contest; Challenge    36

10.5

   Sole Remedy    36 ARTICLE XI GENERAL PROVISIONS    37

11.1

   Brokers    37

11.2

   Notices    37

11.3

   Descriptive Headings    38

11.4

   Entire Agreement; Assignment    38

11.5

   Governing Law    38

11.6

   Parties in Interest    38

11.7

   Counterparts    38

11.8

   Validity    38

11.9

   Investigation    38

11.10

   Consents    38

11.11

   Post-Closing    38

 

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AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of August 2, 2005 (this “Agreement”), by
and among Concentra Operating Corporation, a Nevada corporation (“Buyer”),
Island Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Buyer (“Buyer Sub”), and Beech Street Corporation, a Delaware corporation
(“Beech”). The parties hereto are sometimes hereinafter referred to collectively
as the “Companies.” Buyer Sub and Beech are sometimes hereinafter referred to
collectively as the “Constituent Corporations,” or individually as a
“Constituent Corporation.”

 

WHEREAS, the respective boards of directors of the Companies deem it advisable
and in the best interests of their respective stockholders that Buyer acquire
Beech by the merger of Buyer Sub with and into Beech upon the terms and subject
to the conditions set forth herein (the “Merger”).

 

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:

 

ARTICLE I

THE MERGER

 

1.1 The Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.2 hereof) of the Merger, Buyer Sub shall
be merged with and into Beech, with Beech being the surviving corporation in
such Merger (the “Surviving Corporation”) and the separate existence of Buyer
Sub shall thereupon cease. The Merger shall have the effects set forth in the
Delaware General Corporation Law (“GCL”). Immediately following the Effective
Time of the Merger, the Surviving Corporation shall be a wholly owned subsidiary
of Buyer.

 

1.2 Effective Time of the Merger. The Merger shall become effective upon the
completion of the filing of a properly executed Certificate of Merger with the
Secretary of State of the State of Delaware, which filing shall be made on the
Closing Date after satisfaction of the conditions set forth in Article VIII.
When used in this Agreement, the term “Effective Time” with respect to the
Merger shall mean the date and time at which such Certificate of Merger is
successfully filed with the Secretary of State of the State of Delaware.

 

ARTICLE II

BUYER AND THE SURVIVING CORPORATION

 

2.1 Articles of Incorporation of the Surviving Corporation. The Articles of
Incorporation of Buyer Sub as in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation of the Merger.

 

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2.2 Bylaws of the Surviving Corporation. The Bylaws of Buyer Sub as in effect at
the Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law.

 

2.3 Directors and Officers of the Surviving Corporation.

 

(a) The directors of Buyer Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.

 

(b) The officers of Buyer Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.

 

ARTICLE III

EXCHANGE OF SHARES

 

3.1 Disposition of Constituent Corporation Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:

 

(a) The shares of Buyer Sub common stock which shall be outstanding immediately
prior to the Effective Time of the Merger shall be converted into a number of
shares of common stock of the Surviving Corporation equal to the number of
shares of common stock of Buyer Sub then outstanding.

 

(b) Each share of common stock of Beech held in the treasury of Beech or by any
subsidiary of Beech and each such Beech share held by Buyer or any subsidiary of
Buyer immediately prior to the Effective Time shall be canceled and retired and
cease to exist, and no consideration shall be given in exchange therefor.

 

(c) Each share of Beech Series A voting common stock, $0.001 par value,
outstanding immediately prior to the Effective Time (taking into account any
shares, warrants or options that are vested or accelerated as a result of the
Merger or the transactions contemplated hereby and exercised immediately prior
to the Merger, but other than shares held by Beech, Buyer, Buyer Sub or any
other subsidiary of Buyer or Beech, which shall be canceled as set forth in
Section 3.1(b) above) (“Series A Shares”) and each share of Beech Series B
nonvoting common stock, $0.001 par value, outstanding immediately prior to the
Effective Time (taking into account any shares, warrants or options that are
vested or accelerated and exercised as a result of the Merger or the
transactions contemplated hereby and exercised immediately prior to the Merger,
but other than Series B Shares held by Beech, Buyer, Buyer Sub or any other
subsidiary of Buyer or Beech, which shall be canceled as set forth in Section
3.1(b) above) (“Series B Shares,” and together with the Series A Shares, the
“Shares,”) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive an aggregate amount
in cash equal to the Purchase Price (as defined in Section 3.5)

 

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divided by the sum of (i) the number of Series A Shares, plus (ii) the number of
Series B Shares, such amount payable to the holder thereof, without interest
thereon, upon the surrender of the certificate formerly representing such Share
in accordance with Section 3.3 of this Agreement; provided that an amount equal
to seven and one-half percent (7.5%) of the Purchase Price (the “Indemnification
Escrow Payment”) shall be held by an escrow agent to be mutually agreed by the
parties (the “Escrow Agent”) as provided for in Section 10.1(c) hereof.

 

3.2 Treatment of Stock Options and Warrants. Beech shall cause all issued and
outstanding warrants, options or other similar rights (the “Options”) to acquire
shares or capital stock or other equity securities of Beech (the “Option
Shares”) to be canceled, exercised or terminated as of the Closing Date and
immediately prior to the Effective Time. Buyer is not assuming or replacing any
Options that have been granted by Beech under the Beech Street Corporation 1999
Stock Incentive Plan (the “1999 Stock Plan”) or otherwise.

 

3.3 Exchange of Beech Shares.

 

(a) Immediately following the Effective Time, each record holder (a
“Stockholder”) of any certificate or certificates representing Shares (the
“Certificates”) shall be entitled to surrender his or her Certificates to the
Buyer for cancellation in exchange for the payment of such Stockholder’s pro
rata portion of the Purchase Price less his or her pro rata portion of the
Indemnification Escrow Payment less to the extent applicable any amounts
required to be withheld under any provision of federal, state, local or foreign
law with respect to Taxes (as defined in Section 5.15(k)), and Buyer hereby
agrees to cause such amount to be paid to such person at such time. If any
Stockholder shall fail to surrender his or her Certificates immediately
following the Effective Time, the Buyer shall send to such Stockholder notice of
the Merger and instructions for use in effecting the surrender of the
Certificates in exchange for the payment hereunder, and the holder of such
Certificate shall be entitled to receive in exchange therefor solely such
Stockholder’s pro rata portion of the Purchase Price, less his pro rata portion
of the Indemnification Escrow Payment if such escrowed amount has not already
been released in accordance with this Agreement, and less to the extent
applicable any amounts required to be withheld under any provision of federal,
state, local or foreign law with respect to Taxes, and such Certificate shall
forthwith be canceled. No interest shall be paid or accrued for the benefit of
the Stockholders on the consideration payable upon the surrender of the
Certificates. It shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer.

 

(b) From and after the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Beech shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, the Certificates are presented to the Surviving Corporation for payment,
they shall be canceled and exchanged for the consideration in accordance with
the procedures set forth in this Section 3.3.

 

(c) At or prior to the Effective Time of the Merger, Buyer shall deliver
irrevocably to the Escrow Agent immediately available funds in an aggregate
amount equal to the Indemnification Escrow Payment. As provided in Section
10.1(c) hereof, the Indemnification Escrow Payment shall be held in escrow (the
“Indemnification Escrow”) and invested by the Escrow Agent. Income and earnings
therefrom shall become funds of the

 

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Indemnification Escrow to be disbursed as provided in Section 10.1(f) and (g) of
this Agreement and in the Escrow Agreement.

 

3.4 No Further Rights in Beech Shares. All cash, or cash equivalents, received
by any Stockholders pursuant to this Agreement shall be deemed to have been
delivered and received in full satisfaction of all rights pertaining to such
Stockholders’ Shares. At the Effective Time of the Merger, the record holders of
the Certificates shall cease to have any rights with respect to shares (other
than such rights as they may have as dissenting Stockholders under the GCL), and
their sole right shall be to receive their pro rata share of the Purchase Price
in accordance with Section 3.3(a) above. Dissenting Stockholders shall have the
rights accorded by the GCL.

 

3.5 The Purchase Price. The aggregate merger consideration (the “Purchase
Price”) for all outstanding Beech Shares shall be a cash amount equal to One
Hundred Sixty Five Million Dollars ($165,000,000).

 

3.6 Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place at the offices of Morrison & Foerster, LLP, 19900
MacArthur Blvd., Twelfth Floor, Irvine, CA 92612 at 9:00 a.m., local time, on
the first business day (the “Closing Date”) after the later of (x) September 30,
2005, or (y) the day on which all of the conditions set forth in Article VIII
hereof are satisfied or waived, or at such other date, time and place as the
Companies shall otherwise agree.

 

(a) At the Closing, Beech shall deliver to Buyer the following:

 

(i) Resolutions. Copies of resolutions of directors of Beech certified by a
Secretary, Assistant Secretary, or other appropriate officer of Beech,
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby and copies of resolutions of the meeting of
stockholders of Beech (or written consent in lieu thereof), certified by a
Secretary, Assistant Secretary or other appropriate officer of Beech,
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.

 

(ii) Share Certificates. Certificates duly endorsed in blank or accompanied by
appropriate stock powers.

 

(iii) Resignations. Resignations of certain officers and all directors of Beech,
which Buyer shall request in writing prior to the Closing.

 

(iv) Books and Records. All minute books, stock books, ledgers and registers,
corporate seals, if any, and other corporate records relating to the
organization, ownership and maintenance of Beech and its subsidiaries, if not
already located on the premises of Beech or its subsidiaries;

 

(v) Consents and Approvals. Evidence reasonably satisfactory to Buyer confirming
that the applicable waiting periods, if any, under the HSR (as defined in
Section 4.3) shall have expired or been terminated, and that Beech shall have
received all other

 

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governmental and third party consents necessary to consummate the transactions
contemplated by this Agreement;

 

(vi) Bylaws. A certified copy of the Beech’s Bylaws, with all amendments
thereto, dated as of the Closing Date; and

 

(vii) Officer’s Certificate. A Beech certificate relating to the representations
and warranties and performance of obligations of Beech referred to in Section
8.2(b)(iv).

 

(viii) Termination of Agreements. Evidence reasonably satisfactory to Buyer
confirming that Beech has terminated the agreements referenced in Sections
6.1(e)(ii), (iii) and (iv).

 

(ix) Paid Time Off Information. A list of all employees with accrued paid time
off as of the Closing, which list shall set forth how much paid time off has
accrued to each such employee as of the Closing.

 

(b) At the Closing, Buyer shall deliver to the Stockholders the aggregate
Purchase Price, less the amount of the Indemnification Escrow Payment in
accordance with Section 3.3.

 

(c) At the Closing, Buyer shall deliver to Escrow Agent the aggregate
Indemnification Escrow Payment by wire transfer of immediately available funds
to the financial institution identified by Escrow Agent in accordance with
Section 3.3 hereof.

 

(d) At the Closing, Buyer shall deliver to Beech copies of resolutions of the
directors of Buyer and Buyer Sub certified by a Secretary, Assistant Secretary,
or other appropriate officer of Buyer, authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.

 

(e) At the Closing, Beech shall deliver to UBS Securities LLC the fee payable
under that certain Letter Agreement dated May 1, 2005, between Beech and UBS
Securities LLC.

 

(f) At the Closing, Beech shall deliver to Morrison & Foerster LLP and Ropes &
Gray LLP all amounts payable with respect to services through the Closing Date.

 

3.7 Supplementary Action. If at any time after the Effective Time, any further
assignments or assurances in law or any other things are necessary or desirable
to vest or to perfect or confirm of record in the Surviving Corporation the
title to any property or rights of either Constituent Corporation, or otherwise
to carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
Constituent Corporations, in the name of and on behalf of either Constituent
Corporation as appropriate, to execute and deliver any and all things necessary
or proper to vest or to perfect or confirm title to such property or rights in
the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.

