Document:

EX 10.5

     

     

    EXHIBIT
      10.5

     

    WARRANT
      ASSIGNMENT AGREEMENT

    
      

      This
        Warrant Assignment Agreement (this “Assignment”)
        is
        made and entered into as of the ___ day of September 2008 (the
“Effective
        Date”),
        by
        and between ________________ (the “Assignor”)
        and
        _______________ (the “Assignee”).

       

      RECITALS:

       

      WHEREAS,
        the Assignor is the owner of certain warrants (the “Warrants”)
        to
        purchase shares of common stock, par value $0.001 per share (the “Stock”),
        issued
        by Purple Beverage Company, Inc., a Nevada corporation (“Company”)
        as set
        forth on Exhibit
        A
        annexed
        hereto, at an initial exercise price of $2.00 per share, issued in connection
        with Assignor’s purchase of Common Stock and Warrants during December 2007
        pursuant to a Subscription Agreement by and between Assignor and Company
        (the
“Subscription
        Agreement”);
        

      

      WHEREAS,
        Company has registered for resale 3,681,650 shares of Stock underlying the
        Warrants under the Securities Act of 1933, as amended, and Assignee desires
        to
        acquire up to such number of registered shares in one or more
        closings;

      

      WHEREAS,
        the Company has amended the Warrants to (i) reduce the exercise price of
        all
        unexercised Warrants to $0.40 per share, (ii) grant to the Assignor of the
        Warrants, newly-issued restricted shares of the Company’s Stock in an amount
        equal to 15% of the amount of Stock into which each unexercised Warrant is
        currently exercisable, (iii) permit the transfer and assignment of registered
        Warrants with the reduced exercise price of $0.40 per share, and (iv) and
        has
        consented to the other transactions contemplated hereby, subject to the terms
        and conditions hereof; 

      

      WHEREAS,
        the Assignor acknowledges
        and agrees that it is in Assignor’s interest that the Company seek to obtain
        financing from the exercise of the Warrants and that Assignor has been offered
        the opportunity to exercise the Warrants owned by Assignor and determined
        to
        effectuate this transfer and assignment and that the exercise of Warrants
        provides a benefit to Assignor by providing additional capital to the Company,
        and that such is additional consideration for the assignment, and therefore
        Assignor has elected to and desires
        to sell, transfer, assign and convey the Warrants to the Assignee and Assignee
        desires to exercise such Warrants for cash contemporaneously or following
        such
        assignment.

      

      NOW,
        THEREFORE, for good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, the parties to this Assignment hereby agree
        as
        follows:

      

      
        	 	
                1.

              	
                Assignment
                  of Interest.
                  In consideration of the payment of the Assignment Price to Assignor,
                  Assignor hereby sells, transfers, assigns and conveys to the Assignee,
                  as
                  of the Effective Date, all of Assignor’s right, title and interest in and
                  to the Warrants, free and clear of all liens, encumbrances, security
                  interests, claims or options and hereby irrevocably constitutes
                  and
                  appoints the officers of the Company as Assignor’s attorney-in-fact to
                  transfer the Warrants as well as underlying Stock upon exercise
                  of the
                  Warrants on the books

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      and
        transfer records of the Company. Assignor and Assignee agree that neither
        party
        is making any representation or warranty to the other, except as expressly
        set
        forth in this Agreement.

       

      
        	 	
                2.

              	
                Acceptance.
                  The Assignee hereby accepts the assignment of the Warrants and
                  expressly
                  assumes and promises to perform all obligations of Assignor under
                  the
                  Warrants. Assignee represents and warrants it is an “accredited investor”
                  as such term is defined in Rule 501(a) promulgated under the Securities
                  Act of 1933, as amended.

              

      

       

      
        	 	
                3.

              	
                Assignment
                  Price.
                  The Assignment Price of the Assignment hereunder shall be $0.01
                  per
                  share.

              

      

       

      
        	 	
                4.

              	
                Exercise.
                  Assignee agrees to exercise the Warrant in
                  such amount as shall be set forth in duly executed warrant exercise
                  forms
                  approved for such purpose in the form approved by the Company and
                  attached
                  to the form of Warrant as Exhibit A thereto, and
                  agrees to transmit the warrant exercise price (number of shares
                  set forth
                  in Exhibit A multiplied by $0.40 per share) to the following within
                  two
                  (2) business days of the date of such
                  exercise:

              

      

       

      Receiving
        Bank

      ABA
        Wire # 063 000 021

      Wachovia
        Bank

      350
        East
        Las Olas Blvd, Suite 1800

      Ft
        Lauderdale, FL 33301

      (T)
        954-765-3920

      

      Beneficiary

      Account
        # 200 003 459 5990

      Purple
        Beverage Company, Inc

      450
        East
        Las Olas Blvd, Suite 830

      Ft
        Lauderdale, FL 33301

      (T)
        954-462-8382

      

      Assignee
        shall deliver to Company an exercise notice in the form approved by the Company
        and attached to the form of Warrant as Exhibit A thereto.

       

      
        	 	
                5.

              	
                Condition
                  Precedent.
                  A
                  condition precedent to the Assignment of the Warrant to the Assignee
                  and
                  the issuance of new warrants to Assignor and Assignee shall be
                  Company’s
                  receipt of the consent of the holders of Warrants and Shares (as
                  defined
                  in the Subscription Agreement) including underlying unexercised
                  Warrants,
                  sufficient to authorize the transactions contemplated hereby (including
                  as
                  set forth in paragraph 6 hereof) and thereupon the Assignment shall
                  become
                  effective.

              

      

       

      
        	 	
                6.

              	
                Consent
                  and Amendment of Warrant.
                  By their execution below, Company, Assignor (in Assignor’s capacity as
                  Warrant holder with respect to the Warrants and in Assignor’s capacity as
                  owner of Shares as defined in and purchased pursuant to the Subscription
                  Agreement) and Assignee hereby consent to the Assignment of the
                  Warrants
                  provided herein, and all other transactions, amendments, modifications
                  and
                  waivers to the Warrants as contemplated herein, such consent to
                  be
                  effective upon the receipt of the written consent in accordance
                  with
                  Section 13(b) and 13 (h) of the Subscription Agreement for the
                  Shares
                  and

              

      

       

      
        
          
          

        

        
          -
            2 -

          
            

          

        

        
          
          

        

      

      the
        Warrants which shall constitute an amendment to the Subscription Agreement
        and
        all documents and agreements related thereto.

       

      
        	 	
                7.

              	
                Listing
                  Application.
                  Company agrees it shall use its best efforts to submit an AMEX
                  listing
                  application (or other national exchange as determined by the Board
                  of
                  Directors) prior to January 30,
                  2009.

              

      

       

      
        	 	
                8.

              	
                Future
                  Cooperation.
                  Company, Assignor and Assignee mutually agree to cooperate at all
                  times
                  from and after the date hereof with respect to any of the matters
                  described herein, and to execute any further agreements or documents
                  as
                  may be reasonably requested by the other party for the purpose
                  of giving
                  effect to, evidencing or giving notice of the transaction evidenced
                  by
                  this Assignment.

              

      

       

      
        	 	
                9.

              	
                Counterparts.
                  This Assignment may be executed in any number of counterparts,
                  all of
                  which taken together shall constitute one and the same
                  Assignment.

              

      

       

      
        	 	
                10.

              	
                Governing
                  Law.
                  This
                  Agreement shall be governed by and construed in accordance with
                  the
                  internal laws of the State of New York without regard to principles
                  of
                  conflicts of laws. Any action brought by any party to this Agreement
                  against any other party concerning the transactions contemplated
                  by this
                  Agreement shall be brought only in the state courts of New York
                  or in the
                  federal courts located in the state and county of New York. The
                  parties to
                  this Agreement hereby irrevocably waive any objection to jurisdiction
                  and
                  venue of any action instituted hereunder and shall not assert any
                  defense
                  based on lack of jurisdiction or venue or based upon forum
                  non conveniens.
                  The
                  Parties executing this Agreement and other agreements referred
                  to herein
                  or delivered in connection herewith on behalf of the Company agree
                  to
                  submit to the in personam jurisdiction of such courts and hereby
                  irrevocably waive trial by jury. The
                  prevailing Party shall be entitled to recover from the other Party
                  its
                  reasonable attorney’s fees and costs. In the event that any provision of
                  this Agreement or any other agreement delivered in connection herewith
                  is
                  invalid or unenforceable under any applicable statute or rule of
                  law, then
                  such provision shall be deemed inoperative to the extent that it
                  may
                  conflict therewith and shall be deemed modified to conform with
                  such
                  statute or rule of law. Any such provision which may prove invalid
                  or
                  unenforceable under any law shall not affect the validity or
                  enforceability of any other provision of any
                  agreement.

              

      

       

      

        
          
            
            

          

          
            -
              3 -

            
              

            

          

          
            
            

          

        

      IN
        WITNESS WHEREOF, the undersigned have executed this Assignment effective
        as of
        the Effective Date.

       

      ASSIGNOR:

       

       

      By: 
        _____________________________

      Name:

      Title:

       

       

      ASSIGNEE:

       

       

      By: 
        _____________________________

      Name:

      Title:

       

      AGREED
        AND ACCEPTED:

       

      COMPANY

       

       

       

      By: 
        _____________________________

      Name:

      Title:

      

      

      
        
          
          

        

        
          -
            4 -

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

      

      

      REGISTERED
        WARRANTS OWNED            ______________________________

      

      REGISTERED
        WARRANTS ASSIGNED          ______________________________

       

       

       

      -
        5
        -PURCHASE
      AGREEMENT

     

    by
      and
      between

     

    HALLMARK
      FINANCIAL SERVICES, INC.,

     

    and

     

    JEFFREY
      L. HEATH

     

    DATED
      AS
      OF
      AUGUST
      29, 2008

     

      
        

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

    

      
        	 	 	 	
                Page

              
	 	 	 
	
                ARTICLE
                  I

              	
                TERMS
                  OF THE PURCHASE AND SALE

              	
                1

              
	
                Section
                  1.1

              	 	
                Sale
                  of Interests

              	
                1

              
	
                Section
                  1.2

              	 	
                Purchase
                  Price

              	
                1

              
	
                Section
                  1.3

              	 	
                Payment
                  of the Purchase Price

              	
                2

              
	
                ARTICLE
                  II

              	 	
                CLOSING

              	
                2

              
	
                Section
                  2.1

              	 	
                Closing

              	
                2

              
	
                Section
                  2.2

              	 	
                Deliveries
                  by the Seller

              	
                2

              
	
                Section
                  2.3

              	 	
                Deliveries
                  by Purchaser

              	
                3

              
	
                Section
                  2.4

              	 	
                Simultaneous
                  Deliveries

              	
                3

              
	
                Section
                  2.5

              	 	
                Adjustment
                  Amount

              	
                3

              
	 	 	 
	
                ARTICLE
                  III

              	
                REPRESENTATIONS
                  AND WARRANTIES OF SELLER

              	
                4

              
	
                Section
                  3.1

              	 	
                Title
                  to Interest

              	
                4

              
	
                Section
                  3.2

              	 	
                Power
                  and Authority

              	
                4

              
	
                Section
                  3.3

              	 	
                Execution
                  and Validity

              	
                4

              
	
                Section
                  3.4

              	 	
                No
                  Conflict; Consents

              	
                4

              
	
                Section
                  3.5

              	 	
                Company
                  Organization; Good Standing; Delivery of Charter Documents

              	
                5

              
	
                Section
                  3.6

              	 	
                Corporate
                  Power and Authority

              	
                5

              
	
                Section
                  3.7

              	 	
                Capitalization

              	
                5

              
	
                Section
                  3.8

              	 	
                No
                  Undisclosed Claims

              	
                5

              
	
                Section
                  3.9

              	 	
                Sufficiency
                  and Condition of and Title to the Company Assets

              	
                5

              
	
                Section
                  3.10

              	 	
                Real
                  and Personal Property

              	
                6

              
	
                Section
                  3.11

              	 	
                Compliance
                  with Laws

              	
                6

              
	
                Section
                  3.12

              	 	
                Insurance

              	
                7

              
	
                Section
                  3.13

              	 	
                Contracts

              	
                7

              
	
                Section
                  3.14

              	 	
                Litigation;
                  Orders

              	
                7

              
	
                Section
                  3.15

              	 	
                Licenses

              	
                8

              
	
                Section
                  3.16

              	 	
                Intangible
                  Assets

              	
                8

              
	
                Section
                  3.17

              	 	
                Employees

              	
                8

              
	
                Section
                  3.18

              	 	
                Employee
                  Benefits

              	
                9

              
	
                Section
                  3.19

              	 	
                Taxes

              	
                11

              
	
                Section
                  3.20

              	 	
                Bank
                  Accounts; Powers of Attorney

              	
                11

              
	
                Section
                  3.21

              	 	
                Affiliated
                  Transactions

              	
                11

              
	
                Section
                  3.22

              	 	
                Books
                  and Records

              	
                12

              
	
                Section
                  3.23

              	 	
                Full
                  Disclosure

              	
                12

              
	
                Section
                  3.24

              	 	
                Brokers

              	
                12

              
	
                Section
                  3.25

              	 	
                Absence
                  of Sensitive Payments

              	
                12

              
	
                Section
                  3.26

              	 	
                Financial
                  Information

              	
                12

              
	 	 	 
	
                ARTICLE
                  IV

              	
                REPRESENTATIONS
                  AND WARRANTIES OF PURCHASER

              	
                13

              
	
                Section
                  4.1

              	 	
                Organization;
                  Good Standing; Delivery of Charter Documents

              	
                13

              
	
                Section
                  4.2

              	 	
                Power
                  and Authority

              	
                13

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  4.3

              	 	
                Authorization;
                  Execution and Validity

              	
                13

              
	
                Section
                  4.4

              	 	
                No
                  Conflict; Purchaser Consents

              	
                13

              
	
                Section
                  4.5

              	 	
                Full
                  Disclosure

              	
                13

              
	
                Section
                  4.6

              	 	
                Brokers

              	
                13

              
	
                Section
                  4.7

              	 	
                Investment
                  Representations

              	
                14

              
	 	 	 
	
                ARTICLE
                  V

              	
                COVENANTS
                  OF SELLER

              	
                14

              
	
                Section
                  5.1

              	 	
                Cooperation
                  of the Seller

              	
                14

              
	
                Section
                  5.2

              	 	
                Pre-Closing
                  Access to Information

              	
                14

              
	
                Section
                  5.3

              	 	
                Conduct
                  of Business

              	
                14

              
	
                Section
                  5.4

              	 	
                No
                  Business Changes

              	
                15

              
	
                Section
                  5.5

              	 	
                Supplements
                  to Schedules

              	
                15

              
	
                Section
                  5.6

              	 	
                Standstill

              	
                15

              
	
                Section
                  5.7

              	 	
                Discharge
                  of Encumbrances

              	
                16

              
	
                Section
                  5.8

              	 	
                Non-Disclosure;
                  Non-Competition; Non-Solicitation

              	
                16

              
	 	 	 
	
                ARTICLE
                  VI

              	
                COVENANTS
                  OF PURCHASER

              	
                18

              
	
                Section
                  6.1

              	 	
                Cooperation
                  by Purchaser

              	
                18

              
	 	 	 
	
                ARTICLE
                  VII

              	
                MUTUAL
                  COVENANTS

              	
                19

              
	
                Section
                  7.1

              	 	
                Fees
                  and Expenses

              	
                19

              
	
                Section
                  7.2

              	 	
                Governmental
                  Consents

              	
                19

              
	
                Section
                  7.3

              	 	
                Consents
                  to Assign Leases and Contracts

              	
                19

              
	
                Section
                  7.4

              	 	
                Licenses

              	
                19

              
	
                Section
                  7.5

              	 	
                Further
                  Assurances

              	
                19

              
	
                Section
                  7.6

              	 	
                Supplemental
                  Agreements

              	
                20

              
	
                Section
                  7.7

              	 	
                Tax
                  Matters

              	
                20

              
	
                Section
                  7.8

              	 	
                Employee
                  Benefit Plans; Employment

              	
                24

              
	
                Section
                  7.9

              	 	
                Pre-Closing
                  Restructuring

              	
                24

              
	 	 	 
	
                ARTICLE
                  VIII

              	
                CONDITIONS
                  PRECEDENT TO CLOSING

              	
                25

              
	
                Section
                  8.1

              	 	
                Conditions
                  Precedent to Purchaser’s Obligations

              	
                25

              
	
                Section
                  8.2

              	 	
                Conditions
                  Precedent to the Seller’s Obligations

              	
                26

              
	 	 	 
	
                ARTICLE
                  IX

              	
                TERMINATION
                  PRIOR TO CLOSING

              	
                27

              
	
                Section
                  9.1

              	 	
                Termination
                  of Agreement

              	
                27

              
	
                Section
                  9.2

              	 	
                Procedure
                  Upon Termination

              	
                27

              
	 	 	 
	
                ARTICLE
                  X

              	
                INDEMNIFICATION
                  AND OFFSET

              	
                27

              
	
