Nobilis Health Corp.: Exhibit 10.34 - Filed by newsfilecorp.com











[Execution Version] 


MEMBERSHIP INTEREST PURCHASE AGREEMENT 


by and among 


NORTHSTAR HEALTHCARE SUBCO, LLC, 


NORTHSTAR HEALTHCARE INC., 


ATHAS HEALTH, LLC, 


and 


THE INDIVIDUAL SELLERS PARTY HERETO. 


dated 


November 26, 2014 






TABLE OF CONTENTS 

	ARTICLE I 	DEFINITIONS 	1
    
	    Section 1.1. 	Definitions 	1 
	 	  	  
	ARTICLE II 	PURCHASE AND SALE;
      PURCHASE PRICE 	10 
	    Section 2.1. 	Purchase
      and Sale of the Athas Membership Interest 	10
  
	    Section 2.2. 	Purchase Price
	10 
	    Section 2.3. 	Purchase
      Price Allocation 	11
  
	    Section 2.4. 	First Contingent Shares
      Payment 	11 
	    Section 2.5. 	Second
      Contingent Shares Payment 	12
  
	    Section 2.6. 	Contingent Shares
      Adjustments 	13 
	 	  	  
	ARTICLE III 	CLOSING 	13 
	    Section 3.1. 	Closing
      Date 	13
  
	    Section 3.2. 	Buyer Parties Closing
      Deliveries 	14 
	    Section 3.3. 	Sellers
      Closing Deliveries 	15
  
		  	  
	ARTICLE IV
     	REPRESENTATIONS AND
      WARRANTIES OF SELLERS  	  
	 	REGARDING SELLERS
    	16 
	    Section 4.1. 	Authorization, Validity and Effect of Agreement
    	16
  
	    Section 4.2. 	Conflicts 	16 
	    Section 4.3. 	Title to
      Athas Membership Interest 	16
  
	    Section 4.4. 	Legal Proceedings
    	17 
	    Section 4.5. 	Brokers 	17
  
		  	  
	ARTICLE V
     	
    REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THE ATHAS
      COMPANIES  	  
	 		18 
	    Section 5.1. 	Organization 	18
  
	    Section 5.2. 	Capitalization
	18 
	    Section 5.3. 	Subsidiaries 	18
  
	    Section 5.4. 	Financial Statements
      	19 
	    Section 5.5. 	No
      Undisclosed Liabilities 	19
  
	    Section 5.6. 	Absence of Certain Recent
      Changes 	19 
	    Section 5.7. 	Taxes
      	21
  
	    Section 5.8. 	Governmental Permits
      	23 
	    Section 5.9. 	Compliance with Laws 	24
  
	    Section 5.10. 	Health Care Regulatory
      Matters 	24 
	    Section 5.11. 	Legal
      Proceedings 	25
  
	    Section 5.12. 	Real Property 	25 
	    Section 5.13. 	Personal
      Property 	26
  


i 





	    Section 5.14. 	Intellectual Property 	26
  
	    Section 5.15. 	Material Contracts
      	27 
	    Section 5.16. 	[Reserved] 	28
  
	    Section 5.17. 	Employee Benefits
    	28 
	    Section 5.18. 	Labor
      Matters 	30
  
	    Section 5.19. 	Environmental Matters
      	31 
	    Section 5.20. 	Insurance 	32
  
	    Section 5.21. 	Related Party
      Transactions 	32 
	    Section 5.22. 	Brokers 	32
  
	    Section 5.23. 	Non-Reliance 	32 
	 	  	  
	 	 	  
	ARTICLE VI 	REPRESENTATIONS AND WARRANTIES OF THE
      BUYER PARTIES 	33
      
	    Section 6.1. 	Organization 	33 
	    Section 6.2. 	Authorization, Validity and Effect of Agreement
    	33
  
	    Section 6.3. 	No Conflicts; Consents
      and Approvals 	34 
	    Section 6.4. 	Legal
      Proceedings 	34
  
	    Section 6.5. 	NHC Capitalization
      	35 
	    Section 6.6. 	Compliance with Securities Laws 	35
  
	    Section 6.7. 	Investment Intent
    	36 
	    Section 6.8. 	No
      Brokers 	36
  
	    Section 6.9. 	Non-Reliance 	36 
	 	  	  
	ARTICLE VII 	[RESERVED] 	37 
	 	  	  
	ARTICLE VIII 	ADDITIONAL AGREEMENTS
      	37 
	    Section 8.1. 	Confidentiality 	37
  
	    Section 8.2. 	Further Assurances
      	37 
	    Section 8.3. 	Continued
      Employment; Covenant Not to Compete 	37
  
	    Section 8.4. 	Books and Records; Access
      After Closing 	39 
	    Section 8.5. 	Guaranty
      Arrangements 	39
  
	    Section 8.6. 	NYSE Listing
      Application 	40 
	    Section 8.7. 	Tax
      Matters 	40
  
	 	  	  
	ARTICLE IX
	[RESERVED] 	42
      
	 	  	  
	ARTICLE X 	[RESERVED] 	42
      
	 	  	  
	ARTICLE XI
	INDEMNIFICATION 	42
      
	    Section 11.1. 	Indemnification by
      Sellers 	42 
	    Section 11.2. 	Indemnification by Buyer 	44
  
	    Section 11.3. 	Notice of Claims
    	45 
	    Section 11.4. 	Resolution of Indemnifiable Claims 	45
  
	    Section 11.5. 	Third Party Claims
      	46 
	    Section 11.6. 	Determination of Indemnification Amounts 	46
  


ii 





	    Section 11.7. 	Exclusive
      Remedy 	47
  
	 	  	  
	ARTICLE XII
    	[RESERVED] 	47
      
	 	  	  
	ARTICLE XIII
    	GENERAL
      PROVISIONS 	47
      
	    Section 13.1. 	No Public
      Announcement 	47 
	    Section 13.2. 	Notices 	48
  
	    Section 13.3. 	Successors and Assigns;
      Assignment 	48 
	    Section 13.4. 	No
      Third-Party Beneficiaries 	49
  
	    Section 13.5. 	Entire Agreement
    	49 
	    Section 13.6. 	Amendments 	49
  
	    Section 13.7. 	Waivers 	49 
	    Section 13.8. 	Exhibits
      and Schedules 	49
  
	    Section 13.9. 	Expenses 	50 
	    Section 13.10. 	Partial
      Invalidity 	50
  
	    Section 13.11. 	Execution in
      Counterparts 	50 
	    Section 13.12. 	Governing
      Law; Submission to Jurisdiction; Waiver of Jury Trial 	50
  
	    Section 13.13. 	Remedies 	51 
	    Section 13.14. 	Interpretation 	51
  
	    Section 13.15. 	Seller Representative
      	53 


iii 




MEMBERSHIP INTEREST PURCHASE AGREEMENT 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this
“Agreement”), dated as of November 26, 2014, by and among
Northstar Healthcare Inc., a British Columbia registered corporation
(“NHC”), Northstar Healthcare Subco, LLC, a Delaware limited
liability company (“Buyer”), Athas Health, LLC, a Texas limited
liability company (“Athas”), and each individual owner of the
Athas Membership Interest (as defined below) as listed on the signature page
hereto (each a “Seller” and collectively the
“Sellers”). Sellers, NHC, Buyer, and Athas are sometimes referred
to in this Agreement individually as a “Party” and collectively,
the “Parties”. 

RECITALS: 

A. Sellers own, collectively, all of the issued and outstanding
membership interests of Athas (collectively, the “Athas Membership
Interest”). Athas and its Subsidiaries (collectively, the “Athas
Companies”) are engaged in the business of providing marketing and
administrative support services to healthcare facilities and providers in Texas.


B. Buyer is, indirectly, a wholly-owned subsidiary of NHC. 

C. Sellers desire to sell to Buyer, and Buyer desires to
purchase from Sellers, all of the Athas Membership Interest, on the terms and
subject to the conditions set forth herein. 

In consideration of the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows. 

ARTICLE I 
DEFINITIONS 

Section 1.1. Definitions. In this
Agreement, the following terms have the meanings specified or referred to in
this Section 1.1, which shall be equally applicable to both the singular and
plural forms. 

“AAA” is defined in Section 13.12(b). 

“Affiliate” means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is under
common control with such Person. For purposes of this definition, a Person has
control of another Person if it has the direct or indirect ability or power to
direct or cause the direction of management policies of such other Person or
otherwise direct the affairs of such other Person, whether through ownership of
at least fifty percent (50%) of the voting securities of such other Person, by
contract or otherwise. 

“Allocation” is defined in Section
2.3.

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“Athas Companies” is defined in the recitals to this Agreement. 


“Athas Companies’ Intellectual Property” means all Intellectual Property that is owned or licensed by the Athas Companies and that is material to the conduct of the Business as conducted on the date hereof. 


“Athas Companies Material Adverse Effect” means any change, effect, event or condition that, individually or in the aggregate with all other changes, effects, events or conditions, has, or would reasonably be expected to
have, a material adverse effect upon the financial condition, business or results of operations of the Athas Companies, taken as a whole; provided, however, that any adverse change, effect, event or condition arising from or related to the following
shall not be taken into account in determining whether a Athas Companies Material Adverse Effect has occurred: (i) any changes or conditions affecting economic or capital markets in the United States or internationally, or any change in interest
rates or general economic conditions in the industries or markets in which the Athas Companies operate; (ii) any national or international political or social conditions, including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States; (iii) any changes in financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) any changes in GAAP; (v) any change
in any Law, including any changes in Laws affecting the regulation of health care services; (vi) any change that is generally applicable to behavioral health care companies; (vii) to the extent reasonably demonstrable by Sellers, the entry into or
announcement of this Agreement, the Contemplated Transactions or the identity of Buyer or its Affiliates; or (viii) compliance with the terms of this Agreement or the taking of any action (or omission of any action) expressly consented to or
requested by Buyer; provided that such change, effect, event or condition described in the foregoing clauses (v) or (vi) is not, or would not reasonably be expected to be, disproportionately adverse in any material respect to the financial
condition, business or results of operations of the Athas Companies, taken as a whole, as compared to other Persons engaged in the industries and in the lines or types of businesses in which the Athas Companies operate. 


“Athas Consideration” is defined in Section 2.3. 


“Athas Membership Interest” is defined in the recitals to this Agreement. 


“Business” means the operations of the Athas Companies, as currently conducted. 


“Business Day” means any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by Law to close. 


“Buyer” is defined in the preamble to this Agreement.


2 











“Buyer Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by Buyer or an Affiliate of Buyer under this Agreement or in connection herewith. 


“Buyer Indemnified Party” means Buyer, NHC, their respective Affiliates, and their respective officers, directors, managers, employees, agents, representatives, members, partners and stockholders (as applicable). 


“Buyer Parties” means each of Buyer and NHC.


“Cash” means the aggregate amount of cash and cash equivalents (including marketable securities and short term investments) of the Athas Companies as of immediately prior to Closing. 


“Cash Purchase Price” is defined in Section 2.2(a)(i).


“Cause” (i) with respect to Executive, has the meaning given such term in the Employment Agreement and (ii) with respect to a Named Employee, means any of the following: (A) such Named Employee’s conviction of, or
entering a plea of nolo contendere to, a crime that constitutes a felony under the federal, provincial or state laws of Canada or the United States (other than a traffic violation); or (B) conduct by such Named Employee that constitutes fraud
or a criminal act with respect to NHC or any of its Subsidiaries. 


“Closing” is defined in Section 3.1. 


“Closing Date” is defined in Section 3.1. 


“Closing Indebtedness” means the total amount of Indebtedness encumbering the Athas Companies as of immediately prior to Closing. 


“Closing Shares” is defined in Section 2.2(a)(i).


“COBRA” means Section 4980B of the Code or Title I, Part 6, of ERISA. “Code” means the Internal Revenue Code of 1986, as amended. 


"Competing Business" is defined in Section 8.3(b). "Confidential Information" is defined in Section 8.1. "Confidentiality Agreement" is defined in Section 8.1. 


“Constituent Documents” means any charter, certificate of incorporation, certificate of formation, certificate of organization, articles of association, bylaws, operating agreements,
partnership agreement, trust agreement or similar formation or governing documents and instruments. 


3 











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


“Contemplated Transactions” means the transactions contemplated by this Agreement, the Seller Ancillary Agreements and the Buyer Ancillary Agreements. 


“Contingent Shares” means, collectively, the First Contingent Shares and the Second Contingent Shares.


"Deductible" is defined in Section 11.1 (b)(ii). 


“Elite” means Elite Ambulatory Surgery Centers, LLC, a Texas limited liability company doing business as Elite Surgical Affiliates, and each of its Affiliates.


“Elite Agreements” means each of the agreements set forth on Schedule 1. “Employment Agreement” is defined in Section 3.2(e).


“Encumbrance” means any lien, claim, charge, security interest, mortgage, deed of trust, pledge, easement, option, limitation on use, conditional sale or other title retention agreement, defect in title or other
restrictions of a similar nature, in each case other than Permitted Encumbrances. 


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


“Environmental Permit" is defined in Section 5.19(c). 


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


“ERISA Affiliate” means any Subsidiary or other entity that would be considered a single employer with Sellers or any Athas Company within the meaning of Section 414 of the Code. 


“Estimated Loss Amount” means, with respect to a given Claim Notice, the applicable Buyer Indemnified Parties’ reasonable estimate of potential Losses related to the as yet unresolved claims for indemnity set forth in
such Claim Notice.


4 











“Equity Compensation Plans" means the equity compensation plans of NHC approved by NHC's shareholders that are currently in effect consisting of both the Third Amended and Restated Restricted Share Unit Plan of Northstar
Healthcare Inc. and the First Amended Northstar Healthcare Inc. Stock Option Plan “Executive” means Christopher H. Lloyd, an individual.


“Facilities” means the Persons in which an Athas Company has an Ownership Interest that are healthcare facilities. Each of such locations set forth on Exhibit A.


"Financial Statements" is defined in Section 5.4. 


“First Contingent Payment Date” means the first anniversary of the Closing Date. “First Contingent Shares” is defined in Section 2.4(a).


"Fundamental Reps" is defined in Section 11.1(c). 


“GAAP” means United States generally accepted accounting principles, consistently applied in accordance with the Athas Companies’ past practices. 


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


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


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


“Indebtedness” means, as of any time, without duplication, the outstanding principal amount of, accrued and unpaid interest on, and other payment obligations (including any prepayment premiums payable as a result of the
consummation of the Contemplated Transactions) arising under, any obligations of any Athas Company consisting of (i) indebtedness for borrowed money (but excluding any intercompany indebtedness among the Athas Companies, trade payables and accrued
expenses arising in the ordinary course of business); (ii) indebtedness evidenced by any note, bond, debenture or other debt security, in each case, as of such date; (iii) any letter of credit to the extent drawn for any of the Athas Companies; (iv)
capitalized leases; (v) any deferred compensation arrangement, severance plan or arrangement, bonus plan, transaction bonus, change of control bonus or similar arrangement payable as a result of the consummation of the Contemplated Transactions; or
(vi) any payment obligation under any interest rate swap agreement payable as a result of the consummation of the Contemplated Transactions. 


5 











“Intellectual Property” means all copyrights, trademarks, trade names, service marks, trade dress, domain names, trade secrets, patents, computer programs and other intellectual property and proprietary rights. 


“Interim Balance Sheet Date” means September 30, 2014. 


“Interim Financial Statements” means the Interim Balance Sheet and the related statements of income and cash flows for the nine (9) months ended on the Interim Balance Sheet Date. 


“Knowledge of Buyer” or “Buyer’s Knowledge” or any derivations thereof means, as to a particular matter, the actual knowledge, of Donald Kramer or Harry Fleming. 


“Knowledge of Sellers” or “Sellers’ Knowledge” or any derivations thereof means, as to a particular matter, the actual knowledge, of Chris Lloyd, Stephen Ganss, or Brett Lamb. 


“Laws” means any federal, state and local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body. 


"Leased Real Property" is defined in Section 5.12(b) . “Lock-Up Agreement” is defined in Section 3.2(f).


“Loss” or “Losses” means all losses, damages, settlement payments, judgments, fines, penalties, liabilities or other charges (including reasonable attorneys’ fees and expenses); provided,
however, that Losses shall not include any punitive, incidental, exemplary, special, indirect, consequential, or opportunity cost damages of any kind or the loss of anticipated or future business or profits, any diminution of value or multiples of
earnings damages, or any loss of business reputation or opportunity damages. 


