Document:

Exhibit 10.1

 

EXECUTION COPY

 

Exhibit
“A”

 

 

ASSET
PURCHASE AGREEMENT

 

dated
as of

 

January
14, 2004

 

by
and among

 

TENDER
LOVING CARE HEALTH CARE SERVICES, INC.,

T.L.C.
HOME HEALTH CARE INC.,

ALBERT
GALLATIN HOME CARE, INC.,

STAFF
BUILDERS, INC.,

STAFF
BUILDERS INTERNATIONAL, INC.,

CARECO,
INC.,

TENDER
LOVING CARE HOME CARE SERVICES, INC.,

T.L.C.
MIDWEST, INC.,

U.S.
ETHICARE CORP.,

T.L.C.
MEDICARE SERVICES OF DADE, INC.,

T.L.C.
MEDICARE SERVICES OF BROWARD, INC.,

U.S.
ETHICARE CHAUTAUQUA CORP.,

ETHICARE
CERTIFIED SERVICES, INC.,

U.S.
ETHICARE ERIE CORP.,

U.S.
ETHICARE NIAGARA CORP.,

S.B.H.F.,
INC.,

STAFF
BUILDERS SERVICES, INC.,

STAFF
BUILDERS HOME HEALTH CARE, INC.,

ST.
LUCIE HOME HEALTH AGENCY, INC.,

A
RELIABLE HOMEMAKER OF MARTIN ST. LUCIE COUNTY, INC.,

 

and

 

CHARTER
TLC, INC.

(and/or
its designees)

 

 

TABLE
OF CONTENTS

 

	
  Article I DEFINITIONS

  	
   

  
	
  Article II SALE AND PURCHASE OF ASSETS; CLOSING

  	
   

  
	
   

  	
  2.1

  	
  Asset
  Purchase

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Excluded Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Assumed Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Consideration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Transfer of Assets and Assumed Liabilities.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Possession

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Transfer Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Non-Assignable
  Permits.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Assignment of Provider Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  The Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  Deliveries by Sellers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
  Deliveries by Purchaser

  	
   

  
	
   

  	
   

  
	
  Article III PURCHASE PRICE ADJUSTMENT

  	
   

  
	
   

  	
  3.1

  	
  Estimated Net Working Capital

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Net Working Capital Adjustment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Calculation of Net Working Capital

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Settlement Agreement Adjustment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Claims Adjustment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS

  	
   

  
	
   

  	
  4.1

  	
  Organization and Qualification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Authority; No Breach.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Title to Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Absence of Undisclosed Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  Absence of Certain Changes or Events

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Real Property Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Accounts Receivable

  	
   

  

 

i

 

	
   

  	
  4.11

  	
  Contracts and Commitments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Customers and Suppliers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Litigation, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.15

  	
  Compliance with Law; Necessary
  Authorizations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.16

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.17

  	
  Labor Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.18

  	
  Employee Benefit Plans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.19

  	
  Business Generally

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.20

  	
  Finders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.21

  	
  Bank Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.22

  	
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Article V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

  	
   

  
	
   

  	
  5.1

  	
  Organization and Qualification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Authority

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  No Breach

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Powers; Consents; Absence of Conflicts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Litigation or Proceedings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Financial Capability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VI COVENANTS

  	
   

  
	
   

  	
  6.1

  	
  Conduct of Business of the Sellers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Sellers’ Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Filings and Authorizations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Bankruptcy Covenants.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Apportioned Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Negotiations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Cost Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VII CONDITIONS TO CLOSING

  	
   

  
	
   

  	
  7.1

  	
  Conditions Precedent to Obligations of
  Purchaser

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Conditions Precedent to Obligations of the
  Sellers

  	
   

  

 

ii

 

	
  Article VIII INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
   

  	
  8.1

  	
  Non-Survival of Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IX MISCELLANEOUS

  	
   

  
	
   

  	
  9.1

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  Amendment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.10

  	
  Binding Effect; Third Party Beneficiaries;
  Assignment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.11

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.12

  	
  Specific Performance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.13

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.14

  	
  No Agency

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.15

  	
  Sellers’ Representative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.16

  	
  Public and Private Announcements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.17

  	
  Preservation and Access to Records After
  Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.18

  	
  Sellers’ Knowledge Qualifications

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.19

  	
  Accounting Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.20

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.21

  	
  Confidentiality

  	
   

  

 

iii

 

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE
AGREEMENT, dated as of January 14, 2004 is made by and among Charter TLC, Inc.,
a Delaware corporation, and/or its designees (collectively, “Purchaser”), and Tender Loving Care
Health Care Services, Inc., a Delaware corporation (“TLC”), T.L.C. Home Health Care, Inc., a
Florida corporation (“TLCHHC”),
Albert Gallatin Home Care, Inc., a Delaware corporation (“Gallatin”), Staff Builders, Inc., a New
York corporation (“SBI”),
Staff Builders International, Inc., a New York corporation (“SBII”), Careco, Inc., a Massachusetts
corporation (“Careco”),
Tender Loving Care Home Care Services, Inc., a New York corporation (“TLCHCSI”), T.L.C. Midwest, Inc., a
Delaware corporation (“Midwest”),
U.S. Ethicare Corp., a Delaware corporation (“USEC”), T.L.C. Medicare Services of Dade, Inc., a Florida
corporation (“Dade”),
T.L.C. Medicare Services of Broward, Inc., a Florida corporation (“Broward”), U.S. Ethicare Chautauqua
Corp., a New York corporation (“USECC”),
Ethicare Certified Services, Inc., a New York corporation (“ECSI”), U.S. Ethicare Erie Corp., a New
York corporation (“USEEC”),
U.S. Ethicare Niagara Corp., a New York corporation (“USENC”), S.B.H.F., Inc., a New York
corporation (“SBHF”), Staff
Builders Services, Inc., a New York corporation (“SBSI”), Staff Builders Home Health Care, Inc., a Delaware
corporation  (“SBHHCI”), St. Lucie Home Health Agency,
Inc., a Florida corporation (“SLHHAI”)
and A Reliable Homemaker of Martin St. Lucie County, Inc., a Florida
corporation (“Homemaker”,
together with TLC, TLCHHC, Gallatin, SBI, SBII, Careco, TLCHCSI, Midwest, USEC,
Dade, Broward, USECC, ECSI, USEEC, USENC, SBHF, SBSI, SBHHCI, SLHHAI, and
Homemaker, each individually a “Seller”
and collectively the “Sellers”),
as debtors and debtors-in-possession in jointly administered Chapter 11 cases
(the “Bankruptcy Cases”)
pending in the United States Bankruptcy Court for the Eastern District of New
York (Central Islip) (the “Bankruptcy
Court”).

 

WHEREAS, the
Sellers are in the home health care service provider business (the “Business”);

 

WHEREAS, on
November 8, 2002 (the “Filing Date”),
the Sellers each filed voluntary petitions with the Bankruptcy Court under
Chapter 11 of Title 11 of the United States Code, Section 101, et  seq.
(the “Bankruptcy Code”);
and

 

WHEREAS, the
Sellers desire to sell substantially all of their assets to Purchaser, and
Purchaser desires to purchase and acquire substantially all of the assets of
the Sellers upon the terms and subject to the conditions set forth herein;

 

NOW,
THEREFORE, IN CONSIDERATION OF THE FOREGOING, OF THE REPRESENTATIONS,
WARRANTIES, COVENANTS AND MUTUAL AGREEMENTS HEREINAFTER CONTAINED, AND OF OTHER
GOOD AND VALUABLE CONSIDERATION, RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY
ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

 

 

ARTICLE I

 

DEFINITIONS

 

The terms
defined in this Article I,
whenever used herein (including without limitation the Exhibits and Schedules
hereto), shall have the following meanings for all purposes of this Agreement:

 

“Administrative Bar Date” means the
applicable last day for the filing of proofs of claim relating to obligations
that have accrued on or subsequent to the Filing Date.

 

“Affiliate” of a Person means any other
Person that directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with such Person.

 

“Agreement” means this agreement among
the parties set forth on the first page hereof, including, without limitation,
all Exhibits and Schedules hereto, as the same may be amended from time to
time.

 

“Apportioned Obligations” has the
meaning set forth in Section 6.6
hereof.

 

“Assets” has the meaning set forth in Section 2.1 hereof.

 

“Assumed Claims” means post-petition
accrued and unpaid payroll, payroll related obligations, accounts payable,
accrued expenses, accrued franchise royalties, accrued interest payable,
accrued and unpaid professional fees and any other current liabilities incurred
in the ordinary course of business and usually categorized as such in the
financial statements of the Sellers, in each case accruing from and after the
Filing Date.

 

“Assumed Contracts” has the meaning set
forth in Section 2.1 hereof.

 

“Assumed Liabilities” has the meaning
set forth in Section 2.3 hereof.

 

“Auction” has the meaning set forth in Section 6.5(c) hereof.

 

“Balance Sheet Date” means November 30,
2003.

 

2

 

“Bankruptcy Cases” has the meaning given
to it in the recitals hereto.

 

“Bankruptcy Code” has the meaning given
to it in the recitals hereto.

 

“Bankruptcy Court” has the meaning given
to it in the recitals hereto.

 

“Bidding Procedures Order” has the
meaning set forth in Section 6.5(c) hereof.

 

“Business” has the meaning given to it
in the recitals hereto.

 

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

 

“Claims Escrow” means the sum of One
Million Dollars ($1,000,000) to be delivered by Purchaser to the Escrow Agent
pursuant to the Claims Escrow Agreement on the Closing Date.

 

“Claims Escrow Agreement” means the
Claims Escrow Agreement to be entered into on the date hereof by and among the
Sellers, Purchaser and the Escrow Agent, substantially in the form annexed
hereto as Exhibit 7.

 

“Clinical Due Diligence Review” means a
review of, among other things, the Sellers’ material compliance with state and
federal regulations and guidelines with respect to the provisions of home
health services; admitting practices; coding; utilization and appropriateness
of services; billing procedures; Medicare, state and/or accreditation survey
reports; pre and post billing audits conducted by the Centers for Medicare and
Medicaid Services or its contractors; in each case in order to insure that the
Sellers’ operations and Business are conducted and operated in compliance with
law and in a manner consistent with recognized professional standards of
clinical practice and good industry practice.

 

“Closing” means the closing of the
transactions contemplated by this Agreement.

 

“Closing Date” means the date on which
the conditions set forth in Article VII
are satisfied or waived, or such other date as the parties may mutually agree,
upon which the Closing takes place.

 

3

 

“Code” means the Internal Revenue Code
of 1986, as amended, and the Treasury Regulations promulgated thereunder.

 

“Consent” means any consent, approval,
authorization, license or order of, registration, declaration or filing with,
or notice to, or waiver from, any federal, state, local, foreign or other
Governmental Entity or any other Person, including, without limitation, any
security holder or creditor which is necessary to be obtained, made or given in
connection with the execution and delivery of this Agreement and/or any
Operative Document, the performance by a Person of its obligations hereunder
and/or thereunder and the consummation of the transactions contemplated hereby
and/or thereby.

 

“Deposit” has the meaning set forth in Section 2.4(c) hereof.

 

“Directly or Indirectly” means as an
individual, partner, shareholder, member, creditor, director, officer,
principal, agent, employee, trustee, consultant, advisor or in any other
relationship or capacity.

 

“Disclosure Schedule” means the
disclosure schedule attached to this Agreement as Exhibit 1, and includes but is not limited to each of the
Schedules expressly referred to in Article IV.

 

“Employee Benefit Plan” means any
“employee benefit plan” (as defined under Section 3(3) of ERISA) or any other
bonus, deferred compensation, pension, profit-sharing, retirement, stock
purchase, stock option, stock appreciation, other forms of incentive
compensation, excess benefit, supplemental pension insurance, disability,
medical, supplemental unemployment, vacation benefits, payroll practice, fringe
benefit, scholarship, sickness, accident, severance, or post-retirement
compensation or benefit, welfare or any other employee benefit plan, policy,
arrangement or practice, whether written or oral.

 

“Encumbrances” means collectively, any
and all security interests, liens, pledges, claims, levies, charges, escrows,
encumbrances, options, rights of first refusal, transfer restrictions,
conditional sale contracts, title retention contracts, mortgages,
hypothecations, indentures, security agreements or other agreements,
arrangements, contracts, commitments, understandings or obligations of any kind
whatsoever, whether written or oral.

 

“Environment” means any surface or
subsurface physical medium or natural resource, including, air, land, soil,
surface waters, ground waters, stream and river sediments.

 

“Environmental Laws” means any federal,
state, local or common law, rule, regulation, ordinance, code, order or
judgment (including the common law and any judicial or

 

4

 

administrative interpretations, guidances,
directives, policy statements or opinions) relating to the injury to, or the
pollution or protection of, human health and safety or the Environment.

 

“Environmental Liabilities” means any
claims, judgments, damages (including punitive damages), losses, penalties,
fines, liabilities, encumbrances, liens, violations, costs and expenses
(including attorneys’ and consultants’ fees) of investigation, assessment,
remediation or defense of any matter relating to human health, safety or the
Environment of whatever kind or nature by any Person or Governmental Entity,
(A) which are incurred as a result of (i) the existence of Hazardous Substances
in, on, under, at or emanating from any Real Property, (ii) the off-site
transportation, treatment, storage or disposal of Hazardous Substances
generated by the Sellers, or (iii) the violation of any Environmental Laws, or
(B) which arise under the Environmental Laws.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.

 

“ERISA Affiliate” means any entity that
would be deemed a “single employer” with the Sellers under Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA.

 

“Escrow Agent” means Klestadt &
Winters, LLP.

 

“Escrow Agreement” means the Escrow
Agreement to be entered into on the date hereof by and among the Sellers,
Purchaser and the Escrow Agent, substantially in the form annexed hereto as Exhibit 4.

 

“Estimated Net Working Capital” has the
meaning set forth in Section 3.1(a) hereof.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

“Excluded Assets” has the meaning set
forth in Section 2.2 hereof.

 

“Excluded Liabilities” shall mean all of
the debts, liabilities or obligations of the Sellers other than the Assumed
Liabilities including, without limitation, those excluded debts, liabilities
and obligations listed on Schedule 1.

 

“Expense Reimbursement” has the meaning
set forth in Section 6.5(c) hereof.

 

5

 

“Facilities” means the operating
locations operated by the Sellers or the Sellers’ franchisees.

 

“Filing Date” has the meaning given to
it in the recitals hereto.

 

“Final Order” has the meaning set forth
in Section 7.1(j) hereof.

 

“Financial Statements” means the
consolidated unaudited balance sheets of TLC as of March 31, 2003 and as of
November 30, 2003 and the related consolidated unaudited statements of
operations, shareholder’s equity and cash flows of TLC for the fiscal year
ended March 31, 2003, and the eight-month period ended November 30, 2003, and
including the related notes thereto.

 

“GAAP” means United States generally
accepted accounting principles, applied on a consistent basis.

 

“Government Medical Reimbursement Program”
has the meaning set forth in Section 4.15(d)
hereof.

 

“Governmental Entity” means any federal,
state, local or foreign government, political subdivision, legislature, court,
agency, department, bureau, commission or other governmental regulatory
authority, body or instrumentality, including any industry or other
non-governmental self-regulatory organizations.