                Section
                  10.1

              	 	
                Indemnification
                  by Seller

              	
                27

              
	
                Section
                  10.2

              	 	
                Indemnification
                  by Purchaser

              	
                28

              
	
                Section
                  10.3

              	 	
                Claims
                  for Indemnification

              	
                28

              
	
                Section
                  10.4

              	 	
                Defense
                  by Indemnifying Party

              	
                29

              
	
                Section
                  10.5

              	 	
                Offset

              	
                29

              
	
                Section
                  10.6

              	 	
                Tax
                  Benefit

              	
                30

              
	
                Section
                  10.7

              	 	
                Characterization
                  of Indemnity Payments

              	
                30

              
	
                Section
                  10.8

              	 	
                Limits
                  on Indemnification; Other Provisions

              	
                30

              
	 	 	 
	
                ARTICLE
                  XI

              	
                MISCELLANEOUS

              	
                30

              
	
                Section
                  11.1

              	 	
                Amendment

              	
                30

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  11.2

              	 	
                Counterparts

              	
                31

              
	
                Section
                  11.3

              	 	
                Entire
                  Agreement

              	
                31

              
	
                Section
                  11.4

              	 	
                Expenses

              	
                31

              
	
                Section
                  11.5

              	 	
                GOVERNING
                  LAW

              	
                31

              
	
                Section
                  11.6

              	 	
                Forum

              	
                31

              
	
                Section
                  11.7

              	 	
                No
                  Assignment

              	
                31

              
	
                Section
                  11.8

              	 	
                No
                  Third Party Beneficiaries

              	
                31

              
	
                Section
                  11.9

              	 	
                Notices

              	
                32

              
	
                Section
                  11.10

              	 	
                Public
                  Announcements

              	
                32

              
	
                Section
                  11.11

              	 	
                Representation
                  by Legal Counsel

              	
                32

              
	
                Section
                  11.12

              	 	
                Schedules

              	
                33

              
	
                Section
                  11.13

              	 	
                Severability

              	
                33

              
	
                Section
                  11.14

              	 	
                Successors

              	
                33

              
	
                Section
                  11.15

              	 	
                Time
                  of the Essence

              	
                33

              
	
                Section
                  11.16

              	 	
                Waiver

              	
                33

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      SCHEDULES

    

     

    
      	
              Schedule
                3.7

            	
              Subsidiaries

            
	
              Schedule
                3.8

            	
              Undisclosed
                Liabilities

            
	
              Schedule
                3.10(b)

            	
              Leased
                Real Property

            
	
              Schedule
                3.10(c)

            	
              Owned
                Personal Property

            
	
              Schedule
                3.10(d)

            	
              Leased
                Personal Property

            
	
              Schedule
                3.10(e)

            	
              Personal
                Property Owned by Others

            
	
              Schedule
                3.12

            	
              Insurance

            
	
              Schedule
                3.13

            	
              Contracts

            
	
              Schedule
                3.14 

            	
              Litigation

            
	
              Schedule
                3.15

            	
              Licenses

            
	
              Schedule
                3.16(a)

            	
              Owned
                Intangible Assets

            
	
              Schedule
                3.16(b)

            	
              Licensed
                Intangible Assets

            
	
              Schedule
                3.17(a)

            	
              Employees

            
	
              Schedule
                3.17(b)

            	
              Employee
                Contracts

            
	
              Schedule
                3.18(a)

            	
              Identification
                of Company Plans and Exceptions

            
	
              Schedule
                3.20

            	
              Bank
                Accounts; Powers of Attorney

            
	
              Schedule
                3.21

            	
              Affiliated
                Transactions

            
	
              Schedule
                3.26

            	
              Financial
                Statements

            
	
              Schedule
                7.3(b)

            	
              Pre-Closing;
                Required Consents

            
	
              Schedule
                7.8(a)

            	
              Assumed
                Plans

            
	
              Schedule
                8.1(i)

            	
              Assets
                and Liabilities

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    PURCHASE
      AGREEMENT

     

    THIS
      PURCHASE AGREEMENT (this “Agreement”),
      dated
      as of August 29, 2008 (the “Signing
      Date”),
      is
      made by and between Hallmark Financial Services, Inc., a Nevada corporation
      (“Purchaser”)
      and
      Jeffrey L. Heath (“Seller”).

     

    PRELIMINARY
      STATEMENTS

     

    A. The
      Seller owns 100% of the outstanding membership interests in each of (a) Heath
      XS, LLC, a New Jersey limited liability company (“HXS”)
      and
      (b) Hardscrabble Data Solutions, LLC, a New Jersey limited liability company
      (“Hardscrabble”,
      and
      together with HXS, the “Companies”).
      Membership interests in HXS are herein referred to as “HXS
      Interests”
and
      membership interests in Hardscrabble are herein referred to as “Hardscrabble
      Interests”.
      The
      Companies, together with Jeffrey L. Heath Inc., a New Jersey corporation
      (“JLH”),
      are
      herein referred to herein as the “Heath Group Entities”.

     

    B. Purchaser
      and Seller are collectively referred to herein as the “Parties”
or
      individually as a “Party.”

     

    C. The
      Seller desires to sell, and the Purchaser desires to purchase, (a) 80% of the
      outstanding HXS Interests and (b) 80% of the outstanding Hardscrabble Interests,
      on the terms and subject to the conditions set forth in this
      Agreement.

     

    E. Capitalized
      terms used in this Agreement and rules of construction are defined or indexed
      in
Appendix A
      for the
      convenience of the reader and in order to eliminate the need for
      cross-references. Appendix A
      is
      incorporated herein by this reference.

     

    STATEMENT
      OF AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual agreements,
      covenants, representations and warranties set forth in this Agreement and for
      other good, valid and binding consideration, the receipt and sufficiency of
      which are hereby acknowledged, the Parties, intending to be legally bound,
      hereby agree as follows:

     

    ARTICLE
      I

    TERMS
      OF THE PURCHASE AND SALE

     

    Section
      1.1 Sale
      of Interests.
      Subject
      to the terms and conditions and in reliance upon the representations and
      warranties set forth in this Agreement, at the Closing Seller shall sell and
      assign to Purchaser, and Purchaser shall purchase and acquire from Seller,
      the
      HXS Interests and Hardscrabble Interests described on Schedule
      1.1
      (the
“Purchased
      Heath Interests”),
      in
      each case free and clear of all Encumbrances, for the Purchase Price set forth
      in Section
      1.2
      hereof.
      The Purchased Heath Interests purchased and acquired by Purchaser shall
      represent 80% of the issued and outstanding equity interests in each of the
      Companies. 

     

    Section
      1.2 Purchase
      Price. The
      total
      consideration for the purchase of the Purchased Heath Interests shall be an
      amount equal to Fifteen Million Dollars ($15,000,000) (the
      “Base
      Price”),
      less
      the Final Adjustment Amount, in cash (the “Purchase
      Price”).
      The
      amount paid by Purchaser at Closing shall be the Base Price less the Estimated
      Adjustment Amount (the “Closing
      Consideration”).
      Schedule
      1.2
      shall
      reflect the amount that is allocated to the equity of each Company, which shall
      be mutually agreed upon by the Parties. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Section
      1.3 Payment
      of the Purchase Price. The
      Purchase Price shall be payable to the Seller in the allocated amounts indicated
      on Schedule
      1.1
      at
      Closing by wire transfer of immediately available funds to the bank account
      set
      forth on a notice given to the Purchaser by the Seller at least three (3)
      business days prior to the Closing Date.

     

    ARTICLE
      II

    CLOSING

     

    Section
      2.1 Closing.
      The
      consummation of the transactions contemplated by this Agreement (the
“Closing”)
      shall
      take place at the offices of the Purchaser on the first business day following
      the date on which all of the conditions set forth in Article VIII, to the extent
      not waived, are satisfied. The Closing may be postponed to such other date
      as
      the Parties may mutually agree. The date on which the Closing actually occurs
      is
      hereinafter referred to as the “Closing
      Date.”

     

    Section
      2.2 Deliveries
      by the Seller.
      At
      the
      Closing, the Seller shall deliver to the Purchaser the following:

     

    (a) the
      closing and secretary’s certificates referred to in Section
      8.1(e)
      and
      Section 8.1(f);

     

    (b) a
      duly
      executed assignment of the Purchased Heath Interests in form and substance
      reasonably satisfactory to the Purchaser and its counsel;

     

    (c) a
      certificate dated within ten (10) business days prior to the Closing Date from
      the Secretary of State of the applicable state of organization certifying as
      to
      each of the Companies’ valid existence and good standing in such
      jurisdiction;

     

    (d) certified
      Charter Documents of each of the Companies, recently certified by the Secretary
      of State of the applicable state of organization;

     

    (e) executed
      counterparts of all Required Consents;

     

    (f) a
      receipt
      for the payment of the Closing Consideration;

     

    (g) each
      of
      the agreements referred to in Section 7.6
      executed
      by the Seller;

     

    (h) a
      written
      opinion of counsel to the Seller addressed to the Purchaser confirming that
      the
      representations and warranties contained in Section
      3.1
      through
Section
      3.7
      hereof
      are true; and

     

    (i) all
      other
      previously undelivered documents, instruments and writings required to be
      delivered by the Seller to the Purchaser at or prior to the Closing pursuant
      to
      this Agreement and such other documents, instruments and certificates as the
      Purchaser may reasonably request in connection with the transactions
      contemplated by this Agreement.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Section
      2.3 Deliveries
      by Purchaser. At
      the
      Closing, the Purchaser shall deliver, or cause to be delivered, to the Seller
      the following:

     

    (a) the
      Closing Consideration;

     

    (b) the
      closing and secretary’s certificates referred to in Sections
      8.2(c)
      and
8.2(d);

     

    (c) each
      of
      the agreements referred to in Section
      7.6
      to which
      the Purchaser is a party, each executed on behalf of the Purchaser;

     

    (d) all
      other
      previously undelivered documents, instruments and writings required to be
      delivered by the Purchaser to the Seller at or prior to the Closing pursuant
      to
      this Agreement and such other documents, instruments and certificates as the
      Seller may reasonably request in connection with the transactions contemplated
      by this Agreement.

     

    Section
      2.4 Simultaneous
      Deliveries.
      The
      delivery of the documents required to be delivered at the Closing pursuant
      to
      this Agreement shall be deemed to occur simultaneously. No delivery shall be
      effective until each Party has received, or waived receipt of, all the documents
      that this Agreement entitles such Party to receive.

     

    Section
      2.5  Adjustment
      Amount. 

     

    (a) No
      less
      than two business days prior to the Closing, Seller shall deliver to Purchaser
      a
      good faith estimate (the “Estimated
      Adjustment Amount”)
      as of
      the Closing Date of the sum of (x) the Pre-Closing Operational Liabilities
      plus
      (y) the
      Operating Cash Shortfall. Seller shall also provide Purchaser with its best
      estimate of the Termination Obligation, including a schedule of any additional
      contributions to be made pursuant to Section 7.8(a) and distributions in
      connection therewith. For purposes of this Agreement, (A) the “Pre-Closing
      Operational Liabilities” shall mean the operational liabilities of the Heath
      Group Companies arising on or prior to the Closing Date, including, but not
      be
      limited to, (i) accrued payroll, (ii) accounts payable, (iii) accrued expenses
      and (iv) other normal recurring expenses, including all general and
      administrative expenses and in each case not satisfied as of the Closing Date
      and (B) “Operating
      Cash Shortfall”
means
      $200,000 minus
      cash
      held in accounts of the Companies as of the Closing (all of which cash shall
      remain with the Companies following the Closing Date); provided that the
      Operating Cash Shortfall shall be $0 if the cash held in the accounts of the
      Companies exceeds $200,000. Purchaser shall be entitled to reasonably dispute
      the deliveries provided pursuant to this Section 2.5(a) (including the Estimated
      Adjustment Amount), in which case the parties shall use reasonable efforts
      to
      resolve any such dispute prior to proceeding with the Closing. Any amended
      estimate of the Estimated Adjustment Amount based on such resolution shall
      be
      deemed the Estimated Adjustment Amount for purposes of determining the Closing
      Consideration.

     

    
      
        
        

      

      
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    (b) 
      Within
      ninety days following the Closing, Purchaser shall deliver to Seller its good
      faith determination of the sum of (x) the Pre-Closing Operational Liabilities
      plus
      (y) the
      Operating Cash Shortfall, based on the books and records of the Heath Group
      Entities (Purchaser’s determination, the “Final
      Adjustment Amount”).
      Following Closing, Seller shall provide Purchaser and its representatives with
      access to all applicable books and records of JLH for purposes of making such
      determination. In the event that the Final Adjustment Amount exceeds the
      Estimated Adjustment Amount, then Seller shall promptly (and in no event later
      than ten business days following delivery to Seller of Final Adjustment Amount)
      pay to Purchaser such difference in cash (by wire transfer or check). In the
      event that Estimated Adjustment Amount exceeds the Final Adjustment Amount,
      then
      Purchaser shall promptly (and in no event later than ten business days following
      delivery to Seller of Final Adjustment Amount) pay to Seller such difference
      in
      cash (by wire transfer or check). In the event that Seller fails to make any
      required payment to Purchaser pursuant to the foregoing, then Purchaser shall
      be
      entitled to set off all or portion of any defaulted amount against future
      distributions of profits to Seller under any operating agreement of the
      Companies, in addition to any other remedies available to Purchaser.

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES OF SELLER

     

    The
      Seller hereby represents and warrants to the Purchaser that the statements
      made
      in this Article III are true, correct and complete as of the date
      hereof.

     

    Section
      3.1  Title
      to Interest.
      The
      Seller is the record and beneficial owner of (a) all outstanding HXS Interests
      and (b) all outstanding Hardscrabble Interests, in each case free and clear
      of
      all Encumbrances. At the Closing, the Seller will transfer to the Purchaser
      its
      entire right, title and interest in and to all of the Purchased Heath Interests
      free and clear of all Encumbrances.

     

    Section
      3.2 Power
      and Authority.
      The
      Seller has the requisite power and authority to execute and deliver this
      Agreement, to perform their obligations hereunder and to consummate the
      transactions contemplated hereby, including the execution, delivery and
      performance of all of the Transaction Documents to which the Seller is a
      party.

     

    Section
      3.3 Execution
      and Validity.
      Each
      of
      the Transaction Documents, when executed by the Seller and delivered to the
      Purchaser, will constitute a valid, legal and binding obligation of the Seller,
      enforceable against the Seller in accordance with the terms of such Transaction
      Document, subject to any Law Affecting Creditors’ Rights.

     

    Section
      3.4 No
      Conflict; Consents. The
      execution, delivery and performance by the Seller of each Transaction Document
      will not (a) violate any Law, (b) violate any of the Charter Documents of the
      Heath Group Entities, (c) violate any Order to which Seller or any Heath Group
      Entity is a party or by which Seller, any Heath Group Entity or any of their
      respective assets are bound, (d) result in the creation of any Encumbrance
      on
      the Purchased Heath Interests or any material assets of the Heath Group
      Entities, (e) constitute a default under, or give rise to any right of
      termination, cancellation or acceleration of any material right or obligation
      of
      the Heath Group Entities or to a loss of any material benefit to which any
      Heath
      Group Entities is entitled under any provision of any agreement or other
      instrument binding upon the Heath Group Entities or (f) require any Consent
      from
      any Person that will not be obtained and delivered on or before the
      Closing.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Section
      3.5 Company
      Organization; Good Standing; Delivery of Charter Documents. Each
      of
      the Heath Group Entities is duly organized, validly existing and in good
      standing under the laws of its state of organization. Each of the Heath Group
      Entities is duly qualified or licensed as a foreign limited liability company
      in
      each jurisdiction in which the nature of such Heath Group Entity’s business
      makes qualification or licensing necessary. Prior to the Signing Date, Seller
      has delivered, or caused to be delivered, to Purchaser true and complete copies
      of the Charter Documents of the Heath Group Entities as in effect on the Signing
      Date.

     

    Section
      3.6 Corporate
      Power and Authority.
      The
      Heath
      Group Entities have all the requisite power and authority necessary to own,
      operate and lease their assets and to carry on their business as and where
      conducted.

     

    Section
      3.7 Capitalization.
      The
      HXS
      Interests and Hardscrabble Interests constitute the only issued and outstanding
      membership interests or other equity securities of any kind of the Companies.
      All outstanding HXS Interests and Hardscrabble Interests have been duly
      authorized and validly issued and are fully paid and nonassessable There is
      no
      authorized or outstanding option, subscription, warrant, call, preemptive right,
      commitment or other right or agreement (each, a “Subscription
      Right”)
      obligating any Company or the Seller to issue or sell any equity securities
      or
      any securities convertible into or exercisable for any equity securities of
      any
      Company. The Purchased Heath Interests have not been issued or transferred,
      and
      will not be transferred pursuant to this Agreement, in violation of any
      preemptive or preferential rights or rights of first refusal of any Person.
      Except as set forth in Schedule
      3.7,
      the
      Companies do not have any subsidiaries or own any shares of capital stock,
      membership interests, partnership interests or other beneficial ownership
      interests in any other Person.

