Exhibit 10.55**EQUITY PURCHASE AGREEMENT**     This Equity Purchase Agreement (“Agreement”) is dated August 5, 2005, by and amongPolyMedica Corporation, a Massachusetts corporation (“Buyer”), National Pharmacies Group,Inc., a Delaware corporation (“Seller”), and National Diabetic Pharmacies, Inc., a Virginiacorporation (together with any successor in interest, collectively, the “Company”).**RECITALS**     **WHEREAS**, the Company is a nationwide specialized pharmaceutical distribution company focusingon diabetes management products, including diabetes testing supplies, insulin pumps, respiratorymedications, wound care supplies and prescriptions (the “Business”);     **WHEREAS**, Seller owns all of the issued and outstanding shares (the “Shares”) ofcapital stock of the Company;     **WHEREAS**, Seller intends to cause the Company to be converted into a single member limitedliability company in Virginia prior to the Closing Date (as defined herein);     **WHEREAS**, as of the Conversion (as defined herein), Seller shall own all of the issued andoutstanding membership interests (the “Interests”) of the Company; and     **WHEREAS**, Seller desires to sell, and Buyer desires to purchase, all of the Interests for theconsideration and on the terms set forth in this Agreement.**AGREEMENT**     The parties, intending to be legally bound, agree as follows:**1.****Sale and Transfer of Interests; Closing**     1.1 Interests. Upon the terms and subject to the conditions set forth herein, at theClosing, but effective as of the Effective Time, Seller will sell, convey, assign, transfer anddeliver to Buyer, and Buyer will purchase and acquire from Seller, free and clear of anyEncumbrances, the Interests.     1.2 Purchase Price**.**The purchase price for the Interests will be $55,000,000.00plus the Adjustment Amount (such sum, as so adjusted is herein referred to as the“Purchase Price”). On the Closing Date, Buyer shall make payment on account of thePurchase Price as follows: $55,000,000.00 plus the Estimated Closing Working CapitalExcess orminus the Estimated Closing Working Capital Shortfall by wire transfer toan account designated by Seller as set forth on Schedule 1.2(a).     1.3 Closing**.**The purchase and sale of the Interests provided for in this Agreement(the “Closing”) will take place at the offices of Buyer’s counsel at Weil, Gotshal & MangesLLP, 100 Federal Street, 34th Floor, Boston, Massachusetts 02110, commencing at 10:00 a.m. (localtime) on the later of (a) August 22, 2005, or (b) the date that is five (5) Business Days followingthe termination of the applicable waiting period under the HSRAct,unless Buyer and Seller
 

 
otherwise agree. Subject to the provisions of Section 8,failure to consummate the purchase and sale provided for in this Agreement on the date and time andat the place determined pursuant to this Section 1.3 will not result in the termination ofthis Agreement and will not relieve any party of any obligation under this Agreement. In such asituation, the Closing will occur as soon as practicable, subject to Section 8. The Closingshall be deemed effective as of 12:01 a.m. local time, on the Closing Date (the “EffectiveTime”).     1.4 Closing Obligations. In addition to any other documents to be delivered pursuantto other provisions of this Agreement, at the Closing:          (a) Seller and the Company will deliver to Buyer:               (i) the Interests Certificate duly endorsed (or accompanied by a duly executed power) fortransfer to Buyer;               (ii) a release in the form of Exhibit A duly executed by Seller (the “Seller’sRelease”);               (iii) [Intentionally Omitted]               (iv) a noncompetition agreement in the form of Exhibit C duly executed by Robert Haft(the “Noncompetition Agreement”);               (v) the Seller’s Secretary Certificate;               (vi) the Consents listed on Schedule 1.4(a)(vi).               (vii) the Seller’s Officer Certificate;               (viii) certificates of the Secretaries of State of the State of Delaware and the Commonwealthof Virginia certifying the good standing of Seller and the Company, respectively, dated as of arecent date prior to the Closing Date; and               (ix) resignations of each of the Company’s officers and directors from such positionseffective as of the Effective Time.          (b) Buyer will deliver to Seller:               (i) the Purchase Price to be paid to Seller on the Closing Date in accordance with Section1.2;               (ii) the Buyer’s Secretary Certificate; and               (iii) the Buyer’s Officer Certificate.Each of the deliveries pursuant to this Section 1.4 will be deemed to occur simultaneouslyand no delivery shall be made unless all other deliveries have been made.
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          1.5 Adjustment Amount. (a) Pre-Closing Date Purchase Price Adjustment Estimate.               (i) Not later than three (3) Business Days prior to the Closing Date, the Seller shall provideBuyer with a statement (the “Estimated Closing Statement”) setting forth in reasonabledetail a calculation of its good faith estimation of the Closing Working Capital (“EstimatedClosing Working Capital”). The Estimated Closing Statement and Estimated Closing WorkingCapital shall be prepared by the Company in good faith in accordance with GAAP applied using thesame accounting methods, practices, principles, policies and procedures, with consistentclassifications, judgments and valuation and estimation and accrual methodologies that were used inthe preparation of the Company’s audited Financial Statements for the most recent fiscal year endas if such Estimated Closing Statement and Estimated Closing Working Capital were being preparedand audited as of a fiscal year end. Notwithstanding the foregoing or any other provision of thisAgreement, the Estimated Closing Statement, the Estimated Working Capital and the Closing WorkingCapital Statement shall reflect the reserves set forth on Schedule 1.5 attached hereto(collectively, the “Supplemental Reserves”). The Supplemental Reserves shall bedisregarded for the purposes of calculating any adjustment required to be made under thisSection 1.5.               (ii) If Estimated Closing Working Capital is less than Target Working Capital, then thePurchase Price payable at Closing will be decreased by the positive difference between EstimatedClosing Working Capital and Target Working Capital (the “Estimated Closing Working CapitalShortfall”). If Estimated Closing Working Capital is greater than Target Working Capital, thenthe Purchase Price payable at Closing will be increased by the positive difference betweenEstimated Closing Working Capital and Target Working Capital (the “Estimated Closing WorkingCapital Excess”).          (b) Post-Closing Date Purchase Price Adjustment.               (i) Following the Closing, the Purchase Price shall be adjusted as provided herein to reflectthe difference between Closing Working Capital and Target Working Capital (the “AdjustmentAmount”).               (ii) Within sixty (60) days following the Closing Date, Buyer shall deliver to Seller astatement of Closing Working Capital (the “Closing Working Capital Statement”) settingforth in reasonable detail Buyer’s calculations of Closing Working Capital. The Closing WorkingCapital Statement shall be prepared in accordance with GAAP applied using the same accountingmethods, practices, principles, policies and procedures, with consistent classifications, judgmentsand valuation and estimation methodologies that were used in the preparation of the Company’saudited Financial Statements for the most recent fiscal year end as if such Closing Working CapitalStatement was as of a fiscal year end. In order for the Seller and its Representatives to reviewsuch Closing Working Capital Statement, Buyer will promptly furnish to Seller and itsRepresentatives such work papers, supporting schedules, analyses and other documents andinformation as Seller and its Representatives may reasonably request. Buyer shall reasonablycooperate with Seller to assist Seller’s and its Representatives’ review of any such ClosingWorking Capital Statement and if requested, Buyer’s accounting
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personnel will meet in person with Seller and its Representatives to discuss the ClosingWorking Capital Statement.               (iii) If, within forty-five (45) days following delivery of the Closing Working CapitalStatement, Seller has not given Buyer written notice of its objection as to the Adjustment Amount(which notice shall state in reasonable detail the basis of Seller’s objection or identifyadditional information reasonably required by Seller and its Representatives to evaluate thedetermination made by Buyer), then the Adjustment Amount calculated by Buyer shall be binding andconclusive on the parties.               (iv) If Seller gives Buyer such written notice of objection, and if Seller and Buyer fail toresolve the issues outstanding with respect to the Closing Working Capital Statement and thecalculation of the Adjustment Amount within thirty (30) days of Buyer’s receipt of Seller’sobjection notice, Seller and Buyer shall submit the issues remaining in dispute as identified inSeller’s notice of objection to Deloitte & Touche LLP or such other independent public accountingfirm mutually selected by Buyer and Seller (the “Independent Accountants”) for resolutionapplying the principles, policies and practices referred to in Section 1.5(b)(ii). Ifissues are submitted to the Independent Accountants for resolution, (i) Seller and Buyer shallfurnish or cause to be furnished to the Independent Accountants such work papers, supportingschedules, analyses and other documents and information relating to the disputed issues as theIndependent Accountants may request and are available to that party or its agents and shall beafforded the opportunity to present to the Independent Accountants any material relating to thedisputed issues and to discuss the issues with the Independent Accountants; and (ii) thedetermination by the Independent Accountants, as set forth in a notice to be delivered to bothSeller and Buyer within sixty (60) days of the submission to the Independent Accountants of theissues remaining in dispute, shall be final, binding and conclusive on the parties and shall beused in the calculation of the Adjustment Amount. Copies of all materials submitted or furnishedby a Party to the Independent Accountants shall also be provided to the other Party and itsRepresentatives and all meetings and communications with the Independent Accountants shall be heldso that all Parties are given a reasonable opportunity to participate. The costs and expenses ofthe Independent Accountants in a dispute regarding the Adjustment Amount shall be paid by Seller if(A) the positive difference between (i) the Adjustment Amount resulting from determination of theIndependent Accountants, and (ii) the Adjustment Amount set forth in Seller’s notice of objection,is greater than (B) the positive difference between (i) the Adjustment Amount resulting fromdetermination of the Independent Accountants, and (ii) Buyer’s calculation of the Adjustment Amountas delivered to Seller; otherwise, such costs and expenses of the Independent Accounts will be paidby Buyer. The Independent Accounts will be entitled to the privileges and immunities ofarbitrators.               (v) If Closing Working Capital is greater than the Estimated Closing Working Capital, thedifference shall be paid by Buyer to Seller within five (5) days of either the delivery of theClosing Working Capital Statement or, if Seller gives notice pursuant to Section1.5(b)(iii) herein, the determination of the Independent Accountants. If Closing WorkingCapitalis less than Estimated Closing Working Capital, the difference shall be paid by Seller toBuyerwithin five (5) days of either the delivery of the Closing Working Capital
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Statement or, ifSeller gives notice pursuant to Section 1.5(b)(iii) herein, the determination of theIndependent Accountants.               (vi) The Independent Accountants shall have not been engaged by any Party or any RelatedPerson of such Party within the prior five (5) year period ending on the date of this Agreement.**2.****Representations and Warranties of Seller and the Company**     In order to induce Buyer to enter into this Agreement, except as set forth in the SellerDisclosure Schedule to the specific reference to the section as to which the disclosure applies orto the extent reasonably apparent in any section of such Seller Disclosure Schedule (the“Seller Disclosure Schedule”), Seller and the Company, jointly and severally, subject tothe limitations set forth in Section 10, represent and warrant to Buyer as follows:     2.1 Organization, Good Standing and Capitalization**.**          (a) Each of Seller and the Company is a corporation duly organized, validly existing and ingood standing under the laws of its state of incorporation, with full corporate power and authorityto conduct its business as it is now being conducted, to own or use the properties and assets thatit purports to own or use, and to perform all its obligations under the Applicable Contracts. TheCompany is duly qualified and licensed to do business as a foreign corporation and is in goodstanding under the laws of each jurisdiction in which either the property owned, leased or operatedby it or the nature of the Business as currently conducted makes such qualification or licensenecessary, except where the failure to be so qualified or licensed and in good standing would nothave, individually or in the aggregate, a Material Adverse Effect.          (b) Seller has delivered or made available to Buyer copies of all Governing Documents ofSeller and the Company as currently in effect.          (c) Prior to the Conversion, the authorized equity securities of the Company consist of 5,000shares of voting common stock and 5,000 shares of non-voting common stock, without par value, allof which are issued and outstanding and constitute the Shares. Following the Conversion, theauthorized equity securities of the Company will consist of one hundred units of limited liabilitycompany interests, all of which will be issued and outstanding and constitute the Interests. Selleris the record and beneficial owner and holder of the Shares, free and clear of all Encumbrances andwill be on the Closing Date the record and beneficial owner and holder of the Interests, free andclear of all Encumbrances other than Permitted Encumbrances. The Shares have been duly authorizedand validly issued and are fully paid and nonassessable, and following the Conversion, theInterests will be duly authorized and validly issued and fully paid and nonassessable. There areno Contracts relating to the issuance, sale or transfer of any equity securities or othersecurities of the Company. None of the Shares were issued in violation of the Securities Act orany other Legal Requirement, and following theConversion, none of the Interests will have been issued in violation of the Securities Act orany other Legal Requirement.
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          (d) Except for the Interests, neither the Company nor the Seller owns, or has any Contract toacquire, any equity securities or other securities of any Person or other direct or indirect equityor other ownership interest in any other business.     2.2 Enforceability; Authority; No Conflict**.**          (a) This Agreement constitutes the legal, valid and binding obligation of Seller and theCompany, enforceable against each of them in accordance with its terms. Upon the execution anddelivery by Seller or the Company of each other agreement to be executed or delivered by Seller orthe Company at the Closing (collectively, the “Seller’s Closing Documents”), each of theSeller’s Closing Documents will constitute the legal, valid and binding obligation of Seller and/orthe Company, enforceable against it/them in accordance with its terms. Seller and the Company havethe absolute and unrestricted right, power and authority to execute and deliver this Agreement andthe Seller’s Closing Documents and to perform their obligations under this Agreement and Seller’sClosing Documents, and such action has been duly authorized by all necessary action by Seller’s andthe Company’s shareholders and boards of directors.          (b) Except as set forth on Schedule 2.2(b), neither the execution and delivery of thisAgreement nor the consummation or performance of any of the Contemplated Transactions will,directly or indirectly (with or without notice or lapse of time): (i) Breach (A) any provision ofany of the Governing Documents of Seller or the Company or (B) any resolution adopted by the boardof directors or the shareholders of Seller or the Company; (ii) Breach or give any GovernmentalBody or other Person the right to challenge any of the Contemplated Transactions or to exercise anyremedy or obtain any relief under any Legal Requirement or any Order to which Seller or the Companymay be subject; (iii) contravene, conflict with or result in a violation or breach of any of theterms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend,cancel, terminate or modify, any Governmental Authorization that is held by Seller or the Companythat otherwise relates to the Business; (iv) cause Buyer or the Company to become subject to, or tobecome liable for the payment of, any Tax; (v) Breach any provision of, or give any Person theright to declare a default or exercise any remedy under, or to accelerate the maturity orperformance of, or payment under, or to cancel, terminate or modify, any Contract identified orrequired to be identified on Schedule 2.20(a); or; (vi) result in the imposition orcreation of any Encumbrance upon or with respect to any asset owned or used by the Company.          (c) Except as set forth on Schedule 2.2(c), neither Seller nor the Company is or willbe required to give any notice to or obtain any Consent from any Person in connection with theexecution and delivery of this Agreement or the consummation or performance of any of theContemplated Transactions; provided that, in the case of Contracts, this representation appliesonly to Contracts identified or required to be identified on Schedule 2.20(a).     2.3 Financial Statements**.**Seller has delivered to Buyer: (a) an audited consolidatedbalance sheet of the Company and Seller as at December 31, in each of the years 2002 through 2004,and the related audited consolidated statements of income, changes in shareholders’ equity and cashflows for each fiscal year then ended, including the notes thereto (the “Annual Financial
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Statements”); and (b) an interim unaudited consolidated balance sheet of the Company and Selleras at June 30, 2005 (the “Balance Sheet Date”), including the notes thereto (the“Balance Sheet”) and the related statements of income, changes in shareholders’ equity, andcash flows for the period then ended (together with the Balance Sheet, the “Most RecentFinancial Statements” and together with the Annual Financial Statements, the “FinancialStatements”). The Financial Statements fairly present, in all material respects, theconsolidated financial condition and the results of operations, changes in shareholders’ equity andcash flows of the Company and Seller as at the respective dates of and for the periods referred totherein, all in accordance with GAAP, applied on a consistent basis throughout the periods coveredthereby, subject in the case of the Most Recent Financial Statements to footnotes and normal yearend adjustments. The Financial Statements have been prepared from and are in accordance with theaccounting records of the Company and Seller.     2.4 Books and Records**.**The books of account, minute books, stock record books, andother records of the Company and Seller, all of which have been made available to Buyer, arecomplete and correct in all material respects and have been maintained in accordance with soundbusiness practices.     2.5 Title to Properties; Encumbrances**.**     (a) Schedule 2.5(a) contains a list of all real property leased (“Leased RealProperty”) by the Company. The Company does not own any real property. Except as set forth inSchedule 2.5(a), the Company has valid and subsisting leasehold estate in, and enjoyspeaceful and undisturbed possession of, all Leased Real Property, subject only to (i) any PermittedEncumbrances and (ii) Encumbrances constituting a lease, sublease or occupancy agreement that givesany third party any right to occupy any portion of the Leased Real Property (which have beendisclosed in Schedule 2.5(a)).     (b) Except as set forth in Schedule 2.5(b), the Company owns and has good title to ora valid leasehold in all material buildings, machinery, equipment and other tangible assets (i)shown on the Most Recent Financial Statements and (ii) necessary for the conduct of the Business ascurrently conducted, in each case free and clear or all Encumbrances other than PermittedEncumbrances, except for properties and assets disposed of in the Ordinary Course of Business sincethe Balance Sheet Date.     2.6 Condition and Sufficiency of Assets**.**The buildings, plants, structures, andequipment of the Company are in good operating condition and repair, and are adequate for the usesto which they are currently being used, except as would not reasonably be expected to have aMaterial Adverse Effect. None of such buildings, plants, structures or equipment is in need ofmaintenance or repairs except for ordinary, routine maintenance and repairs that are not materialin nature or cost. The assets of the Company used in the Business are, taken as a whole,sufficient for the continued conduct of the Business after the Closing in substantially thesame manner as conducted prior to the Closing.     2.7 Accounts Receivable. All Accounts Receivable of the Company that are reflected onthe Balance Sheet or the accounting records of the Company as of the Closing Date represent
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or willrepresent valid obligations arising from sales actually made or services actually performed by theCompany in the Ordinary Course of Business.     2.8 Inventories**.**The Inventories, taken as a whole, consist of a quality and quantityusable and, with respect to finished goods, saleable, in the Ordinary Course of Business, exceptfor obsolete items and items of below-standard quality arising in the Ordinary Course of Business.The Company is not in possession of any Inventories not owned by it, including goods already sold.All Inventories not written off have been valued using the weighted average cost method, whichapproximates the first-in, first-out (FIFO) method.     2.9 No Undisclosed Liabilities**.**Except as set forth on Schedule 2.9, theCompany has no Liability that would be required to be reflected on a balance sheet of the Companyprepared as of the date hereof in accordance with GAAP (excluding footnotes and normal year endadjustments), except for Liabilities reflected, accrued for or reserved against in the Most RecentFinancial Statements and liabilities incurred in the Ordinary Course of Business since the BalanceSheet Date.     2.10 Taxes. Except as set forth on Schedule 2.10:          (a) The Company has filed or caused to be filed on a timely basis all Tax Returns that are orwere required to be filed by or with respect to it, either separately or as a member of a group ofPersons, pursuant to applicable Legal Requirements. Seller has delivered or made available to Buyercopies of all such Tax Returns filed by Seller or the Company with respect to the tax periodsending on December 31, 2001, December 31, 2002, December 31, 2003 and December 31, 2004 andSchedule 2.10(a) lists all federal and state income Tax Returns filed by Seller or theCompany with respect to tax periods ending on December 31, 2001, December 31, 2002, December 31,2003 and December 31, 2004. All Tax Returns and reports filed by Seller and/or the Company aretrue, correct and complete in all material respects. The Company has timely paid all of its Taxesthat have or may have become due for all periods covered by the Tax Returns, or pursuant to anyassessment received by Seller or the Company, except such Taxes, if any, as are listed onSchedule 2.10(a) and are being contested in good faith and as to which either adequatereserves (as required and as determined in accordance with GAAP) have been provided in the BalanceSheet (subject to any footnote and normal year-end adjustment) or which will be taken into accountin the calculation of Closing Working Capital. Except as provided on Schedule 2.10(a),neither Seller nor the Company currently is the beneficiary of any extension of time within whichto file any Tax Return. No written claim has been made within the past five years by anyGovernmental Body in a jurisdiction where Seller or the Company do not file Tax Returns that eitherof them is or may be subject to taxation by that jurisdiction. There are no Encumbrances on any ofthe assets of the Company that arose in connection with any failure (or alleged failure) to pay anyTax.          (b) Schedule 2.10(b) contains a list of all Tax Returns of Seller and the Company thathave been audited within the past three years or are currently under audit and accurately describesany deficiencies or other amounts that were paid or are currently being contested with respect tosuch audits. All deficiencies proposed in writing as a result of such audits have been paid,settled or are being contested in good faith by appropriate proceedings as
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described onSchedule 2.10(b). Seller has delivered, or made available to Buyer, copies of anyexamination reports, statements or deficiencies or similar items with respect to such audits. Thereis no outstanding dispute or claim concerning any Taxes of the Company claimed or raised by anyGovernmental Body in writing. Except as described in Schedule 2.10(b), neither Seller northe Company has given or been requested to give waivers or extensions that are still in effect (oris or would be subject to a waiver or extension given by any other Person) of any statute oflimitations relating to the payment of Taxes of Seller or the Company or for the Company may beliable after the Closing Date.          (c) Except as set forth on Schedule 2.10(c), as of the date of the Balance Sheet, thecharges, accruals and reserves with respect to Taxes on the Balance Sheet of the Company areadequate (as required and as determined in accordance with GAAP) and are at least equal to theCompany’s liability for Taxes as of the date of the Balance Sheet as determined and as required byGAAP, subject to any footnotes and normal year end adjustments. No consent to the application offormer Section 341(f)(2) of the Code has been filed with respect to any property or assets of theCompany. All Taxes that the Company is or was required by Legal Requirements to withhold orcollect have been duly withheld or collected and, to the extent required, have been paid to theproper Governmental Body or other Person.          (d) There is no tax sharing agreement or tax allocation agreement with respect to theCompany’s Taxes that will require any payment by the Company after the Closing Date. The Companyis not a party to any advance pricing agreement or any closing agreement that would require anypayment by the Company after the Closing Date. The Company (A) has not been a member of anaffiliated group within the meaning of Code Section 1504(a) (or any similar group defined under asimilar provision of state, local or foreign law) and (B) has no liability for Taxes of any otherPerson under Treas. Reg. sect. 1.1502-6 (or any similar provision of state, local or foreign law),as a transferee or successor by contract or otherwise.          (e) For federal income tax purposes Seller is an S corporation as defined in Code Section1361. Prior to the Conversion, for federal income tax purposes the Company was a QualifiedSubchapter S Subsidiary as defined under Section 1361 of the Code. Following the Conversion,Seller shall not take or cause to be taken any action that would prevent the Company from beingdisregarded as an entity separate from its owners under Treas. Reg. § 301.7701-3 for federal incometax purposes, and to the extent permitted, for all other income tax purposes.2.11 Employees**.**          (a) Schedule 2.11 contains a list of the following information, as of July 25, 2005,for each employee or director of the Company, including each employee on leave of absence or layoffstatus: employer; name; job title; current base compensation and target bonus, status as exempt ornon-exempt and any material change in compensation since January 1, 2005;date of hire; and, to the extent different from date of hire, service credited for purposes ofvesting and eligibility to participate under the Company’s pension, retirement, profit-sharing,thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stockownership (including investment credit or payroll stock ownership), severance pay, insurance,medical, welfare, vacation plan or any other Employee Plan.