 

“Hazardous Substance” means petroleum,
petroleum products, petroleum-derived substances, radioactive materials,
hazardous wastes, polychlorinated biphenyls, lead based paint, radon, urea
formaldehyde, asbestos or any materials containing asbestos, and any materials
or substances regulated or defined as or included in the definition of
“hazardous substances,” “hazardous materials,” “hazardous constituents,” “toxic
substances,” “pollutants,” “contaminants” or any similar denomination intended
to classify or regulate substances by reason of toxicity, carcinogenicity,
ignitability, corrosivity or re activity under any Environmental Law.

 

“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.

 

“Independent Auditor” has the meaning
given to it in Section 3.3(b)
hereof.

 

6

 

“Instruments of Assignment” has the
meaning given to it in Section 2.5(a)
hereof.

 

“Instruments of Assumption” has the
meaning set forth in Section 2.5(b) hereof.

 

“IRS” means the Internal Revenue
Service.

 

“Laws” has the meaning as set forth in Section 2.8(a) hereof.

 

“Licensed Service Provider” has the
meaning as set forth in Section 4.15(c)
hereof.

 

“Marks” has the meaning as set forth in Section 4.9(a)(iv) hereof.

 

“Material Adverse Effect” means any
material adverse effect on the business, prospects, earnings, operations,
Assets, liabilities, Properties, condition (financial or otherwise), results of
operations, net worth or Permits of the Sellers taken as whole, excluding any
effects resulting from (i) events or circumstances adversely affecting a
particular geographic market or the healthcare industry generally which do not
have a disproportionate adverse effect on the Sellers or the Assets, (ii)
general economic conditions, or (iii) the execution, delivery, announcement, or
performance of this Agreement or the consummation of the transactions
contemplated hereby.

 

“Medicare/Medicaid Liabilities” shall
mean the Medicare and Medicaid liabilities of the Sellers set forth on Schedule 3 hereto (Medicare/Medicaid
Liabilities shall not include any obligations arising under the Settlement
Agreements) and the other payor obligations set forth on Schedule 3 hereto.

 

“Net Working Capital” means the
difference between (x) the sum of cash, accounts receivable (net of allowance
for doubtful accounts [excluding the reserve related to ATC Healthcare, Inc.
prepaid expense] and deferred revenue), inventory, prepaid expenses (excluding
the ATC Healthcare, Inc.-related prepaid expense) and other current assets and
(y) post-petition accrued and unpaid payroll, payroll related obligations,
accounts payable, accrued expenses, accrued franchise royalties, accrued
interest payable, accrued and unpaid professional fees and any other current
liabilities incurred in the ordinary course of business and usually categorized
as such in the financial statements of TLC, in each case accruing from and
after the Filing Date.  The calculation
of Net Working Capital shall exclude all liabilities related to: 1) workers’
compensation claims under the Sellers’ self-insured worker compensation plans
arising through December 31, 2002, 2) any potential reversal or repayment of
tax refunds, 3) the

 

7

 

Settlement Agreements and 4) the
Medicare/Medicaid Liabilities.  Each
component of Net Working Capital shall be calculated and reported in accordance
with GAAP.

 

“Operative Document” means any
agreement, instrument or other document to be executed and delivered in
connection with the consummation of the transactions contemplated by this
Agreement.

 

“Oversight Committee” means the
committee consisting of professionals of (i) the five member official committee
of unsecured creditors appointed to represent the interest of all unsecured
creditors in the Sellers’ jointly administered cases, (ii) National Century
Financial Enterprises, Inc. and its related entities, and (iii) Private
Investment Bank, Limited in the Sellers’ jointly administered cases.

 

“Oversight Committee Representative”
means the individual or individuals designated by the members of the Oversight
Committee to act as such committee’s representative as and to the extent
contemplated in this Agreement.

 

“PBGC” means the Pension Benefit
Guaranty Corporation.

 

“Pension Plan” means any “employee
pension benefit plan” within the meaning of Section 3(2) of ERISA maintained or
contributed to by or on behalf of the Sellers.

 

“Permits” means all licenses,
certificates of authority, certificates of need, Medicare Provider Agreements,
Medicaid Provider Agreements, permits, orders, consents, approvals,
registrations, local siting approvals, authorizations, qualifications and
filings under any federal, state or local laws or with any Governmental
Entities or other private Persons.

 

“Person” means an individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint stock company, trust, unincorporated organization or other
entity, or any Governmental Entity or quasi-governmental body or regulatory
authority.

 

“Plan” means any Employee Benefit Plan
established, maintained, sponsored, or contributed to by the Sellers or an
ERISA Affiliate on behalf of any employee, director or shareholder (whether
current, former or retired) or their beneficiaries, or with respect to which
the Sellers or any ERISA Affiliate has or has had any obligation on behalf of
such person.

 

8

 

“Post-Closing Tax Period” shall mean (i)
any Tax period beginning the day after the Closing Date and (ii) with respect
to a Tax period that commences before but ends after the Closing Date, the
portion of such period beginning the day after the Closing Date.

 

“Pre-Closing Tax Period” shall mean (i)
any Tax period ending on or before the Closing Date and (ii) with respect to a
Tax period that commences before but ends after the Closing Date, the portion
of such period up to and including the Closing Date.

 

“Property” (or “Properties” when the context requires)
means any Real Property and any personal or mixed property, whether tangible or
intangible.

 

“Provider Agreements” means the program
participation agreements with the Medicare Program under Title XVIII of the
Social Security Act and with the various state Medical Assistance Programs
under Title XIX of the Social Security Act.

 

“Purchase Price” has the meaning set
forth in Section 2.4(a) hereof, as
adjusted pursuant to Sections 3.2,
3.4 and 3.5.

 

“Real Property” means any real property
presently owned, used, leased, occupied, managed or operated by the Sellers.

 

“Sale Approval Order” has the meaning
set forth in Section 6.5(d) hereof.

 

“Sale Hearing” has the meaning set forth
in Section 6.5(c) hereof.

 

“Sellers” has the meaning given to it in
the recitals hereto.

 

“Sellers Intellectual Property Rights”
has the meaning set forth in Section 4.9(a)
hereof.

 

“Sellers License Rights” has the meaning
set forth in Section 4.9(b) hereof.

 

“Sellers’ Representative” has the
meaning set forth in Section 9.15
hereof.

 

“Sellers Rights” has the meaning set
forth in Section 4.9(b) hereof.

 

9

 

“Sellers Software Products” has the
meaning set forth in Section 4.9(a)(i)
hereof.

 

“Settlement Agreements” means
collectively, (i) the Amended Settlement Agreement, dated October 22, 2003,
among the United States of America, acting through the United States Department
of Justice and on behalf of the Department of Health and Human Services, the
Centers for Medicare and Medicaid Services and the Sellers, (ii) the Settlement
Agreement, dated September 17, 2003, among the Medicaid Fraud Control Unit of
the Maryland Attorney General’s Office, the Maryland Medical Assistance Program
and the Sellers, and (iii) the Settlement and Assumption Agreement, dated July
29, 2003, between McKesson Information Solutions LLC and TLC.

 

“Subsidiary,” or “Subsidiaries” where the context
requires, means any corporation, partnership, limited liability company or
other entity in which the Sellers, directly or indirectly, owns or controls 50%
or more of the voting stock or other ownership interests.

 

“Tax Return” means each and every
report, return, declaration, information return, statement or other information
required to be supplied to a taxing or governmental authority with respect to
any Tax or Taxes, including without limitation any combined or consolidated
return for any group of entities including the Sellers.

 

“Taxes” (or “Tax” where the context requires) shall
mean all federal, state, county, provincial, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment and payroll related
and property taxes and other governmental charges and assessments), whether
attributable to statutory or nonstatutory rules and whether or not measured in
whole or in part by net income, and including, without limitation, interest,
additions to tax or interest, charges and penalties with respect thereto, and
expenses associated with contesting any proposed adjustment related to any of
the foregoing.

 

“Trade Secrets” means any information
which (i) is used in a business, (ii) is not generally known to the public or
to Persons who can obtain economic value from its disclosure, and (iii) is
subject to reasonable efforts to maintain its secrecy or confidentiality; the
term may include but is not limited to inventions, processes, know-how,
formulas, computer software, and mask works which are not patented and are not
protected by registration (e.g., under copyright or mask work laws); lists of
customers, suppliers, and employees, and data related thereto; business plans
and analyses; and financial data.

 

10

 

ARTICLE II

 

SALE AND PURCHASE OF ASSETS; CLOSING

 

2.1           Asset Purchase.  Upon the terms and subject to the conditions
hereof, and upon the basis of the agreements, representations and warranties
contained in this Agreement, on the Closing Date, the Sellers agree to sell,
transfer, assign, convey and deliver to Purchaser, and Purchaser shall
purchase, acquire and accept from the Sellers, all of the Sellers’ right, title
and interest in and to all of the assets, properties and rights of the Sellers
owned or used by the Sellers in the conduct of the Business, as and to the
extent existing on the Closing Date (such assets, properties and rights are
hereinafter collectively referred to as the “Assets”),
free and clear of all Encumbrances. 
Subject to, but without limitation of the foregoing, the Assets include
the following as and to the extent existing on the Closing Date:

 

(a)           Personal Property.  All personal property owned by the Sellers
with respect to the conduct of the Business;

 

(b)           Real Property.  All Real Property owned by the Sellers.

 

(c)           Cash.  All cash and cash equivalents of the
Sellers.

 

(d)           Intellectual
Property.  All right, title and
interest to the Sellers Rights set forth on Schedules
4.9(a) and (b);

 

(e)           Accounts Receivable.  All of the Sellers’ trade accounts, notes
and other receivables to the maximum extent permitted by law and consistent
with the provisions of §1815(c) of the Social Security Act, 42 U.S.C.
§1395g(c), as amended.  To the extent
that any account receivable is unable to be assigned because of any applicable
law or regulation, the Sellers acknowledge and agree that the receipt by any
Seller of any account receivable shall be held in trust for Purchaser and
immediately be endorsed over and remitted to Purchaser.  For purposes of this Agreement, accounts
receivable shall include any settlement amounts received or payable to any of
the Sellers with respect to the settlement of any open cost reporting periods
as well as any lump sum payments attributable to any retroactive adjustments of
payment rates;

 

(f)            Contracts.  The contracts, leases and other agreements
set forth on Schedule 2.1(f) to
which certain of the Sellers are a party and which relate to the conduct of the
Business (the “Assumed Contracts”);

 

(g)           Inventory.  All raw materials, work-in-process, finished
goods and merchandise, packaging materials and other supplies related thereto
which are owned or used by the Sellers in the conduct of the Business;

 

(h)           Insurance.  All rights of the Sellers under insurance
policies covering the Assets or the Business;

 

(i)            Bank Accounts.  All rights with respect to the bank accounts
set forth on Schedule 4.21;

 

11

 

(j)            Deposits and
Prepaid Expenses.  All deposits,
notes receivable, prepaid expenses, and other receivables relating to the
conduct of the Business;

 

(k)           Books and Records.  All general, financial and personnel
records, correspondence and other files and records, including customer lists
and sales records, of the Sellers pertaining to the conduct of the Business, in
accordance with federal and state laws and regulations;

 

(l)            Goodwill.  All of the Sellers’ goodwill and other
intangibles in the Business;

 

(m)          Causes of Action.  All causes of action, rights of recovery and
rights of set-off arising out of the conduct of the Business (other than claims
and actions set forth in Section 2.2(d));

 

(n)           Permits.  All of the Sellers’ rights, title and
interest in and to any and all Permits, licenses, approvals and authorizations
by a federal, state, local or foreign governmental or non-governmental board,
bureau, agency or regulatory body pertaining to the conduct of the Business set
forth on Schedule 2.1(n), to the
extent transferable or assignable;

 

(o)           Preference and
Avoidance Claims.  All preference,
fraudulent transfer and/or other avoidance claims and actions of any kind of
the Sellers, including, without limitation, any such claims and actions arising
under Sections 544, 545, 547, 548 549, 550 and 551 of the Bankruptcy Code
(other than the preference and/or avoidance claims and actions set forth in Section 2.2(d) below); and

 

(p)           Customer and
Supplier Lists.  All customer and
supplier lists and related information of the Sellers, as well as all existing
advertising plans of any kind, sales literature and related items, in
accordance with federal and state laws and regulations.

 

2.2           Excluded
Assets.  Any provision of
this Agreement to the contrary notwithstanding, Purchaser shall not acquire and
there shall be excluded from the Assets the following (the “Excluded Assets”):

 

(a)           all contracts, leases
or other agreements which are not Assumed Contracts;

 

(b)           all claims against
Purchaser arising under or in connection with this Agreement;

 

(c)           claims related solely
to Excluded Liabilities; and

 

(d)           all preference,
fraudulent transfer and/or other avoidance claims and actions of any kind
against (i) National Century Financial Enterprises, Inc. and its related
entities, (ii) Private Investment Bank Limited, (iii) former officers and
directors of the Sellers as of the date of this Agreement, (iv) directors of
TLC as of the date of this Agreement, and (v) the stockholder of TLC as of the
date of this Agreement and such stockholder’s directors and officers.

 

12

 

2.3           Assumed
Liabilities.  Except as
otherwise expressly provided in this Section
2.3, Purchaser shall not assume or be responsible for, and shall in
no event be liable for any debts, liabilities or obligations of the Sellers,
whether fixed or contingent, known or unknown, liquidated or unliquidated,
suspected or unsuspected, material or immaterial, absolute or contingent, matured
or unmatured, determinable or undeterminable, direct or indirect, secured or
unsecured, or otherwise.  As the sole
exception to the first sentence of this Section
2.3, effective as of the Closing Date, Purchaser hereby assumes and
agrees to pay, discharge or perform, as appropriate, when due or otherwise on a
timely basis (i) the obligations of the Sellers under the Assumed Contracts
that accrue after the Closing Date, (ii) the cure payments in connection with
the executory contracts and/or unexpired leases in the respective amounts set
forth on Schedule 2.3, (iii) the
obligations due pursuant to the Settlement Agreements, (iv) the
Medicare/Medicaid Liabilities and (v) the Assumed Claims set forth on Schedule 2.3(a) (collectively, the “Assumed Liabilities”).

 

2.4           Consideration.  (a)  The aggregate consideration
for the Assets (the “Purchase Price”)
shall be the following: (i) a cash payment in the amount of Eighty-Two Million
Dollars ($82,000,000) payable as provided in Section
2.12(a) and (ii) the assumption of the Assumed Liabilities.

 

(b)           Intentionally
Omitted.

 

(c)           As of the date hereof,
Purchaser has delivered to the Escrow Agent a deposit (together with any
interest accrued thereon, the “Deposit”)
in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000) to be
held in accordance with the terms of this Agreement and the Escrow Agreement,
and applied to the cash portion of the Purchase Price at Closing.  In the event of termination of this Agreement,
the Deposit shall be disbursed as provided in Section
9.2(b).

 

(d)           In the event that
Purchaser is the Winning Bidder (as defined in, and in accordance with, the
Bidding Procedures Order), then Purchaser shall within ten (10) Business Days
following the Auction increase the Deposit by Five Million Seven Hundred
Thousand Dollars ($5,700,000).

