Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

by and among

ADDUS HEALTHCARE, INC.,

as the Purchaser,

and

MARGARET COFFEY

and

CAROL KOLAR,

as the Sellers,

and

SOUTH SHORE HOME HEALTH SERVICE INC.

and

ACARING HOME CARE, LLC,

as the Companies

Dated as of April 24, 2015

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS   1   

Section 1.1. Definitions.

  1   

Section 1.2. Other Definitions.

  9    ARTICLE II PURCHASE AND SALE   11   

Section 2.1. Purchase of the Securities.

  11   

Section 2.2. Purchase Price.

  11   

Section 2.3. Payment of Purchase Price.

  11   

Section 2.4. Working Capital Adjustment.

  12   

Section 2.5. Withholding.

  14   

Section 2.6. Closing.

  14    ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE
SELLERS   14   

Section 3.1. Organization; Authorization.

  14   

Section 3.2. Capitalization; Title to Securities.

  15   

Section 3.3. Absence of Conflicts.

  16   

Section 3.4. Real Property.

  16   

Section 3.5. Title to Assets.

  18   

Section 3.6. Financial Statements; Undisclosed Liabilities.

  18   

Section 3.7. Absence of Certain Changes.

  19   

Section 3.8. Legal Proceedings.

  19   

Section 3.9. Compliance with Laws.

  20   

Section 3.10. Compliance with Health Care Laws.

  20   

Section 3.11. Material Contracts.

  22   

Section 3.12. Insurance Policies.

  23   

Section 3.13. Environmental, Health and Safety Matters.

  24   

Section 3.14. Intellectual Property.

  25   

Section 3.15. Transactions with Affiliates.

  26   

Section 3.16. Payor Relations.

  27   

Section 3.17. Employees; Labor Relations.

  27   

Section 3.18. Employee Benefits.

  28   

Section 3.19. Permits.

  31   

Section 3.20. Brokers.

  31   

Section 3.21. Taxes.

  31   

Section 3.22. Disclosure.

  33    ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER   33   

Section 4.1. Organization.

  33   

Section 4.2. Authorization.

  33   

Section 4.3. Absence of Conflicts.

  34   

Section 4.4. Brokers.

  34    ARTICLE V CERTAIN COVENANTS AND AGREEMENTS   35   

Section 5.1. Conduct of Business.

  35   

Section 5.2. Access to Information; Confidentiality.

  37   

Section 5.3. Commercially Reasonable Efforts.

  38   

Section 5.4. Consents.

  38   

 

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Section 5.5. Public Announcements.

  38   

Section 5.6. Non-Competition.

  39   

Section 5.7. No Shop.

  40   

Section 5.8. Tax Matters.

  40   

Section 5.9. Employees.

  45   

Section 5.10. No Intent to Induce Referrals.

  46   

Section 5.11. Supplements to Schedules.

  46   

Section 5.12. Release.

  46   

Section 5.13. Additional Financial Statements.

  47   

Section 5.14. Financial Information; Audits.

  47   

Section 5.15. 2014 Audited Financial Statements.

  48   

Section 5.16. 2014 Personal Care Provider Cost Reports.

  48   

Section 5.17. Further Assurances.

  48    ARTICLE VI CLOSING CONDITIONS   49   

Section 6.1. Conditions to the Purchaser’s Obligations to Close.

  49   

Section 6.2. Conditions to the Sellers’ Obligations to Close.

  51    ARTICLE VII TERMINATION   52   

Section 7.1. Termination.

  52   

Section 7.2. Procedure and Effect of Termination.

  53    ARTICLE VIII INDEMNIFICATION   54   

Section 8.1. Indemnification Obligations of the Sellers.

  54   

Section 8.2. Indemnification Obligations of the Purchaser.

  55   

Section 8.3. Indemnification Procedure.

  56   

Section 8.4. Survival Period.

  57   

Section 8.5. Limitation of Liability.

  58   

Section 8.6. Reliance.

  59   

Section 8.7. Payment of Claims.

  59   

Section 8.8. Effect of Insurance and Other Sources of Reimbursement.

  59    ARTICLE IX MISCELLANEOUS PROVISIONS   60   

Section 9.1. Notices.

  60   

Section 9.2. Schedules and Exhibits.

  61   

Section 9.3. Assignment; Successors in Interest.

  61   

Section 9.4. Captions.

  61   

Section 9.5. Controlling Law; Amendment.

  61   

Section 9.6. Consent to Jurisdiction, Etc.

  62   

Section 9.7. WAIVER OF JURY TRIAL.

  62   

Section 9.8. Severability.

  62   

Section 9.9. Counterparts.

  62   

Section 9.10. Enforcement of Certain Rights.

  63   

Section 9.11. Waiver.

  63   

Section 9.12. Integration.

  63   

Section 9.13. Transaction Costs.

  63   

Section 9.14. Interpretation; Construction.

  63   

Section 9.15. Specific Performance.

  64   

 

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LIST OF ANNEXED DOCUMENTS

 

Annex I Accounting Guidelines Annex II Sample Calculation of Net Working Capital

 

LIST OF EXHIBITS

 

Exhibit A Sellers’ Knowledge and Companies’ Knowledge Exhibit B Form of Escrow
Agreement Exhibit C Form of Membership Interest Transfer Agreement Exhibit D
Form of Employment Agreement

 

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SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of April 24,
2015, is made and entered into by and among Addus HealthCare, Inc., an Illinois
corporation (the “Purchaser”), Margaret Coffey and Carol Kolar (each a “Seller”
and collectively, the “Sellers”), South Shore Home Health Service Inc., a New
York corporation (“South Shore” or a “Company”), and Acaring Home Care, LLC, a
New York limited liability company (“Acaring” or a “Company,” and together with
South Shore, the “Companies”). The Purchaser, the Sellers and the Companies are
sometimes individually referred to herein as a “Party” and collectively as the
“Parties.”

WHEREAS, South Shore operates a home health care business that serves the
counties of Nassau, Suffolk, Queens and Westchester in the State of New York;

WHEREAS, Acaring performs various management services for South Shore;

WHEREAS, the Sellers own all of the issued and outstanding Equity Interests (as
hereinafter defined) of the Companies; and

WHEREAS, the Parties desire to enter into this Agreement pursuant to which the
Sellers propose to sell to the Purchaser, and the Purchaser proposes to purchase
from the Sellers, all of the issued and outstanding: (i) Equity Interests of
South Shore, comprised of 100 Class A Voting Shares of South Shore, without par
value, and 100 Class B Non-Voting Shares of South Shore, without par value (the
“Shares”), and (ii) membership interests of Acaring (the “Membership
Interests”).

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the Parties agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

The following terms, as used herein, have the following meanings:

“Accounting Guidelines” means the guidelines that are set forth on Annex I
attached hereto.

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of this definition, “control,” when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

 

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“Business” means the home health care business of South Shore and, with respect
to Acaring, the provision of management services to South Shore.

“Business Day” means any day except Saturday, Sunday or any day on which banks
are generally not open for business in the City of New York.

“Cash Balances” means cash and cash equivalents on hand or credited to any
account with a financial institution.

“Closing Date Debt” means the Indebtedness of the Companies as of the Closing
Date.

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

“Company IT Systems” means all computer hardware, computer software, computer
systems, telecommunications equipment, systems and services and Internet and
intranet sites used in the each Company’s business.

“Contract” means any written or oral contract, Permit, term sheet, commitment,
loan or credit agreement, note, bond, mortgage, indenture, lease, sublease,
purchase order or other agreement, instrument, concession, franchise or license.

“Employee Benefit Plan” means all employee benefit plans under which the
Sellers, the Companies or their ERISA Affiliates have any Liability, including
secondary and contingent Liability, including (a) each plan, fund, program,
agreement, arrangement or scheme, including each plan, fund, program, agreement,
arrangement or scheme maintained or required to be maintained under the Laws of
a jurisdiction outside the United States, in each case that is at any time
sponsored or maintained or required to be sponsored or maintained by such Person
or to which such Person makes or has made, or has or has had an obligation to
make, contributions providing for employee benefits or for the remuneration,
direct or indirect, of the employees, former employees, directors, managers,
officers, consultants, independent contractors, contingent workers or leased
employees of such Person or the dependents of any of them (whether written or
oral), including each deferred compensation, bonus, incentive compensation,
profit-sharing, pension, retirement, stock purchase, stock option and other
equity compensation plan or equity-based compensation plan, “welfare” plan
(within the meaning of Section 3(1) of ERISA, determined without regard to
whether such plan is subject to ERISA), fringe benefit plan, (b) each “pension”
plan (within the meaning of Section 3(2) of ERISA, determined without regard to
whether such plan is subject to ERISA), (c) each employment, severance, health,
vacation, summer hours, supplemental unemployment benefit, hospitalization
insurance, disability, medical, dental or legal plan or agreement and (d) each
other fringe benefit plan or employee benefit plan, fund, program, agreement,
arrangement or scheme.

“Employee/Contractor Advance” means any cash advance by either Company to any
employee or contractor of either Company.

“Employment Laws” means all applicable Laws concerning or pertaining to
employment, including any Laws governing or concerning labor, employment,
employment practices, terms and conditions of employment, termination of
employment, equal employment opportunity,

 

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nondiscrimination, harassment, retaliation, reasonable accommodation,
immigration, wages, hours, benefits, collective bargaining, labor relations,
occupational safety and health, workers compensation, unemployment compensation,
affirmative action, temporary workers, Leased Workers, independent contractors
(including the classification of individuals as employees or independent
contractors), plant closings and layoffs, arbitration agreements, protection of
employee data and personal information, employment Taxes and the withholding and
payment of social security and other payroll Taxes.

“Environmental Laws” means any federal, state, local or foreign law (including,
without limitation, common law), treaty, judicial decision, regulation, rule,
judgment, order, decree, injunction, permit or governmental restriction or any
agreement with any Governmental Entity or other third party, whether now or
hereafter in effect, relating to the environment, human health and safety or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, medical or
infectious wastes or materials.

“Equity Interest” means (a) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether voting or nonvoting) of capital stock, including each
class of common stock and preferred stock of such Person and (b) with respect to
any Person that is not a corporation, any and all general partnership interests,
limited partnership interests, membership or limited liability company
interests, beneficial interests or other equity interests of or in such Person
(including any common, preferred or other interest in the capital or profits of
such Person, and whether or not having voting or similar rights).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
or any successor federal Law, and the rules and regulations promulgated
thereunder, all as the same may from time to time be in effect.

“ERISA Affiliate” means, with respect to any Person, any entity that is a member
of a “controlled group of corporations” with, or is under “common control” with,
or is a member of the same “affiliated service group” with such Person as
defined in Section 414(b), 414(c), 414(m) or 414(o) of the Code.

“Escrow Agent” means Citibank, N.A.

“Estimated Purchase Price” means $18,000,000, plus (a) the amount of the Cash
Balances, plus (b) any Working Capital Excess in excess of $750,000.00 and minus
(c) any Working Capital Deficiency.

“Federal Health Care Program” shall have the meaning given in 42 U.S.C. §
1320a-7b(f), as amended.

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means any federal, state, local or foreign government or
any court, department, instrumentality, commission, including administrative or
regulatory agencies of the United States government, any state government or any
local government, other governmental authority or agency, domestic or foreign
(including, without limitation, regulatory authorities, carriers, intermediaries
or other instrumentalities administering Federal Health Care Programs and State
Health Care Programs) or arbitrator.

 

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“Hazardous Materials” mean any waste, pollutant, contaminant, hazardous
substance, toxic, ignitable, reactive or corrosive substance, hazardous waste,
special waste, industrial substance, by-product, process intermediate product or
waste, petroleum or petroleum-derived substance or waste, chemical liquids or
solids, liquid or gaseous products or any constituent of any such substance or
waste, the use, handling or disposal of which by either Company is in any way
governed by or subject to any applicable Environmental Law.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as amended, and any rules or regulations promulgated thereunder.

“Indebtedness” means, with respect to the Companies, (a) all indebtedness of the
Companies for borrowed money and all accrued interest thereon (other than
accounts payable in the ordinary course of business), including, without
limitation, arising from loans, advances, letters of credit, surety bonds and
obligations related thereto, (b) all obligations of the Companies for the
deferred purchase price of assets, property or services, including with respect
to any advance payments made by customers, other than (i) operating or other
leases of property (except as set forth in (d)), (ii) trade payables and other
non-ordinary course third party payables and (iii) accrued expenses and
liabilities to current and/or former employees incurred in the ordinary course
of business, (c) all obligations of the Companies evidenced by notes, bonds,
debentures, hedging and swap arrangements or Contracts or other similar
instruments other than trade payables, accrued expenses and Liabilities to
current and/or former employees incurred in the ordinary course of business,
(d) all capital lease obligations of the Companies, (e) all accrued and unpaid
interest on any Indebtedness referred to in clauses (a) through (d) above
through the Closing Date and any prepayment penalties, premiums, consent or
other fees, breakage costs on interest rate swaps and any other hedging
obligations (including, but not limited to, foreign exchange contracts) or other
costs incurred in connection with the repayment or assumption of such
Indebtedness and (f) all Indebtedness of others of the type referred to in
clauses (a) through (e) above guaranteed directly or indirectly in any manner by
the Companies.

“Indemnified Taxes” means any of the following Taxes (in each case, whether
imposed, assessed, due or otherwise payable directly, as a successor or
transferee, jointly and/or severally pursuant to a contract or other agreement
entered (or assumed) by either Company on or prior to the Closing Date, shown as
payable on a Tax Return, resulting from an adjustment or assessment by a
Governmental Entity, or for any other reason and whether disputed or not):

a. All Taxes of either Company for any Pre-Closing Tax Period, or portion of any
Straddle Period ending on the Closing Date, to the extent such Taxes were not
included as a liability in the computation of Closing Net Working Capital, as
finally determined;

b. All Taxes resulting from (i) a breach of a representation or warranty
contained in Section 3.18 (Employee Benefits) or Section 3.21 (Taxes) (in each
construed as if they were not qualified by “knowledge,” “material,” “material
adverse effect” or similar language), (ii) a breach of a covenant or other
agreement of any Seller contained

 

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in this Agreement, including, without limitation, in Section 5.8, or (iii) a
breach of a covenant or other agreement of any Company to be performed prior to
the Closing Date; and

c. To the extent not governed by clause (a) above, all Taxes imposed as a result
of any loss, reduction, disallowance or unavailability (in whole or in part) of
any refund (whether as cash or a credit or offset against Taxes otherwise
payable) that (i) was received by any Company on or before the Closing Date or
(ii) was included in the computation of Closing Net Working Capital, as finally
determined.

“Indemnity Escrow Funds” means $1,350,000.

“Intellectual Property” means any trademark, service mark, trade dress, trade
name and all goodwill associated with any of the foregoing, any mask work,
invention, invention disclosure, patent, trade secret, knowhow or other
proprietary information, work of authorship, software, copyright, database
right, moral right, URL, domain name (including any registrations or
applications for registration of any of the foregoing and all provisionals,
continuations, continuations in part, divisionals, reissues, reexaminations,
renewals and extensions thereof) or any other corresponding or similar type of
proprietary intellectual property right throughout the world.

“Knowledge” of any Person means (a) the actual knowledge of such Person and
(b) that knowledge that could have been acquired by such Person after making
such due inquiry and exercising such due diligence as a reasonable business
person would have made or exercised in the management of his or her business
affairs. When used in the case of either Company or either Seller, the term
“Knowledge” shall include the Knowledge of those individuals set forth on
Exhibit A.

“Law” means any law (both common and statutory law and civil and criminal law),
regulation, treaty, convention, rule, directive, legislation, ordinance,
regulatory code (including, without limitation, any statutory instrument,
guidance note, circular, directive, decision, rule and regulation) or similar
provision having the force of law or an Order.

“Leased Worker” means any contingent worker or worker provided by a staffing
company, temporary employee agency, professional employer organization or
similar entity.

“Liability” means any actual or potential liability or obligation (including as
related to Taxes), whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, determined, determinable or otherwise,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, easement, reservation, cloud, servitude, right of
way, option, right of first refusal, community property interest, equitable
interest, restriction of any kind, conditional sale or other title retention
agreement, any agreement to provide any of the foregoing and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money, whether imposed by Contract, Law, equity or otherwise, or
other adverse claim of any kind in respect of such property or asset.

 

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“LOI” means that certain Letter of Intent, dated February 6, 2015, among the
Purchaser, the Companies and the Sellers.

“Losses” means the Purchaser Losses or the Seller Losses, as applicable.

“Material Adverse Effect” means any state of facts, change, event, effect or
occurrence (whether or not constituting a breach of a representation, warranty
or covenant set forth in this Agreement) that, individually or in the aggregate,
is or may be reasonably likely to be materially adverse to the business,
financial condition, results of operations, properties, assets or Liabilities of
either Company, other than as a result of (a) changes adversely affecting the
United States economy in general and/or the homecare industry, (b) acts of war
or terrorism, or the outbreak of hostilities or (c) changes in the Law or GAAP,
except to the extent such changes affect a Company in a disproportionate manner
as compared to comparable participants in the Company’s industry. A Material
Adverse Effect shall also include any state of facts, change, event or
occurrence that shall have occurred or been threatened that, individually or in
the aggregate, is or would be reasonably likely to prevent or materially delay
the performance by either Company or either Seller of any of their respective
obligations under this Agreement or the consummation of the transactions
contemplated hereby, other than as a result of (a) changes adversely affecting
the United States economy in general and/or the homecare industry, (b) acts of
war or terrorism, or the outbreak of hostilities or (c) changes in the Law or
GAAP, except to the extent such changes affect a Company in a disproportionate
manner as compared to comparable participants in the Company’s industry.

“New York Required Consent” means the final approval of the transactions
contemplated by this Agreement by the New York State Public Health and Planning
Council and the New York State Department of Health.

“Net Working Capital” means the total current assets (excluding cash) of the
Companies minus the total current Liabilities of the Companies, determined in
accordance with the Accounting Guidelines. A sample calculation of Net Working
Capital is attached hereto as Annex II.

“Orders” means judgments, writs, decrees, compliance agreements, injunctions,
judicial, administrative or arbitral decisions, awards and orders and legally
binding determinations of any Governmental Entity or self-regulatory
organization.

“Payoff Letters” shall mean appropriate payoff letters, in form and substance
satisfactory to Purchaser, providing for the repayment of all Indebtedness of
the Companies immediately prior to the Closing Date (including all interest
accrued thereon and all fees, charges or premiums associated therewith), which
Payoff Letters shall (a) provide that upon payment of the amounts specified
therein by the Companies or on their behalf to the parties entitled to such
amounts on the Closing Date, any and all Liens in or upon any of the assets or
properties of the Companies arising from or in connection with such Indebtedness
will be forever satisfied, released and discharged, and such parties will take
all actions necessary to effectuate the release

 

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of such Liens (including executing and delivering to Purchaser all reasonably
necessary documentation in form suitable for filing with all appropriate
Governmental Entities), (b) provide for the filing of all documents necessary or
desirable to effectuate, or reflect in public record, such satisfaction, release
and discharge after such amounts have been paid as specified therein and
(c) provide a complete and correct list of the applicable payees, the amount
payable to each such payee and wire transfer instructions for each such payee.

“Permits” means all permits, licenses, authorizations, filings or registrations,
franchises, approvals, certificates (including certificates of need,
accreditations, Medicare and Medicaid enrollments and participations, state
licenses, waivers and certification and safety certificates), exemptions,
variances and similar rights obtained, or required to be obtained, from
Governmental Entities.