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          (b) To the Knowledge of the Seller and the Company, no employee or director of the Company isa party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality,noncompetition, or proprietary rights agreement, between such employee or director and any otherPerson (“Proprietary Rights Agreement”) that in any way materially adversely affects orwill affect (i) the performance of his duties as an employee or director of the Company, or (ii)the ability of the Company to conduct its business, including any Proprietary Rights Agreement withSeller or the Company by any such employee or director. To the Knowledge of Seller and the Company,no director, officer, or other key employee of the Company intends to terminate his employment withthe Company within 30 days after Closing.          (c) Schedule 2.11 also contains a list of the following information for each retiredemployee or director of the Company, or their dependents, receiving retiree benefits from theCompany or scheduled to receive retiree benefits in the future from the Company: name, retireemedical insurance coverage, retiree life insurance coverage, and other retiree benefits.     2.12 Labor Disputes; Compliance**.**Since January 1, 2003, the Company has not been oris not a party to any collective bargaining or other labor Contract. Since January 1, 2003, therehas not been and, there is not presently pending, existing or to the Knowledge of Seller and theCompany, Threatened (a) any material strike, slowdown, picketing, organizing campaign, workstoppage, or employee grievance process, (b) any material Proceeding against or affecting theCompany relating to the alleged violation of any Legal Requirement pertaining to labor relations oremployment matters, including any material charge or complaint filed by an employee or union withthe National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparableGovernmental Body, organizational activity, or other material labor or employment dispute againstor affecting the Company or its premises, or (c) any application for certification of a collectivebargaining agent. There is no lockout of the employees by the Company, and no such action iscontemplated by the Company. Except as set forth on Schedule 2.12, the Company has compliedin all material respects with all Legal Requirements relating to employment, equal employmentopportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, thepayment of social security and similar taxes, occupational safety and health, and plant closing.The Company is not liable for the payment of any material compensation, damages, taxes, fines,penalties, or other amounts, however designated, for failure to comply with any of the foregoingLegal Requirements.     2.13 WARN Act. Since January 1, 2003, neither Seller nor the Company has effectuated(a) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act (the“WARN Act”), 29 U.S.C. §§ 2101 *et seq.*,) affecting any site of employment or one or morefacilities or operating units within any site of employment or facility of the Business, or (b) a“mass layoff” (as defined in the WARN Act) affecting any site ofemployment or facility of the Business where liabilities under the WARN Act remain, nor hasSeller or the Company been affected by any transaction or engaged in layoffs or employmentterminations relating to the Business sufficient in number to trigger application of any similarstate or local law where liabilities under such law remain.2.14 Employee Benefits**.**
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          (a) Set forth on Schedule 2.14(a) is a list of all “employee benefit plans” as definedby Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D of theCode, and all other bonus, incentive-compensation, deferred-compensation, profit-sharing,stock-option, stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership,savings, severance, change-in-control, supplemental-unemployment, layoff, salary-continuation,retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation,holiday, sick-leave, fringe-benefit or welfare plan, and any other benefit plan, agreement, policy,practice, commitment, contract or understanding (whether qualified or nonqualified, currentlyeffective or terminated, written or unwritten) and any trust, escrow or other agreement relatedthereto that (i) is maintained or contributed to by the Company or any other Person controlled by,controlling or under common control with the Company (within the meaning of Section 414 of the Codeor Section 4001(a)(14) or 4001(b) of ERISA) (“ERISA Affiliate”) or has been maintained orcontributed to in the last six years by the Company or any ERISA Affiliate, and with respect towhich the Company has or may have any liability, and (ii) provides benefits, or describes policiesor procedures applicable to any current or former director, officer, employee or service providerof the Company or any ERISA Affiliate, or the dependents of any thereof, regardless of how (orwhether) liabilities for the provision of benefits are accrued or assets are acquired or dedicatedwith respect to the funding thereof (collectively the “Employee Plans”). No Employee Planis (x) a “Defined Benefit Plan” (as defined in Section 414(l) of the Code); (y) a“Multiemployer Plan” (as defined in Section 3(37) of ERISA); or (z) a plan subject to TitleIV of ERISA, other than a Multiemployer Plan.          (b) Seller has delivered to Buyer copies of (i) the material documents comprising eachEmployee Plan (or, with respect to any Employee Plan which is unwritten, a detailed writtendescription of eligibility, participation, benefits, funding arrangements, assets and any othermaterial documents which relate to the obligations of Seller, the Company or any ERISA Affiliate);(ii) all trust agreements, insurance contracts or any other funding instruments related to theEmployee Plans; (iii) the most recent rulings, determination letters, no-action letters or advisoryopinions from the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation(“PBGC”) or any other Governmental Body that pertain to any Employee Plan and any openrequests therefor; (iv) the most recent actuarial and financial reports (audited and/or unaudited)and the annual reports filed with any Government Body with respect to the Employee Plans during thecurrent year and each of the three preceding years; (v) all collective bargaining agreementspursuant to which contributions to any Employee Plan(s) have been made or obligations incurred(including both pension and welfare benefits) by the Company or any ERISA Affiliate, and allcollective bargaining agreements pursuant to which contributions are being made or obligations areowed by such entities; (vi) all contracts with third-party administrators, actuaries, investmentmanagers, consultants and other independent contractorsthat relate to any Employee Plan; and (vii) all summary plan descriptions, employee handbooksand other material written communications regarding the Employee Plans.          (c) Except as set forth on Schedule 2.14(c), full payment has been made for allamounts that are required under the terms of each Employee Plan to be paid as contributions withrespect to all periods prior to and including the last day of the most recent fiscal year of suchEmployee Plan ended on or before the date of this Agreement and all periods thereafter
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prior to theClosing Date, and no accumulated funding deficiency or liquidity shortfall (as those terms aredefined in Section 302 of ERISA and Section 412 of the Code) has been incurred with respect to anysuch Employee Plan, whether or not waived. The Company is not required to provide security to anEmployee Plan under Section 401(a)(29) of the Code.          (d) The Company has, at all times, complied, and currently complies, in all material respectswith the applicable continuation requirements for its welfare benefit plans, including (1) Section4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections601 through 608, inclusive, of ERISA, which provisions are hereinafter referred to collectively as“COBRA” and (2) any applicable state statutes mandating health insurance continuation coverage foremployees.          (e) Except as set forth on Schedule 2.14(e), the form of all Employee Plans is incompliance in all material respects with the applicable terms of ERISA, the Code, and any otherapplicable laws, including the Americans with Disabilities Act of 1990, the Family Medical LeaveAct of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such planshave been operated in material compliance with such laws and the written Employee Plan documents.Neither Seller nor the Company has violated the requirements of Section 404 of ERISA.          (f) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code hasreceived a favorable determination letter from the IRS, and neither Seller nor the Company hasKnowledge of any circumstances that will result in revocation of any such favorable determinationletter. Each trust created under any Employee Plan has been determined to be exempt from taxationunder Section 501(a) of the Code, and neither Seller nor the Company has Knowledge of anycircumstance that will result in a revocation of such exemption. No Employee Plan utilizes afunding vehicle described in Section 501(c)(9) of the Code or is subject to the provisions ofSection 505 of the Code. With respect to each Employee Plan, no event has occurred or conditionexists that will or could reasonably be expected to give rise to a loss of any intended taxconsequence or to any Tax under Section 511 of the Code.          (g) There is no material pending or to the Knowledge of the Seller and the Company threatenedProceeding relating to any Employee Plan, nor to the Knowledge of the Seller and the Company, isthere any basis for any such Proceeding. Neither Seller, the Company nor any fiduciary of anEmployee Plan has engaged in a transaction with respect to any Employee Plan that, assuming thetaxable period of such transaction expired as of the date hereof, could subject Seller, the Companyor Buyer to a material Tax or penalty imposed by either Section 4975 of the Code or Section 502(l)of ERISA or a violation of Section 406 of ERISA. The Contemplated Transactions will not result inthe potential assessment of a Tax orpenalty under Section 4975 of the Code or Section 502(l) of ERISA nor result in a violation ofSection 406 of ERISA.          (h) Seller and the Company have maintained workers’ compensation coverage as required byapplicable state law through purchase of insurance and not by self-insurance or otherwise.
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          (i) Except as required by Legal Requirements or as set forth on Schedule 2.14(i), theconsummation of the Contemplated Transactions will not accelerate the time of vesting or the timeof payment, or increase the amount, of compensation due to any director, employee, officer, formeremployee or former officer of Seller or the Company. Except as disclosed on Schedule2.14(i), there are no contracts or arrangements providing for payments by Seller or theCompany, in their current form, that could subject any Person to Liability for tax under Section4999 of the Code.          (j) Except for the continuation coverage requirements of COBRA or similar statute, the Companyhas no potential Liability for benefits to employees, former employees or their respectivedependents with respect to claims incurred following termination of employment or retirement underany of the Employee Plans that are Employee Welfare Benefit Plans.          (k) Except as set forth on Schedule 2.14(k), no Contemplated Transaction will resultin an amendment, modification or termination of any of the Employee Plans. No written or oralrepresentations have been made to any employee or former employee of Seller or the Companypromising or guaranteeing any employer payment or funding for the continuation of medical, dental,life or disability coverage for any period of time beyond the end of the current plan year (exceptto the extent of coverage required under COBRA or similar statute). Except as set forth in Section6.1 hereof, no written or oral representations have been made by Seller or the Company to anyemployee or former employee of Seller or the Company concerning the employee benefits of Buyer.     2.15 Compliance With Legal Requirements; Governmental Authorizations**.**          (a) Except as set forth on Schedule 2.15(a): (i) the Company is, and at all timessince January 1, 2001 has been, in material compliance with each Legal Requirement that is or wasapplicable to it or to the conduct or operation of the Business, including its reimbursement,marketing, billing and collection practices; (ii) notwithstanding any qualifications as to time andmateriality set forth in subsection (a)(i) above, no event has occurred or circumstance exists that(with or without notice or lapse of time) may give rise to any obligation on the part of theCompany to undertake, or to bear all or any portion of the cost of, any repayment of overpaymentsmade to the Company by Medicare, Medicaid or any other governmentally funded health carereimbursement program or payment of penalties or other amounts in connection therewith; (iii) noevent has occurred or circumstance exists that (with or without notice or lapse of time) may giverise to any obligation on the part of the Company to undertake, or to bear all or any portion ofthe cost of, any Remedial Action of any material nature; and (iv) the Company has not received, atany time since January 1, 2001, any notice or other communication (whether oral or written) fromany Governmental Body regarding (A) anyactual or alleged material violation of, or material failure to comply with, any LegalRequirement, (B) any actual or alleged obligation on the part of the Company to undertake, or tobear all or any portion of the cost of, any Remedial Action of any material nature, or (C) anyobligation on the part of the Company to undertake, or to bear all or any portion of the cost of,any repayment of overpayments made to the Company by Medicare, Medicaid or any other governmentallyfunded health care reimbursement program or payment of penalties or other
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amounts in connectiontherewith. Neither Seller nor the Company has received notice of any material change and does nothave Knowledge of any potential material change in its status as a Medicare or Medicaidparticipating supplier with Medicare or Medicaid. Neither the Seller nor the Company, nor, to theKnowledge of Company, any officer, director, employee, contractor or vendor of any of them, is nowor has ever been suspended or excluded from participation in Medicare, Medicaid or any othergovernmentally funded health care reimbursement program.          (b) The Company holds all Governmental Authorizations that are material to operation of theBusiness, including those necessary to be a Medicare or Medicaid participating supplier. EachGovernmental Authorization material to operation of the Business is valid and in full force andeffect. Except as set forth on Schedule 2.15(b): (i) the Company is, and at all times sinceJanuary 1, 2001, has been, in material compliance with the terms and requirements of eachGovernmental Authorization material to operation of the Business; (ii) no event has occurred orcircumstance exists that may (with or without notice or lapse of time) (A) constitute or resultdirectly or indirectly in a material violation of or a failure to comply with any material term orrequirement of any Governmental Authorization material to operation of the Business or (B) resultdirectly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of,or any modification to, any Governmental Authorization material to operation of the Business; (iii)the Company has not received, at any time since January 1, 2001, any notice or other communication(whether oral or written) from any Governmental Body regarding (A) any actual or alleged violationof or failure to comply with any term or requirement of any Governmental Authorization or (B) anyactual or proposed revocation, withdrawal, suspension, cancellation, termination of or modificationor restriction to any Governmental Authorization; and (iv) all applications required to have beenfiled for the renewal of the Governmental Authorizations material to operation of the Business havebeen duly filed on a timely basis with the appropriate Governmental Bodies, and all other filingsrequired to have been made with respect to such Governmental Authorizations have been duly made ona timely basis with the appropriate Governmental Bodies.          (c) Notwithstanding any disclosure made elsewhere herein, since January 1, 2001, neitherSeller nor the Company has engaged in any activities, nor, to the Knowledge of Company, has anyevent occurred or circumstance existed, which would constitute or give rise to a material violationof, or subject Seller or the Company to mandatory or permissive exclusion under, 31 U.S.C. §3729,or 42 U.S.C. §§1320a-7, 1320a-7a or §1320a-7b or any regulation promulgated thereunder, or anycomparable state or local statutes or regulations, or which are prohibited by rules of professionalconduct including, but not limited to, the following: (i) making or causing to be made a materiallyfalse statement or representation of a material fact in any application for any benefit or payment;(ii) making or causing to be made any materially false statement or representation of a materialfact for use in determining rights to any benefit orpayment; (iii) any failure by a claimant to disclose knowledge of the occurrence of anymaterial event affecting the initial or continued right to any benefit or payment on its own behalfor on behalf of another, with the intent to fraudulently secure such benefit or payment; and (iv)offering or paying, or soliciting or receiving, any remuneration (including and kickback, bribe orrebate) directly or indirectly, overtly or covertly, in cash or in kind, or offering to pay orreceive such remuneration (I) in return for referring an individual to a Person for the furnishingor
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arranging for the furnishing of any item or service for which payment may be made in whole or inpart by Medicare, Medicaid or any other federal or state health care program, as defined in suchstatutes and regulations, or (II) in return for or to induce purchasing, leasing or ordering orarranging for, or recommending, purchasing, leasing or ordering any good, facility, service or itemfor which payment may be made in whole or in part by Medicare, Medicaid or any other federal orstate health care program, as defined in such statutes and regulations.          (d) This Section 2.15 does not pertain to matters concerning any Environmental Law orEnvironmental, Health and Safety Liabilities, which, for purposes of this Agreement, areexclusively addressed in Section 2.22 hereof.     2.16 Legal Proceedings; Orders**.**          (a) Except as set forth on Schedule 2.16(a), there is no pending Proceeding (providedthat with respect to any Proceeding involving an audit or investigation, so long as no writtennotice of such audit or investigation has been received by the Company, to the Knowledge of theSeller and the Company, there is no such audit or investigation): (i) by or against the Company orthat otherwise relates to or may materially affect the Business; or (ii) that challenges, or thatmay have the effect of preventing, delaying, making illegal or otherwise interfering with, any ofthe Contemplated Transactions. To the Knowledge of Seller and the Company, (1) no such Proceedinghas been Threatened, and (2) no event has occurred or circumstance exists that is likely to giverise to or serve as a basis for the commencement of any such Proceeding. Seller has delivered ormade available to Buyer copies of all pleadings, correspondence and other documents relating toeach Proceeding listed on Schedule 2.16(a). The Proceedings listed or required to belisted on Schedule 2.16(a) will not have a Material Adverse Effect.          (b) Except as set forth on Schedule 2.16(b): (i) there is no Order to which theCompany or the Business is subject requiring payment in excess of $100,000; and (ii) neither Selleror the Company, nor any officer or director of Seller or the Company is subject to any Order thatprohibits Seller, the Company or any such officer or director of Seller or the Company fromconducting the Business.          (c) Except as set forth on Schedule 2.16(c): (i) the Company is, and, at all timessince January 1, 2000, has been in compliance in all material respects with all of the terms andrequirements of each Order to which it or any of the assets owned or used by it, is or has beensubject; (ii) no event has occurred or circumstance exists that may constitute or result in (withor without notice or lapse of time) a material violation of or failure to comply in any materialrespects with any term or requirement of any Order to which the Company, or any of the assets ownedor used by the Company, is subject; and (iii) neither Seller nor the Company hasreceived, at any time since January 1, 2000, any notice or other communication (whether oralor written) from any Governmental Body or any other Person regarding any actual, alleged, possibleor potential material violation of, or failure to comply with, any term or requirement of any Orderto which the Company, or any of the assets owned or used by the Company, is or has been subject.