 

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3.8 Tax Withholding. Each of the Surviving Corporation and Buyer shall be
entitled to deduct and withhold from the consideration otherwise payable to any
Stockholders pursuant to this Agreement any amounts that the Surviving
Corporation or Buyer is required to deduct and withhold with respect to payment
under any provision of federal, state, local or foreign Tax law. If the
Surviving Corporation or Buyer withholds any such amounts, such amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholders in respect of which the Surviving Corporation or the Buyer made
such deduction or withholding.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As used in this Agreement, (i) the term “Material Adverse Effect” means any
change in or effect on a party or any of its subsidiaries that individually or
in the aggregate is materially adverse to the business, assets, results of
operations or financial condition of such party and its subsidiaries taken as a
whole, or is reasonably likely to materially and adversely affect the ability of
such party to conduct its business in the manner in which it is currently
conducted or is reasonably likely to affect its ability to perform its
obligations hereunder and to consummate the transactions contemplated hereby, or
results in Beech or its subsidiaries losing any license, permit or other
authorization necessary to permit Beech and its subsidiaries to lawfully conduct
and operate their businesses in substantially the manner they currently conduct
and operate such businesses and to permit Beech and its subsidiaries to own and
use their assets in substantially the manner in which they currently own and use
such assets, (ii) the word “subsidiary” when used with respect to any party
means any corporation or other organization, whether incorporated or
unincorporated, of which such party or any other subsidiary of such party is a
general partner (excluding partnerships the general partnership interests of
which held by such party or any subsidiary of such party do not have a majority
of the voting interests in such partnership) or of which at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporations or other organizations is directly
or indirectly owned or controlled by such party and/or by any one or more of the
subsidiaries, and (iii) the term “Knowledge” shall mean the actual knowledge of
the applicable party’s executive officers after reasonable inquiry.

 

Buyer and Buyer Sub represent and warrant to Beech as of the date hereof, except
as disclosed to Beech in writing prior to the execution of this Agreement, as
follows:

 

4.1 Organization. Each of Buyer and Buyer Sub is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is now
being conducted, or in the case of Buyer Sub presently proposed to be conducted,
and to own all of its properties and assets. Buyer is duly qualified as a
foreign corporation to do business and is in good standing (to the extent the
concept of good standing exists) in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a Material Adverse Effect.

 

4.2 Authority Relative to this Agreement. Each of Buyer and Buyer Sub has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by Buyer and Buyer Sub
and the consummation by

 

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each such company of the transactions contemplated hereby have been duly
authorized by the respective boards of directors of Buyer and Buyer Sub and this
Agreement and each of the transactions contemplated hereby has been approved by
the Buyer as the sole stockholder of Buyer Sub, no other corporate proceedings
on the part of either such company are necessary to approve this Agreement or
the transactions contemplated hereby and this Agreement constitutes the valid
and binding obligation of Buyer and Buyer Sub, enforceable against each in
accordance with the Agreement’s terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and the rules of
law governing specific performance, injunctive relief and other equitable
remedies.

 

4.3 Consents and Approvals; No Violations. Except for applicable requirements of
state or foreign laws relating to takeovers, state securities or blue sky laws,
filings under the Hart Scott Rodino Antitrust Improvements Act of 1976 (“HSR”),
as amended, and filing and recordation of a Certificate of Merger under the GCL,
no filing with, and no permit, authorization, consent or approval of, any public
body or authority is necessary for the consummation by Buyer or Buyer Sub of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by Buyer or Buyer Sub, nor the consummation by Buyer or Buyer
Sub of the transactions contemplated hereby, nor compliance by Buyer or Buyer
Sub with any of the provisions hereof, will (a) result in any breach of the
Articles of Incorporation or Bylaws of either company, (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the acceleration or creation of any material
lien, pledge or security interest or other encumbrance on assets under, or
change any material rights or obligations under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which Buyer or Buyer Sub is a party or by
which any of them or any of their properties or assets may be bound, (c) violate
any order, writ, injunction, judgment or decree applicable to Buyer or Buyer Sub
or any of its or their properties or assets, or (d) violate any constitution,
law, statute, rule or regulation applicable to Buyer or Buyer Sub or any of its
or their properties or assets except in the case of clause (d) for violations,
breaches or defaults that would not have a Material Adverse Effect.

 

4.4 Buyer Sub. Since the date of its incorporation, Buyer Sub has not and as of
the Effective Time it will not have (a) conducted any business, (b) had assets
other than the minimum statutory amount contributed by Buyer in exchange for its
stock, (c) incurred liabilities other than an amount not exceeding Two Thousand
Five Hundred Dollars ($2,500) representing fees and disbursements incurred in
connection with incorporating and maintaining its corporation existence, or (d)
made any distributions with respect to this stock or other payments except in
satisfaction of liabilities referred to in clause (c) above.

 

4.5 Financial Capacity. Buyer has the capacity and financial capability to
comply with and perform all of its covenants and obligations under this
Agreement and the transactions contemplated hereby.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BEECH

 

Beech and its subsidiaries (jointly and severally) represent and warrant to
Buyer and Buyer Sub as of the date hereof, except as disclosed to Buyer in the
disclosure schedule attached hereto (the “Disclosure Schedule”) or as provided
in Section 6.5 hereof, as follows:

 

5.1 Organization. Each of Beech and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted and to own all of its properties and
assets. Each of Beech and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing (to the extent the concept of
good standing exists) in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a Material Adverse Effect.

 

5.2 Capitalization.

 

(a) As of the date hereof, the authorized capital stock of Beech is as set forth
in Schedule 5.2 hereto. As of the date hereof, the number of Beech shares which
are issued and outstanding is as set forth in Schedule 5.2 hereto. All of the
issued and outstanding Beech shares are validly issued, fully paid and
nonassessable and not subject to any lien, charge or encumbrance. Beech is not,
and prior to the Effective Time will not become, a party to or subject to any
contract or obligation wherein any person has a right or option to purchase or
acquire any rights in, or convertible or exchangeable for, any additional
capital stock or other equity securities of Beech not set forth on Schedule 5.2.
All of such rights or options set forth on Schedule 5.2 will be exercised or
terminated immediately prior to the Merger, and there will be no rights or
options to purchase or acquire any rights in or convertible or exchangeable for
any capital stock or other equity securities of Beech outstanding or in
existence as of the Effective Time.

 

(b) As of the date hereof, (i) the authorized capital stock of each subsidiary
of Beech is as set forth in Schedule 5.2 hereto, (ii) Beech owns 100% of the
issued and outstanding capital stock or other equity interests in each of its
subsidiaries, free and clear of all liens and encumbrances, and (iii) there are
no contracts or obligations wherein any person has a right or option to purchase
or acquire any rights in or convertible or exchangeable for any additional
capital stock or other equity interests of any such subsidiaries of Beech,
except in each case as set forth on Schedule 5.2.

 

(c) There is no plan providing any right or option to purchase or acquire any
rights in, or convertible or exchangeable for, any capital stock or other equity
securities of Beech other than the 1999 Stock Plan, a copy of which has been
provided to Buyer. The terms and conditions of all award agreements granted
under or pursuant to the 1999 Stock Plan are consistent with the terms and
conditions of such plan.

 

5.3 Authority Relative to this Agreement. Beech has the corporate power to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of

 

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this Agreement by Beech and the consummation by Beech of the transactions
contemplated hereby have been duly authorized by the board of directors and the
Stockholders of Beech, and no other corporate proceedings on the part of such
company are necessary to approve this Agreement or the transactions contemplated
hereby. This Agreement constitutes the legal, valid and binding obligation of
Beech, enforceable against it in accordance with the Agreement’s terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and the rules of law governing specific performance, injunctive
relief and other equitable remedies.

 

5.4 Consents and Approvals; No Violations. Except for applicable requirements of
state or foreign laws relating to takeovers, state securities or blue sky laws,
filings under the HSR, and filing and recordation of a Certificate of Merger
under the GCL, no filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary by Beech or any of its
subsidiaries for the consummation by Beech of the transactions contemplated by
this Agreement. Neither the execution and delivery of this Agreement by Beech,
nor the consummation by Beech of the transactions contemplated hereby, nor
compliance by Beech with any of the provisions hereof, will (a) result in any
breach of the Articles of Incorporation or Bylaws of Beech or of the
organizational documents of any subsidiary of Beech, (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the acceleration or creation of any material
lien, pledge or security interest or other encumbrance on assets under, or
change any material rights or obligations under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which Beech or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
(c) violate any order, writ, injunction, judgment or decree applicable to Beech
or any of its subsidiaries or any of its or their properties or assets, or (d)
violate any constitution, law, statute, rule or regulation applicable to Beech
or any of its subsidiaries or any of its or their properties or assets except in
the case of clause (d) for violations, breaches or defaults that would not have
a Material Adverse Effect.

 

5.5 Financial Statements.

 

(a) Beech has furnished to Buyer Beech’s consolidated financial statements
(consolidated balance sheets, consolidated statements of income, consolidated
statements of the Stockholders’ equity and consolidated statements of cash
flows) at and for each of the twelve- (12) month periods ended December 31,
2003, and December 31, 2004, and its financial statements at and for the six-
(6) month period ended June 30, 2005 (collectively, the “Beech Financial
Statements”). The Beech Financial Statements at and for the full year periods
have been audited by Beech’s independent accountants. Each of the balance sheets
(including the related notes) included in the Beech Financial Statements fairly
presents in all material respects the consolidated financial position of Beech
as of the respective dates thereof, and the other related statements (including
the related notes) included therein fairly present in all material respects the
consolidated results of operations and consolidated cash flows of Beech for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the interim financial statements, to normal year-end adjustments and
any other adjustments described therein and the absence of any notes

 

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thereto. Neither Beech nor any of its subsidiaries has any liabilities or
obligations of any kind, whether accrued, absolute, fixed, contingent or
otherwise, required to be disclosed on a balance sheet prepared in accordance
with GAAP, other than (i) liabilities reflected on the consolidated balance
sheet dated June 30, 2005, (ii) current liabilities incurred in the ordinary
course of business consistent with past practice since June 30, 2005, and (iii)
liabilities incurred after the date hereof in accordance with the terms of this
Agreement.

 

5.6 Absence of Certain Changes or Events. Other than as permitted under Sections
6.1 and 6.3, since June 30, 2005, neither Beech nor any of its subsidiaries has
suffered a Material Adverse Effect, and neither Beech nor any of its
subsidiaries has (a) redeemed, repurchased, acquired or disposed of any shares
of its capital stock or other equity interests or granted any options, warrants
or other rights to acquire or convert any obligation into any shares of its
capital stock or other equity interests, (b) entered into any transaction with
any officer, director, employee or any known relative thereof or any entity in
which such person has an interest, except the payment of rent, salaries, wages
and expense reimbursement in the ordinary course of business at the same levels
in effect prior to such date, (c) borrowed any amount or incurred or assumed any
obligation or liability (contingent or otherwise), except for (i) this
Agreement, (ii) normal trade and other obligations incurred in the ordinary
course of business consistent with past practice and (iii) obligations under
contracts, agreements and leases, the performance of which has not and will not,
individually or in the aggregate, have a Material Adverse Effect on Beech, (d)
discharged or satisfied any lien or other encumbrance or paid any obligation or
liability (fixed or contingent), except in the ordinary course of business
consistent with past practice or as contemplated by this Agreement, (e)
mortgaged, pledged or subjected to any lien or other encumbrance any of its
assets (whether tangible or intangible), (f) sold, assigned, transferred,
conveyed, leased or otherwise dispose of or agreed to sell, lease or otherwise
dispose of any of its assets except for sales of inventory or other assets in
the ordinary course of business consistent with past practice or as contemplated
by this Agreement, (g) canceled or compromised any debt or claim, except in the
ordinary course of business consistent with past practice, (h) waived or
released any rights, except for waivers or releases made in the ordinary course
of business consistent with past practice, (i) made any capital expenditures in
excess of One Hundred Thousand Dollars ($100,000), or entered into any
commitments therefor, (j) suffered any casualty loss or damage, whether or not
covered by insurance, or any adverse ruling, judgment or award, whether or not
amounts were reserved on Beech’s books, (k) lost any employees, distributors,
dealers, manufacturers representatives, customers or supplies, the loss of
which, individually or in the aggregate, has had, or is expected to have, a
Material Adverse Effect on Beech, (l) made any distributions of property (other
than cash) with respect to its capital stock, (m) increased the compensation of
or paid a bonus to any of its officers, directors or employees or changed the
benefits plans, welfare plans, compensation plans or similar plans available to
any such persons, (n) modified, amended or terminated any existing material
contract, obligation or agreement, (o) changed its accounting principles or
methods, or (p) except as otherwise provided herein, entered into any other
transaction, contract or commitment other than in the ordinary course of
business or with respect to any of the foregoing.

 

5.7 Litigation. As of the date of this Agreement, (a) there is no action, suit,
judicial or administrative proceeding, arbitration or investigation pending or,
to Beech’s Knowledge, threatened against or involving Beech or any of its
subsidiaries, or any of its or their properties or rights, before any court,
arbitrator, or administrative or governmental body; (b) there is no

 

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judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Beech or any of its subsidiaries or to which any of its or their
properties or rights are subject; and (c) neither Beech nor any of its
subsidiaries is in violation of any term of any judgments, decrees, injunctions
or orders outstanding against it or to which any of its properties or rights are
subject.

