ASSET PURCHASE AGREEMENT

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

This is an Asset Purchase Agreement dated as of October 23, 2007 (the " Agreement "), among (i) Almost Family, Inc., a Delaware corporation, Caretenders Visiting Services of Hernando County, LLC, a Florida limited liability company, Caretenders Visiting Services of Pinellas County, LLC, a Florida limited liability company, and Mederi Caretenders VS of Tampa, LLC, a Florida limited liability company (each a “ Buyer ” and collectively, " Buyers "), (ii) Quality of Life Holdings, Inc., a Florida corporation, Quality of Life Home Health Services, Inc., a Florida corporation, Quality of Life Home Health Services of Hillsborough, Inc., a Florida corporation, Quality of Life Homecare of Hernando, Inc., a Florida corporation (each a " Seller " and collectively, " Sellers "), and (iii) Michael Moses, James Heenan and Rosalind M. Heenan (each a " Seller Affiliate " and collectively, " Seller Affiliates "). Sellers and Seller Affiliates shall each be a " Selling Party " and referred to collectively as " Selling Parties ").

 

Recitals

 

A.         Sellers own and operate home health agencies operating in the State of Florida in Florida Health Districts ## 3, 5 and 6 (the " Territory "), including Medicare-Certified, Medicaid/Waiver, county contracts, HMO and other significant non-certified or "private duty" operations (collectively, the " Business ").

 

B.        Sellers are the holders of one or more licenses issued by the Agency for Health Care Administration of the State of Florida Medicare, provider agreements issued by the U.S. Department of Health and Human Services, and Medicaid provider agreements issued by the Agency for Health Care Administration of the State of Florida, all of which authorize Sellers to provide Medicare and Medicaid certified home health care services in the Territory (collectively, the " Licenses ").

 

C.       Sellers desire to sell, and Buyers desire to purchase, the assets used by Sellers in the operation of the Business.

 

D.        Seller Affiliates own 100% of the issued and outstanding shares of Quality of Life Holdings, Inc. and Quality of Life Holdings, Inc. holds 100% of the stock of each of Quality of Life Home Health Services, Inc., Quality of Life Home Health Services of Hillsborough, Inc. and Quality of Life Homecare of Hernando, Inc.

 

THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS:

 

Article 1 - Purchase and Sale of Assets

 

 

(a)       Sellers hereby agree to sell, assign, transfer and convey to Buyers, and Buyers hereby agrees to purchase from Sellers, all of the assets of Sellers used in the Business (the " Purchased Assets "), including without limitation, the following assets and properties:

 

 

 

 

(i)        All Assumed Leases (as defined below), security deposits, any pre-paid rent, furniture, fixtures, machinery, equipment, leasehold improvements, computers, software (excluding data not relating to the Business, which Sellers shall remove from computers included among the Purchased Assets prior to Closing), vehicles, medical equipment, prepaid expenses, and other tangible personal property used in the Business, including those assets specifically described on Schedule 1.1(a) as being Purchased Assets, together with all manufacturers' warranties pertaining to the same, to the extent that such warranties may exist and be assignable;

 

(ii)      All of Sellers' goodwill relating to the Business; all customer and patient lists and files, referrer lists, provider lists, records and similar sales and marketing information in Sellers' possession relating to the Business; member service agreements relating to the Business; medical records of the patients serviced by the Business and in Sellers' possession; personnel records relating to those employees hired by Buyer; and Sellers' right and interest in the trade names (including "Quality of Life", "Quality of Life Home Health" and "Quality of Life Homecare" and variations thereof used in connection with the Business), trademarks, trade secrets, licenses, know-how, specifications, literature, and all other intangible property which relate specifically to the Business, and all other intangible assets related to the Business, whether located at the Business, or any other location;

 

(iii)     All transferable Licenses, permits, licenses, certificates, authorizations, accreditations, orders, ratings and approvals of all federal, state, or local governmental or regulatory authorities which relate to the Business and which are held by Sellers, but only to the extent the same are transferable, including without limitation, any provider agreements relating to Sellers’ right to participate in the Medicare and Medicaid Programs, and all rights of Sellers to reimbursement or other payments from Centers for Medicare & Medicaid Services (" CMS ") for the period prior to the Closing Date;

 

(iv)     Any and all rights of Sellers which by their terms are transferable and which arise under or pursuant to warranties, representations and guarantees made by suppliers in connection with the Purchased Assets;

 

(v)       All raw materials, supplies, packaging materials, purchased products, finished goods and all other goods, merchandise and materials owned by Sellers; and

 

(vi)      All accounts receivable and unbilled work in process (collectively, “ Accounts Receivable ”).