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          (d) This Section 2.16 does not pertain to matters concerning any Environmental, Healthand Safety Liabilities or to any Proceeding or Order relating to any Environmental Law, which, forpurposes of this Agreement, are exclusively addressed in Section 2.22 hereof.     2.17 No Material Adverse Change**.**Except as set forth on Schedule 2.17, to theKnowledge of Seller and the Company, since the Balance Sheet Date, there has not been any MaterialAdverse Change.     2.18 Absence of Certain Changes and Events**.**Except as set forth on Schedule2.18, since the Balance Sheet Date, the Company has operated the Business only in the OrdinaryCourse of Business and, to the Knowledge of Seller and the Company, there has not been any event,change, occurrence or circumstance that has had or would reasonably be expected to have a MaterialAdverse Effect. Without limiting the generality of the foregoing, since the date of the BalanceSheet there has not been any:          (a) change in the Company’s authorized or issued capital stock; grant of any stock option orright to purchase shares of capital stock of the Company; issuance of any security convertible intosuch capital stock; grant of any registration rights; purchase, redemption, retirement, or otheracquisition by the Company of any shares of any such capital stock; or declaration or payment ofany dividend or other distribution or payment in respect of shares of capital stock;          (b) amendment to the Governing Documents of the Company;          (c) except in the Ordinary Course of Business, payment or increase by the Company of anybonuses, salaries, or other compensation to any shareholder, director, officer, or employee orentry into any severance or similar Contract with any director, officer, or employee;          (d) except in the Ordinary Course of Business, adoption of, or material increase in thepayments to or benefits under, any profit sharing, bonus, deferred compensation, savings,insurance, pension, retirement, or other employee benefit plan for or with any employees of theCompany;          (e) except in the Ordinary Course of Business, damage to or destruction or loss of any assetor property of the Company, whether or not covered by insurance, materially and adversely affectingthe properties, assets, business, financial condition, or prospects of the Company;          (f) except in the Ordinary Course of Business, entry into, termination of, or receipt ofnotice of termination of (i) any license, distributorship, dealer, sales representative, jointventure, credit, or similar agreement, or (ii) any Contract or transaction involving a totalremaining commitment by or to the Company of at least $100,000;          (g) sale (other than sales of inventory in the Ordinary Course of Business), lease, or otherdisposition of any asset or property of the Company or Encumbrance on any
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material asset orproperty of the Company, including the sale, lease, or other disposition of any of the IntellectualProperty Assets;          (h) except in the Ordinary Course of Business, cancellation or waiver of any claims or rightswith a value to the Company in excess of $100,000;          (i) material change in the accounting methods used by the Company;          (j) except for the Conversion, any election or rescinding of any election relating to Taxes ofthe Company or settlement or compromise of any claim, action, suit, litigation, proceeding,arbitration, investigation, audit or controversy relating to Taxes of the Company, or except as maybe required by applicable law, any changes to any of the Company’s methods of reporting income ordeductions for federal income tax purposes from those employed in the preparation of its or Sellersmost recently filed federal tax returns if any of the foregoing actions would have an adverseeffect on Buyer or the Company following the Closing Date; or          (k) agreement, whether oral or written, by the Company to do any of the foregoing.     2.19 Third Party Payors and Suppliers.          (a) Set forth on Schedule 2.19(a) is a list of the eight (8) most significant thirdparty payors (the “Major Customers”) in terms of revenue to the Company during thetwelve-month periods ended December 31, 2002, 2003 and 2004 and the six month period ended June30, 2005, showing the approximate total revenue of the Company from each such payor during theperiods then ended. Except to the extent set forth on Schedule 2.19(a), since December 31,2004, neither Seller nor the Company has received notice that any Major Customer has ceased, orintends to cease, to do business with the Seller, the Company or Buyer, or has reduced, or willreduce, its business in a manner that has a Material Adverse Effect. All of the Company’s claimsbilled to third party payors have been for items and services actually provided, and such claims,items and services have been billed and provided in accordance with all applicable requirements ofsuch third party payors.          (b) Set forth on Schedule 2.19(b) is a list of the ten most significant suppliers (the“Major Suppliers”) of services (including, without limitation, subcontractors), supplies,merchandise or other goods for the Company in terms of purchases by the Company for thetwelve-month periods ended December 31, 2002, 2003 and 2004 and the six month period ended June 30,2005, showing the amount paid to each such Major Supplier during such period. Except as disclosedon Schedule 2.19(b), since December 31, 2004, neither Seller nor the Company hasreceived any notice that any such Major Supplier will not sell supplies, merchandise or othergoods to Buyer and the Company on substantially the same terms and conditions as those used in itscurrent sales to Seller and the Company, subject only to general and customary price increases orother customary changes in terms, or changes in general business conditions or the like.     2.20 Contracts; No Defaults**.**
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          (a) Schedule 2.20(a) contains a list, and Seller has delivered to Buyer copies, of:(i) each Applicable Contract that involves performance of services or delivery of goods ormaterials by the Company to the Major Customers; (ii) each Applicable Contract that involvesperformance of services or delivery of goods or materials to the Company by the Major Suppliers;(iii) each Applicable Contract that was not entered into in the Ordinary Course of Business andthat involves expenditures or receipts of the Company in excess of $25,000; (iv) each lease, rentalor occupancy agreement, license, installment and conditional sale agreement, and other ApplicableContract affecting the ownership of, leasing of, title to, use of, or any leasehold or otherinterest in, any real or personal property (except personal property leases and installment andconditional sales agreements having a value per item or aggregate payments of less than $25,000 andwith terms of less than one year); (v) each licensing agreement or other Applicable Contract withrespect to patents, trademarks, copyrights, or other intellectual property (other than licenses touse “shrink-wrap” or “off-the-shelf” software or any other software which is generally commerciallyavailable), including agreements with current or former employees, consultants, or contractorsregarding the appropriation or the non-disclosure of any of the Intellectual Property Assets; (vi)each collective bargaining agreement and other Applicable Contract to or with any labor union orother employee representative of a group of employees of the Company; (vii) each joint venture,partnership, and other Applicable Contract (however named) involving a sharing of profits, losses,costs, or liabilities by the Company with any other Person; (viii) each Applicable Contractcontaining covenants that in any way purport to restrict the business activity of the Company orany Related Person of the Company or limit the freedom of the Company or any Related Person of theCompany to engage in any line of business or to compete with any Person; (ix) each ApplicableContract providing for payments to or by any Person based on sales, purchases, or profits, otherthan direct payments for goods; (x) each power of attorney that is currently effective andoutstanding; (xi) each Applicable Contract entered into other than in the Ordinary Course ofBusiness that contains or provides for an express undertaking by the Company to be responsible forconsequential damages; (xii) each Applicable Contract for capital expenditures in excess of$25,000; (xiii) each written warranty, guaranty, and or other similar undertaking with respect tocontractual performance extended by the Company other than in the Ordinary Course of Business; and(xiv) each amendment, supplement, and modification (whether oral or written) in respect of any ofthe foregoing.          (b) Except as set forth on Schedule 2.20(b), to Seller’s and the Company’s Knowledge,no officer, director, agent, employee, consultant, or contractor of the Company is bound by anyContract that purports to limit the ability of such officer, director, agent, employee, consultant,or contractor to (A) engage in or continue any conduct, activity, or practice relating to theBusiness, or (B) assign to the Company any rights to any invention, improvement, or discovery.          (c) Except as set forth on Schedule 2.20(c), each Contract identified or required tobe identified on Schedule 2.20(a) is in full force and effect and is valid and enforceablein accordance with its terms (except as such enforceability may be limited by (i) bankruptcy,insolvency, moratorium, reorganization and other similar Legal Requirements affecting creditors’rights generally and (ii) the general principles of equity, regardless of whether asserted in aProceeding in equity or at law).
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          (d) Except as set forth on Schedule 2.20(d): (i) the Company is, and at all timessince January 1, 2003 has been, in compliance in all material respects with all applicable termsand requirements of each Contract identified or required to be identified on Schedule 2.20(a); (ii)to the Knowledge of Seller and the Company, each other Person that has or had any Liability undereach Contract identified or required to be identified on Schedule 2.20(a) is, and at alltimes since January 1, 2003 has been, in compliance in all material respects with all applicableterms and requirements of such Contract; (iii) no event has occurred or circumstance exists that(with or without notice or lapse of time) may contravene, conflict with, or result in a violationor breach of, or give the Company or, to the Knowledge of Seller and the Company, any other Personthe right to declare a default or exercise any remedy under, or to accelerate the maturity orperformance of, or to cancel, terminate, or modify, any Contract identified or required to beidentified on Schedule 2.20(a); and (iv) the Company has not given to or received from anyother Person, at any time since January 1, 2003, any notice or other communication (whether oral orwritten) regarding any actual, alleged, possible, or potential violation or breach of, or defaultunder, any Contract identified or required to be identified on Schedule 2.20(a), exceptwhere any such failure would not have a Material Adverse Effect.     2.21 Insurance**.**          (a) Seller has delivered to Buyer: (i) copies of all policies of insurance to which theCompany is a party or under which the Company, or any director of the Company, is or has beencovered at any time within the three years preceding the date of this Agreement; (ii) copies of allpending applications for policies of insurance; copies of all applications filed in connection withcurrent policies and (iii) any statement by the auditor of the Company’s financial statements withregard to the adequacy of such entity’s coverage or of the reserves for claims. Set forth onSchedule 2.21(a) is a list of all policies of insurance to which the Company is a party,including the policy number of each such policy.          (b) Schedule 2.21(b) describes: (i) any self-insurance arrangement by or affecting theCompany, including any reserves established thereunder and any partial self-insurance such asthrough deductibles of more than $25,000 each occurrence, at any time during the two yearspreceding the date of this Agreement, (ii) any current or previous contract or arrangement, otherthan a policy of insurance, for the transfer or sharing of any material risk by the Company,including any captive insurance company participation; and (iii) all obligations of the Company tothe Major Customers with respect to insurance and identifies the policy under which such coverageis provided.          (c) Schedule 2.21(c) sets forth, by year, for the current policy year and each of thetwo preceding policy years: (i) a summary (whether internally prepared or insurancecompany issued) of the loss experience under each policy; (ii) a statement describing eachopen claim and all closed claims for an amount in excess of $25,000 under an insurance policy,which sets forth: (A) the name of the claimant; (B) a description of the policy by insurer, type ofinsurance, and period of coverage; and (C) the amount and a brief description of the claim; and(iii) a statement describing the loss experience for all claims that were self-insured, includingthe number and aggregate cost of such claims.
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          (d) Except as set forth on Schedule 2.21(d): (i) All policies to which the Company isa party or that provide coverage to Seller, the Company, or any director or officer of the Company:(A) are valid, outstanding, and enforceable; (B) are issued by an insurer that is to the Knowledgeof Seller and the Company financially sound and reputable; (C) are sufficient for compliance withall Legal Requirements and Contracts to which the Company is a party or by which it is bound; (D)will continue in full force and effect following the consummation of the Contemplated Transactions,except with respect to Seller; and (E) do not provide for any retrospective premium adjustment orother experienced-based liability on the part of the Company. (ii) Neither Seller nor the Companyhas received (A) any refusal of coverage or any notice that a defense will be afforded withreservation of rights, or (B) any notice of cancellation or any other indication that any insurancepolicy is no longer in full force or effect or will not be renewed or that the issuer of any policyis not willing or able to perform its obligations thereunder. (iii) The Company has paid allpremiums due, and has otherwise performed all of its obligations, under each policy to which theCompany is a party or that provides coverage to the Company or any director thereof. (iv) TheCompany has given notice to the insurer of all material claims that may be insured thereby.     2.22 Environmental Matters**.**Except as set forth on Schedule 2.22, and exceptas would not reasonably be expected to have a Material Adverse Effect:          (a) The Company is in compliance with, and has not been and is not in violation of or subjectto material liability under, any Environmental Law. Neither Seller nor the Company has any basis toexpect, nor has any of them received, any actual or Threatened order, notice, or othercommunication from any Governmental Body or other person alleging any actual or potential violationor failure to comply with any Environmental Law, or of any actual or Threatened obligation toundertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to anyof the Facilities in which Seller or the Company has had an interest, or with respect to anyproperty or Facility at or to which Hazardous Materials were generated, manufactured, refined,transferred, imported, used, or processed by Seller or the Company.          (b) Seller has delivered to Buyer copies of any Phase 1 or Phase 2 reports, and similarenvironmental self-assessment documentation pertaining to the Facilities, or concerning complianceby the Company with Environmental Laws.          2.23 Intellectual Property Assets.          (a) Set forth on Schedule 2.23(a) is a list and description of all material patents,patent rights, trademarks, service marks, trade names, brands and copyrights (whether ornot registered and, if applicable, including pending applications for registration) owned,used, licensed or held by the Company as of the date hereof. Except as set forth on Schedule2.23(a), (vii) (A) to the Seller’s and the Company’s Knowledge, the Company is the owner of allright, title and interest in and to all of the material Intellectual Property Assets owned by theCompany, free and clear of any Encumbrances other than Permitted Encumbrances, and (B) the Companyhas the right to use and license the same in the conduct of the Business as currently conducted;(viii) there have been no claims made against Seller or the Company asserting the invalidity,
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abuse, misuse, or unenforceability of any of the Intellectual Property Assets; (ix) neither Sellernor the Company has made any claim of any material violation or infringement by others of any ofits Intellectual Property Assets or interests therein and, to the Knowledge of Seller and theCompany, no grounds for any such claims exist; (x) neither Seller nor the Company has received anynotice that it is in conflict with or infringing upon the asserted intellectual property rights ofothers in connection with the Intellectual Property Assets and, to the Knowledge of Seller and theCompany, neither the use of the Intellectual Property Assets nor the operation of the Business isinfringing or has infringed upon any intellectual property rights of others; (xi) the IntellectualProperty Assets are, in the aggregate, sufficient and include all intellectual property rightsnecessary for the Company to lawfully operate the Business as presently being operated; and (xii)to the Knowledge of Seller and the Company, no interest in any of Seller’s or the Company’sIntellectual Property Assets has been assigned, transferred, licensed or sublicensed by Seller orthe Company to any Person other than Buyer pursuant to this Agreement.          (b) Schedule 2.23(b) contains a list and of all internet web sites and internet domainnames presently used by the Company comprising part of the Intellectual Property Assets of theCompany (collectively “Net Names”). All Net Names have been registered in the name of theCompany. No Net Name has been or is now involved in any dispute, opposition, invalidation orcancellation Proceeding and, to the Knowledge of Seller and the Company, no such action isThreatened with respect to any Net Name. To the Knowledge of Seller and the Company, there is nodomain name application pending of any other Person which would or would potentially interfere withor infringe any Net Name. No Net Name is infringed or, to the Knowledge of Seller and the Company,has been challenged, interfered with or threatened in any way. To the Knowledge of Seller and theCompany, no Net Name infringes, interferes with or is alleged to interfere with or infringe thetrademark, copyright or domain name of any other Person.     2.24 Certain Payments. Since January 1, 2003, neither the Company or any of itsdirectors or officers, nor any employee authorized by any such director or officer, has directly orindirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, orother payment to any Person, private or public, regardless of form, whether in money, property, orservices (i) to obtain favorable treatment in securing business, (ii) to pay for favorabletreatment for business secured, (iii) to obtain special concessions or for special concessionsalready obtained, for or in respect of the Company or any Related Person of the Company, or (iv) inviolation of any Legal Requirement, (b) established or maintained any fund or asset belonging tothe Company that has not been recorded in the books and records of the Company.     2.25 Relationships With Related Persons**.**Neither Seller nor any Related Person ofSeller or of the Company has, or since January 1, 2003 has had, any interest in any property(whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to theBusiness of the Company . Neither Seller nor any Related Person of Seller or of the Company is, orsince January 1, 2003 has owned (of record or as a beneficial owner) an equity interest or anyother financial or profit interest in, a Person that has (i) had business dealings or a materialfinancial interest in any transaction with the Company, or (ii) engaged in direct competition withthe Company with respect to any of the line of the products or services of the Company set forth
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inSchedule 2.25 (a “Competing Business”) in any market presently served by theCompany, except for less than five percent (5%) of the outstanding capital stock of any CompetingBusiness that is publicly traded on any recognized exchange or in the over-the-counter market.     2.26 Brokers or Finders**.**Seller and its Representatives have incurred no Liabilityfor brokerage or finders’ fees or agents’ commissions or other similar payment in connection withthis Agreement.     2.27 Disclosure.          (a) No representation or warranty of Seller or the Company in this Agreement omits to state amaterial fact necessary to make the statements herein or therein, in light of the circumstances inwhich they were made, not misleading.          (b) No notice given pursuant to Section 4.5 will contain any untrue statement or omitto state a material fact necessary to make the statements therein or in this Agreement, in light ofthe circumstances in which they were made, not misleading.**3.****Representations and Warranties of Buyer**     In order to induce Seller and the Company to enter into this Agreement, Buyer represents andwarrants to Seller and the Company as follows:     3.1 Organization and Good Standing**.**Buyer is a corporation duly organized, validlyexisting and in good standing under the laws of its state of incorporation, with full corporatepower and authority to conduct its business as it is now conducted.     3.2 Authority; No Conflict.          (a) This Agreement constitutes the legal, valid and binding obligation of Buyer, enforceableagainst Buyer in accordance with its terms. Upon the execution and delivery by Buyer of eachagreement to be executed or delivered by Buyer at Closing (collectively, the “Buyer’s ClosingDocuments”), each Buyer’s Closing Document will constitute the legal, valid and bindingobligation of Buyer, enforceable against Buyer in accordance with its respective terms. Buyer hasthe absolute and unrestricted right, power and authority to execute and deliver this Agreement andthe Buyer’s Closing Documents and to perform its obligations under this Agreement and the Buyer’sClosing Documents, and such action has been duly authorized by all necessary corporate action.          (b) Neither the execution and delivery of this Agreement by Buyer nor the consummation orperformance of any of the Contemplated Transactions by Buyer will give any Person the right toprevent, delay or otherwise interfere with any of the Contemplated Transactions pursuant to: (i)any provision of Buyer’s Governing Documents; (ii) any resolution adopted by the board of directorsor the shareholders of Buyer; (iii) any Legal Requirement or Order to which Buyer may be subject;or (iv) any Contract to which Buyer is a party or by which Buyer may be bound.