 

2.5           Transfer of Assets and Assumed Liabilities.

 

(a)           At the Closing, the
Sellers shall effect the sale, conveyance, assignment, transfer and delivery of
the Assets to Purchaser by delivering to Purchaser or its designees documents
of assignment and transfer as are reasonably necessary to vest in Purchaser
good and valid title to the Assets, free and clear of all Encumbrances, except
the Assumed Liabilities, in form and substance reasonably acceptable to the
parties, collectively, the “Instruments of
Assignment”.

 

(b)           At the Closing,
Purchaser shall deliver to the Sellers instruments, documents or agreements in
form and substance reasonably acceptable to the parties (collectively, the “Instruments of Assumption”) as are
reasonably necessary to evidence Purchaser’s assumption of and agreement to pay
and discharge the Assumed Liabilities.

 

13

 

2.6           Possession.  Right to possession of the Assets shall
transfer to Purchaser on the Closing Date. 
Sellers shall transfer and deliver to Purchaser on the Closing Date such
keys, lock and safe combinations and other similar items as Purchaser shall
require to obtain immediate and full occupation and control of the Assets, and
shall also make available to Purchaser at Sellers’ then existing locations all
documents in Sellers’ possession that are required to be transferred to
Purchaser by this Agreement.

 

2.7           Transfer
Taxes.  Provided that the Sale
Approval Order (as defined in Section 6.5(d) hereof)
includes the finding set forth in clause (xiii) of Section 6.5(d) in accordance with Section 1146(c) of the
Bankruptcy Code, the making or delivery of any instrument of transfer,
including the filing of any deed or other document of transfer to evidence,
effectuate or perfect the rights, transfers and interest contemplated by this
Agreement, shall be in contemplation of a plan or plans or reorganization to be
confirmed in the Bankruptcy Cases, and such shall be free and clear of any and
all transfer tax, stamp tax or similar taxes. 
Such instruments, orders and agreements transferring the Assets to
Purchaser shall contain the following endorsement:

 

“Because this
[instrument] has been authorized pursuant to an order of the United States
Bankruptcy Court for the Eastern District of New York (Central Islip), in
contemplation of a plan of reorganization of the Grantor, it is exempt from
transfer taxes, stamp taxes or similar taxes pursuant to 11 U.S.C. §1146(c).”

 

If such transfer, stamp or similar taxes are
ultimately payable, notwithstanding Section 1146(c) of the Bankruptcy Code or
for any other reason, Purchaser and the Sellers shall equally share in the
payment of any and all such transfer, stamp or similar taxes which may be payable
by reason of the transaction contemplated in this Agreement and any and all
claims, charges, interest or penalties assessed, imposed or asserted in
relation to any such taxes.

 

2.8           Non-Assignable
Permits.

 

(a)           To the extent that any
Permit included among the Assets is not capable of being assigned to Purchaser
at the Closing without the Consent of the issuer thereof, or if such assignment
or attempted assignment would constitute a breach thereof, or a violation of
any applicable federal, state, local or foreign law, statute, ordinance, rule,
regulation, order, judgment or decree, administrative order or decree,
administrative or judicial decision, and any other executive or legislative
proclamation (“Laws”),
neither this Agreement nor any Instrument of Assignment shall constitute an
assignment thereof, or an attempted assignment, unless such Consent has been
obtained.

 

(b)           In the event that any
Consent referred to in Section 2.8(a)
has not been obtained prior to the Closing and Purchaser nevertheless determines
to effect the Closing, if Purchaser so desires, Purchaser shall use its
commercially reasonable efforts, and the Sellers shall cooperate with
Purchaser, to obtain each and every such Consent and to resolve the
impracticalities of assignment referred to in Section
2.8(a) after the Closing; provided, however,

 

14

 

that each party shall bear its own costs and
expenses, and neither the Sellers nor Purchaser shall be obligated to pay any
consideration therefore to the Person from whom the Consent is requested (other
than filing and similar fees payable to any Governmental Entity customarily
paid in connection with transactions of the type contemplated hereby).

 

(c)           To the extent that
Consents referred to in Section 2.8(a)
have not been obtained by the Sellers prior to the Closing and Purchaser
nevertheless determines to effect the Closing, until the impracticalities of
assignment referred to in Section 2.8(a)
hereof are resolved, each Seller shall use its commercially reasonable efforts
to (i) provide Purchaser with the same benefits as those that were granted to
the Sellers with respect to any Permit referred to in Section 2.8(a) , (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Purchaser, without incurring any financial obligation to Purchaser, and (iii)
enforce for the account and benefit of Purchaser any and all rights of the
Sellers arising from the Permits referred to in Section 2.8(a) against such issuer thereof (including the
right to elect to terminate in accordance with the terms thereof on the advice
of Purchaser).

 

(d)           To the extent that
Purchaser is provided the benefits pursuant to Section 2.8(c) of any Permit, Purchaser shall perform, at no
cost to the Sellers, on behalf of the Sellers, for the benefit of the issuer
thereof, and/or all other parties thereto, the obligations of the Sellers
thereunder or in connection therewith, but only to the extent that (i) such
action by Purchaser would not result in any material default thereunder or in
connection therewith and (ii) such obligation would have been an Assumed
Liability but for the non-assignability or non-transferability thereof.

 

2.9           Assignment
of Provider Agreements.  Immediately
following the date hereof, Purchaser shall prepare (with the reasonable
assistance of the Sellers) all necessary CMS Forms 855 Change of Ownership
indicating Purchaser’s intent to take automatic assignment of the Sellers’
Medicare Provider Agreements in accordance with 42 CFR §489.18(c).  As soon as possible following the Auction,
Purchaser and the Sellers shall jointly file such forms.  Each Seller shall timely give any required
notice to the appropriate federal and state agencies of its intention to
terminate participation in all Medicare and Medicaid programs.  Assignment or termination and replacement of
Medicaid Provider Agreements, and any assumption of liabilities therewith,
shall be governed by the applicable state law for the jurisdictions in which
the Sellers hold Medicaid Provider Agreements.

 

2.10         The
Closing.  The Closing shall take
place at 9:00 a.m., local time, on the Closing Date, at the offices of
Proskauer Rose LLP, 1585 Broadway, New York, New York, or at such other time,
date or place as the parties may mutually agree, subject to the satisfaction or
waiver of all of the conditions to Closing set forth in Article VII hereof.  At the Closing, Purchaser and the Sellers
shall deliver or cause to be delivered the items necessary to convey, assign,
transfer and deliver the Assets to Purchaser.

 

2.11         Deliveries
by Sellers.  At the
Closing, the Sellers shall deliver, or cause to be delivered, to Purchaser each
of the following, duly executed by or on behalf of Sellers:

 

(a)           the Instruments of
Assignment referred to in Section 2.5(a)
hereof;

 

15

 

(b)           executed copies of the
Consents referred to in Section 7.1(c)
hereof;

 

(c)           the officer’s
certificate of the Sellers referred to in Section
7.1(e) hereof;

 

(d)           a copy of the Sale Approval
Order referred to in Section 6.5(d)
hereof; and

 

(e)           a copy of the
Bankruptcy Court’s docket sheet for the Bankruptcy Cases evidencing that there
has been no appeal or stay of the Sale Approval Order.

 

2.12         Deliveries by Purchaser.  At the Closing, Purchaser shall deliver or
cause to be delivered to the Sellers each of the following, duly executed by or
on behalf of Purchaser:

 

(a)           an amount equal to the
cash portion of the Purchase Price (less (i) the amount of the Deposit and (ii)
the amount of the Claims Escrow), by wire transfer of immediately available
funds to the account or accounts designated in writing by the Sellers at least
two (2) Business Days prior to the Closing Date;

 

(b)           the Instruments of
Assumption referred to in Section 2.5(b)
hereof;

 

(c)           the officer’s
certificate of Purchaser referred to in Section
7.2(e) hereof;

 

(d)           copies of the
certificate of incorporation and by-laws of Purchaser; and

 

(e)           resolutions of the
board of directors of Purchaser approving and authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated in
connection herewith, certified by the Secretary of Purchaser as of the Closing
Date, together with a certificate of the Secretary of Purchaser as to the
incumbency and signature of the officers of Purchaser executing this Agreement
and any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary.

 

ARTICLE III

 

PURCHASE PRICE ADJUSTMENT

 

3.1           Estimated Net Working Capital.  (a) 
On or before the third Business Day prior to the Closing Date, the
Sellers and Purchaser shall jointly agree on an estimate of the amount of Net
Working Capital as of the Closing Date (the “Estimated Net Working Capital”).  The Estimated Net Working Capital shall be determined in good
faith on a reasonable basis using then available information of the Sellers and
based upon the books and records of the Sellers.

 

16

 

(b)           In the event the
Estimated Net Working Capital is less than $20,000,000, then the payment to be
made pursuant to Section 2.4(a)(i) shall
be reduced dollar-for-dollar by the amount of such shortfall.

 

(c)           In the event the
Estimated Net Working Capital is greater than $20,000,000, then the payment to
be made pursuant to Section 2.4(a)(i) shall
be increased dollar-for-dollar by the amount of such excess.

 

3.2           Net Working Capital Adjustment.  (a) 
The Purchase Price shall be subject to adjustment as set forth below,
and all references in this Agreement to the Purchase Price shall be deemed to
be the Purchase Price as adjusted pursuant to this Section 3.2.

 

(b)           If the Net Working
Capital is less than the Estimated Net Working Capital, then the cash portion
of the Purchase Price shall be reduced dollar-for-dollar by the amount of such
shortfall.

 

(c)           If the Net Working
Capital is greater than the Estimated Net Working Capital, then the cash
portion of the Purchase Price shall be increased dollar-for-dollar by the
amount of such excess.

 

3.3           Calculation of Net Working Capital.  The determination of the Net Working Capital
shall be made pursuant to the following provisions:

 

(a)           Within sixty (60) days
after the Closing Date, Purchaser shall prepare a calculation of Net Working Capital
as of the close of business on the Closing Date on a basis consistent with that
applied in the preparation of the Financial Statements and deliver to the
Sellers’ Representative and the Oversight Committee Representative such
calculation of Net Working Capital.

 

(b)           The Sellers’
Representative and the Oversight Committee Representative will have a period of
thirty (30) days following the delivery of the calculation of Net Working
Capital to notify Purchaser of any disagreements with the calculation of Net
Working Capital.  Failure to notify
Purchaser within such 30-day period shall be deemed acceptance of such
calculation.  In the event the Sellers’
Representative or the Oversight Committee Representative timely notifies
Purchaser of any disagreement, the parties agree that each of them shall
attempt in good faith to resolve such disagreements.  If within thirty (30) days after delivery to Purchaser of the
notification by the Sellers’ Representative or the Oversight Committee
Representative of a disagreement, the parties are unable to resolve such
disagreement, either the Sellers’ Representative or the Oversight Committee
Representative, on the one hand, or Purchaser, on the other hand, shall have
the right to submit the determination of such matters to an independent
accountant of national standing reasonably acceptable to the Sellers’
Representative, the Oversight Committee Representative and Purchaser (the “Independent Auditor”), whose decision
shall be binding on the parties.  The
cost of the Independent Auditor shall be paid by the party whose aggregate
estimate of the disputed amount or amounts, as the case may be, differs most
greatly from the determination of the Independent Auditor.

 

17

 

(c)           If Purchaser, the
Oversight Committee Representative and the Sellers’ Representative or the
Independent Auditor, as the case may be, determines that the actual Net Working
Capital is less than the Estimated Net Working Capital, the Sellers shall remit
such difference to Purchaser.

 

(d)           If Purchaser, the
Oversight Committee Representative and the Sellers’ Representative or the
Independent Auditor, as the case may be, determines that the actual Net Working
Capital is greater than the Estimated Net Working Capital, Purchaser shall
remit such difference to Sellers.

 

(e)           Any cash payment to be
made as a result of adjustments made in accordance with this Section 3.3, shall be paid within five (5)
Business Days of such determination by wire transfer of immediately available
funds.  Any such payment shall be made
to such account or accounts as may be designated by the party entitled to such
payment at least two (2) Business Days prior to the date that such payment is
to be made.

 

3.4           Settlement Agreement Adjustment.  (a)  The Purchase Price shall also be subject to adjustment as set
forth below, and all references in this Agreement to the Purchase Price shall
be deemed to be the Purchase Price as adjusted pursuant to this Section 3.4.

 

(b)           The cash portion of the
Purchase Price shall be increased dollar-for-dollar by the amount of all
regularly scheduled payments actually made by the Sellers pursuant to the
Settlement Agreements between the date hereof and the Closing Date.

 

3.5           Claims Adjustment.  (a) 
The Purchase Price shall also be subject to adjustment as set forth
below, and all references in this Agreement to the Purchase Price shall be
deemed to be the Purchase Price as adjusted pursuant to this Section 3.5.

 

(b)           If, during the period
commencing on the Closing Date and terminating on the tenth Business Day
following the Administrative Bar Date, Purchaser becomes aware of any Assumed
Claims which were not included as a liability in connection with the final
calculation of Net Working Capital, the Purchase Price shall be reduced by the
amount of such Assumed Claims.  In such
event, the Escrow Agent shall promptly remit from the Claims Escrow the amount
of the Purchase Price reduction to Purchaser. 
Any balance remaining in the Claims Escrow shall then be paid by the
Escrow Agent to the Sellers.  In the
event the Purchase Price reduction pursuant to this Section 3.5(b) exceeds the amount in the Claims Escrow, the
Sellers will promptly remit the amount of such shortfall to Purchaser.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

Each of the
Sellers hereby jointly and severally represents and warrants to Purchaser as
follows (all such representations and warranties are qualified by the
Disclosure Schedule attached to this Agreement as Exhibit 1):

 

18

 

4.1           Organization and Qualification.  Each Seller is duly organized, validly
existing and in good standing in the state of its organization (which state is
set forth on Schedule 4.1), with
all necessary corporate power and authority to own, lease and operate its
Assets and Properties and carry on its business as presently owned or
conducted.  Each Seller is licensed or
qualified to transact business and is in good standing as a foreign corporation
in each of the jurisdictions indicated on Schedule
4.1 of the Disclosure Schedule, which are the only jurisdictions
wherein, because of the business conducted there or the nature of its Assets or
Properties there, such Seller is required to be so licensed or qualified,
except where the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.

 

4.2           Authority;
No Breach.

 

(a)           Each of the Sellers
have all requisite power and authority to execute and deliver this Agreement
and the Operative Documents to which it is or shall, pursuant to this
Agreement, be a party, and to perform, carry out and consummate the
transactions contemplated hereby and thereby. 
The execution, delivery and performance of this Agreement and the
Operative Documents to which it is or shall, pursuant to this Agreement, be a
party have been duly authorized by all necessary action on the part of each of
the Sellers.  This Agreement has been
duly executed and delivered by each of the Sellers and constitutes the legal,
valid and binding obligation of the Sellers, enforceable against the Sellers in
accordance with its terms.