 

5.8 Contracts.

 

(a) Each of the contracts, instruments, mortgages, notes, security agreements,
leases, agreements or understandings to which Beech or any of its subsidiaries
is a party that relates to or affects the assets or operations of Beech or such
subsidiary or to which Beech or its subsidiaries or its or their assets or
operations may be bound or subject is a valid and binding obligation of Beech or
such subsidiary and in full force and effect, except for where the failure to be
in full force and effect would not individually or in the aggregate have a
Material Adverse Effect. Except to the extent that the consummation of the
transactions contemplated by this Agreement may require the consent of third
parties, there are no existing defaults by Beech or any of its subsidiaries
thereunder or, to the Knowledge of Beech, by any other party thereto, which
defaults, individually or in the aggregate, would have a Material Adverse
Effect; and no event of default has occurred, and no event, condition or
occurrence exists, that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default by Beech
or any of its subsidiaries thereunder which default would, individually or in
the aggregate, have a Material Adverse Effect.

 

(b) As of the date of this Agreement, neither Beech nor any of its subsidiaries
is a party to any oral or written (i) consulting agreement not terminable on
sixty (60) days’ or less notice involving the payment of more than Two Hundred
Thousand Dollars ($200,000) per annum, (ii) joint venture agreement, partnership
agreement, limited liability company agreement or similar agreement, (iii)
noncompetition or similar agreement that restricts it from engaging in any line
of business, (iv) agreement with any of its directors, executive officers or
other employees the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Beech of the
nature contemplated by this Agreement and which provides for the payment of in
excess of Two Hundred Thousand Dollars ($200,000), (v) agreement with respect to
any of its executive officers or employees providing any term of employment
beyond one year or compensation guaranty in excess of Two Hundred Thousand
Dollars ($200,000) per annum, or (vi) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.

 

5.9 Employee Benefit Plans.

 

(a) Schedule 5.9 of the Disclosure Schedule sets forth (i) each “employee
benefit plan,” as defined in Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended (“ERISA”); (ii) each stock option, stock
purchase, deferred compensation, bonus, vacation plan or arrangement; and (iii)
each other employee fringe benefit plan or

 

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arrangement that is currently maintained, or otherwise contributed to by Beech
and its subsidiaries, or any other person or entity that, together with Beech or
its subsidiaries is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986, as amended (the “Code”), (each, an
“ERISA Affiliate”) for the benefit of the current and/or former employees of
Beech or its subsidiaries, including any such employees who are employed outside
the United States (“Beech Employees”), and with respect to which Buyer could
have any liability (collectively, “Beech Benefit Plans”). Schedule 5.9 of the
Disclosure Schedule further sets forth each employment, severance, change in
control or consulting agreement maintained by Beech or an ERISA Affiliate for
the benefit of any Beech Employees or individuals who had or have an independent
contractor relationship with Beech or any ERISA Affiliate (collectively, “Beech
Services Agreements”). Copies of the following have been made available to
Buyer: (1) each Beech Benefit Plan, (2) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Beech Benefit
Plan (if any such report was required by applicable law), (3) the most recent
summary plan description for each Beech Benefit Plan for which such a summary
plan description is required by applicable law; (4) the most recent Internal
Revenue Service determination, notification, or opinion letter received with
respect to each applicable Beech Benefit Plan, and (5) each trust agreement or
annuity contract in effect as of the date hereof and relating to any Beech
Benefit Plan.

 

(b) Neither Beech nor any ERISA Affiliate maintains or contributes to, or has
maintained or contributed to (or been obligated to contribute to) within the six
(6) calendar years preceding the Closing Date, any multiemployer plan as defined
in Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code,
any multiple employer plan within the meaning of Section 4063 or Section 4064 of
ERISA or Section 413(c) of the Code, any employee benefit plan, fund, program,
contract or arrangement that is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA, or any welfare benefit plan which provides health
benefits to an employee after the employee’s termination of employment or
retirement except as required under Section 4980B of the Code and Sections 601
through 608 of ERISA (or comparable state law).

 

(c) Each Beech Benefit Plan has been administered in substantial compliance with
its terms and with applicable law, including ERISA and the Code, and to Beech’s
Knowledge there are no investigations, legal proceedings or other claims, suits
or threatened suits or proceedings against or involving any Beech Benefit Plan
or asserting any rights or claims to benefits under any Beech Benefit Plan that
could give rise to any liability (except claims for benefits payable in the
normal operation of the Beech Benefit Plans).

 

(d) All contributions to, and payments from, the Beech Benefit Plans that may
have been required to be made in accordance with their terms or any applicable
collective bargaining agreement have been timely made.

 

(e) Each Beech Benefit Plan that is intended to qualify under Section 401(a) of
the Code has been the subject of a determination, notification, or opinion
letter from the Internal Revenue Service to the effect that such plan is
qualified and the related trust is exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and no event has occurred
that could reasonably be expected to result in the revocation of any such
letter.

 

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(f) In connection with the consummation of the transaction contemplated by this
Agreement, no payments have or will be made under the Beech Benefit Plans or
Beech Services Agreements which, in the aggregate, would result in imposition of
the sanctions imposed under Sections 280G or 4999 of the Code.

 

5.10 Intellectual Property.

 

(a) Schedule 5.10(a) sets forth (i) all U.S. registered trademarks and service
marks applications and renewals related thereto, all U.S. material unregistered
trademarks and service marks, and all domain names of Beech or its subsidiaries
used in its or their business as currently conducted; (ii) all U.S. copyright
registrations and applications of Beech and its subsidiaries related thereto,
and all U.S. material unregistered copyrights of Beech and its subsidiaries;
(iii) all U.S. patents and patent applications of Beech and its subsidiaries;
and (iv) all agreements pursuant to which Beech or any of its subsidiaries has
received or granted licenses with respect to any material Intellectual Property
used in connection with, or relating to, its business as it is now being
conducted. For the purposes of this Agreement, “Intellectual Property” shall
mean U.S. patents, patent applications, trademarks and service marks (whether
registered or unregistered), trademark and service mark applications, copyrights
(whether registered or unregistered), copyright registration applications, and
trade secrets.

 

(b) Neither Beech nor any of its subsidiaries has transferred ownership of any
of its Intellectual Property to any third party.

 

(c) Beech and each of its subsidiaries owns, licenses or has valid and
marketable title in and rights to, all the Intellectual Property owned, used by,
or necessary for the conduct of its business as it is now being conducted, free
and clear of liens.

 

(d) To Beech’s Knowledge, Beech’s business and the business of each of its
subsidiaries as it is now being conducted does not infringe or misappropriate,
nor has Beech or any of its subsidiaries received any notice of any actual or
alleged infringement or misappropriation by Beech or any of its subsidiaries, of
any Intellectual Property owned or used by any third party. To Beech’s
Knowledge, no third party is infringing or misappropriating, and no Intellectual
Property owned or used by any third party infringes or misappropriates, any
Intellectual Property owned or used by Beech or any of its subsidiaries.

 

(e) Beech and each of its subsidiaries has taken all reasonable measures and
precautions necessary to protect and preserve its ownership of, and to protect
the confidentiality of, its Intellectual Property.

 

(f) All current and former employees and consultants of Beech and each of its
subsidiaries who have contributed to or participated in the conception and
development of its Intellectual Property either (i) are employees who have been
party to a “work-for-hire” arrangement or agreement with Beech or the applicable
subsidiary, in accordance with applicable federal and state law, that has
accorded Beech or the applicable subsidiary full, exclusive and original
ownership of all tangible and intangible property thereby arising, or (ii) have
executed appropriate instruments of assignment in favor of Beech or the
applicable subsidiary as assignee

 

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that have conveyed to Beech or such subsidiary full and exclusive ownership of
all tangible and intangible property thereby arising.

 

(g) Neither this Agreement nor any transactions contemplated by this Agreement
will result in the granting by Beech or any of its subsidiaries of any rights or
licenses with respect to its Intellectual Property to any third party pursuant
to any contract to which Beech or any of its subsidiaries is a party.

 

5.11 Owned Property; Beech Facilities.

 

(a) Neither Beech nor any of its subsidiaries owns any real property.

 

(b) Schedule 5.11 sets forth, by address, owner and usage, a true and complete
list of all real property agreements (including any amendments thereto) (the
“Real Property Leases”) pursuant to which Beech or any of its subsidiaries
leases, subleases or otherwise occupies any plants, offices, warehouses,
improvements, administration buildings and all other property (the “Beech
Facilities”). Each of the Real Property Leases is in full force and effect.
Beech has provided a copy or made available to Buyer complete and accurate
copies of each Real Property Lease, and none of the leases has been modified in
any material respect. Pursuant to the Real Property Leases, Beech or its
subsidiary has validly existing and enforceable leasehold, subleasehold or
occupancy interests in the property leased thereunder in each case free from
defaults and events which with the passage of time would constitute a default.

 

(c) Neither Beech nor any of its subsidiaries uses or is required to maintain
any fixtures, furniture, improvements, machinery or equipment in its business
which it does not own or lease. All items of fixtures, furniture, improvements,
machinery and equipment used by Beech or any of its subsidiaries are in the
possession or under the control of Beech or its subsidiary and are located at
one of the places of business of Beech or its subsidiary. All items of such
fixtures, furniture, improvements, machinery and equipment have been constructed
in workmanlike order, are adequate and suitable to allow the business of Beech
and its subsidiaries to be operated in the ordinary course of business as
currently conducted, and are in good operating condition free from defects or
damage which would render them unfit for their continued use in the manner in
which they are presently used, except for defects or damage which individually
or in the aggregate, would not have a Material Adverse Effect on Beech.

 

5.12 Environmental Matters.

 

(a) For the purposes of this Agreement, (i) the term “Environmental Laws” shall
mean all federal, foreign, state and local laws (including common law),
ordinances, restrictions, licenses, rules, regulations and permit conditions
relating to pollution or environmental protection, occupational health and
safety, or the spill, disposal or release of Hazardous Materials, including but
not limited to the Federal Water Pollution Control Act, Resource Conservation &
Recovery Act, Safe Drinking Water Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right to Know Act or other U.S. or foreign
federal, state, province, or local laws of similar effect, each as amended as of
the Effective Time, and (ii) the term “Hazardous Materials” shall mean any
compound, waste, material, pollutant, contaminant

 

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or substance that is classified as hazardous, toxic or words of similar import,
or is otherwise regulated under or subject to liability by any Environmental Law
or by any governmental agencies, including but not limited to petroleum or
petroleum products.

 

(b) (i) Throughout the period of the ownership or operation of the Beech
Facilities by Beech or its subsidiaries, neither Beech nor any of its
subsidiaries has received or to its Knowledge been threatened with any written
notices, directives, violations, actions or claims from or by (A) any local,
state, federal or foreign governmental agency concerning Environmental Laws or
(B) any person alleging that, in connection with Hazardous Materials, conditions
at any of the Beech Facilities or the acts or omissions of Beech or any of its
subsidiaries have resulted in or caused or threatened to result in or cause
injury or death to any person or damage to any property, including without
limitation, damage to natural resources, and no such notices, directives,
violation reports, actions, claims or allegations exist or are pending; (ii) the
Beech Facilities and the business operated by Beech and each of its subsidiaries
are in compliance with all applicable Environmental Laws, except where any
noncompliance with Environmental Laws would not have a Material Adverse Effect
on Beech; (iii) no underground storage tanks either are or have been present at
any of the Beech Facilities; and (iv) no friable asbestos containing material or
polychlorinated byphenyls (PCBs) either are or have been present at or on any of
the Beech Facilities.

 

(c) To Beech’s Knowledge, (i) there has been no spill, discharge, release,
cleanup or contamination of or by any Hazardous Materials used, generated,
treated, stored, disposed of or handled by Beech or any of its subsidiaries at
any of the Beech Facilities; (ii) neither Beech nor any of its subsidiaries has
treated, stored, disposed of, released or transported any Hazardous Material in
a manner which would give rise to any liability under any Environmental Laws;
and (iii) Beech and each of its subsidiaries holds all necessary permits,
licenses, approvals and consents to conduct its business as currently being
conducted and are not in violation of any condition of any such permit, license
or consent.

