ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

This is an Asset Purchase Agreement dated as of March 24, 2008 (the " Agreement "), among (i) Caretenders of Jacksonville, LLC, a Florida limited liability company (“ Buyer ”), (ii) Almost Family, Inc., a Delaware corporation (“ Parent ”), (iii) Apex Home Healthcare Services, L.L.C., a Florida limited liability company (“ Apex Healthcare ”) and Apex Health and Rehab Center L.L.C., a Florida limited liability company (“ Apex Rehab ”) (each a " Seller " and collectively, the “ Sellers ”), and (iv) Nancy Ralston, James Spriggs, III, Robert G. Young, Lorrie Snyder, Joann Sorensen and James Spriggs, Jr. (each a " Seller Affiliate " and collectively, " Seller Affiliates ").

Recitals

A.        Apex Healthcare owns and operates home health agencies operating in the State of Florida in Florida Health District # 4 (including Baker, Clay, Duval, Flagler, Nassau, St. Johns and Volusia counties) (collectively, the " Territory "), including Medicare-Certified, Medicaid/Waiver, county contracts, HMO and other significant non-certified or "private duty" operations (collectively, the " Home Health Business ").

B.        Apex Rehab operates a healthcare rehabilitation business in the Territory (the “ Rehab Business ”, together with the Home Health Business, the “ Business ”).

C.        Sellers are holders of one or more licenses issued by the Florida Agency for Health Care Administration, provider agreements issued by the United States 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 and rehab services in the Territory.

D.       Sellers desire to sell, and Buyer desires to purchase, the assets used by Sellers in the operation of the Business.

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

Article 1 - Purchase and Sale of Assets

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

(i)        All Assumed Contracts (as defined below), security deposits, any pre-paid rent, furniture, fixtures, machinery, equipment, leasehold improvements, computers, software, 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 Seller’s goodwill relating to the Business; all customer and patient lists and files, referrer lists, provider lists, records and similar sales and marketing information in Seller’s possession relating to the Business; member service agreements relating to the Business; medical records of the patients serviced by the Business and in Seller’s possession; personnel records relating to those employees hired by Buyer; and Seller’s right and interest in the trade names, including "Apex" and variations thereof, used in connection with the Business, registered and unregistered trademarks, service marks and applications, all registered and unregistered copyrights, trade secrets, licenses, know-how, specifications, literature, all rights in internet web sites and internet domain names presently used by Seller, data, code, and other related intellectual property, 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 Seller, but only to the extent the same are transferable, including without limitation, any provider agreements relating to Seller’s right to participate in the Medicare and Medicaid Programs, and all rights of Seller 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 Seller 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 Seller; 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, and those additional assets identified as Excluded Assets on Schedule 1.1(b) .

(c)       Each Seller agrees to use its reasonable best efforts to cooperate with Buyer in connection with the collection of the Accounts Receivable and to pay over to Buyer as

soon as reasonably possible any of such Accounts Receivable collected by Seller. Except for the Accounts Receivable listed on Schedule 1.1(c) , each Seller represents and warrants that, to the best of Seller’s knowledge, all Accounts Receivable are collectible in the ordinary course. Buyer shall pay to Sellers as additional Purchase Price within 30 days after collection by Buyer, net of any out-of-pocket amounts spent by Buyer to collect such receivables, an amount equal to any Accounts Receivable listed on Schedule 1.1(c) collected after Closing.

(d)       Any software included among the Purchased Assets shall be delivered to Buyer with licenses permitting Buyer 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, each Seller agrees to provide Buyer with a schedule setting forth a list of software for which the necessary licenses are not held and will not be assigned to Buyer at Closing and an estimate of the cost of obtaining such licenses.

(a)       Each Seller acknowledges and agrees that it 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 Buyer is not assuming any liabilities of such Seller of any nature, except for (i) obligations accruing after Closing under the Assumed Contracts, (ii) any PDO Liability, and (iii) any additional liabilities or accrued expenses mutually agreed upon by such Seller and Buyer and offsetting the Purchase Price pursuant to paragraph 2.1(b) below (the liabilities included in items (i) through (iii) above shall be referred to collectively as the “ Assumed Liabilities ”).

(b)       Each Seller’s retained liabilities shall include, without limitation, (i) borrowed money, (ii) subject to paragraph 1.2(d), capital leases for leased equipment and other tangible personal property, (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, (v) amounts payable to any Seller Affiliates or entities or individuals affiliated with Seller, and (vi) 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, except for the Assumed Liabilities.

(c)       With respect to each Seller’s trade payables that represent services provided to the Business that straddle the Effective Time, Seller and Buyer shall pay in the ordinary course such trade payables as invoices are received. On or before the date 60 days after the Closing Date, Seller and Buyer shall reconcile such payments against the portion of such trade payables due from Seller (i.e., the portion relating to the period through the Effective Time) and the amount due from Buyer (i.e., the portion relating to the period after the Effective Time), and any amounts due from Seller to Buyer or from Buyer to Seller arising out of the proration of

such expenses shall be paid by the applicable party within five business days after such determination.

(d)       With respect to capital leases, Buyer agrees to pay at Closing, as additional Purchase Price, the amount necessary to pay and satisfy in full the capital lease described on Schedule 1.2(d) with respect to the computer software capital lease and Sellers shall, at Closing, pay and satisfy at in full the capital lease described on Schedule 1.2(d) with respect to the Oceanside Bank phone system lease.

1.3         Assumed Contracts . Buyer agrees to assume Sellers’ obligations arising after the Closing Date with respect to those contracts listed on Schedule 1.3(a) (the " Assumed Contracts "), except that those contracts among the Assumed Contracts which require consent from third parties before assignment shall not be deemed assigned for legal purposes until such consent is obtained. Sellers will use commercially reasonable efforts after Closing to obtain the consent of the other parties to the assignment of the Assumed Contracts, with reasonable assistance as requested by Buyer (but without any payment of money by Sellers or Buyer). If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Sellers thereunder so that Buyer would not receive all such rights, Sellers agree to enter into a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sublicensing, or subleasing to Buyer, or under which Sellers would enforce for the benefit of Buyer, with Buyer assuming Sellers’ obligations, any and all rights of Sellers against a third party thereto.

(a)       Each Seller acknowledges that Buyer is 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 Seller and any employee, or any person employed to consult with or perform services for Seller.

