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ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

ASSET PURCHASE AGREEMENT | Document Parties: ARCADIA RESOURCES, INC | American Oxygen and Medical Equipment, Inc | Arcadia Home Oxygen and Medical Equipment, Inc You are currently viewing:
This Asset Purchase Agreement involves

ARCADIA RESOURCES, INC | American Oxygen and Medical Equipment, Inc | Arcadia Home Oxygen and Medical Equipment, Inc

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Title: ASSET PURCHASE AGREEMENT
Governing Law: Delaware     Date: 5/21/2009
Industry: Healthcare Facilities     Sector: Healthcare

ASSET PURCHASE AGREEMENT, Parties: arcadia resources  inc , american oxygen and medical equipment  inc , arcadia home oxygen and medical equipment  inc
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Exhibit 10.2

ASSET PURCHASE AGREEMENT

By and among

Braden Partners, L.P.

As Buyer

and

American Oxygen and Medical Equipment, Inc. and Arcadia Home Oxygen and Medical
Equipment, Inc.

and

Arcadia Products, Inc., RKDA, Inc., and Arcadia Resources, Inc.

As Sellers

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

 

ARTICLE I — PURCHASE AND SALE OF ASSETS

 

 

1

 

1.1. Purchased Assets

 

 

1

 

1.2. Excluded Assets

 

 

2

 

1.3. Assignment of Third Party Real Property Leases; Subletting

 

 

3

 

 

 

 

 

 

ARTICLE II — NON-ASSUMPTION OF LIABILITIES

 

 

3

 

2.1. Non-Assumption of Liabilities

 

 

3

 

2.2. Assumed Liabilities

 

 

3

 

2.3. Excluded Liabilities

 

 

3

 

 

 

 

 

 

ARTICLE III — PURCHASE PRICE

 

 

3

 

3.1. Purchase Price

 

 

3

 

3.2. Adjustment to Purchase Price

 

 

4

 

3.3. Disputes Regarding Final Purchase Price

 

 

8

 

3.4. Allocation of Consideration

 

 

8

 

3.5. Transfer Taxes

 

 

9

 

 

 

 

 

 

ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

 

9

 

4.1. Organization and Qualification

 

 

9

 

4.2. Subsidiaries

 

 

9

 

4.3. Authority Relative to this Agreement

 

 

9

 

4.4. Compliance of Transaction With Laws and Other Instruments

 

 

10

 

4.5. Title to Purchased Assets; Liens

 

 

11

 

4.6. Tax Matters

 

 

11

 

4.7. Absence of Undisclosed Liabilities

 

 

12

 

4.8. Inventory

 

 

12

 

4.9. Food and Drug

 

 

12

 

4.10. Contracts, Real Property Leases, and Commitments

 

 

12

 

4.11. Patients

 

 

13

 

4.12. Permits; Governmental Agreements

 

 

14

 

4.13. Environmental Matters

 

 

14

 

4.14. Health Care Compliance

 

 

14

 

4.15. Compliance with Applicable Law; Adverse Restriction

 

 

15

 

4.16. Litigation

 

 

16

 

4.17. Finder’s Fee

 

 

17

 

4.18. Solvency

 

 

17

 

4.19. No Material Adverse Change

 

 

17

 

 

 

 

 

 

ARTICLE V — REPRESENTATIONS AND WARRANTIES OF BRADEN

 

 

17

 

5.1. Organization; and Qualification

 

 

17

 

5.2. Authority Relative to this Agreement

 

 

17

 

5.3. Compliance of Transaction With Laws and Other Instruments

 

 

18

 

5.4. Finder’s Fee

 

 

18

 

i


 

 

 

 

 

 

 

 

Page

 

ARTICLE VI — CERTAIN UNDERSTANDINGS AND AGREEMENTS

 

 

18

 

6.1. Expenses

 

 

18

 

6.2. Confidentiality

 

 

18

 

6.3. Further Assurances

 

 

19

 

6.4. Bulk Sales

 

 

19

 

6.5. Tax Returns

 

 

19

 

6.6. Reimbursement of Funds

 

 

20

 

6.7. Referrals

 

 

20

 

6.8. Rehired Employees

 

 

20

 

6.9. Patient Relationships

 

 

21

 

 

 

 

 

 

ARTICLE VII — CONDITIONS TO CLOSING

 

 

21

 

7.1. Conditions to Braden’s Obligations to Close

 

 

21

 

7.2. Conditions to the Sellers’ Obligations to Close

 

 

21

 

 

 

 

 

 

ARTICLE VIII — CLOSING DELIVERIES

 

 

22

 

8.1. Braden

 