“Permitted Liens” means (a) Liens for Taxes not yet due and payable, (b) Liens
of landlords and Liens of carriers, warehousemen, mechanics, materialmen and
repairmen incurred in the ordinary course of business consistent with past
practice and not yet delinquent and (c) zoning, building, or other restrictions,
variances, covenants, rights of way, encumbrances, easements and other minor
irregularities in title with respect to Real Property, none of which,
individually or in the aggregate, (i) interfere in any material respect with the
present use of or occupancy of such Real Property by either Company, (ii) have
more than an immaterial effect on the value thereof or either Company’s use or
(iii) would impair the ability of such Real Property to be sold for its present
use.

“Person” means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

“Personal Information” means such term or like terms set forth in any Privacy
Law that describes, covers or defines data that identifies or can be used to
identify individuals or that is otherwise regulated, protected or covered by any
Privacy Law.

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date.

“Privacy Laws” shall mean any Laws that relate to privacy, security, data
protection and destruction, data breach notification or data transfer issues,
including all implementing Laws, the Payment Card Industry Data Security
Standard and all current and former privacy policies applicable to the Business.

“Proceedings” means actions, suits, claims, charges, complaints, litigations,
arbitrations, hearings, inquiries, audits, reviews, investigations or
examinations and civil, criminal, administrative, investigative, appellate or
arbitration proceedings commenced, brought, conducted or heard by or before, or
otherwise involving, any court, other Governmental Entity (whether judicial or
administrative) or any arbitrator.

 

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“Properties” means all of the assets and properties of the Companies, whether
real property, personal property, mixed or contractual property interests,
fixtures or other interests, whether tangible or intangible, whether owned,
leased or licensed.

“Seller Expenses” means all fees, costs, charges, expenses and obligations
unpaid on the Closing Date that are incurred by the Sellers or the Companies in
contemplation of, in connection with or relating to the preparation for, and
consummation of, the transactions contemplated by this Agreement, including,
without limitation, the fees, costs, charges, expenses and obligations relating
to or arising out of (a) the preparation, negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby,
(b) professional services provided by the Sellers’ and the Companies’ bankers,
counsel, consultants, accountants, advisors, agents and representatives, (c) any
bonuses, success fees, severance payments, change of control payments and any
other amounts payable to any Person by the Sellers or the Companies in
connection with the consummation of the transactions contemplated by this
Agreement (and all related employment Taxes incurred by the Companies) and
(d) the Companies’ participation in the Health Care Providers Self-Insurance
Trust.

“State Health Care Program” shall have the meaning given in 42 U.S.C. §
1320a-7(h), as amended and shall include without limitation the New York State
Personal Care Services Program and Consumer Directed Personal Assistance
Program.

“Straddle Period” means any taxable period that includes (but does not end on)
the Closing Date.

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

“Taxes” means all taxes, assessments, charges, duties, fees, levies or other
governmental charges (including interest, penalties, additions to tax or
additional amounts associated therewith), including net income, capital gains,
gross income, franchise, real property, personal property, unclaimed property,
withholding, employment, payroll, social security, transfer, sales, use, excise,
gross receipts, value added, net receipts, ad valorem, profits, license,
capital, estimated, goods and services, severance, stamp, registration,
recording, occupation, premium, environmental (including Code Section 59A),
alternative or add-on, windfall profits and all other taxes of any kind
whatsoever (whether estimated or not) imposed by any Governmental Entity,
whether disputed or not.

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and any amendments, submitted to (or required under
applicable Laws to be submitted to) a Governmental Entity or third party.

“Working Capital Deficiency” means the amount of the excess of Target Net
Working Capital over Estimated Net Working Capital, if any.

“Working Capital Excess” means the amount of the excess of Estimated Net Working
Capital over Target Net Working Capital, if any.

 

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Section 1.2. Other Definitions.

Each of the following terms is defined in the Section set forth opposite such
term:

 

Terms

  

Section

2014 Audited Financial Statements

   5.15

20-Day Period

   2.4(a)(ii)

Acaring

   Preamble

Acaring Purchase Price Allocation Schedule

   5.8(g)(ii)

Accountants’ Determination

   2.4(a)(ii)

Agreement

   Preamble

Arbitrating Accountants

   2.4(a)(ii)

Auditor

   5.14

Basket

   8.5(a)

Breach

   3.10(f)

Cap

   8.5(a)

Closing

   2.6

Closing Date

   2.6

Closing Net Working Capital

   2.4(a)(i)

Closing Statement

   2.4(a)(i)

Companies

   Preamble

Company

   Preamble

Company Benefit Plans

   3.18(a)

Company IP

   3.14(a)

Employment Agreements

   6.1(i)(vi)

Escrow Agreement

   2.3(b)

Estimated Net Working Capital

   2.2(b)

Excess Taxes

   5.8(f)(vi)

Excess Tax Statement

   5.8(f)(vi)

Final Purchase Price

   2.4(a)(ii)

Financial Statements

   3.6(a)

Fundamental Representations

   8.4(a)

HITECH Act

   3.10(a)

Indemnified Party

   8.3(a)

Indemnifying Party

   8.3(a)

Interim Balance Sheet

   3.6(a)

Latest Balance Sheet Date

   3.6(a)

Leased Real Property

   3.4(a)

Material Contracts

   3.11(a)

Membership Interests

   Preamble

Non-Compete Period

   5.6(a)

Non-Competition Agreement

   6.1(i)(vi)

Objection Notice

   2.4(a)(ii)

Outside Date

   7.1(c)

Owned Real Property

   3.4(a)

 

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Parties

Preamble

Partnership Returns

5.8(c)(i)

Party

Preamble

Pre-Closing Tax Returns

5.8(c)(i)

Protected Health Information

3.10(f)

Purchased Membership Interests

2.1

Purchased Shares

2.1

Purchase Price

2.2(a)

Purchaser

Preamble

Purchaser Ancillary Documents

4.2

Purchaser Indemnified Parties

8.1

Purchaser Losses

8.1

Purchaser Prepared Returns

5.8(c)(ii)

Real Property

3.4(a)

Real Property Leases

3.4(a)

Related Party Transactions

3.15

Released Persons

5.12(a)

Replenish Amount

2.4(b)(ii)

Representation Letter

5.14

Restricted Territory

5.6(a)

S Corporation Returns

5.8(c)(i)

Section 338(h)(10) Election

5.8(f)(i)

Section 338(h)(10) Forms

5.8(f)(ii)

Securities

2.1

Seller

Preamble

Sellers

Preamble

Seller Ancillary Documents

3.1(b)

Seller Indemnified Parties

8.2

Seller Losses

8.2

Seller Prepared Returns

5.8(c)(i)

Settlement Agreement

2.4(a)(ii)

Shares

Preamble

South Shore

Preamble

South Shore Purchase Price Allocation Schedule

5.8(f)(iv)

Statutory Representations

8.4(b)

Survival Period

8.4

Tax Contest

5.8(d)

Tax Incentive

3.21(h)

Transfer Taxes

5.8(b)

WARN

5.9(b)

 

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ARTICLE II

PURCHASE AND SALE

Section 2.1. Purchase of the Securities.

Upon the terms and subject to the conditions contained herein, at the Closing,
the Sellers agree to sell to the Purchaser, free and clear of any and all Liens,
and the Purchaser agrees to purchase from the Sellers, (a) the Shares owned by
each Seller set forth opposite such Seller’s name on Schedule 2.1(a) hereto
under the column heading “Shares” (the aggregate Shares so purchased from each
Seller set forth on Schedule 2.1(a) hereto being the “Purchased Shares”) and
(b) the Membership Interests owned by each Seller set forth opposite such
Seller’s name on Schedule 2.1(b) hereto under the column heading “Membership
Interests” (the aggregate Membership Interests so purchased from each Seller set
forth on Schedule 2.1(b) hereto being the “Purchased Membership Interests,” and
together with the Purchased Shares, the “Securities”).

Section 2.2. Purchase Price.

(a) The aggregate amount to be paid for the Securities shall be $18,000,000,
plus (i) the positive amount (if any) of the Cash Balances, minus (ii) the
positive amount (if any) by which the Target Net Working Capital exceeds the
actual Net Working Capital (as of the close of business on the Closing Date),
plus (iii) the positive amount (if any) by which the actual Net Working Capital
(as of the close of business on the Closing Date) exceeds the Target Net Working
Capital by more than $750,000 (the “Purchase Price”).

(b) Not later than three Business Days prior to the Closing Date, the Companies
shall deliver to the Purchaser a statement setting forth (i) the Companies’
reasonable, good faith estimate of the Net Working Capital (the “Estimated Net
Working Capital”) and the Companies’ reasonable, good faith estimate of the Cash
Balances, both as of the close of business on the Closing Date, and (ii) the
Estimated Purchase Price. The Estimated Net Working Capital will be calculated
in accordance with the Accounting Guidelines.

Section 2.3. Payment of Purchase Price.

(a) At the Closing, the Purchaser shall pay or cause to be paid to the Sellers
an amount equal to (i) the Estimated Purchase Price minus (ii) the sum of
(A) the Indemnity Escrow Funds, (B) the Closing Date Debt and (C) the aggregate
amount of the Seller Expenses. The amount payable to each Seller pursuant to
this Section 2.3(a) shall be allocated according to the percentage of the
Securities allocable to each Seller as set forth on Schedule 2.3(a).

(b) At the Closing, the Purchaser shall deposit with the Escrow Agent the
Indemnity Escrow Funds. The Indemnity Escrow Funds shall be governed by the
terms of an escrow agreement to be entered into by and among the Purchaser, the
Sellers and the Escrow Agent, in substantially the form attached hereto as
Exhibit B (the “Escrow Agreement”).

 

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(c) At the Closing, the Purchaser shall (i) on behalf of the Companies, cause
the Closing Date Debt outstanding immediately prior to the Closing to be repaid
in full to the party or parties entitled thereto pursuant to the Payoff Letters
and (ii) on behalf of the Sellers, pay the Seller Expenses to the Persons
entitled thereto pursuant to a schedule setting forth all Seller Expenses
accrued but unpaid as of the Closing to be delivered by the Companies at least
two Business Days prior to the Closing Date.

Notwithstanding the foregoing, under no circumstances shall the aggregate amount
payable by the Purchaser pursuant to this Section 2.3 exceed the Estimated
Purchase Price.

Section 2.4. Working Capital Adjustment.

(a) Post-Closing Adjustment.

(i) Within 90 days following the Closing Date, the Purchaser shall in good faith
prepare and deliver to the Sellers a statement (the “Closing Statement”) setting
forth the Net Working Capital (the “Closing Net Working Capital”) and Cash
Balances, both as of the close of business on the Closing Date, and the
resulting Purchase Price, specifying in reasonable detail such calculations.

(ii) Following receipt of the Closing Statement, the Sellers will be afforded a
period of 20 Business Days (the “20-Day Period”) to review the Closing
Statement. At or before the end of the 20-Day Period, the Sellers will either
(A) accept the Closing Net Working Capital and Cash Balances, and the resulting
Purchase Price, as set forth in the Closing Statement in its entirety or
(B) deliver to the Purchaser a written notice (the “Objection Notice”)
containing written explanation, setting forth in reasonable detail, those items
in the Closing Statement that the Sellers dispute, in which case the items
specifically identified by the Sellers shall be deemed in dispute. The failure
by the Sellers to deliver the Objection Notice within the 20-Day Period shall
constitute each Seller’s acceptance of the Closing Net Working Capital and Cash
Balances, and the Purchase Price, as set forth in the Closing Statement. Each
Seller may make inquiries of the Purchaser and its accountants and appropriate
employees and have reasonable access to the Purchaser’s books and records
regarding questions concerning, or disagreements with, the Closing Statement
arising in the course of its review thereof, and the Purchaser shall use
reasonable efforts to cause any such employees and accountants to cooperate
with, respond to such inquiries and provide such requested information in a
timely manner (subject to each Seller entering into any confidentiality and
other agreements reasonably required by the accountants). If the Sellers deliver
the Objection Notice within the 20-Day Period, then, within a further period of
20 Business Days from the end of the 20-Day Period, the Purchaser and the
Sellers, and if desired, their accountants, will attempt to resolve in good
faith any disputed items and reach a written agreement (the “Settlement
Agreement”) with respect thereto. Failing such resolution, the unresolved
disputed items will be referred for final binding resolution to a certified
public accounting firm mutually agreeable to the Parties (the “Arbitrating
Accountants”), provided that if the Purchaser and the Sellers cannot agree on
the Arbitrating Accountants, the Purchaser and the Sellers shall each nominate
an accounting firm experienced in the healthcare industry and the nominated
accounting firms shall choose a third accounting firm that

 

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shall serve as the Arbitrating Accountants and shall resolve such dispute. The
fees and expenses of the Arbitrating Accountants shall be allocated between the
Sellers, on the one hand, and the Purchaser, on the other hand, in the same
proportion that the aggregate amount of the disputed items submitted to the
Arbitrating Accountants that is unsuccessfully disputed by each such Party (as
finally determined by the Arbitrating Accountants) bears to the total amount of
such disputed items so submitted. Such determination (the “Accountants’
Determination”) shall be (W) in writing, (X) furnished to the Sellers and the
Purchaser as soon as practicable (and in no event later than 30 Business Days)
after the items in dispute have been referred to the Arbitrating Accountants,
(Y) made in accordance with the Accounting Guidelines and (Z) nonappealable and
incontestable by the Parties and each of their respective Affiliates and
successors and assigns and not subject to collateral attack for any reason other
than manifest error or fraud. The Sellers and the Purchaser shall each be given
the opportunity to make presentations to the Arbitrating Accountants. As used
herein “Final Purchase Price” means the Purchase Price as ultimately determined
in accordance with this Section 2.4(a)(ii).

(b) Payment of Adjustment. Within 30 days of the determination of the Final
Purchase Price:

(i) if the Final Purchase Price exceeds the Estimated Purchase Price (the amount
of such excess, the “Closing Deficiency”), the Purchaser shall pay the Closing
Deficiency to the Sellers, the amount payable to each Seller pursuant to this
Section 2.4(b)(i) to be allocated according to the percentage of the Securities
allocable to each Seller as set forth on Schedule 2.3(a);

(ii) if the Estimated Purchase Price exceeds the Final Purchase Price (the
amount of such excess, the “Closing Excess”), the Sellers shall be, jointly and
severally, obligated to pay the Closing Excess to the Purchaser, which
obligation shall be satisfied, at the Purchaser’s option, (A) from the Indemnity
Escrow Funds, and the Sellers and the Purchaser shall execute and deliver to the
Escrow Agent joint written instructions directing the Escrow Agent to pay such
amount to the Purchaser from the Indemnity Escrow Funds, or (B) by prompt
payment to the Purchaser by wire transfer of immediately available funds to an
account designated in writing by the Purchaser. To the extent any of the
Sellers’ payment obligations under this Section 2.4(b) are satisfied out of the
Indemnity Escrow Funds (such amount, the “Replenish Amount”), promptly, and in
any event within 10 Business Days following such payment date, the Sellers shall
be, jointly and severally, obligated to deliver to the Escrow Agent an amount
equal to the Replenish Amount to replenish the Indemnity Escrow Funds; or

(iii) if the Estimated Purchase Price equals the Final Purchase Price, neither
the Purchaser nor the Sellers shall owe any payment to the other pursuant to
this Section 2.4.

 

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(c) Adjustments for Tax Purposes. Any payments made pursuant to Section 2.4(b)
shall be treated as an adjustment to the Purchase Price by the parties for Tax
purposes, unless otherwise required by Law.

Section 2.5. Withholding.

The Purchaser will be entitled to deduct and withhold from any amount payable
pursuant to this Agreement (including payments of the Purchase Price) such
amounts as the Purchaser (or any Affiliate thereof) is legally required to
deduct and withhold with respect to the making of such payment under the Code or
any other provision of applicable Law. To the extent that amounts are so
withheld by the Purchaser, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the Person in respect of whom
such deduction and withholding were made.

Section 2.6. Closing.

The closing of the transactions contemplated by this Agreement (the “Closing”)
shall occur electronically at 10:00 a.m. New York time, as promptly as
practicable, but in no event later than, the third Business Day following the
satisfaction or waiver of each of the conditions set forth in Section 6.1 and
Section 6.2 (other than, but subject to satisfaction of, the conditions to be
satisfied on the Closing Date) (the “Closing Date”). Subject to the provisions
of Article VII of this Agreement, the failure to consummate the purchase and
sale provided for in this Agreement on the date and time determined pursuant to
this Section 2.6 shall not result in the termination of this Agreement and shall
not relieve any Party to this Agreement of any obligation under this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SELLERS

The Companies and the Sellers hereby jointly and severally represent and warrant
to the Purchaser as follows:

Section 3.1. Organization; Authorization.

(a) Each Company is duly organized, validly existing and in good standing under
the Laws of its state of formation. Each Company is duly qualified or licensed
to do business as a foreign entity and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or registration necessary.
Schedule 3.1(a) contains a true and correct list of the only jurisdictions in
which each Company is qualified or registered to do business as a foreign
entity. The Sellers have heretofore made available to the Purchaser true,
correct and complete copies of each Company’s organizational documents as
currently in effect and each Company’s record books with respect to actions
taken by such Company’s shareholders, members, managers, directors or officers,
as applicable.

 

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(b) The Companies and the Sellers have full power and authority and, in the case
of each Seller, capacity to execute and deliver this Agreement and any other
certificate, agreement, document or other instrument to be executed and
delivered by it in connection with the transactions contemplated by this
Agreement (collectively, the “Seller Ancillary Documents”) and, subject to the
procurement of the New York Required Consent, to perform their obligations under
this Agreement and the Seller Ancillary Documents to which they are a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Seller Ancillary Documents by the
Companies and the Sellers and the performance by the Companies and the Sellers
of their obligations hereunder and under each Seller Ancillary Document to which
such Person is a party and the consummation of the transactions provided for
herein and therein have been duly and validly authorized by all necessary
corporate or limited liability company, as applicable, action on the part of
each Company. The board of directors (or similar governing body) of each Company
has approved the execution, delivery and performance of this Agreement and the
Seller Ancillary Documents to which such Company is a party and the consummation
of the transactions contemplated by this Agreement and by the Seller Ancillary
Documents to which such Company is a party. This Agreement has been duly
executed and delivered by the Companies and the Sellers and the Seller Ancillary
Documents will be duly executed and delivered by the Companies and the Sellers,
as the case may be, at Closing and each will constitute a valid and binding
agreement of the Companies and the Sellers, as the case may be, enforceable
against such Persons in accordance with their respective terms, subject to the
procurement of the New York Required Consent and subject to applicable
bankruptcy, insolvency and other similar Laws affecting the enforceability of
creditors’ rights generally, general equitable principles and the discretion of
courts in granting equitable remedies.

Section 3.2. Capitalization; Title to Securities.

(a) Schedule 3.2(a) sets forth, with respect to each Company, the number of its
authorized Equity Interests, the number and class of Equity Interests thereof
issued and outstanding, the names of all equity owners and the amount of equity
owned by each equity owner. All of the outstanding Equity Interests of each
Company were duly authorized for issuance, are validly issued, fully paid and
nonassessable and were not issued in violation of any purchase or call option,
right of first refusal, subscription right, preemptive right or any similar
right. Other than the Securities, there are no Equity Interests of either
Company issued, reserved for issuance or outstanding and no outstanding options,
warrants, convertible or exchangeable securities, subscriptions, rights
(including any preemptive rights), equity appreciation rights, calls, limited
liability company interests or other Equity Interests or commitments of any
character whatsoever to which either Company is a party or may be bound
requiring the issuance or sale of any Equity Interest of either Company. There
are no outstanding contractual obligations of either Company to repurchase,
redeem or otherwise acquire any Equity Interests or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any other Person. There are no voting trusts, member agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of the Equity Interests of either Company. Neither Company owns any
Equity Interests in any Person.