(b)      Buyer 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 Buyer, Buyer shall assume each Seller’s paid-days-off (“ PDO ”) liability at Closing, so long as at least three business days prior to Closing, Sellers provide Buyer with a statement setting forth such PDO obligations (to be included as Schedule 1.4(b) to this Agreement) (“ PDO Liability ”) and the amounts shown are reasonably satisfactory to Buyer with respect to the verification of the PDO amounts shown on such statement, and which statement shall be updated through Closing by Sellers post-Closing.

1.5         Noncompetition Agreement . Sellers acknowledge that Buyer’s obligation to close is conditioned upon Sellers and Seller Affiliates entering into a Confidentiality, Nonsolicitation and Noncompetition Agreement at the Closing, in the form of the agreement attached as Attachment A (the " Noncompetition Agreement " ).

Article 2 - Purchase Price and Payments

(a)       In consideration of the transfer of the Purchased Assets and the Business to the Buyer, Buyer agrees to pay Sellers the following consideration for the Purchased Assets (the " Purchase Price "):

(i)        $12,000,000 in cash by wire transfer of immediately available funds at Closing (subject to paragraph 2.1(b));

(ii)       a promissory note from Buyer and guaranteed by Parent in the principal amount of $2,750,000, with (i) a $1,250,000 principal payable due on the date 24 months after the Closing Date, and (ii) the balance of the note payable on the date 36 months after the Closing Date (the “ Purchase Note ”). The principal amount of the Purchase Note shall accrue interest at 7% per annum, payable in quarterly payments. The Purchase Note shall be in the form attached as Attachment D;

(iii)      That number of shares of Parent common stock calculated by dividing (A) $1,000,000 by (B) the average closing price of Parent’s publicly-traded common stock over the 20 trading days prior to Closing (" AFAM Shares "), with such AFAM Shares to be issued to Apex Healthcare.

(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 (i) any PDO Liability assumed by Buyer pursuant to paragraph 1.4(b), and (ii) 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.

(a)       All AFAM Shares issued pursuant to this Agreement shall be unregistered shares and shall be "restricted securities" under Rule 144 promulgated under the Securities Act (“ Rule 144 ”) and Apex Healthcare acknowledges that the sale of the AFAM Shares during the 12 month period after issuance shall be subject to Rule 144 transfer restrictions.

(b)       In addition to the Rule 144 requirements, which Apex Healthcare acknowledges apply to all AFAM Shares separately and independently from any contractual restrictions on transfer, Apex Healthcare agrees to the following additional transfer restrictions on AFAM Shares. Notwithstanding any other provision of this Agreement, Apex Healthcare acknowledges that it may not transfer its AFAM Shares (by assignment or distribution upon liquidation or otherwise) during the two year period after issuance. In addition, Apex Healthcare agrees not to transfer more than 50% of its AFAM Shares prior to the third anniversary of the Closing Date. Apex Healthcare acknowledges that the certificates representing AFAM Shares shall include a legend evidencing the restrictions on transfer set forth in this paragraph 2.2.

holders of AFAM Shares are be entitled to certain piggyback registration rights pursuant to a Registration Rights Agreement, the form of which is attached as Attachment B (the " Registration Rights Agreement "). Apex Healthcare acknowledge and agrees that its registration rights with respect to AFAM Shares are limited to those set forth in the Registration Rights Agreement.

(d)       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 occurring between the date of this Agreement and the Closing Date as the Board of Directors of Parent may deem reasonably appropriate to prevent the enlargement or dilution of Apex Healthcare’s rights to AFAM Shares under this Agreement.

2.3       Allocation of Purchase Price . The Purchase Price will be allocated among the Purchased Assets and between Sellers as set forth on Schedule 2.3 . Sellers and Buyer agree that all tax and information returns will be prepared on a basis consistent with such allocation of the Purchase Price. The parties acknowledge that the allocation of Purchase Price to the Noncompetition Agreement shall not be evidence of the Loss to Buyer in connection with any breach of such Noncompetition Agreement.

2.4         Reimbursement of Audit Expenses for SEC Compliant Financial Statements . Buyer agrees to pay the reasonable directly related professional fees due to Sellers’ CPA firm for the cost of a financial audit performed at Parent’s request to provide, as a condition to Buyer’s obligation to close, one year of audited financial statements satisfying applicable Securities and Exchange Commission (“ SEC ”) requirements. Buyer shall be responsible for paying these expenses regardless of whether a Closing occurs, except where the failure to close arises out of a breach by a Seller of its obligations under this Agreement. Sellers acknowledges that they shall be responsible for the cost of preparing its books and records for such audit. The parties acknowledge, that as of the date of this Agreement, such financials have been prepared for Apex Healthcare and remain to be prepared for Apex Rehab.

2.5         Stoneridge Partners . Parent has engaged Stoneridge Partners (“ Stoneridge ”) to act as its broker or agent in connection with the transactions described in this Agreement. Any compensation payable to Stoneridge shall be the sole responsibility of Parent.

2.6         Real Property Leases . Sellers currently are parties to real property leases with a company owned by Seller Affiliates described on Schedule 2.6 (the “ Current Real Property Leases ”). The parties acknowledge that Buyer is not assuming the Current Real Property Leases but instead the applicable Seller Affiliates and Buyer shall negotiate and enter into a new lease at Closing, with the entering into such lease on terms satisfactory to Buyer being a condition to Buyer’s obligation to close the transactions contemplated by this Agreement.

Article 3 - The Closing

3.1       Time and Place . The parties anticipate that the closing (" Closing ") will take place at 10:00 a.m., March 26, 2008, 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 Closing will be effective for tax and business purposes as of 12:01 a.m. on the first day after the Closing Date (the “ Effective Time ”).

(a)      At the Closing, Sellers and Buyer will execute and deliver such conveyances, bills of sale, certificates of title, assignments, assurances and other instruments and documents as Buyer may reasonably request in order to effect the sale, assignment, conveyance, and transfer of the Purchased Assets, the Business, the Assumed Liabilities, and the Assumed Contracts from Sellers to Buyer. Such instruments and documents must be sufficient to convey to Buyer 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.