“Material Adverse Effect” means (i) with respect to a Party, any event, circumstance or condition materially impairing any Party’s authority, right, or ability to consummate the Contemplated Transactions, (ii) any
event, circumstance or condition materially impairing the validity or enforceability of Transaction Documents, (iii) with respect to the Athas Companies, any change in, or effect on, the Athas Companies that, taken as a whole, is materially adverse
to the business, financial condition, assets or operations of the Athas Companies, or (iv) with respect to Buyer Parties, any change in, or effect on, the Buyer Parties that, taken as a whole, is materially adverse to the business, financial
condition, assets or operations of the Buyer Parties.


"Material Contract" is defined in Section 5.15. 


"Material Lease" is defined in Section 5.12(b). 


"Named Employee" is defined in Section 8.3(a). 


6 











“NHC” is defined in the preamble to this Agreement.


“NHC Common Shares” means registered common shares, having no par value, of NHC.


“NHC Facility” means any location where NHC or any NHC Subsidiary or Affiliate owns, operates, or manages a health care related business.


“NHC Filings” is defined in Section 6.6. 


“NHC Note” is defined in Section 2.2(a)(iii).


“NHC Note Amount” is defined in Section 2.2(a)(iii). “NYSE MKT” is defined in Section 8.6.


"Owned Real Property" is defined in Section 5.12(a). 


“Ownership Interest” means, with respect to any Person, (i) capital stock, membership interests, partnership interests, other equity interests, rights to profits or revenue and any other similar interest of such Person, (i)
any security or other interest convertible into or exchangeable or exercisable for any of the foregoing and (iii) any right (contingent or otherwise) to acquire any of the foregoing.


“Payable Loss” is defined in Section 11.4. 


“Permitted Encumbrances” means (i) mechanic’s, materialman’s, carriers’, repairers’ and other Encumbrances arising or incurred in the ordinary course of business for amounts that are not yet
delinquent or are being contested in good faith through appropriate proceedings, (ii) liens for Taxes, assessments or other governmental charges not yet due and payable as of the Closing Date or which are being contested in good faith, (iii)
encumbrances and restrictions on real property (including easements, covenants, conditions, rights of way and similar restrictions) that do not materially interfere with the Athas Companies’ present uses or occupancy of such real property,
(iv) any right, interest, Encumbrance or title of a licensor, sublicensor, licensee, sublicensee, lessor or sublessor under any license, lease or other similar agreement or in the property being leased or licensed, (v) Encumbrances identified on the
Schedules to this Agreement, (vi) with respect to the Athas Membership Interest, (a) Encumbrances set forth in Athas’s Constituent Documents and (b) Encumbrances imposed by federal or state securities laws, and (vi) other Encumbrances or
imperfections on or to property which are not material in amount or do not materially detract from the value or title of or materially impair the existing use of the property affected by such Encumbrance or imperfection. 


“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body. 


7 











“Pre-Closing Tax Period” means any Tax period ending on or before the day immediately prior to the Closing Date.


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


“Registration Rights Agreement” is defined in Section 3.2(f).


“Related Party” means, as to any Person, (i) each individual who is, or who has at any time since inception been, a director, limited liability company manager, officer, employee or a material
equity holder of such Person or any of its Subsidiaries, (ii) each immediately family member of the individuals described in clause (i) above, and (iii) each trust or other Person (other than such Person and its Subsidiaries) in which any Person
described in clause (i) or clause (ii) above holds (or in which more than one of such Persons collectively hold), beneficially or otherwise, a material voting, proprietary or financial interest. 


 “Release” means the release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor
environment. 


"Representative" is defined in Section 8.1. “SEC” is defined in Section 8.6.


“Second Contingent Payment Date” means the second anniversary of the Closing Date. “Second Contingent Shares” is defined in Section 2.4(b).


 “Seller Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by Sellers or an Affiliate of Sellers under this Agreement or in connection
herewith. 


“Sellers” is defined in the preamble to this Agreement. 


 “Seller Indemnified Party” means each Seller, their respective Affiliates (other than the Athas Companies), and their respective officers, directors, managers, employees, agents,
representatives, members, partners and stockholders (as applicable). 


“Seller Payment Schedule” means the schedule of payments set forth on Exhibit B. “Seller Representative” is defined in Section 13.15.


“Share Value” means, with respect to each share of NHC Common Shares, as of a given date of determination, the volume weighted average price for the ten (10) days immediately prior to such date
for sales of NHC Common Shares on the applicable national securities exchange or
national inter-dealer quotation system on which such securities are listed, in any case, as reported in such source as the NHC’s Board of Directors shall select (provided, that if there is no regular public trading market for shares of NHC
Common Shares, the fair market value of such NHC Common Shares shall be determined by NHC’s Board of Directors in good faith).



8 











“Straddle Period” means any Taxable Period beginning before and ending on or after the Closing Date.


“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors is at the time owned, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof
or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of the membership, partnership or other similar ownership interests thereof is at the time owned, directly or
indirectly, by such Person or one or more Subsidiaries of such Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity’s gains or losses or shall be a, or control any, managing director or general partner of such business entity (other than a corporation); provided, however, that with respect to Athas,
“Subsidiary” shall not include either (a) Ratava, LLC or (b) Elite Orthopedic Spine & Surgery Center LLC. 


 “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, capital, bulk, production, license, payroll, employment, excise, severance, stamp, recording, occupation,
premium, windfall profits, environmental, customs duties, capital stock, units, franchise, single business, profits, margin, withholding, social security, unemployment, disability, real property, real estate excise, mortgage, inventory, personal
property, intangible property, sales, use, ad valorem, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalties, fines, additions to tax or additional
amounts imposed by any Tax Authority with respect thereto. 


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


“Tax Proceeding” means any audit, litigation or other proceeding with respect to Taxes imposed on or with respect to the assets, operations or activities of an Athas Company.


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


9 






“Taxable Period” shall mean any taxable year or
any other period that is treated as a taxable year, with respect to which any
Tax may be imposed under any applicable statute, rule, or regulation. 

“Third Party Claim” is defined in Section
11.5. 

“Transaction Documents” is defined in Section
13.15.

“Transfer Taxes” means any real property transfer
or gains, real property, excise, sales, use, documentary, transfer, value added,
stock transfer, unit transfer, and stamp Taxes, any transfer, recording,
registration, and other fees, and any similar Taxes imposed on the either the
Contemplated Transactions or any deemed transactions contemplated by, or related
to, this Agreement and all transactions involving the ownership, acquisition, or
perfection of security interests (for the avoidance of doubt, Transfer Taxes do
not include any Taxes imposed, in whole or in part, on the basis of net income
by any Tax Authority). 

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

“Unresolved Claim” is defined in Section
2.4(c). "WARN Act" is defined in Section 5.18. 

ARTICLE II 
PURCHASE AND SALE; PURCHASE PRICE



Section 2.1. Purchase and Sale of the Athas
Membership Interest. Upon the terms and subject to the conditions of this
Agreement, at Closing, Sellers shall sell, transfer, assign, convey and deliver
to Buyer, and Buyer shall purchase and accept from Sellers, legal and beneficial
ownership of the Athas Membership Interest, free and clear of all Encumbrances.


Section 2.2. Purchase Price.

(a) The aggregate consideration (the “Purchase
Price”) to be paid or issued by the Buyer Parties to Sellers for the
Athas Membership Interest is as follows: 

(i) Three million dollars
($3,000,000.00) (the “Cash Purchase Price”); 

(ii) Six million six
hundred sixty-six thousand six hundred sixty six (6,666,666) NHC Common Shares
(the “Closing Shares”);

 (iii) Promissory note (the “NHC
Note”) issued by NHC to Sellers in the aggregate principal amount of
twelve million dollars ($12,000,000.00) (the “NHC Notes Amount”);
and 

10 









(iv) The Contingent Shares (if any). 


Section 2.3. Purchase Price Allocation.  The Purchase Price together with all other amounts treated as consideration for the sale of the Athas Membership Interest for U.S. federal Income Tax purposes (the “Athas
Consideration”), shall be allocated among the assets of the Athas Companies (ignoring the equity that an Athas Company owns in another Athas Company) in a manner consistent with Section 1060 of the Code, based upon the relative fair
market values thereof in accordance with the methodology as set forth on Schedule 2.3 (the “Allocation”). The Parties shall update the Allocation to reflect any adjustments to the Purchase Price or
reallocation of the Purchase Price among the assets of Athas pursuant to this Agreement. The Parties agree to file all information reports and Tax Returns in a manner consistent with the Allocation, and no Party shall take any position inconsistent
with such allocation on any Tax Return. The Buyer Parties, on the one hand, and Sellers, on the other hand, each agree to promptly notify the other in writing upon receipt of notice of any pending or threatened Tax audit or assessment challenging
the Allocation. 


Section 2.4. First Contingent Shares Payment. Subject to Section 2.4(c) and Section 2.6, within five (5) days of the First Contingent Payment Date, NHC shall issue to Sellers, by delivery of individual
certificates to each Seller representing such Seller’s pro rata portion determined in accordance with the Seller Payment Schedule, a number of NHC Common Shares (collectively, the “First Contingent Shares”)
determined as follows: 


(a) If either (i) no Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative prior to the First Contingent Payment Date or (ii) one or more Buyer Indemnified Parties has delivered a Claim Notice to
the Seller Representative but prior to the First Contingent Payment Date it is determined pursuant to Section 11.4 that there is no Payable Loss owed by Sellers to such Buyer Indemnified Parties, then the number of First Contingent Shares shall be
two million three hundred and thirty-three thousand three hundred and thirty-three (2,333,333). 


(b) If both (i) a Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative prior to the First Contingent Payment Date and (ii) pursuant to Section 11.4 it is determined prior to the First Contingent Date that there is
a Payable Loss owed by Sellers to one (1) or more Buyer Indemnified Parties, then the number of First Contingent Shares shall be two million three hundred and thirty-three thousand three hundred and thirty-three (2,333,333) minus the
quotient of (x) the aggregate amount of Payable Losses determined pursuant to Section 11.4 divided by (y) the Share Value as of the date on which each such Payable Loss was determined to be payable. 


(c) If (i) a Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative prior to the First Contingent Payment Date but (ii) no determination pursuant to Section 11.4 of whether Sellers owe a Payable Loss to one (1) or
more Buyer Indemnified Parties has been made prior to the First Contingent Payment Date (any such claim for indemnity, an “Unresolved Claim”),
then the number of First Contingent Shares shall be two
million three hundred and thirty-three thousand three hundred and thirty-three (2,333,333) minus the quotient of (x) sum of (A) the aggregate amount of Payable Losses determined pursuant to Section 11.4 plus (B)
the Estimated Loss Amount applicable to the Unresolved Claim, divided by (y) the Share Value as of the date on which such Payable Loss was determined (or with respect to Unresolved Claims, alleged) to be
payable. Within five (5) days immediately following final resolution of any such Unresolved Claim, NHC shall issue to Sellers a number of shares of NHC Common Stock having an aggregate Share Value equal to the portion of such Estimated Loss Amount
(if any) not used to satisfy such Unresolved Claim. 



11 











(d) If, for any reason, NHC fails to issue the First Contingent Shares (if any) in accordance with this Section 2.4, Buyer shall, within fifteen (15) Business Days immediately following the date NHC is required to effect such an issuance
pursuant to this Section 2.4, pay to Sellers by wire transfer of immediately available funds an amount equal to the product of (x) the number NHC Common Shares to be issued pursuant to either Section 2.4(a), Section
2.4(b), or Section 2.4(c), as applicable, multiplied by (y) the Share Value as of the First Contingent Payment Date. 


Section 2.5. Second Contingent Shares Payment.  Subject to Section 2.5(c) and Section 2.6, within five (5) days of the Second Contingent Payment Date, NHC shall issue to Sellers, by delivery of individual
certificates to each Seller representing such Seller’s pro rata portion determined in accordance with the Seller Payment Schedule, a number of NHC Common Shares (collectively, the “Second Contingent Shares”)
determined as follows: 


(a) If either (i) no Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative between the First Contingent Payment Date and the Second Contingent Payment Date or (ii) one or more Buyer Indemnified
Parties has delivered a Claim Notice to the Seller Representative between the First Contingent Payment Date and the Second Contingent Payment Date but prior to the Second Contingent Payment Date it is determined pursuant to Section 11.4 that
there is no Payable Loss owed by Sellers to such Buyer Indemnified Parties, then the number of Second Contingent Shares shall be two million three hundred and thirty-three thousand three hundred and thirty-three (2,333,333). 


(b) If both (i) a Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative between the First Contingent Payment Date and the Second Contingent Payment Date and (ii) pursuant to Section 11.4, it is determined prior to
the Second Contingent Payment Date that Sellers owe a Payable Loss to one (1) or more Buyer Indemnified Parties, then the number of Second Contingent Shares shall be two million three hundred and thirty-three thousand three hundred and thirty-three
(2,333,333) minus the quotient of (x) the aggregate amount of Payable Losses determined pursuant to Section 11.4 divided by (y) the Share Value as of the date on which such Payable Loss was
determined to be payable. 


(c) If (i) a Buyer Indemnified Party has delivered a Claim Notice to the Seller Representative between the First Contingent Payment Date and the Second Contingent Payment Date but (ii) no determination pursuant to Section 11.4
of whether Sellers owe a Payable Loss to one (1) or more Buyer Indemnified Parties has
been made prior to the Second Contingent Payment Date, then the number of Second
Contingent Shares shall be two million three hundred and thirty-three thousand
three hundred and thirty-three (2,333,333) minus the quotient of
(x) sum of (A) the aggregate amount of Payable Losses determined pursuant to
Section 11.4 plus (B) the Estimated Loss Amount applicable
to the Unresolved Claim, divided by (y) the Share Value as of the date on which such Payable Loss was determined
(or with respect to Unresolved Claims, alleged) to be payable. Within five (5)
days immediately following final resolution of any such Unresolved Claim, NHC
shall issue to Sellers a number of shares of NHC Common Stock having an
aggregate Share Value equal to the portion of such Estimated Loss Amount (if
any) not used to satisfy such Unresolved Claim. 



12 






(d) If, for any reason, NHC fails to issue the Second
Contingent Shares (if any) in accordance with this Section 2.5, Buyer
shall, within fifteen (15) Business Days immediately following the date NHC is
required to effect such an issuance pursuant to this Section 2.5, pay to
Sellers by wire transfer of immediately available funds an amount equal to the
product of (x) the number NHC Common Shares to be issued pursuant to either
Section 2.5(a), Section 2.5(b) or Section 2.5(c), as
applicable, multiplied by (y)
the Share Value as of the Second Contingent Payment Date. 

Section 2.6. Contingent Shares Adjustments;
Issuances in Certain Circumstances. The number of NHC Common Shares to be
issued as Contingent Shares pursuant to Section 2.4 and Section
2.5 shall be equitably adjusted to reflect any stock dividend, stock split,
reverse stock split or like event of NHC that occurs after the Closing Date.
Notwithstanding anything to the contrary contained in this Agreement, if any
Seller is a Tag-Along Seller (as defined in the Side Letter Agreement) and the
number of NHC Common Shares that such Tag-Along Seller has the right to sell
pursuant to such Side Letter Agreement exceeds the number of NHC Common Shares
that such Tag-Along Seller has received pursuant to this Agreement, then
immediately prior to the closing of the Tag-along Sale (as defined in the Side
Letter Agreement) NHC shall issue to each such Tag-Along Seller such number of
Contingent Shares as would allow such Tag-Along Seller to fully participate in
such Tag-Along Sale (provided, however, for the avoidance of doubt, (a) in no
event will any Seller be issued Contingent Shares in excess of the number of
Contingent Shares such Seller would be entitled to under Section 2.4 and
Section 2.5 and (b) if not all Sellers are Tag-Along Sellers, the number
of NHC Common Shares issued under Section 2.4 and Section 2.5
shall be appropriately adjusted to reflect the prior issuance to the Tag-Along
Sellers).

ARTICLE III 
CLOSING 


Section 3.1. Closing Date. The closing of
the Contemplated Transactions (“Closing”) will take place at the
offices of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, 1301 McKinney
Street, Suite 3700 Houston, TX 77010, or at such other place as Buyer and
Sellers mutually agree, on the date of this Agreement (the “Closing
Date”); provided, however, that, notwithstanding the foregoing, Closing
shall be deemed effective as of 12:01:00 A.M. (local time in Houston, Texas) on the Closing Date, and the Parties agree
to acknowledge and use such date and time for all purposes, including for
accounting and Tax reporting purposes.