 

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(b) Each Seller listed on Schedule 3.2(a) is the lawful owner, of record and
beneficially, of the Securities identified on Schedule 3.2(a) and has good,
valid and marketable title to such Securities, free and clear of any Liens
whatsoever and with no restriction on the voting rights and other incidents of
record and beneficial ownership pertaining thereto. Each such Seller is not
insolvent or the subject of any bankruptcy, reorganization or similar
Proceeding. There are no outstanding Contracts or understandings between each
such Seller and any other Person with respect to the acquisition, disposition,
transfer, registration or voting of, or any other matters in any way pertaining
or relating to, or any other restrictions on, any of the Equity Interests of
either Company and, except as contemplated by this Agreement, the Seller
Ancillary Documents or the transactions specifically contemplated hereby and
thereby, each such Seller has no right whatsoever to receive or acquire any
Equity Interests of either Company. Each such Seller acquired the Securities
identified on Schedule 3.2(a) in one or more transactions exempt from
registration under the Securities Act and state securities and “blue sky” laws,
and neither Company has violated the Securities Act or any applicable state
securities or “blue sky” laws in connection with the issuance of any Securities.

(c) Upon consummation of the transactions contemplated by this Agreement, the
Purchaser will have acquired all of the issued and outstanding Equity Interests
of each Company free and clear of all Liens (other than those arising under
applicable securities laws).

Section 3.3. Absence of Conflicts.

Except as set forth on Schedule 3.3, the execution, delivery and performance of
this Agreement and the Seller Ancillary Documents, the consummation of the
transactions contemplated by this Agreement and the Seller Ancillary Documents
and the fulfillment of and compliance with the terms and conditions of this
Agreement and the Seller Ancillary Documents do not or will not, as the case may
be, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any benefit under, permit the acceleration of any obligation under or create in
any Person the right to terminate, modify or cancel, or otherwise require any
action, consent, approval, order, authorization, registration, declaration or
filing with respect to (a) any term or provision of the organizational documents
of the Company, (b) except as indicated on Schedule 3.3, any Contract or other
instrument applicable to any Seller or any Company, (c) any Order to which any
of the Sellers or any of the Companies is a party or by which any of the Sellers
or any of the Companies is bound or (d) except as set forth on Schedule 3.3, any
Permit, Law or Order applicable to any Seller or any Company.

Section 3.4. Real Property.

(a) Schedule 3.4(a) sets forth a complete and accurate list and description of
(i) all of the owned real property in which either Company has an interest
(together with all fixtures and improvements thereon, the “Owned Real Property”)
and (ii) all of the leased real property (together with all fixtures and
improvements thereon, the “Leased Real Property”) in which either Company has a
leasehold interest held under leases, subleases, licenses and/or other types of
occupancy agreements (the “Real Property Leases”), including any requirement of
consent of the lessor to consummate the transactions contemplated hereby. The
Owned Real Property and the Leased Real Property (together, the “Real Property”)
constitute all of the real properties used or occupied by the Companies.

 

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(b) With respect to the Real Property, except as set forth on Schedule 3.4(b):

(i) no portion thereof is subject to any pending condemnation or eminent domain
Proceeding or other Proceeding by any public or quasi-public authority and, to
the Knowledge of the Sellers and the Companies, there is no threatened
condemnation or eminent domain Proceeding or other Proceeding with respect
thereto;

(ii) the improvements on the Real Property are in good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted, and
are adequate and suitable for the purposes for which they are presently being
used;

(iii) the Companies have delivered to the Purchaser a true and complete copy of
each Real Property Lease, including all amendments, supplements and
modifications thereto;

(iv) with respect to the Leased Real Property, each Company, as applicable, is
the owner and holder of all of the leasehold estates purported to be granted by
the Real Property Leases, each Real Property Lease is in writing, duly executed,
in full force and effect and constitutes a valid and binding obligation of such
Company enforceable in accordance with their respective terms and there does not
exist under any such Real Property Lease any default by such Company or any
event which with notice or lapse of time or both would constitute a default by
such Company and, to the Knowledge of the Sellers and the Companies, no other
party is in default under any Real Property Lease or has exercised any
termination rights with respect thereto;

(v) each Company’s possession and quiet enjoyment of the rights and benefits
granted it under the Real Property Leases have not been disturbed in any
material respect and there are no known disputes with respect to the Real
Property Leases;

(vi) no written notice of a material violation of any Law, or of any covenant,
condition, easement or restriction affecting any Leased Real Property or
relating to its use or occupancy has been received by any Company;

(vii) to the Knowledge of the Sellers and the Companies, no security deposit or
portion thereof deposited with respect to such Real Property Lease has been
applied in respect of a breach or default under such Real Property Lease that
has not been redeposited in full;

(viii) none of the other parties to the Real Property Leases is an Affiliate of,
or otherwise has any economic interest in, any Company;

(ix) neither Company has caused any work to be performed on or about the Leased
Real Property within the six-month period prior to the date hereof that would
legally entitle any Person to file or record any mechanic’s or materialmen’s
lien, which claim remains unpaid;

 

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(x) with respect to the Leased Real Property, to the Knowledge of the Sellers
and the Companies, all licenses, Permits and approvals required for the
occupancy and operation of the Leased Real Property (with appurtenant parking
uses) as presently being used have been obtained and are in full force and
effect and neither Company has received any written notice of violations in
connection with such licenses, Permits and approvals;

(xi) neither Company’s leasehold interests in the Leased Real Property has been
pledged, mortgaged, encumbered or subjected to a Lien (other than a Permitted
Lien);

(xii) there are no Contracts, written or oral, to which either Company is a
party, granting to any other party the right of use or occupancy of any portion
of the Real Property; and

(xiii) there are no parties (other than the Companies) in possession of any
portion of the Real Property.

Section 3.5. Title to Assets.

Except as set forth on Schedule 3.5, each Company has good, marketable and valid
title to all of the Properties reflected in the Financial Statements as being
owned by such Company, free and clear of all Liens. All equipment and other
items of tangible personal property and assets used by each Company (a) are in
good operating condition and in a state of good maintenance and repair, ordinary
wear and tear excepted, (b) are usable in the regular and ordinary course of
business and (c) materially conform to all applicable Laws, ordinances, codes,
rules and regulations applicable thereto, and the Sellers and the Companies have
no Knowledge of any defects or problems with any of the equipment, other items
of tangible personal property and assets, ordinary wear and tear excepted. No
Person other than each Company owns any equipment or other tangible personal
property or assets situated on the premises of such Company that are necessary
to the operation of the business of such Company, except for the leased items
that are subject to personal property leases. There are no developments
affecting any of the Properties pending or, to the Knowledge of the Sellers and
the Companies, threatened, that might materially detract from the value,
materially interfere with any present or intended use or adversely affect the
marketability of such Properties. The building, structures and equipment of each
Company are sufficient for the continued conduct of the business of such Company
after the date hereof in substantially the same manner as conducted prior to the
date hereof.

Section 3.6. Financial Statements; Undisclosed Liabilities.

(a) Schedule 3.6(a) contains true, correct and complete copies of (i) an
unaudited consolidated balance sheet of each Company as of December 31, 2014 and
the related unaudited consolidated statements of income, changes in
stockholder’s equity or member’s equity, as applicable, and cash flow for the
twelve months then ended, including in each case the notes

 

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thereto, (ii) an audited consolidated balance sheet of each Company as of
December 31, 2013, and the related audited consolidated statements of income,
changes in stockholder’s equity or member’s equity, as applicable, and cash flow
for each of the fiscal years then ended, together with the notes thereto and the
report thereon of Owen Petersen & Co., LLP, independent certified public
accountants, and (iii) an unaudited consolidated balance sheet of each Company
(the “Interim Balance Sheet”) as of February 28, 2015 (the “Latest Balance Sheet
Date”) and the related unaudited consolidated statements of income, changes in
stockholder’s equity or member’s equity, as applicable, and cash flow for the
two months then ended, including in each case the notes thereto (clauses (i),
(ii) and (iii) collectively, the “Financial Statements”). The Financial
Statements fairly present the financial condition and the results of operations,
changes in stockholder’s equity or member’s equity, as applicable, and cash flow
of each Company as at the respective dates of and for the periods referred to in
such Financial Statements, all in accordance with GAAP, subject, in the case of
the interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse). No financial statements of any Person other than those of the
Companies are required by GAAP to be included in the consolidated financial
statements of either Company.

(b) Except as set forth on Schedule 3.6(b), neither Company has any Liabilities,
except for (i) Liabilities on the Interim Balance Sheet, (ii) Liabilities that
have arisen since the Latest Balance Sheet Date in the ordinary course of
business (provided that there is no such Liability that relates to breach of
Contract, breach of warranty, tort, infringement, violation of Law, Order or
Permit or any Proceeding, in each case as in effect on or before the date
hereof) and (iii) Liabilities arising under this Agreement. Neither Company has,
either expressly or by operation of Law, assumed or undertaken any material
Liability of any other Person. The reserves reflected on the Interim Balance
Sheet for Liabilities have been established in accordance with GAAP consistently
applied in accordance with past practices throughout the periods covered
thereby.

Section 3.7. Absence of Certain Changes.

Except as set forth on Schedule 3.7, since December 31, 2014, there has not been
(a) to the Knowledge of the Sellers and the Companies, any event, occurrence,
development or state of circumstances or facts that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect, (b) any damage, destruction, loss or casualty to property or assets of
either Company, whether or not covered by insurance, (c) any sale, transfer,
license, pledge, mortgage or other disposal of tangible or intangible assets of
either Company, (d) any violation by any of the Sellers or any of the Companies
of any Laws related to any Federal Health Care Program or State Health Care
Program, (e) any change in any of the accounting (and Tax accounting) policies,
practices or procedures of either Company or (f) any Contract entered into for
either Company to take any of the actions specified in this Section 3.7.

Section 3.8. Legal Proceedings.

(a) Except as set forth in Schedule 3.8(a), there are no Proceedings pending or,
to the Knowledge of the Sellers and the Companies, threatened against, relating
to or involving any Company. The Sellers have delivered or made available to the
Purchaser true, correct and complete copies of all material documents and
correspondence relating to such matters required to be referred to in Schedule
3.8(a).

(b) There are no Proceedings that (i) resulted in any criminal or civil
sanctions or (ii) within the last three years resulted in any payments, in each
case by or against either Company or any of its respective officers, directors
or managers (whether as a result of a judgment, civil fine, settlement or
otherwise).

 

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Section 3.9. Compliance with Laws.

Each Company is (and has been at all times during the past five years) in
material compliance with all Laws and Orders applicable to such Company. Except
as set forth on Schedule 3.9, since January 1, 2010, each Company, (a) has not
been charged with, and, to the Knowledge of the Sellers and the Companies, is
not now under investigation with respect to, a violation of any applicable Law,
Order or other requirement of a Governmental Entity, (b) has not been a party to
or bound by any Order and (c) has filed all reports required to be filed with
any Governmental Entity or third party payer and all such reports are accurate
and complete in all material respects and in material compliance with all
applicable Laws and third party payer regulations and procedures.

Section 3.10. Compliance with Health Care Laws.

(a) Each Company is (and has been at all times during the past five years) in
material compliance with (i) the False Statements Statute (18 U.S.C. §1001), the
Criminal False Claims Statute (18 U.S.C. §287), the Civil False Claims Act (31
U.S.C. §3729), the Medicare and Medicaid Civil Monetary Penalties Act (42 U.S.C.
§1320a-7a), the Medicare and Medicaid Patent Protection Act of 1987 (42 U.S.C.
§1320a-7b), the Stark Law (42 U.S.C. §1395nn), the Medicare and Medicaid
Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)), HIPAA, the Health Information
Technology for Economic and Clinical Health Act (the “HITECH Act”), any and all
regulations promulgated under any of the foregoing and all similar state
statutes in all of the states in which such Company operates, (ii) any Law
prohibiting the making of any false statement or misrepresentation of material
facts to any Governmental Entity that administers a federal or state healthcare
program (including, but not limited to, Medicare and Medicaid), (iii) any Law,
manual provision or administrative interpretation regarding coding, billing or
reimbursement for healthcare services payable by a state, federal or private
healthcare program or the licensure, certification or registration requirements
of healthcare facilities, services or equipment, (iv) any state certificate of
need or similar Law governing the establishment of healthcare facilities or
services or the making of healthcare capital expenditures, (v) any state Law
relating to fee-splitting or the corporate practice of medicine, (vi) any state
Law prohibiting physician self-referral or state anti-kickback Law, (vii) any
Law relating to the delivery of, or claim for payment for, a healthcare item or
service under any federal or state healthcare program, (viii) any federal or
state Law relating to the interference with or obstruction of any investigation
into any criminal offense or other violation of Law, (ix) any Law relating to
the unlawful manufacture, distribution, prescription or dispensing of a
controlled substance, (x) any state Law related to the protection and/or privacy
of patient data and (xi) any other healthcare regulatory program or Law
applicable to the Business including, without limitation, the Public Health Law
and Social Services Law of the State of New York.

 

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(b) Schedule 3.10 hereto lists all required cost reports and other submissions
and filings (other than claims for payments) with respect to Medicaid and
Medicare or other third party payments to each Company, and the last year for
which such cost reports or other submissions or filings have been audited by any
Governmental Entity or other third party payor (and all disallowances and
retroactive rate adjustments thereon settled, paid or otherwise recouped). All
such cost reports and other submissions and filings were complete and accurate
in all material respects and were prepared in accordance with the requirements
of the Medicaid program, the Medicare program or the other third party payors,
as applicable.

(c) No third party payor (including, without limitation, Medicare or Medicaid)
has asserted any liability against any Company that has not been settled or
paid, excepting payables due in the ordinary course of business. To the
Knowledge of the Sellers and the Companies, there is no pending audit or any
pending or threatened audit assessment or retroactive rate adjustment against
either Company, and no basis therefor, and, if any such audit assessment or
retroactive rate adjustment is so asserted, it will be promptly paid or
otherwise satisfied by the Companies and will have no Material Adverse Effect.
Neither Company is subject to any other pending or, to the Knowledge of the
Sellers and the Companies, threatened investigation or inquiry by any
Governmental Entity.

(d) Schedule 3.10 hereto also contains a complete and correct list of all
agreements, arrangements and other relationships of each Company currently in
effect, or in effect at any time during the past five years, with Persons who
refer or have referred to or otherwise generate or have generated business for
such Company (including, without limitation, sales representatives and referring
health care providers).

(e) To the Knowledge of the Sellers and the Companies, no referring physician,
chiropractor, podiatrist, dentist, nurse or other licensed health professional
currently has, or has had at any time after July 1, 2010, an ownership interest
in or otherwise has or had a financial relationship with either Company.

(f) Each Company is in material compliance with the applicable privacy,
security, transaction standards, breach notification, and other provisions and
requirements of HIPAA and the HITECH Act and any comparable state Laws. Each
Company has established and implemented such policies, programs, procedures,
contracts and systems as are necessary to comply with HIPAA and the HITECH Act.
Schedule 3.10 hereto contains a complete and correct list of all policies,
programs and notices that each Company has enacted to comply with 45 C.F.R. Part
160 and Part 164, Subparts A, C and E, including, but not limited to, notices of
privacy practices, breach notification policies, security policies and business
associate agreements, copies of which have been supplied to the Purchaser.
Neither Company has received any communication from any Person that alleges that
such Company is not in compliance with the HIPAA privacy and security standards
or the HITECH Act. To the Knowledge of the Sellers and the Companies, (i) no
Breach has occurred with respect to any unsecured Protected Health Information
maintained by or for a Company that is subject to the notification requirements
of 45 C.F.R. Part 164, Subpart D and (ii) no information security or privacy
breach event has occurred that would require notification under any comparable
state Laws. For the purposes of this Section 3.10, “Breach” means a breach of
unsecured Protected

 

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Health Information as defined in 45 C.F.R. §164.402, and “Protected Health
Information” means individually identifiable health information defined as
“protected health information” under 45 C.F.R. §160.103.

Section 3.11. Material Contracts.

(a) Schedule 3.11 sets forth a true, correct and complete list of the following
Contracts to which any Company is a party or is bound or to which any Seller is
a party with respect to each Company (collectively, the “Material Contracts”):

(i) any bond, debenture, note, loan, credit or loan agreement or loan
commitment, mortgage, indenture, guarantee or other Contract relating to the
borrowing of money;

(ii) any Contract with Governmental Entities and any subcontract as to a
Contract with Government Governmental Entities;

(iii) any Real Property Lease or other lease or license involving any properties
or assets (whether real, personal or mixed, tangible or intangible);

(iv) any Contract that limits or restricts either Company or any of its
respective officers or employees from engaging in any business in any
jurisdiction;

(v) any franchising or licensing agreement;

(vi) any Contract relating to Intellectual Property or Company IT Systems;

(vii) any Contract with, or obligation that involves, any independent
contractor, consultant or Leased Worker of either Company;

(viii) any employment agreement, severance agreement, retention agreement,
change in control agreement or collective bargaining agreement;

(ix) any Contract for capital expenditures or the acquisition or construction of
fixed assets;

(x) any Contract that provides for an increased payment or benefit, or
accelerated vesting, upon the execution of this Agreement or in connection with
the transactions contemplated hereby;

(xi) any Contract granting any Person a Lien on all or any part of any of the
assets of either Company or the Securities;

(xii) any Contract for the cleanup, abatement or other actions in connection
with any Hazardous Materials, the remediation of any existing environmental
condition or relating to the performance of any environmental audit or study;

 

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(xiii) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire the Securities
or any assets;

(xiv) any Contract with any agent, distributor, representative or sales or
marketing agreement that is not terminable without penalty on 30 calendar days’
or less notice;

(xv) any Contract for the granting or receiving of a license or sublicense or
under which any Person is obligated to pay or have the right to receive a
royalty, license fee or similar payment;

(xvi) any Contract providing for the indemnification or holding harmless of any
officer, director, manager, shareholder, member, employee or other Person;

(xvii) any joint venture or partnership Contract;

(xviii) any customer Contract for the provision of goods or services by either
Company, including with any third party payor;

(xix) any outstanding power of attorney empowering any Person to act on behalf
of either Company; and

(xx) all existing Contracts and commitments (other than those described in
subparagraphs (i) through (xix) of this Section 3.11) to which any of the
Companies or any of the Sellers is a party with respect to either Company or by
which any of such Company’s assets are bound involving an annual commitment or
annual payment to or from such Company that is material to such Company.

(b) True, correct and complete copies of all Material Contracts have been made
available to the Purchaser. The Material Contracts are legal, valid, binding and
enforceable in accordance with their respective terms with respect to the
applicable Company and with respect to each other party to such Material
Contracts. There are no (i) existing defaults or breaches by the Companies under
any Material Contract (or events or conditions that, with notice or lapse of
time or both, would constitute such a default or breach), (ii) to the Knowledge
of the Sellers and the Companies, existing defaults or breaches by the other
contracting parties under any Material Contract (or events or conditions that,
with notice or lapse of time or both, would constitute such a default or
breach), (iii) actual or, to the Knowledge of the Sellers and the Companies,
threatened termination, cancellation or limitation of any Material Contract or
(iv) pending or, to the Knowledge of the Sellers and the Companies, threatened
bankruptcy, insolvency or similar proceeding with respect to any party to such
Material Contracts. Neither any Seller nor any Company is participating in any
discussions or negotiations regarding modification of or amendment to any
Material Contract or entry in any new Material Contract.

Section 3.12. Insurance Policies.