     

    Section
      3.8 No
      Undisclosed Claims.
      Except
      as
      set forth in Schedule
      3.8,
      the
      Heath Group Entities are not subject to any Claim of any nature, absolute or
      contingent, and no events have occurred or circumstances exist that could give
      rise to any future Claim, that could have a Material Adverse Effect on the
      assets or business of the Heath Group Entities.

     

    Section
      3.9 Sufficiency
      and Condition of and Title to the Company Assets.

     

    (a) Sufficiency
      of the Company Assets.
      The
      assets reflected on the Books and Records of the Heath Group Entities
      (collectively, the “Heath
      Group Assets”)
      constitute all the assets, properties, licenses and other arrangements which
      are
      presently being used or are reasonably related to the business of the Heath
      Group Entities, and are sufficient to operate such business in a manner
      consistent with past practice and historic capacity. Except as set forth on
      Schedule 3.9(a), the assets reflected on Schedule 8.1(i) constitute all of
      the
      assets, properties, licenses and other arrangements owned or held for use by
      JLH
      which are presently being used or are reasonably related to the business of
      the
      Heath Group Companies.

     

    (b) Condition
      of the Company Assets.
      Each of
      the Heath Group Assets complies with Law and is in good and normal operating
      condition and repair, structurally sound with no known defects (ordinary wear
      and tear excepted), and suitable for its intended use.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (c) Title
      to the Company Assets.
      At the
      Closing, the Companies will hold good, valid and indefeasible title to, or
      a
      valid leasehold interest in, each of the Heath Group Assets (except for
      the
      assets set forth on Schedule 3.9(a)), free and clear of all Encumbrances, other
      than Permitted Encumbrances. 

     

    (d) No
      Transfers.
      During
      the six month period preceding the Signing Date, no Heath Group Entity has
      made
      any distribution of cash to Seller or any affiliate of Seller, except for
      salaries and expense reimbursement in the ordinary course of
      business.

     

    Section
      3.10 Real
      and Personal Property.

     

    (a) Owned
      Real Property.
      Except
      as set forth on Schedule
      3.10(a),
      the
      Heath Group Entities do not own any interest in real property.

     

    (b) Leased
      Real Property.
      Schedule
      3.10(b)
      lists,
      as of the Signing Date, all leases of real property (collectively, the
“Real
      Property Leases”)
      to
      which the Heath Group Entities are a party. As of the Signing Date, all of
      the
      Real Property Leases are valid, binding and in full force and effect. None
      of
      the Heath Group Entities nor, to Seller’s Knowledge, any other Person is in
      default under any of the Real Property Leases, nor is there any event or
      circumstance which with notice or lapse of time, or both, would constitute
      a
      default thereunder by any Company or any other Person.

     

    (c) Owned
      Personal Property.
      Schedule
      3.10(c)
      lists,
      as of the Signing Date, all of the depreciable personal property (including
      all
      machinery, equipment, vehicles, structures, fixtures and furniture) owned by
      the
      Heath Group Entities and used in the business of the Heath Group Entities or
      located on its premises. 

     

    (d) Leased
      Personal Property.
      Schedule
      3.10(d)
      lists,
      as of the Signing Date, all leases of personal property (collectively, the
      “Personal
      Property Leases”)
      to
      which the Heath Group Entities are a party. As of the Signing Date, all of
      the
      Personal Property Leases are valid, binding and in full force and effect. None
      of the Heath Group Entities nor, to Seller’s Knowledge, any other Person is in
      default under any of the Personal Property Leases, nor is there any event or
      circumstance which with notice or lapse of time, or both, would constitute
      a
      default thereunder by any Heath Group Entity or any other Person.

     

    (e) Personal
      Property Owned by Others.
      Schedule
      3.10(e)
      lists,
      as of the Signing Date, all artwork, memorabilia and other personal property
      routinely located on the premises of the Heath Group Entities which is not
      owned
      by the Heath Group Entities, and is not being sold to the Purchaser pursuant
      to
      this Agreement, together with the name(s) of the owner(s) of such personal
      property.

     

    Section
      3.11 Compliance
      with Laws.
      The
      Heath
      Group Entities have complied with all Laws in the conduct of their business.
      None of the Heath Group Entities has received any notice from any Governmental
      Authority or other Person asserting that any Heath Group Entity has violated
      any
      Law. No events have occurred or, to Seller’s Knowledge, circumstances exist that
      could cause any Heath Group Entity to violate any Law in the
      future.

     

    
      
        
        

      

      
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    Section
      3.12 Insurance.  Schedule
      3.12
      lists,
      as of the Signing Date, all insurance policies which insure the business of
      the
      Heath Group Entities or any of the assets of the Heath Group Entities against
      loss (collectively, the “Insurance
      Policies”),
      including each insurer’s name, coverage deductible and limit, expiration date
      and current premium. Each Insurance Policy is in full force and effect, all
      premiums with respect thereto have been paid to the extent due, and no notice
      of
      cancellation or termination has been received with respect to any such policy,
      other than any policy that will be replaced or is intended to be replaced prior
      to the expiration thereof by policies providing substantially the same coverage
      from an insurer that is financially sound and reputable. The Insurance Policies
      provide the Companies with adequate insurance coverage against the risks
      involved in the conduct of the business of the Companies and ownership of the
      assets of the Companies. All Insurance Policies provide coverage of the
      Companies, and the coverage provided by the Insurance Policies of the Companies
      will not in any way be affected by, or terminate or lapse by reason of, the
      consummation of the transactions contemplated by this Agreement, including
      the
      effectuation of the Pre-Closing Restructuring. True and complete copies of
      all
      Insurance Policies have been provided to the Purchaser. 

     

    Section
      3.13 Contracts. Schedule
      3.13
      lists,
      as of the Signing Date, all contracts relating to the business and assets of
      the
      Heath Group Entities or by which any of the assets of the Heath Group Entities
      is bound, pursuant to which the obligations of any party thereto are, or are
      contemplated to be, with respect to any such contract (a) in excess of $10,000
      during any twelve month period, (b) not terminable prior to 90 days after the
      Signing Date, or (c) otherwise material to the business of the Heath Group
      Entities. All of the contracts listed on Schedule
      3.13
      and any
      contracts entered into after the Signing Date in accordance with Section
      5.3
      (collectively, the “Material
      Contracts”)
      are or
      will be valid and binding and in full force and effect, subject to Laws
      Affecting Creditors’ Rights. None of the Heath Group Entities nor, to Seller’s
      Knowledge, any other Person is in default under any Material Contract, nor,
      to
      Seller’s Knowledge, is there any event or circumstance which with notice or
      lapse of time, or both, would constitute a default thereunder by any Company
      or
      any other Person. No Heath Group Entity is a party to any contract which
      requires the Consent of any Person in order to consummate the transactions
      contemplated by this Agreement (including the effectuation of the Pre-Closing
      Restructuring), except as otherwise stated on Schedule 3.13.
      True
      and complete copies of all the Material Contracts have been provided to
      Purchaser. No Heath Group Entity has received notice (written or oral) of the
      termination or proposed termination of any Material Contract, other than the
      termination notice dated July 28, 2008 related to the Agency Agreement for
      the
      Truckers Umbrella and Excess Program between ACE American Insurance Company,
      Westchester Surplus Lines Insurance Company, Illinois Union Insurance Company
      and Jeffrey L. Heath, Inc. t/a Heath XS effective August 1, 2001, which notice
      has been provided to the Purchaser prior to the Closing Date.

     

    Section
      3.14 Litigation;
      Orders.
      Except
      as
      set forth in Schedule
      3.14,
      there
      are no Actions pending, or to Seller’s Knowledge, threatened against or
      affecting any Heath Group Entity, its business or any of its assets as of the
      Signing Date. No Heath Group Entity is subject to any Order.

     

    
      
        
        

      

      
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      Section
        3.15 Licenses. Schedule
        3.15
        lists
        all of the Licenses related to the assets of the Heath Group Entities or
        operation of the business of the Heath Group Entities, and indicates those
        Licenses for which the Consent of any Person is required to assign such
        License (including in order to effectuate the Pre-Closing Restructuring).
        The
        Heath Group Entities (and Seller) have obtained, maintain in effect, and
        comply
        with the terms and conditions of all Licenses required by Law. There is no
        Action pending or, to Seller’s Knowledge, threatened in writing to revoke or
        limit any License listed on Schedule
        3.15.
        The
        Heath Group Entities (and Seller) have all Licenses necessary for their business
        as presently conducted. At the Closing Date, to Seller’s Knowledge, the
        Companies (together with Seller) have all Licenses materially necessary under
        applicable Law to conduct the business conducted by the Heath Group Entities
        prior to the execution of this Agreement. Following the Closing Date, to
        Seller’s Knowledge, for a period of six (6) months, the Companies (together with
        Seller) will have all Licenses materially necessary under applicable Law
        to
        conduct the business conducted by the Heath Group Entities prior to the
        execution of this Agreement. Licenses held by Seller individually with respect
        to the business of the Heath Group Entities are in full force and effect
        and
        shall remain in full force and effect following consummation of the transactions
        under this Agreement.

    

     

    Section
      3.16 Intangible
      Assets.

     

    Owned
      Intangible Assets.
      Schedule
      3.16(a)
      lists
      all of the Intangible Assets owned by the Heath Group Entities as of the Signing
      Date. With respect to the Intangible Assets listed on Schedule
      3.16(a)
      and all
      of the Intangible Assets obtained or developed prior to the Closing, (i) the
      Heath Group Entities own all right, title and interest in and to such Intangible
      Assets free and clear of all Encumbrances, (ii) the Heath Group Entities have
      not sold, transferred, licensed, sublicensed or conveyed any interest in any
      of
      such Intangible Assets, and (iii) to Seller’s Knowledge, no Person has infringed
      upon or misappropriated any of such Intangible Assets. All Intangible Assets
      listed on Schedule 3.16(a) and all of the Intangible Assets obtained, held
      or
      used by the Heath Group Entities in respect of their business will be owned
      by
      the Companies as of the Closing Date, including without limitation all rights
      to
      the “Jeffrey L. Heath” name and trademark for use in connection with the
      business of the Heath Group Entities. As of the Closing Date, the Companies
      will
      have been irrevocably assigned by Seller all other rights of Seller in the
      “Jeffrey L. Heath” name for use in the business of Purchaser (including the
      Companies following the Closing).

     

    (a) Licensed
      Intangible Assets.
      Schedule
      3.16(b)
      lists
      all licenses and contracts related to any Intangible Asset used by the Heath
      Group Entities as of the Signing Date. Each license or contract listed on
Schedule
      3.16(b)
      and each
      license or contract related to an Intangible Asset which is entered into after
      the Signing Date in accordance with Section
      5.3
      is
      valid, binding and in full force and effect. The Heath Group Entities have
      not
      infringed upon or misappropriated any Intangible Asset owned by another Person.
      As of the Closing Date, the Companies will hold all licenses and contracts
      related to any Intangible Asset used by the Heath Group Entities as of the
      Signing Date pursuant to any third party license.

     

    Section
      3.17 Employees.

     

    (a) Employees.
      Schedule
      3.17(a)
      lists
      the name, job title, date of employment and current annual compensation (salary,
      bonus and participation in any non-qualified deferred or incentive compensation
      arrangement) and Heath Group Entity employer for each employee of the Heath
      Group Entities employed as of the Signing Date (collectively, the “Employees”).
      All
      Employees are either United States citizens or otherwise authorized to engage
      in
      employment in the United States in accordance with all Laws. All sums due for
      Employee compensation and benefits and all vacation time owing to any Employee
      (including all persons whose employment by any Company is terminated prior
      to
      the Signing Date) have been duly and adequately accrued on the accounting Books
      and Records of the Heath Group Entities.

     

    
      
        
        

      

      
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    (b) Contracts.
      Except
      as set forth in Schedule
      3.17(b),
      no
      Heath Group Entity is a party to (i) any contract for employment between any
      Heath Group Entity and an Employee of such Heath Group Entity that cannot be
      terminated at will without cost, or (ii) any collective bargaining agreement
      or
      other contract to or with any labor union, Employee representative or group
      of
      Employees. Except as set forth in Schedule
      3.17(b),
      the
      employment of all Employees is terminable at will without any penalty or
      severance obligation of any kind on the part of any Heath Group Entity.

     

    (c) Compliance
      with Labor Laws.
      The
      Heath Group Entities have complied and are presently complying with all Laws
      respecting employment and employment practices, terms and conditions of
      employment, and wages and hours, and are not engaged in any unfair labor
      practice or unlawful employment practice. 

     

    Section
      3.18 Employee
      Benefits. 

     

    (a) Identification
      of Company Plans.
      Schedule
      3.18(a)
      sets
      forth a list of all Employee Benefit Plans which provide compensation or
      benefits to employees, officers, directors or consultants of any Heath Group
      Entity (collectively, the “Company
      Plans”).
      Seller has delivered to Purchaser true and complete copies of: (i) each of
      the
      Company Plans and any related funding agreements thereto (including insurance
      contracts) including all amendments, all of which are legally valid and binding
      and in full force and effect, and there are no defaults thereunder, (ii) the
      currently effective Summary Plan Description pertaining to each of the Company
      Plans, (iii) the three most recent annual reports for each of the Company Plans,
      (iv) the most recent IRS determination letter for each Company Plan which is
      intended to constitute a qualified plan under Section 401 of the Code, and
      (v)
      financial statements for each funded Company Plan. Notwithstanding any statement
      or indication in this Agreement to the contrary, except as disclosed on
Schedule
      3.18(a),
      there
      are no Company Plans which the Companies (through the applicable Company) will
      not be able to terminate (or in which the Companies (through the applicable
      Company) will not be able to terminate the participation of its employees)
      immediately after the Closing in accordance with their terms and ERISA, and
      without incurring any expenses (including, but not limited to, loads or
      termination charges imposed with respect to insurance policies or mutual funds
      used to fund such Company Plans), other than administrative expenses in
      connection with such termination and benefits accrued as of the date of
      termination.

     

    
      
        
        

      

      
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    (b) Compliance
      with Applicable Laws.
      All
      Company Plans comply with and are and have been operated in material compliance
      with each applicable provision of ERISA, the Code, other federal statutes,
      state
      Law (including, state insurance Law) and the regulations and rules promulgated
      pursuant thereto or in connection therewith. No Heath Group Entity nor any
      member of the same controlled group of businesses as the Heath Group Entities
      within the meaning of Section 4001(a)(14) of ERISA (an “ERISA
      Affiliate”)
      has
      failed to make any material contributions or to pay any material amounts
      due and owing as required by the terms of any Company Plan. Other than routine
      claims for benefits under the Company Plans, there are no pending or, to
      Seller’s Knowledge, threatened investigations, proceedings, claims, lawsuits,
      disputes, actions, audits or controversies involving the Company Plans or the
      fiduciaries, administrators, or trustees of any of the Company Plans or any
      ERISA Affiliate as the employer or sponsor under any Company Plan, with any
      of
      the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation,
      any
      participant in or beneficiary of any Company Plan or any other Person
      whomsoever. To Seller’s Knowledge, there is no reasonable basis for any such
      claim, lawsuit, dispute, action or controversy.

     

    (c) Pension
      Benefit Plans.
      None of
      the Heath Group Entities nor any ERISA Affiliate is or ever has been a sponsor
      or obligated to contribute to any plan covered by Title IV of ERISA or Section
      412 of the Code, or any “multiemployer plan,” within the meaning of Section
      3(37) of ERISA. Each of the Company Plans which is intended to be a qualified
      plan under Section 401(a) of the Code has received a favorable determination
      letter from the IRS, and has been operated substantially in accordance with
      its
      terms and with the provisions of the Code.

     

    (d) Welfare
      Benefit Plans.
      Each
      Company Plan which is required to comply with the provisions of Part 6 of Title
      I of ERISA, Section 601 et seq., and Code Section 4980B and the provisions
      of
      Part 7 of Title I of ERISA, Section 701 et seq., and Code Section 4980D has
      complied in all material respects. Except as required by such Sections of the
      Code, no Company Plan which is a Welfare Benefit Plan provides for any
      post-employment benefits.

     

    (e) Effect
      of Consummation.
      Neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated by this Agreement will (i) entitle any current or former employee
      of any Heath Group Entity or any other individual to a bonus, severance pay,
      unemployment compensation or similar payment by the Heath Group Entity (or
      otherwise trigger any right of termination or separation entitling any current
      or former employee to any such bonus, severance pay, unemployment compensation
      or similar payment) (ii) otherwise accelerate the time of payment or vesting,
      or
      increase the amount of any compensation due to any current or former employee
      of
      any Heath Group Entity, (iii) result in any prohibited transaction described
      in
      Section 406 of ERISA or Section 4975 of the Code for which an exemption is
      not
      available, or (iv) in any way result in any liability of any Heath Group Entity
      with respect to any Employee Benefit Plan of any Person. No Heath Group Entity
      is a party or subject to any agreement, contract or other obligation which
      would
      require the making of any payment, other than payments contemplated by this
      Agreement, to any employee of such Heath Group Entity, Seller or any other
      Person as a result of the consummation of the transactions contemplated
      herein.