 

22

 

8.2. Seller Entity

 

 

22

 

8.3. Joint Deliveries

 

 

24

 

 

 

 

 

 

ARTICLE IX — SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

 

 

24

 

9.1. Representations, etc.

 

 

24

 

9.2. Indemnification

 

 

24

 

9.3. Payment of Claims for Damages; Right of Setoff by Braden

 

 

26

 

9.4. Limitations on Indemnification

 

 

26

 

9.5. Notice; Defense of Claims

 

 

26

 

9.6. Sole Remedy

 

 

27

 

 

 

 

 

 

ARTICLE X — ARBITRATION

 

 

27

 

10.1. Arbitration Rules

 

 

27

 

10.2. Binding Effect of Arbitration

 

 

28

 

 

 

 

 

 

ARTICLE XI — MISCELLANEOUS PROVISIONS

 

 

28

 

11.1. Entire Agreement: Amendment

 

 

28

 

11.2. Assignment and Binding Effect

 

 

28

 

11.3. Waivers

 

 

28

 

11.4. Notices

 

 

28

 

11.5. Governing Law

 

 

29

 

11.6. No Third Party Beneficiaries

 

 

29

 

11.7. Counterparts; Execution

 

 

29

 

11.8. Effect of Headings

 

 

29

 

11.9. Severability

 

 

30

 

11.10. Construction; Complete Agreement

 

 

30

 

11.11. Certain Definitions

 

 

30

 

11.12. Schedules and Exhibits

 

 

31

 

ii


 

SCHEDULES
TITLE

4.1 Organization and Qualification
4.4 Compliance of Transaction With Laws and Other Instruments
4.5(a) Title to Purchased Assets; Liens
4.5(c) Title to Purchased Assets; Liens
4.6 Tax Matters
4.8 Inventory
4.10 Contracts, Real Property Leases, and Commitments
4.11(a) All Active Rental Patients
4.11(b) All Qualified Files
4.12 Permits; Governmental Agreements
4.14 Healthcare Compliance
4.16 Litigation
4.17 Finder’s Fee

iii


 

EXHIBITS

Exhibit A Form of Non-Compete Agreement
Exhibit B Form of Bill of Sale
Exhbit C Form of Sublease Agreement

iv


 

ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made as of this 19 th day of May, 2009 by and among Braden Partners, L.P., a California limited partnership (“ Braden ”), American Oxygen and Medical Equipment, Inc., an Illinois corporation, also doing business as Remedy Therapeutics; and Arcadia Home Oxygen and Medical Equipment, Inc., a Michigan corporation, also doing business as Arcadia H.O.M.E, (collectively, the “ Seller Entity ”), and Arcadia Products, Inc., a Delaware corporation; RKDA, Inc, a Michigan corporation, and Arcadia Resources, Inc., a Nevada corporation, as shareholders of Seller Entity (the “ Shareholders ”). The Shareholders and the Seller Entity are referred to collectively herein as the “ Sellers .”

     Certain terms used herein and not defined shall have the meaning set forth in Section 11.11 hereof.

RECITALS

     WHEREAS, the Seller Entity has been and is currently in the business of providing oxygen, oxygen equipment, compressed oxygen products, nebulizers, sleep therapy equipment, and respiratory and sleep therapy related products, supplies and services in and around Illinois, Indiana and Kentucky (such business shall be referred to herein as the “ Business ”);

     WHEREAS, Braden desires to purchase, and the Sellers desire to sell, substantially all of the assets relating to the Business of the Seller Entity, upon the terms and conditions hereof.

     NOW, THEREFORE, in consideration of the mutual promises herein made, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,

     IT IS AGREED AS FOLLOWS:

ARTICLE I — PURCHASE AND SALE OF ASSETS

      1.1. Purchased Assets

     Subject to and upon the terms and conditions hereof, and in reliance upon the representations, warranties, covenants and agreements made herein by each party to the other, on the Closing Date (as defined in Article VIII), the Sellers hereby agree to sell, transfer, assign, convey and deliver to Braden, and Braden hereby agrees to purchase and acquire from the Sellers, wherever located, free and clear of all liens, claims, encumbrances, charges, liabilities or obligations of every kind and nature whatsoever (collectively, “ Liens ”), all right, title and interest to and in all of the assets, properties and rights of the Seller Entity of every nature, kind and description, tangible and intangible, and any such assets of the Shareholders used in or directly related to the Business, including confidentiality and non-compete agreements for the benefit of Seller Entity, except to the extent that any such assets form a part of the Excluded Assets as defined in Section 1.2 below, (collectively, the “ Purchased Assets ”).