(a) Schedule 3.12(a) contains a complete and correct list of all insurance
policies relating to each Company carried by or for the benefit of such Company,
specifying the insurer,

 

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policy number, amount and nature of coverage, the risk insured against, the
deductible amount (if any) and the date through which coverage will continue
pursuant to the terms of each policy. Each Company maintains insurance with
reputable insurers against those risks and in such amounts as required by the
State of New York or any Federal Health Care Program. All insurance policies and
bonds with respect to each Company and its assets are in full force and effect
and will be maintained by such Company in full force and effect as they apply to
any matter, action or event relating to such Company occurring through the
Closing Date, and neither Company has reached or exceeded its policy limits for
any insurance policies in effect at any time during the past five years. Except
as set forth on Schedule 3.12(a), there is no claim by either Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds or in respect
of which such underwriters have reserved their rights. All premiums payable
under all such policies and bonds have been timely paid, and each Company has
otherwise complied materially with the terms and conditions of all such policies
and bonds. To the Knowledge of the Sellers and the Companies, there is no
threatened termination of, premium increase with respect to, or material
alteration of coverage under, any of such policies or bonds.

(b) Schedule 3.12(b) contains a true, correct and complete list of all policies
of liability, theft, fidelity, business interruption, life, fire, product
liability, professional liability, workers compensation, health and other
material forms of insurance required to be held by each Company pursuant to any
Contract with a customer, vendor, payor or supplier.

Section 3.13. Environmental, Health and Safety Matters.

Except as set forth in Schedule 3.13:

(a) each Company possesses, and is in material compliance with, all Permits and
has filed all notices that are required under Environmental Laws, Federal Health
Care Programs and State Health Care Programs, and each Company is in material
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
those Laws or contained in any Law issued, entered, promulgated or approved
thereunder;

(b) there are no Liabilities arising in connection with or in any way relating
to either Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, arising under or relating to any
Environmental Law, except to the extent that any such Liability has arisen as a
result of any act or omission of any Person other than a Company and as to which
the Companies have no Knowledge, and, to the Knowledge of the Sellers and the
Companies, there are no facts, events, conditions, situations or set of
circumstances that could reasonably be expected to result in or be the basis for
any such Liability;

(c) no notice, notification, demand, request for information, citation, summons
or Order has been received and, to the Knowledge of the Sellers and the
Companies, no complaint has been filed, no penalty has been assessed and no
Proceeding is pending or, to the Knowledge of the Sellers and the Companies,
threatened by any Governmental Entity or other Person with respect to any
matters relating to either Company and relating to or arising out of any
Environmental Law;

 

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(d) neither Company is subject to any Liability, incurred or imposed or based
upon any provision of any Environmental Law or arising out of any act or
omission of either Company, or any of the employees, agents or representatives
or arising out of the ownership, use, control or operation by either Company of
any plant, facility, site, area or property (including, without limitation, any
plant, facility, site, area or property currently or previously owned or leased
by either Company) from which any Hazardous Materials were released into the
environment, except to the extent that any such Liability has arisen as a result
of any act or omission of any Person other than a Company and as to which the
Companies have no Knowledge (the term “release” meaning any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment, and the term “environment”
meaning any surface or ground water, drinking water supply, soil, surface or
subsurface strata or medium or the ambient air);

(e) neither Company has imported, manufactured, stored, used, operated,
transported, treated or disposed of any Hazardous Materials other than in
compliance with all Environmental Laws in all material respects, and, to the
Knowledge of the Sellers and the Companies, no Hazardous Material has been
discharged, disposed of, dumped, injected, pumped, deposited, spilled, leaked,
emitted or released at, on or under any Real Property or any other property now
or previously owned, leased or operated by either Company; and

(f) For purposes of this Section 3.13, the term “Company” (or any derivative
thereof) shall include any entity that is, in whole or in part, a predecessor of
either Company.

Section 3.14. Intellectual Property.

(a) Schedule 3.14(a) sets forth a true and correct list of all Intellectual
Property owned or used by the Companies (the “Company IP”) and the jurisdictions
where each is registered (if any). The Companies have good and marketable title
to or possess adequate licenses or other valid rights to use the Company IP,
free and clear of all Liens, excepting the Permitted Liens, and have paid all
maintenance fees, renewals or expenses related to such Company IP. To the
Knowledge of the Sellers and the Companies, each item of Company IP is valid and
enforceable. The Companies have taken commercially reasonable precautions to
protect the confidentiality of material trade secrets used in connection with
the business of each Company as currently conducted.

(b) Neither the use of the Company IP nor the conduct of the Business in
accordance with either Company’s past practices, or any current or former
product or service of either Company, misappropriates, infringes upon or
otherwise violates any Intellectual Property rights of any third party. None of
the Company IP is subject to any outstanding Order or agreement that restricts
the rights of the Companies to transfer, use, enforce or license Company IP. No
party has filed a claim or, to the Knowledge of the Sellers and the Companies,
threatened to file a claim against either Company alleging that such Company has
violated, infringed on or otherwise violated the Intellectual Property rights of
such party. To the Knowledge of the Companies, no third party has infringed or
is infringing any Intellectual Property right held by the Companies.

 

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(c) The Companies are in material compliance with their obligations under the
terms of any agreement pursuant to which any Company has rights in any Company
IP, and neither Company or, to the Knowledge of the Companies, any third party,
is in default under such agreement. The Companies have not granted to any third
party any license or right to the commercial use of any of the Company IP.

(d) To the extent any passwords are used in the conduct of the Business, whether
internally or by users of Products, each Company maintains accurate records and
logs of such passwords and such records and logs will be available to Purchaser
at Closing.

(e) Each Company is currently conducting its business in accordance with
applicable Privacy Laws, and has conducted its business in material compliance
with such Privacy Laws, since and to the extent the same first became applicable
to it. No Personal Information has been (i) collected by either Company in
violation of any Privacy Laws or (ii) transferred or disclosed by either Company
to third parties in violation of any Privacy Laws. Neither Company has received
a written complaint regarding the collection, use, processing, storage or
disclosure of Personal Information or, to the Knowledge of the Sellers and the
Companies, experienced any material breach of security or other unauthorized
access by third parties to any trade secrets or confidential information,
including any Personal Information in the possession, custody or control of
either Company or any of its respective service providers.

(f) The Company IT Systems that are necessary for or material to the conduct of
each Company’s business are in good working condition and reasonably sufficient
for the existing needs of each Company and have commercially reasonable
security, back-ups and disaster recovery arrangements in place. To the Knowledge
of the Companies, the Company IT Systems have not suffered any material failure
or security breach within the past five years.

(g) The transactions contemplated by this Agreement will not have an adverse
effect on either Company’s right, title or interest in and to any Company IP,
and all such Company IP shall be owned or available for use by the Companies on
identical terms and conditions immediately following the Closing, without
payment of any additional fees.

(h) The Company IT Systems are under the ownership or control of, and are
entitled to be used by, as applicable, each Company.

Section 3.15. Transactions with Affiliates.

Except as set forth on Schedule 3.15, no officer, director, shareholder, manager
or member, as applicable, of either Company, or any Person with whom any such
officer, director, shareholder, manager or member has any direct or indirect
relation by blood, marriage or adoption, or any entity in which any such Person
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than two percent of the stock of which is beneficially owned by all
such Persons in the aggregate) or any Affiliate of any of the foregoing or any
current or former

 

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Affiliate of either Company has any interest in (a) any Contract, arrangement or
understanding with, or relating to, either Company, (b) any loan, arrangement,
understanding or Contract for or relating to either Company or (c) any property
(real, personal or mixed), tangible or intangible, used or currently intended to
be used by either Company (the “Related Party Transactions”).

Section 3.16. Payor Relations.

Schedule 3.16 contains a true and complete list of the name and address of those
payors of each Company that, on a consolidated basis, constitute 10% or more of
either Company’s gross revenue (including, without limitation, private insurers,
hospitals, clinics, agencies, Medicare and Medicaid) and the amount of gross
revenue attributable to such payor based on revenue on the income statement
included in the Financial Statements for the two-month period ended on the
Latest Balance Sheet Date, and since the Latest Balance Sheet Date no such payor
has terminated its relationship with or adversely curtailed its payments to
either Company or communicated to either Company (for any reason) its intention
to so terminate its relationship or curtail its payments.

Section 3.17. Employees; Labor Relations.

(a) Schedule 3.17(a) contains a true and complete list of all of the employees
of each Company other than Field Staff as of the date of this Agreement,
specifying for each such Person, as applicable, the (i) annual salary, hourly
wages and bonuses, (ii) position or service provided and (iii) start date,
length of service, with an appropriate notation next to the name of any
individual on such list who is subject to any Contract or any other written
document relating to the terms and conditions of employment of such employee.
Schedule 3.17(a) further contains a true and complete copy of a summary of all
payments made to South Shore Field Staff in 2014. Neither Company utilizes or
contracts with, or has utilized or has contracted with in the past three years,
any independent contractor or consultant with respect to the provision of
homecare services. Neither Company has made any written or oral commitment to
any individual with respect to compensation, promotion, retention, termination,
severance or similar matters in connection with the transactions contemplated by
this Agreement.

(b) Neither Company is delinquent in payments to any employee or Leased Worker
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by such Person to date or amounts required to be
reimbursed to such Person. There are no Employee Advances outstanding.

(c) Neither the employees of either Company, nor any Leased Worker of either
Company, have been, and currently are, represented by any labor organization
with respect to their employment at either Company or affecting their provision
of services to either Company. Neither Company has been, and is not a party to
or bound by, and its operations are not subject to, any collective bargaining
agreement. To the Knowledge of the Sellers and the Companies, no union
organizing campaign or other attempt to organize or establish a labor
organization involving or representing employees of either Company, or otherwise
affecting terms and conditions for any Leased Workers providing services to
either Company, has occurred, is in progress or is threatened. There is no
pending or, to the Knowledge of the Sellers and the Companies, threatened
petition, demand for recognition or other application for certification as

 

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a collective bargaining representative for any bargaining unit of employees or
otherwise against or affecting either Company. To the Knowledge of the Sellers
and the Companies, there is no labor strike, lockout, material dispute,
grievance, picketing, work slowdown or work stoppage pending or threatened
against, involving or affecting either Company and, to the Knowledge of the
Sellers and the Companies, no event has occurred that could reasonably be
expected to give rise to any such labor strike, lockout, material dispute,
grievance, work slowdown, picketing or work stoppage.

(d) Except as set forth on Schedule 3.17(d), there are no Proceedings pending
against either Company relating to any alleged violation of any Employment Laws.
Except as set forth on Schedule 3.17(d), no workers’ compensation or workers’
compensation retaliation claim, complaint, charge or investigation is pending
against either Company, and each Company has maintained and currently maintains
adequate insurance as required by applicable Law with respect to workers’
compensation claims and unemployment benefits claims.

(e) Each Company is in material compliance with all applicable Employment Laws
and all Contracts governing or concerning terms or conditions of employment and
Leased Workers.

(f) Since January 1, 2010, neither Company has received a claim from any
Governmental Entity to the effect that such Company has improperly classified
any employee as an independent contractor or to the effect that such Company has
improperly classified as exempt from overtime or minimum wages any employee who
is non-exempt. Each Company is in material compliance with each applicable Law
and has correctly characterized each of its service providers as either an
employee or an independent contractor and is and has correctly, in compliance in
all material respects with each applicable Law, characterized each of its
employees as exempt or non-exempt from wage and hour requirements.

(g) Except as set forth on Schedule 3.17(g), neither Company is a government
contractor or subcontractor on government contracts obligated to have an
affirmative action plan. For each Contract listed on Schedule 3.17(g), the
applicable Company is, and has been within the past three years, in material
compliance with all affirmative action requirements of such Contracts and any
applicable Law.

(h) Neither Company has effectuated or been involved with any plant closing or
mass layoff during the past three years that could implicate any applicable Law
requiring notice of plant closing or layoff, including WARN.

Section 3.18. Employee Benefits.

(a) Schedule 3.18(a) contains a correct and complete list of each Company’s
Employee Benefit Plans (collectively, the “Company Benefit Plans”) (i) that
cover any employees, contract employees or former employees of such Company or
any beneficiaries thereof (A) that are maintained, sponsored or contributed to
by such Company or (B) with respect to which such Company is obligated to
contribute or has any actual or potential Liability at any time during the
six-year period ending on the Closing Date or (ii) with respect to which such
Company has any actual or potential Liability or obligation on account of the
maintenance or sponsorship thereof or contribution thereto by any present or
former ERISA Affiliate of such Company.

 

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(b) Except as set forth on Schedule 3.18(b), with respect to each Company
Benefit Plan:

(i) all required, declared or discretionary (in accordance with historical
practices), payments, premiums, contributions, reimbursements or accruals for
all periods ending prior to, or as of, the date hereof have been properly paid
or properly accrued on the Financial Statements or, with respect to accruals
properly made after the Latest Balance Sheet Date, on the books and records of
each Company and all amounts withheld from employees have been timely deposited
into the appropriate trust or account;

(ii) no Proceedings (other than routine claims for benefits) are pending or, to
the Knowledge of the Sellers and the Companies, threatened, against or relating
to any Company Benefit Plan or any fiduciary thereof, and, to the Knowledge of
the Sellers and the Companies, there is no basis for any such Proceeding against
any Company Benefit Plan;

(iii) except as may be required under Laws of general application, no Company
Benefit Plan obligates either Company to provide any employee or former
employee, or their spouses, family members or beneficiaries, any post-employment
or post-retirement health or life insurance, accident or other “welfare-type”
benefits;

(iv) neither either Company nor any of their respective ERISA Affiliates is or
has ever maintained, established, sponsored, participated in, contributed to,
been obligated to contribute to or otherwise incurred any obligations or
Liability (including any contingent Liability) with respect to any
“multiemployer plan” (as defined in Section 3(37) of ERISA), a “multiple
employer plan” (as defined in Section 413 of the Code, whether or not subject to
the Code) or a “defined benefit pension plan” (as defined in Section 3(35) of
ERISA), and no event or fact exists that could give rise to any Liability to
either Company or any of their respective ERISA Affiliates under Title IV or
Section 412 of the Code;

(v) neither Company nor any ERISA Affiliates has engaged in any transaction
described in Section 4069, 4204(a) or 4212(c) of ERISA and none of the Companies
nor any ERISA Affiliates nor any other Person, including any fiduciary, has
engaged in any “prohibited transaction” (as defined in Section 4975 of the Code
or Section 406 of ERISA), which could subject any Company Benefit Plan or any
related trust or any Company or any Person that either Company has an obligation
to indemnify, to any material tax or penalty imposed under Section 4975 of the
Code or Section 502 of ERISA; and

(vi) neither Company has made or agreed to make, and is not required to make (in
order to bring any Company Benefit Plan into compliance with ERISA, the Code or
any applicable Law), any changes in benefits that would materially increase the
costs of maintaining any Company Benefit Plan.

 

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(c) Except as set forth on Schedule 3.18(c), with respect to each Company
Benefit Plan:

(i) such Company Benefit Plan has been established, maintained, operated and
administered in all material respects in accordance with its terms and in
compliance with ERISA, the Code and other applicable Laws (including with
respect to reporting and disclosure); and

(ii) any Company Benefit Plan that is intended to be “qualified” within the
meaning of Section 401(a) of the Code meets all requirements for qualification
under Section 401(a) of the Code and the regulations thereunder. With respect to
each such qualified Company Benefit Plan, the IRS has issued either (A) a
favorable determination or (B) a favorable opinion letter if such Company
Benefit Plan is a prototype plan, and, to the Knowledge of the Companies, no
matter exists that would adversely affect the qualified status of such Company
Benefit Plan and any related trust.

(d) With respect to each Company Benefit Plan set forth in Schedule 3.18(a), the
Companies have provided the Purchaser with true, correct and complete copies of
(i) all documents and any amendments thereto (or in the event the Company
Benefit Plan is not written, a written description thereof) pursuant to which
each Company Benefit Plan is maintained and administered (including the summary
plan description for each Company Benefit Plan for which a summary plan
description is required and each trust agreement and insurance or group annuity
contract relating to any Company Benefit Plan), (ii) the three most recent
annual reports (Form 5500 and attachments) and financial statements therefor,
(iii) all governmental rulings, determinations and opinions (and pending
requests therefor), (iv) any correspondence from a Governmental Entity with
respect to any matter that remains unresolved, or any matter that resulted in
the imposition of Liability on either Company or its ERISA Affiliates, and
(v) the most recent determination letter or opinion letter received from the IRS
with respect to each Company Benefit Plan intended to qualify under
Section 401(a) of the Code. The foregoing documents accurately reflect all of
the terms of such Company Benefit Plans (including, without limitation, any
agreement or provision that would limit the ability of either Company to make
any prospective amendments or to terminate any Company Benefit Plan).

(e) Each Company Benefit Plan that is in any part a “nonqualified deferred
compensation plan” subject to Section 409A of the Code materially complies and,
at all times has materially complied, both in form and operation, with the
requirements of Section 409A of the Code and the final regulations and other
applicable guidance thereunder. No compensation payable by either Company has
been reportable as nonqualified deferred compensation in the gross income of any
individual or entity, and subject to an additional tax, as a result of the
operation of Section 409A of the Code.

(f) Except as set forth in Schedule 3.18(f), the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee,
officer, director or manager, as applicable, of either Company to any
retirement, severance, change in control, unemployment compensation or any other
payment, bonus or enhanced or accelerated benefit (including any lapse of
repurchase rights or obligations with respect to any equity plans or other
benefit under any compensation plan or arrangement of the Companies or the
Sellers or its or their respective Affiliates), (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such

 

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employee, officer, director or manager, as applicable, or result in any
limitation on the right of either Company to amend, merge, terminate or receive
a reversion of assets from any Company Benefit Plan or related trust or
(iii) result in any payment (whether in cash or property or the vesting of
property) to any “disqualified individual” (as such term is defined in Treasury
Regulation Section 1.280G-1) that could reasonably be construed, individually or
in combination with any other such payment, to constitute an “excess parachute
payment” (as defined in Section 280G(b)(1) of the Code). The execution of this
Agreement (either alone or in conjunction with any other event) shall not result
in the funding of any “rabbi” or similar trust pursuant to any Company Benefit
Plan.

Section 3.19. Permits.

Except as set forth on Schedule 3.19, each Company has all Permits necessary for
its operations, such Permits are in full force and effect and no violations are
or have been recorded in respect of any thereof, and no Proceeding is pending
or, to the Knowledge of the Sellers and the Companies, threatened to revoke or
limit any thereof. Each Company has taken all necessary action to maintain each
Permit. Schedule 3.19 contains a true, correct and complete list of all such
Permits under which such Company is operating or bound, and each Company has
furnished or made available to the Purchaser true, correct and complete copies
of the Permits set forth on Schedule 3.19. To the Knowledge of the Sellers and
the Companies, there is no proposed change in any applicable Law that would
require either Company to obtain any Permits not set forth on Schedule 3.19.
Except as set forth on Schedule 3.19, none of the Permits set forth on Schedule
3.19 shall be adversely affected as a result of the Companies’ or the Sellers’
execution and delivery of, or the performance of their obligations under, this
Agreement or the consummation of the transactions contemplated hereby.

Section 3.20. Brokers.

Except as set forth on Schedule 3.20 (which constitute Seller Expenses), neither
the Companies nor the Sellers, nor any officer, shareholder, director, member,
manager or employee of the Companies or the Sellers or any Affiliate of the
Companies or the Sellers, have employed any broker, finder or investment banker
or incurred any Liability for any investment banking fees, financial advisory
fees, brokerage fees or finders’ fees in connection with the transactions
contemplated by this Agreement.

Section 3.21. Taxes.

(a) Each Company has complied in all material respects with all Tax Laws and has
duly and timely filed all Tax Returns required by applicable Law to be filed.
All such Tax Returns are true, correct, and complete in all material respects.
All Taxes shown as payable on such Tax Returns have been timely paid, and
neither Company has any material unpaid Taxes with respect to such Tax Returns
or otherwise. There are no existing Liens for Taxes (except for Permitted
Liens).