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     Except as set forth on Schedule 3.2, Buyer is not and will not be required to obtainany Consent from any Person in connection with the execution and delivery of this Agreement or theconsummation or performance of any of the Contemplated Transactions.     3.3 Investment Intent. Buyer is acquiring the Interests for its own account and notwith a view to their distribution within the meaning of Section 2(11) of the Securities Act.     3.4 Certain Proceedings**.**There is no pending Proceeding that has been commencedagainst Buyer and that challenges, or may have the effect of preventing, delaying, making illegalor otherwise interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no suchProceeding has been Threatened.     3.5 Brokers or Finders**.**Buyer and its Representatives have incurred no Liability forbrokerage or finders’ fees or agents’ commissions or other similar payment in connection with thisAgreement.     3.6 No Outside Reliance. Buyer acknowledges that it has conducted to its satisfactionan independent investigation of the financial condition, results of operations, assets,liabilities, properties and projected operations of the business of the Company and the Seller and,in making the determination to proceed with the Contemplated Transactions, has relied solely on theresults of its own independent investigation and the representations and warranties set forth inSection 2 hereof, provided, however, that no such investigation shall in any way preclude or limitBuyer’s ability to recover for breaches of such representations and warranties under Section10 herein. Such representations and warranties constitute the sole and exclusiverepresentations and warranties of the Company and the Seller, respectively, to Buyer in connectionwith the Contemplated Transactions, and Buyer acknowledges and agrees that neither the Company norSeller is making any representation or warranty whatsoever, express or implied, beyond thoseexpressly given in this Agreement, including any implied warranty as to the condition,merchantability or suitability as to any of the assets or properties of the Company. Buyer furtheracknowledges and agrees that any estimates, projections, forecasts or other predictions that mayhave been provided to Buyer or any of its employees, agents or Representatives are notrepresentations or warranties of the Company or Seller, or any of their respective Related Persons,and were not relied upon by the Buyer in entering into this Agreement or consummating theContemplated Transactions.     3.7 Disclosure.          (a) No representation or warranty of Buyer in this Agreement omits to state a material factnecessary to make the statements herein or therein, in light of the circumstances in which theywere made, not misleading.          (b) No notice given pursuant to Section 5.3 will contain any untrue statement or omitto state a material fact necessary to make the statements therein or in this Agreement, in light ofthe circumstances in which they were made, not misleading.**4.****Seller’s Preclosing Covenants**
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     4.1 Access and Investigation. Between the date of this Agreement and the ClosingDate, Seller and the Company will and will cause their Representatives to, (a) afford Buyer and itsRepresentatives (collectively, “Buyer’s Advisors”) reasonable access to the Company’spersonnel, properties (including subsurface testing), Contracts, books and records, and otherdocuments and data during the Company’s normal business hours, (b) furnish Buyer and Buyer’sAdvisors with copies of all such Contracts, books and records, and other existing documents anddata as Buyer may reasonably request, and (c) furnish Buyer and Buyer’s Advisors with suchadditional financial, operating, and other data and information as Buyer may reasonably request.Notwithstanding the foregoing, Buyer shall not, without Seller’s prior written consent, which maybe withheld at Seller’s sole and absolute discretion, contact or otherwise communicate with any ofSeller’s or the Company’s employees, customers, lenders, prospects, vendors or suppliers or anyother third parties with whom Seller or the Company has a contractual relationship concerning thisAgreement, provided, however, that Buyer (through individuals approved by Seller) shall bepermitted to meet in person, together with a Representative of the Company, with the Company’scontacts at its top four (4) commercial payors (United Healthcare, Sentara Health, Anthem BlueCross Blue Shield of Virginia, and Catalyst RX) at such time and place each as shall be mutuallyagreed upon by Buyer, Seller and the Company. Buyer, Seller and the Company agree that the purposeof these meetings is to introduce Buyer to the representatives of such payors and to assure suchpayors that the Company’s business will be conducted in accordance with historic practices.     4.2 Operation of the Business. Between the date of this Agreement and the ClosingDate, Seller and the Company will:          (a) conduct the Business only in the Ordinary Course of Business; and          (b) use their Best Efforts to preserve intact the current business organization of theCompany, keep available the services of the current officers, employees, and agents of the Company,and maintain the relations and good will with suppliers, customers, landlords, creditors,employees, agents, and others having business relationships with the Company.     4.3 Negative Covenant. Except as set forth on Schedule 4.3 or as otherwiseexpressly permitted by this Agreement, between the date of this Agreement and the Closing Date,Seller and the Company will not, without the prior consent of Buyer, take any of the followingactions:          (a) change the Company’s authorized or issued capital stock; grant any stock option or rightto purchase shares of capital stock of the Company; issue any security convertible into suchcapital stock; grant any registration rights; purchase, redemption, retirement, or otheracquisition by the Company of any shares of any such capital stock; or declare or pay any dividendor otherwise distribute or pay in respect of shares of capital stock;          (b) amend the Governing Documents of the Company, except as required by any Legal Requirementand except in connection with the Conversion;          (c) enter into any employment or similar Contract with any director, officer, or employee or,except in the Ordinary Course of Business consistent with past practice, pay or
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increase anyseverance payment, bonuses, salaries, or other compensation to any shareholder, director, officer,or employee;          (d) adopt any profit sharing, bonus, deferred compensation, savings, insurance, pension,retirement or other employee benefit plan or, except in the Ordinary Course consistent with pastpractice of Business, increase the payments to or benefits under, any profit sharing, bonus,deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan foror with any employees of the Company;          (e) materially change the accounting methods used by the Company; or          (f) agree, whether oral or written, to do any of the foregoing.     4.4 Required Approvals. As promptly as practicable after the date of this Agreement,Seller and the Company will make all filings required by Legal Requirements to be made by them inorder to consummate the Contemplated Transactions (including all filings under the HSR Act, whichshall be made no later than three (3) Business Days after the date hereof) and use their bestefforts to furnish or cause to be furnished as promptly as practicable all information anddocuments requested with respect to such Legal Requirements (including specifically under the HSRAct) and shall otherwise cooperate with the applicable Governmental Body in order to obtain anyLegal Requirements and Consents in connection therewith as expeditiously as possible. Between thedate of this Agreement and the Closing Date, Seller and the Company will (a) reasonably cooperatewith Buyer (at no out-of-pocket expense to Seller and the Company) with respect to all filings thatBuyer elects to make or is required by Legal Requirements to make in connection with theContemplated Transactions, and (b) reasonably cooperate with Buyer in obtaining all consentsidentified on Schedule 3.2; provided that this Agreement will not require Seller to disposeof or make any change in any portion of its business or to incur any other burden to obtain aGovernmental Authorization. Seller and the Company shall use their best efforts to resolve suchobjections, if any, as any Governmental Body may assert with respect to this Agreement and theContemplated Transactions in connection with the Legal Requirements. In the event that a suit isinstituted by a Person or Governmental Body challenging this Agreement and the ContemplatedTransactions as a violation of applicable antitrust or competition laws, Seller and the Companyshall use their best efforts to resist or resolve such suit. Seller and the Company each shall,upon request by the other, furnish Buyer with all information concerning itself, its Subsidiaries,directors, officers and stockholders and such othermatters as may reasonably be necessary or advisable in connection with any statement, filing,ruling request, notice or application made by or on behalf of Seller, the Company, Buyer or any oftheir respective Subsidiaries to any third party and/or any Governmental Body in connection withthis Agreement and the Contemplated Transactions.     4.5 Notification.          (a) Between the date of this Agreement and the Closing Date, Seller will promptly notify Buyerin writing if Seller or the Company becomes aware of any fact or condition that causes orconstitutes a Breach of any of Seller’s and the Company’s representations and warranties as of thedate of this Agreement or becomes aware of the
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occurrence after the date of this Agreement of anyfact or condition that would (except as expressly contemplated by this Agreement) cause orconstitute a Breach of any such representation or warranty had such representation or warranty beenmade as of the Closing Date. The Seller and the Company shall promptly supplement or amend theDisclosure Schedule to reflect any fact necessary to make the representations true and correct.Any such supplement or amendment shall be deemed to qualify the Seller’s and the Company’srepresentations and warranties contained herein in determining Buyer’s rights under Sections 7 and10 unless such supplement or amendment arose out of a fact which, as of the date of execution ofthe Agreement, constituted a breach of a representation or warranty contained herein.     4.6 Payment of or Cancellation of Indebtedness. Except as expressly provided in thisAgreement or on Schedule 4.6, Seller will, prior to Closing, (i) cause all indebtednessowed to the Company by Seller or any Related Person of Seller to be paid in full prior to Closing,(ii) cancel all indebtedness of the Company to Seller or any Related Person of Seller, (iii) payoff any indebtedness owed or guaranteed by the Company to any bank or other financial institution,and (iv) use its Best Efforts to pay off in full all amounts owed under the Master Lease Agreementbetween CitiCapital Technology Finance Inc. and the Company, dated February 22, 2005.     4.7 No Negotiation. After the date of this Agreement and until such time, if any, asthis Agreement is terminated pursuant to Section 9, Seller and the Company will not, andwill cause each of their Representatives not to, directly or indirectly solicit, initiate, orencourage any inquiries or proposals from, discuss or negotiate with, provide any non-publicinformation to, or consider the merits of any unsolicited inquiries or proposals from, any Person(other than Buyer) relating to any transaction involving the sale of the Business, or any of thecapital stock of the Company, or any merger, consolidation, business combination, or similartransaction involving the Company. If Seller, the Company, or any of their officers, directors,officers, agents, employees or affiliates receives any such inquiry or proposal, Seller shallprovide written notice to Buyer as soon as practicable of any such inquiry or proposal by any suchPerson.     4.8 Best Efforts. Between the date of this Agreement and the Closing Date, Seller andthe Company will use their Best Efforts to cause (i) the conditions in Sections 7 and8 to be satisfied and (ii) the Master Lease Agreement between CitiCapital TechnologyFinance Inc. and the Company, dated February 22, 2005, to be terminated and of no further force andeffect as of the Effective Time.     4.9 Change of Name**.**On or before the Closing Date, Seller shall (a) amend itsGoverning Documents and take all other actions necessary to change its name to one sufficientlydissimilar to Seller’s present name, in Buyer’s reasonable judgment, to avoid confusion and (b)take all actions requested by Buyer to enable Buyer and the Company to utilize Seller’s presentname following Closing.     4.10 Interim Financial Statements**.**Until the Closing Date, Seller shall deliver toBuyer within twenty (20) Business Days after the end of each month, copies of consolidated balancesheets, statements of income and shareholders equity and statements of cash flows for the Companyand Seller for such month prepared in accordance with GAAP (without footnotes
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and normal year endadjustments) and certified by Seller’s chief financial officer as to compliance with Section2.3.     4.11 Conversion of Company. No later than three (3) Business Days prior to theClosing Date, Seller shall cause the Company to convert into a single member limited liabilitycompany in Virginia (the “Conversion”). Following the Conversion, Seller shall not take orcause to be taken any action that would prevent the Company from being disregarded as an entityseparate from its owners under Treas. Reg. § 301.7701-3 for federal income tax purposes, and to theextent permitted, for all other income tax purposes.**5.****Buyer’s Preclosing Covenants**     5.1 Required Approvals. Buyer acknowledges that the Parties proceeding to Closing asexpeditiously as possible is an important element of the Contemplated Transactions for Seller and,as promptly as practicable after the date of this Agreement, Buyer will make all filings requiredby Legal Requirements to be made by it in order to consummate the Contemplated Transactions(including all filings under the HSR Act, which shall be made no later than three (3) Business Daysafter the date hereof) and use its best efforts to furnish or cause to be furnished as promptly aspracticable all information and documents requested with respect to such Legal Requirements(including specifically under the HSR Act) and shall otherwise cooperate with the applicableGovernmental Body in order to obtain any Legal Requirements and Consents in connection therewith asexpeditiously as possible. Between the date of this Agreement and the Closing Date, Buyer will (a)reasonably cooperate with Seller and the Company (at no out-of-pocket expense to Buyer) withrespect to all filings that Seller and the Company elect to make or are required by LegalRequirements to make in connection with the Contemplated Transactions, and (b) diligently pursueobtaining all consents identified on Schedule 3.2; provided that this Agreement will notrequire Buyer to dispose of or make any change in any portion of its business or to incur any otherburden to obtain a Governmental Authorization. Buyer shall use its best efforts to resolve suchobjections, if any, as any Governmental Body may assert with respect to this Agreement and theContemplated Transactions in connection with the Legal Requirements. In the event that a suit isinstituted by a Person or Governmental Body challenging this Agreement and the ContemplatedTransactions as a violation of applicable antitrust or competition laws, Buyer shall use its bestefforts to resist or resolve such suit. Buyer shall, upon request by Seller and the Company,furnish the other with all information concerning itself, its Related Persons, directors, officersand stockholders and such other matters as may reasonablybe necessary or advisable in connection with any statement, filing, ruling request, notice orapplication made by or on behalf of the Seller, the Company, Buyer or any of their respectiveSubsidiaries to any third party and/or any Governmental Body in connection with this Agreement andthe Contemplated Transactions.     5.2 Best Efforts. Except as set forth in the proviso to Section 5.1, betweenthe date of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause theconditions in Sections 7 and 8 to be satisfied.     5.3 Notification. Between the date of this Agreement and the Closing Date, Buyer willpromptly notify Seller in writing if Buyer becomes aware of any fact or condition that
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causes orconstitutes a Breach of any of Buyer’s representations and warranties as of the date of thisAgreement that would reasonably be expected to result in a failure to satisfy the condition inSection 8.1, or if Buyer becomes aware of the occurrence after the date of this Agreementof any fact or condition that would (except as expressly contemplated by this Agreement) cause orconstitute a Breach of any such representation or warranty had such representation or warranty beenmade as of the Closing Date that would reasonably be expected to result in a failure to satisfy thecondition in Section 8.1.**6.****Additional Covenants**     6.1 Employee Matters.          (a) Employees. For a period of one year following the Closing Date (or such longerperiod as provided in any written employment agreement), Buyer covenants and agrees that theemployees of the Company who remain employed with the Company (it being understood that Buyer shallin its sole discretion determine who shall continue to be so employed) shall maintain at least thesame salary or hourly wage rate in effect immediately prior to the Closing. Such individuals whocontinue their employment with Company following the Closing Date are hereinafter referred to asthe “Continuing Employees”.          (b) Benefits.               (i) For a period of no more than one year following the Closing Date, or such longer period oftime required by applicable Law or in any applicable employment agreement, Buyer shall cause to bemaintained the Employee Plans, programs arrangements and policies of the Company, for each of theContinuing Employees or shall otherwise provide such transferred employees with compensation(including salary, wages and opportunities for commissions, bonuses, incentive pay, overtime andpremium pay), employee benefits, location of employment and a position of employment that are, ineach case, at least substantially equivalent (in the aggregate) to those provided to suchContinuing Employee immediately prior to the Closing.               (ii) For purposes of eligibility and vesting (but not benefit accrual) under the employeebenefit plans of Buyer providing benefits to Continuing Employees, but expressly excluding theBuyer’s employee stock purchase plan, (the “Buyer Plans”), Buyer shallcredit each Continuing Employee with his or her years of service with the Company, its RelatedPersons and any of their predecessor entities, to the same extent as such Continuing Employee wasentitled immediately prior to the Closing to credit for such service under any similar EmployeePlan. The Buyer Plans shall not deny Continuing Employee coverage on the basis of pre-existingconditions and shall credit such Continuing Employee for any deductibles and out-of-pocket expensespaid in the year of initial participation in the Buyer Plans.               (iii) Buyer shall be liable for any and all obligations and Liabilities in respect ofemployees of the Company (to the extent arising on or after the Closing Date), in each case arisingunder WARN or any similar state Legal Requirement, including any Liabilities imposed or incurred asa result of the failure of any Party to this Agreement to give any requisite