 

5.13 Permits. Beech and each of its subsidiaries has all permits necessary to
operate the Beech Facilities and no such permits will be required, as a result
of the Merger or the other transactions contemplated hereby, to be issued after
the Closing in order to permit Beech or its subsidiaries following the Merger to
continue to operate the Beech Facilities, other than any such permits which are
ministerial in nature or the absence of which would not have a Material Adverse
Effect with respect to the Surviving Corporation. Buyer shall have received
evidence, in form and substance reasonably satisfactory to it, that such
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained.

 

5.14 Violations/Condemnation. Neither Beech nor any of its subsidiaries has
received, with respect to any Beech Facility, any written notice of default or
any written notice of noncompliance with respect to applicable state, federal
and local laws and regulations relating to zoning, building, fire, use
restriction or safety or health codes which have not been remedied in all
respects which could have a Material Adverse Effect. There is no pending, or to
the knowledge of Beech, threatened condemnation or other governmental taking of
any of the Beech Facilities.

 

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5.15 Taxes.

 

(a) Beech and each of its subsidiaries has timely filed, or will timely file,
all Tax Returns required to be filed before the Closing Date (and has timely
paid or will timely pay any Taxes due thereon) and all such Tax Returns were
prepared (or will be prepared) in compliance with applicable laws and are true,
correct and complete in all respects. All Tax withholding and deposit
requirements imposed on or with respect to Beech and its subsidiaries have been
satisfied in full and in all respects.

 

(b) There are no ongoing audits, examinations, assessments, deficiencies or
claims against Beech or any of its subsidiaries for Taxes, and to the Knowledge
of Beech, no notice of any potential review, audit, examination assessment,
deficiency or claim against Beech or any of its subsidiaries for Taxes, whether
pending or threatened, has been received. Neither Beech nor any of its
subsidiaries has waived or extended the statute of limitations with respect to
the collection or assessment of any Tax. There are no liens for Taxes upon the
assets or properties of Beech or its subsidiaries except for statutory liens for
Taxes not yet due and payable.

 

(c) Beech has been a validly electing “S corporation,” within the meaning of
Section 1361(a) of the Code, since January 1, 2005, and will continue to be a
validly electing S corporation until terminated by reason of the transactions
contemplated by this Agreement.

 

(d) Neither Beech nor any of its subsidiaries (i) is or has ever been liable
for, or taken any action that has or would result in the imposition or
incurrence of any liability for, any Tax under Section 1374 of the Code or any
similar state or local Tax law or (ii) will become liable for any Tax under
Section 1374 of the Code or any similar state or local law as a result of the
transactions contemplated by this Agreement.

 

(e) None of Beech or any of its subsidiaries will be required to include any
amount in taxable income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of: (i) any “closing agreement” as described in Code Section 7121
(or any corresponding or similar provision of state, local or foreign income tax
law) executed on or prior to the Closing Date; (ii) an installment sale or open
transaction disposition made on or prior to the Closing Date; (iii) the cash
method of accounting, (iv) any prepaid amount received on or prior to the
Closing Date; or (v) any adjustment pursuant to Section 481(a) of the Code (or
any predecessor provision or any similar provision of state, local or foreign
Tax law) or any adoption or change in any of its accounting methods for Tax
purposes.

 

(f) The unpaid Taxes of Beech and its subsidiaries, whether or not assessed or
disputed, (i) did not, as of the date thereof, exceed the total amounts reserved
as liabilities for taxes in the Beech Financial Statements and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of Beech and its subsidiaries in
filing their Tax Returns. Since the date of the Beech Financial Statements,
neither Beech nor any of its subsidiaries has incurred any liability for Taxes
arising from extraordinary gains or losses, as that term is used in GAAP,
outside the ordinary course of business consistent with past custom and
practice.

 

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(g) Neither Beech nor any of its subsidiaries (i) has been a member of an
affiliated, consolidated, combined, unitary or similar group filing a
consolidated federal income Tax Return, or (ii) has any liability for the Taxes
of any person (other than any of Beech and its subsidiaries). Neither Beech nor
any of its subsidiaries is a party to, is bound by, or has any obligation under,
any Tax sharing agreement, Tax allocation agreement, Tax indemnification
agreement or similar contract, agreement or arrangement.

 

(h) There is no contract, agreement, plan or arrangement covering any person
that, individually in the aggregate, as a consequence of the transactions
contemplated by this Agreement or otherwise, could give rise to the payment of
any amount that would not be deductible by Beech or any of its subsidiaries, as
the case may be, by reason of Section 280G of the Code (or any similar provision
of state, local or foreign law).

 

(i) Each of Beech and its subsidiaries has disclosed on its Tax Returns all
positions taken on such Tax Returns that could give rise to a substantial
understatement of Tax within the meaning of Section 6662 of the Code (or any
similar provision of state, local or foreign law). None of Beech or any of its
subsidiaries has engaged in any “reportable transaction” within the meaning of
Section 6011 of the Code and the Treasury Regulations thereunder or that could
be subject to Section 6111 of the Code, Section 6112 of the Code, or the
Treasury Regulations thereunder. Neither Beech nor any of its subsidiaries has
distributed stock of another person, or has had its stock distributed by another
person, in a transaction that was purported or intended to be governed in whole
or in part by Section 355 or Section 361 of the Code.

 

(j) Beech and each of its subsidiaries have withheld and/or paid all Taxes
required to have been withheld and/or paid in connection with amounts paid or
owed to any employee, independent contractor, creditor, stockholder, member or
other third party.

 

(k) For purposes of this Agreement, “Tax” or “Taxes” shall mean any and all
taxes, charges, fees, levies, and other governmental assessments and impositions
of any kind, payable to any federal, state, local or foreign governmental entity
or taxing authority or agency, including, without limitation, (i) income,
franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes,
(ii) customs duties, imposts, charges, levies or other similar assessments of
any kind, and (iii) interest, penalties and additions to tax imposed with
respect thereto; and “Tax Returns” shall mean any and all returns, reports, and
information statements with respect to Taxes required to be filed with the IRS
or any other governmental entity or Tax authority or agency, whether domestic or
foreign, including, without limitation, consolidated, combined and unitary tax
returns.

 

5.16 Labor Matters.

 

(a) There are no claims, disputes, or controversies pending or, to Beech’s
Knowledge, threatened between Beech or any of its subsidiaries and any of its or
their present or former employees.

 

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        (b) Neither Beech nor any of its subsidiaries is a party to or bound by
any collective bargaining agreements. There is no labor union organizing or
election activity pending or, to Beech’s Knowledge, threatened with respect to
the employees of Beech or any of its subsidiaries. Neither Beech nor any of its
subsidiaries has suffered or sustained any strike, slowdown, or work stoppage
and, to Beech’s Knowledge, no strike, slowdown, or work stoppage is threatened
by the employees of Beech or any of its subsidiaries.

 

        (c) Beech and each of its subsidiaries has complied in all material
respects, and is presently in compliance in all material respects, with all
legal requirements related to the employment of its or their employees,
including provisions related to payment of wages, hours of work, leaves of
absence, equal opportunity, occupational health and safety, and workers’
compensation.

 

        (d) Neither Beech nor any of its subsidiaries has any contracts,
agreements, plans or arrangements that entitle any of its or their employees to
any severance, change of control, or “golden parachute” payments upon
consummation of the Merger or termination of employment.

 

5.17 Health Care Matters.

 

        (a) Neither Beech nor any of its subsidiaries, nor any director, officer
or employee of Beech or any of its subsidiaries (while acting in such capacity),
nor any agent acting on behalf of or for the benefit of the foregoing, has
actively and willfully engaged in any activities that are prohibited under
federal Medicare and Medicaid statutes, 42 U.S.C. §§ 1320a-7, 1320a-7a or
1820a-7b, or the regulations promulgated pursuant to such statutes or state or
local statutes or regulations regulating payments for the referral of patients.

 

        (b) Except for noncompliance that would not have a Material Adverse
Effect, Beech and each of its subsidiaries has complied with all laws,
regulations, rules and orders of any governmental department or agency or any
other commission, board, agency or instrumentality, federal, state or local, or
other requirements of law affecting its business and operations and is not in
default under or in violation of any provision of any applicable federal, state
or local law, regulation, rule or order.

 

        (c) Beech and each of its subsidiaries has filed copies of any of its
contracts that are required to be filed under the laws described in the
preceding section with applicable state authorities only to the extent required
by law, except for failures to file that will not have a Material Adverse
Effect.

 

        (d) In the event that any written communications have been received by
Beech (or any of its subsidiaries) from any regulatory agency, whether federal,
state or local, relating to the need for licensure, permits or registration for
any PPO operations, including without limitation, developing networks of
providers, receipt of fees from clients/customers in exchange for access to the
network, paying brokers for introducing potential customers/clients to Beech or
any of its subsidiaries, providing utilization review/management services and
receiving per member per month payment for such services, Beech represents and
warrants that it and each of its subsidiaries has obtained the appropriate
licenses, permits, registrations and authorizations

 

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recommended by such agency, except for recently enacted requirements as to which
Beech or its subsidiary is diligently pursuing compliance or except where the
failure to hold such license or permit or to be so registered would not in the
aggregate have a Material Adverse Effect.

 

5.18 Interested Party Transactions.

 

        (a) No individual who is, or who has at any time been, an officer or
director of Beech or any subsidiary of Beech, or member of the family of such
individual (“Related Party”), has any direct or indirect interest of any nature
(other than as a shareholder of Beech) in any asset used in or otherwise
relating to the business of Beech or any of its subsidiaries;

 

        (b) no Related Party is indebted to Beech or any Beech subsidiary;

 

        (c) there is no current, pending or proposed agreement or other
arrangement between Beech or any of its subsidiaries (other than as compensation
to employees for services rendered) and any Related Party that is material to
Beech or any such subsidiary, no Related Party has any direct or indirect
financial interest in any contract, agreement, transaction or business dealing
of any nature involving Beech or any Beech subsidiary that is material to Beech
or any such subsidiary, and no such contract, agreement, transaction or business
dealing of any nature is necessary to operate the business of Beech or any Beech
subsidiary as it is currently conducted in all material respects; and

 

        (d) to Beech’s Knowledge, no Related Party is competing, directly or
indirectly, with Beech or any Beech subsidiary in any market served by Beech or
any such subsidiary.

 

5.19 Insurance. As of the date hereof, Beech and each of its subsidiaries is
insured by insurers reasonably believed by Beech to be of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which they are engaged. All policies of insurance
and fidelity or surety bonds insuring Beech or any of its subsidiaries or their
respective businesses, assets, employees, officers and directors are in full
force and effect. Schedule 5.19 attached hereto contains a complete and accurate
list of each such insurance policy. As of the date hereof, there are no material
claims by Beech or any of its subsidiaries under any such policy or instrument
as to which any insurance company is denying liability or defending under a
reservation of rights clause.

 

5.20 Title to Assets . Beech or its subsidiaries own, and have good, valid and
marketable title to, all material assets they purport to own, including all
assets reflected on the Beech consolidated balance sheet at June 30, 2005
(except for assets disposed of, accounts receivable collected or written down,
or cash used by Beech since the date thereof in the ordinary course of
business), all material assets acquired by Beech or its subsidiaries since the
date of the Beech consolidated balance sheet at June 30, 2005, and all other
material assets reflected in Beech’s books and records as being owned by Beech
or its subsidiaries, free and clear of any encumbrances, except liens for
current taxes and assessments not delinquent, purchase money security interests
for related financing and statutory liens. In all material respects, such
material assets are free of defects and deficiencies, in good condition and
repair consistent with their age

 

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and intended use (ordinary wear and tear excepted), in compliance with and are
being used in compliance with all applicable laws, and are adequate for the uses
to which they are being put.

 

5.21 Receivables. All existing accounts receivable of Beech or any of its
subsidiaries (including those reflected in the Beech consolidated balance sheet
at June 30, 2005, that have not yet been collected and those arising after such
date and not yet collected) represent valid obligations of customers of Beech
and its subsidiaries arising from bona fide transactions entered into in the
ordinary course of business, enforceable in accordance with their terms.

 

5.22 Customers and Suppliers. As of the date hereof, no customer that
individually accounted for more than five percent (5%) of Beech’s gross revenues
during the twelve- (12) month period ended December 31, 2004, has indicated to
Beech or any of its subsidiaries that it will stop, or materially decrease the
rate of, buying services or products of Beech or its subsidiaries, or has at any
time on or after December 31, 2004, decreased materially its purchases of the
services or products of Beech or its subsidiaries. No supplier or provider of
health care services or of health care service providers has indicated that it
intends to discontinue or otherwise terminate the availability or provision of
such services for Beech or its subsidiaries where (a) such supplier or provider,
or the health care service providers on behalf of whom such supplier or provider
acts, represents all or a material part of the health care service providers
under contract to Beech (and its subsidiaries) in one or more particular
geographic areas and (b) Beech has not entered into comparable contracts or
other arrangements with other health care providers in such areas, such that the
discontinuation or termination by such supplier or provider could have a
Material Adverse Effect.