(b) Each Company has timely and properly withheld (i) all required amounts from
payments to its employees, agents, contractors, nonresidents, and other Persons
and (ii) all sales, use, and value added Taxes. Each Company has timely remitted
all withheld Taxes to the proper Governmental Entity in accordance with all
applicable Laws.

 

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(c) Neither Company has extended any statute of limitations relating to any
Taxes of such Company or relating to such Company’s assets or employees that the
Purchaser could be liable for under applicable Law. No Government Entity has
made a claim that either Company is obligated to pay Taxes as result of
conducting the Business, owning its assets, or employing any employee (including
the employees of such Company) in a jurisdiction in which such Company is not
filing Tax Returns and paying Taxes. No audits or other Proceedings are ongoing
or, to the Knowledge of the Sellers and the Companies, threatened with respect
to any Tax Return or Taxes of either Company (including any Tax Returns or Tax
relating to any asset or any employee of such Company).

(d) South Shore has duly elected to be treated as an S corporation pursuant to
Code Section 1362(a) and the Laws of each state and other jurisdiction in which
South Shore conducts business or could otherwise be subject to income Taxes.
Each of these elections was initially effective as of January 1, 2004 and is
currently effective. No event has occurred (or fact has existed) that would
preclude South Shore from initially qualifying as an S corporation under Code
Section 1361(a) or that would terminate South Shore’s S corporation status
(other than the transactions contemplated by this Agreement). No Governmental
Entity has challenged the effectiveness of any of these elections.

(e) South Shore has not incurred (and has no potential for) any Liability for
income Taxes under Code Section 1374 (or any similar provision of any state’s or
other jurisdiction’s applicable Laws) on the disposition or sale of any asset of
South Shore (whether actual or deemed). South Shore has not incurred (and, to
the Knowledge of the Sellers and the Companies, has no potential for) any
Liability for income Taxes in any state or other jurisdiction on the sale or
other disposition of any asset of the Company (whether actual or deemed).

(f) Since the date of its formation, Acaring has been treated as a partnership
or disregarded entity for all income Tax purposes. No election is pending to
change the income Tax treatment of Acaring.

(g) Neither Company is (or has ever been) a “United States real property holding
corporation” within the meaning of Code Section 897(c).

(h) Neither Company has ever been a member of a group of corporations that
elects, is required to, or otherwise files a Tax Return or pays a Tax on an
affiliated, consolidated, combined, or unitary basis. Neither Company is liable
for Taxes of any other Person as a result of successor liability, transferee
liability, joint or several liability, contractual liability, or otherwise.
Neither Company is obligated to pay, gross up, or otherwise indemnity any
employee for any Taxes, including Taxes under Code Section 409A.

(i) Neither Company has engaged in any transaction that could affect the income
Tax liability for any taxable year not closed by the applicable statute of
limitations (i) that is a “reportable transaction” (ii) that is a “listed
transaction” or (iii) a “significant purpose of which is the avoidance or
evasion of United States federal income tax” within the meanings of Code

 

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Sections 6662, 6662A, 6011, 6012, 6111, or 6707A or Treasury Regulations
promulgated thereunder or pursuant to notices or other guidance published by the
Internal Revenue Service (irrespective of the effective dates).

(j) Neither Company is subject to a Tax holiday or Tax incentive or grant in any
jurisdiction (collectively, a “Tax Incentive”) that will terminate (or be
subject to a clawback or recapture) as a result of the transactions contemplated
by this Agreement. There is no potential for any Tax Incentive that was realized
on or prior to the Closing Date to be subject to recapture as a result of any
actions or activities following the Closing Date.

(k) Neither Company is required to include an item of income, or exclude an item
of deduction, for any period after the Closing Date as a result of (i) an
installment sale transaction occurring on or before the Closing governed by Code
Section 453 (or any similar provision of state, local or non-U.S. Laws), (ii) a
transaction occurring on or before the Closing reported as an open transaction
for U.S. federal Income Tax purposes (or any similar doctrine under state,
local, or non-U.S. Laws), excepting only the collection of receivables, (iii) a
change in method of accounting requested or occurring on or prior to the Closing
Date, (iv) an agreement entered into with any Government Entity (including a
“closing agreement” under Code Section 7121) on or prior to the Closing Date,
(v) the application of Code Section 263A (or any similar provision of state,
local or non-U.S. Laws) or (vi) an election (including a protective election)
pursuant to Code Section 108(i). Each Company currently uses the cash method of
accounting for income Tax purposes.

Section 3.22. Disclosure.

No representation or warranty made by the Companies or the Sellers in this
Agreement, the Schedules or the Exhibits attached to this Agreement or any of
the Seller Ancillary Documents, and no certificate furnished or to be furnished
to the Purchaser at the Closing, contains an untrue statement of a material fact
or omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Sellers as follows:

Section 4.1. Organization.

The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.

Section 4.2. Authorization.

The Purchaser has full corporate power and authority to execute and deliver this
Agreement and any other certificate, agreement, document or other instrument to
be executed

 

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and delivered by Purchaser in connection with the transactions contemplated by
this Agreement (collectively, the “Purchaser Ancillary Documents”), to perform
its obligations under this Agreement and the Purchaser Ancillary Documents and
to consummate the transactions contemplated by this Agreement and the Purchaser
Ancillary Documents. The execution and delivery of this Agreement and the
Purchaser Ancillary Documents by the Purchaser, the performance by the Purchaser
of its obligations under this Agreement and the Purchaser Ancillary Documents
and the consummation of the transactions provided for in this Agreement and the
Purchaser Ancillary Documents have been duly and validly authorized by all
necessary corporate action on the part of the Purchaser. This Agreement has been
and, as of the Closing Date, the Purchaser Ancillary Documents will be, duly
executed and delivered by the Purchaser and do or will, as the case may be,
constitute the valid and binding agreements of the Purchaser, enforceable
against the Purchaser in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors’ rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.

Section 4.3. Absence of Conflicts.

Except as set forth on Schedule 4.3, the execution, delivery and performance of
this Agreement and the Purchaser Ancillary Documents, the consummation of the
transactions contemplated by this Agreement and the Purchaser Ancillary
Documents and the fulfillment of and compliance with the terms and conditions of
this Agreement and the Purchaser Ancillary Documents do not or will not, as the
case may be, with the passing of time or the giving of notice or both, violate
or conflict with, constitute a breach of or default under, result in the loss of
any benefit under, or permit the acceleration of any obligation under, or
otherwise require any action, approval, order, authorization, registration,
declaration or filing with respect to (a) any term or provision of the
certificate of incorporation, bylaws or other organizational documents of the
Purchaser, (b) any Contract to which the Purchaser is a party or other
instrument applicable to the Purchaser, (c) any Order by which the Purchaser is
bound or (d) any provision of any Permit, Law or Order applicable to the
Purchaser that in any case would be reasonably likely to prevent or materially
delay the performance by the Purchaser of any of its obligations under this
Agreement or the consummation of any of the transactions contemplated hereby.

Section 4.4. Brokers.

Except for Provident Healthcare Partners LLC, neither the Purchaser, nor any
officers, directors or employees of the Purchaser, nor any Affiliate of the
Purchaser, has employed any broker, finder or investment banker or incurred any
Liability for any investment banking fees, financial advisory fees, brokerage
fees or finders’ fees in connection with the transactions contemplated by this
Agreement.

 

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ARTICLE V

CERTAIN COVENANTS AND AGREEMENTS

Section 5.1. Conduct of Business.

(a) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, except as consented to in writing by the
Purchaser, the Companies shall, and the Sellers shall cause the Companies to,
conduct the Business in the ordinary course of business consistent with past
practice and use commercially reasonable efforts to preserve the rights, assets,
properties, business organization, licenses and Permits related to each Company
and preserve the goodwill and relationships of such Company’s employees,
independent contractors, consultants, Leased Workers, customers, suppliers,
regulators and others with a relationship with such Company. Without limiting
the foregoing, from the date hereof until the earlier of the Closing Date or the
termination of this Agreement, each Company shall, and the Sellers shall cause
each Company to use commercially reasonable efforts to:

(i) keep and maintain its assets, in their present condition, repair and working
order, except for normal wear and tear;

(ii) perform all material obligations under the Material Contracts;

(iii) keep in full force and effect all present insurance policies or other
comparable insurance coverage;

(iv) preserve and maintain all Permits and all Material Contracts;

(v) pay its debts, Taxes and other obligations when due;

(vi) maintain its books and records in accordance with past practice; and

(vii) comply with all Laws applicable to it.

(b) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, the Companies shall notify the Purchaser of:

(i) any state of facts, change, event, effect or occurrence that is or may be
reasonably likely to have a Material Adverse Effect on the Companies;

(ii) any material unexpected change in the normal course of business or in the
normal operation of the properties or assets of the Companies;

(iii) any material shortfalls or declines in revenue, margins or profitability
of the Companies;

(iv) any material loss of or disruption in, any customer, supplier and/or vendor
relationships;

(v) any material loss of personnel;

 

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(vi) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

(vii) any actions, suits, claims, investigations or Proceedings commenced or, to
the Knowledge of the Companies, threatened against, relating to or involving or
otherwise affecting the Companies that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 3.7 or that relate to the consummation of the transactions contemplated
by this Agreement;

(viii) the damage or destruction by fire or other casualty of any of the
material assets of the Companies or part thereof or in the event that any of the
material assets of the Companies or part thereof becomes the subject of any
Proceeding or, to the Knowledge of the Sellers and the Companies, threatened
Proceeding for the taking thereof or any part thereof or of any right relating
thereto by condemnation, eminent domain or other similar governmental action;
and

(ix) the occurrence, or failure to occur, of any event, the occurrence of which
or failure would be likely to cause any representation or warranty of the
Sellers or the Companies contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Closing Date or
that will or may result in the failure to satisfy any of the conditions
specified in Article VI of this Agreement and any failure of any Company or any
Seller to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.

No such notice shall limit or modify in any way, or act or result in a waiver
of, the Sellers’ obligations with respect to any breach of any of the
representations, warranties, covenants or agreements contained herein
(including, without limitation, conditions to Closing or indemnification
obligations).

(c) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, except as consented to in writing by the
Purchaser, the Companies shall not, and the Sellers shall cause the Companies
not to:

(i) take any action that would (A) adversely affect the ability of the Companies
to obtain any consents required for the transactions contemplated thereby or
(B) adversely affect the ability of any Company or any Seller to perform its
covenants and agreements under this Agreement;

(ii) impose, or suffer the imposition, on any of the rights, properties or
assets of either Company of any Lien or permit any such Lien to exist, in each
case, other than Permitted Liens;

(iii) other than in the ordinary course of business, sell, contribute or enter
into any contract to sell or contribute any interest in any of the assets of
either Company;

(iv) issue any securities;

 

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(v) grant any increase or change in compensation (salary, bonus or otherwise) or
benefits to any employee, independent contractor, consultant or Leased Worker of
either Company, except in accordance with past practice;

(vi) enter into, modify or terminate any Contract with any employee, independent
contractor, consultant or relating to any Leased Worker, other than in the
ordinary course of business, or any collective bargaining agreement with any
labor organization, concerning or pertaining to compensation, benefits, hours or
terms and conditions of employment or the provision of services to either
Company;

(vii) commence any litigation involving any right, property, asset or Liability
of either Company other than in the ordinary course of business or settle any
litigation involving any right, property, asset or Liability of either Company;
provided, however, that Purchaser’s consent to any such settlement shall not be
unreasonably withheld, conditioned or delayed; or

(viii) modify, amend or terminate any Material Contract or waive, release,
compromise or assign any rights or claims; provided, however, the Purchaser’s
consent to any such modification, amendment, termination, waiver, release,
compromise or assignment shall not be unreasonably withheld, conditioned or
delayed.

Section 5.2. Access to Information; Confidentiality.

(a) From the date hereof through the Closing Date, each Company shall, and the
Sellers shall cause each Company to, (i) give the Purchaser and its agents and
authorized representatives access to all offices, facilities, books and records,
officers, employees and advisors as the Purchaser may reasonably request, upon
reasonable prior written notice, (ii) furnish the Purchaser and its authorized
representatives with such financial, operating and other data and information as
Purchaser and its authorized representatives may reasonably request and
(iii) instruct the representatives of such Company to cooperate with the
Purchaser in its investigation of such Company. The Purchaser covenants that any
investigation shall be conducted in such a manner as not to unreasonably disrupt
the normal operations of the Companies.

(b) At Closing, any obligation the Purchaser has under any Contract entered into
with any of the Companies or any of the Sellers prior to the date hereof
relating to confidentiality shall terminate.

(c) From and after the Closing Date, each of the Sellers shall, and shall cause
her Affiliates to, hold in confidence any and all information concerning the
Companies, except to the extent that such Seller can show that information
(i) is generally available to and known by the public through no fault of such
Seller, any of her Affiliates or their respective representatives or (ii) is
lawfully acquired by such Seller, any of her Affiliates or their respective
representatives from and after the Closing from sources that are not prohibited
from disclosing such information by a legal, contractual or fiduciary
obligation. If any of the Sellers or any of her Affiliates or their respective
representatives are compelled to disclose any information by judicial or
administrative process or by other requirements of Law, such Seller

 

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shall promptly notify the Purchaser in writing and shall disclose only that
portion of such information that such Seller is advised by her counsel in
writing is legally required to be disclosed; provided that such Seller shall use
her commercially reasonable efforts to obtain, at the Purchaser’s expense, an
appropriate protective order or other reasonable assurance that confidential
treatment will be accorded such information.

Section 5.3. Commercially Reasonable Efforts.

Subject to the terms and conditions of this Agreement, each of the Parties
hereto shall (a) use its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law to consummate the transactions contemplated by
this Agreement at the earliest practicable date (including actions necessary to
prevent the entry of any injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered in connection
with the transactions contemplated by this Agreement) and (b) refrain from
taking any actions that could reasonably be expected to impair, delay or impede
the Closing. Without limiting the foregoing, each party shall use its
commercially reasonable efforts to cause the Closing to occur by the Outside
Date.

Section 5.4. Consents.

Without limiting the generality of Section 6.1, the Sellers, the Companies and
the Purchaser shall each use commercially reasonable efforts to obtain all
licenses, permits, authorizations, consents and approvals of all third parties
and Governmental Entities necessary in connection with the consummation of the
transactions contemplated by this Agreement prior to the Closing. Each of the
Parties will make or cause to be made all filings and submissions under
applicable Laws as may be required for the consummation of the transactions
contemplated by this Agreement. The Parties will coordinate and cooperate with
each other in exchanging such information and assistance as any Party may
reasonably request in connection with the foregoing. Notwithstanding anything to
the contrary contained in this Agreement, the Purchaser shall not be required to
undertake any measures which in the reasonable opinion of the Purchaser are
unusual to obtain any such approvals or consents, including, without limitation,
under no circumstances shall the Purchaser be required to (a) make any payments
to any Person or party from whom such consents or approvals are sought, as
consideration therefor, or (b) except as the Purchaser may otherwise agree in
writing (and the Purchaser shall have no obligation to so agree), accept any
changes in the terms of the document or instrument for which a consent, approval
or waiver is sought.

Section 5.5. Public Announcements.

Subject to their respective legal obligations, the Purchaser and the Sellers
shall consult with one another regarding the timing and content of all
disclosures or announcements regarding any aspect of this Agreement or the
transactions contemplated hereby to the financial community, Governmental
Entities, employees, customers or the general public and shall use reasonable
efforts to agree upon the text of any such disclosure or announcement prior to
its release. Notwithstanding the foregoing, neither the Purchaser, the Companies
nor the Sellers shall publicly announce the existence of the Agreement, the
terms of the Agreement or the

 

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transactions contemplated hereby, except as required by applicable Law or the
rules of the NASDAQ Stock Market or made in connection with quarterly earnings
releases, quarterly earnings calls or in filings made with the United States
Securities and Exchange Commission. In addition, the Purchaser shall be
responsible for the timing and content of all post-Closing communications to
customers, suppliers, vendors and payors of each Company.

Section 5.6. Non-Competition.

(a) Until five years after the Closing Date (the “Non-Compete Period”), none of
the Sellers shall directly or indirectly own, manage, control, participate in,
consult with, render services for or in any manner engage in or represent any
business within the Restricted Territory that (i) is competitive with the
Business or (ii) provides private, state or federally reimbursed personal care
services, adult protective services, adult day services or private duty home
care services. As used in this Agreement, “Restricted Territory” means the State
of New York and all states adjacent thereto.

(b) Nothing herein shall prohibit any Seller from being a passive owner of not
more than two percent in the aggregate of the outstanding stock of any class of
a corporation that is publicly traded, so long as such Seller has no active
participation in the business of such corporation.

(c) During the Non-Compete Period, none of the Sellers shall, directly or
indirectly through another Person, (i) induce or attempt to induce any employee
of the Purchaser or any of its Affiliates (including after the Closing, any
Company) to leave the employ of the Purchaser or any such Affiliate or in any
way interfere with the relationship between the Purchaser or such Affiliate, on
the one hand, and any employee thereof, on the other hand, or engage in any
conduct or communications with any employee of the Purchaser or any of its
Affiliates that directly or indirectly causes or with the intent to cause such
employee to terminate his or her employment relationship with the Purchaser or
such Affiliate, (ii) hire any person who was an employee of the Purchaser or any
of its Affiliates (including after the Closing, any Company) until one year
after such individual’s employment relationship with the Purchaser or such
Affiliate has been terminated or (iii) induce or attempt to induce any customer,
supplier, vendor, payor, licensee or other business relation of the Purchaser or
any of its Affiliates (including after the Closing, any Company) to cease doing
business with the Purchaser or such Affiliate or in any way interfere with the
relationship between any such customer, supplier, vendor, payor, licensee or
business relation, on the one hand, and the Purchaser or such Affiliate, on the
other hand.

(d) Each Seller acknowledges that she has received and will receive sufficient
consideration and other benefits as provided hereunder to clearly justify the
foregoing restrictions. Each Seller has carefully considered the nature and
extent of the restrictions placed upon her by this Agreement and hereby
acknowledges and agrees that the same are reasonable in time, scope and
territory, do not confer a benefit upon the Purchaser or any of its Affiliates
disproportionate to the detriment of such Seller, are in the legitimate business
interests of and reasonable and necessary for the protection of the Purchaser
and its Affiliates and are an essential inducement to the Purchaser to
consummate the transactions contemplated by this Agreement.

 

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(e) Each Seller recognizes and agrees that the restrictions set forth in this
Section 5.6 control over any prior restrictive covenants that such Seller may
have previously entered into with any Company, or any predecessor thereof, and
also consents and agrees that the restrictions herein shall be enforceable by
any successors or assigns of the Purchaser, as applicable.

(f) If, at the time of enforcement of this Section 5.6, a court or arbitrator
holds that the restrictions stated herein are unreasonable under the
circumstances then existing, the Parties agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area determined to be reasonable under the
circumstances by such court or arbitrator, as applicable.

(g) Each Seller covenants and agrees that she will not seek to challenge the
enforceability of the covenants contained in this Section 5.6 against the
Purchaser or any of its Affiliates, nor will she assert as a defense to any
action seeking enforcement of the provisions contained in this Section 5.6
(including an action seeking injunctive relief) that such provisions are not
enforceable due to lack of sufficient consideration received by her. The Parties
agree and acknowledge that money damages would be an inadequate remedy for any
breach of this Section 5.6. Therefore, in the event of a breach or threatened
breach by the Sellers of this Section 5.6, the Purchaser or its successors or
assigns may, in addition to other rights and remedies existing in their favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce, or prevent any violations of,
the provisions of this Section 5.6 (without posting a bond or other security).