     

    (f) Termination.
      As of
      the Closing, the Company Plan set forth on Schedule 10.1(c) with respect to
      the
      Companies shall have been terminated in accordance with the terms thereof and
      applicable Law without any further liability of the Companies or any sponsor
      or
      fiduciary thereof. Seller shall have made such additional contributions and
      other payments to such Company Plan as necessary to satisfy the Termination
      Obligation in connection with the foregoing.

     

    
      
        
        

      

      
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    Section
      3.19 Taxes. 

     

    (a) Taxes
      and Tax Returns.
      All
      Taxes that are due and payable by any Heath Group Entity or by Seller (or
      affiliates of Seller) on behalf of or with respect to any Heath Group Entity
      (whether or not shown on a Return) have been paid. There are no liens on the
      property or assets of any Heath Group Entity for Taxes other than Permitted
      Encumbrances. All current Taxes not yet due and payable by the Company or by
      Seller (or affiliates of Seller) on behalf of or with respect to any Heath
      Group
      Entity have been properly accrued on the consolidated balance sheet of the
      Heath
      Group Entities. All Tax returns (including amended returns and claims for
      refund), reports, and declarations of estimated Tax (collectively, “Returns”)
      which
      were required to be filed by any Heath Group Entity or by Seller (or affiliates
      of Seller) on behalf of or with respect to any Heath Group Entity with any
      Governmental Authority have been timely filed. All Returns are true and correct
      in all material respects and accurately reflect the Tax liabilities of the
      applicable Heath Group Entity or by Seller (or affiliates of Seller) on behalf
      of or with respect to any Heath Group Entity . 

     

    (b) Statute
      of Limitations and Tax Actions.
      No
      Heath Group Entity or Seller (or affiliates of Seller) on behalf of or with
      respect to any Heath Group Entity has executed any presently effective waiver
      or
      extension of any statute of limitations against assessments and collection
      of
      Taxes. There are no pending or, to Seller’s Knowledge, threatened Claims,
      assessments, notices, proposals to assess, deficiencies or audits with respect
      to Taxes.

     

    (c) Other
      Tax Representations.
      Proper
      and accurate amounts have been withheld and remitted by the applicable Heath
      Group Entity from and with respect to all Persons from whom it is required
      by
      applicable law to withhold for all periods in compliance with the tax
      withholding provisions of all Laws. There is no contract, plan or arrangement
      covering any Person that, individually or collectively, would give rise to
      the
      payment of any amount that would not be deductible by any Company by reason
      of
      Section 162(m) or Section 280G of the Code. No Heath Group Entity is a “foreign
      person” within the meaning of Section 1445(f)(3) of the Code. No Heath Group
      Entity has ever been a member of any group that filed a consolidated federal
      income tax return.

     

    Section
      3.20 Bank
      Accounts; Powers of Attorney. Schedule
      3.20
      lists
      the names of (a) each bank, trust company and stock or other broker with which
      any Heath Group Entity has an account, credit line or safe deposit box or vault,
      or otherwise maintains relations (the “Bank
      Accounts”),
      (b)
      all Persons authorized to draw on, or to have access to, each of the Bank
      Accounts, and (c) all Persons authorized by proxies, powers of attorney or
      other
      like instruments to act on behalf of any Heath Group Entity in any matter
      concerning the business of such Heath Group Entity. Each of the Bank Accounts
      has a positive cash balance. No proxies, powers of attorney or other like
      instruments are irrevocable. Except as set forth on Schedule 3.20, the Companies
      will have access to, and be authorized to draw on, the Bank
      Accounts.

     

    Section
      3.21 Affiliated
      Transactions.
      Except
      as
      set forth on Schedule
      3.21,
      there
      are no outstanding loans or other transactions between any Heath Group Entity
      and Seller, officer, director, shareholder, consultant or affiliate of any
      Heath
      Group Entity or any spouse or child of any such person. Neither Seller, nor
      any
      officer, director, shareholder, consultant or affiliate of any Heath Group
      Entity nor any spouse or child of any such person owns or has any interest
      in,
      directly or indirectly, any real or personal property owned by or leased to
      any
      Heath Group Entity.

     

    
      
        
        

      

      
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    Section
      3.22 Books
      and Records.
      The
      Books
      and Records of the Heath Group Entities, all of which have been made available
      to Purchaser prior to the Signing Date, are true, correct and complete and
      have
      been maintained in accordance with sound business practices, including the
      maintenance of an adequate system of internal controls.

     

    Section
      3.23 Full
      Disclosure.
      No
      representation or warranty of the Seller made in this Agreement, nor any written
      statement furnished to Purchaser pursuant hereto or in connection with the
      transactions contemplated hereby, contains or will contain any untrue statement
      of a material fact which affects the business or financial condition of the
      Heath Group Entities, or omits or will omit to state a material fact necessary
      to make the statements or facts contained herein or therein not
      misleading.

     

    Section
      3.24 Brokers.
      No
      person
      is or will become entitled to receive any brokerage or finder’s fee, advisory
      fee or other similar payment for the transactions contemplated by this Agreement
      by virtue of having been engaged by or acted on behalf of Seller or any Heath
      Group Entity, except, as to the Seller, Philo Smith Capital Corp., whose fees
      and expenses are to be paid by the Seller. Seller agrees to indemnify and defend
      the Purchaser and to hold Purchaser harmless from any claim by any individual
      or
      entity asserting a broker or agency relationship relative to this Transaction.
      

     

    Section
      3.25 Absence
      of Sensitive Payments.
      No
      Heath
      Group Entity has made or maintained (i) any contributions, payments or gifts
      of
      its funds or property to any governmental official, employee or agent where
      either the payment or the purpose of such contribution, payment or gift was
      or
      is illegal under the laws of the United States or any state thereof, or any
      other jurisdiction (foreign or domestic); or (ii) any contribution, or
      reimbursement of any political gift or contribution made by any other person,
      to
      candidates for public office, whether federal, state, local or foreign, where
      such contributions were or would be a violation of applicable law.

     

    Section
      3.26 Financial
      Information.
      The
      Seller has delivered to the Purchaser all relevant financial information of
      the
      Heath Group Entities necessary to create consolidated financial statements
      as of
      June 30, 2008 based on generally accepted accounting principles (other than
      an
      actuarial report with respect to the unfunded pension liability of the Heath
      Group Entities as of June 30, 2008 (the “Pension
      Liability Report”)),
      along with financial information with respect to the financial condition and
      results of operations for the Heath Group Entities for calendar year 2007 and
      the six month period ended June 30, 2008. The financial information of the
      Heath
      Group Entities set forth on Schedule 3.26 (collectively, the “Scheduled
      Financial Information”)
      (i)
      were prepared in accordance with the books of account and other financial
      records of each
      of
      the Heath Group Entities, (ii) present fairly the financial condition and
      results of operations of each
      of
      the Heath Group Entities as of the dates thereof or for the periods covered
      thereby and
      (iii)
      include all adjustments (consisting only of normal recurring accruals) that
      are
      necessary for a fair presentation of the financial condition of each of the
      Heath Group Entities and the results of the operations of each of the Heath
      Group Entities as of the dates thereof or for the periods covered thereby
      (subject, in the case of interim information, to normal, recurring adjustments,
      consistently applied, none of which, individually or in the aggregate, is
      material); provided that, as of the date of execution of this Agreement, the
      Scheduled Financial Information excludes the amount of the unfunded pension
      liability of Heath Group Entities as of June 30, 2008. Except as set forth
      in
Schedule
      3.26,
      the
      Heath Group Entities do not have any material liability or obligation of any
      kind or nature (fixed or contingent) which is not reflected, reserved against
      or
      disclosed in the Scheduled Financial Information. 

     

    
      
        
        

      

      
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    ARTICLE
      IV

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    The
      Purchaser hereby represents and warrants to the Seller that the statements
      set
      forth in this Article
      IV
      are
      correct and complete as of the date hereof.

     

    Section
      4.1 Organization;
      Good Standing; Delivery of Charter Documents.
      The
      Purchaser is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Nevada. Purchaser is duly qualified as a foreign
      corporation in the State of Texas.

     

    Section
      4.2 Power
      and Authority.
      The
      Purchaser has all requisite corporate power and authority necessary to execute
      and deliver this Agreement, to perform its obligations hereunder and to
      consummate the transactions contemplated hereby, including the execution,
      delivery and performance of all of the Transaction Documents to which the
      Purchaser is a party.

     

    Section
      4.3 Authorization;
      Execution and Validity.
      Each
      of
      the Transaction Documents, when executed and delivered by the Purchaser, will
      be
      duly authorized, executed and delivered, and will constitute a valid, legal
      and
      binding obligation of the Purchaser, enforceable against the Purchaser in
      accordance with the terms of such Transaction Document, subject to any Law
      Affecting Creditors’ Rights.

     

    Section
      4.4 No
      Conflict; Purchaser Consents.
      The
      execution, delivery and performance by the Purchaser of each Transaction
      Document to which it is a party will not (a) violate any Law, (b) violate any
      Charter Document of the Purchaser, (c) violate any Order to which the Purchaser
      is a party or by which the Purchaser or its assets is bound, or (d) require
      any
      Consent from any Person.

     

    Section
      4.5 Full
      Disclosure.
      No
      representation or warranty of the Purchaser made in this Agreement, nor any
      written statement furnished to the Seller pursuant hereto or in connection
      with
      the transactions contemplated hereby, contains or will contain any untrue
      statement of a material fact which affects the business or financial condition
      of the Purchaser, or omits or will omit to state a material fact necessary
      to
      make the statements or facts contained herein or therein not
      misleading.

     

    Section
      4.6 Brokers.
      No
      Person
      is or will become entitled to receive any brokerage or finder’s fee, advisory
      fee or other similar payment for the transactions contemplated by this Agreement
      by virtue of having been engaged by or acted on behalf of the Purchaser. The
      Purchaser agrees to indemnify and defend Seller and to hold Seller harmless
      from
      any claim by any individual or entity asserting a broker or agency relationship
      with Purchaser relating to this Transaction.

     

    
      
        
        

      

      
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    Section
      4.7 Investment Representations.

     

    (a) Purchaser
      is acquiring the Purchased Heath Interests for investment for its own account
      and not as an agent or nominee for any other Person, solely for purposes of
      investment and not with a view to, or for offer or sale or grant of any
      participation in connection with, any distribution thereof in violation of
      any
      Law, subject to Purchaser’s compliance with the applicable provisions of the
      Transaction Documents to which it is specified therein to be a party on or
      after
      the date hereof.

     

    (b) Purchaser
      (1) is an “accredited investor,” within the meaning of Rule 501 of
      Regulation D, as promulgated by the SEC and presently in effect, and (2)
      has such knowledge, skill and experience in business, financial and investment
      matters so that it is capable of evaluating the merits, risks and consequences
      of its purchase of the Purchased Heath Interests at the Closing and is able
      to
      bear the economic risk of loss of its investment in such shares indefinitely
      (including a complete loss of such investment). To the extent deemed necessary
      by Purchaser, Purchaser has retained professionals of Purchaser’s choice at its
      own expense, to provide appropriate professional advice regarding the
      investments, tax and legal merits and consequences of acquiring and owning
      such
      shares.

     

    ARTICLE
      V

    COVENANTS
      OF SELLER

     

    Section
      5.1 Cooperation
      of the Seller.
      From
      the
      Signing Date through the Closing Date, the Seller shall use all reasonable
      efforts (a) to take all actions and to do all things necessary or advisable
      to
      consummate the transactions contemplated by this Agreement, (b) to cooperate
      with Purchaser in connection with the foregoing, including using reasonable
      efforts to obtain all Required Consents, and (c) subject to the other terms
      and
      conditions of this Agreement, to cause all the conditions set forth in
Section
      8.1,
      the
      satisfaction of which is in the reasonable control of the Seller, to be
      satisfied on or prior to Closing.

     

    Section
      5.2 Pre-Closing
      Access to Information.
      From
      the
      Signing Date through the Closing Date, the Seller shall afford to the Purchaser
      and its Representatives access to the properties, management, employees and
      Books and Records of the Heath Group Entities at such times as reasonably
      requested by Purchaser.

     

    Section
      5.3 Conduct
      of Business.
      From
      the
      Signing Date through the Closing Date, the Seller shall, and shall cause each
      of
      the Heath Group Entities to, use all reasonable efforts to (i) preserve
      substantially the relationships with their Representatives, suppliers and
      customers, (ii) perform its obligations under all contracts, leases and Licenses
      in all material respects, (iii) comply with all Laws, (iv) confer with the
      Purchaser regarding operational matters of a material nature, (v) report
      periodically to the Purchaser regarding the status of its business and the
      results of its operations, and (vi) conduct its business in the ordinary course
      and consistent with past practices. 

     

    
      
        
        

      

      
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    Section
      5.4 No
      Business Changes.
      From
      the
      Signing Date through the Closing Date, the Seller shall not, and shall cause
      the
      Heath Group Entities not to, without the express written consent of the
      Purchaser: (i) enter into any material agreement relating to the assets,
      properties or business of the Heath Group Entities, other than in the ordinary
      course of business; (ii) incur or discharge any material obligation or
      liability, except in the ordinary course of business; (iii) commit to make
      or make any capital expenditures or purchase any material assets; (iv)
cancel or fail to renew any License; (v) impose any lien, pledge or
      encumbrance upon the Interest or any of the assets of any Heath Group Entity;
      (vi) make any change or authorize to be made any change to the Charter Documents
      of any Company;
      (vii)
      declare, set aside, or pay any dividend or make any distribution with respect
      to
      HXS Interests or Hardscrabble Interests (whether in cash or in kind) or redeem,
      purchase, or otherwise acquire any HXS
      Interests or Hardscrabble Interests other than (i) distributions by each Company
      to the Seller to pay Taxes on their respective allocable share of the income
      of
      such Company and (ii) to the extent that cash in the Companies exceeds $200,000,
      distributions such that any remaining cash is less than $200,000;
      (viii)
      issue, deliver or sell any equity securities or interests of any kind of the
      Company or split, combine or reclassify HXS Interests or Hardscrabble Interests
      with, into or as any other type of equity security or interest of any kind;
      (ix) incur any indebtedness for borrowed money; (x) forgive or cancel
      any indebtedness owing to any Heath Group Entity or waive any claims or rights
      of value belonging to any Heath Group Entity, (xi) sell, lease, license or
      otherwise dispose of any of the assets or properties of any Heath Group Entity,
      other than in the ordinary course of business; (xii) pay or increase the
      rate or terms of compensation or benefits payable to or to become payable to
      any
      of the directors, officers, employees, consultants or agents of any Heath Group
      Entity above the amounts reflected in Schedule
      3.17(a);
      (xiii)
      except pursuant to the termination under Section 7.8(a), amend or otherwise
      make
      any changes to any of the Company Plans or increase the rate or terms of any
      benefits payable under the Company Plans;
      (xiv)
      make any other change in the terms of employment of any Employee; (xv) make
      or
      rescind any express or deemed material election relating to any Tax; or (xvi)
      commit pursuant to a legally binding agreement to do any of the foregoing.
      

     

    Section
      5.5 Supplements
      to Schedules.
      If,
      between the Signing Date and the Closing Date, Seller becomes aware that any
      of
      its representations and warranties in this Agreement or the schedules to this
      Agreement was inaccurate when made or if during such period any event occurs
      or
      condition changes that causes any of such representations and warranties to
      be
      inaccurate, then the Seller shall notify the Purchaser thereof in writing and
      supplement the schedules hereto to account for any such inaccuracy, event or
      change. Any such supplement to the schedules shall not be deemed to have been
      disclosed as of the Signing Date, or to have cured any breach of a
      representation and warranty made in this Agreement, unless so agreed in writing
      by the Purchaser.

     

    Section
      5.6 Standstill.
      Until
      the earlier to occur of the Closing or the termination of this Agreement
      pursuant to Article
      IX,
      the
      Seller shall not, nor shall the Seller permit the Heath Group Entities or any
      of
      Seller’s or their respective Representatives to, (a) directly or indirectly
      encourage, solicit, initiate or participate in discussions or negotiations
      with,
      or provide any information or assistance to, any Person (other than Purchaser
      and its Representatives) concerning any merger, sale of securities, sale of
      substantial assets, investment proposals or similar transaction involving any
      Heath Group Entity, (b) entertain or discuss any acquisition or investment
      proposals whatsoever with respect to any Heath Group Entity or (c) except as
      required by law after not less than five days notice to Purchaser, disclose
      to
      any third party any non-published information concerning any Heath Group Entity,
      the business of any Heath Group Entity or any Heath Group Entity’s financial
      condition. The Seller shall, and shall cause the Heath Group Entities to,
      promptly notify the Purchaser if Seller or any Heath Group Entity receives
      any
      such proposal or offer or any inquiry or contact with respect thereto and
      provide the Purchaser a copy of any written communication with respect
      thereto. 