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      1.2. Excluded Assets

     Anything contained in this Agreement to the contrary notwithstanding, the following rights, properties and assets (the “ Excluded Assets ”), shall be retained by the Seller Entity and shall not be included in the Purchased Assets:

          (a) Cash . Cash or cash equivalents of the Seller Entity and all rights of the Seller Entity to deposits, prepaid expenses, security deposits, prepaid insurance, claims for refunds and rights to offset in respect thereof.

          (b) Bank Accounts . Bank accounts of the Seller Entity.

          (c) Accounts and Accounts Receivable . The accounts, accounts receivable or notes receivable, whether or not current, arising out of the Business for services provided prior to the Closing Date (the “Accounts Receivable”).

          (d) Tax Refunds . All refunds and deposits of all federal, state, local and foreign taxes due to any of the Sellers with respect to the Business for any period.

          (e) Corporate Records . The Seller Entity’s corporate stock record books, corporate record books containing minutes of meetings of the directors and stockholders of the Seller Entity, and all other records related to the Seller Entity’s corporate organization and capitalization, tax records and returns, schedules of depreciation and financial statements ; provided that , the Seller Entity will retain all such records in accordance with its current record keeping policies and shall, upon the request of Braden (which request shall include, in reasonable detail, the reasons for requiring such information) and upon reasonable advance notice, make such records available for Braden’s inspection and copying during normal business hours.

          (f) Insurance . All insurance policies owned by Sellers and rights to collect insurance proceeds under policies owned by Sellers.

          (g) Provider Numbers and Agreements . Medicare, Medicaid and all other third party provider numbers and agreements.

          (h) Personnel Records . All personnel records that the Seller Entity is required to retain in its possession and all rights in connection with the assets of any employee benefit plans.

          (i) Written Materials . All stationery, purchase orders and sale order forms, invoices, brochures, advertising materials and similar items.

          (j) Permits and Licenses. All permits and licenses of the Business.

          (k) Inactive Patients and Patient Files. Any patient or patient file not listed on Schedule 4.11(a).

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      1.3. Assignment of Third Party Real Property Leases; Subletting

     Sellers will assign all rights and interests in the real property leases in Peoria, Illinois and Jackson, Kentucky, as specified in Schedule 4.10, together with office space, appurtances, fixtures and improvements on the leased property, and will sublet the Business locations in Crystal Lake, Illinois and Jacksonville, Illinois to Braden on a month-to-month basis at Seller’s cost for a period not to exceed Seller’s present lease obligations on those locations. Braden will not assume any other real property leases or obligations of Sellers; provided however, Braden will be permitted access to Sellers’ Crown Point, Indiana facility for the purpose of removing the Purchased Assets from the premises through and including May 31, 2009.

ARTICLE II — NON-ASSUMPTION OF LIABILITIES

      2.1. Non-Assumption of Liabilities

     Other than with respect to the Assumed Liabilities (as defined in Section 2.2 below), on the Closing Date Braden will not assume, agree to perform, discharge or indemnify the Sellers against or otherwise have any liability or obligation with respect to, any liability, debt, contract or obligation of the Seller Entity.

      2.2. Assumed Liabilities

     Upon the sale and purchase of the Purchased Assets, Braden will assume only the liabilities, responsibilities and obligations arising out of, resulting from, or relating to the use and ownership of the Purchased Assets by Braden after the Closing or the conduct of the Business by Braden after the Closing (collectively, the “ Assumed Liabilities ”). The Assumed Liabilities shall specifically not include any severance obligations of the Seller Entity or the Shareholders with respect to any officers or employees of the Seller Entity terminated in connection with the transactions contemplated hereby.

      2.3. Excluded Liabilities

     For purposes hereof the term “ Excluded Liabilities ” means any and all liabilities, responsibilities and obligations not listed in Section 2.2.

ARTICLE III — PURCHASE PRICE

      3.1. Purchase Price

     In reliance on the representations and warranties of the Sellers contained herein, and in consideration of the aforesaid sale, assignment, transfer and delivery of the Purchased Assets, Braden shall pay to the Seller Entity in full payment for the Purchased Assets and in full payment for the agreements of Sellers herein and in the attached Exhibits, and subject to the provisions of Sections 3.1 and 3.2, the amount of Four Million Dollars and No Cents ($4,000,000) (the “ Purchase Price ”). The Purchase Price is payable by Braden (subject to Section 9.2 hereof) as follows:

3


 

          (a) On the Closing Date, Braden will pay an amount equal to seventy-five percent (75%) of the Purchase Price as the same may be adjusted pursuant to Section 3.2 (a) (the “ Closing Payment ”) to the Seller Entity (or directly to the Shareholders if so directed by the Seller Entity) by wire transfer to an account or accounts designated by the Seller Entity.