(b)        Each party hereto agrees that it shall, from time to time after the Closing Date, take such additional action and execute and deliver such further documents as any other party hereto may reasonably request in order to effectively sell, transfer and convey the Purchased Assets and the Business to Buyer, to place Buyer (or Buyer’s or Parent’s affiliates) in position to operate and control all of the Purchased Assets and the Business, and otherwise effectuate the purposes of this Agreement.

Article 4 - Representations and Warranties of Sellers

As a material inducement to Buyer to enter into and perform this Agreement, each Seller represents and warrants to Buyer as follows:

(a)        Seller and each Seller Affiliate 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 Seller and each Seller Affiliate, enforceable against Seller and each Seller Affiliate 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 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 Seller and each Seller Affiliate of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby will not (i) except with respect to the failure to obtain any consent listed in Schedule 4.17 , 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 Seller or any Seller Affiliate 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 or any Seller Affiliate 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 Seller’s articles of organization or operating agreement, (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 Licenses.

(c)         Seller is a limited liability company duly organized, validly existing and in active status 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 Seller or the conduct of Seller’s business requires such qualification. Seller has full power and authority (limited liability company 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 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) , Seller has obtained and holds all material licenses, permits, certificates, accreditations and authorizations necessary for Seller to operate the Business as currently conducted by such Seller (the “ Licenses ”). Schedule 4.2(a) sets forth a list of all Licenses, and a copy of each License has been delivered to Buyer. Except as set forth on Schedule 4.2(a) , (i) to the best of Seller’s knowledge, each License is valid and in full force and effect, (ii) to the best of Seller’s knowledge, no default or violation exists under any Permit, (iii) Seller has received no notice or threat of suspension, deficiency or cancellation of any License, and (iv) to the best of Seller’s knowledge, no event has occurred that (with or without notice or the passage of time) would constitute a breach or violation of any License.

(b)     Seller is certified for participation in, and is a party to valid provider agreements for payment by, Medicare and each other state, local or federal health care program related to the operation of the Business listed on Schedule 4.2(b) (collectively, the " Programs "). Seller has not received a notice of any pending or threatened investigations by, or loss of participation in, the Programs related to the Business.

(a)       Seller has operated its portion of 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 no part thereof has ever been used by Seller as a permanent storage or disposal site for any such Hazardous Substances.

4.4         Taxes . 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. Seller has paid for all taxes due and payable on or before the date of this Agreement (whether or not reported on a filed tax return) for which Buyer could be liable as a result of the transactions described in this Agreement or as a successor under applicable law. Present taxes that 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 Seller for such payment. Except as described on Schedule 4.4 , no examination or audit of any tax return related to the Business by any taxing authority is currently in progress or, to the best of Seller’s 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 Buyer incurring successor liability under applicable laws, has been proposed, asserted, or assessed against Seller in writing, nor has 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)       Seller has, and Buyer will have following the Closing, sole, exclusive, good (legal and beneficial) and marketable title to, or in the case of any equipment leases, a sole and exclusive enforceable leasehold interest in, all of the Purchased Assets, free and clear of any mortgage, security interest, pledge, lien, claim, encumbrance, sublease, license, or other adverse or intervening interest. The Purchased Assets comprise all of the rights and assets necessary for Buyer to carry on the Business as it is currently conducted by Seller. The tangible assets included among the Purchased Assets are in good condition, free from material defects, reasonable wear and tear and normal depreciation excepted.

(b)       Except for equipment subject to those equipment leases included among the Assumed Contracts, none of the Purchased Assets are leased to or by Seller. To the best of Seller’s knowledge, there are no pending or threatened condemnation or other proceedings that could adversely affect the current use, occupancy, or value of the real property subject to the Current Real Property Lease or the leased premises subject thereto. The real property, including the buildings and all other improvements, subject to the Current Real Property Lease is in good

condition, free from material defects, and adequate to operate the facilities as currently used, and comprises all of the real property used by Seller in the operation of the Business. Occupancy and operation of the Business in each of the leased premises is in compliance with applicable law.

(a)        Schedule 4.6 sets forth a complete and correct list of all intellectual property used by Seller in the conduct of the Business. Except as set forth on Schedule 4.6 , each Seller has a license to use all intellectual property that is a Purchased Asset, and all such licenses are in full force and effect. Except as set forth on Schedule 4.6 , Seller has the right to fully assign all such licenses to Buyer.

(b)       Seller has not (i) materially interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of third parties, or (ii) received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation or violation (including any claim that Seller must license or refrain from using any intellectual property rights of a third party in connection with the conduct of the Business). To the best of Seller’s knowledge, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any intellectual property rights of Seller.

(a)        Schedule 4.7(a) sets forth a true and complete list of all policies of insurance (the “ Insurance Policies ”) that insure the Purchased Assets or the Business, setting forth the names of insurers, policy numbers, types and amounts of coverage and expiration dates. Seller is not in default with respect to its obligations under any such insurance policy and has not been denied insurance coverage or been subject to any gaps in insurance coverage during the past two years.

(b)        Schedule 4.7(b) sets forth a true and complete list of all claims against the Insurance Policies during the past two years. During the past two years, no insurer has questioned, denied or disputed (or otherwise reserved its rights with respect to) the coverage of any pending claim, or threatened to cancel any policy insuring any of the Purchased Assets or the Business.

4.8           Disclosure . To the best of Seller’s knowledge, no representation or warranty made by Seller in this Agreement and no statement made in or any amount set forth on any schedule called for by and incorporated into this Agreement is false or misleading in any material respect or omits to state any material fact necessary to make any such representation or statement not misleading.

(a)       Except as disclosed on Schedule 4.9 , Seller has timely filed all requisite cost reports, claims and other reports related to the Business required to be filed in connection

with all Programs due on or before the date of this Agreement (and will duly file all such cost reports, claims and other reports due through the Closing Date), all of which are complete and correct. True and correct copies of all such reports for the three most recent fiscal years of Seller have been furnished to Buyer. Except as specifically described on Schedule 4.9 , there are no claims, actions, appeals, reviews or audits pending before any federal or state commission, board or agency (including, without limitation, any intermediary or carrier, the Provider Reimbursement Review Board or the Administrator of CMS) with respect to Seller's participation in any Program, or any pending disallowances by any commission, board or agency in connection with Seller's participation in any Program, which could adversely or materially affect the Business or any of the Purchased Assets, the operation or the utility thereof, or the consummation of the transactions contemplated hereby, and Seller has provided Buyer with true and correct copies of any such claim, action or appeal.