 

(b)       Sellers shall retain, and Excluded Assets shall be excluded from the scope of, the Purchased Assets. " Excluded Assets " shall mean cash and cash-like items, the current mobile phone number of Seller Affiliates and other senior management of Sellers and those additional assets identified as Excluded Assets on Schedule 1.1(b) .

 

(c)       Selling Parties agree to cooperate with Buyers in connection with the collection of the Accounts Receivable and to pay over to Buyers as soon as reasonably possible

 

2

 

 

 

any of such Accounts Receivable collected by Sellers. Any software included among the Purchased Assets shall be delivered to Buyers with licenses permitting Buyers to use such software in the Business on a perpetual royalty-free basis or the mutually agreed upon cost of obtaining the necessary licenses shall be offset against the Purchase Price and included on the closing statement delivered at Closing. At least three business days prior to Closing, Sellers agree to provide Buyers with a schedule setting forth a list of software for which the necessary licenses are not held and will not be assigned to Buyers at Closing and an estimate of the cost of obtaining such licenses.

 

 

(a)       Pursuant to the terms of Assignment and Assumption Agreements in the form attached as Attachment A , Buyers agree to assume those trade payables (each a “ Trade Payable ”, and collectively, “ Trade Payables ”) incurred in the ordinary course of the Business, as determined by Buyers in their sole discretion, in an amount not to exceed $540,000 in the aggregate, and excluding those liabilities described in paragraph 1.2(b). Buyers shall not be deemed to have assumed any specific Trade Payable until Buyers add such Trade Payable to Schedule 1.2(a) , by identifying the payee and amount of such Trade Payable, which schedule may be amended by Buyers from time to time after Closing. If Buyers elect in their discretion to satisfy any trade payables of Sellers not included among the Trade Payables, then if such assumption is included on the closing statement at Closing, the Purchase Price shall be reduced by such amount, and if such assumption and payment occurs after Closing, Sellers agree to reimburse Buyers for any amount paid within 10 business days after written notice of payment by Buyers (and Buyers shall have a right of setoff for any unreimbursed amounts against any Contingent Consideration due to Sellers pursuant to paragraph 2.2). Buyers’ agreement to assume the Trade Payables is conditioned upon Sellers' agreement to pay its trade payables in the ordinary course of business through the Closing Date. Trade Payables assumed pursuant to this paragraph 1.2 shall be defined as “ Assumed Liabilities ”).

 

(b)       The parties acknowledge and agree that Buyers are not assuming, and Trade Payables do not include, liabilities or other obligations of Selling Parties for (i) borrowed money, (ii) capital leases for leased equipment and other tangible personal property, or (iii) amounts due to any governmental agency or instrumentality, whether federal, state or local, relating to Medicare/Medicaid reimbursements or similar reimbursement obligations relating to the Business, (iv) federal, state or local taxes, including without limitation, income, sales or use, franchise, or withholding taxes, or (v) amounts payable to any Seller Affiliates or entities or individuals affiliated with any Selling Party.

 

(c)       Sellers acknowledge and agree that they shall retain all liabilities, whether known or unknown, arising out of or relating to the operation of the Business through the Closing Date or arising out of or with respect to the Purchased Assets, including the ownership or leasing thereof, through the Closing Date, and that Buyers are not assuming any liabilities of Sellers of any nature, except for (i) obligations accruing after Closing under the Assumed Contracts and Assumed Leases, (ii) any real property lease expenses offsetting the Purchase Price pursuant to paragraph 1.3, (iii) any accrued personal leave assumed pursuant to paragraph 1.4, (iv) any additional liabilities or accrued expenses mutually agreed upon by Sellers and

 

3

 

 

 

Buyers and offsetting the Purchase Price pursuant to paragraph 2.1(b), and (v) the Trade Payables.

 

 

(a)        Buyers agree to assume Sellers' obligations arising after the Closing Date with respect to those contracts listed on Schedule 1.3(a) (the " Assumed Contracts ").