 

(b)           Except with regard to
the contemplated approval and authorization of the Bankruptcy Court, and except
as set forth on Schedule 4.2(b) of
the Disclosure Schedule, neither the execution and delivery of this Agreement
or any Operative Document by the Sellers nor the consummation of any of the
transactions contemplated herein or therein, nor the full performance by each
of the Sellers of its obligations hereunder or thereunder do or will: (i)
violate any provision of the certificate of incorporation or by-laws of any of
the Sellers; (ii) conflict with, result in a breach or violation of, or
constitute a default under (or an event which, with or without notice, lapse of
time or both, would constitute a default) or result in the invalidity of, or
accelerate the performance required by or cause or give rise to any right of
acceleration or termination of any right or obligation pursuant to any
agreement or commitment to which any of the Sellers are a party or by which any
of the Sellers (or any of their respective Assets or Properties) is subject or
bound, except where such conflict, breach, violation, default, invalidity or
acceleration would not, individually or in the aggregate, have a Material
Adverse Effect; (iii) result in the creation of, or give any third party the
right to create, any Encumbrance upon the Assets or Properties of any Seller;
(iv) conflict with, violate, result in a breach of or constitute a default
under any writ, injunction, statute, law, ordinance, rule, regulation,
judgment, award, Permit, decree, order, or process of any Governmental Entity
to which any Sellers or any Assets or Properties of any of the Sellers are
subject, except where such conflict, violation, breach or default would not,
individually or in the aggregate, have a Material Adverse Effect; (v) terminate
or modify, or give any third party the right to terminate or modify, the
provisions or terms of any contract or agreement to which any of the Sellers
are a party or by which any of the Sellers (or any of their respective Assets
or Properties) is subject or bound; (vi) require any of the Sellers to obtain
any Consent, or (vii) result in or give to any Person any additional rights or
entitlement to

 

19

 

increased, additional, accelerated or
guaranteed payments under any contract or agreement to which any of the Sellers
are a party or by which any of their respective Assets or Properties is subject
or bound.

 

4.3           Financial Statements.  The Sellers have heretofore delivered to
Purchaser accurate and complete copies of the Financial Statements.  The Financial Statements have been prepared
from the books and records of TLC and its Subsidiaries, and present fairly in
all material respects (i) the consolidated financial position of TLC and its
Subsidiaries at March 31, 2003 and November 30, 2003, and (ii) the consolidated
results of their operations, cash flows and changes in shareholder’s equity (if
applicable) for the periods covered thereby in conformity with GAAP.

 

4.4           Title
to Assets.  Sellers have
good and valid title to all of the Assets free and clear of any and all
Encumbrances pursuant to Section 363 of the Bankruptcy Code and any other
applicable sections of the Bankruptcy Code and as set forth in the Sale
Approval Order.  Upon the Closing and
transfer to Purchaser of the Assets, Purchaser shall receive good and marketable
title to all of the Assets free and clear of any and all Encumbrances, pursuant
to Section 363 of the Bankruptcy Code and any other applicable sections of the
Bankruptcy Code and as set forth in the Sale Approval Order.

 

4.5           Intentionally Omitted.

 

4.6           Absence of Undisclosed Liabilities.
 Except as set forth on Schedule 4.6 of the Disclosure Schedule and
other than liabilities arising in the ordinary course of business under the
agreements set forth on Schedule 4.11
(but excluding any liabilities arising as a result of a breach by any Seller of
any such agreement), no Seller has any liabilities, losses or obligations of
any nature (whether absolute, accrued, fixed, contingent, liquidated,
unliquidated, due or to become due, or otherwise), except for liabilities
included or reflected in the Financial Statements and adequately reserved
against therein in accordance with GAAP, except to the extent any such
liability, loss or obligation would not, individually or in the aggregate, have
a Material Adverse Effect.  To the
knowledge of the Sellers, there is no basis for the assertion against the
Sellers of any such liability.

 

4.7           Absence of Certain Changes or Events.  Except as set forth on Schedule 4.7 of the Disclosure Schedule,
since the Filing Date the business of the Sellers has been conducted only in
the ordinary and usual course consistent with past practice.  Without limiting the generality of the
foregoing, except as set forth on Schedule
4.7 of the Disclosure Schedule, since the Balance Sheet Date no
Seller has suffered any Material Adverse Effect, and no fact or condition
exists or, to the knowledge of any Seller, is contemplated or threatened that
might reasonably be expected to cause a Material Adverse Effect in the future.

 

4.8           Real
Property Assets.

 

(a)           Schedule 4.8(a) of the Disclosure Schedule
contains a complete and correct list of all Real Property owned by the
Sellers.  Each of the Sellers have good
and

 

20

 

marketable title to all such owned Real
Property, free and clear of all Encumbrances except for (i) liens for current
Taxes not yet due and payable and (ii) Encumbrances set forth on Schedule 4.8(a) of the Disclosure Schedule.

 

(b)           Schedule 4.8(b) of the Disclosure Schedule
contains a complete and correct list of all Real Property leased by the
Sellers.  Each of the Sellers enjoys
peaceful possession of all such property. 
The Sellers have previously delivered to Purchaser true, complete and
correct copies of all lease documents to which any Seller is a party relating
to such Real Property.  All such lease
documents are unmodified and valid, binding and enforceable in accordance with
their terms and are in full force and effect. 
Except as set forth on Schedule 4.8(b),
no default has been declared and is continuing under any such lease document,
and to the knowledge of the Sellers, no event has occurred which constitutes
or, with the passing of time or giving of notice, or both, would constitute, a
default under any such lease document.

 

4.9           Intellectual Property.

 

(a)           Except as disclosed on Schedule 4.9(a) of the Disclosure Schedule,
one or more of the Sellers is the exclusive owner of all right, title and
interest in and to each of the following that are being used in the business of
the Sellers as currently conducted, and/or have been or are being developed or
acquired for potential use in the business of the Sellers and/or that are
promoted, sold, licensed or otherwise distributed by the Sellers to any third
parties:

 

(i)            all computer programs
and databases and their associated system and user documentation (collectively,
the “Sellers Software Products”)
set forth on Schedule 4.9(a)(i) of
the Disclosure Schedule;

 

(ii)           all copyrights and
copyright registrations set forth on Schedule
4.9(a)(ii) of the Disclosure Schedule;

 

(iii)          all patents and patent
applications set forth on Schedule
4.9(a)(iii) of the Disclosure Schedule;

 

(iv)          All trademarks, service
marks and tradenames (collectively the “Marks”),
and the registrations of, and/or applications to register, any one or more of
the Marks in federal, state or foreign jurisdictions set forth on Schedule 4.9(a)(iv) of the Disclosure
Schedule; and

 

(v)           all Trade Secrets and
other proprietary rights.

 

The items
referred to in subparagraphs (i) through (v) of this Section 4.9(a) are herein referred to collectively as the “Sellers Intellectual Property Rights.”  The Sellers Intellectual Property Rights
constitute all such rights necessary to operate the business of the Sellers as
it is currently operated.

 

21

 

(b)           Schedule 4.9(b) of the Disclosure Schedule
sets forth a list of all license and similar agreements between the Sellers and
third parties, under which the Sellers are granted rights to the use,
reproduction, distribution, manufacture, sale or licensing of items embodying
the patent, copyright, Trade Secret, trademark or other proprietary rights of
such third parties (collectively, the “Sellers
License Rights”).  The
Sellers are not, nor will the Sellers be as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
thereby, in violation of any material rights pursuant to any license and
similar agreements described on Schedule
4.9(b) of the Disclosure Schedule. 
The Sellers have not lost, nor will the Sellers lose as a result of the
execution and delivery of this Agreement or the consummation of the
transactions contemplated thereby, any material rights pursuant to any license
and similar agreements described on Schedule
4.9(b) of the Disclosure Schedule. 
Except as set forth on Schedule 4.9(b)
of the Disclosure Schedule, no Person is entitled to any royalty, fee and/or
other payment or other consideration of whatever nature with respect to the
Sellers License Rights or Sellers Intellectual Property Rights.  The Sellers License Rights and the Sellers
Intellectual Property Rights are sometimes collectively referred to as the “Sellers Rights”.

 

(c)           Schedule 4.9(c) of the Disclosure Schedule
sets forth a list of all agreements under which the Sellers have granted any
rights of whatever nature to third parties of, to or under the Sellers
Rights.  All such rights granted have
been and are non-exclusive.  True,
correct and complete copies of all such agreements have been delivered to
Purchaser.

 

(d)           No claims with respect
to the Sellers Rights have been asserted or, to the knowledge of any Seller,
are threatened by any Person, nor does any Seller know of any valid grounds for
any bona fide claims against the use by the Sellers of any Sellers Rights.  To the knowledge of the Sellers, there has
not been any infringement, misappropriation or any other unauthorized use of
any of the Sellers Rights by any third party, employee, consultant or former
employee or consultant of the Sellers.

 

(e)           To the knowledge of the
Sellers, none of the Sellers have, by reason of its use, license, sale or other
distribution of the Sellers’ Rights or otherwise, nor has any Seller been
alleged to have, infringed upon, violated, misappropriated or misused any
intellectual property right or other proprietary right (including, without
limitation, any patent right, copyright, trade name or Trade Secret) of any
third party.

 

4.10         Accounts
Receivable.  Except as
set forth on Schedule 4.10 of the
Disclosure Schedule, all of the accounts, notes and other receivables of the
Sellers (i) reflected on the Financial Statements as of the Balance Sheet Date
and (ii) as of the date hereof, represent sales actually made in the ordinary
course of business consistent with past practice for goods or services
delivered or rendered in bona fide arm’s-length transactions, constitute only
valid, undisputed claims, have not been extended or rolled over in order to
make them current and are collectible at their recorded amounts net of reserves
for non-collectibility reflected on the Financial Statements in accordance with
GAAP.

 

4.11         Contracts and Commitments.  Except as set forth on Schedules 4.8(b), 4.9(b) and 4.11 of the Disclosure Schedule:

 

22

 

(a)           None of the Sellers
have any agreements, contracts, or commitments, written or oral, which either
individually or in conjunction with other agreements, contracts or commitments
with the same party, and in connection with the same matter, relate to commitments
in excess of $50,000 per annum or are otherwise material to its business,
operations or prospects;

 

(b)           None of the Sellers
have any (i) employment agreements, (ii) employee non-competition agreements,
or (iii) agreements or policies that contain any bonus, severance or
termination pay liabilities or obligations;

 

(c)           None of the Sellers
have any collective bargaining or union contracts or agreements;

 

(d)           None of the Sellers are
a party to any partnership or joint venture agreement whether or not a separate
legal entity is created thereby;

 

(e)           None of the Sellers are
in breach or default under any contract, license agreement, commitment or
restriction (whether written or oral) to which such Seller is a party or by
which such Seller or any of its Assets are bound, except to the extent such
breach or default would not, individually or in the aggregate, have a Material
Adverse Effect, and, to the knowledge of the Sellers, there exists no event or
condition which (whether with or without notice, lapse of time, or both) would
constitute a default thereunder, give rise to a right to accelerate, modify or
terminate any provision thereof or give rise to any Encumbrance on its Property
or Assets or a right to any additional or guaranteed payments; and to the knowledge
of the Sellers, no other party to any such contract, agreement or commitment is
in breach or default thereof;

 

(f)            Each contract and
agreement referred to on Schedule 4.11
is valid and in full force and effect and constitutes a legal, valid and binding
obligation of the Seller(s) that is a party to such contract or agreement, and,
to the knowledge of the Sellers, is enforceable in accordance with its terms,
and will not cease to be valid and in full force and effect after the Closing
Date, except to the extent that the failure of any such contracts or agreements
to be in full force and effect, enforceable in accordance with its terms, and a
legal, valid and binding obligation of the Sellers would not, individually or
in the aggregate, have a Material Adverse Effect; accurate and complete copies
of the contracts and agreements listed on Schedule
4.11, together with all amendments thereto, have been heretofore
delivered to Purchaser.

 

4.12         Customers and Suppliers.  Except as set forth on Schedule 4.12 of the Disclosure Schedule,
there has not been any material adverse change and, to the knowledge of the
Sellers, there are no facts which may reasonably be expected by the Sellers to
indicate that any material adverse change may occur in the business relationship
of the Sellers with any customer or supplier which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.  None of the Sellers are engaged in any
material disputes with any material customers or suppliers and no Seller has
any reason to believe that any material customer or supplier intends to
discontinue or adversely modify its relationship with the Sellers in any
material respect after the Closing Date where any such dispute or change would

 

23

 

reasonably be expected to have a Material
Adverse Effect.  In addition, none of
the Sellers has any knowledge that any material customer or group of customers
of the Sellers are materially dissatisfied with its services.

 

4.13         Insurance.  Schedule
4.13 of the Disclosure Schedule contains a true and complete list of
all insurance policies covering any of the Sellers or otherwise held by or on
behalf of it, or any aspect of its Assets or business, indicating the type of
coverage, name of insured, the insurer, the amount of coverage, the
deductibles, the premium, and the expiration date.  Except as set forth on Schedule
4.13, there are no pending claims under any insurance policy listed
on Schedule 4.13.

 

4.14         Litigation,
etc.  Except as set forth on Schedule 4.14 of the Disclosure Schedule,
there has not been in the thirty-six (36) months prior to the date hereof, nor
is there currently, any claim, action, suit, inquiry, proceeding or
investigation of any kind or nature whatsoever, by or before any court or
Governmental Entity or other regulatory or administrative agency or commission
or tribunal pending or, to the knowledge of any Seller, threatened against or
involving or that reasonably would be expected to involve any Seller or its
business, Assets, Properties, officers or directors, or which questions or
challenges the validity of this Agreement or any action taken or to be taken by
such Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby; and, to the knowledge of any Seller, there is no valid
basis for any such claim, action, suit, inquiry, proceeding or investigation.

 

4.15         Compliance with Law; Necessary
Authorizations.

 

(a)           Each of the Sellers are
duly complying and has duly complied in respect of its business, operations,
Properties and Assets, with all applicable laws, rules, regulations, orders,
building and other codes, zoning and other ordinances, Permits, authorizations,
judgments and decrees of all Governmental Entities, except to the extent that
any such failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect.  Except as set
forth on Schedule 4.15(a) of the
Disclosure Schedule, no Seller is aware of any present or past failure so to
comply or of any past or present events, activities or practices of the Sellers
which may be construed to indicate interference with or prevention of continued
compliance with any laws, rules or regulations or which may give rise to any
common law or statutory liability, or otherwise form the basis of any material
claim, action, suit, proceeding, hearing or investigation, except to the extent
that any such failure to comply would not, individually or in the aggregate,
have a Material Adverse Effect.  Except
as set forth on Schedule 4.15(a)
of the Disclosure Schedule, to the knowledge of the Sellers, none of the
Sellers nor any of their respective officers or employees is the subject of any
investigation relating to the business of the Sellers.

 

(b)           Each of the Sellers has
duly obtained all Permits, concessions, grants, franchises, licenses and other
governmental authorizations, Consents, and approvals necessary for the conduct
of its business including, without limitation, those relating to Medicare,
Medicaid or any other health insurance or health care program sponsored or
financed in whole or in part by any Governmental Entity; each of the foregoing
is set forth on Schedule 4.15(b)
of the Disclosure Schedule and is in full force and effect; each of the Sellers
are in compliance with all

 

24

 

material terms of all the foregoing, except
to the extent that failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect; except as set forth on Schedule 4.15(b) of the Disclosure
Schedule, there are no proceedings pending or, to the knowledge of any Seller,
threatened which may result in the revocation, cancellation, suspension or
modification thereof, and no Seller has any knowledge of any basis therefor;
and except as set forth on Schedule 4.15(b) of
the Disclosure Schedule the consummation of the transactions contemplated
hereby will not result in any such revocation, cancellation, suspension or
modification nor require the Sellers or Purchaser to make any filing or take
any action in order to maintain the validity of any item listed on Schedule 4.15(b) of the Disclosure
Schedule.