 

5.23 Compliance with Laws.

 

        (a) Beech and its subsidiaries are, and for the applicable statute of
limitations have been, in compliance in all material respects with any order,
writ, injunction, judgment, decree, constitution, law, statute, rule or
regulation applicable to Beech or any of its subsidiaries or to the conduct or
operation of its or their business or to the ownership of its or their assets,
except for such violations as would not, individually or in the aggregate, have
a Material Adverse Effect.

 

        (b) No event has occurred or circumstances exist that (with or without
notice or the lapse of time) is reasonably likely to (i) constitute a material
violation by Beech or any of its subsidiaries of, or a material failure on the
part of Beech or any of its subsidiaries to comply with, any order, writ,
injunction, judgment, decree, constitution, law, statute, rule or regulation
applicable to Beech or any of its subsidiaries or to the conduct or operation of
its or their business or to the ownership of its or their assets, or (ii) give
rise to any material obligation on the part of Beech or any of its subsidiaries
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature.

 

        (c) Neither Beech nor any of its subsidiaries has received written
notice or other communication from any governmental entity or other person
regarding (i) any actual or alleged material violation of, or failure to comply
in any material respect with, any order, writ, injunction, judgment, decree,
constitution, law, statute, rule or regulation applicable to Beech or any of its
subsidiaries or to the conduct or operation of its or their business or to the
ownership of

 

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its or their assets, or (ii) any actual or alleged obligation on the part of
Beech or any of its subsidiaries to undertake, or bear all or any portion of the
cost of, any remedial action of any nature.

 

5.24 Federal Healthcare Programs. Neither Beech nor any of its subsidiaries
participate in any federal healthcare program, including without limitation the
Medicare and Medicaid programs.

 

5.25 Exclusion. Neither Beech nor any of its subsidiaries nor, to the Knowledge
of Beech, any affiliate thereof, any person who has a direct or indirect
ownership interest (as those terms are defined in 42 C.F.R. §1001.1001(a)(2)) in
Beech or any of its subsidiaries of 5% or more or who has an ownership or
control interest (as defined in Section 1124(a)(3) of the Social Security Act or
any regulations promulgated thereunder) in Beech or any of its subsidiaries, or
any officer, director, employee, vendor or agent of Beech or any of its
subsidiaries: (a) has had a civil monetary penalty assessed against it under
Section 1128A of the Social Security Act or any regulations promulgated
thereunder; (b) has been excluded from participation under any federal
healthcare program; or (c) has been convicted (as that term is defined in 42
C.F.R. §1001.2) of any of the categories of offenses as described in the Social
Security Act Section 1128(a) and (b)(1), (2), (3) or any regulations promulgated
thereunder.

 

5.26 Billing. Beech has designed its internal policies and procedures to ensure
that all billing by, or on behalf of, Beech or any of its subsidiaries to
third-party payors, including, but not limited to, government entities and
private insurance companies is, in the aggregate, true, correct and complete in
all material respects. Neither Beech nor any of its subsidiaries has received
any notice from any third-party payor that indicates that Beech and its
subsidiaries could not continue to bill in substantially the same manner and
structure as Beech and its subsidiaries are billing on the date hereof.

 

5.27 Licenses. Schedule 5.27 attached hereto contains a complete and accurate
list of each material License that is owned, held or possessed by Beech or any
Beech subsidiary. Each License listed or required to be listed on Schedule 5.27
is valid and in full force and effect. The “Licenses” listed in Schedule 5.27
collectively constitute all of the Licenses necessary to permit Beech and its
subsidiaries to lawfully conduct and operate their businesses in substantially
the manner they currently conduct and operate such businesses and to permit
Beech and its subsidiaries to own and use their assets in substantially the
manner in which they currently own and use such assets. Except as set forth on
Schedule 5.27:

 

        (a) Beech and each Beech subsidiary is, and at all times has been, in
compliance in all material respects with the terms and requirements of each
License identified or required to be identified on Schedule 5.27, and to the
Knowledge of Beech, no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (i) constitute or result directly or
indirectly in a material violation of or a material failure to comply with any
term or requirement of any License listed or required to be listed on Schedule
5.27; or (ii) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, termination or nonrenewal of, or any modification to,
any License listed or required to be listed on Schedule 5.27;

 

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        (b) Neither Beech nor any Beech subsidiary has received any written
notice or, to the Knowledge of Beech, other communication from any governmental
entity or any other person regarding (i) any actual, alleged, possible or
potential material violation of or material failure by Beech or any subsidiary
to comply with any term or requirement of any License; or (ii) any actual,
proposed, possible or potential revocation, withdrawal, suspension, cancellation
or termination of, or modification to, any License; and

 

        (c) All applications required to have been filed for the renewal of the
Licenses listed or required to be listed on Schedule 5.27 have been duly filed
on a timely basis with the appropriate governmental entities, and all other
filings required to have been made with respect to such Licenses have been duly
made on a timely basis with the appropriate governmental entities; and to the
Knowledge of Beech, there is no reason why any Licenses listed or required to be
listed on the Schedule 5.27 and issued to Beech or any of its subsidiaries will
not be reissued or transferred in the ordinary course if required as a result of
the execution and consummation of this Agreement.

 

5.28 Deferred Payments and Letter of Credit Obligations. As of the Closing Date,
Beech and its subsidiaries shall have no (a) deferred indebtedness or contingent
payments associated with the payment of the purchase price of property or assets
or prior company acquisitions, other than those related to the BestCare
Agreement and (b) outstanding reimbursement obligation with respect to letters
of credit other than those associated with Beech’s workers compensation
insurance.

 

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER

 

6.1 Conduct of Business Pending the Merger. Beech agrees that except as
expressly contemplated by this Agreement, during the period from the date of
this Agreement and continuing until the Effective Time:

 

        (a) The business of Beech and each of its subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent with
past practices, including, without limitation, policies and practices relating
to the collection of accounts receivable, the filing of Tax Returns and payment
of applicable Taxes, and the payment of trade accounts payable, bonuses,
commissions and other liabilities;

 

        (b) Neither Beech nor any of its subsidiaries shall (i) amend its
Articles of Incorporation or Bylaws; or (ii) split, combine or reclassify any
shares of its outstanding capital stock, declare, set aside or pay any dividend
or other distribution payable in stock or property in respect of its capital
stock, or directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or other securities;

 

        (c) Neither Beech nor any of its subsidiaries shall (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire, convert into or exchange for any shares of, its capital stock
of any class (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise); (ii) acquire,
dispose of,

 

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transfer, lease, license, mortgage, pledge or encumber any fixed or other
substantial assets other than in the ordinary course of business and consistent
with past practices; (iii) incur, assume or prepay any indebtedness, liability
or obligation or any other liabilities or issue any debt securities other than
in the ordinary course of business and consistent with past practices;
(iv) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person in a material amount other than in the ordinary course of business and
consistent with past practices; (v) make any loans, advances or capital
contributions to, or investments in, any other person, other than in the
ordinary course of business and consistent with past practices; (vi) fail to
maintain adequate insurance consistent with past practices for its businesses
and properties; (vii) merge or consolidate with any other person, dissolve or
liquidate, (viii) amend, modify or terminate (or fail to use reasonable efforts
to renew or perform any obligations under) any existing material contract,
agreement or obligation, (ix) make any settlement of or compromise any Tax
liability, change in any respect any Tax election or Tax method of accounting or
make any new Tax election or adopt any new Tax method of accounting or amend any
Tax Return or enter into any agreement, extension, waiver or transaction of the
type described in Section 5.15(b), (e), (g), (h), or (i), including to waive or
extend the statute of limitations in respect of Taxes or apply for any refund,
or (x) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;

 

        (d) Beech and each of its subsidiaries shall use its best efforts to
maintain its assets, preserve intact its business organization, retain its
present officers and employees, timely perform all contractual obligations to
which it is subject, keep in full force and effect its insurance policies, and
preserve the goodwill of and maintain its relationships with its employees,
suppliers, patients, payors and others having business relationships with it or
its subsidiaries; and

 

        (e) Notwithstanding anything to the contrary herein, Beech shall be
permitted to take the following actions: (i) pay cash dividends; (ii) terminate
the consulting arrangement with Mulberry Street; (iii) terminate the lease of
office space at 577 Mulberry Street, North Georgia; and (iv) terminate or
transfer the Aircraft Lease Agreement N620S between Key Corporate Capital, Inc.
and Beech Street Corporation, dated December 4, 2003 (the “Airplane Lease”).

 

6.2 Conduct of Business of Buyer Sub. During the period from the date of this
Agreement to the Effective Time, Buyer Sub shall not engage in any activities of
any nature except as provided in or contemplated by this Agreement.

 

6.3 Compensation Plans. During the period from the date of this Agreement and
continuing until the Closing Date, Beech agrees that, unless required as a
result of a material adverse change in the coverage provided by a current third
party provider or by an applicable law, rule or regulation, neither it nor any
of its subsidiaries will, without the prior written consent of Buyer (except as
required by applicable law or pursuant to existing contractual arrangements or
other plans or commitments as otherwise disclosed in writing pursuant hereto)
(a) enter into, adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment, severance or
other employee benefit plan, agreement, trust, plan, fund or other arrangement
between Beech or any of its subsidiaries and one or more of its or their
officers, directors or employees (collectively, “Compensation Plans”), (b) grant
or

 

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become obligated to grant any increase in the compensation or fringe benefits of
directors, officers or employees (including any such increase pursuant to any
Compensation Plan) or any increase in the compensation payable or to become
payable to any officer or employee, except for increases in compensation in the
ordinary course of business consistent with past practice, or enter into any
contract, commitment or arrangement to do any of the foregoing, except for
normal increases and non-stock benefit changes in the ordinary course of
business consistent with past practice, (c) institute any new employee benefit,
welfare program or Compensation Plan, (d) make any change in any Compensation
Plan or other employee welfare or benefit arrangement or enter into any
employment or similar agreement or arrangement with any employee, or (e) enter
into or renew any contract, agreement, commitment or arrangement providing for
the payment to any director, officer or employee of compensation or benefits
contingent, or the terms of which are altered in favor of such individual, upon
the occurrence of any of the transactions contemplated by this Agreement;
provided, however, the parties acknowledge that Buyer intends to restructure the
Bill Hale Employment Agreement.

 

6.4 Legal Conditions to Merger. Each of Beech and Buyer shall use commercially
reasonable efforts (a) to take, or cause to be taken, all actions reasonably
necessary to comply promptly with all legal requirements which may be imposed on
such party or its subsidiaries with respect to the Merger and to consummate the
transactions contemplated by this Agreement, subject to the appropriate vote or
consent of stockholders and (b) to obtain (and to cooperate with the other party
to obtain) any consent, authorization, order or approval of, or any exemption
by, any governmental entity and or any other public or private third party which
is required to be obtained or made by such party or any of its subsidiaries in
connection with the Merger and the transactions contemplated by this Agreement;
provided, however, that a party shall not be obligated to take any action
pursuant to the foregoing if the taking of such action or such compliance or the
obtaining of such consent, authorization, order, approval or exemption would, in
such party’s reasonable opinion, be materially burdensome to such party or
impact in such a materially adverse manner the economic or business benefits of
the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger. Each Company will cooperate with and promptly
furnish information to the other in connection with any such burden suffered by,
or requirement imposed upon, either of them in connection with the foregoing.

 

6.5 Notification; Updates to Disclosure Schedule.

 

        (a) Prior to the Closing Date, Beech shall as promptly as reasonably
practicable notify Buyer in writing of its Knowledge of:

 

                (i) the discovery by Beech of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a breach of any representation or warranty made
by Beech in this Agreement;

 

                (ii) any event, condition, fact or circumstance that occurs,
arises or first exists after the date of this Agreement and that would cause or
constitute a breach of any representation or warranty made by Beech in this
Agreement if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;

 

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                (iii) any breach of any covenant or obligation of Beech; and

 

                (iv) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Article VIII
impossible or unlikely.