Section 5.7. No Shop.

Unless and until this Agreement is terminated pursuant to Article VII, neither
any of the Companies nor any of the Sellers shall, directly or indirectly,
through any officer, director, manager, employee, agent, intermediary, Affiliate
or otherwise, (a) solicit, initiate or encourage submission of proposals or
offers from any Person relating to any purchase of an interest in either Company
or any of the assets of either Company or any transaction, in each case, that
would adversely affect the consummation of the transactions contemplated by this
Agreement, (b) participate in any discussions or negotiations regarding, or
furnish to any other Person, any information with respect to, or otherwise
respond to, cooperate or encourage, any effort or attempt by any other Person to
purchase any interest in either Company or any of the assets of either Company
or any transaction, in each case, that would adversely affect the consummation
of the transactions contemplated by this Agreement or (c) approve or undertake
any of the foregoing transactions. If any Company or any Seller receives an
offer or proposal relating to any purchase of an interest in either Company or
the assets of either Company, such Company or such Seller shall promptly notify
the Purchaser of the receipt of such offer.

Section 5.8. Tax Matters.

(a) Apportionment. If any Tax or (or Tax refund) relates to a Straddle Period,
the parties shall use the following conventions (i) in the case of property
Taxes and other similar Taxes imposed on a periodic basis, the amount of Taxes
(or Tax refunds) attributable to the portion of the Straddle Period ending on
the Closing Date shall be determined by multiplying the Taxes for the entire
Straddle Period by a fraction, the numerator of which is the number of

 

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calendar days in the portion of the Straddle Period ending on the Closing Date
and the denominator of which is the number of calendar days in the entire
Straddle Period and (ii) in the case of all other Taxes, the amount of Taxes (or
Tax refunds) attributable to the portion of the Straddle Period ending on the
Closing Date shall be determined as if a separate return was filed for the
Straddle Period ending as of the end of the day on the Closing Date using a
“closing of the books methodology”; provided, however, that for purposes of
clause (ii), exemptions, allowances or deductions that are calculated on an
annual basis (including depreciation and amortization deductions) shall be
apportioned based on the mechanics set forth in clause (i) for periodic Taxes.

(b) Transfer Taxes. All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, franchise, property, transfer, gains and
similar Taxes incurred in connection with the transactions contemplated by this
Agreement (collectively, “Transfer Taxes”) shall be borne by the Purchaser. The
Purchaser and the Sellers shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation. The
Party that is required by applicable Law to make the filings, reports, or
returns with respect to any applicable Transfer Taxes shall do so, and the other
Party shall cooperate with respect thereto as necessary.

(c) Tax Returns.

(i) The Sellers, at their sole cost and expense, shall (A) prepare and timely
file (or cause the applicable Company to prepare and timely file) all Tax
Returns of each Company due (after taking into account all appropriate
extensions) on or prior to the Closing Date (the “Pre-Closing Tax Returns”),
(B) prepare (or cause South Shore to prepare) the IRS Form 1120S (and any
comparable state and local Tax Returns) of South Shore for any Pre-Closing Tax
Period (the “S Corporation Returns”), (C) prepare (or cause Acaring to prepare)
the IRS Form 1065 (and any comparable state and local Tax Returns) of Acaring
for any Pre-Closing Tax Period (the “Partnership Returns” and collectively with
the Pre-Closing Tax Returns and S Corporation Returns, the “Seller Prepared
Returns”) and (D) timely pay (or cause the Company to timely pay) all Taxes that
are shown as payable with respect to any Seller Prepared Returns. Each Seller
Prepared Return shall be prepared in accordance with existing procedures and
practices and accounting methods. Each S Corporation Return and Partnership
Return due after the Closing Date shall be submitted to the Purchaser for the
Purchaser’s review and approval (which shall not be unreasonably withheld,
delayed or conditioned) at least 30 days prior to the due date of the Tax
Return. The Purchaser shall cause the applicable Company to file, in the form
reasonably approved by the Purchaser, all S Corporation Returns and Partnership
Returns required to be filed after the Closing which are prepared by the Sellers
and timely delivered to the Purchaser in accordance with this Section 5.8(c)(i).

(ii) The Purchaser shall cause each Company to prepare and timely file all Tax
Returns (other than S Corporation Returns and Partnership Returns) of such
Company due after the Closing Date (the “Purchaser Prepared Returns”). To the
extent that a Purchaser Prepared Return relates solely to a Pre-Closing Tax
Period, such Tax Return shall be prepared on a basis consistent with existing
procedures and practices and

 

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accounting methods, unless, as reasonably determined by the Purchaser, such
procedure, practice, accounting method or other contemplated treatment does not
have sufficient legal support to avoid the imposition of Taxes in the form of
penalties, in which case, such Purchaser Prepared Return shall be prepared in
accordance with any good faith method determined by the Purchaser that has
sufficient support to avoid the imposition of Taxes in the form of penalties. To
the extent that a Purchaser Prepared Return relates solely to a Pre-Closing Tax
Period and is not prepared on a basis consistent with existing procedures and
practices and accounting methods, such Tax Return shall be submitted to the
Sellers for the Sellers’ review and approval (which shall not be unreasonably
withheld, delayed or conditioned) at least 30 days prior to the due date of the
Tax Return.

(d) Tax Contests. The Purchaser shall control, or cause the applicable Company
to control, the conduct of any audit or other Proceeding relating to Taxes of
such Company (a “Tax Contest”); provided, however, that the Sellers, at the
Sellers’ sole cost and expense, shall have the right to participate in any such
Tax Contest to the extent it relates solely to Taxes for a Pre-Closing Tax
Period. Notwithstanding the foregoing, if any Tax Contest relates solely to S
Corporation Returns or Partnership Returns for a Pre-Closing Tax Period, the
Sellers, at the Sellers’ sole cost and expense, shall control such Tax Contest;
provided, however, that (i) the Sellers shall control such contest diligently
and in good faith, (ii) the Sellers shall keep the Purchaser reasonably informed
regarding the status of such Tax Contest, (iii) the Purchaser, at the
Purchaser’s sole cost and expense, shall have the right to participate, or cause
the applicable Company, to participate in such Tax Contest and (iv) the Sellers
shall not settle, resolve or abandon (and shall not allow such Company to
settle, resolve or abandon) such Tax Contest without the prior written
permission of the Purchaser (which shall not be unreasonably withheld,
conditioned, or delayed).

(e) Cooperation. The Purchaser and the Sellers shall (i) assist in the
preparation and timely filing of any Tax Return (including any claim for a Tax
refund) relating to either Company, (ii) assist in any audit or other Proceeding
with respect to Taxes or Tax Returns relating to either Company, (iii) make
available any information, records, or other documents relating to any Taxes or
Tax Returns relating to either Company, (iv) provide any information required to
allow the Purchaser to comply with any information reporting or withholding
requirements contained in the Code or other applicable Tax Laws and (v) provide
certificates or forms, and timely execute any Tax Return that are necessary or
appropriate to establish an exemption for (or reduction in) any Transfer Tax.

(f) South Shore Section 338(h)(10) Election.

(i) The Sellers shall join (and, as necessary, cause any Person that is treated
as the owner of the Shares for income Tax purposes to join), in an appropriate
and timely manner, with the Purchaser in making an election under
Section 338(h)(10) of the Code and any corresponding election permitted under
the applicable Laws of any local, state or non-U.S. jurisdiction (collectively,
the “Section 338(h)(10) Election”) with respect to the Purchaser’s acquisition
of the Shares of South Shore.

 

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(ii) The Sellers shall cooperate (and, to the extent any Seller is not treated
as the owner of the Shares treated for income Tax purposes, such Seller shall
cause the Person that is treated as the owner of the Shares for income Tax
purposes to cooperate) with the Purchaser to take all actions necessary or
appropriate to effect and preserve a timely Section 338(h)(10) Election with
respect to the Purchaser’s acquisition of the Shares, including, but not limited
to, participating in the timely filing of IRS Form 8023 and related or
comparable forms for state, local or foreign law purposes (collectively, the
“Section 338(h)(10) Forms”).

(iii) The Purchaser shall prepare all Section 338(h)(10) Forms (other than
sections that relate to information regarding each Seller and parties in such
Seller’s control) and shall provide them to each Seller for completion and
execution. The Sellers shall cause (and, as applicable, shall cause any other
Person that is treated as owning the Shares for income Tax purposes) to promptly
and properly complete and execute all of the forms the Purchaser provides and
return the appropriately executed copies to the Purchaser for timely filing by
the Purchaser with the applicable Governmental Entity. For avoidance of doubt,
with respect to the IRS Form 8023, the Sellers shall be responsible for
(A) completing the information regarding the Sellers (and any other Person that
is treated as owning the Shares for income tax purposes) in Section C,
(B) completing the information regarding South Shore in Section B and
(C) properly executing (and causing each other Person that is treated as owning
any Share for U.S. federal income Tax purposes properly to execute) the form on
the signature blocks under the heading “S Corporation Shareholder Signatures”
and subject to the required penalties of perjury statement.

(iv) Within 60 days of determination of the Net Working Capital, as finally
determined, the Purchaser shall provide to the Sellers a schedule allocating the
portion of the Purchase Price allocable to South Shore (and the relevant
liabilities of South Shore) among the assets of South Shore (the “South Shore
Purchase Price Allocation Schedule”). The South Shore Purchase Price Allocation
Schedule shall be prepared in accordance with the applicable provisions of the
Code and consistent with the methodologies set forth on Schedule 5.8(f). The
Purchaser and the Sellers shall make appropriate adjustments to the South Shore
Purchase Price Allocation Schedule to reflect changes in the Purchase Price, if
any.

(v) The Purchaser and each Seller shall file all Tax Returns (and cause their
respective Affiliates and Persons that are treated as owning the Shares for
income Tax purposes to file all Tax Returns) consistently with the
Section 338(h)(10) Election, the Section 338(h)(10) Forms and the South Shore
Purchase Price Allocation Schedule (as appropriately adjusted) and to not take
any position during the course of any audit or other Proceeding that is
inconsistent with such election, forms or schedule, unless required by a
determination of the applicable Governmental Entity that is final.

(vi) Notwithstanding anything to the contrary contained in this Agreement, the
Seller Ancillary Documents or the Purchaser Ancillary Documents, in the event
that the Section 338(h)(10) Election results in an increase in the taxes to be
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connection with the sale of the Securities, over and above the taxes that would
have been paid by the Sellers had there been no Section 338(h)(10) Election (the
“Excess Taxes”), the Purchaser shall pay to the Sellers, within 10 Business Days
of the final determination of Excess Taxes, the lesser of (a) such additional
amounts as are necessary to completely compensate the Sellers for such Excess
Taxes, as finally determined, so that the Sellers receive the same after-tax
amounts from the sale of the Securities that they would have received had there
been no Section 338(h)(10) Election and (b) $760,000. The Sellers shall in good
faith prepare and deliver to the Purchaser a statement setting forth the Excess
Taxes, specifying in reasonable detail such calculations (the “Excess Tax
Statement”). Following receipt of such statement, the Purchaser will be afforded
a 20-Day Period to review the Excess Tax Statement. At or before the end of the
20-Day Period, the Purchaser will either (A) accept the Excess Taxes, as set
forth in the Excess Tax Statement in its entirety, or (B) deliver to the Sellers
an Objection Notice containing written explanation, setting forth in reasonable
detail, those items in the Excess Tax Statement that the Purchaser disputes, in
which case the items specifically identified by the Purchaser shall be deemed in
dispute. The failure by the Purchaser to deliver the Objection Notice within the
20-Day Period shall constitute the Purchaser’s acceptance of the Excess Taxes,
as set forth in the Excess Tax Statement. The Purchaser may make inquiries of
the Sellers and their accountants and appropriate employees and have reasonable
access to the Sellers’ books and records regarding questions concerning, or
disagreements with, the Excess Tax Statement arising in the course of its review
thereof, and the Sellers shall use reasonable efforts to cause any such
employees and accountants to cooperate with, respond to such inquiries and
provide such requested information in a timely manner (subject to the Purchaser
entering into any confidentiality and other agreements reasonably required by
the accountants). If the Purchaser delivers the Objection Notice within the
20-Day Period, then, within a further period of 20 Business Days from the end of
the 20-Day Period, the Purchaser and the Sellers, and if desired, their
accountants, will attempt to resolve in good faith any disputed items and reach
a Settlement Agreement with respect thereto. Failing such resolution, the
unresolved disputed items will be referred for final binding resolution to the
Arbitrating Accountants, who shall be selected, and the fees and expenses of
whom shall be paid, in accordance with the procedure set forth in
Section 2.4(a)(ii). Such determination shall be (X) in writing, (Y) furnished to
the Sellers and the Purchaser as soon as practicable (and in no event later than
30 Business Days) after the items in dispute have been referred to the
Arbitrating Accountants and (Z) nonappealable and incontestable by the Parties
and each of their respective Affiliates and successors and assigns and not
subject to collateral attack for any reason other than manifest error or fraud.
The Sellers and the Purchaser shall each be given the opportunity to make
presentations to the Arbitrating Accountants.

(g) Acaring Tax Matters.

(i) With respect to certain Tax matters of Acaring, the Sellers and the
Purchaser agree as follows:

A. To treat the Sellers as selling their interests in Acaring and the Purchaser
as acquiring the assets of Acaring for all federal income Tax purposes,

 

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including any state or local Tax jurisdiction that follows the federal income
Tax system, and for all other purposes, including for purposes of Transfer
Taxes, to treat the Purchaser as acquiring all the Membership Interests from the
Sellers.

B. To treat Acaring as having a year for income tax purposes that ends as of the
close of the day on the Closing Date and to file a final IRS Form 1065 for such
year.

C. To treat any gains, income, deductions, losses, or other items realized by
Acaring with respect to any transaction engaged on the Closing Date, but after
the Closing, that is outside of the ordinary course or business as occurring the
“next day.”

Unless otherwise required by a determination of a Governmental Entity that is
final, the Sellers and the Purchaser shall prepare and file all Tax Returns (and
cause Acaring to file all Tax Returns), including timely and properly making all
agreed elections, consistently with the agreements set forth in this
Section 5.8(g)(i), and neither the Sellers nor the Purchaser shall take any
position during the course of any audit or other legal proceedings with respect
to any Taxes or Tax Returns that is inconsistent with the agreements set forth
above.

(ii) Within 60 days of determination of the Net Working Capital, as finally
determined, the Purchaser shall provide to the Sellers a schedule allocating the
portion of the Purchase Price allocable to Acaring (and the relevant liabilities
of Acaring) among the assets of Acaring (the “Acaring Purchase Price Allocation
Schedule”). The Acaring Purchase Price Allocation Schedule shall be prepared in
accordance with the applicable provisions of the Code and consistent with the
methodologies set forth on Schedule 5.8(g)(ii). The Purchaser and the Sellers
shall make appropriate adjustments to the Acaring Purchase Price Allocation
Schedule to reflect changes in the Purchase Price, if any. The Purchaser and
each Seller shall file all Tax Returns (and cause their respective Affiliates)
consistently with the Acaring Purchase Price Allocation Schedule (as
appropriately adjusted) and to not take any position during the course of any
audit or other Proceeding that is inconsistent with such election, forms or
schedule, unless required by a determination of the applicable Governmental
Entity that is final.

Section 5.9. Employees.

(a) Neither the Sellers nor the Companies shall take or cause to be taken, or
omit to take, any action that would cause any party to be in violation of or
otherwise trigger Liability under the federal Workers Adjustment and Retraining
Notification Act or any applicable state or local Laws pertaining to plant
closings and group layoffs (collectively, “WARN”) prior to the Closing Date, and
the Sellers agree to indemnify the Purchaser for any such Liability. The
Companies will provide the Purchaser with a list of all employees whose
employment is terminated within the six months immediately prior to the Closing
Date. The Purchaser shall be responsible for compliance with WARN, as well as
any Liability that may arise out of WARN, on account of any termination of an
employee of either Company, on or after the Closing Date,

 

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provided that, if the Purchaser requests either Company or the Sellers to
provide WARN notices prior to the Closing with respect to any plant closing or
mass layoff that will occur on or after the Closing, such Company or the Sellers
shall comply with such request and the Purchaser agrees to indemnify the Sellers
for any Liability arising thereunder.

(b) Effective as of the Closing, (i) each Company shall withdraw from and cease
to be a participating employer under the Company Benefit Plans, (ii) each
Company shall cause all employees of such Company to fully vest in all Company
Benefit Plans providing retirement or incentive benefits and (iii) the employees
of each Company shall cease to accrue further benefits and shall cease to be
active participants under the Company Benefit Plans. The Purchaser shall not
have any obligation, Liability or responsibility from and after the Closing to
or under the Company Benefit Plans, whether such obligation, Liability or
responsibility arose before, on or after the Closing Date. The Sellers shall be
responsible, or shall cause the Company Benefit Plans, to be responsible for
providing welfare benefits (including medical, hospital, dental, accidental
death and dismemberment, life, disability and other similar benefits) to each
Company’s employees for all claims incurred prior to the Closing Date under and
subject to the generally applicable terms and conditions of such plans.

Section 5.10. No Intent to Induce Referrals.

Each of the Purchaser and the Sellers acknowledges and agrees that no portion of
the Purchase Price payable by the Purchaser to the Sellers pursuant to this
Agreement is intended to represent a payment for any referral of future business
to the Purchaser, or to any of the Purchaser’s officers, directors, employees or
Affiliates, that is prohibited by 42 U.S.C. §1320a-7b, commonly referred to as
the “Anti-Kickback Statute.”

Section 5.11. Supplements to Schedules.

During the period between the date hereof and the Closing, for information
purposes only, the Sellers and the Companies will promptly supplement or amend
the Schedules that they have delivered pursuant to this Agreement with respect
to any matter that, if existing or occurring at or prior to the date hereof,
would have been required to be set forth or described in such Schedules or that
is necessary to correct any information in such Schedules that has been rendered
inaccurate thereby. No supplement or amendment to any Schedule will have any
effect with respect to claims for indemnification pursuant to Article VIII or
for the purpose of determining satisfaction of the conditions set forth in
Article VI. For purposes of determining whether there is any misrepresentation
or breach of a warranty, covenant or agreement by the Sellers or the Companies
hereunder, the Schedules delivered by the Sellers and the Companies shall be
deemed to include only the information contained therein on the date of this
Agreement.

Section 5.12. Release.

(a) Notwithstanding anything set forth herein to the contrary, effective as of
the Closing Date, in consideration of the mutual covenants and agreements
contained herein, including, without limitation, the payment of the Purchase
Price, each Seller, on behalf of herself and her Affiliates, hereby irrevocably
releases and forever discharges the Purchaser, the Companies and each of their
respective subsidiaries and each of their respective individual, joint or
mutual,

 

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past, present and future representatives, equity holders, subsidiaries,
successors, assigns, heirs, executors, administrators and Affiliates
(collectively, the “Released Persons”) of and from all manner of action and
actions, cause and causes of action, suits, rights, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, Contracts,
controversies, omissions, promises, variances, trespasses, losses, judgments,
executions, rights, claims and demands whatsoever, in Law or in equity that such
Seller ever had, now has or hereafter can, shall or may have, against the
Released Persons, whether known or unknown, suspected or unsuspected, matured or
unmatured, fixed or contingent, in law, equity or admiralty, for, upon or by
reason of any matter, thing or cause whatsoever, from the beginning of the world
to the Closing Date, including, without limitation, action and actions, cause
and causes of action, suits, rights, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, Contracts, controversies,
omissions, promises, variances, trespasses, losses, judgments, executions,
rights, claims and demands, but excluding any obligations of the Released
Persons pursuant to this Agreement and the Purchaser Ancillary Documents.