     

    
      
        
        

      

      
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    Section
      5.7 Discharge
      of Encumbrances.
      Seller
      shall, and shall cause the Heath Group Entities to, take all actions and do
      all
      things necessary to cause all Encumbrances, other than Permitted Encumbrances,
      on any of the Purchased Heath Interests or the assets of the Heath Group
      Entities to be terminated or otherwise discharged at or prior to the
      Closing.

     

    Section
      5.8 Non-Disclosure;
      Non-Competition; Non-Solicitation.

     

    (a) Non-Disclosure
      Agreement.
      From
      the Signing Date through the Closing Date, Seller agrees that Seller will not
      (i) disclose to any person, either directly or indirectly, any Confidential
      Information, unless and solely to the extent that such Confidential Information
      is required to be disclosed by law or pursuant to a final judicial order or
      decree, (ii) use for his own account or cause, facilitate or allow any
      third party to use Confidential Information in any way. The Seller further
      agrees that, on or prior to the Closing Date, the Seller shall deliver to
      Companies all memoranda, notes, plans, records, reports and other documents
      (and
      copies thereof) relating to the Heath Group Entities or the conduct of the
      business of the Heath Group Entities that the Seller may possess or have under
      their control. Notwithstanding the foregoing, Seller shall be permitted to
      use
      Confidential Information for the purpose of winding up the affairs of JLH
      following the Closing.

     

    (b) Work
      Product.
      All
      records and documents embodying any Confidential Information or pertaining
      to
      the existing or contemplated scope of the Heath Group Entities’ business which
      have been conceived, prepared or developed by Seller in connection with his
      ownership interests in the Heath Group Entities, his employment by the Heath
      Group Entities or otherwise, either alone or with others (herein called
“Work
      Product”),
      shall
      be the sole property of the Companies following the Closing Date. At or prior
      to
      the Closing Date, the Seller shall deliver all Work Product to the Companies.
      

     

    (c) Non-Competition
      Agreement.
      From
      the date hereof through the later of (i) the sixth (6th)
      anniversary of the Closing or (ii) the second anniversary of the Option Closing
      with respect to Seller, Seller will not, directly or indirectly (including
      through any affiliate or related person), without the express written consent
      of
      the Purchaser, (A) own, engage in, manage, operate, join, control, or
      participate in the ownership, management, operation, or control of, or be
      connected as a stockholder, director, officer, employee, agent, partner, joint
      venturer, member, beneficiary, or otherwise with, any “Competing
      Business”
      (defined below) anywhere in the “Restricted
      Territory”
      (defined below), provided, however that nothing in this Agreement shall prohibit
      the Seller from being a passive owner of less than five percent (5%) of the
      outstanding ownership interests of any Person which is publicly traded on a
      national exchange, so long as the Seller has no active participation in the
      business or affairs of such Person (whether through employment, management,
      board position, consulting or otherwise); (B) induce any customer of any
      Heath Group Entity to patronize any Competing Business; (C) solicit or
      accept any Competing Business from any customer of any Heath Group Entity;
      (D) request or advise any customer, supplier or partnerof any Heath Group
      Entity to withdraw, curtail or cancel its business with the Heath Group Entity
      ;
      or (E) disclose to any Person engaged in any Competing Business the names
      or addresses of any of the customers of any Heath Group Entity or (F) subject
      to
      the license agreement provided for in Section 7.6(d), use the “Heath” name
      (including but not limited to “Jeffrey L. Heath”) in any Competing Business or
      any insurance business or any kind. For purposes of this Agreement, the term
      “Competing
      Business”
is
      defined to mean any activity or business (other than on behalf of any Company)
      that is or would be competitive with the business conducted by any Heath Group
      Entity or by Purchaser or any of its Subsidiaries at any time on or following
      the date hereof and prior to the later of (i) the fourth (4th)
      anniversary of the Closing or (ii) the Option Closing with respect to Seller.
      The term “Restricted
      Territory”
is
      defined to mean any location in the United States or Canada. The Parties
      understand and agree that, for purposes of this Section
      5.8(c)
      or
Section
      5.8(d),
      references to the Option Closing shall be deemed to be the “Option
      Expiration Date”
      following such time as the Heath Put-Call Option (as defined in the Amended
      and
      Restated Operating Agreements ceases to be exercisable. Notwithstanding the
      termination of the foregoing provision, the restriction set forth in clause
      (F)
      of this Section 5.8(c) above shall continue to apply indefinitely.

     

    
      
        
        

      

      
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    (d) Non-Solicitation
      Agreement.
      From
      the date hereof through the later of (i) the sixth (6th)
      anniversary of the Closing or (ii) the second anniversary of the Option Closing
      with respect to Seller, Seller shall not, either on its own behalf or on behalf
      of any business competing with the Purchaser, directly or indirectly (A) solicit
      or induce, or in any manner attempt to solicit or induce any person employed
      by,
      or an agent of, any Heath Group Entity or the Purchaser to terminate such
      person’s employment or agency, as the case may be, with such entity, or (B)
      attempt to induce any supplier or customer to cease being (or any prospective
      supplier or customer not to become) a supplier or customer of any Heath Group
      Entity or the Purchaser.

     

    (e) Modification
      of Restrictions.
      Seller
      agrees that if an arbitrator or a court of competent jurisdiction determines
      that the length of time or any other restriction, or portion thereof, set forth
      in this Section
      5.8
      is
      overly restrictive and unenforceable, the arbitrator or court shall reduce
      or
      modify such restrictions to those which it deems reasonable and enforceable
      under the circumstances, and as so reduced or modified, the Parties agree that
      the restrictions of this Section 5.8
      shall
      remain in full force and effect. Seller further agrees that if an arbitrator
      or
      court of competent jurisdiction determines that any provision of this
Section 5.8
      is
      invalid or against public policy, the remaining provisions of this Section 5.8
      and the
      remainder of this Agreement shall not be affected thereby, and shall remain
      in
      full force and effect.

     

    (f) Injunctive
      Relief.
      In the
      event of any pending, threatened or actual breach of any of the covenants or
      provisions of this Section 5.8,
      as
      determined by an arbitrator or a court of competent jurisdiction, it is
      understood and agreed by Seller that the remedy at law for a breach of any
      of
      the covenants or provisions of this Section
      5.8
      may be
      inadequate and, therefore, the Purchaser and the Companies shall be entitled
      to
      a restraining order or injunctive relief in addition to any other remedies
      at
      law and in equity, as determined by an arbitrator or a court of competent
      jurisdiction. Seller waives any bond, surety, or other security that might
      be
      required of the Purchaser or the Companies as a condition of any such
      restraining order or injunctive relief.

     

    
      
        
        

      

      
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    (g) Acknowledgments
      of Seller.
      Seller
      acknowledges that (i) any public disclosure of the Confidential Information
      will
      have an adverse effect on the Companies, the Purchaser and the respective
      businesses, (ii) Seller possesses unique skills and experience, (iii) the
      Companies and the Purchaser would suffer irreparable injury if Seller breached
      any of the terms of this Section
      5.8,
      (iv)
      the Companies and the Purchaser will be at a substantial competitive
      disadvantage if such entity fails to acquire and maintain exclusive ownership
      of
      the Confidential Information or Seller fails to abide by the restrictions
      provided in this Section
      5.8,
      (v) the
      scope of
      the
      restrictions provided in this Section
      5.8
      are
      reasonable when taking into account (A) the negotiations between the Parties
      and
      (B) that Seller is the direct beneficiary of the Purchase Price paid pursuant
      to
      this Agreement, (vi) the consideration being paid to Seller (and the Seller
      collectively) pursuant to this Agreement is sufficient inducement for the Seller
      to agree to the terms hereof, (vii) the provisions of this Section 5.8 are
      reasonable and necessary to protect the business and interests of the Companies
      and Purchaser, to prevent the improper use or disclosure of the Confidential
      Information and to provide the Companies and the Purchaser with exclusive
      ownership of all such Confidential Information, and (viii) the terms of this
      Section
      5.8
      preclude
      Seller from engaging in the conduct of the business of the Company only for
      a
      reasonable period.

     

    (h) Release.
      Seller,
      in his capacity as a member, manager, officer and/or employee of the Company,
      hereby releases and forever discharges the Companies from any and all Claims
      whatsoever, whether known or unknown suspected or unsuspected, both at law
      and
      in equity, which the Seller or any of its affiliates now has, have ever had
      or
      may hereafter have against the Companies related to any matter arising prior
      to
      the Closing Date. As of the Closing Date, the Seller has no knowledge of any
      Claims by it against the Companies. Seller also releases the Companies from
      any
      claims or rights to indemnification Seller may have under the Governing
      Documents of the Companies. 

     

    (i) Affiliates.
      Any
      reference to the Company or Companies in this Section 5.8 shall be deemed to
      include the Company, Purchaser, its subsidiaries and any other entity controlled
      by or under common control with Purchaser or its subsidiaries, unless the
      context clearly indicates otherwise.

     

    (j) Acknowledgement.
      For the
      avoidance of doubt, the provisions set forth in this Section 5.8 are in addition
      to (and not in lieu of) provisions with respect to non-disclosure,
      non-competition and non-solicitation set forth in an employment agreement with
      Seller to be executed at Closing, which provisions may be in effect concurrently
      with this Agreement. In the event of any conflict between the provisions of
      this
      Agreement and such employment agreement, Seller shall be subject to the most
      restrictive provision then in effect.

     

    ARTICLE
      VI

    COVENANTS
      OF PURCHASER

     

    Section
      6.1 Cooperation
      by Purchaser.
      From
      the
      Signing Date through the Closing Date, the Purchaser shall use all reasonable
      efforts (a) to take all actions and to do all things necessary or advisable
      to
      consummate the transactions contemplated by this Agreement, (b) to cooperate
      with the Companies and the Seller in connection with the foregoing, including
      using reasonable efforts to obtain all of the Required Consents, and (c) subject
      to the other terms and conditions of this Agreement, to cause all the conditions
      set forth in Section
      8.2,
      the
      satisfaction of which is in the reasonable control of the Purchaser, to be
      satisfied on or prior to Closing.

     

    
      
        
        

      

      
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    ARTICLE
      VII

    MUTUAL
      COVENANTS

     

    Section
      7.1 Fees
      and Expenses. Each
      Party hereto will be responsible for and bear all its own costs and expenses
      incurred at any time in connection with pursuing, negotiating or consummating
      this Agreement and all other agreements contemplated by the Transaction
      Documents. Such costs and expenses incurred by the Seller will be paid by the
      Seller with funds other than those of the Companies.

     

    Section
      7.2 Governmental
      Consents. Promptly
      after the Signing Date, each Party shall take all actions and do all things
      necessary to obtain all Consents required by any Governmental Authority to
      consummate the transactions contemplated hereby.

     

    Section
      7.3 Consents
      to Assign Leases and Contracts.

     

    (a) Cooperation
      and Reasonable Efforts.
      Each
      Party hereby agrees to use reasonable efforts, to take reasonable actions
      (including the Purchaser’s delivery to third parties of its audited financial
      statements) and to cooperate with each other as may be necessary to obtain
      Consents under Encumbered Instruments. Except as expressly provided herein
      (including as provided in Section 7.9), no Party shall be required to pay any
      sum, to incur any obligation or to agree to any amendment of any Encumbered
      Instrument in order to obtain any such Consent to transfer and assign the
      Encumbered Instrument. 

     

    (b) Pre-Closing;
      Required Consents.
      Schedule
      7.3(b)
      lists
      the Encumbered Instruments under which a Consent must be obtained from the
      appropriate third party prior to Closing as a condition to Closing
      (collectively, the “Required
      Consents”).
      

     

    (c) Notwithstanding
      anything to the contrary set forth in this Section 7.3, Seller’s obligations
      with respect to Consents in connection with effectuating the Pre-Closing
      Restructuring are set forth in Section 7.9.

     

    Section
      7.4 Licenses.
      Each
      Party hereby agrees to use reasonable efforts, to take reasonable actions and
      to
      cooperate with each other as may be necessary to transfer to Purchaser, or
      assist Purchaser in obtaining, all Licenses required for the Companies to
      conduct the business of the Heath Group Entities. On or as soon as practicable
      after the Signing Date, each Party shall file, separately or jointly with any
      other Party, as the case may be, all applications necessary to transfer or
      obtain the Licenses. Each Party shall use reasonable efforts to resolve such
      objections, if any, as may be asserted by any Governmental Authority with
      respect to the applications contemplated hereby. Except as expressly provided
      herein (including as provided in Section 7.9)., the Seller on the one hand
      and
      the Purchaser on the other hand shall each pay one-half of the fees and expenses
      incurred in connection with transferring or obtaining all Licenses.
      Notwithstanding anything to the contrary set forth in this Section 7.4, Seller’s
      obligations with respect to transferring Licenses in connection with the
      Pre-Closing Restructuring are set forth in Section 7.9. 

     

    Section
      7.5 Further
      Assurances.
      Subject
      to the other terms and conditions of this Agreement, at any time and from time
      to time, whether before or after Closing, each Party shall execute and deliver
      all instruments and documents and take all other action that the other Party
      may
      reasonably request to consummate or to evidence the consummation of the
      transactions contemplated by this Agreement.

     

    
      
        
        

      

      
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    Section
      7.6 Supplemental
      Agreements.
      At
      or
      prior to the Closing, (a) the individuals set forth on Schedule
      7.6
      shall
      execute employment agreements in substantially the forms attached hereto as
      Exhibit
      A;
      (b)
      Purchaser and Seller shall execute an amended and restated operating agreement
      for each of HXS and Hardscrabble (collectively, the “Amended
      and Restated Operating Agreements”)
      in
      substantially the forms attached hereto on Exhibit
      B
      and
Exhibit
      C,
      (c)
      Seller shall have irrevocably assigned to the Companies, pursuant to an
      assignment of rights in a form reasonably satisfactory to Purchaser, all rights
      of Seller in the “Jeffrey L. Heath” name (including derivative forms thereof)
      for use in Purchaser’s business (including the business of the Heath Group
      Entities) and (d) Purchaser and Seller shall execute a license agreement
      providing JLH with the right to use the “Jeffrey L. Heath” trademark for the
      sole purpose of winding up the operations of JLH.

     

    Section
      7.7 Tax
      Matters. Preparation
      of Returns.
      

     

    (i) Tax
      Periods Ending On or Before the Closing Date.

     

    (A) Non-Income
      Returns.
      Purchaser shall prepare or cause to be prepared and file or cause to be filed
      all Returns for the Companies for all periods ending on or prior to the Closing
      Date (“Pre-Closing
      Tax Period”)
      which
      are filed after the Closing Date, other than income Returns for such periods.
      Such Returns shall be prepared consistently with the past practice of the
      Companies, unless otherwise required by applicable Law. Purchaser shall permit
      the Seller to review and comment on each such Return described in the preceding
      sentence prior to filing. Seller shall reimburse Purchaser for Taxes of the
      Companies with respect to such periods within five (15) days of payment by
      Purchaser or the Companies of such Taxes.

     

    (B) Income
      Returns.
      Seller
      shall prepare or cause to be prepared all income Returns for the Companies
      for
      all Pre-Closing Tax Periods, including specifically, the final partnership
      income Return of each of HXS and Hardscrabble that will result from the
      termination of each such partnership (as treated for Tax purposes) pursuant
      to
      Section 708 of the Code. Such income Returns shall be prepared consistently
      with
      past practice of the Companies. Seller shall permit Purchaser to review and
      comment on each such Return described in the preceding sentence prior to filing.
      The Purchaser or the Companies shall file such Returns at the direction of
      the
      Seller. The cost of preparing such Returns shall be borne by the Seller, and
      not
      the Companies.

     

    (ii) Tax
      Periods Beginning Before and Ending After the Closing Date.
      Purchaser shall prepare or cause to be prepared and file or cause to be filed
      Returns of the Companies (if any) for Tax periods which begin before the Closing
      and end after the Closing (a “Straddle
      Tax Period”).
      Such
      Returns shall be prepared consistently with the past practice of the Companies
      unless otherwise required by applicable Law. Purchaser shall permit the Seller
      to review and comment on each such Return described in the preceding sentence
      prior to filing. Seller shall reimburse Purchaser within five (5) days of the
      date on which Taxes are paid with respect to such periods an amount equal to
      the
      portion of such Taxes which relates to the portion of such taxable period ending
      on Closing.