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notice under the WARNor any similar state Legal Requirement (including in connection with the transactions contemplatedherein).               (iv) For the eighteen (18) month period following Closing, Buyer shall offer to provide toRobert Haft and his wife and children health continuation medical care coverage under COBRA, at hissole expense.**7.****Conditions Precedent To Buyer’s Obligation To Close**     Buyer’s obligation to purchase the Interests and to take the other actions required to betaken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of eachof the following conditions (any of which may be waived by Buyer, in whole or in part):     7.1 Accuracy of Representations. The representations and warranties contained inSection 2 of this Agreement (i) that are qualified by materiality or Material AdverseEffect shall be true and correct as if made on the Closing Date and (ii) that are not qualified bymateriality or Material Adverse Effect shall be true and correct in all material respects as ifmade on the Closing Date, except, in each case, for inaccuracies or omissions that would notreasonably be expected to have a Material Adverse Effect, and except for the representations andwarranties in Sections 2.1 and 2.2, which shall be true in all respects.     7.2 Seller’s and the Company’s Performance.          (a) All of the covenants and obligations that Seller and the Company are required to performor to comply with pursuant to this Agreement at or prior to the Closing (considered collectively),and each of these covenants and obligations (considered individually), must have been dulyperformed and complied with in all material respects.          (b) Each document required to be delivered pursuant to Section 1.4 must have beendelivered, and each of the other covenants and obligations in Section 4 must have beenperformed and complied with in all material respects.     7.3 Consents. Each Consent identified on Schedule 1.4(a)(vi), must have beenobtained and must be in full force and effect.     7.4 No Proceedings. No temporary restraining order, preliminary or permanentinjunction or other order issues by a court or other Governmental Authority of competentjurisdiction shall be in effect and have the effect of making the Contemplated Transactions illegalor otherwise prohibiting consummation of the Contemplated Transactions; provided, however, that theprovisions of this Section 7.4 shall not be available to Buyer if its failure to fulfillits obligations shall have been the cause of, or shall have resulted in, such order or injunction.     7.5 No Claim Regarding Stock Ownership or Sale Proceeds. There must not have beenmade or Threatened by any Person any claim asserting that such Person (a) is the holder or thebeneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock
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of, or any other voting, equity, or ownership interest in, the Company, or (b) is entitled to allor any portion of the Purchase Price payable for the Interests.     7.6 Termination of Certain Agreements. Seller and the Company shall have caused to beterminated prior to the Effective Time the loan agreement between the Company and Wachovia, N.A.and the Guaranty of the Seller’s obligations to Wachovia N.A., and shall have provided lien releasewaivers from Wachovia, N.A. with respect thereto.     7.7 UnitedHealth. UnitedHealth shall not have notified Seller or the Company prior toClosing that it will cease or materially reduce its business with the Company before Closing orwithin thirty (30) days thereafter.**8.****Conditions Precedent To Seller’s Obligation To Close**     Seller’s obligation to sell the Interests and to take the other actions required to be takenby Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions (any of which may be waived by Seller, in whole or in part):     8.1 Accuracy of Representations. The representations and warranties contained inSection 3 of this Agreement (i) that are qualified by materiality or Material AdverseEffect shall be true and correct as if made on the Closing Date and (ii) that are not qualified bymateriality or Material Adverse Effect shall be true and correct in all material respects as ifmade on the Closing Date, except, in each case, for inaccuracies or omissions that would notreasonably be expected to have a Material Adverse Effect, and except for the representations andwarranties in Sections 3.1 and 3.2, which shall be true in all respects.     8.2 Buyer’s Performance.          (a) All of the covenants and obligations that Buyer is required to perform or to comply withpursuant to this Agreement at or prior to the Closing (considered collectively), and each of thesecovenants and obligations (considered individually), must have been performed and complied with inall material respects.          (b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuantto Section 1.4 and must have made the cash payments required to be made by Buyer pursuantto Section 1.4(b)(i).     8.3 No Injunction. There must not be in effect any Legal Requirement or anyinjunction or other Order that (a) prohibits the sale of the Interests by Seller to Buyer, and (b)has been adopted or issued, or has otherwise become effective, since the date of this Agreement.     8.4 Consents. Each Consent identified on Schedule 3.2, must have beenobtained and must be in full force and effect.**9.****Termination**
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     9.1 Termination Events. This Agreement may, by notice given prior to or at theClosing, be terminated:          (a) by either (i) Buyer or (ii) Seller and the Company, if a material Breach of any provisionof this Agreement has been committed by the other party or parties and such Breach has not beenwaived and has continued without cure for a period of five (5) days following notice thereof by theterminating Party;          (b) (i) by Buyer if any condition in Section 7 has not been satisfied as of October 1,2005 or if satisfaction of such a condition is or becomes impossible (other than through thefailure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived suchcondition on or before the Closing Date; or (ii) by Seller and the Company, if any condition inSection 8 has not been satisfied as of the Closing Date or if satisfaction of such acondition is or becomes impossible (other than through the failure of Seller or the Company tocomply with their obligations under this Agreement) and neither Seller nor the Company has waivedsuch condition on or before the Closing Date;          (c) by mutual consent of Buyer, Seller and the Company; or          (d) by either (i) Buyer or (ii) Seller and the Company if the Closing has not occurred (otherthan through the failure of any party seeking to terminate this Agreement to comply with itsobligations under this Agreement) on or before September 15, 2005, or such later date as theparties may agree upon.     9.2 Effect of Termination. Each party’s right of termination under Section9.1 is in addition to any other rights it may have under this Agreement or otherwise, and theexercise of a right of termination will not be an election of remedies. If this Agreement isterminated pursuant to Section 9.1, all further obligations of the parties under thisAgreement will terminate, except that the obligations in Sections 11.1 and 11.3will survive; provided, however, that if this Agreement is terminated by a partybecause of a willful or intentional Breach of the Agreement by the other party or parties orbecause one or more of the conditions to the terminating party’s obligations under this Agreementis not satisfied as a result of the other party’s or parties’ failureto comply with its or their obligations under this Agreement in all material respects, theterminating party’s right to pursue all legal remedies will survive such termination unimpaired.**10.****Indemnification; Remedies**     10.1 Survival and Right to Indemnification. All representations, warranties,covenants, and obligations in this Agreement, the supplements to Seller’s and the Company’sschedules, the certificates delivered pursuant to Section 1.4, and any other certificate ordocument delivered pursuant to this Agreement will survive the Closing; provided,however that all of the Company’s Liability with respect to its representations,warranties, covenants and obligations pursuant hereto (whether or not made jointly with Seller)shall terminate at Closing and each such representation, warranty, covenant and obligation shall bedeemed to be solely the representation, warranty, covenant or obligation of Seller as if theCompany was not a party to this Agreement. The right to indemnification, payment of Damages orother remedy based on
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such representations, warranties, covenants, and obligations will not beaffected by any investigation conducted with respect to, or any Knowledge acquired (or capable ofbeing acquired) at any time, whether before or after the execution and delivery of this Agreementor the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any suchrepresentation, warranty, covenant, or obligation. The waiver of any condition based on theaccuracy of any representation or warranty, or on the performance of or compliance with anycovenant or obligation, will not affect the right to indemnification, payment of Damages, or otherremedy based on such representations, warranties, covenants, and obligations.     10.2 Indemnification and Payment of Damages by Seller and the Company. Prior toClosing, Seller and the Company will jointly and severally and following the Closing Seller solelywill indemnify and hold harmless Buyer, the Company, and their respective Representatives,shareholders, controlling persons, and affiliates (collectively, the “BuyerIndemnifiedPersons”) for, and will pay to the Indemnified Persons the amount of, any Damages, arising,directly or indirectly, from or in connection with:          (a) any Breach of any representation or warranty made by Seller or the Company in thisAgreement (without giving effect to any supplement to Seller’s and the Company’s schedules) or anyother certificate or document delivered by Seller pursuant to this Agreement;          (b) any Breach by Seller or the Company of any covenant or obligation of Seller or the Companyin this Agreement; or          (c) any claim by any Person for brokerage or finder’s fees or commissions or similar paymentsbased upon any agreement or understanding alleged to have been made by such Person with Seller orthe Company (or any Person acting on its behalf) in connection with any of the ContemplatedTransactions.     Notwithstanding the foregoing, neither the Seller nor the Company shall be obligated toprovide indemnification for any Breach of a representation or warranty contained herein to theextent that the amount of Damages arising from such Breach is provided for in the SupplementalReserves.     10.3 Indemnification and Payment of Damages by Buyer. Buyer will indemnify and holdharmless Seller and its Representatives, shareholders, controlling persons and affiliates(collectively, “Seller Indemnified Persons”), and will pay to the Seller IndemnifiedPersons the amount of any Damages arising, directly or indirectly, from or in connection with (a)any Breach of any representation or warranty made by Buyer in this Agreement or in any certificatedelivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant orobligation of Buyer in this Agreement, or (c) any claim by any Person for brokerage or finder’sfees or commissions or similar payments based upon any agreement or understanding alleged to havebeen made by such Person with Buyer (or any Person acting on its behalf) in connection with any ofthe Contemplated Transactions.
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     10.4 Time Limitations. If the Closing occurs, Seller will have liability (forindemnification or otherwise) with respect to any representation or warranty, or covenant orobligation to be performed and complied with prior to the Closing Date, for a period of eighteen(18) months after the Closing Date; provided, however, that the representations and warranties setforth in Sections 2.1, 2.2, 2.10, 2.14, 2.22, and2.26 and the indemnification obligation set forth in Section 10.7 shall survive theClosing for a period of three (3) years, and provided further that the representations andwarranties set forth in Section 2.15 shall survive the Closing for a period of four (4)years. If the Closing occurs, Buyer will have liability (for indemnification or otherwise) withrespect to any representation or warranty, or covenant or obligation to be performed and compliedwith prior to the Closing Date, for a period of eighteen (18) months after the Closing Date;provided, however, that the representations and warranties set forth in Section 3.5 or aclaim for indemnification or reimbursement based upon Section 10.6(e) shall survive theClosing for a period of four (4) years.     10.5 Monetary Limitations.          (a) If the Closing occurs, Seller will have no liability (for indemnification or otherwise)with respect to the matters described in this Section 10.5(a), or, to the extent relatingto any failure to perform or comply prior to the Closing Date, clause (b) of Section 10.2,or, subject to the last sentence of this Section 10.5(a), indemnification claims made underSection 10.7 unless the total of all Damages with respect to such matters is at least$750,000, at which time the Seller shall be liable for all Damages in excess of $250,000 (the“Basket”). The maximum aggregate liability of the Seller as a result of all Damagesdescribed in Section 10.2 and in Section 10.7 shall not exceed $11,400,000.00 (the“Cap Amount”). The Basket will not apply to any Breach of any of Seller’s representationsand warranties set forth in Section 2.15 or to any Damages arising out of the failure ofthe Company to pay Income Taxes for taxable periods (or portions thereof) ending on or before theClosing Date and neither the Basket nor the Cap Amount will apply to any Breach of any of Seller’srepresentations and warranties set forth in Sections 2.1, 2.2, or 2.26 such thatBuyer shall be entitled to recover the full amount of such Damages, which shall not exceed theaggregate consideration that the Seller received hereunder.          (b) If the Closing occurs, Seller’s liability for any Damages with respect to any Breach ofSeller’s representations and warranties set forth in Section 2.15 shall be as follows, withthe remaining liability to be assumed and paid by Buyer: (i) with respect to the first$1,000,000.00 of Damages, liability for fifty percent (50%) of such Damages; (ii) with respect toup to the next $4,000,000.00 of Damages, liability for eighty percent (80%) of such Damages; and(iii) with respect to up to the next $6,400,000.00 of Damages, liability for one hundred percent(100%) of such Damages. For the avoidance of doubt, liability for all such damages shall becumulative and subject, together with any other claims under Section 10.2, to the CapAmount.          (c) [Intentionally omitted.]          (d) If the Closing occurs, in no event shall the total Liability of Seller or Buyer withrespect to claims under this Section 10 exceed the Purchase Price.
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          (e) The amount of any Damages shall be reduced or reimbursed, as the case may be, by anyamount received by the Indemnified Person with respect thereto under any insurance coverage or fromany other party. An Indemnified Person shall use reasonable efforts to collect any amountsavailable under such insurance coverage or from such other party. If an Indemnified Personreceives an amount under insurance coverage or from a third party with respect to Damages at anytime subsequent to any indemnification provided by an Indemnifying Party, then such IndemnifiedPerson shall promptly reimburse the Indemnifying Party for any payment made or expense incurred bysuch party in connection with providing such indemnification up to such amount received by theIndemnified Person.          (f) Any indemnification payments required to be made hereunder with respect to any mattershall be reduced by the amount of any economic benefits (including, income tax benefits) that arereadily quantifiable and have been received by the Indemnified Person as a result of the samematter.          (g) To the extent Seller discharges any claim for indemnification hereunder, it shall besubrogated to all related rights of the Buyer Indemnified Parties against third parties.          (h) The Buyer Indemnified Parties shall not be entitled to indemnification with respect to anymatters or amounts which are the subject of a Closing Working Capital adjustment pursuant toSection 1.5.          (i) The Basket shall be increased dollar for dollar by any refund or recovery actuallyreceived (net of Tax costs associated with such refund or recovery) by the Company after Closing inconnection with (1) the matter described on Schedule 10.5(i) with respect to the DMERCAudit and (2) the Company’s amended Sales and Use Tax Returns for the State of California, which isdescribed on Schedule 2.10(b).          (j) From and after the Closing, the indemnification provided in this Section 10 shallbe the sole and exclusive remedy of any Party hereto with respect to this Agreement and theContemplated Transactions, except with respect to the Noncompetition Agreement.Notwithstanding any provision of this Agreement to the contrary, nothing contained in thisAgreement shall in any way limit, impair, modify or otherwise affect the rights of Buyer to bringany claim, demand, suit or cause of action otherwise available to Buyer based upon, or to seek orrecover any Damages arising from or related to, an allegation or allegations that an indemnifyingparty had an intent to defraud (as such term applies under common law and securities lawprinciples) or made a willful, intentional or reckless misrepresentation or omission of a materialfact in connection with this Agreement or any of the agreements contemplated hereby.     (k) To the extent that a Breach of a representation or warranty contained in Section 2 arisesout of a review being conducted by the State of Virginia first described in Item 2 to Schedule2.9, then any Damages arising from such Breach shall first be applied toward the Basket andthen any excess Damages arising from such Breach shall be funded eighty percent (80%) by Seller andtwenty percent (20%) by Buyer; provided, that Seller’s total liability for Damages under thisSection 10.5(k) shall be cumulative and subject to the Cap Amount along with other Damages subjectto the Cap Amount.