 

        (b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 6.5(a) requires any change in a previously
delivered disclosure schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the disclosure schedule were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstances, then Beech shall as promptly as reasonably
practicable deliver to Buyer an update specifying such change (a “Disclosure
Schedule Update”). No such notice or update shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder, and Buyer shall be entitled to seek post-closing indemnification for
damages arising from such breach (even if disclosed pursuant to Section 6.5(a))
as provided in Section 10.1 hereunder. If the event, condition, fact or
circumstance disclosed by Beech to Buyer hereunder (together with any other
conditions, facts or circumstances previously disclosed by Beech to Buyer
pursuant to this Section 6.5) would cause or constitute a material breach of any
representation or warranty made by Beech in this Agreement, Buyer shall have the
right to terminate this Agreement within twenty (20) days of the receipt of any
such update.

 

6.6 Bank Accounts. Beech shall take all actions necessary to remove existing
signatories to all bank accounts of Beech and each of its subsidiaries as of the
Effective Time, and to replace such signatories, effective as of the Effective
Time, with individuals to be designated by Buyer at least five (5) days prior to
the Effective Time.

 

6.7 No Solicitation.

 

        (a) Immediately after the execution of this Agreement, Beech shall
terminate and cease, and shall cause its subsidiaries and its and their
representatives to terminate and cease immediately, all solicitations,
initiations, encouragements, activities, discussions and/or negotiations with
any person other than Buyer with respect to any proposed, potential or
contemplated Alternative Transaction. In addition, through the earlier of the
Closing and the termination of this Agreement in accordance with its terms, none
of Beech or its subsidiaries shall, and Beech shall cause each of its
subsidiaries and its or their representatives not to, (i) solicit, initiate,
participate in or encourage the submission of any proposal or indication of
interest relating to an Alternative Transaction, (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Alternative Transaction or (iii) authorize, engage in or enter into any
agreement, letter of intent or memorandum of understanding involving an
Alternative Transaction or which could reasonably be expected to result in Beech
or any of its subsidiaries abandoning, terminating or failing to consummate the
transactions contemplated hereby. The Stockholder Representative shall promptly,
but in no event later than 24 hours, notify Buyer, orally and in writing, of any
proposal for an Alternative Transaction of which Beech, its subsidiaries, or its
or their representatives may become aware (which notice shall state the

 

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identity of the person making the proposal, the beneficial owner(s) thereof (if
any) and the material terms of such proposal and shall include a copy of any
written proposal).

 

        (b) “Alternative Transaction” means, with respect to Beech and its
subsidiaries, any transaction or series of related transactions involving
(i) any investment in, capital contribution or loan to, or reorganization,
dissolution, liquidation or recapitalization of all or any portion of Beech or
any of its subsidiaries, (ii) any merger, consolidation, tender offer, share
exchange or other similar transaction involving all or any portion of Beech or
any of its subsidiaries, (iii) any sale, transfer or assignment, including by
operation of law, of any of the material assets of Beech or any of its
subsidiaries, other than sales of inventory or in the ordinary course of
business, (iv) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, business combination or similar transaction involving all or any
portion of Beech’s or its subsidiaries’ equity securities (other than upon
exercise of Options), (v) any other transaction undertaken by Beech or its
subsidiaries that could reasonably be expected to prevent, impede or delay the
consummation of the transactions contemplated by this Agreement, or (vi) any
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.

 

6.8 Financial Statements; Financing Assistance.

 

        (a) As promptly as practicable (and in no event later than ten
(10) business days) following each regular monthly accounting period subsequent
to June 30, 2005 and prior to the Closing Date, Beech will deliver to Buyer
periodic financial reports in the form which it customarily prepares for its
internal purposes concerning Beech and its subsidiaries, and unaudited
consolidated balance sheets with respect to Beech and its subsidiaries as of the
last day of each such accounting period and related consolidated statements of
income, consolidated statements of changes in stockholders’ equity and
consolidated statements of cash flows for the period then ended, together with
notes thereto. Beech covenants that such interim financial statements (i) will
present fairly the financial condition of Beech and each subsidiary as of their
respective dates and the related results of their respective operations for the
respective periods then ended and (ii) will be prepared on a basis consistent in
all material respects with the Beech Financial Statements.

 

        (b) Prior to the Closing, Beech shall reasonably cooperate with Buyer
and Buyer’s investment bankers, auditors and attorneys in connection with the
financing of the transactions contemplated by this Agreement. Beech shall
furnish to Buyer, as promptly as practicable, any additional financial
statements (including with respect to subsequent periods) reasonably requested
by Buyer, including (i) unaudited financial statements for the three (3) month
period ended June 30, 2005 and (ii) any other financial statements required by,
and meeting the requirements of, Regulation S-X under the Securities Act, or as
otherwise approved by the SEC, for inclusion in a Registration Statement on Form
S-1 relating to the businesses acquired by Buyer pursuant to this Agreement.

 

        (c) Without limitation of the foregoing clauses (a) and (b), prior to
the Closing, Beech shall provide, and cause its subsidiaries and its and their
respective accountants, investment bankers, advisors, counsel and other
representatives to provide, reasonable cooperation to assist Buyer in
consummating the financing necessary to consummate the

 

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transactions contemplated hereunder. Such cooperation shall include, without
limitation, arranging for senior officers of Beech to provide reasonable and
customary management and legal representations to auditors, to attend meetings
with prospective lenders and investors in presentations or other meetings and
due diligence sessions, and for employees and advisors of Beech to provide
reasonable assistance with the Buyer’s preparation of business projections and
financing documents.

 

6.9 Debt Payment. As of the Closing (taking into account the payments to be made
under Sections 3.6(e) and (f)), Beech shall have cash and cash equivalents equal
to or in excess of all Debt. “Debt” means, without duplication, the aggregate
amount of (i) all indebtedness of Beech or any of the subsidiaries (including
the principal amount thereof or, if applicable, the accreted amount thereof and
the amount of accrued and unpaid interest thereon), whether or not represented
by bonds, debentures, notes or other securities or similar instruments for
borrowed money, (ii) all obligations of Beech or any of the subsidiaries to pay
rent or other payment amounts under a lease of real or personal property that is
classified as a capital lease, (iii) all conditional sale obligations of and all
obligations under any title retention agreements of Beech or any of the
subsidiaries, (iv) any payment obligation of Beech or any of the subsidiaries
under any interest rate swap agreement, forward rate agreement, interest rate
cap or collar agreement or other financial agreement or arrangement entered into
for the purpose of limiting or managing interest rate risks, (v) all
indebtedness for borrowed money secured by any lien existing on property owned
by Beech or any of the subsidiaries, whether or not indebtedness secured thereby
shall have been assumed, (vi) all guaranties, endorsements, assumptions and
other contingent obligations of Beech or any of the subsidiaries in respect of,
or to purchase or to otherwise acquire, indebtedness for borrowed money of
others the repayment of which is guaranteed by Beech or any of the subsidiaries,
(vii) all other short-term and long-term liabilities of Beech or any of the
subsidiaries for borrowed money, (viii) all change of control payments, bonuses
or severance payments that are accelerated or owed as a result of the Merger or
the consummation of the transactions contemplated hereby (excluding any amounts
attributable to termination by Buyer or the Surviving Corporation of any person
following the Merger, (ix) all payments owed for bonuses and sales commissions
accrued by Beech or any of its subsidiaries as of the Closing Date but unpaid
and (x) all premiums, penalties and change of control payments required to be
paid or offered in respect of any of the foregoing as a result of the
consummation of the transactions contemplated by this Agreement, other than any
such premiums, penalties and payments owed to Bill Hale under the Bill Hale
Employment Agreement.

 

ARTICLE VII

ADDITIONAL AGREEMENTS

 

7.1 Access and Information. Beech shall afford to Buyer and to Buyer’s financial
advisors, legal counsel, accountants, consultants and other representatives
access during normal business hours throughout the period from the date hereof
to the Closing Date to all of its and its subsidiaries’ books, records,
properties, facilities, personnel commitments and records (including but not
limited to tax returns) and, during such period, shall furnish promptly to Buyer
all information concerning its and their business, properties and personnel as
Buyer may reasonably request.

 

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7.2 Stock Options, Warrants, Convertible Securities and Other Agreements. Any
stock options, warrants, convertible securities or other contractual commitments
to purchase or issue Beech shares or shares of any Beech subsidiary that are
outstanding at the Effective Time shall be terminated as of the Effective Time.

 

7.3 Director and Officer Indemnification; Change of Control.

 

        (a) Buyer agrees that for acts occurring prior to the Effective Time,
all rights to indemnification and advancement of expenses existing in favor of
the directors and officers of Beech (the “Indemnified Directors and Officers”)
under the provisions existing on the date hereof of the Certificate of
Incorporation, By-Laws and indemnification agreements of Beech shall survive the
Effective Time for a period of six (6) years, and Buyer agrees to indemnify and
advance expenses during such six- (6) year period to the Indemnified Directors
and Officers to the full extent required or permitted under the provisions
existing on the date hereof of Beech’s Certificate of Incorporation, By-Laws and
indemnification agreements.

 

        (b) For a period of six (6) years after the Effective Time, Buyer shall
maintain, with respect to claims arising from facts or events which occurred
before the Effective Time, officers’ and directors’ liability insurance covering
the Indemnified Directors and Officers who are currently covered (in their
capacities as officers and directors) by Beech’s existing officers’ and
directors’ liability insurance policies, on terms substantially no less
advantageous to such officers and directors than such existing insurance for so
long as the annual premium in respect thereof is not in excess of 150% of the
last annual premium paid by Beech prior to the date hereof (the “Current
Premium”). If, during such six- (6) year period, Buyer determines that it is
unable to maintain such liability insurance for a premium that is not in excess
of 150% of the Current Premium, but maintains comparable liability insurance for
persons who are directors and officers of Buyer or its affiliates, then Buyer
may provide liability insurance to the Indemnified Directors and Officers for
the remainder of such six- (6) year period on the same basis as Buyer maintains
such liability insurance for persons who are then directors and officers of
Buyer or its affiliates

 

        (c) Buyer acknowledges that the transactions contemplated under this
Agreement will trigger a change of control under the Bill Hale Employment
Agreement and that the Surviving Corporation will succeed to Beech’s obligations
thereunder. The parties further acknowledge that Buyer intends to restructure
the Bill Hale Employment Agreement without impacting the amount that Bill Hale
is entitled to receive under the Bill Hale Employment Agreement as a result of
the change of control triggered by the Merger.

 

7.4 Public Announcements. Each of Buyer and Beech agrees that it will obtain the
approval of the other prior to issuing any press release with respect to the
transactions contemplated by this Agreement or termination thereof and will use
its best efforts to consult with the others before otherwise making any public
statement or responding to any press inquiry with respect to this Agreement or
the transactions contemplated hereby or termination thereof, except as may be
required by law or any governmental agency.

 

7.5 Expenses. Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be

 

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paid by the party incurring such expenses; provided, however, that the cost of
all filing fees to be paid in respect of any filings required by the HSR shall
be shared equally by Buyer and Beech.

 

7.6 Additional Agreements.

 

        (a) Subject to the terms and conditions herein provided, including
without limitation those set forth in the proviso to Section 6.4 hereof, each of
the parties hereto agrees to use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals, and to effect all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers or directors of
the Companies shall take all such necessary action.

 

        (b) Subject to the terms and conditions herein provided, including
without limitation those set forth in the proviso to Section 6.4 hereof, Buyer
and Beech will cooperate with each other and use all commercially reasonable
efforts to prepare all necessary documentation to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders and
authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement.

 

(c) Each party will keep the other party apprised of the status of any inquiries
made of such party by any governmental agency or authority or members of their
respective staffs with respect to this Agreement or the transactions
contemplated herein.

 

7.7 Confidentiality. All confidential information disclosed by any party to this
Agreement to any other party to this Agreement in connection with the
transactions contemplated hereby shall be kept confidential by such other party
and shall not be used by such other party otherwise than as herein contemplated,
except to the extent that (a) it may be disclosed to such other party, its
lenders and potential lenders as well as to such other party’s and such lenders’
and potential lenders’ employees, accountants, financial advisors, and
representatives in connection with the contemplated transaction so long as such
lenders, potential lenders, employees, accountants, financial advisors and
representatives agree to keep such information confidential, (b) it is or
becomes generally available to the public other than as a result of a wrongful
disclosure by a party receiving such confidential information hereunder, (c) it
was readily available to the party receiving such information on a
non-confidential basis prior to its disclosure hereunder, (d) it was already
lawfully in the receiving party’s possession prior to its disclosure hereunder,
(e) it becomes available to the receiving party on a non-confidential basis from
a source other than the disclosing party hereunder without violation of such
source’s confidentiality agreement with the disclosing party or its
representatives or of legal, fiduciary or ethical constraints on disclosure of
such information, (f) it may be required by law, or (g) such duty as to
confidentiality is waived by the other party. Such obligation as to
confidentiality and non-use shall survive the termination of this Agreement for
any reason. This Section 7.7 shall survive for three (3) years from the date
hereof and shall replace any prior confidentiality agreements entered into by
the parties hereto.