(b)       The structure and operations of Business by and the activities of the respective officers, directors and employees of Seller are, and at all times have been, in compliance in all material respects with all relevant federal and state laws regulating health services or payment including, but not limited to, 42 U.S.C. Sections 1320a-7, 1320a-7a and 7b, 18 U.S.C. Sections 1035 and 1347, and 31 U.S.C. Section 3729, or the regulations promulgated pursuant to such statutes or related state or local statutes or regulations, and, no Seller or officer, director or employee has taken any action which is prohibited by rules of professional conduct or which otherwise could constitute fraud. Seller has maintained, secured, used and transmitted all electronic or other data or information with respect to the Business relating to any persons in compliance with (i) the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder (“ HIPAA ”), (ii) privacy laws applicable to such Seller, as applicable, and (iii) any other legal requirement applicable to Seller, including, without limitation, those relating to use, confidentiality, protection, security or integrity of Protected Health Information (as defined under HIPAA) except where the failure to do so would be unlikely to have a material adverse effect on the Business or the Purchased Assets. Seller has not, in obtaining or performing any contract or agreement related to the Business, violated in any material respect any obligation it has undertaken in connection with HIPAA as a “business associate” of a “covered entity” or as a “covered entity” as such terms are defined in HIPAA. Seller has established and implemented such policies, programs, procedures, contracts and systems with respect to the Business, as are necessary to comply with HIPAA; Title II, Subtitle F, Sections 261-264, Public Law 104-191; and the Standards for Privacy of Individually Identifiable Health Information, 45 C.F.R. Parts 160-164, and the HIPAA Security and Transactions and Code Sets standards.

(c)       No person having a “financial relationship” with Seller, as that term is defined in 42 U.S.C. Section 1395nn, is in a position, directly or indirectly, to refer patients or services to Seller with respect to the Business, other than referrals which comply with (or are exempt from) the requirements of 42 U.S.C. Section 1395nn and the regulations promulgated pursuant thereto.

(d)       All material reports, documents, claims and notices related to the Business required to be filed, maintained or furnished to any governmental or health care authority by Seller has been so filed, maintained or furnished. All such reports, documents, claims and

notices were materially complete and correct on the date filed (or were corrected in or supplemented by a subsequent filing).

4.10       Contracts and Commitments . Except for the Assumed Contracts or as set forth on Schedule 4.10 , Seller is not a party to any material contract or commitment relating to the Business, and neither the Business nor the Purchased Assets are the subject of any material contract or commitment. Each of the Assumed Contracts is in full force and effect, is a valid and binding obligation of the parties to such contracts in accordance with its terms, and, to the best of Seller’s knowledge, and except with respect to the failure to obtain any consent listed on Schedule 4.17, no party to the Assumed Contracts is in default under such contracts.

4.11         No Violation of Law . Except as disclosed on Schedule 4.11 , the conduct of the Business by Seller does not, to the best of Seller’s knowledge, violate any statute, ordinance, law, regulation, order, writ, injunction or decree of any court or governmental agency. Seller has not received a notice of default or violation of, and has no knowledge that any circumstance exists or event has occurred that, with or without the lapse of time or giving of notice, would constitute a default or violation of any statute, ordinance, regulation, order, writ, injunction or decree of any court or governmental agency or authority applicable to the Business or the Purchased Assets.

4.12     Litigation . Except as disclosed on Schedule 4.12 , there are no actions, suits or proceedings pending, or, to the best of Seller’s knowledge, threatened before any court, commission, agency or other governmental or regulatory authority (i) affecting the Business or the Purchased Assets, (ii) to which the Business or the Purchased Assets are subject, or (iii) that seek to prohibit or materially and adversely restrict or delay the consummation of the transactions contemplated under this Agreement. Except as disclosed on Schedule 4.12 , Seller is not the subject of any judgment, order, writ, injunction or decree relating to or affecting the Business or the Purchased Assets, other than those of general application, or that seeks to prohibit or materially and adversely restrict or delay the consummation of the transactions contemplated under this Agreement. To the best of Seller’s knowledge, no event has occurred or circumstance exists that is reasonably expected to give rise to or serve as a basis for the commencement of any action, suit or proceeding affecting the Business or the Purchased Assets.

4.13         Labor . No employee of Seller engaged in the Business is represented by a labor union and there is no collective bargaining or other union contract relating to the Business to which Seller is a party. To the best of Seller’s knowledge, there is not pending or threatened against Seller any grievance, labor dispute, organizational activity, union trouble, work slowdown, lockout, strike or work stoppage related to the Business. Seller has complied in all material respects with all applicable federal, state, local and foreign laws, rules and regulations related to the Business pertaining to the employment of labor, including those relating to wages, hours, collective bargaining, employee health and safety, fair employment, and the payment of or withholding of taxes. Seller has withheld all amounts required by law or agreement to be withheld from the wages or salaries of Seller’s employees engaged in the Business and Seller is not liable for any arrears of wages or any tax or penalties for failure to comply with any of the foregoing.

4.14         Employee Benefit and Retirement Plans . Except as disclosed on Schedule 4.14 , Seller does not maintain any "employee pension benefit plan" or any "employee welfare benefit plan" (as defined respectively in Section 3(2) and 3(1) of the Employee Retirement Income Security Act of 1974, as amended (" ERISA ")) on behalf of such Seller's employees engaged in the Business. Except as disclosed on Schedule 4.14 , Seller does not maintain any pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, share purchase, retention, change in control or severance plans; bonus or other incentive arrangements; life or disability insurance plans; medical, vision, dental or other health insurance plans; flexible spending account; vacation, holiday or any other fringe benefit arrangements for any employees engaged in the Business, whether written or unwritten, funded or unfunded, actual or contingent. Seller acknowledges and agrees that (i) Buyer shall not be treated as a successor employer within the meaning of Treasury Regulation § 54-4980B-9 (“ COBRA ”), (ii) Seller will retain all obligations under COBRA for all employees of the Business, whether or not hired by Buyer, and (iii) Buyer shall have no liability under COBRA relating to the employees engaged in the Business for events occurring on or prior to the Closing. Seller agrees to provide each employee engaged in the Business with COBRA notices.