 

(b)         Buyers agree to assume Sellers' obligations arising after the Closing Date with respect to the equipment leases and real estate leases set forth on Schedule 1.3(b) (the " Assumed Leases "), provided that any accrued rent, fees, taxes, expenses or other amounts payable as of the Closing Date and/or relating to the period through the Closing Date (collectively, " Lease Liabilities ") shall be offset against the Purchase Price. At the Closing, Sellers shall deliver to Buyers landlord consent and estoppel certificates for each Assumed Lease for real property, each in a form reasonably satisfactory to Buyers confirming the landlord's consent to assignment and further confirming among other customary matters that the Assumed Lease is not in default and that there are no accrued and unpaid amounts due the landlord for the period through Closing, which certificates may be delivered post-Closing, as necessary and with Buyers’ consent. Buyers shall have the right to require as a condition to Buyers’ obligation to close, a renegotiation of the terms of any related-party lease.

 

 

(a)       Selling Parties acknowledge that Buyers are not purchasing, recognizing, assuming or otherwise acquiring any rights, obligations, assets or liabilities under, arising from or resulting from any employment agreement or arrangement in existence between any Seller and any employee, or any person employed to consult with or perform services for Sellers.

 

(b)        Buyers agree to assume all payroll, insurance, payroll deduction, salary and other payroll related costs of Sellers arising out of the pay period immediately preceding to Closing and incurred in the ordinary course of Sellers’ business. Selling Parties agree that, as of the Closing Date, Sellers shall have paid and satisfied in full all payroll, insurance, payroll deduction, salary and other payroll related costs of Sellers for all periods ending prior to Closing, except for the pay period immediately preceding the Closing.

 

(c)      Buyers shall have the right, but not the obligation, to make offers of employment to employees of the Business. With respect to any employees of the Business who accept employment with Buyers, Buyers shall assume Sellers’ paid-days-off (PDO) liability at Closing for employees of the Business, so long as at least three business days prior to Closing, Sellers’ provide Buyers with a statement setting forth such PDO obligations (to be included as Schedule 1.4(c) to this Agreement) and the amounts shown are reasonably satisfactory to Buyers with respect to the verification of the PDO amounts shown on such statement, and which statement to be updated through Closing by Sellers post-Closing.

 

(d)       The parties acknowledge that Buyers shall withhold $50,000 of cash portion of the Purchase Price payable at Closing, with such funds to partially fund a bonus pool

 

4

 

 

established for any of Sellers’ employees listed on Schedule 1.4(d) who are hired by Buyers. The bonus pool will provide for an aggregate maximum payout of $100,000 to such employees if each remains employed for a two year period after Closing. The division of the bonus pool among such employees shall be determined post-Closing by Buyers and Sellers. If the aggregate payout is less than $100,000, then Buyers shall pay to Sellers as additional Purchase Price an amount equal to 50% of the difference between $100,000 and the aggregate bonus amounts paid to Sellers’ former employees. Qualification for participation in the bonus pool shall be conditioned upon an employee’s release of any claims under such employee’s employment agreement or other arrangement with Seller and an acknowledgement that such employee has no rights under such agreement or arrangement against Buyers.

 

1.5         Noncompetition Agreement . Selling Parties acknowledge that Buyers’ obligation to close is conditioned upon each Selling Party entering into a Confidentiality, Nonsolicitation and Noncompetition Agreement at the Closing, in the form of the agreement attached as Attachment B (the " Noncompetition Agreement " ).

 

Article 2 - Purchase Price and Payments

 

 

(a)       In consideration of the transfer of the Purchased Assets and the Business, Buyers agree to pay for the Purchased Assets (the " Purchase Price "), consideration in the form of the assumption of the Assumed Liabilities, and the cash and shares of Almost Family, Inc. common stock (“ AFAM Shares ”) as follows:

 

(i)        $8,000,000 in cash by wire transfer of immediately available funds at Closing (subject to paragraphs 2.1(b) through (d));

 

(ii)       $2,000,000 in the form of Almost Family, Inc. common stock (" Closing AFAM Shares "). The number of Closing AFAM Shares shall be fixed as of the Closing Date by dividing $2,000,000 by the average closing price of AFAM Shares as reported on NASDAQ for the 20 trading days immediately prior to the Closing Date. Closing AFAM Shares shall be issued among Selling Parties in the percentages set forth on Schedule 2.1(a)(ii) .