13 




Section 3.2. Buyer Parties Closing
Deliveries. At Closing, the Buyer Parties (as applicable) shall: 

(a) Pay the Cash Purchase Price to Sellers, by wire transfer of
immediately available funds to each Seller in the amount of such Seller’s pro
rata portion of the Cash Purchase Price determined in accordance with the
Seller Payment Schedule; 

(b) Issue the Closing Shares to Sellers, by delivery of
individual certificates to each Seller representing such Seller’s pro rata
portion of the Closing Shares determined in accordance with the Seller
Payment Schedule; 

(c) Issue the NHC Note to Sellers, by delivery of the NHC Note,
duly executed by an authorized signatory of NHC, to the Seller Representative;


(d) Deliver to Sellers a certificate of an officer of each
Buyer Party, dated the Closing Date, certifying (i) as to the Constituent
Documents of such Buyer Party, (ii) as to resolutions of the board of directors
of such Buyer Party authorizing the execution, delivery and performance of this
Agreement and the Buyer Ancillary Agreements, and (iii) the incumbency of any
officers or authorized representatives of such Buyer Party executing this
Agreement or any of the Buyer Ancillary Agreements; 

(e) Deliver to Executive the Employment Agreement, dated as of
the Closing Date, by and between Executive and NHC (the “Employment
Agreement”), duly executed by NHC; 

(f) Deliver to Sellers the Registration Rights Agreement, dated
as of the Closing Date, by and among NHC and Sellers (the “Registration
Rights Agreement”), duly executed by NHC; 

(g) Deliver to Sellers the First Side Letter Agreement, dated
as of the Closing Date, by and among Sellers, Donald Kramer and Harry Fleming
(the “First Side Letter Agreement”), duly executed by each of
Donald Kramer and Harry Fleming; 

(h) Deliver to Sellers documentary evidence of the resignations
and appointments set forth on Schedule 3.2(h); 

(i) Deliver to Sellers the Second Side Letter Agreement, dated
as of the Closing Date, by and among NHC, Buyer and Sellers Representative (the
“Second Side Letter Agreement”), duly executed by each of NHC,
Buyer and Sellers Representative; and 

14 




(j) Deliver to Sellers such other documents, instruments and
certificates as the Seller Representative or its counsel reasonably deems
necessary to consummate the Contemplated Transactions; and Section 

3.3. Sellers Closing Deliveries. At
Closing, Sellers (as applicable) shall, and shall cause the Athas Companies to
deliver to the Buyer Parties: 

(a) The Employment Agreement, duly executed by Executive; 

(b) The Registration Rights Agreement, duly executed by each
Seller; 

(c) The Side Letter Agreement, duly executed by each Seller;


(d) A membership assignment for each Seller, dated as of the
Closing Date, duly executed such Seller and evidencing such Seller’s transfer to
Buyer of such Seller’s portion of the Athas Membership Interest; 

(e) A certificate of an officer of Athas, dated the Closing
Date, certifying (i) as to the Constituent Documents of Athas, (ii) as to
resolutions of the managers of Athas authorizing the execution, delivery and
performance of this Agreement and the Seller Ancillary Documents, and (iii) the
incumbency of any officers or authorized representatives of Athas executing this
Agreement or any of the Seller Ancillary Documents; 

(f) Certificates of good standing or existence, as applicable,
of each Athas Company, issued as of a recent date by an appropriate official of
the state of organization of such Athas Company; 

(g) Complete minute books for each of the Athas Companies (to
the extent they exist); 

(h) Copies of all written consents, waivers or approvals
obtained by Sellers or the Athas Companies with respect to the consummation of
the Contemplated Transactions; 

(i) The written resignations of each officer, manager and
director of the Athas Companies set forth on Schedule 3.3(i); 

(j) A certificate of non-foreign status of each Seller meeting
the requirements of Treasury Regulation Section 1.1445 -2(b)(2); and

(k) Such other documents, instruments and certificates as the
Buyer Parties or their counsel reasonably deems necessary to consummate the
Contemplated Transactions. 

15 




ARTICLE IV 
REPRESENTATIONS AND WARRANTIES OF
SELLERS REGARDING SELLERS 


Sellers represent and warrant to the Buyer Parties that the
statements contained in this Article IV are true and correct as of the
Closing Date: 

Section 4.1. Authorization, Validity and
Effect of Agreement. Each Seller is a natural person and has all necessary
power, capacity and authority to execute, deliver and perform its obligations
under this Agreement, and to consummate the Contemplated Transactions. This
Agreement has been duly executed and delivered by each Seller and is (assuming
the valid authorization, execution and delivery of this Agreement by the Buyer
Parties) the legal, valid and binding obligation of each Seller, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar Laws of general application relating to or affecting
creditors’ rights and to general equity principles. With respect to each Seller,
no other action on the part of such Seller is necessary to authorize the
execution and delivery of this Agreement by such Seller, the performance of such
Seller’s obligations hereunder or the consummation by such Seller of the
Contemplated Transactions. 

Section 4.2. Conflicts. Except as set
forth on Schedule 4.2, with respect to each Seller, neither the
execution and delivery by such Seller of this Agreement or the consummation by
such Seller of any of the Contemplated Transactions nor compliance by such
Seller with or fulfillment of the terms, conditions and provisions hereof will:


(a) With or without the giving of notice, lapse of time or
both, conflict with, result in a violation or breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event creating
rights of acceleration, termination or cancellation or a loss of rights under
(i) any material agreement to which such Seller is a party or any of its
properties is subject or by which such Seller is bound, (iii) any Governmental
Order to which such Seller is a party or by which it is bound, or (iv) any Law
or Governmental Permits applicable to such Seller, other than, in the case of
clauses (ii), (ii) and (iii) above, any such violations, breaches, defaults,
rights or loss of rights that, individually or in the aggregate, would not
materially impair the ability of such Seller to perform its obligations
hereunder or prevent the consummation of any of the Contemplated Transactions;
or 

(b) Require the approval, consent, authorization or act of, or
the making by such Seller of any declaration, filing or registration with, any
Person, except for (i) in connection, or in compliance, with the provisions of
the HSR Act and (ii) such approvals, consents, authorizations, declarations,
filings or registrations the failure of which to be obtained or made would not
materially impair the ability of such Seller to perform its obligations
hereunder or prevent the consummation of any of the Contemplated Transactions.


Section 4.3. Title to Athas Membership
Interest. Each Seller is the sole record and beneficial owner of the Athas
Membership Interest set forth on Schedule 4.3, and except for Encumbrances that will be released at or prior to Closing, each
Seller has good and marketable title to such Athas Membership Interest, free and
clear of all Encumbrances. 

16 




Section 4.4. Legal Proceedings. With
respect to each Seller: 

(a) There are no Proceedings pending or, to the actual
knowledge of such Seller, threatened against such Seller that, individually or
in the aggregate, would reasonably be expected to adversely affect in any
material respect the ability of such Seller to enter into, perform its
obligations under and consummate the Contemplated Transactions. 

(b) There are no Proceedings pending or, to the actual
knowledge of such Seller, threatened against such Seller that question the
legality of the Contemplated Transactions, or which seeks to restrain, enjoin or
delay the consummation of the Contemplated Transactions, or which seeks damages
in connection the Contemplated Transactions, and no injunctions of any type have
been entered or issued in connection with the Contemplated Transactions. 

(c) There are no Governmental Orders to which such Seller, or
any of such Seller’s assets, properties or businesses is subject or bound,
except for any Governmental Orders, which, individually or in the aggregate,
would not reasonably be expected to adversely affect in any material respect the
ability of such Seller to enter into, perform its obligations under and
consummate the Contemplated Transactions. 

Section 4.5. Brokers. Neither Sellers nor
any Person acting on Sellers’ behalf has paid or become obligated to pay any fee
or commission to any third party broker, finder or intermediary for or on
account of the Contemplated Transaction. 

Section 4.6. Investment. Each Seller (a)
understands that the Closing Shares and the Contingent Shares have not been
registered under the Securities Act of 1933, or under any applicable state
securities law, and are being offer and sold in reliance upon certain exemptions
from federal and state securities law, (b) is acquiring the Closing Shares and
Contingent Shares for his, her, or its own account for investment purposes and
not with a view to, or for resale in connection with, any distribution or other
disposition thereof in violation of the Securities Act of 1933 or any applicable
state securities law (c) is a sophisticated investor with knowledge and
experience in business and financial matters, (d) has received certain
information concerning the Buyer Parties (e) is able to bear the economic risk
and lack of liquidity inherent in holding the Closing Shares and Contingent
Shares, and (f) acknowledges that the Closing Shares and Contingent Shares may
not be resold in the United States in the absence of registration, or the
availability of an exemption from such registration, under the Securities Act of
1933 or any applicable state securities law.

17 




ARTICLE V 
REPRESENTATIONS AND WARRANTIES OF
SELLERS
REGARDING THE ATHAS COMPANIES 


Sellers represent and warrant to the Buyer Parties that the
statements contained in this Article V are true and correct as of the
Closing Date: 

Section 5.1. Organization. Each of the
Athas Companies is duly incorporated or organized and duly formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation. Each of the Athas Companies is duly licensed or
qualified to conduct business as a foreign corporation and is in good standing
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing, individually or in the
aggregate, would not constitute a Material Adverse Effect. Each of the Athas
Companies has all necessary power and authority to own or lease and operate its
assets and to carry on the business conducted by it in the manner that it is
currently conducted. Each of the Athas Companies has made available to Buyer
correct and complete copies of its Constituent Documents, together with any
amendments thereto. 

Section 5.2. Capitalization.

(a) Except as set forth on Schedule 5.2, the
Athas Membership Interest is owned, in the aggregate, beneficially and of
record, by Sellers, free and clear of all Encumbrances. The Athas Membership
Interest has been duly authorized and validly issued and is not subject to, nor
issued in violation of, any preemptive rights. 

(b) Except for this Agreement or as set forth in Schedule
5.2, there are no options, warrants, calls, subscriptions, convertible
securities or other rights (i) to acquire any of the Athas Membership Interest
or other Ownership Interest of Athas or (ii) which obligate Athas to issue,
exchange, transfer or sell an Ownership Interest of Athas. 

Section 5.3. Subsidiaries. Set forth on
Schedule 5.3 is (a) the name and jurisdiction of organization of
each Subsidiary of Athas, (ii) the designation, par value (as applicable) and
number of authorized, issued and outstanding shares or other Ownership Interest
of each Subsidiary of Athas, and (iii) the record and beneficial owners of such
Ownership Interest and the amount and percentage of such Ownership Interest held
by each such holder as of the Closing Date. Other than as set forth on
Schedule 5.3 and except for the direct or indirect ownership by
Athas of the Ownership Interest of its Subsidiaries, neither Athas nor any of
its Subsidiaries, directly or indirectly, owns, of record or beneficially, any
Ownership Interest of any Person, and neither Athas nor any of its Subsidiaries
is obligated to acquire any Ownership Interest of any Person. Except as set
forth in Schedule 5.3, there are no options, warrants, calls,
subscriptions, convertible securities or other rights (i) to acquire any
Ownership Interest of any Subsidiary of Athas or (2) which obligate any
Subsidiary of Athas to issue, exchange, transfer or sell any of its Ownership
Interest. All Ownership Interest of the Subsidiaries of Athas have been duly authorized and validly issued, are fully paid and
non-assessable (except to the extent such concepts are not applicable under the
applicable Law of such Subsidiary’s jurisdiction of formation or other
applicable Law). Sellers have made available to Buyer correct and complete
copies of the Constituent Documents, as amended, of each of the Subsidiaries of
Athas, together with any amendments thereto.


18





Section 5.4. Financial Statements. Sellers
have made available to Buyer correct and complete copies of: (a) the audited
consolidated balance sheet of the Athas Companies as of each of the years ended
December 31, 2012 and December 31, 2013 and the audited consolidated statement
of income of the Athas Companies for each year then ended, and (b) the unaudited
unconsolidated balance sheets of the Athas Companies as of the Interim Balance
Sheet Date (the “Interim Balance Sheet”) and the related unaudited
unconsolidated statements of income of the Athas Companies as of the Interim
Balance Sheet Date (collectively, the “Financial Statements”).
Except as set forth in any notes thereto and except as set forth in
Schedule 5.4, the Financial Statements (a) were prepared from the
books and records of the Athas Companies, (b) were prepared on the accrual basis
of accounting in accordance with GAAP applied on a consistent basis during the
periods involved, and (c) present fairly, in all material respects, the
financial condition and results of operations of the Athas Companies taken as a
whole as of their respective dates and for the respective periods covered
thereby, and are, in all material respects, correct and complete, subject to the
absence of notes and, in the case of interim financial statements, normal
year-end adjustments and the absence of eliminating and consolidating entries
required to produce a consolidated financial statement. 

Section 5.5. No Undisclosed Liabilities. Except as set forth on Schedule 5.5, as of the Closing Date,
the Athas Companies do not have any liabilities or obligations of the type
required to be reflected in a balance sheet prepared in accordance with GAAP or
described as a contingency in the notes thereto, other than liabilities or
obligations (a) reflected in or reserved against in the Financial Statements or
(b) incurred in the ordinary course of business since the Interim Balance Sheet
Date that, individually or in the aggregate, do not exceed One Hundred Thousand
Dollars ($100,000). 

Section 5.6. Absence of Certain Recent
Changes. Except as set forth on Schedule 5.6, since the Interim Balance Sheet Date there has not
occurred any Material Adverse Effect and each Athas Company has conducted its
respective business only in the ordinary course of business; and with respect to
each Athas Company none of the following is pending or has occurred

(a) amendment of the charter, by-laws or other Constituent
Documents; 

(b) issuance, sale or other disposition of any of membership
interest, partnership interest, capital stock, or grant of any options, warrants
or other rights to purchase or obtain (including upon conversion, exchange or
exercise) any ownership interest of any kind; 

19 




(c) payment of distributions; 

(d) material change in any method of accounting or accounting
practice of the Company, except as required by GAAP or as disclosed in the notes
to the Financial Statements; 

(e) material change in the Company's cash management practices
and its policies, practices and procedures with respect to collection of
accounts receivable, establishment of reserves for uncollectible accounts,
accrual of accounts receivable, inventory control, prepayment of expenses,
payment of trade accounts payable, accrual of other expenses, deferral of
revenue and acceptance of customer deposits; 

(f) incurrence, assumption or guarantee of any indebtedness for
borrowed money except unsecured current obligations and liability incurred in
the ordinary course of business consistent with past practice; 

(g) transfer, assignment, sale or other disposition of any of
the assets shown or reflected in the Interim Balance Sheet or cancellation of
any debts or entitlements; 

(h) any capital investment in, or any loan to, any other
Person; 

(i) acceleration, termination, material modification to or
cancellation of any material contract (including, but not limited to, any
Material Contract) to which the Company is a party or by which it is bound; 

(j) any material capital expenditures; 

(k) imposition of any Encumbrance upon any of the Athas
Company's properties, ownership interest or assets, tangible or intangible; 

(l) (i) grant of any bonuses, whether monetary or otherwise, or
increase in any wages, salary, severance, pension or other compensation or
benefits in respect of its current or former employees, officers, directors,
independent contractors or consultants, other than as provided for in any
written agreements or required by applicable Law, (ii) change in the terms of
employment for any employee or any termination of any employees for which the
aggregate costs and expenses exceed $25,000, or (iii) action to accelerate the
vesting or payment of any compensation or benefit for any current or former
employee, officer, director, independent contractor or consultant; 

(m) adoption, modification or termination of any employment,
severance, retention or other agreement with any current or former officer or
director; 

(n) any loan to (or forgiveness of any loan to), or entry into
any other transaction with, any of its stockholders or current or former
directors, officers and employees; 

20 




(o) entry into a new line of business or abandonment or
discontinuance of existing lines of business; 

(p) adoption of any plan of merger, consolidation,
reorganization, liquidation or dissolution or filing of a petition in bankruptcy
under any provisions of federal or state bankruptcy Law or consent to the filing
of any bankruptcy petition against it under any similar Law; 

(q) purchase, lease or other acquisition of the right to own,
use or lease any property or assets for an amount in excess of thirty thousand
dollars ($30,000.00), individually (in the case of a lease, per annum) or thirty
thousand dollars ($30,000.00) in the aggregate (in the case of a lease, for the
entire term of the lease, not including any option term), except for purchases
of inventory or supplies in the ordinary course of business consistent with past
practice; 

(r) acquisition by merger or consolidation with, or by purchase
of a substantial portion of the assets or stock of, or by any other manner, any
business or any Person or any division thereof; or 

(s) action by any Athas Company to make, change or rescind any
Tax election, amend any Tax Return or take any position on any Tax Return, take
any action, omit to take any action or enter into any other transaction that
would have the effect of increasing the Tax liability or reducing any Tax asset
of Buyer in respect of any Post-Closing Tax Period. 