 

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ARTICLE VIII

CONDITIONS TO CONSUMMATION OF THE MERGER

 

8.1 Conditions to Both Beech’s and Buyer’s Obligation to Effect the Merger. The
respective obligations of Beech and Buyer to effect the transactions
contemplated herein shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any one of which may be waived by
mutual agreement:

 

        (a) This Agreement and the transactions contemplated hereby shall have
prior to signing been approved and adopted by the requisite vote of the
Stockholders of Beech and the directors of Beech, each in accordance with
applicable law.

 

        (b) No temporary, preliminary or permanent injunction or other order by
or before any federal, state or foreign court of competent jurisdiction which
prohibits the consummation of the Merger shall have been threatened or issued
and remain in effect. No statute, rule, regulation, executive order, stay,
decree, or judgment shall have been enacted, entered, issued, promulgated or
enforced by or before any court or governmental authority which threatens,
prohibits or restricts the consummation of the Merger. Other than the filing of
a Certificate of Merger with the Secretary of State for the State of Delaware,
all authorizations, consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods (including under the HSR Act)
imposed by, any governmental entity (all of the foregoing, “Consents”) which are
necessary for the consummation of the Merger, other than Consents the failure to
obtain which would have no material adverse effect on the consummation of the
Merger or on the Surviving Corporation, Buyer and their subsidiaries, shall have
been filed, occurred or been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
“Requisite Regulatory Approvals”) and all such Requisite Regulatory Approvals
shall be in full force and effect.

 

8.2 Conditions to Obligation of the Companies to Effect the Merger.

 

        (a) The obligation of Beech to effect the Merger shall be further
subject to the following conditions: (i) Buyer shall satisfy all of the
obligations under this Agreement required to be performed by Buyer at or prior
to the Effective Time in all material respects, (ii) the representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects (except with respect to any provisions including the word
“material” or words of similar import, with respect to which such
representations and warranties shall be true and correct) when made and at and
as of the Effective Time as if made at and as of such time, and (iii) Buyer
shall have provided a certificate, signed by an officer of Buyer stating that
the conditions set forth in clauses (i) and (ii) of this Section 8.2(a) have
been satisfied. These conditions may be waived by Beech.

 

        (b) The obligation of Buyer to effect the Merger shall be further
subject to the following conditions: (i) Beech shall satisfy all of the
obligations under this Agreement required to be performed by Beech at or prior
to the Effective Time in all material respects, and (ii) the representations and
warranties of Beech contained in this Agreement shall be true and correct in all
material respects (except with respect to any provisions including the word
“material” or words of similar import, with respect to which such
representations and warranties shall be true

 

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and correct) when made and at and as of the Effective Time as if made at and as
of such time, except as contemplated by this Agreement, (iii) there shall have
been no material adverse change in the business, financial condition or working
capital of Beech and its subsidiaries, taken as a whole, other than changes
related to this Agreement and the transactions contemplated hereby or general
economic or industry changes not specific to Beech and its subsidiaries after
the date hereof, and (iv) Beech shall have provided a certificate, signed by an
officer of Beech stating that the conditions set forth in clauses (i), (ii), and
(iii) of this Section 8.2(b) have been satisfied. These conditions may be waived
by Buyer.

 

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

 

9.1 Termination. This Agreement may be terminated and the Merger contemplated
hereby abandoned at any time prior to the Effective Time, whether before or
after approval by the Stockholders of Beech:

 

        (a) By mutual written consent of Buyer and Beech.

 

        (b) By Buyer or Beech if the Merger shall not have been consummated on
or before October 31, 2005, unless the failure of the Effective Time to occur by
such date shall be due to (i) the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein, or (ii) the fact that the HSR waiting period has not expired by
such date.

 

        (c) By either Buyer or Beech if there shall have been any material
breach of a material obligation of the other; provided, however, that if such
breach is curable, this Agreement may not be terminated unless such default
shall have not been remedied within thirty (30) days after receipt by the
defaulting party of notice in writing from the other Company specifying such
breach and requesting that it be remedied; provided further that such thirty-
(30) day period shall be extended for so long as the defaulting party shall be
making diligent attempts to cure such default.

 

        (d) By Beech or Buyer, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or any other
action shall have become final and non-appealable.

 

        (e) By Buyer pursuant to Section 6.5(b).

 

9.2 Effect of Termination. In the event of termination of this Agreement as
provided above, this Agreement shall forthwith become of no further effect and,
except for a termination resulting pursuant to Section 6.5(b) or from a breach
by a Company of this Agreement, there shall be no liability or obligation on the
part of either of the Constituent Corporations or their respective officers or
directors (except as set forth in this Section 9.2 and except for Section 7.7
and Article XI hereof, all of which shall survive the termination). Nothing
contained in this Section 9.2 shall relieve any party from liability for willful
breach of this Agreement that results in termination of this Agreement. Upon
request therefor, each party will redeliver or destroy all documents, work
papers and other material of any other party relating to the transactions

 

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contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing same.

 

9.3 Amendment. This Agreement may be amended by action taken at any time before
or after approval hereof by the Stockholders of Beech, but after any such
approval, no amendment shall be made which alters the Purchase Price or which in
any way materially adversely affects the rights of such Stockholders, without
the further approval of such Stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.

 

9.4 Waiver. At any time prior to the Effective Time, the parties hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.

 

ARTICLE X

SURVIVAL OF REPRESENTATIONS

AND WARRANTIES; INDEMNIFICATION

 

10.1 Survival; Indemnification.

 

        (a) No representations, warranties or agreements to be made or performed
on or prior to the Closing Date and contained herein shall survive beyond the
Effective Time except that (i) the agreements contained in Sections 3.1, 3.2,
3.3, 3.4, 3.5, 3.7, 7.3, 7.4, 7.5, 7.6, 7.7, and 9.2 and Articles X and XI
hereof shall survive beyond the Effective Time and (ii) the representations and
warranties and other agreements of Buyer and Beech in this Agreement to be made
or performed on or prior to the Closing Date shall survive beyond the Effective
Time for one year following the Effective Time (the “Termination Date”).

 

        (b) The Surviving Corporation, Buyer, Buyer Sub and each of their
officers, directors, employees, agents, representatives and affiliates
(collectively, the “Indemnitees,” and individually each an “Indemnitee”)
(subject to the terms and conditions of subparagraph (c) below) will be entitled
to be indemnified and held harmless against and in respect of any claims,
damages, losses, costs, expenses, liabilities (absolute, accrued, contingent or
otherwise), and reasonable legal fees and expenses (collectively, “Losses”)
incurred or suffered by any Indemnitee, directly or indirectly caused by or
arising out of or related to (i) any untruth, inaccuracy, error in, or breach
of, any representation or warranty of Beech contained in this Agreement, when
made or deemed to be made, (ii) any breach or nonfulfillment by Beech of any of
its covenants, agreements or other obligations hereunder, (iii) any amounts
becoming due and payable prior to the Termination Date for contingent payment
obligations arising under the Share Purchase Agreement (“BestCare Agreement”)
among Beech Street Corporation, BestCare Incorporated and Charles D. Calvi, Jr.,
dated as of September 10, 2004, or (iv) amounts paid by the Surviving
Corporation on or prior to the Termination Date to former Beech employees upon

 

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termination of employment with the Surviving Corporation related to paid time
off accrued as of the Closing and not utilized prior to such termination,
determined on a first-in, first-out basis (i.e., oldest accrued time would be
deemed to be used up first as time off is taken subsequent to Closing). The
rights of the Indemnitees to indemnification under Section 10.1(b) shall be
satisfied first out of the Indemnification Escrow pursuant to the terms of the
Escrow Agreement described in subparagraph (c) below. All indemnification
requests of the Indemnitees hereunder shall be made by or through Buyer.
Notwithstanding anything to the contrary in this Article X, the reasonable legal
fees and expenses of the Indemnitor shall be payable by the Indemnitor separate
and apart from the Indemnification Escrow, and the reasonable legal fees and
expenses of the Indemnitee with respect to a claim of indemnification or a
demand for the creation of a reserve for any unliquidated claim shall be payable
by the Indemnitor from the Indemnification Escrow, unless (x) the Representative
objects to the claim or the demand, (y) an agreement between the Representative
and the claiming Indemnitee is not reached, and (z) at arbitration, the
arbitrators determine that no part of the Indemnification Escrow is to be
delivered to the Indemnitee or is to be set aside in a reserve for any
unliquidated claim.

 

        (c) By voting to approve this Agreement or by surrendering his or her
Certificate(s) evidencing Beech shares at Closing, each Stockholder (other than
Stockholders who have perfected dissenter rights under the GCL) agrees that an
amount equal to seven and one-half percent (7.5%) of the Purchase Price shall be
placed in the Indemnification Escrow provided for in an Escrow Agreement to be
entered into, as of the Effective Time, between Buyer, Beech and the Escrow
Agent, in the form of Exhibit “A” attached hereto. The Escrow Agent is hereby
authorized from time to time to transfer all or any portion of the amounts so
deposited in satisfaction of the indemnity obligation as contemplated in the
Escrow Agreement.

 

        (d) If any Indemnitee shall have any liquidated claim of indemnification
pursuant to subparagraph (b) above, it shall promptly request that Buyer give
written notice thereof to the Representative (as defined in subparagraph (h)
below) and the Escrow Agent, including a brief description of the facts upon
which such claim is based and the amount thereof. Any Indemnitee may also
request that Buyer provide written notice to the Representative and the Escrow
Agent of any unliquidated claim of indemnification pursuant to subparagraph (b)
above, including a brief description of the facts upon which such claim is based
and a demand for a reserve amount to be created in respect of such claim. Any
claim made by any Indemnitee for Losses that are unliquidated shall not be paid
but funds equal to such claim shall be held in the Indemnification Escrow until
such Losses are fully liquidated. Notwithstanding the foregoing, no amount will
be delivered to an Indemnitee pursuant to a written claim notice (with respect
to either a liquidated or unliquidated claim) pursuant to subparagraph (b) above
unless and only to the extent that the aggregate amount of Losses sustained by
the Indemnitees as a group and as to which written claim notices have been given
(other than Indemnitee’s reasonable legal fees and expenses with respect to any
such claim and Losses caused by a breach or nonfulfillment by Beech of any of
its covenants, agreements, obligations, representations or warranties set forth
in Sections 3.2, 5.2, 6.1(b), 6.1(c)(i)-(vii), 6.1(c)(ix), 6.3 or 6.9) exceeds
One Million Dollars ($1,000,000) (taking into account any reduction of prior
noticed claims resulting from the dispute resolution procedures of
subparagraph (e) below) at which point the Indemnitees shall be entitled to
receive the aggregate Losses in excess of One Million Dollars ($1,000,000).
Notwithstanding anything to the contrary in this Agreement, the aggregate
liability of the Stockholders for Losses under the Agreement shall not exceed an
amount equal to (i) seven and

 

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one-half percent (7.5%) of the Purchase Price plus (ii), if the aggregate amount
of all Losses indemnifiable by Stockholders (including, without limitation, the
aggregate amount of Indemnitee’s total reasonable legal fees and expenses
related thereto) exceeds seven and one-half percent (7.5%) of the Purchase
Price, the lesser of (A) the total amount of such excess, or (B) the sum of
(1) the aggregate amount of Indemnitee’s reasonable legal fees and expenses and
(2) all Losses caused by a breach or nonfulfillment by Beech of any of its
covenants, agreements, obligations, representations or warranties set forth in
Sections 3.2, 5.2, 6.1(b), 6.1(c)(i)-(vii), 6.1(c)(ix), 6.3 or 6.9.