          (b) Subject to any further adjustment made pursuant to the provisions of Section 3.2 hereof, on the fifteenth (15 th ) day following the date that is six (6) months after the Closing Date, (such day being the “ Deferred Disbursement Date ”), Braden shall pay to the Seller Entity an additional amount (“Adjusted Payment”) such that the total received by the Seller Entity, including both the Adjusted Payment and the Closing Payment, shall equal ninety percent (90%) of the Purchase Price subject to any adjustment(s) pursuant to the provisions of Section 3.2(b).

          (c) On the fifteenth (15 th ) day following the date that is twelve (12) months following the Closing Date (the “ Final Disbursement Date ”), Braden shall pay to the Seller Entity by wire transfer an additional amount (“ Final Disbursement ”) such that the total received by the Seller Entity shall be equal to one hundred percent (100%) of the Purchase Price, subject to any adjustment(s) pursuant to the provisions of Section 3.1(d) and 3.2 (b).

          (d) Notwithstanding anything herein to the contrary, Braden shall have a right of setoff against any or all amounts owed by Braden to the Seller Entity pursuant to this Section 3.1 with respect to any unpaid indemnity claims made pursuant to Section 9.2 and subject to Section 9.3 hereof. In the event that Braden shall have asserted against Sellers any claim(s) for indemnification pursuant to Section 9.2 or 9.3 hereof and such claim(s) shall not have been resolved prior to the Final Disbursement Date, then Braden’s obligation to make such payment shall be deferred until resolution under Article X with respect to such claims is reached, in an amount equal to the aggregate amount of all such claims. Braden shall not be required to pay any interest on deferred payments. Upon resolution under Article X of such claims, Braden shall pay to the Seller Entity such amount of the deferred Purchase Price, as reduced by the indemnification amount resolved to be due to Braden, if any, as a result of such claims.

          (e) Braden and certain of the Sellers are parties to a Purchase and Sale Agreement dated as of January 6, 2009 relating to Braden’s purchase of assets of a separate business owned by certain of the Sellers and their Affiliates (the “O2 Agreement”). Braden has asserted claims for indemnification and adjustments to the purchase price under the O2 Agreement, which claims certain of the Sellers and their Affiliates dispute. Braden agrees that it shall not withhold or adjust amounts due to Sellers under this Agreement for claims under the O2 Agreement. Notwithstanding the foregoing, Sellers agree that Braden shall be entitled to withhold or adjust amounts due to Sellers under this Agreement (i) for any binding and finally resolved or adjudicated claims arising from the O2 Agreement, and (ii) subject to the limitations on claims set forth in the O2 Agreement, including but not limited to the provisions of Section 9.4 thereof.

      3.2. Adjustment to Purchase Price

          (a) Adjustments to Closing Payment at Closing Date. The Closing Payment shall be (i) reduced by the total of all amounts billed by Seller Entity during the fifteen (15) days

4


 

prior to the Closing Date in the ordinary course, representing payment to Braden to render services on and after the Closing Date that have been billed in advance by the Seller Entity; and (ii) increased by the total of any agreed amounts representing payment to the Seller Entity for rendering services after the Closing Date, but before Braden assumes operating responsibility. The Seller Entity shall not bill for any Billing Cycles that commence on or after the Closing Date. The adjustment referenced in Section 3.2(a)(i) above shall include only amounts billed for recurring rental equipment during the current Billing Cycle and shall not include any billings for prior services provided by Sellers. In addition, the adjustment shall exclude any purchase conversions billed during the fifteen (15) days prior to the Closing Date unless the patient is shown as actively renting the purchased item on Schedules 4.11(a) or 4.11(b).

          (b) Adjustments at Deferred Disbursement Date. On the Deferred Disbursement Date, the Purchase Price may, at Braden’s election, be adjusted if the number of Oxygen Qualified Files and Sleep Qualified Files are fewer than the number listed on Schedule 4.11(b).