Section 5.7. Taxes. Except as set forth on
Schedule 5.7: 

(a) All material Tax Returns required to have been filed by or
on behalf of each Athas Company and all material Tax Returns for which a Athas
Company reasonably may have a Tax liability have been timely filed and there are
no current extensions to file any material Tax Return except any extension that
may be requested for tax year 2013 or other current period in accordance with
past practice. All such Tax Returns are true, correct and complete in all
material respects. 

(b) Each Athas Company have timely paid all material Taxes
whether or not shown on a Tax Return to the extent such failure to pay Taxes
could reasonably result in a Tax liability to the Athas Companies. There are no
Encumbrances, other than Permitted Encumbrances, with respect to Taxes upon any
assets of the Athas Companies. 

(c) No audit, suit, proceeding, claim, examination, deficiency
or assessment by any Tax Authority is currently being conducted which could
reasonably be expected to create a Tax liability for a Athas Company, and no
such audit, suit, proceeding, claim, examination, deficiency or assessment is
currently pending or, to the Sellers’ Knowledge, threatened. No waivers of
statutes of limitation have been given or requested by any Athas Company in
connection with any material Tax Return covering any Athas Company or with respect to any material Taxes for which any Athas Company could
reasonably be expected to be liable. 

21 




(d) Schedule 5.7(d) contains a list of all
jurisdictions in which an Athas Company files a return. No claim has ever been
made by a Tax Authority in a jurisdiction where any Athas Company does not file
Tax Returns that any Athas Company is or may be subject to Tax in that
jurisdiction. No Athas Company have and has ever had, a permanent establishment
or other taxable presence in any foreign country, as determined pursuant to
applicable foreign law and any applicable Tax treaty or convention between the
United States and such foreign country. 

(e) For periods beginning January 1, 2012, all required
estimated Tax payments sufficient to avoid any underpayment penalties have been
timely made by or on behalf of any Athas Company. 

(f) No Athas Company has been a member of an affiliated group
or filed or been included in a combined, consolidated or unitary Income Tax
Return or, is a party to or bound by, or liable for any Taxes as a result of,
any Tax allocation or sharing agreement. 

(g) Athas is a domestic limited liability company.

(h) Each Athas Company has been in compliance in all material
respects with the provisions of the Code relating to the withholding and payment
of Taxes, as well as similar provisions under any other state, local or foreign
Tax Laws, and all material Taxes required to have been withheld from employee
wages and paid over to the proper Governmental Bodies have, within the time and
in the manner prescribed by Tax Law, been withheld by or with respect to the
Athas Companies. 

(i) None of the Athas Companies that is a limited liability
company has ever elected to be treated as an association taxable as a
corporation or filed a corporate tax return. 

(j) None of the Athas Companies nor any consolidated, combined
or unitary group of which it is a member has engaged in any “listed transaction”
as defined in the Treasury Regulations promulgated under Section 6011 of the
Code. 

(k) None of the Athas Companies will be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing as a result of any
(i) change in method of accounting for a taxable period ending on or prior to
the Closing, (ii) ”closing agreement” as described in Section 7121 of the Code
(or any corresponding or similar provision of state, local or foreign Tax law)
executed on or prior to the Closing Date, (iii) installment sale or open
transaction disposition transaction made on or prior to the Closing Date, or
(iv) prepaid amount received on or prior to the Closing Date. 

22 




(l) None of the Athas Companies is a member of the affiliated
group (within the meaning of Section 1504(a)(1) of the Code). None of the Athas
Companies is organized under state law as a corporation. Each Athas Company that
is organized under state law as a limited liability company is treated as a
disregarded entity for federal Income Tax purposes, except for Athas. 

(m) But for liabilities that an Athas Company may have as the
member of the same group of which another Athas Company is a member, none of the
Athas Companies has any liability for Taxes of any Person, except for itself,
under Section 1.1502 -6 of the Treasury Regulations (or any similar provision of
state, local or foreign Law), as a member of any affiliated group, transferee or
successor, by law or contract or otherwise.

(n) Sellers have delivered or made available to Buyer true and
correct copies of all Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any Athas Company
since January 1, 2011, and Schedule 5.7(n) contains a list of Tax
Returns for which the applicable statute of limitations has not run. 

(o) Each of the Athas Companies is, and at all times from the
beginning of its existence has been, treated as partnership or a disregarded
entity for federal Income Tax purposes. 

Section 5.8. Governmental Permits. 

(a) Except as set forth on Schedule 5.8, the
Athas Companies own, hold or possess all licenses, permits, approvals,
variances, exemptions and other authorizations of or from all Governmental
Bodies that are necessary to entitle them to own or lease, operate and use their
assets and to carry on and conduct the Business under and pursuant to all
applicable Laws, except for such Governmental Permits as to which the failure to
so own, hold or possess, individually or in the aggregate, would not constitute
a Material Adverse Effect (collectively, the “Governmental
Permits”). The Athas Companies have complied, and are in compliance,
with all terms and conditions of the Governmental Permits, except for such
non-compliance which, individually or in the aggregate, would not constitute a
Material Adverse Effect. No Proceeding is pending nor, to the Knowledge of
Sellers, threatened, contemplating the suspension, cancellation, revocation,
withdrawal, modification, limitation or nonrenewal of any Governmental Permit.
Each of the Facilities that has historically received reimbursement from the
Governmental Programs is eligible to receive payment without restriction under
such Governmental Programs consistent with its past practices and is a
“provider” with valid and current provider agreements and with one or more
provider numbers with the federal Medicare program and any state Medicaid
programs in which any individual Facility may participate. Each of the
Facilities is in compliance with the conditions of participation for the
Governmental Programs in all material respects. 

(b) There is no pending or, to Sellers’ Knowledge, threatened
any proceeding or investigation under the Governmental Programs involving any of
the Facilities.

23 




Sellers have made available to Buyer true, correct and complete
copies of the Facilities’ most recent Medicare and Medicaid certification survey
reports (as applicable), including any statements of deficiencies and plans of
correction. 

Section 5.9. Compliance with Laws. Except
as set forth on Schedule 5.9, the Athas Companies are, in all material
respects, in compliance with, and are conducting the Business in accordance
with, all applicable Laws and Governmental Orders, except for any such violation
or non-compliance which, individually or in the aggregate, would not constitute
a Material Adverse Effect. 

Section 5.10. Health Care Regulatory Matters. Except as set forth on Schedule 5.10: 

(a) The Athas Companies are not in violation of any health care
Laws to which they are subject, including those relating to Medicare, Medicaid,
TRICARE and other federal health care programs (collectively “Governmental
Programs”), the federal health care program anti-kickback statute, 42
U.S.C. § 1320a-7b, Texas Occupations Code Ch. 102, the federal physician
self-referral law, 42 U.S.C. § 1395nn, the federal False Claims Act, 31 U.S.C.
§§ 3729 et seq., the Health Insurance Portability and Accountability Act of 1996
and applicable sections of the Social Security Act, each as amended, and rules
and regulations promulgated under the foregoing, except for any such violation
or non-compliance which, individually or in the aggregate, would not constitute
a Material Adverse Effect. 

(b) None of the Athas Companies is a party to a Corporate
Integrity Agreement with the Office of Inspector General of the U.S. Department
of Health and Human Services or has any reporting obligations pursuant to any
settlement agreement entered into with any Governmental Body. 

(c) None of the Athas Companies has been excluded from
participating in any Governmental Program, been subject to sanction pursuant to
42 U.S.C. § 1320a-7a or 1320a-8 or been convicted of a crime described at 42
U.S.C. § 1320a-7b, and, to Sellers’ Knowledge, no such exclusion or sanction is
threatened or pending. 

(d) [Reserved]. 

(e) Except as would not reasonably be expected to have a
Material Adverse Effect, neither the Athas Companies, nor any of their
respective officers, directors, stockholders or to Sellers’ Knowledge employees
or medical staff members: (i) has been charged with or convicted of any criminal
offense relating to the delivery of an item or service under any Governmental
Program; (ii) has been debarred, excluded or suspended from participation in any
Governmental Program; (iii) is currently listed on the General Services
Administration published list of parties excluded from federal procurement
programs and non-procurement programs; or (iv) is the target of any current
investigation relating to any Governmental Program-related offense. 

24 




(f) [Reserved]. 

(g) Sellers or Athas Companies have made available to Buyer,
with respect to the Facilities, true and correct copies of, or access to review,
the policies and procedures adopted in compliance with the Health Insurance
Portability & Accountability Act of 1996 and promulgated regulations thereto
(all as amended, “HIPAA”). To the Knowledge of Sellers, each of
the Facilities is and, since January 1, 2011, has been, in material compliance
with HIPAA, except for any such non-compliance which, individually or in the
aggregate, would not constitute a Material Adverse Effect. Neither Sellers nor
any of the Athas Companies have received from the U.S. Department of Health
& Human Services, Office of Civil Rights, written notice of an investigation
of a HIPAA complaint or written notice of a HIPAA audit. Sellers or Athas
Companies have made available to Buyer, with respect to the Facilities, true and
correct copies of each Facility’s log of Breaches of Unsecured Protected Health
Information (as defined by HIPAA) for the years 2012 and 2013 through the date
of this Agreement (the “Breach Notification Logs”). Except as set
forth in the Breach Notification Logs, to the Knowledge of Sellers and each of
the Athas Companies, there has not been any Breach of Unsecured Protected Health
Information (as defined by HIPAA) at any of the Facilities which, individually
or in the aggregate, constitutes a Material Adverse Effect. 

Section 5.11. Legal Proceedings. Except as
set forth on Schedule 5.11: 

(a) There are no Proceedings pending against any Athas Company
or against Sellers involving any Facility or Athas Company that would reasonably
be expected to involve amounts in controversy exceeding One Hundred Thousand
dollars ($100,000); 

(b) There are no Proceedings pending or, to the Knowledge of
Sellers, threatened in writing that question the legality of the Contemplated
Transactions, or which seeks to restrain, enjoin or delay the consummation of
the Contemplated Transactions, or which seeks damages in connection herewith or
therewith, and no injunctions of any type have been entered or issued in
connection with the Contemplated Transactions; and 

(c) There are no Governmental Orders to which any Athas
Company, or any of their respective assets, properties or businesses, is subject
or bound. 

Section 5.12. Real Property.

(a) Schedule 5.12(a) sets forth all real property
owned by each of the Athas Companies (the “Owned Real Property”).
Except as set forth on Schedule 5.12(a), (i) each of the Athas
Companies has sole and exclusive, good and clear, record and marketable title to
its Owned Real Property free and clear of any Encumbrance, (ii) no Athas Company
has leased or otherwise granted to any Person the right to use or occupy the
Owned Real Property or any portion thereof, and (iii) there are no outstanding
options, rights of first refusal, right of first offer to purchase any Owned
Real Property, or any portion thereof or interest therein. 

25 




(b) Schedule 5.12(b) sets forth all leases,
subleases or other agreements (collectively, the “Material
Leases”) under which any Athas Company leases or subleases any real
property (the “Leased Real Property”), other than real property
with respect to which the annual rental payments do not exceed Seventy Five
Thousand Dollars ($75,000.00) . Sellers have made available to Buyer a correct
and complete copy of each Material Lease, together with all amendments,
modifications, and extensions thereof. Each such Material Lease creates in the
applicable Athas Company a valid leasehold estate (subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting
generally the enforcement of creditors’ rights and subject to general principles
of equity). 

(c) Except as set forth on Schedule 5.12(c), with
respect to the Owned Real Property or Leased Real Property: 

(i) Neither Sellers nor any Athas Company has received any
written notice of any pending or threatened plans to modify or realign any
adjacent street or highway or any eminent domain proceeding that would result in
the taking of any portion of any such property or that would adversely affect
the current use, enjoyment or value of any such property; 

(ii) The buildings and improvements constituting the Facilities
on the Real Property are in material compliance with all applicable public
health, fire safety or building codes and regulations. Certificates of occupancy
and/or use have been duly issued by the Applicable Governmental Authority having
jurisdiction over the Facilities; and 

(iii) Neither Sellers nor any Athas Company has received any
written notice of any pending or threatened public improvements which will
result in special assessments or taxes against the Real Property. 

Section 5.13. Personal Property. Except as
set forth on Schedule 5.13, the Athas Companies have good and valid title
to all items of personal property owned by them, and a valid and enforceable
leasehold interest in all tangible items of personal property leased by or
licensed to them, in each case, free and clear of all Encumbrances. Except as
set forth in Schedule 5.13, such equipment and other personal
property have been maintained in accordance with good business practices, and
are, in the aggregate, in good operating condition and repair (normal wear and
tear excepted), in each case, except as would not, individually or in the
aggregate, constitute a Material Adverse Effect. 

Section 5.14. Intellectual Property.

(a) Set forth on Schedule 5.14 is a list of all
registered Athas Companies’ Intellectual Property. 

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(b) Except as set forth on Schedule 5.14, to
Sellers’ Knowledge, (i) there are no claims pending against any Athas Company
contesting the use or ownership of any Athas Companies’ Intellectual Property,
or alleging that any Athas Company is currently infringing the Intellectual
Property of any other Person in any material respect, and (ii) there are no
claims pending that have been brought by any Athas Company against any Person
currently alleging infringement of any Athas Companies’ Intellectual Property.


(c) Except as set forth on Schedule 5.14, to
Sellers’ Knowledge, (i) the conduct of the Business as currently conducted does
not infringe any Intellectual Property of any Person in any material respect,
and (ii) no Person is currently infringing any Athas Companies’ Intellectual
Property, except for such matters which, individually or in the aggregate, would
not constitute a Material Adverse Effect. 

Section 5.15. Material Contracts.

(a) Set forth on Schedule 5.15 is a list of the
following contracts or agreements to which any Athas Company is a party or by
which any Athas Company is bound (collectively, the “Material
Contracts”): 

(i) Any contract for the purchase, acquisition, sale or
disposition of assets or properties involving future payments to or by any Athas
Company of more than Seventy Five Thousand Dollars ($75,000) during any
twelve-month period; 

(ii) Any Material Leases; 

(iii) Any loan agreements, promissory notes, indentures, bonds,
security agreements, mortgages, deeds of trust, extensions of credit or other
agreements for Indebtedness of any Athas Company in an amount in excess of Fifty
Thousand Dollars ($50,000); 

(iv) Any joint venture agreements relating to the Athas
Companies; 

(v) Any employment agreement, severance agreement or other
contract for the employment by any Athas Company of any officer, employee or
other individual that provides for an annual base salary in excess of One
Hundred Thousand Dollars ($100,000); 

(vi) Any collective bargaining agreement, labor contract or
other written agreement or arrangement between any Athas Company and any labor
union or any employee organization; 

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

27 




(viii) Agreements to which a physician is a party; 

(ix) Agreements with health maintenance organizations,
preferred provider organizations, school districts, alternative delivery systems
or other payors that involved payments to the Athas Companies in excess of One
Hundred Twenty Five Thousand Dollars ($125,000.00) during the twelve months
ended September 30, 2014; 

(x) Corporate integrity agreements, settlement and other
agreements with Governmental Authorities; 

(xi) Agreements in which any Athas Company manages the
operations of any other Person, and any agreement in which any Athas Company has
material management services provided to it; and 

(xii) Any other contracts or commitments not identified above,
whether in the ordinary course of business or not, which (A) involve future
payments, performance of services or delivery of goods or materials, to or by
any Athas Company in an amount exceeding One Hundred Thousand Dollars
($100,000.00) on an annual basis, and (B) is not terminable by the applicable
Athas Company in ninety (90) days or less. 

(b) Except as set forth on Schedule 5.15, each of
the Material Contracts is (i) valid and binding on the applicable Athas Company
party thereto and, to the Knowledge of Sellers, the other party or parties
thereto, and is in full force and effect and (ii) enforceable against the
applicable Athas Company party thereto and, to the Knowledge of Sellers, the
other party or parties thereto, in accordance with its terms, in each case
subject to bankruptcy, insolvency, reorganization, moratorium and similar Laws
of general application relating to or affecting creditors’ rights and to general
equity principles. No Athas Company nor, to the Knowledge of Sellers, any other
party, is in material violation or breach of or in default under, nor, to the
Knowledge of Sellers, does there exist any event, condition or omission that,
with or without the giving of notice, lapse of time or both, would result in a
violation or breach of, or constitute a default under, or would give rise to any
claim for damages or right of termination, amendment, cancellation, acceleration
or loss of benefits under, or result in the creation of any Encumbrances upon
any of the assets or properties of any of the Athas Companies, any Material
Contract, except as would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect. Sellers have made available to Buyer a
correct and complete copy of each Material Contract. 