     

    
      
        
        

      

      
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    (iii) Allocation.
      For
      purposes of this Section
      7.7,
      in the
      case of any Taxes that are imposed on a periodic basis and are payable for
      a
      taxable period that includes (but does not end on) the Closing, the portion
      of
      such Tax which relates to the portion of such taxable period ending on the
      Closing shall (x) in the case of any Taxes other than the Taxes based upon
      or
      related to income or receipts, be deemed to be the amount of such Tax for the
      entire taxable period multiplied by a fraction the numerator of which is the
      number of days in the taxable period ending on the Closing and the denominator
      of which is the number of days in the entire taxable period, and (y) in the
      case
      of any Tax based upon or related to income or receipts be deemed equal to the
      amount which would be payable if the relevant taxable period ended on the
      Closing. For purposes of this Section
      7.7,
      in the
      case of any Tax credit relating to a taxable period that begins before and
      ends
      after the Closing, the portion of such Tax credit which relates to the portion
      of such taxable period ending on the Closing shall be the amount which bears
      the
      same relationship to the total amount of such Tax credit as the amount of Taxes
      described in (y) above bears to the total amount of Taxes for such taxable
      period.

     

    (b) Cooperation
      on Tax Matters.

     

    (i) Purchaser
      and Seller (and Purchaser shall cause the Companies to) cooperate fully, as
      and
      to the extent reasonably requested by the other party, in connection with the
      filing of Returns and any audit, litigation or other proceeding with respect
      to
      Taxes. Such cooperation shall include the retention and (upon the other party's
      request) the provision of records and information reasonably relevant to any
      such audit, litigation, or other proceeding and making employees available
      on a
      mutually convenient basis to provide additional information and explanation
      of
      any material provided hereunder. The Seller and Purchaser agree to (A) retain
      all books and records with respect to Tax matters pertinent to the Companies
      relating to any taxable period beginning before the Closing Date until
      expiration of the statute of limitations (and any extensions thereof) of the
      respective taxable periods, and to abide by all record retention agreements
      entered into with any taxing authority, and (B) give all parties reasonable
      written notice prior to transferring, destroying or discarding any such books
      and records and, if any other party so requests, shall allow such other party
      to
      take possession of such books and records.

     

    (ii) The
      Purchaser and the Seller further agree, upon request, to use their reasonable
      best efforts to obtain any certificate or other document from any governmental
      authority or any other Person as may be necessary to mitigate, reduce or
      eliminate any Tax that could be imposed.

     

    (c) Amended
      Returns.

     

    (i) Any
      amended Return of the Companies or claim for Tax refund on behalf of the
      Companies for any period ending on or prior to the Closing Date shall be filed,
      or caused to be filed, only by the Seller. The Seller shall not, without the
      prior written consent of the Purchaser (which consent shall not be unreasonably
      withheld or delayed), make or cause to be made, any such filing, to the extent
      such filing, if accepted, reasonably might change the Tax liability of the
      Purchaser or the Companies for any period ending after the Closing
      Date.

     

    
      
        
        

      

      
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    (ii) Any
      amended Return of the Companies or claim for Tax refund on behalf of the
      Companies for any period ending after the Closing Date shall be filed, or caused
      to be filed, only by the Purchaser. The Purchaser shall not, without the prior
      written consent of the Seller (which consent shall not be unreasonably withheld
      or delayed), make or cause to be made, any such filing, to the extent such
      filing, if accepted, reasonably might change the Tax liability of the Seller
      for
      any period ending on or prior to the Closing Date.

     

    (d) Audits.

     

    (i) Purchaser
      shall provide Seller with notice of any written inquiries, audits, examinations
      or proposed adjustments by the Internal Revenue Service (“IRS”) or any other
      Taxing Authority, which relate to any Pre Closing Tax Periods. Seller shall
      have
      the sole right to represent the interests of the Companies in any Tax audit
      or
      other proceeding relating to any Pre Closing Tax Periods, to employ counsel
      of
      their choice at their own expense, and to settle any issues and to take any
      other actions in connection with such proceedings relating to such taxable
      periods; provided, however, that Seller shall inform Purchaser of the status
      of
      any such proceedings, shall provide Purchaser (at Purchaser’s cost and expense)
      with copies of any pleadings, correspondence, and other documents as Purchaser
      may reasonably request and shall consult with Purchaser prior to the settlement
      of any such proceedings and shall obtain the prior written consent of Purchaser
      prior to the settlement of any such proceedings that could reasonably be
      expected to adversely affect Purchaser in any taxable period ending after the
      Closing Date, which consent shall not be unreasonably withheld or delayed;
      provided further, however, that Purchaser and counsel of its own choosing shall
      have the right to participate in, but not direct, the prosecution or defense
      of
      such proceedings at Purchaser’s sole expense.

     

    (ii) Purchaser
      and Seller shall promptly provide each other with notice of any written
      inquiries, audits, examinations or proposed adjustments by the IRS or any other
      Taxing Authority that relate to any Straddle Tax Period. Purchaser and Seller
      shall jointly control the conduct of any Tax audits or other proceedings
      relating to Taxes for a Straddle Tax Period, and neither party shall settle
      any
      such Tax audit or other proceeding without the written consent of the other
      party, which consent shall not be unreasonably withheld or delayed.

     

    (iii) Purchaser
      shall have the right to control all other Tax audits or proceedings of the
      Companies. Purchaser shall obtain the prior written consent of Seller prior
      to
      the settlement of any such proceedings that could reasonably be expected to
      increase the Seller’s Tax liabilities for a Pre-Closing Tax Period, which
      consent shall not be unreasonably withheld or delayed.

     

    (iv) Purchaser
      and the Companies shall execute and deliver to Seller such powers of attorney
      and other documents as may be necessary or appropriate to give effect to the
      foregoing.

     

    
      
        
        

      

      
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    (e) Certain
      Taxes.
      All
      transfer, documentary, sales, use, stamp, registration and other such Taxes
      and
      fees (including any penalties and interest) incurred in connection with this
      Agreement shall be paid by the Purchaser when due, and the Purchaser or the
      Companies will, at its own expense, file all necessary Returns and other
      documentation with respect to all such transfer, documentary, sales, use, stamp,
      registration and other taxes and fees, and, if required by applicable Law,
      Seller will join in the execution of any such Returns and other documentation,
      provided that Seller is held harmless from any liability solely by reason of
      such joinder.

     

    (f) Tax
      Covenants.

     

    (i) Purchaser
      covenants that without obtaining the prior written consent of Seller it will
      not, and will not cause or permit the Companies or any affiliate of Purchaser,
      to (i) take any action on the Closing Date other than in the ordinary course
      of
      business that could give rise to any Tax liability of Seller or (ii) make or
      change any material Tax election, amend any Return, take any Tax position on
      any
      Return, or compromise or settle any Tax liability, in each case if such action
      could have the effect of increasing the Tax liability of Seller or reducing
      any
      Tax asset of the Companies with respect to any Pre Closing Tax Period or portion
      of a Straddle-Tax Period ending on the Closing Date.

     

    (ii) After
      the
      Closing Date, Purchaser and/or the Companies will not, without obtaining the
      written consent of Seller, agree to the waiver or any extension of the statute
      of limitations relating to any Taxes of the Companies for any Pre Closing Tax
      Period or any Straddle Tax Period.

     

    (iii) Seller
      shall have the right to any Tax refunds received by the Companies for any
      Pre-Closing Tax Period or portion of any Straddle Tax Period that ends on the
      Closing Date. Purchaser shall pay such amounts to Seller no later than ten
      days
      after the receipt by the Companies of such Tax refunds.

     

    (g) Allocation
      of Purchase Price.
      Within
      ninety (90) days after the Closing, Seller shall provide to Purchaser a
      statement (the “Allocation
      Notice”)
      of the
      amount of the Purchase Price allocated to each of HXS and Hardscrabble it
      proposes to allocate to the respective assets of HXS and Hardscrabble described
      in Section 751(a)(1) or (2) of the Code (the “Allocation”)
      for
      the review of the Purchaser. The Allocation shall be based on applicable Law.
      Seller shall consider and implement any reasonable adjustments to such
      Allocation as may be proposed by the Purchaser. To the extent the Purchaser
      fails to notify Seller of any disagreements within twenty (20) days of receipt
      of the Allocation Notice, then the Allocation, as proposed in the Allocation
      Notice, shall be final, binding and conclusive on the parties hereto. If (x)
      the
      Purchaser is in disagreement with the Allocation proposed in the Allocation
      Notice, and the Purchaser notifies the Seller within such twenty (20) day period
      in accordance with this Agreement, or (y) Seller do not agree with the
      Purchaser’s proposed adjustments to the Allocation, then such disagreement shall
      be submitted to the national office of a firm of independent accountants of
      nationally recognized standing reasonably satisfactory to the Seller and the
      Purchaser.

     

    
      
        
        

      

      
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    Section
      7.8 Employee
      Benefit Plans; Employment. 

     

    (a) Employee
      Benefit Plans.
      As of
      the Closing Date (immediately prior to the Closing), the Seller shall, and
      shall
      cause the Companies to, terminate the Company Plan set forth on Schedule 10.1(c)
      with respect to the Companies in accordance with the terms thereof and
      applicable Law without any further liability of the Companies or any sponsor
      or
      fiduciary thereof, including making applicable distributions to participants
      therein. In connection with such termination, (i) Seller shall make, or cause
      to
      be made, such contributions and other payments as necessary to satisfy the
      Termination Obligation and (ii) Seller and Seller’s participating family members
      shall execute an indemnification of such Company Plan and its fiduciaries and
      sponsors, including a disclaimer of any rights or benefits under such Company
      Plan following the Closing Date (other than as provided in connection with
      the
      termination). 

     

    (b) No
      Representations.
      Without
      the written consent of the Purchaser (or except as expressly contemplated by
      this Agreement), neither the Seller nor any Company will make any promise or
      commitment to any employee of any Company with regard to his or her employment
      status with the Purchaser or such Company, or the terms or conditions upon
      which
      such employment might occur or be continued.

     

    Section
      7.9 Pre-Closing
      Restructuring

     

    (a) Following
      the date hereof, Seller shall take all actions necessary to cause the transfer
      by JLH to the Companies of the assets (including Intangible Assets) set forth
      on
      Schedule 8.1, free and clear of Encumbrances (the “Pre-Closing
      Restructuring”).
      Prior
      to execution thereof, Seller shall provide Purchaser and its representatives
      with copies for its review of any bills of sale, assignment of trademarks or
      related transfer documents in connection with the foregoing.

     

    (b) Seller
      shall take all actions (including making out-of-pocket expenditures) necessary
      to obtain Consents under Encumbered Instruments required in connection with
      effectuating the Pre-Closing Restructuring; provided that Seller shall not,
      without the express consent of Purchaser, in connection with the Pre-Closing
      Restructuring (1) commit or agree to any amendment or modification of any
      Contract of the Heath Group Entities or to any other obligation binding on
      the
      Companies or (2) cause any Company to incur any liability. 

     

    (c) Seller
      shall take all actions (including making out of pocket expenditures borne by
      Seller) necessary to transfer to the Companies any Licenses held by JLH and
      required by the Companies to alone conduct the business of the Heath Group
      Entities as conducted prior to the date of this Agreement. In the event that
      any
      Licenses held by JLH cannot be legally transferred to the Companies (or such
      transfer would result in a material delay in the transaction), then Seller
      shall
      promptly cause the Companies (at the cost and expense of the Companies) to
      apply
      for new Licenses required for the Companies alone to conduct the business of
      the
      Heath Group Entities as conducted prior to the date of this Agreement. If the
      Closing occurs, Seller shall make available to the Companies all Licenses held
      by JLH (and not then held by the Companies) and/or Seller for the purpose of
      the
      conducting the business of the Heath Group Entities following the Closing until
      such time as all required Licenses have been issued to the
      Companies.

     

    (d) Seller
      and JLH (and not the Companies nor Purchaser) shall bear all costs and expenses
      associated with effectuating the Pre-Closing Restructuring, including with
      respect to transferring or applying for Licenses in connection
      therewith.

     

    
      
        
        

      

      
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    (e) Seller
      shall keep Purchaser informed on a current basis with respect to the progress
      of
      the Pre-Closing Restructuring, including with respect to completing any
      transfer, obtaining any Consent or License or other step which in each case
      presents a risk of delaying the Closing hereunder. Seller shall keep Purchaser
      informed of any material communication with the counterparty and its affiliates
      with respect the transfer of Material Contract set forth in Schedule
      7.9(e).

     

    ARTICLE
      VIII

    CONDITIONS
      PRECEDENT TO CLOSING

     

    Section
      8.1 Conditions
      Precedent to Purchaser’s Obligations.
      The
      obligation of the Purchaser to consummate the transactions contemplated by
      this
      Agreement shall be subject to the satisfaction of the following conditions,
      any
      of which may be waived in writing by the Purchaser.

     

    (a) Accuracy
      of Representations and Warranties.
      The
      representations and warranties made by the Seller in this Agreement shall have
      been true and complete as of the Signing Date and as of the Closing Date as
      though made as of the Closing Date, except to the extent such representations
      or
      warranties made as of a specific date shall have been correct and complete
      as of
      the specified date.

     

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

     

    (c) No
      Material Adverse Change.
      None of
      the Heath Group Entities has undergone any Material Adverse Change since the
      Signing Date.

     

    (d) Consents.
      The
      Companies and the Seller, as the case may be, shall have received and delivered
      to Purchaser all of the Required Consents, each in form and substance
      satisfactory to Purchaser, and shall have given all notices required to be
      given
      to any Persons prior to the consummation of the transactions contemplated by
      this Agreement.

     

    (e) Closing
      Certificate.
      The
      Seller and an executive officer of each of the Companies shall have delivered
      to
      the Purchaser a certificate confirming (i) the satisfaction of the conditions
      set forth in Sections
      8.1(a),
      8.1(b),
      8.1(c)
      and
8.1(d)
      and (ii)
      the continuing force and effect of the Required Consents.

     

    (f) Secretary’s
      Certificate.
      Seller
      shall have delivered to the Purchaser a certificate executed by the secretary
      or
      an assistant secretary of each of the Companies certifying as to (i) the
      applicable Company’s Charter Documents, (ii) the applicable Company’s good
      standing, (iii) the resolutions in which the applicable Company’s board of
      directors, or members and managers (if any), as the case may be, approved the
      Transaction Documents to which the Company is a party and the transactions
      contemplated thereby, and (iv) the incumbency of the applicable Company’s
      officers who execute any documents on behalf of such Company in connection
      with
      this Agreement.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (g) Deliveries.
      The
      Seller shall have delivered the documents required by Section
      2.2
      and such
      other documents as Purchaser may reasonably require.

     

    (h) No
      Order or Action.
      No
      Order shall be in effect forbidding or enjoining the consummation of the
      transactions contemplated hereby. No Action shall be pending or threatened
      before any court or other Governmental Authority seeking to enjoin the Closing
      or seeking damages against the Purchaser or any of its Representatives as a
      result of any of the transactions contemplated by this Agreement, provided
      that
      neither the Purchaser nor any of its affiliates instituted such
      Action.

     

    (i) Transfer
      of Assets.
      The
      Seller shall have caused the transfer of the assets set forth on Schedule
      8.1(i)
      from
      Jeffrey L. Heath, Inc. to HXS, free and clear of all Encumbrances, and all
      Consents with respect to such transfers shall have been received

     

    (j) Licenses.
      All
      Licenses required for the Companies alone following the Closing to operate
      the
      business conducted by the Heath Group Entities as of the date of this Agreement,
      as determined in the reasonable discretion of the Purchaser, shall have been
      transferred to, or been received by, the Companies, and such Licenses shall
      remain in full force and effect.

     

    (k) Pension
      Termination.
      The
      Company Plan set forth on Schedule 10.1(c) shall have been terminated with
      respect to the Companies in accordance with the terms of such Company Plan
      and
      applicable Law, and the Termination Obligation shall have been
      satisfied.

     

    Section
      8.2 Conditions
      Precedent to the Seller’s Obligations.
      The
      obligation of the Seller to consummate the transactions contemplated by this
      Agreement shall be subject to the satisfaction of the following conditions,
      any
      of which may be waived in writing by the Seller.

     

    (a) Accuracy
      of Representations and Warranties.
      The
      representations and warranties made by the Purchaser in this Agreement shall
      have been true and complete as of the Signing Date and as of the Closing Date
      as
      though made as of the Closing Date, except to the extent such representations
      or
      warranties made as of a specific date shall have been correct and complete
      as of
      the specified date.

     

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

     

    (c) Closing
      Certificate.
      An
      executive officer of Purchaser shall have delivered to the Seller a certificate
      confirming the satisfaction of the conditions set forth in Sections
      8.2(a)
      and
8.2(b).

     

    (d) Deliveries.
      The
      Purchaser shall have delivered the documents required by Section 2.3
      and such
      other documents as the Seller may reasonably require.

     

    (e) No
      Order or Action. No Order shall be in effect forbidding or enjoining the
      consummation of the transactions contemplated hereby. No Action shall be pending
      or threatened before any court or other Governmental Authority seeking to enjoin
      the Closing or seeking damages against the Companies or the Seller or any of
      their Representatives as a result of any of the transactions contemplated by
      this Agreement, provided that neither the Companies nor the Seller nor any
      of
      their affiliates instituted such Action.