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     10.6 Procedure For Indemnification — Third Party Claims.          (a) Promptly after receipt by an indemnified party under Sections 10.2 or 10.3of notice of the commencement of any Proceeding against it, such indemnified party will, if a claimis to be made against an indemnifying party under such Section, give notice to the indemnifyingparty of the commencement of such claim, but the failure to notify the indemnifying party will notrelieve the indemnifying party of any liability that it may have to any indemnified party, exceptto the extent that the indemnifying party demonstrates that the defense of such action isprejudiced by the indemnifying party’s failure to give such notice.          (b) If any Proceeding referred to in Section 10.6(a) is brought against an indemnifiedparty and it gives notice to the indemnifying party of the commencement of such Proceeding, theindemnifying party will, be entitled to participate in such Proceeding and, to the extent that itwishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnifiedparty determines in good faith that joint representation would be inappropriate, or (ii) theindemnifying party fails to provide reasonable assurance to the indemnified party of its financialcapacity to defend such Proceeding and provide indemnification with respect to such Proceeding), toassume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party(Latham & Watkins, LLP being acceptable to Buyer for these purposes) and, after notice from theindemnifying party to the indemnified party of its election to assume the defense of suchProceeding, the indemnifying party will not, as long as it diligently conducts such defense, beliable to the indemnified party under this Section 10 for any fees of other counsel or anyother expenses with respect to the defense of such Proceeding, in each case subsequently incurredby the indemnified party in connection with the defense of such Proceeding, other than reasonablecosts of investigation conducted at the request of the indemnifying party. If the indemnifyingparty assumes the defense of a Proceeding, (i) it will be conclusively established for purposes ofthis Agreement that the claims made in that Proceeding are within the scope of and subject toindemnification; (ii) no compromise or settlement of such claims may be effected by theindemnifying party without the indemnified party’s consent (notto be unreasonably withheld, conditioned or delayed) unless (A) there is no finding oradmission of any violation of Legal Requirements or any violation of the rights of any Person andno effect on any other claims that may be made against the indemnified party, and (B) the solerelief provided is monetary damages that are paid in full by the indemnifying party; and (iii) theindemnified party will have no liability with respect to any compromise or settlement of suchclaims effected without its consent (not to be unreasonably withheld, conditioned or delayed). Ifnotice is given to an indemnifying party of the commencement of any Proceeding and the indemnifyingparty does not, within thirty (30) days after the indemnified party’s notice is given, give noticeto the indemnified party of its election to assume the defense of such Proceeding, the indemnifyingparty will be bound by any determination made in such Proceeding or any compromise or settlementeffected by the indemnified party.          (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that thereis a reasonable probability that a Proceeding may adversely affect it or its affiliates other thanas a result of monetary damages for which it would be entitled to indemnification under thisAgreement, the indemnified party may, by notice to the indemnifying
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party, assume the exclusiveright to defend, compromise, or settle such Proceeding, but the indemnifying party will not bebound by any determination of a Proceeding so defended or any compromise or settlement effectedwithout its consent (which may not be unreasonably withheld).          (d) Seller hereby consents to the non-exclusive jurisdiction of any court in which aProceeding is brought against any Indemnified Person for purposes of any claim that an IndemnifiedPerson may have under this Agreement with respect to such Proceeding or the matters allegedtherein, and agrees that process may be served on Seller with respect to such a claim anywhere inthe world.          (e) The Parties covenant and agree that the protocol set forth on Schedule 10.6(e)shall be followed without exception in connection with any matters involving Medicare or Medicaid,including indemnification claims arising under Section 2.15.          (f) The Indemnified Party shall cooperate with the Indemnifying Party and its counsel in suchdefense and make available to the Indemnifying Party all witnesses, records, materials, andinformation in the Indemnified Party’s possession or under the Indemnified Party’s control relatingthereto as may be reasonably requested by the Indemnifying Party, and in contesting any claim,demand or Proceeding which the Indemnifying Party defends, or if appropriate and related to theclaim, demand or Proceeding in question, in making any counterclaim against the Person assertingthe Third Party Claim, or any cross-complaint against any Person. In the event the IndemnifyingParty fails to assume the defense of such Third Party Claim within thirty (30) days after receiptof notice thereof in accordance with the terms hereof, (A) the Indemnified Party against which suchThird Party Claim has been asserted shall have the right to undertake the defense, and (B) theIndemnifying Party agrees to cooperate with the Indemnified Party in such defense and makeavailable to the Indemnified Party, all witnesses, records, materials and information in theIndemnifying Party’s possession or under theIndemnifying Party’s control relating thereto as may be reasonably requested by theIndemnified Party.     10.7 Tax Indemnification.     In addition to Section 10.2, without duplication, Seller agrees to indemnify and holdharmless the Indemnified Persons from any Damages for (i) any Taxes imposed on the Company withrespect to Tax periods ending on or prior to the Closing Date (a “Pre-Closing Tax Period”)and (ii) any Taxes imposed on the Company with respect to Tax periods beginning before and endingafter the Closing Date, but only with respect to the portion of such period up to and including theClosing Date (such portion, a “Pre-Closing Partial Period”), to the extent such Taxes areallocable pursuant to Section 11.4(b) to the Pre-Closing Partial Period, including, withoutlimitation, any Taxes (other than Transfer Taxes which are governed under Section 12.2)arising as a result of the transactions contemplated in this Agreement to be undertaken by Selleror the Company (including, without limitation, the Conversion described in Sections 4.11)on or prior to the Closing Date. Notwithstanding the foregoing, Seller shall not be liable to theIndemnified Parties for Taxes to the extent of the amount of Taxes that are taken into account indetermining Closing Working Capital or any Taxes imposed on the Company that are payable as
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a result of any events occurring on the Closing Date after the Closing that are outside of theordinary course of business. Seller’s indemnification obligation under this Section 10.7shall survive the Closing for a period of three (3) years and as provided in Section 10.5,Seller’s indemnification obligations with respect to Taxes (other than Income Taxes) shall besubject to the Basket.     10.8 Procedure For Indemnification — Other Claims. A claim for indemnification forany matter not involving a Third-Party Claim may be asserted by notice to the party from whomindemnification is sought.     10.9 Payment of Indemnification Obligations. All indemnification amounts payable toany party hereto in connection with a claim for indemnification pursuant to this Section 10shall be effected immediately upon final determination of the amount of the indemnificationliability by payment of cash or delivery of a cashier’s check in the amount of the indemnificationliability.     10.10 Retention of Holdback Amount by the Seller.          (a) At the Closing, the Seller shall retain $11,400,000.00 from the proceeds of the PurchasePrice (the “Holdback Amount”) to satisfy payment of any future indemnification obligationsof the Seller or the Company pursuant to the terms of this Section 10. The Seller shallinvest at least $5,700,000.00 of the Holdback Amount in Required Investments. The term “RequiredInvestments” means (A) the following investments so long as they have maturities of six (6) monthsor less: (a) obligations issued or guaranteed by the United States or by any person controlled orsupervised by or acting as an instrumentality of the United States pursuant to authority granted byCongress; (b) obligations issued or guaranteed by any state or political subdivision thereof ratedeither AA or higher, or MIG 1 or higher, by Moody’s Investors Service, Inc. or AA or higher, or anequivalent, by Standard & Poor’s Corporation, both of New York,New York, or their successors; (c) commercial or finance paper which is rated either Prime-1or higher or an equivalent by Moody’s Investors Service, Inc. or A-1 or higher or an equivalent byStandard & Poor’s Corporation, both of New York, New York, or their successors; (d) certificates ofdeposit or time deposits of banks or trust companies, organized under the laws of the UnitedStates, having a minimum equity of $500,000,000 or (e) money market funds and (B) equity securitiesfreely tradeable without regard to volume limitations and traded on either Nasdaq or The New YorkStock Exchange, Inc. The Seller shall be entitled to invest the remainder of the Holdback Amountas it determines.          (b) The Seller shall not pay dividends or make liquidating distributions involving all or aportion of the Holdback Amount until the date that is four (4) years following the Closing;provided, however, that if on the date that is four (4) years following the Closing there is apending claim or controversy governed by the terms of this Section 10, the Seller shall beobligated to maintain that amount of the Holdback Amount, necessary to satisfy such pending claimor controversy. In such event, the first Five Million Seven Hundred Thousand ($5,700,000) Dollarsof such Holdback Amount shall be in the form of Required Investments.
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     10.11 Access to Company Employees. Buyer shall make available to Seller from time totime, at no charge, members of the Company’s management as well as other Company personnel as maybe reasonably requested by Seller to assist Seller after Closing in connection with the processdescribed in Section 1.5 hereof or with any claim for indemnification under thisSection 10.     10.12 Tax Treatment of Indemnity Payments. Seller and Buyer agree to treat anyindemnity payment made pursuant to this Section 10 as an adjustment to the Purchase Pricefor federal, state, local and foreign income tax purposes unless a contrary treatment is requiredunder applicable law.**11.****Additional Covenants**11.1 Noncompetition, Nonsolicitation and Nondisparagement**.**          (a) *Noncompetition*. For a period of three (3) years after the Closing Date, Seller shall not,directly or indirectly, invest in, own, manage, operate, finance, control, advise, render servicesto or guarantee the obligations of any company identified on Schedule 11.1(a) (each, a“Competing Company” and, together, the “Competing Companies”), provided,however, that Seller may purchase or otherwise acquire up to (but not more than) fivepercent (5%) of any class of the securities of any such Competing Company (but may not otherwiseparticipate in the activities of such Person) if such securities are listed on any nationalsecurities exchange.          (b) *Nonsolicitation*. For a period of three (3) years after the Closing Date, Seller shallnot, directly or indirectly: (i) cause, induce or attempt to cause or induce any customer,supplier, licensee, licensor, franchisee, employee, consultant or other business relation of theCompany as of the date of this Agreement to cease doing business with the Company or to deal withany Competing Company; (ii) cause, induce or attempt to cause or induce any customer, supplier,licensee, licensor, franchisee, employee, consultant or other business relationof Seller or the Company on the Closing Date or within the year preceding the Closing Date tocease doing business with the Company or, to deal with any Competing Company; or (iii) hire, retainor attempt to hire or retain any Continuing Employee (other than by general solicitations ofemployment) or in any way interfere with the relationship between the Company and any of itsContinuing Employees.          (c) *Modification of Covenant*. If a final judgment of a court or tribunal of competentjurisdiction determines that any term or provision contained in Sections 11.1(a) and(b) is invalid or unenforceable, then the parties agree that the court or tribunal willhave the power to reduce the scope, duration or geographic area of the term or provision, to deletespecific words or phrases or to replace any invalid or unenforceable term or provision with a termor provision that is valid and enforceable and that comes closest to expressing the intention ofthe invalid or unenforceable term or provision. This Section 11.1 will be enforceable asso modified after the expiration of the time within which the judgment may be appealed. ThisSection 11.1 is reasonable and necessary to protect and preserve Buyer’s legitimatebusiness interests and the value of the Company and the Business and to prevent any unfairadvantage conferred on Seller.
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11.2 Intentionally Omitted**.**     11.3 Confidentiality.          (a) Seller and Buyer have entered into a letter agreement dated August 26, 2004 (the “NDAAgreement”) and the terms of the NDA Agreement are hereby incorporated herein by reference asif set forth in full in this Section 11.3.          (b) Following the Closing, Seller shall and shall cause its Related Persons to, hold in strictconfidence all, and not divulge or disclose any Confidential Information, except to the extentrequired in connection with any Legal Requirement (including preparation and filing of tax returnsfor pre-closing periods) or as required or requested by any Governmental Body.     11.4 Tax Matters.          (a) Seller shall be responsible for preparing and filing all Income Tax Returns withrespect to Taxes relating to the Company for taxable periods (or portions thereof) ending on orprior to the Closing Date, including any form 1120S’s to be filed by Seller after the Closing Date,and all other Tax Returns of the Company (including all sales and use Tax Returns) that are filedon or before the Closing Date). Buyer shall prepare or cause to be prepared all Tax Returns of theCompany, other than those described in the preceding sentence, that are due to be filed after theClosing Date and those Tax Returns of the Company which are filed after the Closing Date, includingall sales and use and property Tax Returns. Buyer shall furnish copies of all such Tax Returns forperiods that end on before the Closing Date and for Straddle Periods (as defined below inSection 11.4(b)) with respect to Taxes relating to the Company, to Seller for its review atleast ten (10) days prior to the due date for filing such Tax Returns and shall make any revisionsto such Tax Returns as are not unreasonably requested by Seller to the extent such revisions relateto Taxes of the Company for a period that ends on or prior to the Closing Date or for a Pre-ClosingPartial Period. Such Tax Returns shall be prepared on a basis consistent withthose prepared for prior taxable periods, unless a different treatment of any item is requiredby applicable law or such different treatment does not result in increased Tax Liability to theSeller or an increased Tax Liability to the Company with respect to a Pre-Closing Tax Period or aPre-Closing Partial Period. Not later than five (5) Business Days prior to the due date for thepayment of any Tax on any such Tax Return, Seller shall pay to Buyer or the Company the amount ofTaxes owed by Seller pursuant to Section 10.7. Buyer and Seller shall provide suchassistance (including the provision of information and any required consents, powers of attorney,authorizations or signatures) necessary or desirable to allow the applicable party to file any TaxReturns described in this section.     (b) In order to apportion appropriately any Taxes relating to a taxable period thatincludes (but does not end on) the Closing Date (a “Straddle Period”), the parties heretowill, to the extent permitted by applicable law, elect with the relevant taxing authority to treatfor all purposes the Closing Date as the last day of a taxable period of the Company (a “ShortPeriod”). In any case where applicable law does not permit Seller to elect the Closing Date asthe last day of a Short Period, then, for purposes of this Agreement, the portion of each Taxrelating to the Company for the Pre-Closing Partial Period shall be (i) in the case of *ad valorem*or property
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Taxes, be deemed to be the amount of such Taxes for the entire Straddle Periodmultiplied by a fraction, the numerator of which is the number of calendar days during thePre-Closing Partial Period and the denominator of which is the total number of calendar days in theStraddle Period, and (ii) in the case of all other Taxes be determined based on an interim closingof the books as of the close of business on the Closing Date.     (c) For federal income tax purposes, and to the extent permitted, for all other income taxpurposes, the parties acknowledge and agree that Buyer shall be treated as acquiring the assetsheld by the Company in exchange for the Purchase Price. Buyer and Seller shall report thetransaction hereunder in a manner consistent with such treatment. Buyer and Seller agree tonegotiate in good faith to determine the amount of the Purchase Price to be allocated to thenon-competition agreement that Seller is entering into pursuant to Section 11.1(a) of thisAgreement (the “Seller Non-Compete”) and that $0 of the Purchase Price shall be allocatedto all other non-competition agreements entered into in connection with this Agreement and theremainder of the Purchase Price plus any liabilities of the Company that are treated as beingassumed by the Buyer for federal income tax purposes shall be allocated among the Company’s assetsin accordance with Section 1060 of the Code as provided in this Section 11.4(c), providedthat in no event will the amount allocated to the Seller Non-Compete exceed $100,000 (the“Asset Allocation”). Consistent with the foregoing sentence, Buyer and Seller shall usegood faith efforts to agree upon, prior to Closing the Asset Allocation and if agreed upon prior toClosing will incorporate the Asset Allocation on a schedule to be attached hereto prior to or atClosing. If Buyer and Seller are unable to agree upon the Asset Allocation by the Closing Date,they shall determine the Asset Allocation within sixty (60) days of the Closing Date. If Sellerand Buyer are unable to reach a resolution within such sixty (60) day period, then all remainingdisputed issues shall be submitted for resolution by an independent accounting firm mutuallyacceptable to Seller and Buyer which shall make a final determination as to the disputed itemswithin thirty (30) days after such submission, and such determination shall be final, binding andconclusive on the Seller and Buyer. Each of the parties hereto agree that (i) none of the partiesshall take aposition on any Tax Return (including IRS Form 8594), that is in any way inconsistent with suchAsset Allocation without the written consent of the other party or unless specifically required byan applicable governmental authority, and (ii) they shall promptly advise each other regarding theexistence of any tax audit, controversy or litigation related to such Asset Allocation.Notwithstanding the foregoing, nothing contained herein shall prevent Buyer or Seller from settlingany proposed deficiency or adjustment by any governmental authority based upon or arising out ofthe Asset Allocation, and neither Buyer nor Seller shall be required to litigate before any courtany proposed deficiency or adjustment by any governmental authority challenging such AssetAllocation.     (d) If after the Closing Date either party hereto receives any notice, letter, correspondence,claim or decree relating to Taxes of the Company from any taxing authority (a “Tax Notice”)for periods or portions of period that end or prior to the Closing Date or for which anindemnification claim may be made hereunder, the party receiving such Tax Notice shall deliver suchTax Notice to the other party hereto. Seller shall have the right to handle, defend, conduct andcontrol any Tax audit or other proceeding that relates to Taxes for which Seller may have liabilityprovided that Seller shall not compromise or settle any such Tax audit or
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proceeding withoutobtaining Buyer’s consent, which consent shall not be unreasonably withheld, conditioned ordelayed. In the event that Seller fails to provide Buyer with a written notice that it elects todefend a Tax audit or proceeding described in this Section 11.4(d) within thirty (30) days ofreceiving a Tax Notice, Buyer shall have the right to handle, defend, conduct and control such Taxaudit or proceeding and Seller shall have the right to participate in such Tax audit or proceedingat its own expense. Buyer shall also have the right to compromise or settle any such Tax audit orproceeding that it controls pursuant to the preceding sentence, subject to Seller’s consent, whichconsent shall not be unreasonably withheld, conditioned or delayed. To the extent of any conflictbetween the provision set forth in this Section 11.4(d) and the provision set forth in Section10.6 of this Agreement, the provisions set forth in this Section shall control.     (e) Without the Seller’s prior written consent, which consent shall not be unreasonablywithheld, conditioned or delayed, the Buyer shall not and it shall not permit or cause the Companyor any of its Affiliates to make or change any Tax election, amend any Tax Return of the Companyfor a period that ends on prior to the Closing or for a Straddle Period, take any action or enterinto any transaction that results in any increased Tax liability of the Seller or the owners of theSeller or that would increase the indemnification obligation of the Seller under this Agreementunless such election, amendment, action or transaction is required by applicable law.     (f) Buyer agrees to assume the preparation and filing of all income tax withholdingand employment tax forms (including Forms W-2) for all Company employees for the full 2005 calendaryear in accordance with the alternate procedure set forth in Rev. Proc. 2004-53, 2004-34 I.R.B.320.     (g) Buyer and Seller shall furnish or cause to be furnished to each other, aspromptly as practicable, such information and assistance relating to the Company as is reasonablynecessary for the preparation and filing of any Tax Return, claim for refund or other filings relatingto Tax matters, for the preparation for any Tax audit, for the preparation for any Tax protest, forthe prosecution or defense of any suit or other proceeding relating to Tax matters.**12.****General Provisions**     12.1 Expenses. Except as otherwise expressly provided in this Agreement, each partyto this Agreement will bear its respective expenses incurred in connection with the preparation,execution, and performance of this Agreement and the Contemplated Transactions, including all feesand expenses of agents, representatives, counsel, and accountants in connection with this Agreementand the Contemplated Transactions; provided that the fees and expenses of Seller’s and theCompany’s attorneys, finders and brokers will be borne by Seller. Buyer will pay one-half andSeller will pay one-half of the HSR Act filing fee. In the event of termination of this Agreement,the obligation of each party to pay its own expenses will be subject to any rights of such partyarising from a Breach of this Agreement by another party.     12.2 Transfer Taxes. All Transfer Taxes applicable to, or resulting from, thepurchase of the Interests contemplated under this Agreement shall be borne equally by Seller andBuyer.
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     12.3 Public Announcements. Any public announcement or similar publicity with respectto this Agreement or the Contemplated Transactions will be issued, if at all, at such time and insuch manner as agreed by each of the parties hereto, except as required by Legal Requirements.Unless consented to in writing by each party hereto in advance or required by Legal Requirements,prior to the Closing, each party to this Agreement shall, and shall cause the Company to, keep thisAgreement strictly confidential and may not make any disclosure of this Agreement to any Person.Seller and Buyer will consult with each other concerning the means by which the Company’semployees, customers, and suppliers and others having dealings with the Company will be informed ofthe Contemplated Transactions, and Buyer will have the right to be present for any suchcommunication. The foregoing will in no way preclude communications or disclosures by the partiesnecessary to comply with any applicable accounting, stock exchange or federal securities disclosureobligations.     12.4 Notices. All notices, notifications, consents, waivers, and other communicationsunder this Agreement must be in writing and will be deemed to have been duly given when (a)delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with writtenconfirmation of receipt), provided that a copy is mailed by registered mail, return receiptrequested, or (c) when received by the addressee, if sent by a nationally recognized overnightdelivery service (receipt requested), in each case to the appropriate addresses and telecopiernumbers set forth below (or to such other addresses and telecopier numbers as a party may designateby notice to the other parties):   Seller: National Pharmacies Group, Inc.  2157 Apperson Drive  Salem, Virginia 24153  Attention: David Dixon and J. O’Neil Leftwich  Facsimile No.: (540) 777-0015 (Dixon)  Facsimile No.: (888) 797-4643 (Leftwich)   with copies to Latham & Watkins, LLP  555 Eleventh Street, NW  Washington, DC 20004  Attention: Michael Schlesinger, Esq.  Facsimile No.: (202) 637-2201  Robert Haft  2346 Massachusetts Avenue NW  Washington, DC 20008   Buyer: PolyMedica Corporation  11 State Street  Woburn, Massachusetts 01801  Attention: Chief Executive Officer  Facsimile No.: (781) 938-6950
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   with copies to PolyMedica Corporation  11 State Street  Woburn, Massachusetts 01801  Attention: Devin Anderson, Esq.  Facsimile No.: (781) 935-0695  Weil, Gotshal & Manges LLP  100 Federal Street, 34th Floor  Boston, Massachusetts 02110  Attention: James Westra, Esq.  Facsimile No.: (617) 772-8333     12.5 Jurisdiction; Service Of Process. Any action or proceeding seeking to enforceany provision of, or based on any right arising out of, this Agreement may be brought against anyof the parties in the courts of the State of Delaware, or, if it has or can acquire jurisdiction,in any United States District Court sitting in Delaware, and each of the parties consents to thejurisdiction of such courts (and of the appropriate appellate courts) in any such action orproceeding and waives any objection to venue laid therein. Process in any action or proceedingreferred to in the preceding sentence may be served on any party anywhere in the world. Each partywaives personal service of any and all process upon it, and irrevocably consents to the service ofprocess out of any of the aforementioned courts in any such action or proceeding by the mailing ofcopies thereof by certified mail, postage prepaid, to such party at the address set forth above,such service to become effective five business days after mailing.     12.6 Waiver of Jury Trial. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANYPROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS,WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THEPARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCEOF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIALBY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF THECONTEMPLATED TRANSACTIONS SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGESITTING WITHOUT A JURY.     12.7 Enforcement of Agreement**.**The parties acknowledge and agree that in the event ofa Breach of this Agreement, the non-breaching party would be irreparably damaged and could not beadequately compensated in all cases by monetary damages alone. Accordingly, in addition to anyother right or remedy to which the non-breaching party may be entitled, at law or in equity, itshall be entitled to enforce any provision of this Agreement by a decree of specific performanceand to temporary, preliminary and permanent injunctive relief to prevent Breaches or threatenedBreaches of any of the provisions of this Agreement, without posting any bond or other undertaking.