 

(c)           Each person or entity
employed or engaged by any of the Sellers to provide services on behalf of such
Seller (“Licensed Service Provider”)
has obtained (and maintains) all necessary licensure or certification to
provide such services in compliance in all material respects with any
applicable law or the requirements of any Government Medical Reimbursement
Program.  Each Licensed Service Provider
is covered by a professional liability insurance policy underwritten by a
licensed insurance company, with coverage limits and terms that are consistent
with industry standards.

 

(d)           Except as set forth on Schedule 4.15(d) of the Disclosure
Schedule, to the knowledge of the Sellers, none of the Sellers nor any of their
respective officers, directors, employees or agents has been, in the thirty-six
(36) months prior to the date hereof, or is currently being investigated, charged
or implicated in any violation of any laws involving fraudulent and abusive
practices relating to its participation in Medicare, Medicaid, Tricare or any
other state or federally sponsored health care reimbursement or health care
program (each, a “Government Medical
Reimbursement Program”), including but not limited to fraudulent
billing or recordkeeping practices.  In
the thirty-six (36) months prior to the date hereof, the Sellers have properly
and legally billed all individuals, intermediaries and third party payors, as
appropriate, for services rendered through the Sellers’ business and have
maintained all necessary documentation to support and reflect such billing
practices, except to the extent that failure to legally and properly bill would
not, individually or in the aggregate, have a Material Adverse Effect.  To the knowledge of the Sellers, except as
set forth on Schedule 4.15(d) of
the Disclosure Schedule, none of the Sellers nor any of their respective
directors, officers, employees, independent contractors or agents has committed
any offense which is reasonably likely to be the basis for suspension or
exclusion of the Sellers or any of their respective directors, officers,
managers, current employees, partners or independent contractors from any
Government Medical Reimbursement Program, including, but not limited to,
defrauding a government program, loss of a license to provide health care
services, and failure to provide quality care.

 

(e)           None of the Sellers nor
any of their respective directors, officers, employees, independent contractors
or agents, have engaged in any activities which may serve as the grounds for
any material penalties of any kind under Sections 1128A, 1128B or 1877 of the
Social Security Act (42 U.S.C. §§ 1320a-7a, 1320a-7b and 1395nn), the False
Claims Act (31 U.S.C. § 3729 et seq.), the False Statements Act (18 U.S.C. §
1001), the Program Fraud Civil Penalties Act (31 U.S.C. § 3801 et seq.), the
Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.) (all as amended or superseded),
and the anti-fraud and abuse provisions of the Health

 

25

 

Insurance Portability and Accountability Act
of 1996 (18 U.S.C. § 1347, 18 U.S.C. § 669, 18 U.S.C. § 1035, 18 U.S.C. § 1518)
and the corresponding fraud and abuse, false claims and anti-self referral
statutes and regulations in each state or other jurisdictions where any Seller
has operations or any related regulations or other federal or state laws and
regulations.

 

4.16         Environmental Matters.  All of the operations of the Sellers comply
and have at all times complied with all applicable Environmental Laws, except
to the extent that any such failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect, and none of the Sellers are subject
to any Environmental Liabilities which would, individually or in the aggregate,
have a Material Adverse Effect.

 

4.17         Labor
Matters.  Except to the extent
set forth on Schedule 4.17 of the
Disclosure Schedule:

 

(a)           there is no labor
strike, or, to the knowledge of the Sellers, dispute, grievance, arbitration
proceeding, slowdown or stoppage, or charge of unfair labor practice actually
pending, threatened against or affecting the operation of the business of the
Sellers;

 

(b)           None of the Sellers
have, during the three years prior to the date hereof, experienced any work
stoppage or other labor dispute, nor is any Seller aware of any fact or
circumstance that could result in any of the foregoing;

 

(c)           there are no charges or
complaints of discrimination pending or to the knowledge of any Seller,
threatened, before the Equal Employment Opportunity Commission or any state or
local agency with respect to the Sellers, nor is any Seller aware of any basis
for any such charge or complaint; and

 

(d)           during the three years
preceding the date hereof, no unions or other collective bargaining units have
been certified or recognized by the Sellers as representing any of its
employees and there are no existing union organizing efforts or representation
questions with respect to any of the employees of the Sellers.

 

4.18         Employee Benefit Plans

 

(a)           Except as set forth on Schedule 4.18(a) of the Disclosure
Schedule, there are no Plans.  With
respect to each Plan, as applicable, accurate and complete (i) copies of each
written Plan (including all amendments thereto), (ii) written descriptions of
each oral Plan, (iii) copies of related trust or funding agreements, (iv)
summary plan descriptions, (v) summaries of material modifications, (vi) copies
of the most recent annual reports and actuarial valuations and (vii) copies of
the most recent determination letter from the IRS for each Plan intended to
qualify under Code Section 401(a) have been heretofore delivered to Purchaser.

 

(b)           None of the Sellers,
their respective ERISA Affiliates, or any of their respective predecessors has
ever contributed to, contributes to, has ever been required to contribute to,
or otherwise participated in or participates in or in any way, directly or
indirectly, has any liability with respect to any “multiemployer plan” (within
the meaning of Sections

 

26

 

(3)(37) or 4001(a)(3) of ERISA or Section
414(f) of the Code) or any single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) which is subject to Sections 4063 and 4064 of
ERISA.

 

(c)           None of the Sellers are
liable for any liability of any ERISA Affiliate (including predecessors) with
regard to any Employee Benefit Plan, including without limitation, liabilities
under Title IV of ERISA, Section 412 of the Code, and Section 302(a)(2) of
ERISA.

 

(d)           The Sellers, each ERISA
Affiliate, each Plan, and each “plan sponsor” (within the meaning of Section
3(16) of ERISA) of each “welfare benefit plan” (within the meaning of Section
3(1) of ERISA) has complied in all respects with the requirements of Section
4980B of the Code and Title I, Subtitle B, Part 6 of ERISA.

 

(e)           No “reportable event”
within the meaning of Section 4043(b) of ERISA has occurred or is expected to
occur, and the consummation of the transaction contemplated by this Agreement
will not result in a reportable event.

 

(f)            With respect to each
of the Plans on Schedule 4.18(a):

 

(i)            each Plan intended to
qualify under Section 401(a) of the Code has been qualified since its inception
and has received a determination letter from the IRS to the effect that the
Plan is qualified under Section 401 of the Code and any trust maintained
pursuant thereto is exempt from federal income taxation under Section 501 of
the Code and nothing has occurred (since the date of the determination letter)
or is expected to occur through the date of the Closing (including, without
limitation, the transactions contemplated by this Agreement) that caused or
could cause the loss of such qualification or exemption or the imposition of
any penalty or tax liability;

 

(ii)           all payments required
by any Plan, any agreement, or by law (including, without limitation, all
contributions, insurance premiums, or intercompany charges) with respect to all
periods through the date of the Closing shall have been made prior to the
Closing (on a pro rata basis where such payments are otherwise discretionary at
year end) or provided for by the Sellers, by full accruals as if all targets
required by such Plan had been or will be met at maximum levels on its
financial statements;

 

(iii)          no “accumulated funding
deficiency”, (within the meaning of Section 302 of ERISA and Section 412 of the
Code), has been or could be expected to be incurred, whether or not waived, and
no excise or other taxes have been or could be expected to be incurred or are
due and owing with respect to the Plan because of any failure to comply with
the minimum funding standards of ERISA and the Code;

 

(iv)          no claim, lawsuit, arbitration
or other action has been threatened, asserted, instituted, or anticipated
against the Plans (other than non-material routine claims for benefits, and
appeals of such claims), any trustee or fiduciaries thereof, the Sellers, any
ERISA Affiliate, any director, officer, or employee thereof, or any of the
assets of any trust of the Plans;

 

27

 

(v)           the Plan complies and
has been maintained and operated in accordance with its terms and applicable
law, including, without limitation, ERISA and the Code;

 

(vi)          no “prohibited
transaction,” within the meaning of Section 4975 of the Code and Section 406 of
ERISA, has occurred or is expected to occur with respect to the Plan (and the
consummation of the transactions contemplated by this Agreement will not
constitute or directly or indirectly result in such a “prohibited
transaction”);

 

(vii)         no Plan is or expected to
be under audit or investigation by the IRS, Department of Labor, or any other
governmental authority and no such completed audit, if any, has resulted in the
imposition of any tax or penalty; and

 

(viii)        with respect to each Plan
that is funded mostly or partially through an insurance policy, none of the
Sellers nor any ERISA Affiliate has any liability in the nature of retroactive
rate adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring on or before the
Closing.

 

(g)           The consummation of the
transactions contemplated by this Agreement will not give rise to any
liability, including, without limitation, liability for severance pay,
unemployment compensation, termination pay, or withdrawal liability, or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any employee, director or shareholder of the Sellers
(whether current, former, or retired) or their beneficiaries solely by reason
of such transactions.  No amounts
payable under any Plan will fail to be deductible for federal income tax
purposes by virtue of Sections 280G or 162(m) of the Code.

 

(h)           None of the Sellers nor
any ERISA Affiliate maintains, contributes to, or in any way provides for any
benefits of any kind whatsoever (other than under Section 4980B of the Code,
the Federal Social Security Act, or a plan qualified under Section 401(a) of
the Code) to any current or future retiree or terminee.

 

(i)            None of the Sellers
nor any ERISA Affiliate, or any officer or employee thereof, has made any
promises or commitments, whether legally binding or not, to create any
additional plan, agreement, or arrangement, or to modify or change any existing
Plan.

 

4.19         Business Generally.  To the knowledge of the Sellers, no events or transactions have
occurred which could be expected to have a Material Adverse Effect.

 

4.20         Finders.  Except as set forth on Schedule 4.20 of the Disclosure Schedule,
none of the Sellers nor any of the Sellers’ directors or officers, have taken
any action that, Directly or Indirectly, would obligate Purchaser or the
Sellers, to anyone acting as broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby.

 

4.21         Bank
Accounts.  Schedule 4.21 of the Disclosure Schedule contains a
true and complete list of (a) the names and locations of all banks, trust
companies, securities brokers and other financial institutions at which the
Sellers have an account or safe deposit box or

 

28

 

maintain a banking, custodial, trading or
other similar relationship, (b) a true and complete list and description of
each such account, box and relationship and (c) the name of every Person
authorized to draw thereon or having access thereto.

 

4.22         Disclosure.  No representation or warranty by the Sellers
in this Agreement, in any documents or papers furnished to Purchaser or its
representatives by or on behalf of the Sellers, pursuant to this Agreement or
any statement contained in the Disclosure Schedule or any certificates
delivered hereunder contains or will contain any untrue statement of material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein in light of the
circumstances under which it was made, not false or misleading.  All copies of contracts, agreements and
other documents made available to Purchaser or any of its representatives
pursuant hereto are complete and accurate.

 

ARTICLE
V

 

REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER

 

Purchaser
hereby represents and warrants as follows:

 

5.1           Organization and Qualification.  It is duly organized, validly existing and
in good standing in its jurisdiction of organization.

 

5.2           Authority.  It has all requisite power and authority to
execute and deliver this Agreement and to perform, carry out and consummate the
transactions contemplated hereby.  The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on its part. 
This Agreement has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

 

5.3           No
Breach.  Neither the execution
and delivery of this Agreement by it nor the consummation of the transactions
contemplated herein and the full performance by it of its obligations hereunder
do or will:  (i) violate any provision
of its organizational documents; (ii) conflict with, violate, result in a
breach of or constitute a default under any writ, injunction, statute, law,
ordinance, rule, regulation, judgment, award, decree, order, or process of any
Governmental Entity; or (iii) require it to obtain any Consent.

 

5.4           Powers; Consents; Absence of Conflicts.  The execution, delivery, and performance of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby by Purchaser:  (a)
are within its corporate powers, are not in contravention of the terms of the
certificate of incorporation or bylaws of Purchaser, and have been duly
authorized by all appropriate corporate action; (b) do not and will not require
any approval or consent of, or filing with, any governmental agency or
authority; (c) do not and will not violate any statute, law, rule, or
regulation to which Purchaser may be subject; (d) do not and will not conflict
with, or result in a breach of or a default under (with or without notice or
lapse of time,

 

29

 

or both), any contract, agreement, indenture,
mortgage, deed of trust, lease, or other instrument to which Purchaser is a
party or by which Purchaser is bound or subject; and (e) do not and will not
violate any judgment, order, or decree of any court or other governmental
agency or authority to which Purchaser may be subject.  This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws affecting creditors’ rights and remedies generally
and general principles of equity.

 

5.5           Litigation or Proceedings.  There is no litigation or other proceeding
pending or, to the knowledge of Purchaser or any of its Affiliates, directors,
managers, officers, employees, agents, or representatives, threatened against
Purchaser that could reasonably be expected to affect adversely Purchaser’s
ability to consummate the transactions contemplated by this Agreement.

 

5.6           Financial Capability.  Purchaser has cash, or the ability to obtain
cash by means of credit facilities with financially responsible third parties,
in an amount sufficient to enable it to perform all of its obligations
hereunder, including, without limitation, payment of the Purchase Price.

 

ARTICLE
VI

 

COVENANTS

 

6.1           Conduct of Business of the Sellers.  Except as set forth on Schedule 6.1, from the date hereof and
until the Closing Date, except as contemplated by this Agreement or expressly
consented to by an instrument in writing signed by Purchaser, each Seller
shall:  (i) conduct its business and
operations only in the ordinary course, consistent with past practice, (ii)
maintain and preserve the Assets in good repair, order and condition,
including, without limitation, performing, in a manner and on a basis
consistent with past practice, all periodic maintenance and necessary
reconditioning, (iii) preserve its business operations and organizations
intact, (iv) keep available the services of its current officers and
satisfactorily performing employees, (v) preserve its current advantageous
business relationships, including, without limitation, the goodwill of its
customers and suppliers and others having business relationships with it, (vi)
other than in the ordinary course, not grant any increase in the rate or terms
of compensation payable, or to become payable to any of its directors, officers
or key employees; (vii) other than in the ordinary course, not grant any
increase in the rate or terms of any Employee Benefit Plan payment or
arrangement; (viii) not enter into any agreement or make any other commitment
involving an amount in excess of $50,000, absent prior consent of Purchaser,
which consent shall not be unreasonably withheld or delayed; and (ix) not,
Directly or Indirectly, redeem, purchase or otherwise acquire any of its shares
of capital stock or authorize any stock split or recapitalization.  Without limiting the generality of the
foregoing, and, except as contemplated in this Agreement, prior to the Closing
Date the Sellers shall use all commercially reasonable efforts to not take any
action which would result in the incorrectness as

 

30

 

of the Closing Date of any representation and
warranty contained in Article IV
without the prior written consent of Purchaser.

 

6.2           Sellers’
Records.  Prior to the Closing
Date, each Seller shall afford Purchaser, its attorneys, accountants and
representatives, free and full access to the Sellers’ business, books, records
and employees, and shall provide to Purchaser and its representatives such
additional financial and operating data and other information as Purchaser
shall from time to time reasonably request upon advance written notice.  The Sellers shall permit Purchaser upon
advance written notice to contact customers and suppliers of the Sellers for
determining and verifying the precise terms and nature of their arrangements.