 

(iii)      up to $6,900,000 in contingent consideration (" Contingent Consideration ") based on the Net Revenues (as defined below) generated by the Business after Closing, calculated and payable as provided in paragraph 2.2.

 

(b)       The cash portion of the Purchase Price payable at Closing pursuant to paragraph 2.1(a)(i) shall be increased or decreased, as applicable, to account for any proration of expense items relating to the Business. The parties agree to enter into a closing statement at Closing setting forth the determination of the cash portion of the Purchase Price payable at Closing. The payment of Contingent Consideration shall be treated and reported for tax purposes by Selling Parties and Buyers as additional purchase consideration subject to installment sales treatment under Section 453 of the Internal Revenue Code.

 

5

 

 

 

(c)       Buyers shall have the right to satisfy directly out of the cash consideration payable at Closing the liabilities of Sellers identified on Schedule 2.1(c) .

 

(d)       The parties acknowledge that Selling Parties have engaged The Braff Group (“ Braff ”) to act as their broker or agent in connection with the transactions described in this Agreement. Any compensation payable to Braff shall be the sole responsibility of Selling Parties, and Buyers shall under no circumstance be liable for payment of any such compensation. The closing statement shall set forth the amount of compensation to be paid directly to Braff out of the cash portion of the Purchase Price payable at Closing.

 

 

(a)       The amount of Contingent Consideration payable to Sellers shall be calculated using two components, as follows:

 

(i)         Contingent Consideration Component #1 (“CCC#1”) . Up to $3,500,000 of Contingent Consideration may be earned by Sellers based on the net revenues generated directly by activities of the Business in any of the following counties in the State of Florida: Pinellas, Hillsborough, Pasco, Hernando and Polk (collectively, “ Territory #1 ”).

 

(ii)        Contingent Consideration Component #2 (“CCC#2”) . Up to $3,400,000 of Contingent Consideration may be earned by Sellers based on the net revenues generated directly by the activities of the Business in any territory outside of Territory #1 (“ Territory #2 ”).

 

(b)        Determination of CCC#1 . The determination of the amount of Contingent Consideration ultimately payable for CCC#1 (up to a maximum of $3,500,000) shall be based on total revenues generated directly by the activities in the Business in Territory #1 for a trailing consecutive 12 month (“ TTM ”) within the first full 18 month period following the Closing Date minus $10,000,000 (“ CCC#1 Actual Revenues ”). The CCC#1 Revenue Target shall be $4,000,000. The CCC#1 Minimum Revenue Threshold shall be $2,000,000. The amount payable under CCC#1 shall be based on the following table:

 

 

 

6

 

 

 

(i)        If CCC#1 Actual Revenues are greater than or equal to the CCC#1 Minimum Revenue Threshold and less than the CCC#1 Revenue Target and agency level contribution to corporate and regional overhead as a percent of revenue is greater than 19% then: CCC#1 Actual Revenues divided by CCC#1 Revenue Target multiplied by $3,000,000 shall be the amount payable, subject to a cap of $3,000,000. Schedule 2.2(b)(ii) sets forth the calculation which will be used to determine the corporate and regional overhead contribution.

 

(ii)       A determination of the amount of CCC#1 ultimately payable shall be made no later than 90 days following the end of the TTM period in which the goal has been reached but in no event beyond the first full 18 month period following the Closing Date and shall be paid no later than 30 days after the determination is made.

 

(iii)      The CCC#1 payout shall be made 80% in cash and 20% in AFAM Shares. The value of each AFAM Share to be issued pursuant to this paragraph 2.2(b) shall be fixed as of the Closing Date by dividing the amount of CCC#1 payable by the average closing price of AFAM Shares as reported on NASDAQ for the 20 trading days immediately prior to the Closing Date. For example, if the value of an AFAM Share as determined pursuant to the preceding sentence is $25, then if the dollar amount of Contingent Consideration to be issued after the Closing is $1,000,000, then Selling Parties would be issued 8,000 AFAM Shares (20% of $1,000,000 is $200,000 and $200,000 divided by 25 is 8,000), regardless of the trading price of AFAM Shares at such later date. AFAM Shares to be issued pursuant to this paragraph 2.2(b) shall be issued in the percentages set forth on Schedule 2.1(a)(ii) .