Section 5.16. [Reserved]. 

Section 5.17. Employee Benefits.

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(a) Set forth on Schedule 5.17(a) is a true,
complete and correct list of all “employee benefit plans,” as defined in Section
3(3) of ERISA, and all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, severance, supplemental
unemployment, layoff, salary continuation, retirement, pension, health, life
insurance, disability, group insurance, vacation, holiday, sick leave, fringe
benefit or welfare plan or any other similar plan, agreement, policy or
understanding (whether oral or written, qualified or non-qualified), including
deferred compensation arrangements that are referenced in an employment
agreement, and any trust, escrow or other funding arrangement related thereto
(collectively, the “Benefit Plans”), (i) which is maintained or contributed to,
for or on behalf of the current or former employees of any Athas Company or any
other individuals who provide or have provided services to or at any Athas
Company; (ii) with respect to which any Athas Company has any expense, liability
or obligation to or with respect to any current or former officer, director,
employee, service provider or the dependents or beneficiaries thereof,
regardless of whether funded; and (iii) with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA), which is sponsored,
maintained or contributed to by, or that benefits, any current or former
employee or service provider of Sellers or any Athas Company or to which any of
the Athas Companies is a party or has any expense, liability or obligation. 

(b) Except as set forth on Schedule 5.17(b), each
Benefit Plan has been established and administered in accordance with its terms
and is in compliance with all applicable Laws, including ERISA and the Code,
except for such matters or non-compliance which, individually or in the
aggregate, would not constitute a Material Adverse Effect. Each Benefit Plan
that is intended to be qualified under Section 401(a) of the Code is so
qualified, each trust established in connection with any Benefit Plan that is
intended to be exempt from federal Income Taxation under Section 501(a) of the
Code is so exempt. All material contributions to, and material payments from,
each Benefit Plan that are required to be made in accordance with the terms and
conditions thereof and applicable Laws (including ERISA and the Code) have been
timely made in all material respects. 

(c) Except as set forth on Schedule 5.17(c),
neither Sellers nor any Athas Company has ever maintained, been a participating
employer in or contributed to any employee benefit plan and no Benefit Plan is
(i) subject to Title IV of ERISA or (ii) subject to the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code. Neither the Athas
Companies nor any ERISA Affiliate thereof has sponsored or contributed to, or
been required to contribute to, a multiemployer plan (as defined in Section
4001(a)(3) of ERISA), any multiple employer plan within the meaning of Section
4063 or Section 4064 of ERISA, or a multiple employer welfare arrangement (as
defined in Section 3(40) of ERISA). 

(d) No Benefit Plan provides health or other welfare benefits
to former employees of any Athas Company other than health continuation coverage
pursuant to COBRA. 

(e) Sellers have made available to Buyer a correct and complete
copy or original of (i) each written Benefit Plan, including all amendments
thereto, and all related trust documents; (ii) the three most recent Annual
Report (Form 5500 Series) and accompanying schedules with respect to each Benefit Plan, as applicable; and
(iii) the most recent determination, opinion, notification or advisory letter
from the Internal Revenue Service with respect to each Benefit Plan, as
applicable. 

29 




(f) With respect to any Benefit Plan, as of the date of this
Agreement (i) no actions (other than routine claims for benefits in the ordinary
course) are pending, or, to Sellers’ Knowledge, threatened and (ii) no
administrative investigation, audit or other administrative proceeding by the
U.S. Department of Labor, the IRS or other Governmental Body is pending, in
progress or, to Sellers’ Knowledge, threatened. Each of the Benefit Plans and
Athas Companies have properly classified individuals providing services to any
Athas Company as independent contractors or employees, as the case may be. 

(g) Except as set forth on Schedule 5.17(g), none
of the execution and delivery of this Agreement, the performance by any Party of
its obligations hereunder or the consummation of the transactions (alone or in
conjunction with any other event, including any termination of employment on or
following the Closing Date) will (i) entitle any Acquired Employee to any
compensation or benefit, (ii) accelerate the time of payment or vesting, or
trigger any payment or funding, of any compensation or benefit or trigger any
other material obligation under any Benefit Plan or (iii) result in any breach
or violation of, or default under, or limit any Athas Company’s right to amend,
modify or terminate any Benefit Plan. 

(h) No amount or other entitlement that could be received as a
result of the transactions (alone or in conjunction with any other event) by any
“disqualified individual” (as defined in Section 280G(c) of the Code) with
respect to Sellers will constitute an “excess parachute payment” (as defined in
Section 280G(b)(1) of the Code). No director, officer, employee or independent
contractor of any Athas Company is entitled to receive any gross-up or
additional payment by reason of the tax required by Sections 409A or 4999 of the
Code being imposed on such person. 

(i) Sellers and the Athas Companies have complied in all
material respects with the continuation coverage provisions of COBRA and any
applicable state statutes mandating health insurance continuation coverage for
the Acquired Employees. Schedule 5.17(i)
contains a list of all current and former employees performing services for the
Athas Companies and their beneficiaries who are eligible for (or have elected
continuation coverage under COBRA) and who will be treated as “M&A qualified
beneficiaries” as such term is defined in Treasury Regulation Section 54.4980B
-9. 

S.ection 5.18. Labor Matters.

(a) There is no pending or, to the Knowledge of Sellers,
threatened, with respect to any employee of any Athas Company, (i) any strike,
slowdown, picketing, work stoppage or employee grievance process, (ii) charge,
grievance proceeding or other claim against any Athas Company relating to the
alleged violation of any Law pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment
Opportunity Commission or any comparable Governmental Body, (iii) union
organizational activity or other labor or employment dispute against any Athas
Company, or (iv) application for certification of a collective bargaining agent. 

30 




(b) No Athas Company is a party to, or bound by, any union
contract, collective bargaining agreement or other labor-related agreements or
arrangements with any labor union, labor organization or works council. No union
or similar organization represents employees of any Athas Company and, to the
Knowledge of Sellers, no such organization is attempting to organize such
employees. 

(c) Except as set forth on Schedule 5.18, the
Athas Companies are in compliance with all applicable Laws relating to labor,
labor relations or employment, except for any such violation or non-compliance
which, individually or in the aggregate, would not constitute a Material Adverse
Effect. No Athas Company has engaged in any location closing or employee layoff
activities during the two (2)-year period prior to the Closing Date that would
violate or in any way implicate the Worker Adjustment and Retraining
Notification Act of 1988 or any similar state or local Law (collectively,
“WARN Act”). 

Section 5.19. Environmental Matters. Except as set forth in Schedule 5.19: 

(a) (i) the Athas Companies are in compliance with
Environmental Laws and hold and are in compliance with all Governmental Permits
required pursuant to Environmental Laws, (ii) no Athas Company has assumed,
undertaken or otherwise become subject to any liability or corrective,
investigatory or remedial obligation of any other Person relating to any
Environmental Laws, (iii) no Athas Company has received in the past three (3)
years any currently unresolved written notice of any violation of any
Environmental Laws, and (iv) no Athas Company has Released any Contaminant at,
on, under or from any property owned or leased by any Athas Company in violation
of any Environmental Laws, except in each case, as would not, individually or in
the aggregate, constitute a Material Adverse Effect. 

(b) Neither Sellers nor any of the Athas Companies has disposed
of or Released any Contaminant on the Owned Real Property or Leased Property so
as to give rise to any liabilities or investigatory, corrective or remedial
obligations under any Environmental Laws that would reasonably be expected to
have a Material Adverse Effect. 

(c) Each of the Athas Companies has all licenses, permits,
registrations, approvals and authorizations required under applicable
Environmental Laws in connection with its operations of the Facilities
(“Environmental Permits”), all such Environmental Permits are in
full force and effect and all renewal applications due for such Environmental
Permits have been timely filed, and each Facility is in compliance with such
Environmental Permits, except for any such noncompliance as would not reasonably
be expected to have a Material Adverse Effect. 

31 




(d) To Sellers’ Knowledge, Sellers have furnished to Buyer all
written environmental assessments, tests, analyses, reports and audits relating
to the Facilities, the Owned Real Property and the Leased Property that are in
its possession, including any prior Phase I or Phase II environmental
assessments of the Owned Real Property (the “Environmental
Reports”). 

Section 5.20. Insurance. Set forth on
Schedule 5.20 is a list of all policies of fire, liability,
workers’ compensation, property, casualty and other forms of insurance currently
covering the Athas Companies. Such policies are in full force and effect, all
premiums due thereon have been paid, and no notice of cancellation or
termination has been received by any Athas Company with respect to any such
policy. Sellers have made available to Buyer correct and complete copies of all
such policies, together with all riders and amendments thereto. 

Section 5.21. Related Party Transactions. Other than arrangements between the Athas Companies and Sellers and except
as set forth on Schedule 5.21, (a) no Related Party has, and no
Related Party has had within the past three (3) years, any interest in any
material asset used in or otherwise relating to the Business, (b) no Related
Party is or has, within the past three (3) years, been indebted to any of the
Athas Companies (other than for ordinary travel advances) and none of the Athas
Companies is or has been indebted to any Related Party, and (c) to Sellers’
Knowledge, no Related Party has entered into, or has any financial interest in,
any material contract, transaction or business dealing with or involving any
Athas Company, other than transactions or business dealings conducted in the
ordinary course of business at prevailing market prices and on prevailing market
terms. 

Section 5.22. Brokers. Neither any of the
Athas Companies nor any Person acting on behalf of the Athas Companies has paid
or become obligated to pay any fee or commission to any third party broker,
finder or intermediary for or on account of the Contemplated Transactions. 

Section 5.23. Non-Reliance. Sellers
acknowledge that (a) they have had adequate access to the officers, managers,
employees, assets, operations, books, records, and files of NHC necessary to
evaluate the Contemplated Transaction and their acceptance of NHC Common Shares
as partial consideration for the sale of their Athas Membership Interest and (B)
in making the decision to enter into this Agreement and consummate the
transactions contemplated hereby, Sellers have relied solely on their
independent investigation and upon the express representations, warranties,
covenants and agreements set forth in this Agreement. Accordingly, Sellers
acknowledge and agree that, except as expressly set forth herein and subject to
all the terms and conditions hereof, THE BUYER PARTIES HAVE NOT MADE, AND EACH
BUYER PARTY HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO
NHC OR BUYER (OR THE ASSETS OF EITHER), INCLUDING ANY REPRESENTATION OR WARRANTY
REGARDING ANY INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL), EXCEPT
FOR THE NHC FILINGS, FURNISHED TO SELLERS BY OR ON BEHALF OF THE BUYER PARTIES, AND THAT ALL INTERPRETATIONS TO THE CONTRARY SHALL
HAVE NO FORCE OR EFFECT. UNLESS OTHERWISE EXPRESSLY SET FORTH HEREIN OR
CONTAINED IN THE NHC FILINGS, THE BUYER PARTIES FURTHER SPECIFICALLY DISCLAIM
ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING ANY
FINANCIAL ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS CONTAINED OR REFERRED TO
IN ANY MATERIALS (WHETHER CONVEYED ORALLY OR IN WRITING) THAT HAS BEEN PROVIDED
TO SELLERS OR ANY OF THEIR AFFILIATES, AGENTS OR REPRESENTATIVES AND SUCH
MATERIALS ARE NOT AND SHALL NOT BE DEEMED TO BE REPRESENTATIONS OR WARRANTIES OF
THE BUYER PARTIES OR ANY OF THE BUYER PARTIES’ RESPECTIVE AFFILIATES, AGENTS,
EMPLOYEES OR REPRESENTATIVES. 

32 




ARTICLE VI 
REPRESENTATIONS AND WARRANTIES OF THE
BUYER PARTIES 


The Buyer Parties represent and warrant to Sellers that the
statements contained in this Article VI are true and correct as of the
Closing Date: 

Section 6.1. Organization. Buyer is a
limited liability company duly organized, validly existing and in good standing
under the Laws of the State of Delaware. NHC is a registered corporation duly
incorporated, validly existing and in good standing under the Laws of British
Columbia. With respect to each Buyer Party, such Buyer Party is duly licensed or
qualified to conduct business as a foreign limited liability company and is in
good standing in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Buyer or its operations. With respect to each Buyer
Party, such Buyer Party has all necessary corporate or company power (as
applicable) and authority to own or lease and operate its assets and to carry on
its business in the manner that it has been and is currently conducted. Buyer
is, and has been since the date of its formation, (a) wholly-owned by NHC, and
(b) an entity disregarded as separate from its owner, for U.S. federal income
Tax purposes pursuant to Treasury Regulation Section 301.7701 -3. 

Section 6.2. Authorization, Validity and
Effect of Agreement. With respect to each Buyer Party, (a) such Buyer Party
has all necessary power and authority to execute, deliver and perform its
obligations under this Agreement and each of the Buyer Ancillary Agreements to
which it is a party, and to consummate the Contemplated Transactions, (b) this
Agreement has been duly authorized by the governing board of such Buyer Party,
duly executed and delivered by such Buyer Party, and is (assuming the valid
authorization, execution and delivery of this Agreement by Sellers) the legal,
valid and binding obligation of such Buyer Party enforceable in accordance with
its terms, and each of the Buyer Ancillary Agreements has been duly authorized
by the governing board of such Buyer Party and, upon execution and delivery
thereof by such Buyer Party, will be duly executed and delivered by such Buyer
Party, and will be (assuming the valid authorization, execution and delivery by
each Seller, where such Seller is a party, or the other party or parties thereto) a legal, valid and binding
obligation of such Buyer Party, enforceable in accordance with its terms, in
each case subject to bankruptcy, insolvency, reorganization, moratorium and
similar Laws of general application relating to or affecting creditors’ rights
and to general equity principles, and (c) no other action on the part of such
Buyer Party, its members, shareholders, managers or directors (each, as
applicable) is necessary to authorize the execution and delivery by such Buyer
Party of this Agreement and the Buyer Ancillary Agreements to which such Buyer
Party is a party, the performance of such Buyer Party’s obligations hereunder or
thereunder or the consummation by such Buyer Party of the Contemplated
Transactions.  

33 




Section 6.3. No Conflicts; Consents and
Approvals. With respect to each Buyer Party, the execution and delivery of,
and the performance of its obligations under, this Agreement by such Buyer Party
do not, and the consummation by such Buyer Party of the Contemplated
Transactions or by any of the Buyer Ancillary Agreements will not: 

(a) With or without the giving of notice, lapse of time or
both, conflict with, result in a violation or breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event creating
rights of acceleration, termination or cancellation or a loss of rights under,
(i) the Constituent Documents of such Buyer Party, (ii) any contract to which
such Buyer Party is a party or by which such Buyer Party or any of its assets,
properties or businesses may be subject or bound, (iii) any Governmental Order
to which such Buyer Party is a party or by which such Buyer Party or any of its
assets, properties or businesses may be subject or bound or (iv) any material
Laws or Governmental Permits applicable to such Buyer Party or any of its
assets, properties or businesses, other than, in the case of clause (ii) above,
any such conflicts, violations, breaches, defaults, rights or loss of rights
that, individually or in the aggregate, would not reasonably be expected to
adversely affect in any material respect the ability of such Buyer Party to
enter into, perform its obligations under and consummate the Contemplated
Transactions; or 

(b) Require the authorization, consent, approval, order, waiver
or act of, or the making by Buyer of any declaration, filing or registration
with or notice to, any Person, except (i) in connection, or in compliance, with
the listed issuer obligations of the Toronto Stock Exchange as set forth in the
TSX Company Manual, each of which has been obtained or complied with prior to
Closing, and (ii) such authorizations, consents, approvals, orders, waivers,
acts of, declarations, filings, registrations or notices the failure of which to
be obtained or made, individually or in the aggregate, would reasonably be
expected to adversely affect in any material respect the ability of such Buyer
Party to enter into, perform its obligations under and consummate the
Contemplated Transactions. 