 

6.3           Filings and Authorizations.  Each of the Sellers and Purchaser, as
promptly as practicable, (i) shall make, or cause to be made, all such filings
and submissions under laws, rules and regulations applicable to it or its
Affiliates, as may be required to consummate the transactions contemplated
herein, in accordance with the terms of this Agreement, (ii) shall use all
commercially reasonable best efforts to obtain, or cause to be obtained, all
authorizations, approvals, consents and waivers from all governmental and
non-governmental Persons necessary to be obtained by it or its Affiliates, in
order to consummate the transactions contemplated herein; provided, however,
that, any provision hereof to the contrary notwithstanding, the Sellers shall
have no obligation to: (A) except as set forth in Section 6.10, pay any fee to any third party for the purpose
of obtaining any Consent or any costs and expenses of any third party resulting
from the process of obtaining such Consent or (B) sell any material portion of
the Business; provided  further, however, that neither
Purchaser nor the Sellers shall be obligated to consummate the transactions
contemplated by this Agreement absent the prior approval of the Bankruptcy
Court and neither Purchaser nor the Sellers shall be obligated to modify the
Agreement in any material respect to satisfy the Bankruptcy Court, and (iii)
shall use all commercially reasonable efforts to take, or cause to be taken,
all other actions necessary, proper or advisable in order for him, her or it to
fulfill his, her or its obligations hereunder. 
The Sellers and Purchaser shall coordinate and cooperate with one
another in exchanging such information and supplying such reasonable assistance
as may be reasonably requested by each in connection with the foregoing.

 

6.4           Further Assurances.  Simultaneous with the Closing, Sellers shall take such steps as
may be necessary to put Purchaser in actual possession and operating control of
the Assets and the Business.  At or
after the Closing, Sellers shall, at the reasonable request of Purchaser,
without further consideration, promptly execute and deliver, or cause to be
executed and delivered, to Purchaser such assignments, bills of sale, consents
and other instruments in addition to those required by this Agreement, in form
and substance reasonably satisfactory to Purchaser, and take all such other
actions as Purchaser may reasonably deem necessary to implement any provision
of this Agreement and to transfer to and vest in Purchaser title to, and to put
Purchaser in possession of, all of the Assets, free and clear of any and all Encumbrances.

 

6.5           Bankruptcy Covenants.

 

(a)           Cure of Defaults.  Sellers shall promptly, on or prior to the
Closing Date, cure any and all defaults and breaches and satisfy any liability
or obligation arising from or

 

31

 

relating to pre-Closing periods under the
Assumed Contracts, except as expressly assumed by Purchaser under this
Agreement, so that such Assumed Contracts may be assigned by Sellers to
Purchaser in accordance with the provisions of Section 365 of the Bankruptcy
Code, the Sale Approval Order, any other orders of the Bankruptcy Court
effectuating such assignments, and this Agreement.

 

(b)           Motions, Orders, etc.  Sellers shall promptly provide Purchaser
with the proposed final drafts of all documents, motions, orders, or pleadings
that Sellers propose to file with the Bankruptcy Court which relate to the
approval of this Agreement, the Assets, or the consummation of the transactions
contemplated hereby, or any provision therein or herein, and shall provide
Purchaser and its counsel with a reasonable opportunity to review and comment
on such documents, motions, orders, or pleadings.

 

(c)           Bidding Procedures
Order  Without limiting the
generality of the foregoing Section 6.5(b),
the bidding procedures order, in the form annexed hereto as Exhibit 2 (the “Bidding Procedures Order”), shall be
reasonably acceptable in form and substance to Purchaser and shall include
provisions, among other things (i) setting the earliest available date for a
hearing to approve the sale of the Assets (the “Sale Hearing”), (ii) authorizing Sellers to conduct an
auction (the “Auction”) of
the Assets in the event that qualified bids are received for the sale of the
Assets in accordance with the Bidding Procedures Order and setting a date for
such Auction, (iii) establishing bidding procedures reasonably acceptable to
Purchaser, (iv) approving the selection of Purchaser as the stalking horse
bidder, (v) approving the payment of reasonable out-of-pocket expenses (which
shall not include salaries of any employees of Purchaser or its Affiliates)
incurred by Purchaser up to the date of the Auction, including but not limited
to financing commitment fees, up to an aggregate amount of $1,500,000 (the “Expense Reimbursement”), in the event that
Purchaser is not the Winning Bidder (as defined in, and in accordance with, the
Bidding Procedures Order) at the Auction, which payment shall be made to
Purchaser concurrently with the receipt by any of the Sellers of any proceeds
(including the proceeds of a deposit in the event of a default by such third
party purchaser) in connection with such third party sale, (vi) providing that
Purchaser’s claim to the Expense Reimbursement shall be entitled to
superpriority administrative expense claim treatment in the Bankruptcy Cases,
senior to all other superpriority claims, whether now or hereafter incurred or
accrued, (vii) providing that no prospective purchaser will be permitted to bid
at the Auction unless such party has been deemed “qualified” in accordance with
objective criteria set forth in the Bidding Procedures Order, which at a
minimum, shall require any such prospective purchaser to provide documentation
establishing that such prospective purchaser has sufficient cash on hand or a
binding financial commitment from an established financial institution or other
credit worthy party to ensure such prospective purchaser’s ability to meet its
commitments pursuant to its bid, (viii) providing that no prospective purchaser
who bids for the Assets at the Auction shall be entitled to purchase the Assets
unless such prospective purchaser submits to Sellers in writing in accordance
with the Bidding Procedures Order a bid at least equal to $2,000,000 greater
than the consideration set forth in this Agreement (including all cash,
non-cash consideration and assumed liabilities), and then $500,000 greater for
any additional incremental bid, accompanied by a commitment to proceed to a
closing on contractual terms at least as favorable to Sellers as those set
forth in this Agreement plus a cash deposit of $2,500,000, (ix) requiring
Sellers to provide to Purchaser, upon receipt thereof, a copy of any and all
bids received by Sellers, and (x)

 

32

 

authorizing any other procedural matters that
Sellers and Purchaser reasonably deem appropriate.  Should overbidding take place, Purchaser shall have the right,
but not the obligation, to participate in the overbidding and to be approved as
the successful overbidder at the Sale Hearing based upon any such overbid, provided,
however, that Purchaser shall receive a credit against any additional
incremental bid in an amount equal to $1,500,000, provided  further
that if the actual expenses incurred by Purchaser up to the date of the Auction
are less than $1,500,000 then Purchaser shall, if it is the Winning Bidder (as
defined in, and in accordance with, the Bidding Procedures Order), increase the
cash portion of the Purchase Price by an amount equal to the difference between
(1) $1,500,000 and (2) the actual expenses incurred by Purchaser.  Sellers shall use their best efforts to
obtain entry of the Bidding Procedures Order. 
To the extent there is any inconsistency between this paragraph and the
Bidding Procedures Order, the Bidding Procedures Order shall govern.

 

(d)           Sale Approval Order.  Without limiting the generality of the
foregoing Section 6.5(b), the sale
approval order, in the form annexed hereto as Exhibit 3  (the “Sale
Approval Order”), shall be reasonably acceptable in form and substance
to Purchaser and shall include provisions, among other things (i) providing
that Purchaser shall not incur any liability as a successor to the Business,
(ii) approving the sale of the Assets to Purchaser on the terms and conditions
set forth in this Agreement, or such higher and better terms and conditions
offered at the Auction, and authorizing Sellers to proceed with this
transaction, (iii) stating that any objections timely filed with respect to the
sale of the Assets, which have not been withdrawn, are overruled or the
interests of such objections have been otherwise satisfied or adequately
provided for by the Bankruptcy Court, (iv) finding that the Purchase Price
represents fair value for the Assets, (v) finding that the sale is in the best interests
of Sellers’ estates and creditors, (vi) finding that Purchaser is a good faith
purchaser of the Assets under Section 363(m) of the Bankruptcy Code and that
the provisions of Section 363(n) of the Bankruptcy Code have not been violated,
(vii) providing that the sale of the Assets to Purchaser shall be free and
clear of all liens, claims, interests, obligations and encumbrances whatsoever
under Section 363 of the Bankruptcy Code and any other applicable sections of
the Bankruptcy Code, (viii) providing that the Bankruptcy Court shall retain
jurisdiction for the purpose of enforcing the provisions of the Sale Approval
Order including, without limitation, compelling delivery of the Assets to
Purchaser and protecting Purchaser against any liens, claims, interests,
obligations and encumbrances against Sellers or the Assets, (ix) finding that
there are no brokers involved in consummating the sale and no brokers’
commissions are due, (x) providing that the parties hereto shall be authorized
to close this transaction immediately upon execution of the Sale Approval Order
pursuant to Rules 6004(g) and 6006(d) of the Federal Rules of Bankruptcy
Procedure, (xi) authorizing and directing Sellers to execute, deliver, perform
under, consummate and implement this Agreement, together with all additional
instruments and documents that may be reasonably necessary or desirable to
implement the foregoing, (xii) determining that Purchaser is not a successor to
Sellers or otherwise liable for any of the Excluded Liabilities or Excluded
Assets and permanently enjoining each and every holder of any of the Excluded
Liabilities or Excluded Assets from commencing, continuing or otherwise
pursuing or enforcing any remedy, claim, cause of action or encumbrance against
Purchaser or the Assets related thereto, and (xiii) finding that, pursuant to
Section 1146(c) of the Bankruptcy Code, the within transaction is “in
contemplation of a plan or plans of reorganization to be confirmed in the
Bankruptcy Cases,” and as such shall be free and clear of any and all transfer
tax, stamp tax or

 

33

 

similar taxes; provided, however,
that Purchaser’s obligations hereunder shall not be conditioned on the finding
set forth in this clause (xiii). 
Sellers shall use their best efforts to obtain entry of the Sale
Approval Order.  Purchaser’s obligations
to consummate the transactions contemplated herein shall be conditioned upon
the Bankruptcy Court’s entry of the Sale Approval Order in form and substance
satisfactory to Purchaser.  To the
extent that there is any inconsistency between this paragraph and the Sale
Approval Order, the Sale Approval Order shall govern.

 

(e)           Assumed Contracts.  Sellers shall not reject under Section 365
of the Bankruptcy Code, waive or release any of their rights under, amend or
otherwise modify any of the Assumed Contracts without the prior written consent
of Purchaser, which consent shall not be unreasonably withheld.  Sellers shall obtain an order or orders
(which may include the Sale Approval Order) in a form reasonably satisfactory
to Purchaser, among other things (i) approving the assumption and assignment of
the Assumed Contracts to Purchaser pursuant to, and subject to the provisions
of, Section 365 of the Bankruptcy Code, (ii) providing that all defaults of
Sellers under the Assumed Contracts arising or accruing prior to the date of
the Closing (without giving effect to any acceleration clauses or any default
provisions in such contracts of a kind specified in Section 365(b)(2) of the
Bankruptcy Code) have been cured or will be promptly cured by Sellers or
Purchaser so that Purchaser shall have no liability or obligation with respect
to any default or obligation arising or accruing prior to the date of the
Closing or in respect of any cure obligations, except as may otherwise be
specifically agreed as set forth in this Agreement, such Assumed Contracts and
cure amounts are set forth on Schedule 6.5(e),  and (iii) providing that the Assumed
Contracts shall be transferred to, and remain in full force and effect for the
benefit of, Purchaser, notwithstanding any provision in any such Assumed
Contract or in applicable Law (including those described in Sections 365(b)(2)
and (f) of the Bankruptcy Code) that prohibits, restricts, or limits in any way
such assignment or transfer.

 

(f)            Other Bankruptcy
Covenants.  Sellers shall promptly
make any filings, take all actions, and use their best efforts to obtain any
and all other approvals and orders necessary or appropriate for consummation of
the sale of the Assets, subject to their obligations to comply with any order
of the Bankruptcy Court. In the event an appeal is taken, or a stay pending
appeal is requested, from any of the foregoing orders of the Bankruptcy Court,
Sellers shall immediately notify Purchaser of such appeal or stay request and,
upon Purchaser’s request, shall provide to Purchaser within two days after
Sellers’ receipt thereof a copy of the related notice of appeal or order of
stay.  Sellers shall also provide
Purchaser with written notice of any motion, application, brief or other
pleading filed in connection with any appeal from any of such orders.

 

6.6           Apportioned Obligations.  All real property Taxes, personal property
Taxes and similar ad valorem obligations levied with respect to the Assets for
a taxable period which includes (but does not end on) the Closing Date
(collectively, the “Apportioned
Obligations”) shall be apportioned between the Sellers and
Purchaser based on the number of days of such taxable period included in the
Pre-Closing Tax Period and the number of days of such taxable period included
in the Post-Closing Tax Period.  The
Sellers shall be liable for the proportionate amount of such Taxes that is
attributable to the Pre-Closing Tax Period, and Purchaser shall be liable for
the proportionate amount of such Taxes that is attributable to the Post-Closing
Tax Period.  Upon receipt of any bill
for real or personal property Taxes relating to

 

34

 

the Assets, each of the Sellers and Purchaser
shall present a statement to the other and simultaneously provide a copy of
same to the Oversight Committee Representative, setting forth the amount of
reimbursement to which each is entitled under this Section 6.6 together with such supporting evidence as is
reasonably necessary to calculate the proration amount.  The proration amount shall be paid by the
party owing it to the other within ten (10) Business Days after delivery of such
statement.  In the event that either the
Sellers or Purchaser shall make any payment for which it is entitled to
reimbursement under this Section 6.6,
the other party shall make such reimbursement promptly but in no event later
than ten (10) Business Days after the presentation of a statement setting forth
the amount of reimbursement to which presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.  Purchaser shall notify
the Sellers’ Representative and the Oversight Committee Representative of any
audit or examination of the Apportioned Obligations.  The Sellers’ Representative and the Oversight Committee
Representative shall have the right to participate in any such audit or examination
and Purchaser shall not settle any such audit or examination without the
consent of the Sellers’ Representative and the Oversight Committee
Representative, which consent shall not be unreasonably withheld.

 

6.7           Taxes.  Except as otherwise specifically provided in
this Agreement, (i) the Sellers shall pay all Taxes payable with respect to the
operations of the Business for all periods ending on or prior to the Closing
Date and (ii) Purchaser shall pay all Taxes payable with respect to the
operations of the Business for all periods from and after the Closing Date.

 

6.8           Negotiations.     Commencing
immediately following the Auction, Purchaser shall have the right to negotiate
with any third party, including, but not limited to, any governmental
regulatory authority, with respect to the terms of any claim, liability or
agreement to which any of the Sellers is a party, including, but not limited
to, the Settlement Agreements and that certain Corporate Integrity Agreement,
as amended, among the Office of Inspector General of the Department of Health
and Human Services, TLC, SBI, SBSI, SLHHAI and SBHHCI; provided, however,
that the Sellers shall have the right to be present at all such
negotiations.  The failure or refusal of
any such third party to agree to a modification of any such claim, liability,
or agreement, shall not constitute a breach of this Agreement.