 

(c)        Determination of CCC#2 . The determination of the amount of Contingent Consideration ultimately payable for CCC#2 (up to a maximum of $3,400,000) shall be based on the trailing 12 months revenues generated directly by the activities of the Business in Territory #2 during the four full years following the Closing Date (“ Attributable CCC#2 Revenues ”). The CCC#2 Revenue Target shall be $16,000,000. The CCC#2 Minimum Revenue Threshold shall be $4,000,000. For each full increment of $4,000,000 of Attributable CCC#2 Revenues an incremental $850,000 of Contingent Consideration shall be deemed to have been earned according to the following formula:

 

(i)        At the end of each of the four consecutive full 12 month periods following the Closing Date a calculation would be made of revenues directly attributable to the activities of the Business (“ Attributable CCC#2 Revenues ”) and compared against same calculation for the full 12 month period ending one year earlier to determine the amount payable (or returnable). The calculations shall begin starting with the first full 12 month period following the Closing Date and shall end with the fourth consecutive full 12 month period following the Closing Date. The following outlines the calculation to be made:

 

7

 

 

 

(A)       Step 1 : determine Attributable CCC#2 Revenues for the trailing 12 month period then ended

 

(B)       Step 2 : Look up the Attributable CCC#2 Revenues in the following table to arrive at the Cumulative Payout Amount:

 

 

 

(C)       Step 3 : Subtract the previous 12 month period’s Cumulative Payout Amount from the current 12 month period’s Cumulative Payout Amount to arrive at the Current 12 Month Period Payout (Payback) Amount. If the Current 12 Month Period Payout (Payback) Amount is positive it shall be paid by Buyers to Sellers; if negative it shall be paid by Sellers to Buyers.

 

(ii)       If at any of the four 12 month periods for which a calculation is made, the actual Attributable CCC#2 Revenues for the 12 months then ended shall equal or exceed $16,000,000, the entire $3,400,000 amount of CCC#2 shall have been fully earned and there shall be no more calculations made from that point forward.

 

(iii)      The payment of each Current 12 Month Payout (Payback) Amount shall be made 80% in cash and 20% in AFAM Shares. The value of each AFAM Share to be issued pursuant to this paragraph 2.2(b) shall be fixed as of the Closing Date by dividing the amount of CCC#1 payable by the average closing price of AFAM Shares as reported on NASDAQ for the 20 trading days immediately prior to the Closing Date. AFAM Shares to be issued pursuant to this paragraph 2.2(c) shall be issued in the percentages set forth on Schedule 2.1(a)(ii) .

 

(iv)      In order for revenues to quality as CCC#2 Revenues for purpose of this paragraph 2.2(c), (i) the markets for CCC#2 must be identified and approved by Buyer senior management prior to initiation of selling activities by Buyer’s representatives, and (ii) the group living facilities must execute acknowledgement forms, in a form mutually satisfactory to Sellers and Buyers, indicating that such facility is participating in the applicable program.

 

(d)       The Contingent Consideration shall be paid, if due, within 10 business days after the final determination of Net Revenue for the Determination Period.

 

(e)       " Net Revenue " means the consolidated net revenues of the Business operated under the Licenses, determined in accordance with generally accepted accounting principles (GAAP) applied on a basis consistent with past periods.

 

8

 

 

(f)        During the Determination Period, Buyers will deliver to Sellers reports setting forth Net Revenues on a quarterly basis.

 

(g)       Buyers agree to provide Sellers' independent accountants reasonable access to Buyers’ management and the financial records of Buyers during the Determination Period for the sole purpose of verifying Net Revenue. It shall be a condition to the provision of any information pursuant to this paragraph 2.2 that Sellers and their independent auditor sign a confidentiality agreement reasonably satisfactory to Buyers with respect to any information so provided.

 