     

    
      
        
        

      

      
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    ARTICLE
      IX

    TERMINATION
      PRIOR TO CLOSING

     

    Section
      9.1 Termination
      of Agreement.
      This
      Agreement may be terminated at any time prior to the Closing:

     

    (a) by
      mutual
      agreement of the Purchaser and the Seller;

     

    (b) by
      the
      Purchaser at any time after the occurrence of a Material Adverse Change in
      any
      of the Heath Group Entities; 

     

    (c) by
      the
      Purchaser or the Seller at any time on or after December 31, 2008 (the “Drop
      Dead Date”), if any of the conditions provided for in Section
      8.1
      or
8.2,
      respectively, shall not have been met or waived in writing prior to such date;
      provided that a Party shall not have the right to terminate under this
Section
      9.1(c)
      if such
      Party’s actions were the cause of the conditions not being satisfied on or prior
      to the Drop Dead Date;

     

    (d) by
      Purchaser, if any of the conditions set forth in Section
      8.1
      shall
      become impossible to be satisfied; or

     

    (e) by
      Seller, if any of the conditions set forth in Section
      8.2
      shall
      become impossible to be satisfied. 

     

    Section
      9.2 Procedure
      Upon Termination.
      In
      the
      event of termination pursuant to Section
      9.1,
      written
      notice thereof shall be immediately given to the other Party and the
      transactions contemplated by this Agreement shall be terminated, without any
      further action by any Party. If the transactions contemplated by this Agreement
      are terminated as provided herein:

     

    (a) each
      Party shall return all documents, work papers and other materials of the other
      Party, whether obtained before or after the execution hereof, to the Party
      furnishing the same; and

     

    (b) such
      termination shall not in any way limit, restrict or relieve any Party of
      liability for any breach of this Agreement.

     

    ARTICLE
      X

    
      INDEMNIFICATION
        AND OFFSET

    

     

    Section
      10.1 Indemnification
      by Seller.
      The
      Seller shall indemnify and hold harmless the Purchaser, the Companies, and
      their
      respective directors, officers, employees, agents, attorneys and shareholders
      (excluding the Seller and his affiliates) (collectively, the “Purchaser
      Group”)
      in
      respect of any and all Claims incurred by the Purchaser Group, in connection
      with each and all of the following:

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (a) Any
      breach of any representation or warranty made by the Seller in this Agreement
      as
      of the date of this Agreement or as of the Closing Date; and

     

    (b) The
      breach of any covenant, agreement or obligation of the Seller contained in
      this
      Agreement or any other instrument delivered at the Closing, including, the
      agreement and covenants of the Seller set forth in Section
      5.8
      of this
      Agreement.

     

    (c) Any
      liability (including any Tax liability) incurred in connection with the failure
      to administer any Company Plans in accordance with applicable Law prior to
      or on
      the Closing Date, and any liability arising in connection with the Company
      Plan
      described on Schedule 10.1(c) (including, but not limited to, any liability
      or
      Claim arising in connection with the termination thereof pursuant to Section
      7.9(f) or otherwise, including the Termination Obligation).

     

    (d) Any
      liability arising in connection with the Pre-Closing Restructuring (including
      but not limited to any liability arising from a failure to obtain any required
      Consent and any Tax liability).

     

    (e) Any
      liability arising from the failure of the Companies to hold or obtain following
      Closing any License required under applicable Law for the Companies to conduct
      following the Closing the business conducted by the Heath Group Entities prior
      to Closing; provided that, without limiting any other rights under this Section
      10.1, this specific indemnity under 10.1(e) shall no longer apply in respect
      of
      an individual License following the first issuance of such License following
      Closing.

     

    (f) Any
      Pre-Closing Operational Liability.

     

    (g) Any
      Operating Cash Shortfall.

     

    (h) Any
      liabilities of JLH.

     

    Section
      10.2 Indemnification
      by Purchaser.
      The
      Purchaser shall indemnify and hold harmless the Seller in respect of any and
      all
      Claims reasonably incurred by the Seller in connection with each and all of
      the
      following:

     

    (a) Any
      breach of any representation or warranty made by the Purchaser in this
      Agreement; and

     

    (b) The
      breach of any covenant, agreement or obligation of the Purchaser contained
      in
      this Agreement or any other instrument delivered at the Closing.

     

    Section
      10.3 Claims
      for Indemnification. Whenever
      any Claim shall arise for indemnification hereunder, the party entitled to
      indemnification (the “Indemnified
      Party”)
      shall
      promptly notify the other party (the “Indemnifying
      Party”)
      of the
      Claim and, when known, the facts constituting the basis for such Claim. In
      the
      event of any Claim for indemnification hereunder resulting from or in connection
      with any Claim or legal proceedings by a third party, the notice to the
      Indemnifying Party shall specify, if known, the amount or an estimate of the
      amount of the liability potentially arising therefrom. The Indemnified Party
      shall not settle or compromise any Claim by a third party for which it is
      entitled to indemnification hereunder without the prior written consent of
      the
      Indemnifying Party, consent not be unreasonably withheld or
      delayed.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    Section
      10.4 Defense
      by Indemnifying Party. In
      connection with any Claim giving rise to indemnity hereunder resulting from
      or
      arising out of any Claim or legal proceeding by a Person who is not a party
      to
      this Agreement, the Indemnifying Party at its sole cost and expense may, upon
      written notice to the Indemnified Party given within twenty (20) days after
      delivery of the written notice referred to in Section
      10.3
      hereof
      assume the defense of any such Claim or legal proceeding if it acknowledges
      to
      the Indemnified Party in writing its obligations to indemnify the Indemnified
      Party with respect to all elements of such Claim. Without the prior written
      consent of the Indemnified Party, the Indemnifying Party will not enter into
      any
      settlement of any third-party claim which would lead to liability or create
      any
      financial or other obligation on the part of the Indemnified Party for which
      the
      Indemnified Party is not entitled to indemnification hereunder, or which
      provides for injunctive or other non-monetary relief applicable to the
      Indemnified Party, or does not include an unconditional release of all
      Indemnified Parties. The Indemnified Party shall be entitled to participate
      in
      (but not control) the defense of any such action, with its own counsel and
      at
      its own expense. If the Indemnifying Party does not assume the defense of any
      such Claim or litigation resulting therefrom with counsel reasonably
      satisfactory to the Indemnified Party, (a) the Indemnified Party may defend
      against such Claim or litigation, in such manner as it may deem appropriate,
      including, but not limited to, settling such Claim or litigation, after giving
      notice of the same to the Indemnifying Party, on such terms as the Indemnified
      Party may deem appropriate, and (b) the Indemnifying Party shall be entitled
      to
      participate in (but not control) the defense of such action, with its counsel
      and at its own expense. If the Indemnifying Party thereafter seeks to question
      the manner in which the Indemnified Party defended such third party Claim or
      the
      amount or nature of any such settlement, the Indemnifying Party shall have
      the
      burden to prove by a preponderance of the evidence that the Indemnified Party
      did not defend or settle such third party Claim in a reasonably prudent manner
      as a prudent businessman would if his own funds were subject to such suit.
      

     

    Section
      10.5 Offset. The
      Indemnified Party shall have the right to offset any amounts for which it is
      entitled to indemnification under this Article
      X
      against
      any amounts otherwise payable by the Indemnified Party to the Indemnifying
      Party
      under this Agreement. In addition, the parties acknowledge and agree that
      Purchaser shall be entitled to cause the Companies to (i) offset any amounts
      for
      which the Purchaser Group is entitled to indemnification under this Article
      X
      against amounts otherwise payable to the Seller or his affiliates under the
      Amended and Restated Operating Agreements (including distributions thereunder)
      and/or (ii) direct to Purchaser amounts otherwise payable to the Seller or
      his
      affiliates under the Amended and Restated Operating Agreements (including
      distributions thereunder) in respect of any amounts for which the Purchaser
      Group is entitled to indemnification under this Article X.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    Section
      10.6 Tax
      Benefit. Any
      payment or indemnity required to be made pursuant to Section
      10.1
      or
Section
      10.2
      shall be
      adjusted to take into account any reduction in Taxes actually realized by the
      Indemnified Party (which term shall, for purposes of this Section
      10.6,
      include
      the ultimate payer(s) of Taxes in the case of an Indemnified Party that
      is a branch or a disregarded entity or other pass-through entity for any Tax
      purpose) as a result of the Claims giving rise to the payment or indemnity;
      provided that, in calculating whether a net Tax benefit was actually realized,
      Purchaser shall assume that all items of deduction other than the applicable
      loss for which an indemnity payment is to be made hereunder shall first be
      used
      to determine the Tax liability of the Purchaser for the Tax year in which the
      relevant loss arises and, if the item of deduction (or portion thereof) with
      respect to such loss is not allowed in such Tax year applying the limitations
      of
      the foregoing provision, then such item of deduction (or any portion thereof)
      shall be deemed used in the first succeeding Tax year following such year that
      such item is allowed applying the foregoing ordering rules for such other Tax
      years.

     

    Section
      10.7 Characterization
      of Indemnity Payments. The
      parties hereto agree to treat any indemnification payments made pursuant to
      this
      Agreement as an adjustment to the Purchase Price, unless a “Final
      Determination”
with
      respect to the Indemnified Party or any of its affiliates causes any such
      payment not to be treated as an adjustment to such price for federal income
      Tax
      purposes. For purposes of this agreement “Final
      Determination”
means
      (i) with respect to federal income Taxes, a “determination” as defined in
      Section 1313(a) of the Code or execution of an Internal Revenue Service Form
      870
      AD and, (ii) with respect to Taxes other than federal income Taxes, any final
      determination of liability in respect of a Tax that, under applicable law,
      is
      not subject to further appeal, review or modification through proceedings or
      otherwise (including the expiration of a statute of limitations or a period
      for
      the filing of claims for refunds, amended returns or appeals from adverse
      determinations).

     

    Section
      10.8 Limits
      on Indemnification; Other Provisions.

     

    (a) The
      maximum amount of indemnifiable Claims which may be recovered by
      an
      Indemnified Party arising out of or resulting from the causes set forth in
      Section
      10.1(a)
      or
10.2
      (a),
      as the
      case may be, shall be an amount equal to 66 2/3% of the Purchase
      Price.

     

    (b) Purchaser’s
      rights to indemnification hereunder shall not be affected by any investigation
      (including any investigation or assessment with respect to the financial
      condition of the Companies based on information provided to Purchaser) conducted
      with respect to, or any knowledge acquired (or capable of being acquired) at
      any
      time, whether before or after the execution and delivery of this Agreement
      or
      the Closing Date, with respect to the accuracy or inaccuracy of or compliance
      with any such representation, warranty, covenant or obligation. 

     

    (c) Purchaser
      may elect that indemnification payments by Seller in respect of 100% of any
      indemnifiable Claim suffered or incurred directly by the Companies be paid
      directly to (i) the applicable Company or Companies or (ii) Purchaser, in each
      case in settlement thereof. 

     

    
      ARTICLE
        XI

      MISCELLANEOUS

       

      Section
        11.1 Amendment.
        No
        amendment of this Agreement shall be effective unless in a writing signed
        by
        Purchaser, on the one hand, and the Seller, on the other hand.

       

    

    
      
        
        

      

      
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    Section
      11.2 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original agreement, but all of which shall constitute one and
      the same agreement. Any Party may execute and deliver this Agreement by an
      executed signature page transmitted by a facsimile machine. If a Party transmits
      its signature page by a facsimile machine, such Party shall promptly thereafter
      deliver an originally executed signature page to the other Party, provided
      that
      any failure to deliver such an originally executed signature page shall not
      affect the validity, legality, or enforceability of this Agreement.

     

    Section
      11.3 Entire
      Agreement.
      This
      Agreement constitutes the entire agreement and understanding between the Parties
      and supersedes all prior agreements and understandings, both written and oral,
      with respect to the subject matter of this Agreement.

     

    Section
      11.4 Expenses.
      Each
      Party shall bear its own expenses with respect to the negotiation and
      preparation of this Agreement and the Closing, including any fees and expenses
      of its Representatives, provided that if a Party terminates this Agreement
      because of another Party’s breach of this Agreement, the non-breaching Party
      shall be entitled to seek reimbursement of its expenses as part of its damages
      with respect to such breach. The Seller shall bear any Tax imposed in connection
      with the transfer of the Interests to the Purchaser pursuant to this
      Agreement.

     

    Section
      11.5 GOVERNING
      LAW.
      THIS
      AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF
      THE
      LAWS THAT MIGHT OTHERWISE GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF
      SUCH
      STATE.

     

    Section
      11.6 Forum.
      The
      Parties agree that any action relating to this Agreement shall be instituted
      in
      a federal or state court sitting in Fort Worth, Texas, which courts and their
      respective appellate courts shall be the exclusive venue for any such claim.
      Each Party waives any objection that it may have to the laying of such venue,
      and irrevocably submits to the jurisdiction of any such court with respect
      to
      any such claim. Any service of process and other notice in any such case shall
      be effective against a Party when transmitted in accordance with Section
      11.9,
      provided that a Party also may serve process in any manner permitted by
      Law.

     

    Section
      11.7  No
      Assignment.
      No
      Party
      may assign its benefits or delegate its duties under this Agreement without
      the
      prior written consent of the other Party. Any attempted assignment or delegation
      without such prior consent shall be void. Notwithstanding this prohibition
      against assignment and delegation, the Purchaser may assign its rights and
      delegate its duties under this Agreement to a wholly-owned subsidiary of the
      Purchaser without the Seller’s consent; provided that Purchaser shall not be
      released from its obligations under this Agreement. 

     

    Section
      11.8 No
      Third Party Beneficiaries.
      This
      Agreement is solely for the benefit of the Parties and no other Person shall
      have any right, interest, or claim under this Agreement.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    Section
      11.9 Notices.
      All
      claims, consents, designations, notices, waivers, and other communications
      in
      connection with this Agreement shall be in writing. Such claims, consents,
      designations, notices, waivers, and other communications shall be considered
      received (i) on the day of actual transmittal when transmitted by facsimile
      with
      written confirmation of such transmittal, (ii) on the next business day
      following actual transmittal when transmitted by a nationally recognized
      overnight courier, or (iii) on the third business day following actual
      transmittal when transmitted by certified mail, postage prepaid, return receipt
      requested; in each case when transmitted to a Party at its address set forth
      below (or to such other address to which such Party has notified the other
      Party
      in accordance with this Section to send such claims, consents, designations,
      notices, waivers, and other communications):

     

    
      	
              Purchaser:

            	 	
              Hallmark
                Financial Services, Inc.

            
	 	 	
              777
                Main Street, Suite 1000

            
	 	 	
              Fort
                Worth, Texas 76102

            
	 	 	
              Phone:
                (817) 348-1800

            
	 	 	
              Fax:
                (817) 348-1815

            
	 	 	
              Attn.:
                Mr. Mark Morrison

            
	
              with
                a copy to:

            	 	 
	 	 	 
	
              Seller:

            	 	
              Jeffrey
                L. Heath

            
	 	 	
              59
                South Finley Ave.

            
	 	 	
              Basking
                Ridge, NJ 07920

            
	 	 	
              E-mail:
                jheath@heathxs.com

            
	 	 	
              Facsimile:
                (908) 766-4419

            
	 	 	 
	
              with
                a copy to:

            	 	 
	 	 	
              Blank
                Rome, LLP

            
	 	 	
              One
                Logan Square

            
	 	 	
              Philadelphia,
                PA 19103

            
	 	 	
              E-mail:
                becker@blankrome.com

            
	 	 	
              Facsimile:
                (215) 832-5527

            
	 	 	
              Attention:
                Samuel H. Becker, Esquire

            

    

    

    Section
      11.10 Public
      Announcements.
      The
      Parties shall agree on the terms of any press releases or other public
      announcements related to this Agreement, and shall consult with each other
      before issuing any press releases or other public announcements related to
      this
      Agreement; provided,
      however,
      that
      any Party may make a public disclosure if in the opinion of such Party’s counsel
      it is required by Law or the rules of the Securities Exchange Commission, any
      stock exchange or other regulatory agency to make such disclosure. The Parties
      agree, to the extent practicable, to consult with each other regarding any
      such
      public announcement in advance thereof.

     

    Section
      11.11 Representation by Legal Counsel. Each Party is a sophisticated
      Person that was advised by experienced legal counsel and other advisors in
      the
      negotiation and preparation of this Agreement.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    Section
      11.12 Schedules.
      All
      references in this Agreement to schedules shall mean the schedules identified
      in
      this Agreement, which are incorporated into this Agreement and shall be deemed
      a
      part of this Agreement for all purposes. Each Section of this Agreement that
      refers to a schedule shall have a separate schedule. In addition, any disclosure
      under a particular Section’s schedule shall be made under the heading of any
      relevant subsection of such Section. A disclosure of an item in a schedule
      for a
      particular Section or under a heading in a schedule corresponding to a
      particular subsection shall not be a disclosure under any other Section’s
      schedule or any other subsection, unless so noted specifically on such schedule.
      The Seller has delivered to the Purchaser a correct and complete copy of each
      document described on each schedule to this Agreement and a correct and complete
      written description of each unwritten arrangement or other item described on
      each such schedule.