          (i) Except as provided in Section 3.2(b)(iii), if the number of Qualified Files meeting the standards included in their respective definitions at Section 3.2 (c) as of the Deferred Disbursement Date is fewer than the number of Qualified Files scheduled by Sellers in Schedule 4.11(b), the Purchase Price shall be reduced by an amount equal to the total of: (i) the difference between the number of Oxygen Qualified Files scheduled in 4.11(b) and the number of actual Oxygen Qualified Files as of the Deferred Disbursement Date multiplied by Two Thousand Five Hundred Dollars ($2500.00), plus (ii) the difference between the number of Sleep Qualified Files in Schedule 4.11(b) and the number of actual Sleep Qualified Files as of the Deferred Disbursement Date multiplied by Five Hundred Dollars ($500.00); provided however that the Purchase Price will not be adjusted unless the cumulative total amount of the adjustments relating to Qualified Files in this Section 3.2(b)(i) and the adjustments relating to equipment in Section 3.2 (b)(iv) is greater than One Hundred Thousand Dollars ($100,000) ( “The Threshold” ). In the event that the cumulative total amount of adjustments relating to Qualified Files exceeds the Threshold, then the Purchase Price will be reduced under this Section 3.2(b)(i) by the amount that such adjustment relating to Qualified Files exceeds the Threshold.

          (ii) A Qualified File that is listed on Schedule 4.11(b) as both an active Qualified Oxygen File and an active Qualified Sleep File will result in a total adjustment of Three Thousand Dollars ($3,000) if the file fails to qualify under the criteria for both oxygen and sleep rental services.

          (iii) In the event that Braden gives notice that the provisions of Section 3.2(h) for an Enhanced Purchase Price Adjustment have been met, then the Purchase Price adjustment reduction shall be calculated at the amounts of Five Thousand Dollars ($5,000) for every Oxygen Qualified File transferred or discontinued from service and One Thousand Dollars ($1,000) for each Sleep Qualified File transferred or discontinued from service. Braden shall be entitled to claim this “Enhanced Purchase Price Adjustment” reduction for each transferred or discontinued Qualified File listed on Schedule 4.11(b) and for each file listed on Schedule 4.11(a) that subsequently meets the criteria in Section 3.2(c) after the Closing Date through the efforts of Braden.

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          (iv) Braden shall be entitled to reduce the Purchase Price for oxygen concentrators and home fill systems that fail to conform to manufacturers’ specifications by the amounts of One Thousand Dollars ($1,000.00) for each non-conforming home fill system and Four Hundred Dollars ($400.00) for each non-conforming concentrator. A concentrator shall be deemed non-conforming only if the non-conformity is such that Braden takes the unit out of service and disposes of it. If Braden elects to reduce the Purchase Price for non-conforming assets, Braden will document the make, model, and serial number of each non-conforming home fill system or concentrator, describe the substandard operating condition (including but not limited to accurate liter flow readings, minimum purity, working alarms, warning lights and indicators operative and at a reasonable decibel level, and breakage) and provide same to the Seller Entity on a monthly basis. This Section 3.2(a)(iv) shall not apply to units on hand that have been taken out of service and are properly tagged at the Closing Date as awaiting disposal.

          (c) Certain Definitions . For the purposes of this Section 3.2, a patient file included in the Purchased Assets is defined as a “Qualified File” only if all of following conditions are met: (i) The patient file as and when transferred by Seller Entity has complete paperwork necessary at the Closing Date, including accurate patient contact and insurance information, valid orders and prescriptions, valid pre-authorizations, wet ink initial and recertification CMNs (if required), proof of physician visits, all relevant qualifying tests, proof of patient adherence and other medical records necessary to support billing to Medicare or the appropriate insurer, as determined by written guidance from insurers; provided, however, such paperwork must be in the file or available to Braden only if the paperwork is required by the applicable payor in order to prove medical necessity for the equipment or services billed; (ii) on the Closing Date the patient is actively served by the Seller Entity and is using the equipment provided; and (iii) the patient is insurance-eligible and executes a valid assignment of benefits in favor of Braden within three (3) months of the Closing Date; and, (iv) the patient files, which meet all of the above three requirements, must represent a patient that is on active and billable service with Braden for at least three (3) Billing Cycles following the Closing Date; provided however, that any patient file meeting all of the above requirements that is billed by Braden, and for which Braden receives at least one (1) Billing Cycle, but subsequently becomes ineligible due to death or residence in a long term care facility or hospital, is a Qualified File. In determining whether a patient file is a Qualified File, Braden is entitled to rely upon its billing experience from the Closing Date to the Deferred Disbursement Date; provided however, that Braden will submit only those claims to insurers that are, in Braden’s sole discretion, adequately supported by medical necessity and required documentation and for which the beneficiary has agreed to an assignment of insurance benefits to Braden. With respect to qualifying tests referenced in Subsection 3.2(c)(i), a patient file will be considered “Qualified” unless Braden determines that the qualifying tests are not contained in the file, the qualifying test (or other similar information in the patient notes) cannot be obtained from the physician or testing entity after reasonable diligence to obtain such information, and the patient fails to qualify after subsequent retesting. A patient shall be deemed to have failed to qualify if, after exercising commercially reasonable efforts, Braden is unable to perform retesting for any reason, including a physician’s refusal to order the test, a patient’s refusal to be tested, a patient’s relocation, or death. With respect to valid order and prescriptions referenced in Subsection 3.2(c)(i), a patient file will be considered

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“Qualified” provided the necessary information is set forth in an appropriate document within the file, including a valid CMN. “Wet ink” CMNs are required only where the applicable payor does not accept facsimile CMNs as a basis for billing patient services.