(h)       In no event later than 50 days immediately following the Determination Period, Buyers shall have prepared and delivered to Sellers a statement of Buyers’ calculation of Net Revenue for the Determination Period (a " Determination Statement "). If, (x) after the parties are unable to mutually agree upon such calculation of Net Revenue or (y) after receiving the Determination Statement and prior to 90 days immediately following the receipt of such statement, Sellers notify Buyers in writing (a " Revenue Dispute Notice ") that it disputes the amount of Net Revenue as calculated by Buyers (and in such Revenue Dispute Notice states the nature of the dispute in reasonable detail, including, without limitation, Sellers' determination of Net Revenue, and if Sellers and Buyers are unable to resolve such dispute within three (3) days after receipt of the Revenue Dispute Notice by Buyers, they shall submit the dispute to a nationally recognized independent accounting firm mutually agreeable to them, which firm shall not have had a material relationship with either party, or any of their respective affiliates, within four (4) years preceding the appointment of such firm (the " Adjustment Arbitrator "). The Adjustment Arbitrator shall be instructed to arbitrate the disputed Net Revenue, and determine whether the Contingent Consideration is payable within 60 days from the date such Adjustment Arbitrator is selected. If Sellers and Buyers cannot agree on the selection of the independent accounting firm to act as the Adjustment Arbitrator, they shall request Buyer's independent accounting firm to appoint such an independent accounting firm and such appointment shall be conclusive and binding on the parties. In determining Net Revenue, the Adjustment Arbitrator shall be bound by the provisions of this Agreement and may not assign a value to any adjustment or item greater than the greatest value for such adjustment or item claimed by Sellers or Buyers (as applicable) or less than the smallest value for such adjustment or item claimed by Sellers or Buyers (as applicable). The resolution of disputes by the Adjustment Arbitrator shall be set forth in writing and shall be conclusive and binding on the parties, and the determination of Net Revenue shall become final upon the date of such resolution, and may be entered as a final judgment in any court of proper jurisdiction. Whether any dispute is resolved by agreement between Sellers and Buyers or by the Adjustment Arbitrator, changes to the Determination Statement shall be made hereunder only for items as to which Sellers have taken exception as provided herein. The fees and expenses of the Adjustment Arbitrator, if required hereunder, shall be apportioned between Sellers and Buyers to reflect the relative differences between the position asserted by Sellers and Buyers with respect to each disputed adjustment or item referred to the Adjustment Arbitrator, and the resolution reached by such Adjustment Arbitrator with the party that is further from such resolution bearing a proportionately greater share of such fees and expenses.

 

 

9

 

 

 

(i)        In the event a Change of Control occurs during the Determination Period, then Sellers shall be entitled, at Sellers’ option, to (i) demand a determination of Net Revenue for the period through the date of the Change of Control, and receive, if due, a pro-rata (based on the percentage of the Determination Period occurring before the date of the Change of Control) payment of Contingent Consideration in full satisfaction of Sellers' right to Contingent Consideration, or (ii) allow the determination of Contingent Consideration to run through the full Determination Period.

 

(j)        For purposes of this Agreement, a " Change of Control ", shall mean a change of control of Almost Family, Inc. which is of a nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the " Exchange Act "); provided that, without limitation, such a change of control shall be deemed to have occurred if (A) any "person"(as such term is used in Sections 13(d) and 14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of Almost Family, Inc. representing 51% or more of the combined voting power of Almost Family, Inc.’s then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute Almost Family, Inc.'s Board of Directors cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by Almost Family, Inc.'s shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

 

 

(a)       All AFAM Shares issued pursuant to this Agreement shall be unregistered shares and shall be "restricted securities" under Rule 144 and Selling Parties acknowledge that the holders of such shares must satisfy the Rule 144 holding period requirements of 12 months before such shares are tradable upon satisfaction of all Rule 144 requirements. In addition to the Rule 144 requirements, which Selling Parties acknowledge apply to all AFAM Shares separately and independently from any contractual restrictions on transfer, Selling Parties agree to the following additional transfer restrictions on AFAM Shares. No holder of AFAM Shares issued pursuant to this Agreement may transfer such shares during the 12 month period after issuance in accordance with paragraphs 2.1(a)(ii), 2.2(b)(iii) and 2.2(c)(iii). In addition, holders of Restricted AFAM Shares agree not to transfer such Restricted AFAM Shares for an additional two year period beyond the initial one year prohibition on transfer (i.e., a total of 36 months), except that Restricted AFAM Shares are released ratably from such additional transfer restrictions in 24 installments over the 24 month period commencing on the first anniversary of issuance date of such Restricted AFAM Shares. For purposes of this Agreement, “ Restricted AFAM Shares ” shall mean 50% of all AFAM Shares issued pursuant to this Agreement (to be issued among Selling Parties in the percentages set forth on Schedule 2.1(a)(ii) ), with such shares to be identified on the certificate representing such Restricted AFAM Shares.