4.15         Employees and Independent Contractors . Schedule 4.15 sets forth a true and complete list including the name, salary or compensation (including without limitation all commission, override or bonus arrangements), and PDO, and to the best of Seller’s knowledge, Seller has not received any notice of intent to terminate employment from any person listed on Schedule 4.15 , and no person listed on Schedule 4.15 has any written or oral contract for employment with Seller, other than at-will employment relationships.

4.16         Worker's Compensation . Except as disclosed on Schedule 4.16 , Seller is in material compliance with all worker's compensation laws with respect to the Business and has worker's compensation insurance coverage in full force and effect with respect to the Business.

4.17         Consents . Except as described on Schedule 4.17 , no consents, approvals or authorizations of, filing with, or notice to any third parties, including any governmental or regulatory authorities, is required in connection with the execution and delivery of this Agreement or the Ancillary Agreements by Seller and Seller Affiliates and consummation by Seller and Seller Affiliates of the transactions contemplated hereby and thereby.

4.18       Commissions . Neither Seller nor any Seller Affiliate has authorized any person to act in such a manner as to give rise to any valid claim against Buyer for a brokerage commission, finder's fee, or similar payment as a result of the transactions contemplated under this Agreement.

(a)       Apex Healthcare has delivered to Buyer the audited balance sheet of the Apex Healthcare’s Business as of December 31, 2007 and the related statements of income, cash flows and changes in members’ equity for the fiscal year then ended (the " Apex Financial Statements "). The Apex Financial Statements fairly present, in accordance with generally accepted accounting principles for financial reporting in the United States (" GAAP "), the

financial condition and the results of operations, changes in members’ equity and cash flows of Apex Healthcare as of the respective dates of and for the periods referred to in such Financial Statements. The Apex Financial Statements reflect the consistent application of such accounting principles throughout the periods involved. The Apex Financial Statements have been prepared in accordance with the accounting records of Apex Healthcare, which have been properly maintained and are complete and correct in all material respects. There are no liabilities (whether known, unknown, contingent or otherwise) of Apex Healthcare other than (i) liabilities reflected on the Apex Financial Statements, or (ii) liabilities incurred since December 31, 2007 in the ordinary course of business consistent with past practice, none of which are material.

(b)       Apex Rehab has delivered to Buyer the unaudited balance sheet of the Apex Rehab’s Business as of December 31, 2007 and the related statements of income, cash flows and changes in members’ equity for the fiscal year then ended (the " Apex Rehab Financial Statements "). The Apex Rehab Financial Statements fairly present the financial condition and the results of operations, changes in members’ equity and cash flows of Apex Rehab as of the respective dates of and for the periods referred to in such Apex Rehab Financial Statements. The Apex Rehab Financial Statements have been prepared in accordance with the accounting records of Apex Rehab, which have been properly maintained and are complete and correct in all material respects. There are no liabilities (whether known, unknown, contingent or otherwise) of Apex Rehab other than (i) liabilities reflected on the Apex Rehab Financial Statements, or (ii) liabilities incurred since December 31, 2007 in the ordinary course of business consistent with past practice, none of which are material.

4.20       Absence of Changes . Since December 31, except as disclosed on Schedule 4.20 , Seller:

(a)       has operated the Business in the ordinary course of business consistent with past practice;

(b)       has not permitted any of the Purchased Assets to become subject to a lien or other encumbrance;

(c)       has not suffered any material loss, destruction, damage or eminent domain taking (in each case, whether or not insured) affecting the Business or any Purchased Asset;

(d)       has not sold, assigned, transferred, leased, licensed or otherwise disposed or encumbered any of the Purchased Assets (tangible or intangible), except in the ordinary course of business consistent with past practice and except as contemplated by this Agreement or the transactions contemplated hereunder;

(e)       has not terminated any of the relationships of the Business between Seller, on the one hand, and any dealer, franchisee, distributor, licensee, licensor or supplier material to Seller, on the other hand, or modified any such relationships to be less favorable to the Business, or has not been threatened or notified of any intention (orally or in writing) by any such dealer, franchisee, distributor, licensee, licensor or supplier to effect any such termination or modification;

(f)        has not granted or incurred any obligation for any increase in the compensation of any employee of Seller engaged in the Business (including any increase pursuant to any bonus, pension, profit-sharing, retirement, or other plan or commitment) except for raises in the ordinary course of business consistent with past practice;

(g)       has not made any material change in its methods of accounting or accounting principles or practices (including with respect to reserves) with respect to the Business;

(h)       except as contemplated by this Agreement or the transactions hereunder, has not entered into any other material transaction related to the Business, whether or not in the ordinary course of business;

(i)        except as contemplated by this Agreement or the transactions hereunder, has not agreed, whether orally or in writing, to do any of the foregoing; and

(j)        has not suffered any event or circumstance that has had, or is reasonably likely to have, a material adverse effect on the business, operations, condition (financial or otherwise), assets or earnings of the Business.

4.21       Internal Control . To the best of Seller’s knowledge, Seller has implemented and maintain a system of internal control over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, without limitation, that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(a)       The AFAM Shares to be received by Apex Healthcare will be acquired for investment for Apex Healthcare’s own accounts, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Apex Healthcare has no present intention of selling, granting any participation in, or otherwise distributing the same. Apex Healthcare does not have any need for liquidity with respect to its investment in AFAM Shares.

(b)       Buyer has delivered to Apex Healthcare a reasonable time before the date hereof true and complete copies of Parent’s (i) Annual Report on Form 10-K for the year ended December 31, 2007; (ii) all periodic reports on Form 8-K filed with the Securities and Exchange Commission since December 31, 2007 to the date hereof; and (iii) all Forms 10-Q filed with the Securities and Exchange Commission since December 31, 2007 to the date hereof. Apex Healthcare, or a representative thereof, has received and read or reviewed, and is familiar with, this Agreement and the other agreements executed in connection with this Agreement and confirms that all documents, books and records pertaining to Apex Healthcare’s investment in

AFAM Shares and requested by Apex Healthcare have been made available.

(c)       Apex Healthcare has had an opportunity to ask questions and receive answers from Parent regarding the terms and conditions of the offering of AFAM Shares and about other information, documents and records relative to Parent’s business assets, financial condition, results of operations and liabilities.