          (d) For purposes of the Purchase Price Adjustment only, a patient file being served by the Seller Entity or by Braden is defined as an “Oxygen Qualified File” only if all of the requirements of 3.2(c) are met, and the file represents a medically necessary and appropriate presently active rental of an oxygen concentrator or liquid oxygen system and related oxygen equipment and supplies listed on Schedule 4.11(b) as producing insurance-paid reimbursement at a monthly allowable rental rate in an amount equal to no less than One Hundred and Forty Five Dollars ($145.00) per month at rental rates for each Billing Cycle specified in 3.2(c)(iv).

          (e) For purposes of the Purchase Price Adjustment only, a patient file being served by the Seller Entity or by Braden is defined as a “Sleep Qualified File” only if all of the requirements of 3.2(c) are met, and the file represents a medically necessary and appropriately documented presently active rental of a sleep blower unit device for each Billing Cycle specified in 3.2(c)(iv).

          (f) On or before the date that is Ninety (90) days after the Closing Date, Braden shall provide a report of Qualified Files listed on Schedule 4.11(b) that have not conformed to the requirements of Section 3.2(c), together with a brief identification of the deficient paperwork. Braden agrees to provide Sellers with an updated report on a monthly basis thereafter until Braden elects to provide notice of a claim to adjust the Purchase Price under this Section 3.2, which claim may be made at any time before the Final Disbursement Date. For each such claimed adjustment, Braden shall provide a specific reason or reasons it has determined that such file fails to conform to the requirements of Section 3.2 (c).

          (g) Notwithstanding the foregoing, if Braden establishes that the failure of a file to meet the requirements of Section 3.2 (c) is the result of a separate and independent breach of a specific representation or warranty in this Agreement, Braden may pursue its remedies for that file under the indemnification provisions of Article IX upon proof of actual losses, which shall not be determined by reference to or limted by the agreed adjustments to Purchase Price for Oxygen Qualified Files and Sleep Qualified Files. For any file that Braden determines it will not accept a Purchase Price adjustment as the sole recourse for such failure, Braden shall notify Sellers to that effect no later than sixty (60) days after determining that the patient file is not an “Oxygen Qualified File” or a “Sleep Qualified File” or on the Deferred Disbursement Date, whichever is later. Braden shall be bound by that election and shall not be entitled to any Purchase Price adjustment for that file. If Braden agrees to accept an adjustment of the Purchase Price pursuant to this Section 3.2 and Seller agrees to the adjustment, such adjustment shall be the sole recourse under this Agreement for losses suffered as the result of the failure of any patient file to meet the definitions of a Qualified File under Section 3.2(c).

          (h) Braden is entitled to the enhanced Purchase Price adjustments for Qualified Files as set forth in Section 3.2 (b)(iii) or for any file that meets the criteria in Section 3.2(c) at any time after the Closing Date through the efforts of Braden if: (i) any employee who was actively employed by Seller Entity as of May 1, 2009 fails to continue employment with Braden following the Closing Date, and (ii) the employee enters into any direct or indirect

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relationship with a competitor of Braden’s following the Closing Date and before the applicable disbursement date, and (iii) active rentals scheduled by Seller Entity on Schedule 4.11 (a) are transferred from service with Braden to service with such competitor of Braden. A direct or indirect relationship shall include, but is not limited to, any relationship defined as a financial relationship under the Stark Law. For purposes of establishing a causal connection between the acts of the employee and the transfer of active rentals to a competitor, Braden may proffer evidence of: (i) specific acts by the employee or persons associated with the employee, or (ii) a pattern of patients who transfer service as the result of physician orders, physician recommendations, or patient requests that are unexplained, inadequately explained, or commercially unusual, or (iii) patient-verified affidavits concerning the reason for the transfer, or (iv) other reliable evidence, or (v) a combination of any of the above. The Enhanced Purchase Price Adjustment shall apply only to those files that are transferred or discontinued as the result of the pattern of activity addressed in this Section 3.2(h); provided however, that if Braden provides credible evidence of a relationship and a pattern of transferral of patient files, then the Enhanced Purchase Price Adjustment shall apply to all similarly discontinued or transferred files.