 

(b)       Holders of Closing AFAM Shares shall be entitled to certain piggyback registration rights pursuant to a Registration Rights Agreement, the form of which is attached as Attachment C (the " Registration Rights Agreement "). Selling Parties acknowledge and agree that their registration rights with respect to AFAM Shares are limited to those set forth in the

 

10

 

 

 

Registration Rights Agreement.

 

(c)       The price per share and number of AFAM Shares to be issued pursuant to paragraph 2.2 shall be appropriately adjusted to reflect any recapitalization, merger, consolidation, combination, stock dividend or split, reverse stock split, spin-off, exchange of shares or similar corporate change as the Board of Directors of Almost Family, Inc. may deem reasonably appropriate to prevent the enlargement or dilution of rights of Selling Parties to AFAM Shares under this Agreement.

 

2.4       Allocation of Purchase Price . The Purchase Price will be allocated among the Purchased Assets as set forth on Schedule 2.4 . Sellers and Buyers agree that all tax and information returns will be prepared on a basis consistent with such allocation of the Purchase Price. The cash portion of the Purchase Price consideration shall be divided among Sellers in a manner consistent with allocations of the Purchase Price among the respective Sellers as shown on Schedule 2.4 .

 

2.5         Reimbursement of 2007 Audit Expense . At the Closing, Buyers agree to reimburse Sellers, upon the presentation of reasonable documentation, for the cost of the financial audit performed in 2007 at Almost Family, Inc.’s request, in an amount not to exceed $110,000.

 

Article 3 - The Closing

 

3.1       Time and Place . The parties anticipate that the closing (" Closing ") will take place at 10:00 a.m., October 26, 2007, or such other date mutually agreed upon by the parties, and upon satisfaction or waiver of each of the conditions to the parties' obligations to close (the " Closing Date "). The "effective time" of the Closing shall be 12:01 a.m., October 27, 2007, or such other date as may be agreed upon in writing by Sellers and Buyers.

 

 

(a)      At the Closing, Sellers and Buyers will execute and deliver such conveyances, bills of sale, certificates of title, assignments, assurances and other instruments and documents as Buyers may reasonably request in order to effect the sale, assignment, conveyance, and transfer of the Purchased Assets, the Business, the Assumed Contracts, the Trade Payables and the Assumed Leases from Sellers to Buyers. Such instruments and documents must be sufficient to convey to Buyers good title to the Purchased Assets and the Business. The parties will also cause the Noncompetition Agreement, the Stock Pledge Agreement and the Registration Rights Agreement (collectively, the " Ancillary Agreements ") to be executed and delivered at Closing. The parties acknowledge that Purchased Assets, the Assumed Contracts, Trade Payables, and the Assumed Leases shall be transferred and assigned, at Buyers’ discretion, to one or more Buyers or Buyers’ affiliates through separate bills of sale and assignment instruments.

 

(b)        Sellers agree that they shall, from time to time after the Closing Date, take such additional action and execute and deliver such further documents as Buyers may reasonably

 

11

 

 

 

request in order to effectively sell, transfer and convey the Purchased Assets and the Business to Buyers and to place Buyers (or their affiliates) in position to operate and control all of the Purchased Assets and the Business.

 

Article 4 - Representations and Warranties of Selling Parties

 

As a material inducement to Buyers to enter into and perform this Agreement, each Selling Party represents and warrants to Buyers as follows:

 

 

(a)        Each Seller has full power and authority to execute and deliver this Agreement and each Ancillary Agreement, and to consummate the transactions contemplated under this Agreement and the Ancillary Agreements. This Agreement and each Ancillary Agreement constitutes a valid and legally binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as enforceability may be limited by applicable equitable principles (whether applied in a proceeding at law or in equity) or by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ right generally, by the exercise of judicial discretion in accordance with general equitable principles, and by equitable defenses that may be applied to the remedy of specific performance. The execution, delivery and performance of this Agreement and the Ancillary Agreements by or on behalf of each Seller and the consummation of the transactions contemplated hereunder and thereunder, have each been duly authorized and approved by all necessary corporate action of such Seller.

 

(b)       The execution, delivery and performance by each Seller of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby will not (i) violate any provision of, result in the breach of, or accelerate or permit the acceleration of any performance required by the terms of, any contract, agreement, arrangement or undertaking to which such Seller is a party or by which any Purchased Assets may be bound; any judgment, decree, writ, injunction, order or award of any arbitration panel, court or governmental authority to which such Seller is subject or by which any Purchased Assets may be bound; or any applicable law, ordinance, rule or regulation of any governmental body; (ii) violate such Seller’s Articles of Incorporation or Bylaws, (iii) result in the creation of any claim, lien, charge or encumbrance upon any of the Purchased Assets; or (iv) in any way affect or violate the terms or conditions of, or result in the cancellation, modification, revocation or suspension of, any of such Seller’s permits or licenses.