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     12.8 Further Assurances. The parties agree (a) to furnish upon request to each othersuch further information, (b) to execute and deliver to each other such other documents, and (c) todo such other acts and things, all as the other party may reasonably request for the purpose ofcarrying out the intent of this Agreement and the documents referred to in this Agreement.     12.9 Waiver. The rights and remedies of the parties to this Agreement are cumulativeand not alternative. Neither the failure nor any delay by any party in exercising any right, power,or privilege under this Agreement or the documents referred to in this Agreement will operate as awaiver of such right, power, or privilege, and no single or partial exercise of any such right,power, or privilege will preclude any other or further exercise of such right, power, or privilegeor the exercise of any other right, power, or privilege. To the maximum extent permitted byapplicable law, (a) no claim or right arising out of this Agreement or the documents referred to inthis Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation ofthe claim or right unless in writing signed by the other party; (b) no waiver that may be given bya party will be applicable except in the specific instance for which it is given; and (c) no noticeto or demand on one party will be deemed to be a waiver of any obligation of such party or of theright of the party giving such notice or demand to take further action without notice or demand asprovided in this Agreement or the documents referred to in this Agreement.     12.10 Entire Agreement and Modification. This Agreement supersedes all prioragreements between the parties with respect to its subject matter and constitutes (along with thedocuments referred to in this Agreement) a complete and exclusive statement of the terms of theagreement between the parties with respect to its subject matter. This Agreement may not beamended except by a written agreement executed by the party to be charged with the amendment.     12.11 Disclosure Schedules.          (a) The schedules to this Agreement, and any supplement thereto, must relate only to therepresentations and warranties in the Section of the Agreement to which they expressly relate or towhich any disclosure therein is readily apparent.          (b) In the event of any inconsistency between the statements in the body of this Agreement andthose in the schedules, the statements in the body of this Agreement will control.     12.12 Assignments, Successors, and No Third-Party Rights. No party may assign any ofits rights under this Agreement without the prior consent of the other parties, except that Buyermay assign any of its rights under this Agreement to any Related Person of the Buyer; provided thatno such assignment shall release Buyer from its liabilities hereunder. Subject to the precedingsentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefitof the successors and permitted assigns of the parties. Nothing expressed or referred to in thisAgreement will be construed to give any Person other than the parties to this Agreement any legalor equitable right, remedy, or claim under or with respect to this Agreement or any provision ofthis Agreement. This Agreement and all of its provisions and conditions are
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for the sole andexclusive benefit of the parties to this Agreement and their successors and assigns.     12.13 Severability. If any provision of this Agreement is held invalid orunenforceable by any court of competent jurisdiction, the other provisions of this Agreement willremain in full force and effect. Any provision of this Agreement held invalid or unenforceable onlyin part or degree will remain in full force and effect to the extent not held invalid orunenforceable.     12.14 Section Headings, Construction. The headings of Sections in this Agreement areprovided for convenience only and will not affect its construction or interpretation. Allreferences to “Section” or “Sections” refer to the corresponding Section or Sections of thisAgreement. All words used in this Agreement will be construed to be of such gender or number as thecircumstances require. Unless otherwise expressly provided, the word “including” does not limit thepreceding words or terms.     12.15 Time of Essence. With regard to all dates and time periods set forth orreferred to in this Agreement, time is of the essence.     12.16 Governing Law. This Agreement will be governed by the laws of the State ofDelaware without regard to conflicts of laws principles.     12.17 Legal Fees. Each party shall pay its own attorneys’ fees and other costs andexpenses incurred as a result of any legal proceeding commenced in connection with this Agreement.     12.18 Execution of Agreement. This Agreement may be executed in counterparts, each ofwhich will be deemed to be an original copy of this Agreement and all of which, when takentogether, will be deemed to constitute one and the same agreement. The exchange of copies of thisAgreement and of signature pages by facsimile transmission shall constitute effective execution anddelivery of this Agreement as to the parties and may be used in lieu of the original Agreement forall purposes. Signatures of the parties transmitted by facsimile shall be deemed to be theiroriginal signatures for all purposes.**13.****Definitions And Usage**     13.1 Definitions**.**In addition to the terms defined elsewhere in this Agreement, forpurposes of this Agreement, the following terms and variations thereof have the meanings specifiedor referred to in this Section 13.1:     “Accounts Receivable”—all accounts receivable and other rights to payment fromcustomers of the Company for products sold or services rendered thereto, whether or not generatedin the Ordinary Course of Business, including the full benefit of all security for such accounts orrights to payment and any claim, remedy or other related right.     “Adjustment Amount”—as defined in Section 1.5(b)(i).
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     “Agreement”—as defined in the preamble.     “Annual Financial Statements”—as defined in Section 2.3.     “Applicable Contract”—any Contract (a) under which the Company has or may acquire anyrights, (b) under which the Company has or may become subject to any obligation or liability, or(c) by which the Company or any of the assets owned or used by it is or may become bound.     “Asset Allocation”—as defined in Section 11.4(c).     “Balance Sheet”—as defined in Section 2.3.     “Balance Sheet Date”—as defined in Section 2.3.     “Basket” —as defined in Section 10.5(a).     “Best Efforts”—the efforts that a prudent business Person desirous of achieving aresult would use in similar circumstances to achieve that result as expeditiously as possible.     “Breach”—(a) any breach of, or any inaccuracy in, any representation or warranty, (b)any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with anyrepresentation or warranty or (c) any breach of, or failure to perform or comply with, any covenantor obligation.     “Business”—as defined in the recitals of this Agreement.     “Business Day”—any day other than (a) Saturday or Sunday or (b) any other day on whichbanks in Woburn, Massachusetts are permitted or required to be closed.     “Buyer”—as defined in the preamble.     “Buyer Plans”—as defined in Section 6.1(b)(ii).     “Buyer Indemnified Persons”—as defined in Section 10.2.     “Buyer’s Advisors”—as defined in Section 4.1.     “Buyer’s Closing Documents”—as defined in Section 3.2(a).     “Buyer’s Officer Certificate” – a certificate of an officer of Buyer in the form ofExhibit G.     “Buyer’s Secretary Certificate” – a certificate of the Secretary of Buyer in the formof Exhibit H.     “Cap Amount” – as defined in Section 10.5(a).
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     “Closing”—as defined in Section 1.3.     “Closing Working Capital” – as of Closing, the excess of (x) the sum of the Company’scash, cash equivalents, accounts receivables, inventory, prepaid assets and other assets that maybe properly classified as current assets in conformity with GAAP, over (y) the Company’sliabilities that may be properly classified as current liabilities in conformity with GAAP.Closing Working Capital shall be calculated after giving effect to payment in full of that certainMaster Lease Agreement between CitiCapital Technology Finance Inc. and the Company, dated February22, 2005, whether or not paid off by the Effective Time. In addition, Closing Working Capitalshall be prepared in good faith in accordance with GAAP applied using the same accounting methods,practices, principles, policies and procedures, with consistent classifications, judgments andvaluation and estimation and accrual methodologies that were used in the preparation of theCompany’s audited Financial Statements for the most recent fiscal year end Closing Working Capitalwas being prepared and audited as of a fiscal year end.     “Closing Working Capital Statement” – as defined in Section 1.5(b)(ii).     “Closing Date”—the date and time as of which the Closing actually takes place.     “COBRA”— the Consolidated Omnibus Reconciliation Act of 1985, as amended, and therules and regulations promulgated thereunder.     “Code”—the Internal Revenue Code of 1986, as amended, and the rules and regulationspromulgated thereunder.     “Company”—as defined in the preamble.     “Competing Business”—as defined in Section 2.25.     “Competing Company”—as defined in Section 11.1(a).     “Confidential Information”—all knowledge, documents, materials and information, notgenerally known to the public, regarding matters relating to the Company and/or the Company’sBusiness, including its finances, financial condition, owners, technology, products, services,research and development, marketing, operations or plans, technical data, trade secrets orknow-how, equipment procurement plans or designs, ideas, inventions, specifications, techniques,discoveries, models, software, including source code and object code, systems, technology researchand development partners and/or materials vendors, customer lists and customers and employees(including names, contacts and other information relating to existing or potential key employees ofthe Company).     “Consent”—any approval, consent, ratification, waiver or other authorization of anyPerson.     “Contemplated Transactions”— (a) the sale of the Interests by Seller to Buyer; (b) theexecution, delivery and performance of the Noncompetition Agreement and the Seller’s Release;
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(c) the performance by Buyer, Seller and the Company of their respective covenants and obligationsunder this Agreement; and (d) Buyer’s acquisition of the Interests.     “Continuing Employees”—as defined in Section 6.1(a).     “Contract”—any agreement, contract, Lease, consensual obligation, promise orundertaking (whether written or oral and whether express or implied), which is, or intended to be,legally binding.     “Conversion” —as defined in Section 4.11.     “Damages” – means any and all costs, Taxes, liabilities, obligations, damages,expenses, and reasonable attorneys’ fees. Notwithstanding anything to the contrary in hisAgreement, “Damages” shall expressly exclude lost profits, consequential damages, special damages,punitive damages, exemplary damages, multiple damages and other penalty damages, except and solelyto the extent such types of Damages are actually paid in respect of a Third Party Claim.     “Effective Time”—as defined in Section 1.3.     “Employee Plans”—as defined in Section 2.14(a).     “Encumbrance”—any charge, claim, community or other marital property interest,condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way,easement, encroachment, building or use restriction, servitude, conditional sales agreement, rightof first option, right of first refusal or similar restriction, encumbrance or right of thirdparties, whether voluntarily or by operation of law, and includes any agreement to give any of theforegoing in the future, and any contingent sale or other title retention agreement or leasein the nature thereof.     “Environment”—soil, land surface or subsurface strata, surface waters (includingnavigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwaters,drinking water supply, stream sediments, ambient air (including indoor air), plant and animal lifeand any other environmental medium or natural resource.     “Environmental, Health and Safety Liabilities”—any cost, damage, expense, liability,obligation or other responsibility arising from or under any Environmental Law or OccupationalSafety and Health Law.     “Environmental Law”—any Legal Requirement that requires or relates to (a) advisingappropriate authorities, employees or the public of intended or actual Releases of pollutants orhazardous substances or materials, violations of discharge limits or other prohibitions that couldhave significant impact on the Environment; (b) preventing or reducing to acceptable levels theRelease of pollutants or hazardous substances or materials into the Environment; (c) reducing thequantities, preventing the Release or minimizing the hazardous characteristics of wastes that aregenerated; (d) assuring that products are designed, formulated, packaged and used so that they donot present unreasonable risks to human health or the Environment when used or disposed of; (e)
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protecting resources, species or ecological amenities; (f) reducing to acceptable levels the risksinherent in the transportation of hazardous substances, pollutants, oil or other potentiallyharmful substances; or (g) cleaning up pollutants that have been Released, preventing the Threat ofRelease or paying the costs of such clean up or prevention.     “ERISA”—the Employee Retirement Income Security Act of 1974, as amended, and the rulesand regulations promulgated thereunder.     “ERISA Affiliate”—as defined in Section 2.14(a).     “Estimated Closing Statement” – as defined in Section 1.5(a)(i).     “Estimated Closing Working Capital” – as defined in Section 1.5(a)(i).     “Estimated Closing Working Capital Excess” – as defined in Section 1.5(a)(ii).     “Estimated Closing Working Capital Shortfall” – as defined in Section1.5(a)(ii).     “Exchange Act”—the Securities Exchange Act of 1934, as amended, and the rules andregulations promulgated thereunder.     “Facilities”—any real property, leaseholds, or other interests currently owned oroperated by the Company and any buildings, plants, structures, or equipment (including motorvehicles, tank cars, and rolling stock) currently or formerly owned or operated by the Company.     “Financial Statements”—as defined in Section 2.3.     “GAAP”—generally accepted accounting principles for financial reporting in the UnitedStates, in effect from time to time applied consistently with the Balance Sheet and the otherFinancial Statements.     “Governing Documents”—with respect to any corporation, the corporate charter and thebylaws; as amended or supplemented from time to time, all equityholders’ agreements, votingagreements, voting trust agreements, joint venture agreements, registration rights agreements orother agreements or documents, as amended or supplemented from time to time, relating to theorganization, management or operation thereof or relating to the rights, duties and obligations ofthe equityholders thereof.     “Governmental Authorization”—any Consent, license, registration or permit issued,granted, given or otherwise made available by or under the authority of any Governmental Body orpursuant to any Legal Requirement.     “Governmental Body”—any: (a) nation, state, county, city, town, borough, village,district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign orother government; (c) governmental or quasi-governmental authority of any nature (including anyagency, branch, department, board, commission, court, tribunal or other entity exercisinggovernmental or quasi-governmental powers); (d) multinational organization or body; (e) body
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exercising, or entitled or purporting to exercise, any administrative, executive, judicial,legislative, police, regulatory or taxing authority or power; or (f) official of any of theforegoing.     “Hazardous Material”—any substance, material or waste which is regulated by anyGovernmental Body, including any material, substance or waste which is defined as a “hazardouswaste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restrictedhazardous waste,” “contaminant,” “toxic waste” or “toxic substance” under any provision ofEnvironmental Law, and including petroleum, petroleum products, asbestos, presumedasbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinatedbiphenyls.     “Holdback Amount”—as defined in Section 10.10(a).     “HSR Act”—the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successorlaw, and regulations and rules issued pursuant to that act or any successor law.     “Income Taxes” means all federal, state, local and foreign income taxes imposed on ormeasured by net income (including gains and capital gains) of the relevant entity, together withany interest and any penalty, addition to tax or additional amount imposed with respect thereto.     “Independent Accountants”—as defined in Section 1.5(b)(iv).     “Intellectual Property Assets”—collectively, all worldwide intellectual property andassociated rights, including patents, patent applications, rights to file for patent applications(including but not limited to continuations, continuations-in-part, divisionals and reissues),trademarks, logos, confidential documentation, service marks, trade names and service names (ineach case whether or not registered) and applications for and the right to file applicationsfor registration thereof, Internet domain name or application for an Internet domain name, Internetand World Wide Web URLs or addresses, copyrights (whether or not registered) and applications forand the right to file applications for registration thereof, moral rights, mask work rights, maskwork registrations and applications therefor, franchises, licenses, license or lease rights withrespect to software or hardware, inventions, trade secrets, trade dress, know-how, customer lists,supplier lists, proprietary processes and formulae, software source code and object code,algorithms, net lists, architectures, structures, screen displays, layouts, inventions, developmenttools, designs, blueprints, specifications, technical drawings (or similar information inelectronic or digital format), publicity and privacy rights and any other intellectual propertyrights arising under the laws of the United States of America, any state thereof, or any othercountry or province thereof, and all documentation and media (in whatever form) constituting,describing or relating to the foregoing, including, without limitation, manuals, programmers’notes, memoranda and records.     “Interests”—as defined in the recitals to this Agreement.     “Interests Certificate” – a certificate representing the Interests in the form ofExhibit D.