(d)       Apex Healthcare is an experienced investor in securities and acknowledges that Apex Healthcare can bear the complete economic risk of Apex Healthcare’s investment and has such knowledge and experience in financial or business matters that Apex Healthcare is capable of evaluating the merits and risks of the investment in AFAM Shares. Apex Healthcare also represents that it is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act of 1933 (“ Securities Act ”).

(e)       The purchase of AFAM Shares by Apex Healthcare is consistent with the general investment objectives of Apex Healthcare. Apex Healthcare understands that the purchase of AFAM Shares involves a high degree of risk.

(f)        Apex Healthcare understands that AFAM Shares are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from Parent in a transaction not involving a public offering and that under such laws and applicable regulations such securities may not be resold without registration under the Securities Act and applicable state securities laws, except in certain limited circumstances. In this connection, Apex Healthcare represents that it is familiar with Rule 144 promulgated under the Securities Act (“ Rule 144 ”), as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Apex Healthcare agrees that in no event will it make a transfer or disposition of any AFAM Shares unless and until, if requested by Parent, Apex Healthcare shall have furnished to Parent (at the expense of Apex Healthcare or its transferee) an opinion of counsel or other evidence, reasonably satisfactory to Parent, to the effect that such transfer may be made without restrictions under the Securities Act.

(g)       The AFAM Shares issued to Apex Healthcare shall not be registered under the Securities Act at the time of issuance, and as such shall constitute "restricted securities" within the meaning of Rule 144 and, unless sold pursuant to an effective registration statement, the AFAM Shares shall be available for sale in the public market only in compliance with Rule 144. Certificates representing the AFAM Shares shall bear a legend substantially as follows:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN AN ASSET

PURCHASE AGREEMENT DATED _________, 2008, A COPY OF WHICH IS MAINTAINED IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.

Article 5 - Representations and Warranties of Buyer

As a material inducement to Sellers to enter into this Agreement, Buyer hereby represents and warrants to Sellers as follows:

5.1         Authority as to Execution . The execution and delivery of this Agreement and the instruments called for by this Agreement by or on behalf of Parent and Buyer and the consummation of the transactions contemplated hereunder and thereunder, shall have been duly authorized by all necessary limited liability company or corporate actions, as appropriate, on or prior to the Closing Date. This Agreement and each of the instruments called for by this Agreement will be a valid and binding obligations of Parent and Buyer, each enforceable against Parent and Buyer in accordance with their respective terms.

5.2         Organization and Entity Authority . Parent is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, with full legal power and authority to execute, deliver and perform its obligations under this Agreement and the instruments called for by this Agreement. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of its state of organization, with full legal power and authority to execute, deliver and perform its obligations under this Agreement and the instruments called for by this Agreement.

5.3       No Violation of Law; Other Agreements . Neither the execution and delivery of this Agreement or the instruments called for by this Agreement, nor consummation of the transaction herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof, will conflict with or violate any provision of law or of the organizational documents of Parent or Buyer, or result in a violation or default in any provision or any regulation, order, writ, injunction or decree of any court or governmental agency or authority, or of any agreement or instrument to which Parent or Buyer is a party or by which Parent or Buyer is bound or subject.

5.4         Commissions . Neither Parent nor Buyer has authorized any person to act in such a manner as to give rise to any valid claim against Seller or Seller Affiliates for a brokerage commission, finder's fee, or similar payment as a result of the transactions contemplated under this Agreement. Parent shall be responsible for the payment of any fees due to Stoneridge.

5.5         Issuance and Validity of AFAM Shares . AFAM Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable, will be free of any liens or encumbrances other than the pledge of AFAM Shares contemplated by this Agreement, and will not be subject to any preemptive rights, rights of first refusal or redemption rights.

5.6         Disclosure . No statement made in the information listed on paragraph 4.22(b) or representation and warranty of Buyer in this Agreement or any schedule to this Agreement is

false or misleading in any material respect or omits to state any fact necessary to make any such representation or statements not misleading in any material respect.

Article 6 – Covenants of Sellers

6.1         Conduct of Business . From the date of this Agreement until the Closing Date, each Seller agrees to operate the Business and otherwise carry on the Business in substantially the same manner heretofore conducted and not make other than in the ordinary course of business, any material change in its personnel, operations, finances, accounting policies, or personal property, without the prior written consent of Buyer, including without limitation, the filing of all requisite cost reports, claims and other reports related to the Business required to be filed in connection with all Programs due on or before the Closing Date. Between the date of this Agreement and the Closing Date, each Seller agrees to use its reasonable efforts to retain its present employees and preserve the goodwill and business of their customers, suppliers, and others having business relations with them, and agree to conduct the financial operations of the Business in accordance with its existing business practices. From the date of this Agreement to the Closing Date, each Seller agrees to not do any of the following in connection with its ownership and operation the Business and the Purchased Assets without Buyer’s prior written consent:

(a)       cancel or permit any insurance, bond, surety instrument or letter of credit to lapse or terminate, except in the ordinary course of business or unless renewed or replaced by like coverage;

(b)       default in any respect under any loan, material contract, agreement, lease or commitment;     

(c)       enter into any contract, agreement, lease or other commitment, except in the ordinary course of business;

(e)       hire any employees other than in the ordinary course, increase any compensation to employees, enter into any employment arrangement, agreement or undertaking, or pay or promise to pay any fringe benefit, bonus or special compensation to employees, except in the ordinary course of business, except as otherwise contemplated in this Agreement;

(f)        impede Buyer, its counsel, accountants and other representatives from reasonable access, during normal business hours and upon reasonable advance notice, to the Business and the Purchased Assets so that Buyer may have the opportunity to conduct a reasonable investigation of the Business;

(g)       encumber any of the Purchased Assets or incur any liabilities with respect to the Business, except in the ordinary course of business; or

(h)       permit any employees of the Business to be "hired" or otherwise used by Seller other than in connection with the operation of the Business (the intention of the parties

being that as of the Closing, Buyer will have the opportunity, but not the obligation, to hire all of Seller’s employees utilized in the operation of the Business as of the date of this Agreement and that none of such employees will have any preexisting arrangement to remain employed by Seller after the Closing Date).

6.2         No Sale of Purchased Assets . Each Seller agrees to not sell, lease, remove or otherwise dispose of any of the Purchased Assets, which are located or used in the Business (except for retirements and replacements in the ordinary course of business, provided that all items which are retired or replaced are contemporaneously replaced by items of substantially equivalent value), or liquidate or dissolve.