(b) Each Seller represents and warrants to the Released Persons that such Seller
has not assigned any such claim set forth in Section 5.12 and agrees to
indemnify and hold harmless the Released Persons from and against any and all
Losses arising from or in any way related to any such assignment.

(c) Each Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any proceeding of any kind against any Released Person, based
upon any matter purported to be released hereby.

Section 5.13. Additional Financial Statements.

As soon as available and in any event within 25 calendar days after the end of
each month prior to Closing, the Sellers shall furnish to the Purchaser
(a) unaudited financial statements (consisting of profit and loss statements and
balance sheets) for such monthly periods in such detail as such financial
statements have been prepared by the Sellers consistent with past practice and
(b) monthly key performance indicators with respect to client census and
billable hours.

Section 5.14. Financial Information; Audits.

Upon the request of the Purchaser made to the Sellers, the Sellers shall provide
to the Purchaser copies of, or shall provide the Purchaser reasonable access to,
such factual information as may be reasonably and timely requested by the
Purchaser, and in the possession or control of the Sellers or their respective
Affiliates or accountants, to enable the Purchaser’s parent (and/or its
Affiliates) to file its or their Current Reports on Form 8-K, Quarterly Reports
on Form 10-Q and Annual Reports on Form 10-K, in each case, including all
amendments thereto, if, as and when such filing may be required by the United
States Securities and Exchange Commission. After the Closing, the Sellers shall
allow an independent public accounting firm retained by the Purchaser at
Purchaser’s expense (the “Auditor”) to conduct an audit of the financial
statements of each Company for their most recently completed three fiscal years
and shall cooperate with the Auditor in the conduct of such audit.
Notwithstanding the foregoing, the Sellers shall be

 

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responsible for the costs of the 2014 Audited Financial Statements. In addition,
after the Closing (but not more than 10 Business Days after the Purchaser’s
request therefor made to the Sellers), the Sellers agree to provide to the
Auditor a letter of representation in form and substance reasonably satisfactory
to the Purchaser (the “Representation Letter”) and, if requested by the Auditor,
historical financial statements for each Company, including income and balance
sheet data for such Company and opinions. Without limiting the foregoing, after
the Closing: (a) the Purchaser or the Auditor may audit the operating statements
of each Company, and the Sellers shall provide such documentation as the
Purchaser or the Auditor may reasonably request in order to complete such audit,
and (ii) the Sellers shall furnish to the Purchaser such financial and other
information as may be reasonably required by the Purchaser’s parent to make any
filings with the United States Securities and Exchange Commission or other
Governmental Entity.

Section 5.15. 2014 Audited Financial Statements.

The Companies shall, and the Sellers shall cause the Companies to, prepare in
form and substance reasonably satisfactory to the Purchaser an audited
consolidated balance sheet of each Company as of December 31, 2014, and the
related audited consolidated statements of income, changes in stockholder’s
equity or member’s equity, as applicable, and cash flow for the fiscal year then
ended, together with the notes thereto and the report thereon of an independent
certified public accountant (the “2014 Audited Financial Statements”). When
preparing the 2014 Audited Financial Statements, the Sellers shall give the
Purchaser a reasonable opportunity to review and comment thereon, and the
Sellers shall act in good faith to consider and incorporate the Purchaser’s
comments therein.

Section 5.16. 2014 Personal Care Provider Cost Reports.

The Companies shall, and the Sellers shall cause the Companies to, prepare
personal care provider cost reports for the year 2014 (and 2015 if the same
shall be due prior to Closing) for filing with the New York State Department of
Health using the same methodologies (e.g., with respect to allowable costs and
expenses) as used in preparation of such reports for the years 2013 (and 2014 as
the case may be). The Purchaser shall have the right to review such reports
prior to their submission to the New York State Department of Health and provide
comments thereon, and the Sellers shall consider such comments in good faith for
inclusion therein.

Section 5.17. Further Assurances.

Following the Closing, each of the Parties hereto shall, and shall cause their
respective Affiliates to, execute and deliver such additional documents,
instruments, conveyances and assurances and take such further actions as may be
reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated by this Agreement, the Seller Ancillary Documents and
the Purchaser Ancillary Documents.

 

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ARTICLE VI

CLOSING CONDITIONS

Section 6.1. Conditions to the Purchaser’s Obligations to Close.

The obligations of the Purchaser to consummate the transactions contemplated by
this Agreement are subject to the fulfillment at or prior to the Closing of each
of the following conditions (any or all of which may be waived in whole or in
part by the Purchaser in its sole discretion):

(a) Representations and Warranties. The representations and warranties of the
Companies and the Sellers in Article III of this Agreement shall be true and
correct in all respects (in the case of any representation or warranty qualified
by materiality or Material Adverse Effect) or in all material respects (in the
case of representations and warranties not qualified by materiality or Material
Adverse Effect) on and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date (except for such
representations and warranties expressly stated to relate to a specific date, in
which case the accuracy of such representations and warranties shall be
determined as of such date).

(b) Performance. The Companies and the Sellers shall have, in all material
respects, performed and complied with all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by the
Companies and the Sellers at or prior to the Closing.

(c) Officer’s Certificates. Each Company and each Seller shall have delivered to
the Purchaser a certificate, dated as of the Closing Date, executed on its
behalf by an executive officer in the case of each Company or by each Seller, as
the case may be, certifying the fulfillment of the conditions specified in
Section 6.1(a), Section 6.1(b) and, to the Knowledge of the Sellers and the
Companies, Section 6.1(f).

(d) Secretary’s Certificates. Each Company shall have delivered to the Purchaser
a certificate, dated as of the Closing Date and signed by the Secretary of such
Company, certifying as to (i) such Company’s certificate or articles of
incorporation or formation, as applicable, (ii) the Company’s bylaws or limited
liability company agreement, as applicable, (iii) the incumbency of such
Company’s officers executing this Agreement and each Seller Ancillary Document
and (iv) the resolutions of such Company’s board of directors or board of
managers, as applicable, authorizing the execution, delivery and performance by
such Company of this Agreement and each Seller Ancillary Document.

(e) No Injunctions or Restraints. No applicable Law or injunction enacted,
entered, promulgated, enforced or issued by any Governmental Entity or
arbitrator or other legal restraint or prohibition preventing the consummation
of the transactions contemplated hereby shall be in effect.

 

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(f) No Material Adverse Effect. Since the Latest Balance Sheet Date, there shall
not have occurred, and no effect or circumstance shall exist that could be
expected to have, a Material Adverse Effect.

(g) Consents and Approvals. The Purchaser shall have received duly executed
copies of the New York Required Consent and all consents and approvals
(including, without limitations, those consents and approvals set forth on
Schedule 6.1(g)), in form and substance reasonably satisfactory to the
Purchaser, that are (i) required for consummation of the transactions
contemplated by this Agreement or (ii) required in order to prevent a breach of,
or a default under, or a termination of, any Material Contract.

(h) Resignations. The Purchaser shall have received the resignations of each
director, manager and officer of each Company as directed by the Purchaser.

(i) Ancillary Documents. The Sellers shall have delivered, or caused to be
delivered, to the Purchaser the following:

(i) the Escrow Agreement duly executed by the Sellers;

(ii) Payoff Letters with respect to all Closing Date Debt;

(iii) stock certificates evidencing all of the Purchased Shares, in each case
duly endorsed in blank or accompanied by stock powers duly executed in blank and
otherwise sufficient to transfer the Purchased Shares to the Purchaser free and
clear of all Liens;

(iv) documents from each Seller evidencing the transfer of the Purchased
Membership Interests owned by such Seller substantially in the form of Exhibit C
hereto;

(v) copies of all filings and/or notices, if any, made by the Sellers with
Governmental Entities and third party payors in connection with the consummation
of the transactions contemplated by this Agreement and the Seller Ancillary
Documents;

(vi) copies of the employment and non-competition agreements, dated as of the
Closing Date, between the Purchaser and the individuals set forth on Schedule
6.1(i)(vi), in substantially the form attached as Exhibit D hereto, duly
executed by each employee listed on Schedule 6.1(i)(vi) (the “Employment
Agreements”);

(vii) a certificate of each Seller in the form specified in Treasury Regulation
Section 1.1445-2(b)(2)(iv) that such Seller is not a “foreign person” within the
meaning of Section 1445 of the Code;

(viii) a properly executed IRS Form W-9 of each Seller;

(ix) IRS Form 8023 properly executed by each Seller and completed as provided in
Section 5.8(f);

(x) a certificate of the Secretary of State (or other applicable office) in
which each Company is organized and qualified to do business, dated as of a date
not more than five Business Days prior to the Closing Date, certifying as to the
good standing of such Company;

 

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(xi) evidence satisfactory to the Purchaser that the Sellers have secured tail
policies for each Company’s existing insurance plans that will cover all
Liabilities of such Company incurred prior to the Closing; and

(xii) all other documents required to be entered into by the Sellers pursuant to
this Agreement or reasonably requested by the Purchaser.

(j) Consents. The Purchaser shall have received copies of the consents set forth
on Schedule 4.3.

(k) Related Party Transactions. The Related Party Transactions set forth on
Schedule 6.1(k) shall have been terminated.

(l) 2014 Audited Financial Statements. The Purchaser shall have received the
2014 Audited Financial Statements in form reasonably satisfactory to the
Purchaser.

(m) South Shore Revenue and EBITDA. At the time of the Closing, South Shore
shall have a minimum of $47,000,000 in trailing twelve month revenue and a
minimum of $4,000,000 in trailing twelve month adjusted earnings before
interest, taxes, depreciation and amortization (calculated consistently with the
calculation thereof for purposes of the LOI). South Shore shall have delivered a
certificate to the Purchaser to such effect duly executed by an executive
officer of South Shore.

(n) Waiver of Certain Rights. Each Seller and each Company shall have waived all
of their respective rights, as applicable, under (i) that certain Second Amended
and Restated Shareholders’ Agreement, dated as of March 2012, between the
Sellers, and (ii) that certain Operating Agreement of Acaring, dated as of
September 12, 2000, required to so be waived in order to enter into this
Agreement and consummate the transactions contemplated hereby.

(o) Withdrawal from Joint Venture. South Shore shall have duly withdrawn as a
member and participant in the Care Management Network Joint Venture under that
certain Operating Agreement, dated as of September 12, 2012.

Section 6.2. Conditions to the Sellers’ Obligations to Close.

The obligations of the Sellers to consummate the transactions contemplated by
this Agreement are subject to the fulfillment at or prior to the Closing of each
of the following conditions (any or all of which may be waived in whole or in
part by the Sellers in their sole discretion):

(a) Representations and Warranties. The representations and warranties of the
Purchaser in Article IV of this Agreement shall be true and correct in all
respects (in the case of any representation or warranty qualified by materiality
or Material Adverse Effect) or in all material respects (in the case of
representations and warranties not qualified by materiality or

 

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Material Adverse Effect) on and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date (except
for such representations and warranties expressly stated to relate to a specific
date, in which case the accuracy of such representations and warranties shall be
determined as of such date).

(b) Performance. The Purchaser shall have, in all material respects, performed
and complied with all agreements, obligations, covenants and conditions required
by this Agreement to be so performed or complied with by the Purchaser at or
prior to the Closing.

(c) Officer’s Certificate. The Purchaser shall have delivered to the Sellers a
certificate, dated as of the Closing Date, executed on its behalf by an
executive officer, certifying the fulfillment of the conditions specified in
Section 6.2(a) and Section 6.2(b).

(d) Secretary’s Certificate. The Sellers shall have received a certificate,
dated as of the Closing Date and signed by the Secretary of the Purchaser,
certifying as to (i) the Purchaser’s certificate of incorporation, (ii) the
Purchaser’s bylaws, (iii) the incumbency of the Purchaser’s officers executing
this Agreement and each Purchaser Ancillary Document and (iv) the resolutions of
the board of directors of the Purchaser authorizing the execution, delivery and
performance by the Purchaser of this Agreement and each Purchaser Ancillary
Document.

(e) No Injunctions or Restraints. No applicable Law or injunction enacted,
entered, promulgated, enforced or issued by any Governmental Entity or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated hereby shall be in effect.

(f) Consents and Approvals. The Sellers and the Companies shall have received
the New York Required Consent.

(g) Ancillary Deliveries. The Purchaser shall have delivered, or caused to be
delivered, to the Sellers the following:

(i) the Escrow Agreement, duly executed by the Purchaser; and

(ii) all other documents required to be entered into or delivered by the
Purchaser at or prior to the Closing pursuant to this Agreement or the Purchaser
Ancillary Documents.

ARTICLE VII

TERMINATION

Section 7.1. Termination.

Prior to the Closing, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:

(a) at any time, by mutual written agreement of the Sellers and the Purchaser;

 

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(b) by either the Purchaser or the Sellers if a court of competent jurisdiction
shall have issued an Order permanently restraining or prohibiting the
transactions contemplated by the Agreement and such Order shall have become
final and nonappealable;

(c) by the Purchaser if any Company or any Seller materially breaches any of its
or her representations, warranties or obligations under this Agreement in a
manner that would prevent satisfaction, or result in the failure, of any
conditions to the Purchaser’s obligations to consummate the transactions
contemplated hereby as provided in Section 6.1, and such breach is not cured
within 10 days after written notice to the Sellers by the Purchaser; provided,
however, that no cure period will be required for any such breach that by its
nature cannot be cured or if, as a result of such breach and notwithstanding the
timely cure thereof, one or more of the conditions to the Purchaser’s
obligations to consummate the transactions contemplated hereby would not be
satisfied at or prior to the date that is 12 months from the date hereof (the
“Outside Date”);

(d) by the Sellers if the Purchaser materially breaches any of its
representations, warranties or obligations under this Agreement in a manner that
would prevent satisfaction, or result in the failure, of any conditions to the
Sellers’ obligations to consummate the transactions contemplated hereby as
provided in Section 6.2 and such breach is not cured within 10 days after
written notice to the Purchaser by the Sellers; provided, however, that no cure
period will be required for any such breach that by its nature cannot be cured
or if, as a result of such breach and notwithstanding the timely cure thereof,
one or more of the conditions to the Sellers’ obligations to consummate the
transactions contemplated hereby would not be satisfied at or prior to the
Outside Date; or

(e) by the Sellers or the Purchaser at any time after the Outside Date, if the
Closing shall not have occurred by 5:00 p.m. New York time on the Outside Date;
provided, however, that the right to terminate this Agreement shall not be
available (i) to the Sellers, if any breach of any provision of this Agreement
by either Seller or either Company has been the cause of, or resulted in,
directly or indirectly, the failure of the Closing to be consummated by the
Outside Date or (ii) the Purchaser, if any breach of any provision of this
Agreement by the Purchaser has been the cause of, or resulted in, directly or
indirectly, the failure of the Closing to be consummated by the Outside Date.

Section 7.2. Procedure and Effect of Termination.

Any Party desiring to terminate this Agreement pursuant to Section 7.1 shall
give written notice of such termination to the other Party. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 7.1 hereof, this Agreement shall become
void and there shall be no Liability on the part of any Party hereto, except
(a) the obligations provided for in this Section 7.2, Section 5.2(c)
(Confidentiality), Section 5.5 (Public Announcements) and Article IX
(Miscellaneous) hereof shall survive any such termination of this Agreement and
(b) nothing herein shall relieve any party from Liability for breach of this
Agreement.

 

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ARTICLE VIII

INDEMNIFICATION

Section 8.1. Indemnification Obligations of the Sellers.

The Sellers will, jointly and severally, defend and hold harmless the Purchaser
and its Affiliates (including after the Closing, the Companies), each of their
respective officers, directors, managers, employees, agents and representatives
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the “Purchaser Indemnified Parties”) from, against and in respect
of any and all claims, Liabilities, losses (whether or not involving a third
party claim), costs, expenses, Taxes, penalties, fines and judgments (at equity
or at law) and damages whenever arising or incurred (including, without
limitation, amounts paid in settlement, costs of investigation and reasonable
attorneys’ fees and expenses) arising out of, relating to or in connection with:

(a) any breach or inaccuracy of any representation or warranty made by any
Company or any Seller in this Agreement or in the Seller Ancillary Documents
(other than Taxes or related Losses from a breach or inaccuracy of any
representation or warranty set forth in Section 3.21 (Taxes), which, for the
avoidance of doubt, shall be governed exclusively by clause (c)) (for purposes
of determining Losses pursuant to this Article VIII, such representations and
warranties shall be read without reference to materiality, Material Adverse
Effect or similar phrases);

(b) any breach of any covenant, agreement or undertaking made by any Company or
any Seller in this Agreement or in the Seller Ancillary Documents (for purposes
of determining Losses pursuant to this Article VIII, such covenants, agreements
and undertakings shall be read without references to materiality, Material
Adverse Effect or similar phrases);

(c) any Indemnified Taxes;

(d) any Seller Expenses outstanding after the Closing;

(e) any Indebtedness of the Companies outstanding after the Closing;

(f) any fraud, willful misconduct or intentional breaches by any Company (prior
to the Closing) or any Seller in connection with this Agreement or the Seller
Ancillary Documents;

(g) any Liability or reimbursement obligation with respect to periods prior to
the Closing Date arising out of or related to a Company-specific negative
retroactive rate adjustment (net of any positive rate adjustments during the
same period) resulting from an audit of personal care provider cost reports
filed by the Companies with the New York State Department of Health. For the
avoidance of doubt, the foregoing indemnity shall not cover annual rate
adjustments of the type reflected on Schedule 3.10; and

(h) any of the matters listed on Schedules 3.8(a) and 3.17(d).

 

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The claims, Liabilities, losses (including, without limitation, diminution in
value of assets or equity interests), costs, expenses (including reasonable
attorneys’ and accountants’ and other professionals’ fees and litigation
expenses), penalties, fines, damages, shortages, assessments, Tax deficiencies
and Taxes (including interest and penalties thereon) incurred in connection with
the receipt of indemnification payments (including interest or penalties
thereon) arising from or in connection with any such matter that is the subject
of indemnification under this Article VIII, whether or not foreseeable, of the
Purchaser Indemnified Parties described in this Section 8.1 as to which the
Purchaser Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as the “Purchaser Losses.”

Section 8.2. Indemnification Obligations of the Purchaser.

The Purchaser will indemnify, defend and hold harmless the Sellers, their
Affiliates, each of their respective representatives and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
“Seller Indemnified Parties”) from, against and in respect of any and all
claims, Liabilities, costs, losses (whether or not involving a third party
claim), expenses, penalties, fines and judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement, costs of investigation and reasonable attorneys’ fees and
expenses) arising out of or incurred (including without limitation, amounts paid
in settlement costs of investigation and reasonable attorneys’ fees and
expenses) arising out of, relating to or in connection with:

(a) any breach or inaccuracy of any representation or warranty made by the
Purchaser in this Agreement or in any of the Purchaser Ancillary Documents (for
purposes of determining Losses pursuant to this Article VIII, such
representations and warranties shall be read without reference to materiality,
Material Adverse Effect or similar phrases);

(b) any breach of any covenant, agreement or undertaking made by the Purchaser
in this Agreement or in any of the Purchaser Ancillary Documents (for purposes
of determining Losses pursuant to this Article VIII, such covenants, agreements
and undertakings shall be read without references to materiality, Material
Adverse Effect or similar phrases); and

(c) any fraud, willful misconduct or intentional breaches by the Purchaser in
connection with this Agreement or the Purchaser Ancillary Documents.

The claims, Liabilities, losses (including, without limitation, diminution in
value of assets or equity interests), costs, expenses (including reasonable
attorneys’ and accountants’ and other professionals’ fees and litigation
expenses), penalties, fines, damages, shortages, assessments, Tax deficiencies
and Taxes (including interest and penalties thereon) incurred in connection with
the receipt of indemnification payments (including interest or penalties
thereon) arising from or in connection with any such matter that is the subject
of indemnification under this Article VIII, whether or not foreseeable, of the
Seller Indemnified Parties described in this Section 8.2 as to which the Seller
Indemnified Parties are entitled to indemnification are hereinafter collectively
referred to as the “Seller Losses.”