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     “Inventories”—all inventories of the Company attributable to the Business, held forresale, wherever located, and all of the Company’s raw materials, work in process, finishedproducts, supplies and packing items and similar items with respect to the Business, in each casewherever located.     “IRS”—the United States Internal Revenue Service and, to the extent relevant, theUnited States Department of the Treasury.     “Knowledge”— an individual will be deemed to have Knowledge of a particular fact orother matter if that individual is actually aware of that fact or matter. The Company and Sellerwill each be deemed to have Knowledge of a particular fact or other matter if any of Robert Haft,David Dixon, Scott Snead, Samuel Silek or J. O’Neil Leftwich has, or at any time had, Knowledge ofthat fact or other matter. The Buyer will be deemed to have Knowledge of a particular fact orother matter if any individual who is serving, or who has at any time served, as a director,officer or manager of that Person (or in any similar capacity) has, or at any time had, Knowledgeof that fact or other matter.     “Lease”—any lease or rental agreement, license, right to use or installment andconditional sale agreement to which the Company is a party and any other Contract pertaining to theleasing or use of any Tangible Personal Property.     “Leased Real Property”—as defined in Section 2.5(a).     “Legal Requirement”— any (i) federal, state, local, municipal, foreign, internationalor multinational law (statutory, judicial or otherwise), ordinance, rule, regulation, judgment,order, injunction, writ, decree or award of any Governmental Body, including without limitationlaws, regulations, manual instructions, and Centers for Medicare and Medicaid Services (“CMS”)program memoranda relating to participation as a provider or supplier in the Medicare andMedicaid programs or other governmentally funded health care reimbursement programs and to theprovision of, and billing and collection for, items and services provided to beneficiaries of suchprograms; and (ii) standards of organizations offering accreditation or certification programs inwhich the Company participates or must participate.     “Liability”—with respect to any Person, any liability or obligation of such Person ofany kind, character or description, whether known or unknown, absolute or contingent, accrued orunaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint orseveral, due or to become due, vested or unvested, executory, determined, determinable orotherwise, and whether or not the same is required to be accrued on the financial statements ofsuch Person.     “Major Customers”—as defined in Section 2.19(a).     “Major Suppliers”—as defined in Section 2.19(b).     “Material Adverse Effect” or “Material Adverse Change”— with respect to theBusiness, any material adverse effect or material adverse change in the condition (financial orother),
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business, results of operations or operations of the Business or on the ability of Sellerto consummate the Contemplated Transactions, provided that none of the following events set forthin clauses (a) through (h) below shall be deemed to constitute a Material Adverse Effect orMaterial Adverse Change for one or more of the following occurrences: (a) changes in generalbusiness or economic conditions, including such conditions related to the Business, (b) changes innational or international political or social conditions, (c) changes in financial, banking, orsecurities markets, (d) changes in the United States generally accepted accounting principles, (e)changes in law, rules, regulations, orders, or other binding directives issued by any governmentalentity, (f) any change, circumstance, event or effect that relates to or results from theannouncement of the execution of this Agreement or the pendency of the consummation of theContemplated Transactions, (g) the taking of any action contemplated by this Agreement and theother agreements contemplated hereby or (h) the termination or reduction or Threatened terminationor reduction of business with the Company by any of the Company’s Major Customers or MajorSuppliers, with the exception of UnitedHealth.     “Most Recent Financial Statements”—as defined in Section 2.3.     “Multiemployer Plan”—as defined in Section 2.14(a).     “NDA Agreement”—as defined in Section 11.3(a).     “Net Names”—as defined in Section 2.23(b).     “Noncompetition Agreement”—as defined in Section 1.4(a)(iv.     “Occupational Safety and Health Law”—any Legal Requirement designed to provide safeand healthful working conditions and to reduce occupational safety and health hazards, includingthe Occupational Safety and Health Act.     “Order”—any award, decision, injunction, judgment, order, decree, ruling, assessment(including without limitation overpayment notice or demand), subpoena, or verdict entered, issued,made or rendered by any court, administrative agency, or other Governmental Body or by anyarbitrator.     “Ordinary Course of Business”—an action taken by a Person will be deemed to have beentaken in the Ordinary Course of Business only if that action: (i) is consistent in nature, scopeand magnitude with the past practices of such Person and is taken in the ordinary course of thenormal, day-to-day operations of such Person; and (ii) does not require authorization by the boardof directors of such Person (or by any Person or group of Persons exercising similar authority) anddoes not require any other separate or special authorization of any nature.     “Party” or “Parties” – one or more of Seller, Buyer and the Company.     “PBGC”—as defined in Section 2.14(b).
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     “Permitted Encumbrances”—means (i) all defects, exceptions, restrictions, easements,rights of way and Encumbrances disclosed in policies of title insurance which have been madeavailable to Buyer; (ii) statutory liens for current Taxes, assessments or other governmentalcharges not yet delinquent or the amount or validity of which is being contested in good faith byappropriate proceedings, provided an appropriate reserve is established therefor; (iii) mechanics’,carriers’, workers’, repairers’ and similar liens arising or incurred in the Ordinary Course ofBusiness that are not material to the business, operations and financial condition of the propertyso encumbered or the Company; (iv) zoning, entitlement and other land use and environmentalregulations by any Governmental Body, provided that such regulations have not been violated; and(v) such other imperfections in title, charges, easements, restrictions and encumbrances which donot materially detract from the value of or materially interfere with the present use of any LeasedReal Property subject thereto or affected thereby.     “Person”—any individual, partnership, corporation, business trust, limited liabilitycompany, general, limited or limited liability partnership, joint stock company, trust,unincorporated association, joint venture or other entity or a Governmental Body.     “Pre-Closing Partial Period” as defined in Section 10.7.     “Pre-Closing Tax Period” as defined in Section 10.7.     “Proceeding”—any action, arbitration, audit, governmental health care programintegrity review, hearing, investigation, litigation or suit (whether civil, criminal,administrative, judicial or investigative, whether formal or informal, whether public or private)commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Bodyor other Person.     “Proprietary Rights Agreement”—as defined in Section 2.11(b).     “Purchase Price”—as defined in Section 1.2.     “Related Person”—With respect to a particular individual (a) each other member of suchindividual’s Family; (b) any Person that is directly or indirectly controlled by any one or moremembers of such individual’s Family; (c) any Person in which members of such individual’s Familyhold (individually or in the aggregate) a Material Interest; and (d) any Person with respect towhich one or more members of such individual’s Family serves as a director, officer, partner,executor or trustee (or in a similar capacity).     With respect to a specified Person other than an individual (a) any Person that directly orindirectly controls, is directly or indirectly controlled by or is directly or indirectly undercommon control with such specified Person; (b) any Person that holds a Material Interest in suchspecified Person; (c) each Person that serves as a director, officer, partner, executor or trusteeof such specified Person (or in a similar capacity); (d) any Person in which such specified Personholds a Material Interest; and (e) any Person with respect to which such specified Person serves asa general partner or a trustee (or in a similar capacity).
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     For purposes of this definition, (a) “control” (including “controlling,”“controlled by,” and “under common control with”) means the possession, direct orindirect, of the power to direct or cause the direction of the management and policies of a Person,whether through the ownership of voting securities, by contract or otherwise, and shall beconstrued as such term is used in the rules promulgated under the Exchange Act; (b) the“Family” of an individual includes (i) the individual, (ii) the individual’s spouse, (iii)any other natural person who is related to the individual or the individual’s spouse within thesecond degree and (iv) any other natural person who resides with such individual; and (c)“Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3under the Exchange Act) of voting securities or other voting interests representing at leasttwenty-five percent (25%) of the outstanding voting power of a Person or equity securities or otherequity interests representing at least twenty-five percent (25%) of the outstanding equitysecurities or equity interests in a Person.     “Release”—any release, spill, emission, leaking, pumping, pouring, dumping, emptying,injection, deposit, disposal, discharge, dispersal, leaching or migration on or into theEnvironment or into or out of any property.     “Remedial Action”—all actions, including any capital expenditures, required orvoluntarily undertaken (a) to clean up, remove, treat or in any other way address any HazardousMaterial or other substance; (b) to prevent the Release or Threat of Release or to minimize thefurther Release of any Hazardous Material or other substance so it does not migrate or endanger orthreaten to endanger public health or welfare or the Environment; (c) to perform pre-remedialstudies and investigations or post-remedial monitoring and care; or (d) to bring the Premises andthe operations conducted thereon into compliance with Environmental Laws and environmentalGovernmental Authorizations.     “Representative”—with respect to a particular Person, any director, officer, manager,employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or otherrepresentative of that Person.     “Securities Act”—the Securities Act of 1933, as amended, or any successor law, andregulations and rules issued pursuant to that act or any successor law.     “Seller”—as defined in the preamble.     “Seller Disclosure Schedule”—as defined in Section 2.     “Seller Indemnified Persons”—as defined in Section 10.3.     “Seller Non-Compete”—as defined in Section 11.4(c).     “Seller’s Closing Documents”—as defined in Section 2.2(a).     “Seller’s Officer Certificate” – a certificate of an officer of the Seller in the formof Exhibit E.
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     “Seller’s Release”—as defined in Section 1.4(a)(ii).     “Seller’s Secretary Certificate” – a certificate of the Secretary of Seller in theform of Exhibit F.     “Shares”—as defined in the recitals to this Agreement.     “Straddle Period” shall have the meaning as set forth in Section 11.4(b).     “Short Period” shall have the meaning set forth in Section 11.4(b).     “Subsidiary”—with respect to any Person (the “Owner”), (a) any other Person ofwhich securities or other interests having the power to elect a majority of that Person’s board ofdirectors or similar governing body, or otherwise having the power to direct the business andpolicies of that other Person (other than securities or other interests having such power only uponthe happening of a contingency that has not occurred), are held by the Owner or one or more of itsSubsidiaries; or (b) any Person that is directly or indirectly controlled by the Owner.     “Supplemental Reserves”—as defined in Section 1.5(a)(i).     “Tangible Personal Property”—all machinery, equipment, tools, furniture, officeequipment, fixtures, leasehold improvements, computer hardware, supplies, materials, vehicles andother items of tangible personal property (other than Inventories) of every kind owned or leased bythe Company (wherever located and whether or not carried on the Company’s books), together with anyexpress or implied warranty by the manufacturers or sellers or lessors of any item or componentpart thereof and all maintenance records and other documents relating thereto.     “Target Working Capital” shall be $3,075,000.00.     “Tax”—any income, gross receipts, license, payroll, employment, excise, severance,stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane,boat, vessel or other title or registration, capital stock, franchise, employees’ incomewithholding, foreign or domestic withholding, social security, unemployment, disability, realproperty, personal property, sales, use, transfer, value added, alternative, add-on minimum andother tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest,penalty, addition or additional amount thereon imposed, assessed or collected by or under theauthority of any Governmental Body.     “Tax Notice”—as defined in Section 11.4(d).     “Tax Return”—any return (including any information return), report, statement,schedule, notice, form, declaration, claim for refund or other document or information filed withor submitted to, or required to be filed with or submitted to, any Governmental Body in connectionwith the determination, assessment, collection or payment of any Tax or in connection with the
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administration, implementation or enforcement of or compliance with any Legal Requirement relatingto any Tax.     “Third Party”—a Person that is not a party to this Agreement.     “Third-Party Claim”—any claim against any Indemnified Person by a Third Party, whetheror not involving a Proceeding.     “Threat of Release”—a reasonable likelihood of a Release that may require action inorder to prevent or mitigate damage to the Environment that may result from such Release.     “Threatened”—a claim, Proceeding, dispute, action, or other matter will be deemed tohave been “Threatened” if any demand or statement has been made (orally or in writing) or anynotice has been given (orally or in writing), or if any other event has occurred or any othercircumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding,dispute, action or other matter is likely to be asserted, commenced, taken or otherwise pursued inthe future.     “Transfer Tax” means all sales, use, transfer, intangible, recordation, documentary,stamp or similar taxes or charges of any nature whatsoever.     “WARN Act” —as defined in Section 2.13.     13.2 Usage**.**          (a) *Interpretation*. In this Agreement, unless a clear contrary intention appears: (i) thesingular number or term includes the plural number or term and vice versa; (ii) reference to anyPerson includes such Person’s successors and assigns but, if applicable, only if such successorsand assigns are not prohibited by this Agreement, and reference to a Person ina particular capacity excludes such Person in any other capacity or individually; (iii)reference to any gender includes each other gender; (iv) reference to any agreement, document orinstrument means such agreement, document or instrument as amended or modified and in effect fromtime to time in accordance with the terms thereof; (v) reference to any Legal Requirement meanssuch Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part,and in effect from time to time, including rules and regulations promulgated thereunder, andreference to any section or other provision of any Legal Requirement means that provision of suchLegal Requirement from time to time in effect and constituting the substantive amendment,modification, codification, replacement or reenactment of such section or other provision; (vi)“hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to thisAgreement as a whole and not to any particular Article, Section or other provision hereof; (vii)“including” (and with correlative meaning “include”) means including without limiting thegenerality of any description preceding such term; (viii) “or” is used in the inclusive sense of“and/or”; (ix) with respect to the determination of any period of time, “from” means “from andincluding” and “to” means “to but excluding”; and (x) references to documents, instruments oragreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendmentsthereto.
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          (b) *Accounting Terms and Determinations*. Unless otherwise specified herein, all accountingterms used herein shall be interpreted and all accounting determinations hereunder shall be made inaccordance with GAAP.          (c) *Legal Representation of the Parties*. This Agreement was negotiated by the parties with thebenefit of legal representation, and any rule of construction or interpretation otherwise requiringthis Agreement to be construed or interpreted against any party shall not apply to any constructionor interpretation hereof.**[Signature Page Follows.]**
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first writtenabove.       **Buyer:**   **Seller:**         **PolyMedica Corporation** **National Pharmacies Group, Inc.**       By:   By:           Name:   Name:  Title:   Title:           **The Company:**           **National Diabetic Pharmacies, Inc.**           By:               Name:      Title:
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**TABLE OF CONTENTS**                   **Page**1. SALE AND TRANSFER OF INTERESTS; CLOSING  1    1.1  Interests  1    1.2  Purchase Price  1    1.3  Closing  1    1.4  Closing Obligations  2    1.5  Adjustment Amount  3 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY  5    2.1  Organization, Good Standing and Capitalization  5    2.2  Enforceability; Authority; No Conflict  6    2.3  Financial Statements  6    2.4  Books and Records  7    2.5  Title to Properties; Encumbrances  7    2.6  Condition and Sufficiency of Assets  7    2.7  Accounts Receivable  7    2.8  Inventories  8    2.9  No Undisclosed Liabilities  8    2.10  Taxes  8    2.11  Employees  9    2.12  Labor Disputes; Compliance  10    2.13  WARN Act  10    2.14  Employee Benefits  10    2.15  Compliance With Legal Requirements; Governmental Authorizations  13    2.16  Legal Proceedings; Orders  15    2.17  No Material Adverse Change  16    2.18  Absence of Certain Changes and Events  16 
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**TABLE OF CONTENTS****(continued)**                   **Page**   2.19  Third Party Payors and Suppliers  17    2.20  Contracts; No Defaults  17    2.21  Insurance  19    2.22  Environmental Matters  20    2.23  Intellectual Property Assets  20    2.24  Certain Payments  21    2.25  Relationships With Related Persons  21    2.26  Brokers or Finders  22    2.27  Disclosure  22 3. REPRESENTATIONS AND WARRANTIES OF BUYER  22    3.1  Organization and Good Standing  22    3.2  Authority; No Conflict  22    3.3  Investment Intent  23    3.4  Certain Proceedings  23    3.5  Brokers or Finders  23    3.6  No Outside Reliance  23    3.7  Disclosure  23 4. SELLER’S PRECLOSING COVENANTS  23    4.1  Access and Investigation  24    4.2  Operation of the Business  24    4.3  Negative Covenant  24    4.4  Required Approvals  25    4.5  Notification  25    4.6  Payment of or Cancellation of Indebtedness  26    4.7  No Negotiation  26    4.8  Best Efforts  26    4.9  Change of Name  26 
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**TABLE OF CONTENTS****(continued)**                   **Page**   4.10  Interim Financial Statements  26    4.11  Conversion of Company  27 5. BUYER’S PRECLOSING COVENANTS  27    5.1  Required Approvals  27    5.2  Best Efforts  27    5.3  Notification  27 6. ADDITIONAL COVENANTS  28    6.1  Employee Matters  28 7. CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE  29    7.1  Accuracy of Representations  29    7.2  Seller’s and the Company’s Performance  29    7.3  Consents  29    7.4  No Proceedings  29    7.5  No Claim Regarding Stock Ownership or Sale Proceeds  29    7.6  Termination of Certain Agreements  30    7.7  UnitedHealth  30 8. CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE  30    8.1  Accuracy of Representations  30    8.2  Buyer’s Performance  30    8.3  No Injunction  30    8.4  Consents  30 9. TERMINATION  30    9.1  Termination Events  31    9.2  Effect of Termination  31 10. INDEMNIFICATION; REMEDIES  31    10.1  Survival and Right to Indemnification  31    10.2  Indemnification and Payment of Damages by Seller and the Company  32 
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**TABLE OF CONTENTS****(continued)**                   **Page**   10.3  Indemnification and Payment of Damages by Buyer  32    10.4  Time Limitations  33    10.5  Monetary Limitations  33    10.6  Procedure For Indemnification — Third Party Claims  34    10.7  Tax Indemnification  36    10.8  Procedure For Indemnification — Other Claims  37    10.9  Payment of Indemnification Obligations  37    10.10  Retention of Holdback Amount by the Seller  37    10.11  Access to Company Employees  37    10.12  Tax Treatment of Indemnity Payments  38 11. ADDITIONAL COVENANTS  38    11.1  Noncompetition, Nonsolicitation and Nondisparagement  38    11.2  Intentionally Omitted  38    11.3  Confidentiality  38    11.4  Tax Matters  39 12. GENERAL PROVISIONS  41    12.1  Expenses  41    12.2  Transfer Taxes  41    12.3  Public Announcements  41    12.4  Notices  42    12.5  Jurisdiction; Service Of Process  43    12.6  Waiver of Jury Trial  43    12.7  Enforcement of Agreement  43    12.8  Further Assurances  44    12.9  Waiver  44    12.10  Entire Agreement and Modification  44    12.11  Disclosure Schedules  44 
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**TABLE OF CONTENTS****(continued)**                   **Page**   12.12  Assignments, Successors, and No Third-Party Rights  44    12.13  Severability  45    12.14  Section Headings, Construction  45    12.15  Time of Essence  45    12.16  Governing Law  45    12.17  Legal Fees  45    12.18  Execution of Agreement  45 13. DEFINITIONS AND USAGE  45    13.1  Definitions  45    13.2  Usage  56 
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**EXHIBITS**   A Form of Seller’s ReleaseB [Reserved]C Noncompetition Agreement of Robert HaftD Form of Interests CertificateE Form of Seller’s Officer’s CertificateF Form of Seller’s Secretary’s CertificateG Form of Buyer’s Officer’s CertificateH Form of Buyer’s Secretary’s Certificate
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**SCHEDULES**   1.2(a) Designated Seller’s Account1.4(a)(vi) Consents Deliveries1.5 Supplemental Reserves2.2(b) Enforceability; Authority; No Conflict2.2(c) Notice/Consents2.5(a) Leased Real Property2.5(b) Title to Properties; Encumbrances2.9 Undisclosed Liabilities2.10(a) Tax Returns2.10(b) Audited Tax Returns2.10(c) Tax Assessments and Deficiencies2.11 Employees2.12 Labor Disputes; Compliance2.14(a) Employee Benefits2.14(c) Contributions to Employee Plans2.14(e) Employee Plan Compliance2.14(i) Accelerated Payments2.14(k) Promised Benefits2.15(a) Compliance with Legal Requirements2.15(b) Governmental Authorization2.16(a) Legal Proceedings2.16(b) Orders2.16(c) Compliance2.17 Material Adverse Changes2.18 Absence of Certain Changes and Events2.19(a) Major Customers2.19(b) Major Suppliers2.20(a) Material Contracts2.20(b) Seller’s Rights and Liabilities2.20(c) Contract Validity2.20(d) Contract Compliance2.21(a) Insurance Policies2.21(b) Third Party Insurance2.21(c) Insurance Claims2.21(d) Policy Validity2.22 Environmental Matters2.23(a) Intellectual Property Assets2.23(b) Net Names2.25 Relationships with Related Persons3.2 Consents4.3 Negative Covenant4.6 Payment or Cancellation of Indebtedness by or to Related Persons10.5(i) DMERC Audit10.5(b)(i) California Sales and Use Tax Returns10.6(e) Medicare Protocol
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   11.1(a) Competing Companies
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