 

6.9           Cost
Reports.  Each Seller shall,
within fifty (50) days after the Closing, file with the appropriate Medicare
and Medicaid agencies all final cost reports with respect to its operation
which are required to be filed under the terms of the Medicare and Medicaid
Programs.  Following the Closing, Buyer
shall make reasonably available to the Sellers such of its personnel and books
and records as are reasonably necessary to assist the Sellers in the
preparation of such cost reports. 
Purchaser shall also make such personnel and books and records
reasonably available to the Sellers with respect to any other reports, filings,
or forms that the Sellers must submit to any Governmental Entity after the
Closing.  Simultaneous with such filing,
each Seller shall provide Purchaser with copies of such cost reports, together
with copies of any amendments thereto and correspondence related to such final
cost reports.

 

6.10         Consents.  Prior to Closing, the Sellers shall use
their commercially reasonable best efforts to (a) obtain, or cause to be
obtained, all Consents, including but not limited to the Consents set forth on Schedule 7.1(c) and (b) obtain, or cause to
be obtained, and

 

35

 

deliver each of the franchisee waivers
described in Section 7.1(l) and
the agreement set forth on Section 7.1(m) to
Purchaser.  The Sellers shall be
responsible for all costs and expenses resulting from securing each such Consent
or agreement (including without limitation, any fee to any third party for the
purpose of obtaining each such Consent or agreement or any costs and expenses
of any third party resulting from securing each such Consent or agreement).

 

ARTICLE
VII

 

CONDITIONS TO CLOSING

 

7.1           Conditions Precedent to Obligations
of Purchaser.  The obligation of
Purchaser under this Agreement to consummate the transactions contemplated by
this Agreement on the Closing Date shall be subject to the satisfaction, at or
prior to the Closing Date, of all of the following conditions, any one or more
of which may be waived by Purchaser:

 

(a)           Representations and
Warranties Accurate.  The
representations and warranties of the Sellers contained in this Agreement which
are qualified as to materiality shall be true and correct in all respects, and
those not so qualified shall be true and correct in all material respects, as
of the date of this Agreement and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date.

 

(b)           Performance by the
Sellers.  Each of the Sellers shall
have performed and complied in all material respects with all covenants and
agreements required to be performed or complied with by such Person hereunder
on or prior to the Closing Date.

 

(c)           Consents.  All Consents required in connection with the
consummation of the transactions contemplated by this Agreement and the Closing
(including those set forth on Schedule 7.1(c)
hereto) shall have been duly obtained, made or given and shall be in full force
and effect, without the imposition upon Purchaser or the Sellers of any
condition, restriction or required undertaking.

 

(d)           No Legal Prohibition.  No suit, action, investigation, inquiry or
other proceeding by any Governmental Entity or other Person shall have been
instituted or threatened which arises out of or relates to this Agreement, or
the transactions contemplated hereby and no injunction, order, decree or
judgment shall have been issued and be in effect or threatened to be issued by
any Governmental Entity of competent jurisdiction, and no statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
and be in effect, which in each case restrains or prohibits the consummation of
the transactions contemplated hereby.

 

(e)           Certificate.  Purchaser shall have received a certificate,
dated the Closing Date, signed on behalf of the Sellers by an officer of TLC,
to the effect that the conditions set forth in Sections 7.1(a), 7.1(b),
and 7.1(c) have been satisfied.

 

(f)            Due Diligence.  Purchaser shall have completed its Clinical
Due Diligence Review of the Sellers and the Business, and said Clinical Due
Diligence Review shall be

 

36

 

satisfactory to Purchaser in its sole
discretion; provided, however, that this condition shall be
deemed satisfied on January 21, 2004.

 

(g)           No Material Adverse
Change.  No material adverse change
shall have occurred in the business of the Sellers and no other event, loss,
damage, condition or state of facts of any kind shall exist which has a
Material Adverse Effect or can reasonably be expected to have a Material
Adverse Effect.  The provisions of this Section 7.1(g) shall not apply to items
which appear on Schedules 4.6 and 4.14.

 

(h)           HSR Act.  The required waiting period under the HSR
Act shall have expired or been earlier terminated.

 

(i)            Intentionally
Omitted.

 

(j)            Entry of Order;
Appeal.  The Bankruptcy Court shall
have entered the Bidding Procedures Order in accordance with Section 6.5(c),  the Sale Approval Order in accordance with Section 6.5(d), and any other order in
accordance with Section 6.5(e)
relating to the assignment of the Assumed Contracts, all in form and substance
reasonably acceptable to Purchaser, and the Sale Approval Order and any other
order in accordance with Section 6.5(e)
relating to the assignment of the Assumed Contracts, shall not have been
stayed, and shall have become a Final Order, unless the finality of the Sale
Approval Order is waived by Purchaser in Purchaser’s sole discretion.  The term “Final Order” as used in this Agreement shall mean an
order, judgment or other decree, the operation or effect of which has not been
reversed, stayed, modified or amended and any and all appeal periods with respect
to such order, judgment or other decree have expired.

 

(k)           Assigned Agreements.  The agreements set forth on Schedule 7.1(k) shall have been assigned to
Purchaser.

 

(l)            Franchisee Waivers.  Each of the franchisees set forth on Schedule 7.1(l) shall have executed and
delivered to Purchaser a waiver agreement substantially in one of the forms
annexed hereto as Exhibit 5-1
through Exhibit 5-10.

 

(m)          Maryland Agreement.  The Medicaid Fraud Control Unit of the
Maryland Attorney General’s Office and the Maryland Medical Assistance Program
shall have executed and delivered to Purchaser an agreement substantially in
the form annexed hereto as Exhibit 6.

 

7.2           Conditions Precedent to Obligations
of the Sellers.  The obligations
of each of the Sellers under this Agreement to consummate the transactions
contemplated by this Agreement on the Closing Date shall be subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived by the Sellers:

 

(a)           Representations and
Warranties Accurate.  The
representations and warranties of Purchaser contained in this Agreement which
are qualified as to materiality shall be true and correct in all respects, and
those not so qualified shall be true and correct in all material respects, as
of the date of this Agreement and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date.

 

37

 

(b)           Performance by
Purchaser.  Purchaser shall have
performed and complied in all material respects with all covenants and
agreements required to be performed or complied with by them hereunder on or
prior to the Closing Date.

 

(c)           Consents.  All Consents required in connection with the
purchase and sale of the Assets and the Closing shall have been duly obtained,
made or given and shall be in full force and effect.

 

(d)           No Legal Prohibition.  No suit, action, investigation, inquiry or
other proceeding by any Governmental Entity or other Person shall have been
instituted or threatened which arises out of or relates to this Agreement or
the transactions contemplated hereby and no injunction, order, decree or
judgment shall have been issued and be in effect or threatened to be issued by
any Governmental Entity of competent jurisdiction, and no statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
and be in effect, which in each case restrains or prohibits the consummation of
the transactions contemplated hereby.

 

(e)           Certificate.  Sellers’ Representative shall have received
a certificate, dated the Closing Date, signed on behalf of Purchaser by an
officer of Purchaser, to the effect that the conditions set forth in Sections 7.2(a), 7.2(b) and 7.2(c)
have been satisfied.

 

(f)            HSR Act.  The required waiting period under the HSR
Act shall have expired or been earlier terminated.

 

(g)           Intentionally
Omitted.

 

(h)           Entry of Order;
Appeal.  The Sale Approval Order
shall have been entered by the Bankruptcy Court and shall not have been
stayed.  If an appeal of the Sale
Approval Order is filed and Purchaser elects in its sole discretion to waive
the condition to Closing that the Sale Approval Order shall be a Final Order,
then Sellers shall be obligated to proceed with the Closing notwithstanding the
pendency of any such appeal, unless the Sale Approval Order is stayed.

 

ARTICLE
VIII

 

INDEMNIFICATION

 

8.1           Non-Survival of Representations and
Warranties.  All representations
and warranties contained in Articles IV
and V shall expire at the close of
business on the Closing Date.

 

38

 

ARTICLE
IX

 

MISCELLANEOUS

 

9.1           Termination.  This Agreement may be terminated, and the
transactions contemplated herein may be abandoned:

 

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

 

(b)           any time before the
Closing, by the Sellers, on the one hand, or Purchaser, on the other hand, (i)
in the event of a material breach hereof by any non-terminating party if such
non-terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party or (ii) upon
notification to the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party’s obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party;

 

(c)           by Purchaser, upon five
(5) Business Days’ prior written notice to the Sellers’ Representative, if (i)
Purchaser is not determined to be the Winning Bidder (as defined in, and in
accordance with, the Bidding Procedures Order) upon the conclusion of the
Auction, (ii) the Sale Approval Order and any other order in accordance with Section 6.5(e) relating to the assignment
of the Assumed Contracts shall not have been entered within three (3) Business
Days following the date of the Sale Hearing or (iii) the Closing has not taken
place by the 120th day following the date of the Auction, other than
by reason of a material breach of this Agreement by Purchaser; or

 

(d)           by the Sellers, upon
five (5) Business Days’ prior written notice to Purchaser, if the Closing has
not taken place by the 270th day following the date of the Auction,
other than by reason of a material breach of this Agreement by the Sellers.

 

The time periods for termination of this
Agreement set forth in Sections 9.1(c)(iii) and
9.1(d) may be extended by mutual
written agreement of the Sellers and Purchaser without further order of the
Bankruptcy Court.

 

9.2           Effect of Termination.

 

(a)           If this Agreement is
validly terminated pursuant to Section 9.1,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party (or any of their respective
officers, directors, employees, partners, agents or other representatives or
Affiliates), except as provided in the next succeeding sentence and except that
the provisions in Sections 9.3, 9.16 and 9.21
will continue to apply following any such termination.  Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to Sections 9.1(b), (c) and (d), the
Sellers will remain liable to Purchaser for any breach of this Agreement by the
Sellers existing at the time of such

 

39

 

termination, and Purchaser will remain liable
to the Sellers for any breach of this Agreement by Purchaser existing at the
time of such termination.  Failure of
any party to satisfy any of the conditions set forth in Sections 7.1 or 7.2 of this Agreement shall not be deemed a breach of this
Agreement by such party except to the extent that such failure also constitutes
a breach of a representation, warranty or covenant.

 

(b)           Notwithstanding the
provisions of Section 9.2(a),
above:

 

(i)            if Purchaser or the
Sellers terminate this Agreement pursuant to Section
9.1(a) or Section 9.1(b)(ii),
Purchaser shall receive the prompt return of the Deposit;

 

(ii)           if Purchaser terminates
this Agreement pursuant to Section 9.1(b)(i) or
Section 9.1(c), Purchaser shall
receive the prompt return of the Deposit;

 

(iii)          if the Sellers terminate
this Agreement pursuant to Section 9.1(b)(i),
the Sellers shall receive, as their sole and exclusive remedy available under
any Law, including the Bankruptcy Code, the Deposit; and

 

(iv)          if the Sellers terminate
this Agreement pursuant to Section 9.1(d),
Purchaser shall receive the prompt return of the Deposit.

 

9.3           Expenses.  Except as otherwise set forth herein, each
party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions contemplated hereby.  Purchaser and the Sellers shall each pay one half of all filing
fees required to be paid to the Federal Trade Commission pursuant to the HSR
Act.  Notwithstanding the foregoing, in
the event Purchaser is not the Winning Bidder (as defined in, and in accordance
with, the Bidding Procedures Order) at the Auction, the Sellers will reimburse
Purchaser for all reasonable expenses incurred by Purchaser up to the date of
the Auction, including but not limited to financing commitment fees, up to an
aggregate amount of $1,500,000.

 

9.4           Amendment.  This Agreement may not be modified, amended,
altered or supplemented except by a written agreement executed by Purchaser and
the Sellers.

 

9.5           Entire Agreement.  This Agreement, together with the Exhibits and Schedules hereto
and the instruments and other documents delivered pursuant to this Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof, and supersede all prior agreements, understandings, representations,
warranties and covenants of any kind between the parties.  All others are specifically waived.

 

40

 

9.6           Waivers.  Waiver by any party of any breach of or
failure to comply with any provision of this Agreement by the other party shall
not be construed as, or constitute, a continuing waiver of such provision, or a
waiver of any other breach of, or failure to comply with, any other provision
of this Agreement.  No waiver of any
such breach or failure or of any term or condition of this Agreement shall be
effective unless in a written notice signed by the waiving party and delivered,
in the manner required for notices generally, to each affected party.

 

9.7           Notices.  All notices and other communications
hereunder shall be validly given or made if in writing, (i) when delivered
personally (by courier service or otherwise), (ii) when sent by telecopy, or
(iii) when actually received if mailed by first-class certified or registered
United States mail or recognized overnight courier service, postage-prepaid and
return receipt requested, and all legal process with regard hereto shall be
validly served when served in accordance with applicable law, in each case to
the address of the party to receive such notice or other communication set
forth below, or at such other address as any party hereto may from time to time
advise the other parties pursuant to this Subsection:

 

If to the
Sellers:

 

Tender Loving
Care Health Care Services, Inc.

1983 Marcus Avenue

Lake Success, New York 11042

Telephone:     (516) 358-1000

Telecopier:     (516) 327-3373

Attention:       Chief Restructuring Officer
& General Counsel

 

with a copy
to:

 

Klestadt &
Winters, LLP

381 Park Avenue South, 12th Floor

New York, NY 10016-8806

Telephone:     (212) 972-3000

Telecopier:     (212) 972-2245

Attention:       Tracy L. Klestadt, Esq.

 

and

 

Fulbright
& Jaworski, LLP

801 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2623

Telephone:     (202) 662-0200

Telecopier:     (202) 661-4643

Attention:       Frederick Robinson, Esq.

 

41

 

If to
Purchaser:

 

Charter TLC,
Inc.

c/o Charterhouse Group International, Inc.

535 Madison Avenue

New York, NY 10022

Telephone:     (212) 584-3200

Telecopier:     (212) 750-9704

Attention:       Jim Silver

 

with a copy
to:

 

Proskauer Rose
LLP

1585 Broadway

New York, New York  10036

Telephone:     (212) 969-3000

Telecopier:     (212) 969-2900

Attention:       Stephen W. Rubin, Esq.

 

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

 

9.9           Governing
Law.  All disputes arising out
of or related to this Agreement, including, without limitation, any dispute
relating to the interpretation, meaning or effect of any provision hereof, will
be resolved in the Bankruptcy Court and the parties hereto will each submit to
the exclusive jurisdiction of the Bankruptcy Court for the purposes of
adjudicating any such dispute, to the extent the jurisdiction of the Bankruptcy
Court is applicable.  If the
jurisdiction of the Bankruptcy Court is not applicable, any legal action, suit
or proceeding arising out of or relating to this Agreement, each and every
agreement and instrument contemplated hereby or the transactions contemplated
hereby and thereby shall be instituted in any Federal court of the Eastern
District of New York.  This Agreement
shall be governed by and construed in accordance with the internal laws of the
State of New York (i.e., without
regard to its conflicts of law rules).

 

9.10         Binding Effect; Third Party
Beneficiaries; Assignment.  This
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective legal representatives, successors
and permitted assigns.  Except as
expressly set forth herein, nothing expressed or referred to in this Agreement
is intended or shall by construed to give any Person other than the parties to
this Agreement, or their respective legal representatives, successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.  Neither party may assign this Agreement nor any of its rights
hereunder, other than any right to payment of a liquidated sum, nor delegate
any of its obligations hereunder, without the prior written consent of the
other, except that Purchaser may assign its rights under this Agreement to any
Affiliate or to any Person providing financing for the transaction.  Purchaser may assign the Assets to any of
its Subsidiaries or Affiliates, except as prohibited by applicable health care
law.