Section 6.4. Legal Proceedings. With
respect to each Buyer Party: 

(a) There are no Proceedings pending or, to Buyer’s Knowledge,
threatened against such Buyer Party or its Affiliates, or any of their
respective officers, directors, managers employees, consultants or agents (in
their capacity as such), in each case, that, individually or in the aggregate, would reasonably be expected
to adversely affect in any material respect the ability of such Buyer Party to
enter into, perform its obligations under and consummate the Contemplated
Transactions; 

34 




(b) There are no Proceedings pending or, to Buyer’s Knowledge,
threatened against such Buyer Party or its Affiliates that questions the
legality of the Contemplated Transactions, or which seeks to restrain, enjoin or
delay the consummation of the Contemplated Transactions, or which seeks damages
in connection herewith or therewith, and no injunctions of any type have been
entered or issued in connection with the Contemplated Transactions; and 

(c) There are no Governmental Orders to which such Buyer Party
or any of its Affiliates, or any of their respective assets, properties or
businesses is subject or bound, except for any Governmental Orders, which,
individually or in the aggregate, would not reasonably be expected to adversely
affect in any material respect the ability such Buyer Party Buyer to enter into,
perform its obligations under and consummate the Contemplated Transactions and
Buyer has no reasonable basis to believe that any Governmental Orders or
restrictions are contemplated or that its current assets or activities make any
such Governmental Orders or restrictions reasonably likely to result as a result
of the execution of this Agreement or otherwise. 

Section 6.5. NHC Capitalization. Except as
set forth on Schedule 6.5, as otherwise contemplated by
this Agreement (including, for the avoidance of doubt, the issuance of the
Contingent Shares), or pursuant to Equity Compensation Plans.

(a) The authorized capital stock of NHC consists solely of an
unlimited number of shares of NHC Common Stock, of which fifty two million four
hundred ten thousand nine hundred seventy (52,410,970) shares are issued and
outstanding. All of the issued and outstanding shares of capital stock of NHC
are, and upon their issuance in accordance with this Agreement, all of the
issued and outstanding shares of NHC Common Stock shall be, duly authorized,
validly issued, fully paid and nonassessable, free of preemptive rights or any
other third party rights, and have been offered, sold and issued by NHC in
compliance with applicable securities and corporate Laws and NHC’s Constituent
Documents and in compliance with any preemptive rights, rights of first refusal
or similar right. 

(b) There are no contracts or agreements of any character
relating to any Buyer Party, to which a Buyer Party is a party or by which a
Buyer Party is bound that obligate such Buyer Party to (1) issue, exchange,
transfer, sell, repurchase, redeem, or otherwise acquire any Ownership Interests
in such Buyer Party or (2) grant, extend or accelerate the vesting of any
Ownership Interests in such Buyer Party.

Section 6.6. Compliance with Securities Laws. NHC has filed all reports, schedules, forms, certifications, prospectuses,
registration, proxy and other statements required to be filed by it with the
Ontario Securities Commission and the British Columbia Securities Commission (collectively, and together with any other reports filed on a
voluntary basis, and in each case including all other exhibits and schedules
thereto and documents incorporated by reference therein, the “NHC
Filings”). The financial statements of NHC included in the NHC Filings
were prepared from the books and records of NHC and its Subsidiaries, complied
in all material respects with applicable Canadian National Instruments and the
rules and regulations of the Toronto Stock Exchange with respect thereto, and
fairly present in all material respects the consolidated financial position of
NHC and its Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of NHC and its
Subsidiaries for the periods presented therein.


35






 

Section 6.7. Investment Intent. Buyer is
acquiring the Athas Membership Interest for investment, solely for Buyer’s own
account and not with a view to, or for resale in connection with, any
distribution or other disposition thereof in violation of the Securities Act of
1933 or any applicable state securities law. Buyer acknowledges that the Athas
Membership Interest may not be resold in the absence of registration, or the
availability of an exemption from such registration, under the Securities Act of
1933 or any applicable state securities law. Buyer is an “accredited investor”
as defined in Rule 501 promulgated under the Securities Act of 1933 and has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Athas Membership
Interest. 

Section 6.8. No Brokers. Neither Buyer,
NHC, nor any Person acting on Buyer or NHC’s behalf has paid or become obligated
to pay any fee or commission to any broker, finder or intermediary for or on
account of the Contemplated Transactions. 

Section 6.9. Non-Reliance. Each Buyer
Party acknowledges that (a) it has had adequate access to the officers,
managers, employees, assets, operations, books, records, and files of the Athas
Companies necessary to evaluate its investment in the Athas Companies and
purchase of the Athas Membership Interest and (B) in making the decision to
enter into this Agreement and consummate the transactions contemplated hereby,
such Buyer Party has relied solely on its independent investigation and upon the
express representations, warranties, covenants and agreements set forth in this
Agreement. Accordingly, the Buyer Parties acknowledge and agree that, except as
expressly set forth herein and subject to all the terms and conditions hereof,
SELLERS HAVE NOT MADE, AND EACH SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES,
ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR
OTHERWISE RELATING TO THE ATHAS MEMBERSHIP INTEREST, SELLERS, THE ATHAS
COMPANIES (OR THE ASSETS OF ANY OF THEM), INCLUDING ANY REPRESENTATION OR
WARRANTY REGARDING ANY INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED TO SUCH BUYER PARTY BY OR ON BEHALF OF SELLERS OR THE ATHAS COMPANIES
AND THAT ALL INTERPRETATIONS TO THE CONTRARY SHALL HAVE NO FORCE OR EFFECT.
UNLESS OTHERWISE EXPRESSLY SET FORTH HEREIN, SELLERS FURTHER SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING (I) THE ABSENCE OF HAZARDOUS MATERIALS OR LIABILITY
OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAW, AND (II) THE CONDITION,
VALUE OR QUALITY OF THE ASSETS HELD BY THE ATHAS COMPANIES OR THE PROSPECTS
(FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF SUCH ASSETS. ANY COST
ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS CONTAINED OR REFERRED TO IN ANY
MATERIAL THAT HAS BEEN PROVIDED TO SUCH BUYER PARTY OR ANY OF ITS AFFILIATES,
AGENTS OR REPRESENTATIVES (INCLUDING ANY DUE DILIGENCE PRESENTATIONS OR
DOCUMENTS) ARE NOT AND SHALL NOT BE DEEMED TO BE REPRESENTATIONS OR WARRANTIES
OF SELLERS OR ANY OF SELLERS’ RESPECTIVE AFFILIATES, AGENTS, EMPLOYEES OR
REPRESENTATIVES. 

36 




ARTICLE VII 
[RESERVED] 


ARTICLE VIII 
ADDITIONAL AGREEMENTS 


Section 8.1. Confidentiality. The Parties
acknowledge and agree that all confidential information relating to Sellers, the
Athas Companies, the Buyer Parties or their respective Affiliates and
businesses, including confidential matters consisting of “know-how,” trade
secrets, customer lists, details of contracts, pricing policies, operational and
service methods, sales data, marketing plans or strategies, service development
techniques or plans, business acquisition plans, new personnel acquisition
plans, technical processes, designs and design projects and inventions
(collectively, “Confidential Information”) are valuable, special
and unique assets of such Person to which the Confidential Information belongs
and are, and upon the Closing will be, owned exclusively by such Person. Each
Party agrees to, and agrees to use its reasonable best efforts to cause its
directors, officers, employees, partners, Affiliates, agents, advisors
(including accountants and legal counsel) and other representatives
(“Representatives”) to, treat the Confidential Information,
together with any other confidential information furnished to Sellers or the
Athas Companies or their respective Affiliates by Buyer or its Affiliates, on
the one hand, or to Buyer or its Affiliates by Sellers, the Athas Companies or
any of their respective Affiliates, on the other hand, as confidential and not
to make use of such information for its own purposes or for the benefit of any
other Person. To the extent the terms in this Section 8.1 conflict with
the terms of the Confidentiality Agreement, dated as of October 28, 2014,
between Athas and Buyer or its Affiliate (the “Confidentiality
Agreement”), the terms of this Section 8.1 shall supersede the
conflicting terms in the Confidentiality Agreement. 

Section 8.2. Further Assurances. Each
Party will use reasonable best efforts to take all further actions and execute
and deliver all further documents that are necessary to carry out the intent and
purposes of this Agreement and the Buyer Ancillary Agreements and Seller
Ancillary Agreements. 

Section 8.3. Continued Employment; Covenant
Not to Compete. 

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(a) With respect to each of the Athas employees set forth on
Schedule 8.3(a) (each, a “Named
Employee”), from the Closing Date until the earlier of (i) the first
anniversary of the Closing Date and (ii) the date on which all amounts owed by
NHC under the Note have been paid in full, the Buyer Parties shall not, and
shall not permit Athas to, either (A) terminate the employment relationship
between Athas and such Named Employee, other than for Cause, or (B) modify,
including with respect to titles, compensation or benefits, the employment
relationship between Athas and such Named Employee. 

(b) The Named Employees hereby covenant and agree with Buyer
Parties and their Affiliates that, during the Non-Compete Period (as such term
is defined below) and within the Non-Compete Area (as such term is defined
below), they shall not directly or indirectly, be employed by, acquire, lease,
manage, consult for, serve as agent or subcontractor for, finance, invest in,
own any part of or exercise management control over in-patient or out-patient
facility or business that engages in direct or indirect to-patient marketing
services in any service line that could reasonable be deemed to compete with the
Athas Companies (a “Competing Business”). The “Non-Compete
Period” shall commence on the Closing Date and shall terminate:

(i) for Executive and each of Steve Ganss, Alex Noffsinger and
Vance Wells, on the earlier of: 

(A) the second anniversary of the Closing Date; 

(B) the date Executive is terminated by Buyer for any reason
other than Cause; and

(C) the first anniversary of the Closing Date if the NHC Note
is not paid by such date;

(ii) for all other Named Employees, on the earlier of: 

(A) the first anniversary of the Closing Date; and 

(B) the date Executive is terminated by Buyer for any reason
other than Cause;

and, without limitation to the foregoing, with respect to each
Named Employee, the Non-Compete Period shall terminate solely with respect to
such Named Employee on the date such Named Employee is terminated for any reason
other than for Cause. The “Non-Compete Area” shall mean the area
within a twenty (20) mile radius of each NHC Facility, including any satellite
locations thereof. Ownership of less than three percent (3%) of the stock of a
publicly held company shall not be deemed a breach of this covenant. The
existing indirect investment by Steven Ganss, Chris Lloyd, Alex Noffsinger and
Vance Wells in Forest Park Medical Center, LLC, a Texas limited liability
company, shall not be deemed a breach of this covenant. 

38 




(c) The Sellers and their Affiliates hereby covenant and agree
with Buyer Parties and their Affiliates that during the Non-Compete Period they
shall not directly or indirectly (a) employ any person who is employed by the
Athas Companies as of the Closing Date or any Acquired Employee, or (b) disrupt
or attempt to disrupt any past, present or reasonably foreseeable future
relationship, contractual or otherwise between the Facilities, on the one hand,
and any physician, physician group, or other healthcare provider with whom any
Athas Company contracts with in connection with the Facilities or make
statements to the same that disparage Buyer Parties and their Affiliates or
their respective operations in any way. 

(d) Notwithstanding Section 13.12, in the event of a
breach of Section 8.3, Buyer Parties and their Affiliates shall be
entitled to seek an injunction restraining such breach in a court of competent
jurisdiction, with the costs (including attorney’s fees) of obtaining such
injunction to be borne by the breaching party. Sellers and their Affiliates
recognize that monetary damages shall be inadequate to compensate Buyer Parties
and their Affiliates and that Buyer Parties and their Affiliates shall be
entitled, without the posting of a bond or similar security, to an injunction
restraining such breach. Nothing contained herein shall be construed as
prohibiting Buyer Parties and their Affiliates from pursuing any other remedy
available for such breach or threatened breach. All Parties hereby acknowledge
the necessity of protection against the competition of Sellers and their
Affiliates and that the nature and scope of such protection has been carefully
considered by the parties. The period provided and the area covered are
expressly represented and agreed to be fair, reasonable and necessary. The
consideration provided for herein is deemed to be sufficient and adequate to
compensate the Sellers and their Affiliates for agreeing to the restrictions
contained in Section 8.3. If, however, any court determines that the
forgoing restrictions are not reasonable, such restrictions shall be modified,
rewritten or interpreted to include as much of their nature and scope as will
render them enforceable. 

Section 8.4. Books and Records; Access After
Closing. Buyer will hold all the books and records of the Athas Companies
existing on the Closing Date in accordance with Buyer’s retention policies in
effect from time to time for a period of not less than three (3) years from the
Closing Date. After the Closing Date, (a) Buyer will afford Sellers and their
respective accountants and counsel, during normal business hours, upon
reasonable request, full access to the books and records of the Athas Companies
to the extent required in order to prepare Sellers’ Tax Returns and (b) Buyer
will make available to Sellers upon written request and at the expense of such
Seller, but consistent with the Buyer Parties’ reasonable business requirements,
reasonable assistance of any of the Athas Companies’ personnel whose assistance
or participation is required by any Seller, in anticipation of, or preparation
for, existing or future litigation or other matters in which such Seller is
involved related to the Athas Companies. 

Section 8.5. Guaranty Arrangements. With
respect to all Indebtedness, Material Leases, and any other personal guaranties
entered into for the benefit of an Athas Company, the Buyer Parties shall (a)
take all commercially reasonable efforts necessary to have Sellers
unconditionally released as promptly as practicable from each guaranty and other
obligation to ensure the payment by or performance of any Athas Company made
or given by Sellers and (b) to the extent the Buyer Parties are unable to obtain
such an unconditional release, to indemnify Sellers for any liability as
guarantor or obligor (as applicable) under any such guaranty or other such
obligation, so that Sellers have no obligation thereunder after the Closing
Date. 

39 




Section 8.6. NYSE Listing Application.
Promptly after the Closing Date, and in any event prior to March 1, 2015, NHC
shall (a) have filed with the NYSE MKT stock exchange (the “NYSE
MKT”) a listing application and any and all other documents or
instruments to effect the listing upon the NYSE MKT of NHC Common Stock,
including the Closing Shares, (b) file with the Securities and Exchange
Commission of the United States (the “SEC”) all required filings
in order to effectuate such listing, and (c) pay all filing, listing and
application fees in connection with the foregoing. Promptly after the issuance
of any Contingent Shares, and in a manner consistent with the Registration
Rights Agreement, NHC shall file a supplemental listing application and any and
all other documents or instruments with the NYSE MKT and the SEC reasonably
necessary to effectuate the listing upon the NYSE MKT of such Contingent Shares.


Section 8.7. Tax Matters.

(a) The Parties acknowledge that for federal and applicable
state and local income Tax purposes (i) based upon the representation of NHC as
to the Tax classification of Buyer and all Persons (other than NHC) holding
direct or indirect Ownership Interests in Buyer, each of Buyer and all Persons
(other than NHC) holding direct or indirect Ownership Interests in Buyer is a
disregarded entity pursuant to Treasury Regulation Section 301.7701 -3, and (ii)
the purchase and sale of the Athas Membership Interest pursuant to this
Agreement shall be treated (A) with respect to Sellers as a sale of their Athas
Membership Interests to NHC and (B) with respect to NHC as a purchase of the
assets of the Athas, subject to Athas’ liabilities, in accordance with Revenue
Ruling 99-6, 1999-1 C.B. 432. 

(b) The Seller Representative shall prepare, or cause to be
prepared, all Tax Returns of the Athas Companies for all Pre-Closing Tax Periods
filed after the Closing Date. Such Tax Returns shall be prepared on a basis
consistent with past practices of the Athas Companies. Not later than thirty
(30) days (or with respect to Tax Returns not relating to Income Taxes, within a
reasonable time) prior to the due date for filing any such Tax Return, the
Seller Representative shall deliver a copy of such Tax Return to NHC for its
review. To the extent applicable, NHC will cause such Tax Returns to be timely
filed and will provide a copy to the Seller Representative. 

(c) NHC shall prepare and file, or cause to be prepared and
filed, all Tax Returns of the Athas Companies for all Straddle Periods. Such Tax
Returns shall be prepared on a basis consistent with past practices of the Athas
Companies. NHC shall provide the Seller Representative with copies of such Tax
Returns at least thirty (30) days (or with respect to Tax Returns not relating
to Income Taxes, within a reasonable time) prior to the due date for the filing
of such Tax Returns for the Seller Representative's review and approval, which
shall not be unreasonably withhold, conditioned or delayed. 