 

(c)         Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and is duly qualified to do business and is in good standing as a foreign corporation in each other jurisdiction in which the ownership or use of the rights and assets of such Seller or the conduct of such Seller’s business requires such qualification. Each Seller has full power and authority (corporate or otherwise) to carry on the Business as it has been and is now being conducted. Schedule 4.1(c) contains the address (including city, county, state and zip code) of each location where any of the Purchased Assets are located and each trade name under which each Seller operates at such address, and any

 

12

 

 

 

additional business or trade names under which the Business has been operated at each such address or any other location in the five years preceding the date of this Agreement.

 

 

(a)       Except as set forth on Schedule 4.2(a) , each Seller has obtained and holds all material licenses, permits, certificates, accreditations and authorizations necessary for such Seller to operate the Business as currently conducted by such Seller (the “ Permits ”). Schedule 4.2(a) sets forth a list of all Permits, and a copy of each Permit has been delivered to Buyer. Except as set forth on Schedule 4.2(a) , (i) each Permit is valid and in full force and effect, (ii) no default or violation exists under any Permit, (iii) no Seller has received any notice or threat of suspension, deficiency or cancellation of any Permit, and (iv) to the best of Selling Parties’ knowledge, no event has occurred that (with or without notice or the passage of time) would constitute a breach or violation of any Permit.

 

(b)     Each Seller is certified for participation in, and is a party to valid provider agreements for payment by, Medicare, Medicaid and each other state, local or federal health care program related to the operation of the Business listed on Schedule 4.2(b) (the " Programs "). No Seller has received notice of any pending or threatened investigations by, or loss of participation in, the Programs related to the Business.

 

 

(a)       Each Seller has operated the Business in compliance with all federal, state, local and foreign statutes, ordinances, laws (including common law), regulations, ordinances, rules, permits, licenses, consent decrees, orders and clearances relating to: (i) releases or threatened releases or the use, storage, transportation or disposal of hazardous substances, as that term is now defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), pollutants, dangerous, toxic, or hazardous substances, materials or wastes, or petroleum, asbestos-containing materials or polychlorinated biphenyls (“ Hazardous Substances ”), (ii) pollution, and (iii) the protection of the environment or human health (collectively, " Environmental Laws ").

 

(b)       No Seller has caused or permitted any Hazardous Substances to be disposed on, under or at the premises of the Business, or any part thereof, and, to the best of Selling Parties’ knowledge, no part thereof has ever been used by any Seller as a permanent storage or disposal site for any such Hazardous Substances.

 

4.4         Taxes . Each Seller has timely filed all federal, state, local and other tax returns required to be filed by it prior to the date of this Agreement with respect to the Business and all such tax returns were true, complete and accurate. Each Seller has paid for all taxes due and payable on or before the date hereof (whether or not reported on a filed tax return) for which Buyers could be liable. Present taxes that each Seller is required by law to withhold or collect with respect to the Business have been withheld or collected and have been paid over to the proper governmental authorities or are properly held by such Seller for such payment. Except as described on Schedule 4.4 , no examination or audit of any tax return related to the Business by

 

13

 

 

 

any taxing authority is currently in progress or, to the best of Selling Parties’ knowledge, threatened or contemplated. There are no liens on any of the Purchased Assets resulting from any failure (or alleged failure) to pay any taxes. No deficiency for any taxes or claim for additional tax assessment by any taxing authority, which if unsatisfied could result in a lien upon any of the Purchased Assets or could result in Buyers incurring successor liability under applicable laws, has been, to the best of Selling Parties’ knowledge, proposed, asserted, or assessed against any Seller, nor has any Seller granted any extension or waiver of any limitation period applicable to any tax claims relating to the Business which has not been closed.

 

 

(a)       Each Seller has, and Buyers will have following the Closing, sole, exclusive, good (legal and beneficial) and marketable title to, or in the case of the Assumed Lease, a sole and exclusive enforceable leasehold interest in, all of the Purchased Assets, free and clear of any mortgage, security inter