 

        (e) If the Representative shall notify the Escrow Agent in writing
(within fifteen (15) days of delivery to the Escrow Agent by Buyer of a written
notice of claim for indemnification) of his objection to a claim of
indemnification or a demand for the creation of a reserve for any unliquidated
claim (or the amount thereof), the Escrow Agent shall hold the disputed amount
of funds in the Indemnification Escrow until the rights of the Beech
Stockholders and the Indemnitees with respect thereto have been agreed upon
between the Representative and the claiming Indemnitee. In the event such an
agreement is reached, the claiming Indemnitee shall request Buyer to provide to
the Escrow Agent a written notice signed by the Representative and the claiming
Indemnitee in the form specified in the Escrow Agreement. If no such agreement
has been reached, either the Indemnitee or the Representative may, not earlier
than thirty (30) days after the date of the initial claim notice, submit the
dispute to confidential, binding arbitration in Orange County, California before
a panel of three arbitrators, one each to be selected by the Buyer and the
Representative, and the third to be selected by the other two arbitrators,
pursuant to the procedures and rules for commercial arbitration of the American
Health Lawyers Association Alternative Dispute Resolution Service. The Escrow
Agent may rely on the order or other determination of such arbitrators. If such
arbitrators shall determine that any part of the Indemnification Escrow is to be
delivered to an Indemnitee or is to be set aside in a reserve for any
unliquidated claim, the Escrow Agent shall promptly following receipt of a copy
of such determination establish such reserve or deliver to such Indemnitee the
lesser of (i) the amount of the claim or claims as awarded to the Indemnitee to
be satisfied, subject to the limitation set forth in subparagraph (d) above, or
(ii) the excess of seven and one-half percent (7.5%) of the Purchase Price over
all amounts previously disbursed (or currently reserved) in respect of Losses
(other than (x) Indemnitee’s reasonable legal fees and expenses and (y) Losses
caused by a breach or nonfulfillment by Beech of any of its covenants,
agreements, obligations, representations or warranties set forth in
Sections 3.2, 5.2, 6.1(b), 6.1(c)(i)-(vii), 6.1(c)(ix), 6.3 or 6.9). Any
disputed amounts not awarded to the Indemnitee shall promptly be transferred to
the unreserved portion of the Indemnification Escrow. Buyer and the
Representative shall each bear their respective costs and expenses of any such
arbitration.

 

        (f) On the Termination Date, the Escrow Agent shall distribute to the
Stockholders on a proportional basis consistent with Section 3.1 all remaining
amounts in the Indemnification Escrow, less an amount equal to the dollar amount
of all claims pursuant to subparagraph (d) above that are still in process of
resolution pursuant to subparagraph (d) above. No new claims may be brought
under this Section 10.1 after the Termination Date with respect to
representations and warranties to be made on or prior to the Closing Date
hereunder or agreements to be performed prior to the Closing Date hereunder.

 

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        (g) After the Termination Date, (i) as each matter referred to in
subparagraph (e) above is resolved or otherwise concluded and (ii) as each
undisputed unliquidated claim under subparagraph (b) above which remains
unliquidated as of the Termination Date is liquidated, the Escrow Agent shall
distribute to the Stockholders their respective share in the Indemnification
Escrow then determined by the Escrow Agent to be free of any rights of any
Indemnitee under subparagraphs (b) through (d) above, and, when all such matters
are resolved and such claims are liquidated, the obligations under subparagraph
(b) above shall terminate with respect to representations and warranties to be
made on or prior to the Closing Date hereunder or agreements to be performed
prior to the Closing Date hereunder. The Indemnification Escrow shall be
terminated when all of the funds in the Indemnification Escrow shall have been
disbursed in accordance with the provisions hereof and the Escrow Agreement.

 

        (h) As of the Effective Time of the Merger, the Stockholders shall, by
virtue of the approval of this Agreement by the requisite vote of the
Stockholders, be deemed, for themselves and their heirs and representatives and
successors, to have constituted and appointed, effective from the Effective
Time, Norman H. Werthwein, as their agent and attorney-in-fact (the
“Representative”) to take all action required or permitted under the
Indemnification Escrow as provided in the Escrow Agreement or herein with
respect to the interests and rights of the Stockholders. In the event of the
death, physical or mental incapacity or resignation of the Representative a
replacement Representative shall be appointed as provided in the Escrow
Agreement.

 

In taking any action whatsoever hereunder, the Representative shall be protected
in relying upon any notice, paper or other document reasonably believed by him
to be genuine, or upon any evidence reasonably deemed by them to be sufficient.
The Representative may consult with counsel in connection with his duties
hereunder and shall be fully protected in any act taken, suffered or permitted
by him in good faith or in accordance with the advice of counsel. The
Representative shall not be liable to the Stockholders for the performance of
any act or the failure to act so long as he acted or failed to act in good faith
within what he reasonably believed to be the scope of his authority and for a
purpose which he reasonably believed to be in the best interests of the
Stockholders.

 

10.2 Indemnification by Buyer and the Surviving Corporation. Subject to
Section 10.5(b), Buyer at all relevant times hereunder, and the Surviving
Corporation, after the Closing Date, jointly and severally, covenant and agree
to defend, indemnify and hold harmless the Stockholders and their heirs and
successors from and against, and shall compensate and reimburse the Stockholders
for, any Losses that are suffered or incurred by the Stockholders (regardless of
whether such Losses relate to any third-party claim), directly or indirectly
arising or resulting from or connected with (a) any breach of any representation
or warranty made by Buyer or Buyer Sub in this Agreement; or (b) any breach of
any covenant, agreement or other obligation of Buyer or Buyer Sub contained in
this Agreement.

 

10.3 Procedure. In the event that at any time or from time to time after the
Effective Time a person indemnified under Section 10.1 or Section 10.2
(“Indemnified Party”) shall sustain a Loss, such Indemnified Party shall notify
the party hereto obligated to provide such indemnification (the “Indemnitor”) of
any such Loss so sustained. If Indemnitor is Buyer, Indemnitor shall within
thirty (30) days after transmittal of such notice pay to such Indemnified

 

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Party the amount of such Loss so sustained, subject to the right to contest any
claim which has not yet resulted in a Loss, as herein provided. If Indemnitor is
the Escrow Agent, payment shall be governed by the Escrow Agreement. The
Indemnified Party shall promptly notify the Indemnitor of the existence of any
claim, demand, or other matter involving liabilities to third parties to which
the Indemnitor’s indemnification obligations would apply. The Buyer shall have a
reasonable opportunity to defend the same or prosecute such action to conclusion
or settlement satisfactory to the Representative with counsel of the Buyer’s
selection (who shall be approved by Representative, which approval shall not be
unreasonably withheld); provided that the Representative shall at all times also
have the right to fully participate in the defense at its own expense. If the
Buyer shall, within a reasonable time after said notice, fail to defend, the
Representative shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment) the claim or other matter on behalf, for the account, and at the risk
and expense of Indemnitor. Neither the Indemnitor nor the Indemnified Party
shall compromise or settle the claim or other matter without the prior written
consent of the other. If the claim is one that cannot by its nature be defended
solely by the Buyer, the Representative shall make available all information and
assistance that the Buyer may reasonably request; provided that any associated
expenses shall be payable out of the Indemnification Escrow.

 

10.4 Contest; Challenge. If Indemnitor contests or challenges any claim or
action asserted against Indemnified Party referred to in this Article, it shall
do so at its own cost and expense, holding Indemnified Party harmless from all
costs, fees, expenses, debts, liabilities and charges in connection with such
contest; shall diligently defend against any such claim; and shall hold
Indemnified Party’s business and assets free and harmless from any attachment,
execution, judgment, lien or other legal process.

 

10.5 Sole Remedy.

 

        (a) Other than rights to equitable relief or claims for fraud, to the
extent available under applicable law or under applicable securities laws, the
sole remedy available to any Indemnitee or other person for breaches of this
Agreement or any other agreement or transaction contemplated hereby shall be
limited to the rights set forth in this Article X. The maximum aggregate amounts
payable by the Stockholders to any and all of the Indemnitees for any and all
Losses arising out of, or in connection with, this Agreement, any agreement
contemplated hereby, any certificate, any other document delivered, or any of
the transactions contemplated hereby, are the amounts specified as limitations
in Section 10.1 hereof. In no event will any other person except the named
Indemnitees have any rights to any payments whatsoever.

 

        (b) Notwithstanding anything to the contrary in this Agreement, (i) the
maximum aggregate liability of the Buyer, Buyer Sub and the Surviving
Corporation, in the aggregate for any and all Losses under the Agreement (other
than the obligation to pay the Purchase Price due at Closing hereunder) shall
not exceed seven and one-half percent (7.5%) of the Purchase Price, and
(ii) Buyer shall not be liable under Section 10.2 or otherwise unless and until
the Losses for which it would otherwise be liable exceed One Million Dollars
($1,000,000), at which point Buyer shall become liable for the aggregate amount
of Losses in excess of One Million Dollars ($1,000,000).

 

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ARTICLE XI

GENERAL PROVISIONS

 

11.1 Brokers. Beech represents and warrants to the other Companies that, except
for Beech’s financial advisor, UBS Securities LLC, no broker, finder or
financial advisor is entitled to any brokerage, finder’s or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Beech or any of
its subsidiaries, and Beech further covenants and agrees that (a) any brokerage,
finder’s or other fees or commissions due to UBS Securities LLC in connection
with the Merger or the transactions contemplated by this Agreement shall be
payable solely by the Stockholders out of their respective shares of the
Purchase Price if not paid in full by Beech or such Stockholders at the Closing,
and (b) neither Buyer nor the Surviving Corporation shall be liable for any such
brokerage, finder’s or other fee or commission due to UBS Securities LLC in
connection with the Merger or the transactions contemplated by this Agreement.
Buyer represents and warrants to the other Companies that no broker, finder or
financial advisor is entitled to any brokerage, finder’s or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Buyer.

 

11.2 Notices. All notices, claims, demands and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
telex or telecopy or mailed by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):

 

  (a) If to Beech, to:

 

Beech Street Corporation

25500 Commercentre Drive

Lake Forest, CA 92630

Attn: William E. Hale,

President and Chief Executive Officer

 

  (b) with a copy to:

 

Morrison & Foerster

19900 MacArthur Boulevard, Suite 1200

Irvine, California 92612

Attn: Tamara P. Tate, Esq.

 

  (c) If to Buyer or Buyer Sub, to:

 

Concentra Operating Corporation

5080 Spectrum Drive

Suite 1200, West Tower

Addison, Texas 75001

Attn: General Counsel

 

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with a copy to:

 

Vinson & Elkins LLP

3700 Trammell Crow Center

2001 Ross Avenue

Dallas, Texas 75201-2975

Attn: Jeffrey A. Chapman

 

11.3 Descriptive Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

11.4 Entire Agreement; Assignment. This Agreement (including the schedules,
exhibits, and other documents and instruments referred to herein) constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof, and shall not be assigned by operation of
law or otherwise.

 

11.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to the
provisions thereof relating to conflicts of law.

 

11.6 Parties in Interest. Except for Section 7.3 and Article X hereof, nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefit or remedies of any nature whatsoever or by
reason of this Agreement.

 

11.7 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.

 

11.8 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

 

11.9 Investigation. The respective representations and warranties of Buyer or
Beech contained herein or in the certificates or other documents delivered prior
to the Effective Time shall not be deemed waived or otherwise affected by any
investigation made by the other.

 

11.10 Consents. For purposes of any provision of this Agreement requiring,
permitting or providing for the consent of any Company, the written consent of
the chief executive officer of a Company shall be sufficient to constitute such
consent.

 

11.11 Post-Closing. Promptly after the Closing, Buyer shall enter into an
agreement with Mulberry Street Investment Company pursuant to which, for a
period of two (2) years after the Closing, Buyer shall pay Mulberry Street
Investment Company Twenty Thousand Dollars ($20,000) per month to defray certain
operating expenses associated with Mulberry Street Investment Company’s Macon,
Georgia location.

 

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IN WITNESS WHEREOF, each Company has caused this Agreement to be executed on its
behalf by its officers thereunto duly authorized, all as of the date first above
written.

 

CONCENTRA OPERATING CORPORATION,

a Nevada corporation

By:

 

/s/ Richard A. Parr II

Name:

 

Richard A. Parr II

Title:

 

Executive Vice President

ISLAND ACQUISITION CORP.,

a Delaware corporation

By:

 

/s/ Richard A. Parr II

Name:

 

Richard A. Parr II

Title:

 

Executive Vice President

BEECH STREET CORPORATION,

a Delaware corporation

By:

 

/s/ William E. Hale

Name:

 

William E. Hale

Title:

 

President and CEO

 

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EXHIBIT A

 

ESCROW AGREEMENT

 

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