6.3         Insurance . Through the Closing Date, each Seller agrees to maintain the insurance described in Article 4.

6.4         Notice . From the date of this Agreement to the Closing Date, each Seller agrees to promptly advise Buyer of the occurrence of any governmental inspections, investigations, citations with respect to the Business or the Purchased Assets, and of which Seller has received written or oral notification.

6.5         Access to Personnel and Records . From the date of this Agreement until the Closing Date, each Seller agrees to give Buyer, and Buyer’s counsel, accountants, consultants and other agents and representatives, full access, during normal business hours and upon reasonable request, to its properties, books, contracts, commitments and records relating to the Purchased Assets and the operations of the Business. The review of any such business records shall be conducted subject to the site and business hours limitations requested by Sellers to the extent reasonably possible and shall designed so as to minimize any disruption to a Seller’s business.

6.6         Financial Information . Each Seller agrees to provide Buyer with such financial information available to Seller relating to the operations of the Business as Buyer may reasonably request.

6.7         Collection Practices . Each Seller agrees to not deviate from its current lawful practices with respect to the collection of accounts receivable from the Business's patients to the extent that any such change in collection practices would impair or adversely affect the Business' ability to continue its relationships with those patients after Closing.

6.8         Cooperation . Seller agrees to cooperate in good faith with Buyer after the Closing in order to obtain all governmental, regulatory and other third party consents and approvals which are necessary or desirable to consummate the transactions contemplated under this Agreement.

6.9         Approval of Transfer . From the date of this Agreement to the Closing Date, each Seller agrees to use its reasonable best efforts, including the filing and submission of all necessary and appropriate applications and documents, to obtain the approvals and consents of all applicable governmental and regulatory authorities, and any other third party identified as

necessary in order to transfer the Business, the Purchased Assets, the Assumed Contracts and the Licenses to Buyer.

6.10       Consents . Each Seller agrees to use its good faith efforts after the Closing to procure the consents of any third parties necessary for the assignment to Buyer of the Assumed Contracts and Licenses.

6.11        No-Shop Clause . From and after the date of this Agreement until the termination of this Agreement (unless the Closing Date is extended beyond such date by the parties), each Seller agrees to not, without the prior written consent of Buyer: (i) offer for sale any material portion of the Business or Purchased Assets; (ii) solicit offers to buy all or any material portion of the Business or Purchased Assets; (iii) hold discussions with any party (other than Buyer) looking toward such an offer or solicitation or looking toward a merger or consolidation with such Seller; or (iv) enter into any agreement with any party (other than Buyer) with respect to the sale or other disposition of any material portion of the Business or Purchased Assets.

6.12       Preparation of Financials . Subject to paragraph 2.4, Sellers shall provide Buyer with such audited financial statements for Sellers and/or the Business for the fiscal year ended December 31, 2007,. The parties acknowledge that Apex Healthcare has caused its auditors to provide Buyer with such financials. Apex Rehab agrees to cause it auditors to provide Buyer with such financials as soon as reasonably possible.

6.13       Medicare Change of Ownership Filing . Each Seller agrees on the first business day after the execution of this Agreement to make its Medicare Form 855 change in control filings.

6.14       Maintenance of Seller’s Existence . Each Seller agrees that to maintain its existence in good standing and not dissolve for at least three years after the Closing Date.

6.15       Transfer of AFAM Shares . Apex Healthcare agrees that a transfer of AFAM Shares by Apex Healthcare to its equity owners shall not be undertaken prior to the second anniversary date of the Closing, unless (a) such transfer is permissible under applicable state laws, (b) the distribution of the AFAM Shares does not render Apex Healthcare unable to pay all of its obligations and liabilities in the ordinary course, (c) the transfer of AFAM Shares shall be limited to persons affiliated with Apex Healthcare who (A) join in making representations and warranties substantially similar to those set forth in paragraph 4.22 at the time of the transfer, and (B) acknowledge in writing that the AFAM Shares remain subject to the Stock Pledge Agreement, and (d) Apex Healthcare obtains Buyer’s consent in advance in writing to such transfers.

Article 7 - Covenants of Buyer

7.1         Access to Records . For a period extending to the greatest of five years from and after the Closing Date, any longer period required by law, or the date of final settlement of cost reports for any period prior to the Closing Date, Buyer agrees to retain the patient and medical records of the patients serviced by the Business on and prior to the Closing Date, and will give

Seller, and Seller’s counsel, accountants, consultants and other agents and representatives, full and complete access, during reasonable business hours and upon reasonable request.

7.2         Cooperation . From the date of this Agreement until the Closing Date, Buyer agrees to cooperate in good faith with Seller in order to obtain all governmental, regulatory and other third party consents and approvals which are necessary or desirable to consummate the transactions contemplated under this Agreement.

7.3         Approval of Transfer . From the date of this Agreement until the Closing Date, Buyer agrees to use its reasonable best efforts, including the filing and submission of all necessary and appropriate applications and documents, to obtain the approvals and consents of all applicable governmental and regulatory authorities and other third parties required or necessary in order to transfer the Business, the Licenses, the Assumed Contracts and the Purchased Assets to Buyer. Buyer agrees to be responsible for any filing fees, late fees or penalties arising out of or with respect to the change in control of the Business from Sellers to Buyer.

7.4         Medicare Change of Ownership Filings . Buyer agrees on the first business day after execution of this Agreement to make its Medicare Form 855 change in control filings.

Article 8 - Conditions Precedent to Buyer’s Obligations

Buyer’s obligation to close is subject to the satisfaction of the following conditions before or at Closing, unless waived by Buyer:

8.1         Representations and Warranties True at Closing . The representations, warranties and covenants made by each Seller in this Agreement must be true in all material respects at and as of Closing as if made on and as of Closing (excluding any materiality qualifier in such representations and warranties).

8.2         Compliance with Agreement . Each Seller must have performed and complied with all of its covenants and obligations under this Agreement in all material respects which are to be performed or complied with by them before or at Closing.

8.3         Sellers’ Certificates . Each Seller must have delivered to Buyer a certificate stating that (i) the representations, warranties and covenants made by such Seller in the Agreement are true in all material respects at and as of Closing as if made on and as of Closing (excluding for this purpose any materiality qualifier in such representations and warranties), and (ii) such Seller has performed and complied with all of its covenants and obligations under this Agreement which are to be performed or complied with by them before or at Closing.