40 




(d) If any Tax Authority asserts a claim, makes an assessment
or otherwise disputes or affects the Tax reporting position of an Athas Company
for any Pre-Closing Tax Period, NHC shall, promptly upon receipt by NHC or an
Athas Company of notice thereof, provide written notice to the Seller
Representative thereof. The Seller Representative shall have the right to
represent and control the interests of each Athas Company in any such Tax
Proceeding and to employ counsel of the Seller Representative’s choice;
provided, however, that NHC shall have the right to participate in, and consult
with the Seller Representative regarding, any such Tax Proceeding that may
affect any Athas Company for any periods ending after the Closing Date at
Buyer’s own expense and provided, further, that any settlement or other
disposition of any such Tax Proceeding may only be with the written consent of
NHC, which consent will not be unreasonably withheld or delayed. Athas and the
Seller Representative shall have the joint right to represent and control the
interests of the Athas Companies in any Tax Proceeding relating to a Straddle
Period of an Athas Company, and to employ counsel of their choice; provided,
however, that neither Party may settle or otherwise dispose of any Tax
Proceeding except with the prior written consent of the other Party, which
consent will not be unreasonably withheld or delayed. 

(e) Without the prior written consent of the Seller
Representative, which consent shall not be unreasonably conditioned, withheld,
or delayed, with respect to any Pre-Closing Tax Period, the Buyer Parties and
their Affiliates (including the Athas Companies) shall not, and shall not permit
the Athas Companies, to (i) amend any Tax Return of the Athas Companies; make or
change any Tax method on any Tax Return of the Athas Companies; make or amend
any claim, disclaimer or election in respect of any Tax of the Athas Companies;
consent to any extension or waiver of the limitation period applicable to any
Tax of the Athas Companies, or (ii) take or omit to take any action specifically
relating to any Pre-Closing Tax Period that would have the effect of increasing
the Tax liability for which Sellers are responsible under this Agreement or
decreasing any Tax refund to which Sellers are entitled under this Agreement.


(f) The Buyer Parties (and their Affiliates) and the Seller
Representative shall cooperate fully as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns and any Tax
Proceeding with respect to Taxes imposed on or with respect to the assets,
operations or activities of an Athas Company. Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and
information which are reasonably relevant to any such Tax Return or Tax
Proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. 

(g) Sellers and NHC shall each be responsible for the payment
of fifty-percent (50%) of all Transfer Taxes resulting from the transactions
contemplated by this Agreement, if any. NHC and Sellers shall cooperate in good
faith to minimize, to the extent permissible under applicable law, the amount of
any such Transfer Taxes. 

41 




(h) The Parties acknowledge and agree to report for federal and
applicable state Income Taxes purposes the right to the Contingent Shares and
the NHC Notes (exclusive of interest accruing thereon) issued to the Sellers
pursuant to this Agreement (x) as deferred Purchase Price issued in exchange for
the Athas Membership Interests, and (y) as installment obligations for purposes
of Section 453 of the Code. The Parties agree for federal and applicable state
Income Tax purposes: that the Contingent Shares shall not be treated as
outstanding until and unless they are actually issued by NHC to the Sellers. The
Parties agree to report consistently with the foregoing on all applicable Tax
Returns. 

(i) Any refund of Taxes of any Athas Companies (whether in the
form of cash received or a credit or offset against Taxes otherwise payable),
including any interest received from a Governmental Authority with respect
thereto, that is attributable to any Pre-Closing Tax Period or to the portion of
a Straddle Period ending on the Closing Date, shall be the property of the
Sellers, except to the extent such refund is reflected as a current asset in the
Company’s books and records as of the Closing Date and taken into account in
determining Closing Working Capital. If any such refund is received by Buyer or
the Company and such refund belongs to the Sellers, Buyer or the Company shall
pay over such refund to the Sellers within ten (10) days after receipt thereof
from the applicable Governmental Authority (or, if the Tax refund is in the form
of credit or offset, ten (10) days after the due date of the Tax Return claiming
such credit or offset). Upon request of the Seller Representative, Buyer and the
Company shall use its commercially reasonable efforts to claim (and shall cause
its affiliates to use all commercially reasonable efforts to claim) any such Tax
refunds that belong to the Sellers. 

ARTICLE IX 
[RESERVED] 


ARTICLE X 
[RESERVED] 


ARTICLE XI 
INDEMNIFICATION 


Section 11.1. Indemnification by
Sellers.

(a) From and after the Closing, subject to the limitations in
Section 11.1(b) through Section 11.1(e) and the other
provisions in this Article XI, Sellers, jointly and severally, agree to
indemnify, defend and hold harmless each Buyer Indemnified Party from and
against any and all Losses incurred by such Buyer Indemnified Party in
connection with or arising from: 

(i) Any breach of any warranty or the inaccuracy of any
representation of Sellers contained in Article IV or Article
V;

42 




(ii) Any breach by Sellers (including, without limitation,
Named Employees) of, or failure by Sellers to perform, any of Sellers’ covenants
or obligations contained in this Agreement; or 

(iii) Any Third Party Claim related to the Elite Agreements
that is brought by Elite against any Athas Company or any Seller (an
“Elite Claim”).

(b) Notwithstanding anything to the contrary in this Agreement,
Sellers shall only be required to indemnify a Buyer Indemnified Party for Losses
incurred by such Buyer Indemnified Party to the extent that: 

(i) Any particular Loss equals or exceeds Five Thousand Dollars
($5,000); and 

(ii) The aggregate amount of Losses exceeds Four Hundred and
Fifty Thousand Dollars ($450,000) (the “Deductible”), in which
case Sellers will be liable for the aggregate amount of all Losses in excess of
the Deductible; provided that the Deductible shall not apply to claims for
breaches of Section 4.1 (Authorization, Validity and Effect of
Agreement), Section 4.3 (Title to Athas Membership Interest), Section
5.2 (Capitalization), or claims for fraud. 

(c) Notwithstanding anything to the contrary in this Agreement,
and except for claims for breaches of Section 4.1 (Authorization,
Validity and Effect of Agreement), Section 4.3 (Title to Athas Membership
Interest), and Section 5.2 (Capitalization) (collectively,
“Fundamental Reps”), (i) the Buyer Indemnified Parties’ sole
recovery against Sellers for amounts otherwise owed by Sellers pursuant to
Article XI shall be in the form of reductions to the number of Contingent
Shares issuable to Sellers pursuant to Section 2.4 and Section 2.5
and (ii) with respect to any Elite Claim, Sellers shall have no obligation to
indemnify the Buyer Indemnified Parties for any amounts in excess of fifty
percent (50%) of the aggregate Losses suffered by the Buyer Indemnified Parties
with respect to such Elite Claim.

(d) With respect to claims for breaches of Fundamental Reps,
the Buyer Indemnified Parties shall recover Payable Losses resulting from such
breaches in the following manner: 

(i) If the amount of such Payable Loss is equal to or less than
the aggregate Share Value of the Contingent Shares as of the date such Payable
Loss is determined, the Buyer Indemnified Parties’ sole recovery against Sellers
for such Payable Loss shall be in the form of reductions to the number of
Contingent Shares issuable to Sellers pursuant to Section 2.4 and
Section 2.5; 

(ii) If the amount of such Payable Loss is greater than the
aggregate Share Value of the Contingent Shares as of the date such Payable Loss
is determined, Sellers shall satisfy such Payable Loss by one or more of the
following, the amounts to be satisfied from any of the following and the order
and amount of application to be determined in the Seller Representative’s sole
and absolute discretion: 

43 




(A) By reduction to the number of Contingent Shares issuable to
Sellers pursuant to Section 2.4 and Section 2.5; 

(B) By reduction of the principal amount owed under the Note
(which reduction shall (1) first reduce any accrued but unpaid interest, then
the outstanding principal amount, and finally any other amounts owed under the
Note and (2) occur automatically without any further action); 

(C) By forfeiture to NHC of shares of Closing Shares with an
aggregate Share Value equal to such portion of the Payable Loss that the Seller
Representative elects to satisfy by such forfeiture; or 

(D) By delivery of cash, up to a maximum amount of cash equal
to the Cash Purchase Price. 

(e) The indemnification provided for in this Section
11.1 shall terminate on the Second Contingent Payment Date and no claims
shall be made by any Buyer Indemnified Party under this Section 11.1 or
otherwise thereafter; provided, however, that notwithstanding the foregoing, the
indemnification by Sellers under this Section 11.1 shall continue as to
any Losses for which any Buyer Indemnified Party has validly given a Claim
Notice to Sellers in accordance with the requirements of Section 11.3 on
or prior to the Second Contingent Payment Date, as to which the obligation of
Sellers under this Section 11.1 shall continue solely with respect to the
specific matters in such Claim Notice until the liability of the Sellers shall
have been determined pursuant to this Article XI and satisfied in
accordance with Section 2.4, Section 2.5 or Section
11.1(d), as applicable. 

Section 11.2. Indemnification by
Buyer.

(a) The Buyer Parties, jointly and severally, agree to
indemnify, defend and hold harmless each Seller Indemnified Party from and
against any and all Losses incurred by such Seller Indemnified Party in
connection with or arising from: 

(i) Any breach of any warranty or the inaccuracy of any
representation of the Buyer Parties contained in Article VI; 

(ii) Any breach by the Buyer Parties of, or failure by the
Buyer Parties to perform, any of their respective covenants and obligations
contained in this Agreement or the Buyer Ancillary Agreements;

44 




(iii) Any Taxes imposed upon or payable by any of the Athas
Companies for any Taxable Period (or portion thereof) that began prior to the
Closing Date; or

(iv) Any Elite Claim. 

(b) Notwithstanding anything to the contrary in this Agreement,
with respect to any Elite Claim, the Buyer Parties shall have no obligation to
indemnify the Seller Indemnified Parties for any amounts in excess of fifty
percent (50%) of the aggregate Losses suffered by the Seller Indemnified Parties
with respect to such Elite Claim. 

(c) The indemnification provided for in this Section
11.2 shall terminate thirty (30) days immediately following the Second
Contingent Payment Date and no claims shall be made by any Seller Indemnified
Party under this Section 11.2 thereafter); provided, however, that
notwithstanding the foregoing the indemnification by the Buyer Parties under
this this Section 11.2 shall continue as to any Losses of which any
Seller Indemnified Party has validly given a Claim Notice to Buyer in accordance
with the requirements of Section 11.3 on or prior to thirty (30)
days immediately following the Second Contingent Payment Date, as to which the
obligation of the Buyer Parties shall continue solely with respect to the
specific matters in such Claim Notice until the liability of the Buyer Parties
shall have been determined pursuant to this Article XI and the Buyer
Parties shall have reimbursed such Seller Indemnified Parties for the full
amount of such Losses that are payable with respect to such Claim Notice in
accordance with this Article XI. 

Section 11.3. Notice of Claims. Any Person
seeking or intending to seek indemnification hereunder (the “Indemnified
Party”) shall give promptly to the Party or Parties obligated to provide
indemnification to such Indemnified Party (each, the “Indemnitor”)
a written notice (a “Claim Notice”) describing in reasonable
detail the facts giving rise to the claim for indemnification hereunder and
shall include in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the provision of
this Agreement or any other agreement, document or instrument executed hereunder
or in connection herewith upon which such claim is based. 

Section 11.4. Resolution of Indemnifiable
Claims. After the giving of any Claim Notice pursuant to Section
11.3, the amount of indemnification to which an Indemnified Party shall be
entitled under this Article XI shall be determined: (a) by the written
agreement between the Indemnified Party and the Indemnitor; (b) by a final
judgment or decree of any court of competent jurisdiction; or (c) by any other
means to which the Indemnified Party and the Indemnitor shall agree. The
judgment or decree of a court shall be deemed final when the time for appeal, if
any, shall have expired and no appeal shall have been taken or when all appeals
taken shall have been finally determined. The Indemnified Party shall have the
burden of proof in establishing the amount of Losses suffered by it. Once a Loss
is payable pursuant to this Section 11.4 (a “Payable
Loss”): (x) with respect to Losses suffered by a Buyer Indemnified
Party, Sellers shall satisfy their obligations in accordance with Section
2.4 and Section 2.5 and (y) with respect to Losses suffered by a Seller Indemnified
Party, the Buyer Parties shall satisfy their obligations by wire transfer of
immediately available funds to an account designated in writing by the Seller
Indemnified Party. 

45 




Section 11.5. Third Party Claims. 

(a) Any Indemnified Party seeking or intending to seek
indemnification under this Agreement in respect of, arising out of or involving
any claim, action, demand or Proceeding made by any Person who is not a Party or
Affiliate thereof (a “Third Party Claim”) against the Indemnified
Party shall promptly give a Claim Notice to the Indemnitor(s) with respect to
the Third Party Claim. Thereafter, the Indemnified Party shall promptly deliver
to the Indemnitor, after the Indemnified Party’s receipt thereof, copies of all
notices, pleadings, demands and documents received by the Indemnified Party or
its Affiliates or Representatives relating to the Third Party Claim. The failure
to give notice as provided in this Section 11.5 shall not relieve the
Indemnitor of its obligations hereunder except to the extent it shall have been
prejudiced by such failure. 

(b) In the event of a Third Party Claim, the Indemnitor shall
have the sole and absolute right, at its election (within twenty (20) Business
Days following its receipt of Claim Notice from the Indemnified Party with
respect to such Third Party Claim) and at its expense, to control, defend
against, negotiate, settle or otherwise deal with such Third Party Claim using
counsel of its choice; provided, however, that the Indemnified Party may
participate in any such proceeding with counsel of its choice and at its sole
expense. The Indemnitor shall not settle or otherwise compromise any such Third
Party Claim without the consent of the Indemnified Party (which consent shall
not be unreasonably withheld, conditioned or delayed) if the settlement does not
include as a term thereof the giving by the Person(s) asserting such Third Party
Claim to the Indemnified Party of a release from all liability with respect to
such Third Party Claim. If the Indemnitor does not so elect to undertake the
defense of such Third Party Claim, the Indemnified Party shall have the right to
undertake the defense against the Third Party Claim; provided, however, that the
Indemnified Party shall not settle or otherwise compromise any such Third Party
Claim without the consent of the Indemnitor (which consent shall not be
unreasonably withheld, conditioned or delayed). The Parties agree to cooperate
fully with each other in connection with the defense, negotiation or settlement
of any such Third Party Claim. 

Section 11.6. Determination of Indemnification
Amounts.

(a) The liability of a Party with respect to any claim pursuant
to this Article XI shall be determined net of (i) any Tax benefit that
may be available to the Indemnitee, (ii) any insurance proceeds reasonably
available to by the Indemnitee after the Effective Time in respect of the Losses
for which such claim is asserted, and (iii) any other recovery reasonably
available to the Indemnitee from any third party on account of the Losses for
which such claim is asserted. Each Party hereby waives, to the extent permitted
under its applicable insurance policies, any subrogation rights that its insurer
may have with respect to any indemnifiable Losses and agrees, promptly following
such other Party’s request, to file any applicable insurance claims and will take all reasonable necessary, proper
or desirable actions (including the execution and delivery of any document
reasonably requested) to accomplish the foregoing. 

46 




(b) In any case where an Indemnified Party recovers from third
Persons any amount in respect of a matter with respect to which an Indemnitor
has indemnified it pursuant to this Article XI, such Indemnified Party
shall promptly pay over to the Indemnitor the amount so recovered (after
deducting therefrom the amount of reasonable expenses incurred by the
Indemnified Party in procuring such recovery), but not in excess of the sum of
(i) any amount previously so paid by the Indemnitor to or on behalf of the
Indemnified Party in respect of such matter and (ii) any amount expended by the
Indemnitor in pursuing or defending any claim arising out of such matter. 

(c) Each of the Parties agrees to take all reasonable steps to
mitigate their respective Losses (including using commercially reasonable
efforts to recover under applicable insurance policies or other indemnities and
incurring costs only to the minimum extent necessary to remedy the breach that
gives rise to such Loss) upon and after becoming aware of any event or condition
which could reasonably be expected to give rise to any Losses that are
indemnifiable hereunder. 

(d) No claims by any Buyer Indemnified Party shall be so
asserted for any inaccuracy in or breach of a representation or warranty
contained in Article IV or Article V if Buyer had actual knowledge
of such inaccuracy or breach at or prior to the Closing and no Losses related
thereto shall be subject to indemnification by Sellers hereunder. 

(e) Any indemnification payment under this Agreement shall be
treated as an adjustment to the Purchase Price for Tax purposes. 

Section 11.7. Exclusive Remedy. Each of
the Buyer Parties acknowledges and agrees that, from and after the Closing, its
sole and exclusive remedy against Sellers with respect to any and all claims
relating (directly or indirectly) to the subject matter of this Agreement or the
Contemplated Transactions shall be pursuant to the indemnification provisions
set forth in this Article XI and the corresponding provisions of
Section 2.4 and Section 2.5. 