     

    Section
      11.13 Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall not invalidate the remaining provisions of this Agreement
      or
      affect the validity or enforceability of such provision in any other
      jurisdiction. In addition, any such prohibited or unenforceable provision shall
      be given effect to the extent possible in the jurisdiction where such provision
      is prohibited or unenforceable.

     

    Section
      11.14 Successors.
      This
      Agreement shall be binding upon and shall inure to the benefit of each Party
      and
      its heirs, legal representatives, permitted assigns, and successors, provided
      that this Section shall not permit the assignment or other transfer of this
      Agreement, whether by operation of law or otherwise, if such assignment of
      other
      transfer is not otherwise permitted under this Agreement.

     

    Section
      11.15 Time
      of the Essence.
      Time
      is
      of the essence in the performance of this Agreement and all dates and periods
      specified in this Agreement.

     

    Section
      11.16 Waiver.
      No
      provision of this Agreement shall be considered waived unless such waiver is
      in
      writing and signed by the Party that benefits from the enforcement of such
      provision. No waiver of any provision in this Agreement, however, shall be
      deemed a waiver of a subsequent breach of such provision or a waiver of a
      similar provision. In addition, a waiver of any breach or a failure to enforce
      any term or condition of this Agreement shall not in any way affect, limit,
      or
      waive a Party’s rights under this Agreement at any time to enforce strict
      compliance thereafter with every term and condition of this
      Agreement.

     

    [Signatures
      on next page]

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each Party has executed, or caused a duly authorized officer
      to
      execute, this Agreement as of the Signing Date.

     

    
      	PURCHASER: 	HALLMARK
              FINANCIAL SERVICES, INC.
	 	 
	 	
              By:

            	  

	 	
              Name:

            	 

	 	
              Title:

            	 

    

     

    
      	
              SELLER:

            	  

	 	
              Jeffrey
                L. Heath

            

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    APPENDIX
      A

    DEFINITIONS
      AND RULES OF INTERPRETATION

     

    Definitions.
      Unless
      the context otherwise requires, the terms defined in this Appendix shall have
      the meanings specified below for all purposes of this Agreement:

     

    “Action”
means
      any action, arbitration proceeding, cause of action, charge, counterclaim,
      cross
      claim, inquiry, investigation, legal action, litigation, Order, proceeding,
      or
      suit.

     

    “Agreement”
shall
      have the meaning set forth in the Preamble.

     

    “Assumed
      Plans”
shall
      have the meaning set forth in Section
      7.8(a).

     

    “Bank
      Accounts”
shall
      have the meaning set forth in Section
      3.20.

     

    “Books
      and Records”
shall
      mean all the books and records maintained by or for any Person, including all
      accounting records, minute books, stock records, computerized records and
      storage media and the software used in connection therewith.

     

    “Charter
      Documents”
shall
      mean (i) in the case of a corporation, its articles or certificate of
      incorporation and its bylaws, (ii) in the case of a partnership, its partnership
      certificate and its partnership agreement, and (iii) in the case of any other
      Person, its organic and governing documents; in each case as such document
      has
      been amended or supplemented from time to time prior to the Signing
      Date.

     

    “Claim”
shall
      mean any arbitration award, assessment, charge, citation, claim, damage, demand,
      directive, expense, fine, interest, joint or several liability, lawsuit, loss,
      notice, obligation, payment, penalty, or summons of any kind or nature
      whatsoever, including any damages incurred because of the claimant’s negligence
      or gross negligence or any strict liability imposed upon the claimant, any
      consequential or punitive damages, and any reasonable attorneys’ fees and
      expenses. A Claim shall be considered to exist even though it may be
      conditional, contingent, indirect, potential, secondary, unaccrued, unasserted,
      unknown, unliquidated, or unmatured.

     

    “Closing”
shall
      have the meaning set forth in Section
      2.1.

     

    “Closing
      Date”
shall
      have the meaning set forth in Section
      2.1.

     

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

     

    “Companies”
      shall
      have the meaning set forth in Recital
      A.

     

    “Company
      Plans”
      shall
      have the meaning set forth in Section
      3.18(a).

     

    “Competing
      Business”
shall
      have the meaning set forth in Section
      5.8(c).

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    “Confidential
      Information”
means
      any proprietary information, and any information which Purchaser reasonably
      considers to be proprietary, pertaining to the Company’s and Purchaser’s past,
      present or prospective business secrets, methods or policies, earnings,
      finances, security holders, lenders, key employees, nature of services performed
      by such entity’s sales personnel, procedures, standards and methods, information
      relating to arrangements with suppliers, the identity and requirements of
      arrangements with customers, all policyholder information of policyholders,
      the
      type, volume or profitability of services or products for customers, drawings,
      records, reports, documents, manuals, techniques, ratings, information, data,
      statistics, trade secrets and all other information of any kind or character
      relating to each of the Parties, whether or not reduced to writing.

     

    “Consent”
shall
      mean a consent, approval, order, authorization or waiver from, notice to or
      declaration, registration or filing with any Person.

     

    “Effective
      Date”
shall
      mean shall have the meaning set forth in Section
      1.4.

     

    “Employee
      Benefit Plan”
shall
      mean any (i) Pension Benefit Plan, (ii) Welfare Benefit Plan, (iii) accident,
      dental, disability, health, life, medical, or vision plan or insurance policy,
      (iv) bonus, executive, incentive or deferred compensation plan, (v) change
      in
      control plan, (vi) fringe benefits and perquisites, (vii) holiday, sick pay,
      leave, vacation, moving or tuition reimbursement or other similar policy, (viii)
      stock option, stock purchase, phantom stock, restricted stock or stock
      appreciation plan, (ix) severance plan, or (x) other employee arrangement,
      commitment, custom, policy or practice.

     

    “Employees”
shall
      have the meaning set forth in Section
      3.17(a).

     

    “Encumbered
      Instrument”
shall
      mean any contract or lease that by its terms requires Consent from a third
      party
      by reason of the transactions contemplated by the Transaction Documents,
      including the effectuation of the Pre-Closing Restructuring.

     

    “Encumbrance”
shall
      mean any title defect or objection, mortgage, lien, deed of trust, judgment,
      claim, restrictive covenant, use restriction, charge, pledge, security interest
      or other encumbrance of any nature whatsoever, including all leases, chattel
      mortgages, conditional sales contracts, collateral security arrangements and
      other title or interest retention arrangements.

     

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

     

    “ERISA
      Affiliate”
shall
      have the meaning set forth in Section
      3.18(b).

     

    “Financial
      Statements”
shall
      have the meaning set forth in Section
      3.26.

     

    “GAAP”
shall
      mean generally accepted accounting principles in effect in the United States
      of
      America as of the Signing Date.

     

    “Governmental
      Authority”
shall
      mean any federal, state, local, tribal, foreign or other governmental agency,
      department, branch, commission, board, bureau, court, instrumentality or
      body.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    “Hardscrabble Interest”
shall
      have the meaning set forth in Recital
      A.

     

    “Heath
      Group Assets”
shall
      have the meaning set forth in Section
      3.9(a).

     

    “Heath
      Put-Call Option”
shall
      have the meaning set forth in Section
      5.8(c).

     

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 10.3.

     

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 10.3.

     

    “Insurance
      Policies”
shall
      have the meaning set forth in Section
      3.12.

     

    “Intangible
      Asset”
shall
      mean any patent, trademark, trademark license, servicemark, servicemark license,
      computer software, trade name, masthead, brand name, slogan, copyright, reprint
      right, franchise, license, process, authorization, invention, know-how, formula,
      trade secret and other intangible asset, together with any pending application,
      continuation-in-part or extension therefore.

     

    “Law”
shall
      mean any applicable code, statute, law, common law, rule, regulation, order,
      ordinance, judgment, decree, order, writ or injunction of any Governmental
      Authority.

     

    “Law
      Affecting Creditors’ Rights”
shall
      mean any bankruptcy, fraudulent conveyance or transfer, insolvency, moratorium,
      reorganization, or other law affecting the enforcement of creditors’ rights
      generally, and any general principles of equity.

     

    “License”
shall
      mean any license, approval, certificate, franchise, registration, qualification,
      permit or authorization issuable by any Governmental Authority or industry
      self-regulating organization.

     

    “Material
      Adverse Change”
shall
      mean, with respect to a Person, that such Person has (i) breached a Material
      Contract, (ii) incurred a Claim or become a party to an Action that could have
      a
      significant and detrimental effect upon it, (iii) suffered a Material Adverse
      Effect, or (iv) violated any Law or Order to which it or any of its assets
      is
      subject or bound.

     

    “Material
      Adverse Effect”
shall
      mean, with respect to a Person, the occurrence of an event or the existence
      of a
      circumstance that has a material adverse effect on such Person’s assets,
      business, cash flows, financial condition, liabilities, operations, prospects,
      or relationships, including the occurrence of any event or the existence of
      any
      circumstance that could cause such an effect in the future in an amount of
      $250,000.00 or more.

     

    “Material
      Contracts”
shall
      have the meaning set forth in Section
      3.13.

     

    “Option
      Closing” shall
      have the meaning set forth in the Amended and Restated Operating
      Agreements.

     

    “Option
      Expiration Date”
shall
      have the meaning set forth in Section
      5.8(c).

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    “Order”
shall
      mean any consent decree, decree, determination, injunction, judgment, order,
      or
      writ of any arbitrator or Governmental Authority.

     

    “Parties”
and
      “Party”
      shall
      have the meaning set forth in Recital
      B.

     

    “Pension
      Benefit Plan”
shall
      mean (i) an “employee pension benefit plan” as defined in Section 3(2) of ERISA,
      and (ii) a “multiemployer plan” as defined in Section 4001(a)(3) of
      ERISA.

     

    “Permitted
      Encumbrance”
shall
      mean any Encumbrance directly related to (i) workers’, repairmen’s and similar
      Encumbrances imposed by Law that have been incurred in the ordinary course
      of
      business, (ii) retention of title agreements with suppliers entered into in
      the
      ordinary course of business, (iii) the rights of others to customer deposits
      and
      (iv) liens for Taxes that are not yet due and payable or are being contested
      in
      good faith by the applicable Company and for which appropriate reserves have
      been established on the Financial Statements.

     

    “Person”
shall
      mean any association, bank, business trust, corporation, estate, general
      partnership, Governmental Authority, individual, joint stock company, joint
      venture, labor union, limited liability company, limited partnership, non-profit
      corporation, professional association, professional corporation, trust, or
      any
      other organization or entity.

     

    “Personal
      Property Leases”
shall
      have the meaning set forth in Section
      3.10(d).
      .

     

    “Purchase
      Price”
shall
      have the meaning set forth in Section
      1.2.

     

    “Purchased
      Heath Interests”
shall
      have the meaning set forth in Section
      1.1.

     

    “Purchased
      Heath Interests”
shall
      have the meaning set forth in Section
      1.1.

     

    “Purchaser”
shall
      have the meaning set forth in the Preamble.

     

    “Purchaser
      Group”
shall
      have the meaning set forth in Section
      10.1.

     

    “Real
      Property Leases”
shall
      have the meaning set forth in Section
      3.10(b).

     

    “Representatives”
shall
      mean, with respect to a Person, such Person’s directors, employees, officers,
      agents, accountants, affiliates, consultants, investment bankers, attorneys,
      lenders, representatives and shareholders.

     

    “Required
      Consents”
shall
      have the meaning set forth in Section
      7.3(b).

     

    “Restricted
      Territory”
shall
      have the meaning set forth in Section 5.8(c).

     

    “Returns”
shall
      have the meaning set forth in Section
      3.19(a).

     

    “Seller”
and
      “Seller”
shall
      have the meaning set forth in the Preamble.

     

    “Seller’s
      Knowledge”
shall
      mean the actual knowledge as of the date that a specific representation or
      warranty is made or deemed made, after reasonable inquiry, of
      Seller.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    “Signing
      Date”
shall
      have the meaning set forth in the Preamble.

     

    “Subscription
      Right”
shall
      have the meaning set forth in Section
      3.7.

     

    “Tax”
shall
      mean any Federal, state, local or foreign assessment, charge, duty, fee, impost,
      levy, tariff, or tax of any nature whatsoever imposed by any Governmental
      Authority or payable pursuant to any tax sharing agreement, including any
      income, payroll, withholding, excise, gift, alternative minimum, capital gain,
      added value, social security, sales, use, real and personal property, use and
      occupancy, business and occupation, mercantile, real estate, capital stock,
      and
      franchise tax or charge, together with any related interest, penalties or
      additions thereon.

     

    “Taxing
      Authority”
shall
      mean the Internal Revenue Service and any other domestic or foreign Governmental
      Authority responsible for the administration of any Tax.

     

    “Termination
      Obligation”
shall
      mean the all contributions and other amounts (together with assets of the
      Company Plan as of the date of Closing) necessary to discharge in full all
      obligations and liabilities of the Companies with respect to the Company Plan
      set forth on Schedule 10.1(c) and to terminate such Company Plan with respect
      to
      the Companies in accordance with the terms thereof and applicable Law without
      any further liability of the Companies or any sponsor or fiduciary
      thereof.

     

    “Transaction
      Documents”
shall
      mean this Agreement and all other documents and instruments executed and
      delivered pursuant to or in furtherance of this Agreement.

     

    “Welfare
      Benefit Plan”
shall
      mean an “employee welfare benefit plan” as defined in Section 3(1) of ERISA,
      including an employee welfare benefit plan which is a “multiemployer welfare
      plan” as defined in Section 3(37) of ERISA and a “multiple employer welfare
      arrangement” as defined in Section 3(40) of ERISA.

     

    “Work
      Product”
shall
      have the meaning set forth in Section
      5.8(b).

     

    “XS Interest”
shall
      have the meaning set forth in Recital
      A.

     

    Accounting
      Terms.
      Except
      as otherwise provided in this Agreement, all accounting terms defined in this
      Agreement, whether defined in this Article or otherwise, shall be construed
      in
      accordance with GAAP on a consolidated basis.

     

    Articles,
      Sections, Exhibits and Schedules.
      Except
      as specifically stated otherwise, references to Articles, Sections, Exhibits
      and
      Schedules refer to the Articles, Sections, Exhibits and Schedules of this
      Agreement.

     

    Attorneys’
      Fees.
      Whenever this Agreement refers to a Person’s “attorneys’ fees and expenses,”
such reference also shall include any fees and expenses of accountants, experts,
      investigators, and other professional advisors whose services such Person’s
      attorney considered advisable in connection with the prosecution or defense
      of
      the particular matter.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    Breach.
      The
      term “breach” with respect to any contract or instrument means any breach or
      violation of, or default under, such contract or instrument, any conflict with
      another contract or instrument or any emergence of a right of another party
      to
      such contract or instrument to accelerate, cancel, modify or terminate such
      contract or instrument, including any such breach, violation, default, conflict,
      or right that will arise after notice or lapse of time.

     

    Drafting.
      Neither
      this Agreement nor any provision set forth in this Agreement shall be
      interpreted in favor of or against any Party because such Party or its legal
      counsel drafted this Agreement or such provision. No prior draft of this
      Agreement or any provision set forth in this Agreement shall be used when
      interpreting this Agreement or its provisions.

     

    Headings.
      Article
      and Section headings are used in this Agreement only as a matter of
      convenience and shall not have any effect upon the construction or
      interpretation of this Agreement.

     

    Include.
      Whenever the words “include”, “includes” or “including” are used in this
      Agreement, they are deemed to be followed by the words “without
      limitation”.

     

    Or.
      The
      term “or” shall not be interpreted as excluding any of the items
      described.

     

    Plural
      and Singular Words.
      Whenever the plural form of a word is used in this Agreement, that word shall
      include the singular form of that word. Whenever the singular form of a word
      is
      used in this Agreement, that word shall include the plural form of that
      word.

     

    Predecessors.
      Any of
      the Seller’s representations and warranties concerning any Claim against the
      Company, any liability or obligation of the Company, or any violation of Law
      by
      the Company shall include any Claims with respect to each predecessor of the
      Company, including all direct and indirect predecessors of any such
      predecessor.

     

    Pronouns.
      Whenever a pronoun of a particular gender is used in this Agreement, if
      appropriate that pronoun also shall refer to the other gender and the neuter.
      Whenever a neuter pronoun is used in this Agreement, if appropriate that pronoun
      also shall refer to the masculine and feminine gender.

     

    Representations
      and Warranties.
      The
      Seller’s representations and warranties under this Agreement shall mean the
      representations and warranties set forth in Article
      III
      and the
      reaffirmation of the Seller’s representations and warranties in certificates
      delivered pursuant to Article
      II.
      Purchaser’s representations and warranties under this Agreement shall mean the
      representations and warranties set forth in Article
      IV
      and the
      reaffirmation of those representations and warranties in the certificates
      delivered pursuant to Article
      II.

     

    
      
        
        

      

      
        40

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