8.4         Adverse Proceedings . As of the Closing Date, no suit, action, claim or governmental proceeding is pending or threatened against, and no order, decree or judgment of any court, agency or other governmental authority has been rendered against any party to this Agreement which would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms or otherwise have a material

adverse effect on Buyer’s ownership, use or enjoyment of the Business, the Licenses, the Assumed Contracts or the Purchased Assets.

8.5         Medicare Change in Control Filing . Each Seller shall have made its Medicare Form 855 change of ownership filings.

8.6         Closing Documents . The documents required to be delivered by Sellers to Buyer pursuant to this Agreement must be executed in a form reasonably acceptable to Buyer.

8.7         Opinion of Counsel . Sellers shall have caused there to be delivered at Closing an opinion of counsel in a form satisfactory to Buyer with respect to certain matters, including authorization of this Agreement and the Ancillary Agreements, no conflict with Sellers’ organizational documents and contracts and other customary matters.

8.8         Employment Arrangements . Buyer shall have reached employment arrangements with certain employees of the Business identified by Buyer on terms and conditions satisfactory to Buyer and such employees (which terms may include restrictive covenants).

Article 9 - Conditions Precedent to Sellers’ Obligations

Sellers’ obligation to close is subject to the satisfaction of the following conditions prior to or at Closing, unless waived by Seller:

9.1         Representations and Warranties True at Closing . The representations and warranties made by Buyer in this Agreement must be true in all material respects at and as of Closing with the same effect as though such representations and warranties had been made or given on and as of Closing (excluding any materiality qualifier in such representations and warranties).

9.2         Compliance with Agreement . Buyer must have performed and complied with all covenants and obligations under this Agreement in all material respects which are to be performed or complied with by Buyer before or at the Closing.

9.3         Buyer’s and Parent’s Certificate . Buyer and Parent must have delivered to Seller a certificate stating that (i) the representations, warranties and covenants made by Buyer in the Agreement are true in all material respects at and as of Closing as if made on and as of the Closing, and (ii) Buyer and Parent has performed and complied with all of its covenants and obligations under this Agreement which are to be performed or complied with by it before or at Closing.

9.4         Adverse Proceedings . As of the Closing Date, no suit, action, claim or governmental proceeding is pending against, and no order, decree or judgment of any court, agency or other governmental authority has been rendered against any party to this Agreement which would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms.

9.5         New Real Property Lease . The entering into by Buyer of one or more real property leases with certain Seller Affiliates on terms satisfactory to Seller Affiliates and Buyer with respect to the real property owned by entities owned by Seller Affiliates and currently used in the operation of the Business.

9.6         Closing Documents . The documents required to be delivered by Buyer to Seller pursuant to this Agreement must be executed and delivered in a form reasonably acceptable to Seller.

9.7         Medicare Change in Control Filing . Buyer shall have made its Medicare Form 855 change of ownership filings.

Article 10 - Termination of Agreement

10.1       Termination . This Agreement and the transactions contemplated hereby may be terminated or abandoned at any time before the Closing Date:

(b)       by Sellers or Buyer, if a Closing does not occur on or before April 15, 2008;

(c)        by Buyer, if there has been a material misrepresentation in this Agreement by a Seller, or a material breach by a Seller of any of its warranties or covenants set forth in this Agreement, or an uncured failure of any condition to which the obligations of Buyers are subject; and

(d)         by Sellers, if there has been a material misrepresentation in this Agreement by Buyer, or a material breach by Buyer of any of its warranties or covenants set forth in this Agreement, or an uncured failure of any condition to which the obligations of Sellers are subject.

Article 11 - Indemnification

11.1      Survival of Representations and Warranties . All of the representations, and warranties made by Sellers and Buyer under this Agreement will survive the Closing of the transactions contemplated by this Agreement for a period of 36 months after the Closing Date, except that the representations and warranties with respect to (i) taxes in paragraphs 4.4 and 4.14, and (ii) healthcare matters in paragraph 4.9, and (iii) healthcare regulatory or malpractice claims included within the scope of paragraph 4.12 shall survive after the Closing Date for the greater of 36 months or the applicable statute of limitations for claims with respect to the subject matter of such representation and warranty.

(a)        General . Subject to the limitations of this Article 11, each Seller and each Seller Affiliate, jointly and severally, agrees to indemnify, defend and hold each Buyer included as a party to this Agreement, and each Buyer’s officers, directors, shareholders, agents, affiliates and attorneys (each a “ Buyer Indemnified Person ” and collectively, " Buyer Indemnified Persons ") harmless from, against and in respect of, and shall reimburse each Buyer Indemnified Person on demand for, any damage, liability, loss, cost or expense (including reasonable attorneys' fees) (collectively, “ Losses ”) incurred by a Buyer Indemnified Person resulting from, arising out of, or in any way related to, any of the following:

(i)        any breach of a Seller’s representations, warranties or covenants in this Agreement, the Ancillary Agreement or any document, schedule, certificate or instrument delivered pursuant to this Agreement;

(ii)       any brokerage or similar fee due to any agent of a Seller or Seller Affiliates;

(iii)      any liability of a Seller or liability with respect to which the Purchased Assets are subject to, or obligation under the Assumed Contracts (except for any liabilities that result in a Purchase Price adjustment) to be performed prior to the Closing or accruing prior to Closing Date but payable after Closing Date, but not including any liability arising out the failure to obtain any consent set forth on Schedule 4.17 ;

(iv)      any mortgage, security interest, lease, obligation, claim, liability, debt, lien, charge or encumbrance relating to matters prior to Closing asserted against the Purchased Assets; and

(v)       any claims by the creditors, Seller Affiliates or equity holders of a Seller arising out of or with respect to the distribution or other use by either Seller of the Purchase Price.

(b)        Audits, Investigations, Refund Obligations and Other Pre-Closing Liabilities; Taxes . Subject to the limitations of this Article 11, each Seller and each Seller Affiliate, jointly and severally, agree to indemnify, defend and hold each Buyer Indemnified Person harmless from, against and in respect to, and reimburse a Buyer Indemnified Person on demand for, any Losses resulting from, arising out of or in any way related to, any of the following:

(ii)       any audit or investigation by M