ARTICLE XII 
[RESERVED] 


ARTICLE XIII 
GENERAL PROVISIONS 


Section 13.1. No Public Announcement. None
of Sellers or their respective Affiliates will issue any press release or make
any public announcement with respect to the Contemplated Transactions without
the prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed) of Buyer (with respect to disclosures by Sellers).
Notwithstanding the foregoing, each Party is permitted to make one or more
public announcements if such Party’s legal counsel determines in good
faith that such Party is so obligated by applicable Law, in which case such
disclosing Party shall give notice to Buyer or Sellers (as applicable) in
advance of such Party’s intent to make such disclosure, announcement or issue
such press release and the applicable Parties or their Affiliates shall use
reasonable efforts to cause a mutually agreeable release or disclosure or
announcement to be issued; provided, however, that the foregoing shall not
preclude communications or disclosures necessary to implement the provisions of
this Agreement. 

47 




Section 13.2. Notices. All notices or
other communications required or permitted hereunder shall be in writing and
shall be delivered personally, by facsimile, by reputable overnight courier
(costs prepaid), or by U.S. registered or certified mail (return receipt
requested and postage prepaid), and shall be deemed given or made when (i)
delivered personally, (ii) the Business Day sent (or next Business Day if not
sent on a Business Day or not sent during normal business hours of the
recipient) if sent by facsimile with receipt confirmation, (iii) one (1)
Business Day after delivery to the overnight courier for next Business Day
delivery, and (iv) three (3) Business Days after being sent by registered or
certified mail, at the following address: 

If to Buyer or NHC, to: 

Northstar Healthcare Inc.
4120
Southwest Freeway Suite 150 
Houston Texas 77047 


If to Sellers, to: 

c/o Steven Ganss (as the Seller
Representative) 
[•] 
[•] 
email: [•] 


or to such other address as such Party may indicate by a notice
given to the other Parties at least five (5) Business Days in advance in
accordance with this Section 13.2. 

Section 13.3. Successors and Assigns;
Assignment. This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns; provided,
however, that no Party to this Agreement may assign its rights by operation of
law or otherwise or delegate its obligations under this Agreement without the
express prior written consent of, in the case of an assignment by a Buyer Party,
the Seller Representative, and, in the case of Sellers, Buyer; provided,
however, that Buyer shall have the right at any time, without such consent, to
assign, in whole or in part, its rights hereunder and under any Buyer Ancillary
Agreement to any of its Affiliates and to any lender providing financing to
Buyer or any of its Affiliates for collateral security purposes; provided,
further, that any such assignment in accordance with this Section 13.3 shall not relieve the
assigning Party of any of its obligations hereunder. 

48 




Section 13.4. No Third-Party
Beneficiaries. This Agreement is for the sole benefit of the Parties and
their successors and permitted assigns and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement. 

Section 13.5. Entire Agreement. This
Agreement, together with the Exhibits and Schedules referred to herein, the
documents delivered pursuant hereto and the Confidentiality Agreement contain
the entire agreement of the Parties with regard to the subject matter contained
herein or therein, and supersede all other prior representations, warranties,
agreements, understandings or letters of intent between or among any of the
Parties. Each Party hereto acknowledges that in entering into and executing this
Agreement, such Party relied solely upon the representations, warranties and
agreements contained in this Agreement and no others. 

Section 13.6. Amendments. This Agreement
shall not be amended, modified or supplemented except by a written instrument
signed by the Buyer Parties and the Seller Representative. 

Section 13.7. Waivers. Any term or
provision of this Agreement may be waived, or the time for its performance may
be extended, by the Party or Parties entitled to the benefit thereof; provided
that any such waiver shall be validly and sufficiently authorized for the
purposes of this Agreement if, as to any Party, it is authorized in writing by
such Party or an authorized representative of such Party. The failure of any
Party hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any Party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach. 

Section 13.8. Exhibits and Schedules. All
Exhibits and Schedules or other documents expressly incorporated into this
Agreement, are hereby incorporated into this Agreement and are hereby made a
part hereof as if set out in full in this Agreement. Any matter, fact or item
disclosed in any section or paragraph of the Schedules shall be considered
disclosed with respect to such other section or paragraph of the Schedules or
this Agreement, as the case may be, if the relevance of such disclosure to such
other section or paragraph is reasonably apparent. Neither the specification of
any dollar amount in any representation or warranty contained in this Agreement
nor the inclusion of any specific item in any section or paragraph of the
Schedules is intended to imply that such amount, or higher or lower amounts, or
the item so included or other items, are or are not material, or are or are not
in the ordinary course of business, and no Party shall use the fact of the
setting forth of any such amount or the inclusion of any such item in any
dispute or controversy between the Parties as to whether any obligation, item or
matter not described herein or included in any section or paragraph of the
Schedules is or is not material for purposes of this Agreement, or is or is not
in the ordinary course of business. 

49 




Section 13.9. Expenses. Except as
expressly set forth herein, whether or not the Closing occurs, each Party will
pay all fees and expenses incurred by such Party in connection with the
negotiation and preparation of this Agreement and the Contemplated Transactions,
including the fees, expenses and disbursements of its counsel, financial
advisors and accountants. 

Section 13.10. Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner
as to be effective and valid under applicable Laws, but in case any one or more
of the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable. 

Section 13.11. Execution in Counterparts. This Agreement may be executed by the Parties in separate counterparts, each
of which when so executed and delivered will be an original, but all such
counterparts will together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the Parties. A facsimile copy of a signature
page shall be deemed to be an original signature page. This Agreement shall
become binding when one or more counterparts have been signed by each of the
Parties. The Parties may deliver executed signature pages to this Agreement by
facsimile or e-mail transmission. No Party may raise (a) the use of a facsimile
or email transmission to deliver a signature or (b) the fact that any signature,
agreement or instrument was signed and subsequently transmitted or communicated
through the use of a facsimile or e-mail transmission as a defense to the
formation or enforceability of a contract, and each Party forever waives any
such defense. 

Section 13.12. Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial.

(a) This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the Law
of any jurisdiction other than the State of Delaware. 

(b) Except for claims for breach of Section 8.3, any
unresolved dispute or controversy arising under or relating to this Agreement
shall be settled exclusively by binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association
(“AAA”) then in effect, as modified by this Section
13.12(b). Such arbitration shall be conducted by a panel of three
arbitrators, selected in accordance with AAA rules. The consideration for this
Agreement includes the Parties’ mutual agreement to arbitrate as provided
herein. This Section 13.12(b) shall be construed and enforced exclusively
in accordance with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. 18.
THE PARTIES’ AGREEMENT TO BE BOUND BY THE ARBITRATION PROVISIONS OF THIS
AGREEMENT IS A MATERIAL CONDITION OF THIS AGREEMENT. The arbitration shall take
place in Houston, Texas. Any Party may initiate arbitration of any dispute under
this Agreement by giving notice to the other Parties of the commencement of arbitration proceedings.
The arbitrators shall not have the authority to limit the number of depositions.
A decision by the arbitrators shall be final and binding, except as provided by
applicable Law. Notwithstanding anything to the contrary contained herein, any
Party shall have the right to obtain injunctive relief to protect any rights or
property of such Party pending selection of the arbitrators or their
determination of the merits of the controversy. The arbitrators shall not have
the authority to award punitive damages. Judgment may be entered on the
arbitrators’ award. The Parties shall direct the arbitrators to issue a
reasoned, written award within thirty (30) days after the conclusion of all oral
testimony, unless the Parties agree otherwise. The Buyer Parties, on the one
hand, and Sellers on the other hand, shall bear equally the fees charged by the
AAA and the arbitrators, and each Party shall each bear its own costs, expenses,
and attorneys’ fees incurred in arbitration except to the extent such costs are
Losses, in which case such Losses shall be subject to the provisions of
Section 11.1 or Section 11.2 (as applicable). This
arbitration award may be enforced by any court of competent jurisdiction. 

50 




(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS.


Section 13.13. Remedies.

(a) The Parties agree that irreparable damage for which
monetary damages, even if available, would not be an adequate remedy, may occur
in the event that the Parties do not perform the provisions of this Agreement
(including failing to take such actions as are required of it hereunder to
consummate this Agreement) in accordance with its specified terms or otherwise
breach such provisions. The Parties acknowledge and agree that the Parties shall
be entitled to an injunction, specific performance and other equitable relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which the
Parties are entitled at law or in equity. 

(b) Each of the Parties agrees that it will not oppose the
granting of an injunction, specific performance and other equitable relief when
expressly available pursuant to the terms of this Agreement on the basis that
(i) there is adequate remedy at law or (ii) an award of specific performance is
not an appropriate remedy for any reason at law or equity. Any Party seeking an
injunction or injunctions to prevent breaches of this Agreement when expressly
available pursuant to the terms of this Agreement and to enforce specifically
the terms and provisions of this Agreement when expressly available pursuant to
the terms of this Agreement shall not be required to provide any bond or other
security in connection with any such order or injunction. 

Section 13.14. Interpretation. For
purposes of this Agreement: 

51 




(a) The words “include,” “includes” and “including” indicate
examples of a predicate word or clause and not a limitation on that word or
clause, and shall be deemed to be followed by the words “without
limitation;”

(b) The word “or” is not exclusive and shall mean “and/or;”

(c) The words “herein,” “hereof,” “hereby,” “hereto” and
“hereunder” refer to this Agreement as a whole;

(d) The phrase “ordinary course of business” or phrases of
similar import shall be deemed to be followed by the words “consistent with past
practice;”

(e) All pronouns and any variation thereof will be construed to
refer to such gender and number as the identity of the subject may require;

(f) References to “$” or “Dollars” shall be to United States
dollars;

(g) Unless the context otherwise requires, references herein:
(i) to Articles, Sections, Exhibits and Schedules mean the Articles and Sections
of, and the Exhibits and Schedules attached to, this Agreement; (ii) to an
agreement, contract, instrument or other document means such agreement,
contract, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and by this
Agreement; and (iii) to a statute means such statute as amended from time to
time and includes any successor legislation thereto and any rules and
regulations promulgated thereunder;

(h) The Schedules and Exhibits referred to herein shall be
construed with and as an integral part of this Agreement to the same extent as
if they were set forth verbatim herein;

(i) Headings of Articles, Sections and subsections herein are
inserted for convenience of reference only and shall not be deemed a part of or
to affect the meaning or interpretation of this Agreement;

(j) With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence; and

(k) Each Party participated in the negotiation and drafting of
this Agreement, assisted by such legal and tax counsel as it desired, and
contributed to its revisions. No Party, nor its respective counsel, shall be
deemed the drafter of this Agreement for purposes of construing or enforcing the
provisions hereof, and all provisions of this Agreement shall be construed
according to their fair meaning and not strictly for or against either Party,
and no presumption or burden of proof will arise favoring or disfavoring any
Person by virtue of its authorship of any provision of this Agreement.

52 




Section 13.15. Seller Representative. By
the execution and delivery of this Agreement, Sellers each hereby irrevocably
constitutes and appoints Steven Ganss (the “Seller
Representative”), as the true and lawful agent and attorney-in-fact of
Sellers with full power of substitution to act in the name, place and stead of
Sellers with respect to the transfer of the Athas Membership Interest owned by
Sellers in accordance with the terms and provisions of this Agreement, and to
act on behalf of Sellers in any litigation involving this Agreement, the Sellers
Ancillary Agreements, the Buyer Ancillary Agreement (collectively, the
“Transaction Documents”) and the transactions contemplated hereby
and thereby, to take or refrain from taking any action by a Seller under this
Agreement following Closing and to do or refrain from doing all such further
acts and things, and execute all such documents as the Seller Representative
shall deem necessary or appropriate in connection with the transactions
contemplated by this Agreement, including the power: 

(a) To act for Sellers with regard to matters pertaining to
indemnification referred to in this Agreement, including the power to compromise
any indemnity claim on behalf of Sellers and to transact matters of
litigation;

(b) To amend this Agreement or waive any of Sellers’ respective
rights hereunder; 

(c) To execute and deliver all ancillary agreements,
certificates and documents that the Seller Representative deems necessary or
appropriate in connection with the consummation of the transactions contemplated
by the Transaction Documents;

(d) To do or refrain from doing any further act or deed on
behalf of Sellers that the Seller Representative deems necessary or appropriate
in his sole discretion relating to the subject matter of the Transaction
Documents as fully and completely as Sellers could do if personally present; and


(e) To receive service of process in connection with any claims
under the Transaction Documents. 

53 




The appointment of the Seller Representative shall be deemed
coupled with an interest and shall be irrevocable, and the Buyer Parties and any
other Person may conclusively and absolutely rely, without inquiry, upon any
action of the Seller Representative in all matters referred to herein. All
notices required to be made or delivered by the Buyer Parties after Closing to
Sellers shall be made to the Seller Representative for the benefit of Sellers
and shall discharge in full all such notice requirements of the Buyer Parties to
Sellers with respect thereto. Sellers hereby confirm all that the Seller
Representative shall do or cause to be done by virtue of his appointment as the
Seller Representative of Sellers. The Seller Representative shall act for
Sellers on all of the matters set forth in the Transaction Documents in the
manner the Seller Representative believes to be in the best interest of Sellers
and consistent with the obligations thereunder, but the Seller Representative
shall not be responsible to Sellers for any Losses Sellers may suffer by the
performance by the Seller Representative of his duties hereunder, other than
Losses arising from willful violation of Law by the Seller Representative or gross
negligence in the performance by the Seller Representative of his duties
hereunder. In the event that the Seller Representative, or any Subsequent Seller
Representative, dies or becomes disabled in a manner that would preclude the
Seller Representative from executing the powers of this appointment, then the
Seller with the next largest percentage of Ownership Interest as listed on
Sellers Payment Schedule shall serve as Seller Representative (a
“Subsequent Seller Representative”).

[Remainder of page intentionally left blank. Signature pages
follows.] 

54 




IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed as of the day and year first above written. 

	BUYER: 	 	 
    
	  	 	Vance Wells 
	Northstar Healthcare Subco, LLC 	 	  
	  	 	The Ganss Irrevocable Trust 
	By: 	 	  
	Harry J. Fleming, President 	 	By:
  
	  	 	Name:
    
	NHC: 	 	Title:
    
	  	 	  
	Northstar Healthcare Inc. 	 	The Steven Ganss Irrevocable Asset Trust 
	  	 	  
	By: 	 	By:
  
	Donald L. Kramer, CEO 	 	Name:
    
	  	 	Title:
    
	ATHAS: 	 	  
	  	 	The Amy Ganss Irrevocable Asset Trust 
	Athas Health, LLC 	 	  
	  	 	By:
  
	By: 	 	Name:
    
	Chris H. Lloyd, CEO 	 	Title:
    
	  	 	  
	SELLERS: 	 	 
    
	  	 	Steve Ganss 
	  	 	  
	Chris H. Lloyd 	 	 
    
	  	 	Alex Noffsinger 
	The Wells Children’s Irrevocable Trust 	 	  
	  	 	  
	By: 	 	Nick Lloyd 
	Name: 	 	  
	Title: 	 	 
    
	  	 	Tyler Holland 
	The Vance Wells Irrevocable Asset Trust 	 	  
	  	 	  
	By: 	 	Lewis Lefko 
	Name: 	 	  
	Title: 	 	 
    
	  	 	Brett Lamb 
	The Kim Wells Irrevocable Asset Trust 	 	  
	  	 	  
	By: 	 	Doug Johnson 
	Name: 	 	  
	Title: 	 	[Signatures continue on next page]
  


[Signature Page to Membership Interest Purchase Agreement
(Athas)]





	 	 	 
	Christopher Smith 	 	 
	 	 	 
	 	 	 
	John Lookabaugh 	 	 
	 	 	 
	 	 	 
	Jonathan Herland 	 	 
	 	 	 
	 	 	 
	Greg Campbell 	 	 
	 	 	 
	 	 	 
	Brad Nelson 	 	 
	 	 	 
	 	 	 
	Keith Crider 	 	 
	 	 	 
	 	 	 
	Christopher Quinn 	 	 
	 	 	 
	 	 	 
	Erin Bouck 	 	 
	 	 	 
	 	 	 
	Chance McElhaney 	 	 
	 	 	 
	 	 	 
	Cottonwood Family Trust 	 	 
	 	 	 
	By: 	 	 
	Name: 	 	 
	Title: 	 	 
	 	 	 
	 	 	 
	Melanie Gross 	 	 


[Signature Page to Membership Interest Purchase Agreement
(Athas)]