      3.3. Disputes Regarding Final Purchase Price

     If Seller disputes the calculation of the Purchase Price, Sellers shall give timely written notice to Braden no later than thirty (30) calendar days following the Final Disbursement Date (the “Dispute Notice”), which Dispute Notice shall specify the reasons for such disagreement, the amount of any adjustments that are necessary in Sellers’ judgment for the computation of the Purchase Price and the basis for Sellers’ suggested adjustment. If the parties resolve their differences over the disputed items in accordance with the foregoing procedures, the final determination of the Purchase Price as determined by the preceding sentence shall be the amount agreed upon. If Sellers and Braden are unable to resolve the disputed matters outstanding within the thirty (30) day period following Braden’s receipt of the Dispute Notice, all disputed matters not so resolved shall be submitted to arbitration in accordance with the provisions of Article X of this Agreement.

      3.4. Allocation of Consideration

     Braden shall allocate the Purchase Price (and all other capital costs) among the Purchased Assets applying the Purchase Price to goodwill to the extent allowable consistent with generally accepted accounting principles and deliver a written copy thereof to Sellers within ninety-five (95) days of the Closing Date. Such allocation shall be made in accordance with the provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and shall be binding upon Braden and Sellers for all purposes (including financial accounting purposes, financial and regulatory reporting purposes and Tax purposes). Each of the parties agrees to file appropriate documents with the IRS under Section 1060 of the Code reflecting the foregoing. Notwithstanding any allocation of the Purchase Price made by the parties hereto pursuant to this Agreement or any other agreement delivered pursuant hereto, Braden shall be entitled to recover the full amount of any damages incurred from any breach of the non-compete agreement by and among Braden and the Sellers (the “Non-Compete Agreement”) attached hereto as Exhibit A in

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accordance with the terms therein without reference to the amount allocated thereto by the parties.

      3.5. Transfer Taxes

     Braden hereby waives compliance by the Sellers with the bulk sales laws of any country or state, it being expressly understood and agreed that this Section 3.5 shall not be deemed an admission or acknowledgment that any such law is applicable to the transactions contemplated by this Agreement. Sellers shall be solely responsible for payment of any bulk sales taxes, if any, that are assessed against Sellers or Braden, in addition to any California State taxes due as the result of sales and operations prior to the Closing Date. The parties shall cooperate with each other to the extent reasonably requested and legally permitted to minimize any such Sales Tax.

ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     In order to induce Braden to enter into this Agreement, the Sellers jointly and severally make the following representations and warranties to Braden, which will be true and complete as written on the Closing Date, subject to the exceptions as are specifically disclosed in the disclosure schedules delivered by the Sellers on or before the Closing Date:

      4.1. Organization and Qualification

The Seller Entity is a corporation duly organized, validly existing and, except as set forth in Schedule 4.1, in good standing under the laws of the jurisdiction of its incorporation. The Seller Entity has all requisite corporate power and corporate authority to own, lease and operate its properties and to carry on its business as now being conducted . The Seller Entity is duly qualified to conduct its affairs in each jurisdiction in which it operates, except where such nonqualification would not reasonably be expected to have a material adverse effect. The Seller Entity has delivered to Braden complete and correct copies of its Articles of Incorporation and Bylaws, or applicable governing documents, in each case as amended to the date hereof.

      4.2. Subsidiaries

With the exception of the subsidiary or Affiliate relationship between any corporations constituting the Seller Entity, the Seller Entity does not hold, directly or indirectly, any equity, partnership, joint venture, membership or other interest in or control over any Person or legally cognizable entity.

      4.3. Authority Relative to this Agreement

          (a) The Seller Entity has all requisite right, corporate power and corporate authority to execute, enter into and deliver this Agreement and any agreement or document contemplated hereby, and to consummate the transactions contemplated hereby. The Shareholders have full right, legal authority, and legal power to enter into this Agreement and each agreement, document and instrument to be executed and delivered by or on behalf of him or her pursuant to this Agreement and to carry out the transactions contemplated hereby and thereby.

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          (b) The execution, delivery and performance by the Seller Entity of this Agreement and each agreement, document and instrument contemplated hereby have been duly authorized by all necessary action of the Seller Entity and the Shareholders.

          (c) This Agreement, and all agreements or documents contemplated hereby, have been duly executed and delivered by the Seller Entity and the Shareholders and the obligations imposed on the Seller Entity and the Shareholders by this Agreement, or by any agreement or document contemplated hereby, constitute the valid and binding obligations and agreements of the Seller Entity and the Shareholders, respectively, enforceable against the Seller Entity or the Shareholders, as the case may be, in accordance with its terms, except: (i) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors rights; and (ii) that the remedy of specific performance, and injunctive and other forms of equitable relief, may be subject to equitable defenses and to the discretion of the court before which any proceeding therefore may be brought.