 

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Section 8.3. Indemnification Procedure.

(a) Promptly after receipt by a Purchaser Indemnified Party or a Seller
Indemnified Party (hereinafter collectively referred to as an “Indemnified
Party”) of notice by a third party (including any Governmental Entity) of any
complaint or the commencement of any audit, investigation, action or proceeding
with respect to which such Indemnified Party may be entitled to receive payment
from the other Party for any Purchaser Losses or Seller Losses, as the case may
be, such Indemnified Party will notify the Purchaser or the Seller, as the case
may be (the “Indemnifying Party”), promptly following the Indemnified Party’s
receipt of such complaint or of notice of the commencement of such audit,
investigation, action or proceeding; provided, however, that the failure to so
notify the Indemnifying Party will relieve the Indemnifying Party from Liability
under this Agreement with respect to such claim only if, and only to the extent
that, such failure to notify the Indemnifying Party results in the forfeiture by
the Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party shall have
the right, upon written notice delivered to the Indemnified Party within 10 days
thereafter assuming full responsibility for any Purchaser Losses or Seller
Losses, as the case may be, resulting from such audit, investigation, action or
proceeding, to assume the defense of such audit, investigation, action or
proceeding, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of the fees and disbursements of such counsel.
If, however, the Indemnifying Party declines or fails to assume the full
responsibility for any Losses or otherwise fails assume the defense of the
audit, investigation, action or proceeding on the terms provided above or to
employ counsel reasonably satisfactory to the Indemnified Party, in either case
within such 10-day period, then such Indemnified Party may employ counsel to
represent or defend it in any such audit, investigation, action or proceeding,
and the Indemnifying Party will pay the reasonable fees and disbursements of
such counsel as incurred. In any audit, investigation, action or proceeding with
respect to which indemnification is being sought hereunder, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, will have the right to participate in such matter and to retain its own
counsel at such party’s own expense. The Indemnifying Party or the Indemnified
Party, as the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of any matter the defense of which they
are maintaining and to cooperate in good faith with each other with respect to
the defense of any such matter.

(b) No Indemnified Party shall settle or compromise any claim or consent to the
entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
the Indemnifying Party fails to assume and maintain the defense of such claim
pursuant to Section 8.3(a). An Indemnifying Party may not, without the prior
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder unless (i) such settlement, compromise or consent
includes an unconditional release of the Indemnified Party from all Liability
arising out of such claim, (ii) does not contain any admission or statement
suggesting any wrongdoing or liability on behalf of the Indemnified Party,
(iii) does not contain any equitable order, judgment or term which in any manner
encumbers the assets of any Indemnified Party or affects, restrains or
interferes with the

 

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business of the Indemnified Party or any of the Indemnified Party’s Affiliates
and (iv) the Indemnifying Party has agreed to pay all amounts due pursuant to
the settlement or judgment concurrently with the effectiveness of the settlement
or judgment.

(c) In the event any Indemnified Party should have a claim for indemnity against
any Indemnifying Party that does not involve a third party claim, the
Indemnified Party shall deliver notice of such claim with reasonable promptness
to the Indemnifying Party. Such notice shall specify the basis for such claim.
The failure by any Indemnified Party to so notify the Indemnifying Party shall
not relieve the Indemnifying Party from any Liability that it may have to such
Indemnified Party with respect to any claim made pursuant to this
Section 8.3(c), it being understood that notices for claims in respect of a
breach of a representation or warranty shall be delivered prior to the
expiration of the survival period for such representation or warranty under
Section 8.4. If the Indemnifying Party does not notify the Indemnified Party
within 30 calendar days following its receipt of such notice that the
Indemnifying Party disputes its liability to the Indemnified Party under this
Article VIII, or the amount thereof, the claim specified by the Indemnified
Party in such notice shall be conclusively deemed a Liability of the
Indemnifying Party under this Article VIII, and the Indemnifying Party shall pay
the amount of such Liability to the Indemnified Party on demand or, in the case
of any notice in which the amount of the claim (or any portion of the claim) is
estimated, on such later date when the amount of such claim (or such portion of
such claim) becomes finally determined. If the Indemnifying Party has timely
disputed its liability with respect to such claim as provided above, as promptly
as possible, such Indemnifying Party and the Indemnified Party will establish
the merits and amount of such claim (by mutual agreement, litigation,
arbitration or otherwise) and, within 10 Business Days of the final
determination of the merits and amount of such claim, the Indemnifying Party
shall pay to the Indemnified Party immediately available funds in an amount
equal to such claim as determined hereunder.

Section 8.4. Survival Period.

For purposes of this Agreement, a “Survival Period” shall be the period during
which a claim for indemnification may be asserted under this Agreement by an
Indemnified Party. The Survival Periods under this Agreement shall begin on the
date hereof and terminate as follows:

(a) with respect to Purchaser Losses arising under Section 8.1(a) with respect
to any breach or inaccuracy of any representation or warranty in Section 3.1
(Organization; Authorization), Section 3.2 (Capitalization; Title to
Securities), Section 3.20 (Brokers) and Section 3.21 (Taxes) (collectively, the
“Fundamental Representations”) or under Section 8.1(c) or Section 8.1(f), the
Survival Period shall continue indefinitely;

(b) with respect to Purchaser Losses arising under Section 8.1(b),
Section 8.1(d), Section 8.1(e) and Section 8.1(h), the Survival Period shall
terminate upon the expiration of the applicable statutes of limitation;

(c) with respect to Purchaser Losses arising under Section 8.1(g), the Survival
Period shall terminate on the date that is three years after the Closing Date;

 

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(d) with respect to Seller Losses arising under Section 8.2(a) with respect to
any breach or inaccuracy of any representation or warranty in Section 4.1
(Organization), Section 4.2 (Authorization) and Section 4.4 (Brokers), the
Survival Period shall continue indefinitely;

(e) with respect to Seller Losses arising under Section 8.2(b), the Survival
Period shall terminate upon the expiration of the applicable statutes of
limitation;

(f) with respect to Seller Losses arising under Section 8.2(c), the Survival
Period shall continue indefinitely; and

(g) with respect to all other Purchaser Losses or Seller Losses arising under
this Agreement, the Survival Period shall terminate on the date that is 18
months after the Closing Date.

Notwithstanding the foregoing, if, prior to the close of business on the last
day of the applicable Survival Period, an Indemnifying Party shall have been
properly notified of a claim for indemnity hereunder and such claim shall not
have been finally resolved or disposed of at such date, such claim shall
continue to survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms hereof.
The indemnification obligations under this Article VIII include, without
limitation, the obligation to pay and reimburse the Indemnified Party for all
Seller Losses and Purchaser Losses, as applicable, whether or not arising due to
third party claims.

Section 8.5. Limitation of Liability.

Notwithstanding anything contained in this Agreement to the contrary, the rights
of the Parties to indemnification under this Agreement are limited as follows:

(a) Limitations on Liability of the Sellers. With respect to the matters
described in Section 8.1(a), the Purchaser Indemnified Parties shall not be
entitled to recover any Losses until the total of all such Losses suffered by
the Purchaser Indemnified Parties exceeds $270,000 (the “Basket”), in which
event the Purchaser Indemnified Parties will be entitled to indemnification for
all Losses in excess of the amount of the Basket up to a maximum of $2,700,000
(the “Cap”); provided that neither the Basket nor the Cap shall apply to claims
brought with respect to the Fundamental Representations. With respect to the
matters described in Section 8.1(g), the Purchaser Indemnified Parties shall not
be entitled to recover any Losses until the total of all such Losses suffered by
the Purchaser Indemnified Parties exceeds $500,000, in which event the Purchaser
Indemnified Parties will be entitled to indemnification for half of all such
Losses in excess of $500,000; provided, however, that the total amount of Losses
that the Purchaser Indemnified Parties may recover with respect to the matters
described in Section 8.1(g) shall not exceed $1,500,000. For the avoidance of
doubt, the separate limitations on Liability set forth in the immediately
preceding sentence shall be deemed to limit Liability for all Losses arising as
a result of an event covered by Section 8.1(g), notwithstanding that such event
may also result in a breach of a representation and warranty that causes Losses
made the subject of Section 8.1(a). Moreover, Losses arising as a result of an
event covered by Section 8.1(g) shall not be taken into account for purposes of
determining whether the Cap has been met. Notwithstanding anything else to the
contrary herein, the Purchaser Indemnified Parties shall not be entitled to
recover any Losses in an aggregate amount in excess of the Purchase Price.

 

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(b) Limitations on Liability of the Purchaser. The Seller Indemnified Parties
shall not be entitled to indemnification pursuant to Section 8.2(a) hereof for
any Losses until the total of all such Losses suffered by the Seller Indemnified
Parties exceeds the Basket, in which event the Seller Indemnified Parties will
be entitled to indemnification for all Losses in excess of the amount of the
Basket up to a maximum of the Cap; provided that neither the Basket nor the Cap
shall apply to claims brought with respect to the representations and warranties
set forth in Section 4.1, Section 4.2 and Section 4.4. Notwithstanding anything
else to the contrary herein, the Seller Indemnified Parties shall not be
entitled to recover any Losses in an aggregate amount in excess of the Purchase
Price.

Section 8.6. Reliance.

Each Party hereto shall be entitled to rely upon, and shall be deemed to have
relied upon, all representations, warranties and covenants of each other Party
set forth in this Agreement that have been or are made in favor of such Party,
and the rights of the Purchaser under this Article VIII shall not be affected,
notwithstanding (a) the making of this Agreement, (b) any investigation or
examination conducted with respect to, or any Knowledge acquired (or capable of
being acquired) about the accuracy or inaccuracy of or compliance with, any
representation, warranty, covenant, agreement, undertaking or obligation made by
or on behalf of the Parties hereto or (c) the Closing hereunder.

Section 8.7. Payment of Claims.

Any obligation of the Sellers to indemnify the Purchaser Indemnified Parties
shall be satisfied (a) first, in cash, by recourse to the Indemnity Escrow Funds
until such funds are depleted and (b) thereafter any obligation of the Sellers
to indemnify the Purchaser Indemnified Parties shall be satisfied by the
Sellers, jointly and severally, by prompt payment in cash from the Sellers to
the Purchaser or the appropriate Purchaser Indemnified Party.

Section 8.8. Effect of Insurance and Other Sources of Reimbursement.

The amount of any claim for which indemnification is provided under this
Article VIII shall be reduced by (i) the amount of any insurance proceeds
actually received by the Indemnified Party with respect to any such claim (net
of enforcement costs, deductions, premium increases and other similar items) and
(ii) any other amount actually recovered from third parties (as a result of
indemnification, contribution, guarantee or otherwise) by the Indemnified Party
(or its Affiliates) with respect to any claim (net of costs of collection). If
any Indemnified Party shall have received any payment pursuant to this
Article VIII with respect to any claim and has or shall subsequently have
actually received insurance proceeds or other amounts with respect to such
claim, then such Indemnified Party shall promptly pay over to the Indemnifying
Party the amount so recovered (after deducting the amount of the expenses
reasonably incurred by it in procuring such recovery and any increase in
premiums resulting solely from such recovery), but not in excess of the amount
previously so paid by the Indemnifying Party.

 

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ARTICLE IX

MISCELLANEOUS PROVISIONS

Section 9.1. Notices.

All notices, communications and deliveries under this Agreement shall (a) be
made in writing, signed by or on behalf of the Party making the same,
(b) specify the Section under this Agreement pursuant to which it is given or
being made and (c) be delivered personally or by facsimile or sent by registered
or certified mail (return receipt requested) or by next day courier (with
evidence of delivery and postage and other fees prepaid) as follows:

To the Purchaser and, after the Closing, to the Companies:

Addus HealthCare, Inc.

2300 Warrenville Road

Downers Grove, Illinois 60065

Attn: Mark S. Heaney

Facsimile: 847-303-5376

with a copy to:

Winston & Strawn LLP

200 Park Avenue

New York, New York 10166

Attn: Jennifer C. Kurtis, Esq.

Facsimile: 212-294-4700

To the Sellers and, prior to the Closing, to the Companies:

Margaret Coffey

132 Southern Boulevard

Patchogue, New York 11772

Carol Kolar

29 Joseph Street

Sayville, New York 11782

South Shore Home Health Service Inc.

1225-2 Montauk Highway

Oakdale, New York 11769

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

Schulz & Associates, P.C.

225 Broadhollow Road, Suite 303

Melville, New York 11747

Attn: Thomas P. Schulz, Esq.

Facsimile: 631-753-0950

 

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or to such other representative or at such other address of a Party as such
Party may furnish to the other Parties in writing. Any notice that is delivered
personally or by facsimile in the manner provided herein shall be deemed to have
been duly given to the Party to whom it is directed upon actual receipt by such
Party or its agent. Any notice that is addressed and mailed in the manner herein
provided or sent by next day courier shall be conclusively presumed to have been
duly given at the time of actual receipt or the refusal to accept delivery
thereof.

Section 9.2. Schedules and Exhibits.

The Schedules and Exhibits to this Agreement are hereby incorporated into this
Agreement and are hereby made a part of this Agreement as if set out in full in
this Agreement. Items that are disclosed in one Schedule shall be deemed
disclosed on any other Schedule if readily apparent from the face of the
disclosure.

Section 9.3. Assignment; Successors in Interest.

No assignment or transfer by any Party of such Party’s rights and obligations
under this Agreement shall be made except with the prior written consent of the
other Parties to this Agreement; provided, however, that the Purchaser may
assign any or all of its rights, obligations and interests hereunder without any
such written consent to any Affiliate of the Purchaser or to any of the
Purchaser’s lenders as security for any obligations arising in connection with
the financing of the transactions contemplated hereby so long as the Purchaser
continues to remain liable hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the Parties and their successors and permitted
assigns, and any reference to a Party shall also be a reference to a successor
or permitted assign.

Section 9.4. Captions.

The titles, captions and table of contents contained in this Agreement are
inserted in this Agreement only as a matter of convenience and for reference and
in no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision of this Agreement. Unless otherwise specified to the
contrary, all references to Articles and Sections are references to Articles and
Sections of this Agreement and all references to Schedules or Exhibits are
references to Schedules and Exhibits, respectively, to this Agreement.

Section 9.5. Controlling Law; Amendment.

This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without reference to its choice
of law rules. This Agreement shall not be amended, modified or supplemented
except by written agreement of the Purchaser and the Sellers.

 

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Section 9.6. Consent to Jurisdiction, Etc.

Except as otherwise expressly provided in this Agreement, the Parties hereto
agree that any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby shall be brought only to the exclusive
jurisdiction of the courts of the State of New York (venued in Suffolk County)
or the federal courts located in the State of New York (venued in the Eastern
District), and each of the Parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding that is brought in any such court has been brought in an
inconvenient forum. The Parties agree that, after a legal dispute is before a
court as specified in this Section 9.6, and during the pendency of such dispute
before such court, all actions, suits or proceedings with respect to such
dispute or any other dispute, including without limitation, any counterclaim,
cross-claim or interpleader, shall be subject to the exclusive jurisdiction of
such court. Process in any such suit, action or proceeding may be served on any
Party anywhere in the world, whether within or without the jurisdiction of any
such court. Each Party hereto agrees that a final judgment in any action, suit
or proceeding described in this Section 9.6 after the expiration of any period
permitted for appeal and subject to any stay during appeal shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by applicable laws.

Section 9.7. WAIVER OF JURY TRIAL.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 9.8. Severability.

Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by law, the Parties waive any
provision of law that renders any such provision prohibited or unenforceable in
any respect.

Section 9.9. Counterparts.

This Agreement may be executed in two or more counterparts (delivery of which
may be by facsimile or via email as a portable document format (.pdf)), each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Agreement or the terms of this Agreement to produce or account for more
than one of such counterparts.

 

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Section 9.10. Enforcement of Certain Rights.

Nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the Parties, and their
successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, or result in such Person being
deemed a third party beneficiary of this Agreement.

Section 9.11. Waiver.

Any agreement on the part of a Party to any extension or waiver of any provision
of this Agreement shall be valid only if set forth in an instrument in writing
signed on behalf of such Party. A waiver by a Party of the performance of any
covenant, agreement, obligation, condition, representation or warranty shall not
be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by a Party of a condition to
Closing shall not be considered as a waiver of any rights to indemnification
that may be claimed by such Party with respect to the matters relating to such
waived condition. A waiver by any Party of the performance of any act shall not
constitute a waiver of the performance of any other act or an identical act
required to be performed at a later time.

Section 9.12. Integration.

This Agreement and the documents executed pursuant to this Agreement supersede
all negotiations, agreements and understandings (both written and oral) among
the Parties with respect to the subject matter of this Agreement and constitute
the entire agreement between the Parties.

Section 9.13. Transaction Costs.

Except as provided above or as otherwise expressly provided herein, each Party
shall each pay its own fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement, including the
fees, costs and expenses of its financial advisors, accountants and counsel.

Section 9.14. Interpretation; Construction.

The term “Agreement” means this agreement together with all Schedules and
Exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. Unless the context
otherwise requires, words importing the singular shall include the plural, and
vice versa. The use in this Agreement of the term “including” means “including,
without limitation.” The words “herein”, “hereof”, “hereunder”, “hereby”,
“hereto”, “hereinafter” and other words of similar import refer to this
Agreement as a whole, including the Schedules and Exhibits, as the same from
time to time may be amended, modified, supplemented or restated and not to any
particular article, section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to articles, sections, subsections,
clauses, paragraphs, schedules and exhibits mean such provisions of this
Agreement and the Schedules and Exhibits attached to this Agreement, except
where otherwise stated. The use herein of the masculine, feminine or neuter
forms shall also denote the other

 

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forms, as in each case the context may require. The use in this Agreement of the
terms “furnished,” “provided,” “delivered,” “made available” and similar terms
refers, with respect to the provision of information and documents to the
Purchaser, in addition to the physical delivery of such information or documents
to the Purchaser, to such information and/or documents as are made available by
the Sellers or any of their respective employees, consultants, advisors or
attorneys. The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any party.

Section 9.15. Specific Performance.

The Parties hereto each acknowledge that the rights of each Party to consummate
the transactions contemplated by this Agreement are special, unique and of
extraordinary character and that, in the event that any Party violates or fails
or refuses to perform any covenant or agreement made by it in this Agreement,
the non-breaching Party may be without an adequate remedy at Law. The Parties
hereto agree, therefore, that in the event that any Party violates or fails or
refuses to perform any covenant or agreement made by such Party in this
Agreement, the non-breaching Party or Parties may, subject to the terms of this
Agreement, (i) institute and prosecute an action in any court of competent
jurisdiction to enforce specific performance of such covenant or agreement or
(ii) seek any other equitable relief; provided, that if either of the remedies
in clause (i) or (ii) is sufficient to make such non-breaching Party or Parties
whole, such Party or Parties will not be entitled to any other remedy.

[Signature pages follow]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed,
as of the date first above written.

 

SELLERS

/s/ Margaret Coffey

Name: Margaret Coffey

/s/ Carol Kolar

Name: Carol Kolar COMPANIES SOUTH SHORE HOME HEALTH SERVICE INC. By:

/s/ Carol Kolar

Name: Carol Kolar Title: President ACARING HOME CARE, LLC By:

/s/ Carol Kolar

Name: Carol Kolar Title: Member/Manager

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PURCHASER ADDUS HEALTHCARE, INC. By:

/s/ Mark S. Heaney

Name: Mark S. Heaney Title: President & CEO