 

42

 

9.11         Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction, and any such provision, to the extent invalid or
unenforceable, shall be replaced by a valid and enforceable provision which
comes closest to the intention of the parties underlying such invalid or
unenforceable provision.

 

9.12         Specific Performance.  Notwithstanding anything to the contrary
contained herein, each party hereto acknowledges that money damages would be
incalculable and an insufficient remedy for any breach of this Agreement by
such party and that any such breach would cause the other party hereto
irreparable harm.  Accordingly, each
party hereto also agrees that, in the event of any breach or threatened breach
of the provisions of this Agreement by such party, the other party hereto shall
be entitled to equitable relief without the requirement of posting a bond or
other security, including in the form of injunctions and orders for specific
performance.

 

9.13         Headings.  The headings contained in this Agreement are
for reference purposes only and shall not modify define, limit, expand or
otherwise affect in any way the meaning or interpretation of this Agreement.

 

9.14         No
Agency.  Except as provided in Section 9.15 hereof, no party hereto shall
be deemed hereunder to be an agent of, or partner or joint venturer with, any
other party hereto.

 

9.15         Sellers’ Representative.  Each Seller hereby irrevocably appoints
Tender Loving Care Health Care Services, Inc. (the “Sellers’ Representative”) as its true
and lawful attorney-in-fact and agent, with full power of substitution or
resubstitution, to act solely and exclusively on behalf of such Seller with
respect to any matters relating to this Agreement and any document, certificate
or other agreement to be executed and delivered by or on behalf of any Seller
pursuant hereto, with the full power, without the consent of the Sellers or any
of them, to exercise as it in its sole discretion deems appropriate, all of the
powers which any Seller could exercise under the provisions of this Agreement
or any document, certificate or other agreement to be executed and delivered by
or on behalf of any Seller pursuant hereto, including, without limitation, to
(i) accept and give notices hereunder or thereunder on behalf of any or all of
the Sellers, (ii) consent to any modification or amendment hereof or thereof or
(iii) give any waiver or consent hereunder or thereunder.  Sellers’ Representative does hereby accept
such appointment.  Purchaser shall be
entitled to rely exclusively upon such notices, waivers, consents, amendments,
modifications and other acts of the Sellers’ Representative as being the
binding acts of the Sellers or any of them, and Purchaser shall be entitled to
deliver any notices, payments or other items required to be delivered by it to
any Seller hereunder or thereunder only to the Sellers’ Representative, and any
such delivery shall be fully effective as if it were made directly to any
relevant Seller.  Sellers’
Representative shall not effect any substitution for himself as the Sellers’
Representative without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld.  In
the event that Sellers’ Representative is dissolved or merged out of existence,
the Sellers shall promptly designate a new Sellers’ Representative.

 

43

 

9.16                         Public and Private Announcements.  Prior to Closing, neither Purchaser nor any
Seller will issue or cause the publication of any press release or otherwise
make any public and/or private statement with respect to the transactions
contemplated hereby without the prior written consent of the parties hereto,
except with regard to certain negotiations or communications by the Sellers
with any or all competing bidders as contemplated under the Bidding Procedures
Order, provided, that any party hereto may make a public and/or private announcement
to the extent required by law, judicial process or the rules, regulations or
interpretations of the Securities and Exchange Commission or any national
securities exchange.

 

9.17                         Preservation and Access to Records
After Closing.    (a)    With
regard to patient records relating to the Business, from and after the Closing
Date, Purchaser shall maintain the patient records held at the Facilities as of
the Closing Date relating to periods prior to the Closing Date in accordance
with applicable law, and in a manner consistent with the policies and
procedures of the Sellers governing maintenance of patient records generated at
the Facilities.

 

(b)           Purchaser acknowledges
that, as a result of purchasing the Assets, it will gain access to patient and
other information that is subject to statutes, laws, rules, and regulations
regarding confidentiality, and agrees to abide by such statutes, laws, rules,
and regulations with regard to such confidential information.

 

(c)           Purchaser acknowledges
that following the Closing Date, the Sellers may need access to information or
documents in the control or possession of Purchaser for the purposes of
concluding the transactions contemplated hereby, audits, compliance with
governmental requirements and regulations, and the prosecution or defense of
claims.  Accordingly, Purchaser agrees
that following the Closing Date it shall make reasonably available to the
Sellers, their representatives, agents or independent auditors, and/or any governmental
agencies or authorities designated by the Sellers, upon written request,
consistent with applicable law, and at the expense of the Sellers, such
documents and information as may be available relating to the Business for
periods prior and subsequent to the Closing Date to the extent necessary to
facilitate concluding the transaction herein contemplated, audits, compliance
with governmental requirements and regulations, and the prosecution or defense
of claims or other causes of action retained by the Sellers.  Subsequent to the Closing Date, Purchaser
shall make available to Sellers’ Representative and it’s counsel the Sellers’
books and records, for the purposes of, inter alia, (i) complying with the
terms of this Agreement or applicable law and (ii) resolving all claims against
the Sellers scheduled or filed in the Bankruptcy Cases and any claims to which
the Sellers have retained liabilities.

 

9.18         Sellers’ Knowledge Qualifications.  Whenever the Sellers’ make any
representation, warranty or other statement to the Sellers’ knowledge, Sellers’
knowledge means the knowledge, after due inquiry, of each of the persons set
forth on Schedule 9.18 hereto.

 

9.19         Accounting
Terms.  Any accounting terms
used in this Agreement shall, unless otherwise defined in this Agreement, have
the meaning ascribed thereto by GAAP.

 

44

 

9.20         Interpretation.  In this Agreement, unless a contrary
intention appears, (i) the words “herein”, “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and to any certificates
delivered pursuant hereto; and (ii) reference to any Article or Section means
such Article or Section hereof.

 

9.21         Confidentiality.     Prior to Closing, any
information obtained or derived by Purchaser as a result of its Clinical Due
Diligence Review shall be maintained strictly confidential, shall be used
solely for the purposes contemplated by this Agreement, and shall not be
disclosed to any third party except to the extent that such disclosure is
specifically required by law.  Purchaser
further agrees that, not less than five (5) Business Days prior to disclosing
any confidential information pursuant to the first sentence of this Section 9.21, it will inform the Sellers of
the circumstances requiring disclosure, unless providing such disclosure is
itself prohibited by law.

 

45

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first above
written.

 

	
   

  	
  TENDER LOVING CARE HEALTH CARE

  
	
   

  	
  SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  T.L.C. HOME HEALTH CARE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALBERT GALLATIN HOME CARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  STAFF BUILDERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STAFF BUILDERS INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

46

 

	
   

  	
  CARECO, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENDER LOVING CARE HOME CARE

  
	
   

  	
  SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  T.L.C. MIDWEST, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. ETHICARE CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  T.L.C. MEDICARE SERVICES OF DADE,

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

47

 

	
   

  	
  T.L.C. MEDICARE SERVICES OF

  
	
   

  	
  BROWARD, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. ETHICARE CHAUTAUQUA CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ETHICARE CERTIFIED SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. ETHICARE ERIE CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. ETHICARE NIAGARA CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

48

 

	
   

  	
  S.B.H.F., INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STAFF BUILDERS SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  STAFF BUILDERS HOME HEALTH

  
	
   

  	
  CARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ST. LUCIE HOME HEALTH AGENCY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  A RELIABLE HOMEMAKER OF MARTIN

  
	
   

  	
  ST. LUCIE COUNTY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James K. Happ

  	
   

  
	
   

  	
   

  	
  Name: James K. Happ

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

49

 

	
   

  	
  CHARTER TLC, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lori Hess

  	
   

  
	
   

  	
   

  	
  Name: Lori Hess

  
	
   

  	
   

  	
  Title: Vice President

  

 

50Exhibit 4.1

                           AUTO-Q INTERNATIONAL, INC.

                FISCAL 2004 EQUITY CONSULTANT COMPENSATION PLAN.

     AUTO-Q INTERNATIONAL, INC., a Delaware corporation (the "Company"), hereby
adopts The Fiscal 2004 Equity Consultant Compensation Plan (the "Plan") this 8th
day of January 2004. Under the Plan, the Company may issue shares of the
Company's common stock or grant options to acquire the Company's common stock,
par value $0.001 (the "Stock"), from time to time to consultants or advisors of
the Company or its subsidiaries, all on the terms and conditions set forth
herein. In addition, at the discretion of the Board of Directors, Shares may
from time to time be granted under this Plan to other individuals, including
consultants or advisors, who contribute to the success of the Company or its
subsidiaries, provided that bona fide services shall be rendered by consultants
and advisors, and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction.

1. Purpose of the Plan.
   --------------------

     The Plan is intended to aid the Company in rewarding those individuals who
have contributed to the success of the Company. The Company has designed this
Plan to permit the Company to reward those individuals who are not employees of
the Company but who management perceives to have contributed to the success of
the Company or who are important to the continued business and operations of the
Company. The above goals will be achieved through the granting of Shares.

2. Administration of this Plan.
   ----------------------------

     Administration of this Plan shall be determined by the Company's Board of
Directors (the "Board"). Subject to compliance with applicable provisions of the
governing law, the Board may delegate administration of this Plan or specific
administrative duties with respect to this Plan on such terms and to such
committees of the Board as it deems proper (hereinafter the Board or its
authorized committee shall be referred to as "Plan Administrators"). The
interpretation and construction of the terms of this Plan by the Plan
Administrators thereof shall be final and binding on all participants in this
Plan absent a showing of demonstrable error. No member of the Plan
Administrators shall be liable for any action taken or determination made in
good faith with respect to this Plan. Any shares approved by a majority vote of
those Plan Administrators attending a duly and properly held meeting shall be
valid. Any shares approved by the Plan Administrators shall be approved as
specified by the Board at the time of delegation.

3. Shares of Stock Subject to this Plan.
   -------------------------------------

     The total number of shares issues pursuant to this Plan shall not exceed
10,000,000 shares. If any right to acquire Stock granted under this Plan is
exercised by the delivery of shares of Stock or the relinquishment of rights to
shares of Stock, only the net shares of Stock issued (meaning the shares of
stock issued less the shares of Stock surrendered) shall count against the total
number of shares reserved for issuance under the terms of this Plan.

<PAGE>

4. Reservation of Stock on Granting of Rights.
   -------------------------------------------

     At the time any right is granted under the terms of this Plan, the Company
will reserve for issuance the number of shares of Stock subject to such right
until that right is exercised or expires. The Company may reserve either
authorized but unissued shares or issued shares reacquired by the Company.

5. Eligibility.
   ------------

     The Plan Administrators may grant shares to individuals who are not
employees of the Company or its subsidiaries, including consultants and
advisors, provided that such consultants and advisors render bona fide services
to the Company or its subsidiaries and such services are not rendered in
connection with the offer or sale of securities in a capital-raising
transaction. In any case, the Plan Administrators shall determine, based on the
foregoing limitations and the Company's best interests, which consultants and
advisors are eligible to participate in this Plan. Shares shall be in the
amounts, and shall have the rights and be subject to the restrictions, as may be
determined by the Plan Administrators, all as may be within the provisions of
this Plan.

6. Terms of Grants and Certain Limitations on Right to Exercise.
   -------------------------------------------------------------

a. Each right to shares may have its terms established by the Plan
Administrators at the time the right is granted.

b. The terms of the right, once it is granted, may be reduced only as provided
for in this Plan and under the express written provisions of the grant.

c. Unless otherwise specifically provided by the written provisions of the grant
or required by applicable disclosure or other legal requirements promulgated by
the Securities and Exchange Commission ("SEC"), no participant of this Plan or
his or her legal representative, legatee, or distributee will be, or shall be
deemed to be, a holder of any shares subject to any right unless and until such
participant exercises his or her right to acquire all or a portion of the Stock
subject to the right and delivers any required consideration to the Company in
accordance with the terms of this Plan and then only as to the number of shares
of Stock acquired. Except as specifically provided in this Plan or as otherwise
specifically provided by the written provisions of any grant, no adjustment to
the exercise price or the number of shares of Stock subject to the grant shall
be made for dividends or other rights for which the record date is prior to the
date on which the Stock subject to the grant is acquired by the holder.

d. Rights shall vest and become exercisable at such time or times and on such
terms as the Plan Administrators may determine at the time of the grant of the
right.

e. Grants may contain such other provisions, including further lawful
restrictions on the vesting and exercise of the grant as the Plan Administrators
may deem advisable.

f. In no event may a grant be exercised after the expiration of its term.

g. Grants shall be non-transferable, except by the laws of descent and
distribution.

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<PAGE>

7. Exercise Price.
   ---------------

     The Plan Administrators shall establish the exercise price payable to the
Company for shares to be obtained pursuant to any purchase options which
exercise price may be amended from time to time as the Plan Administrators shall
determine.

8. Payment of Exercise Price.
   --------------------------

     The exercise of any option shall be contingent on receipt by the Company of
the exercise price paid in either cash, certified or personal check payable to
the Company.

9. Dilution or Other Adjustment.
   -----------------------------

     The shares of Common Stock subject to this Plan and the exercise price of
outstanding options are subject to proportionate adjustment in the event of a
stock dividend on the Common Stock or a change in the number of issued and
outstanding shares of Common Stock as a result of a stock split, consolidation,
or other re-capitalization. The Company, at its option, may adjust the grants
and rights made hereunder, issue replacements, or declare grants void.

10. Options to Foreign Nationals.
    -----------------------------

         The Plan Administrators may, in order to fulfill the purpose of this
     Plan and without amending this Plan, grant Options to foreign nationals or
individuals residing in foreign countries that contain provisions, restrictions,
and limitations different from those set forth in this Plan and the Options made
to United States residents in order to recognize differences among the countries
in law, tax policy, and custom. Such grants shall be made in an attempt to give
such individuals essentially the same benefits as contemplated by a grant to
United States residents under the terms of this Plan.

11. Listing and Registration of Shares.
    -----------------------------------

     Each grant shall be subject to the requirement that if at any time the Plan
Administrators shall determine, in their sole discretion, that it is necessary
or desirable to list, register, or qualify the shares covered thereby on any
securities exchange or under any state or federal law, or obtain the consent or
approval of any governmental agency or regulatory body as a condition of, or in
connection with, the granting of such rights or the issuance or purchase of
shares thereunder, such right may not be exercised in whole or in part unless
and until such listing, registration, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Plan
Administrators.

12. Expiration and Termination of this Plan.
    ----------------------------------------

     This Plan may be abandoned or terminated at any time by the Plan
Administrators except with respect to any rights then outstanding under this
Plan. This Plan shall otherwise terminate on the earlier of the date that is
five years from the date first appearing in this Plan or the date on which the
10,000,000th share is issued hereunder.

13. Amendment of this Plan.
    -----------------------

     This Plan may not be amended more than once during any six month period,
other than to comport with changes in the Code or the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder. The Plan

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<PAGE>

Administrators may modify and amend this Plan in any respect; provided, however,
that to the extent such amendment or modification would cause this Plan to no
longer comply with the applicable provisions of the Code governing incentive
stock options as they may be amended from time to time, such amendment or
modification shall also be approved by the shareholders of the Company.

ATTEST:

/s/  Tom Lam
-------------------------------
     Tom Lam, Chairman
     Principal Executive Officer

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