          (d) None of the Shareholders has exercised or has the right to exercise any shareholder dissenter rights as provided under applicable state law and none of the Shareholders has any claim against Braden in connection with the transactions contemplated by this Agreement and the Exhibits hereto.

      4.4. Compliance of Transaction With Laws and Other Instruments

The execution, delivery and performance by Sellers of this Agreement, and the other agreements and documents contemplated hereby and the performance and consummation of the transactions contemplated hereby by Sellers:

          (a) do not require on behalf of the Seller Entity or the Shareholders any approval, consent, order or authorization of or registration, declaration or filing with, any governmental agency, court, or other authority federal, state, local or otherwise (a “ Governmental Authority ”) which has not been obtained and which is not in full force and effect as of the date hereof;

          (b) does not and will not conflict with, or result in a breach or violation of any provision of the Articles of Incorporation or Bylaws, or any applicable governing documents, of the Sellers;

          (c) does not and will not result in a violation of any law, regulation, statute, ordinance, rule, judgment, writ, injunction, license, permit, order or decree of any Governmental Authority to which the Seller Entity, the Shareholders or the Purchased Assets are subject, the effect of which would be adverse to the Purchased Assets or require the Sellers to obtain any approval, consent or waiver of, or make any filing with, any Person (governmental or otherwise) that has not been obtained or made;

          (d) does not and will not result in the creation or imposition of any Lien on any of the Purchased Assets; and

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          (e) except as indicated on Schedule 4.4 , does not and will not require the approval, consent or waiver of, or filing with any party to, violate or conflict with or result in a breach of, or constitute a default or acceleration of or give rise to a right of termination (or an event which with notice or lapse of time or both would become a default) under, any provision of any contract, indenture, mortgage, lease, agreement or other instrument directly or indirectly associated with or related to the Purchased Assets and to which the Seller Entity or the Shareholders are a party or by which the Purchased Assets or the Seller Entity is subject.

      4.5. Title to Purchased Assets; Liens

          (a) Except as specifically disclosed in Schedule 4.5(a), the Sellers have good and (if applicable) marketable title to all of the Purchased Assets. The Sellers will sell and transfer the Purchased Assets to Braden free and clear of all Liens, including, without limitation, Liens for Taxes. Except as set forth on Schedule 4.5(a), none of the Purchased Assets is subject to any Liens except for (i) Liens for Taxes not yet due and payable and (ii) Liens arising by operation of law which could not be expected to materially affect the value or use of the Purchased Assets. Except as set forth on Schedule 4.5(a) , the Purchased Assets are subject to no restrictions with respect to the transferability thereof and the Purchased Assets may be lawfully transferred to Braden without the consent of any third party.

          (b) Condition of Purchased Assets . The Purchased Assets are in good and lawful working condition, excepting ordinary wear and tear.

          (c) Customer Information . Except as disclosed on Schedule 4.5(c) , the Seller Entity has not sold or otherwise released for distribution any of its customer files and other customer information relating to any of the current customers of the Seller Entity including, but not limited to, patient lists, marketing and pricing information and customer and referral source information (the “ Customer Information ”), and transfer of the Customer Information by Seller Entity to Braden does not constitute a violation of the Seller Entity’s obligations to any Person. To the Seller’s Knowledge, and except as set forth on Schedule 4.5(c), no Person other than the Seller Entity possesses any claims or rights with respect to use of the Customer Information, as it has been maintained in confidence and in accordance with applicable state laws and the Health Insurance Portability and Accountability Act of 1996 or regulations thereunder, (known as “ HIPAA ”).

      4.6. Tax Matters

          (a) All Taxes owed by Seller Entity (whether or not shown on any Return) have been paid in full when due and all amounts required to be withheld by Seller Entity as of the Closing Date for Taxes or otherwise, have been withheld and paid when due or will be paid when due to the appropriate agency or authority or which are not yet delinquent or are being contested in good faith.

          (b) Except as set forth on Schedule 4.6, neither the Internal Revenue Service nor any other governmental authority is now asserting or, to the Knowledge of Sellers, threatening to assert against the Seller Entity any deficiency or claim for additional Taxes. No claim has ever been made by an authority in a jurisdiction where the Seller Entity does not file

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reports and returns that the Seller Entity is or may be subject to taxation by that jurisdictio


 
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