Exhibit 10.2
Membership Interests Purchase Agreement
by
Addus HealthCare, Inc. (“Buyer”),
American Health Companies, LLC (“Seller Parent”),
HHH Newco Holdings, LLC (“Seller”),
and
each Acquired Company
(as defined herein)
Dated
June 28, 2023
tABLE OF CONTENTS
1. Definitions and Usage 1
1.1 Definitions 1
1.2 Usage. 14
2. Sale and Transfer of Membership Interests; Closing 16
2.1 Membership Interests 16
2.2 Purchase Price 16
2.3 Closing Purchase Price Adjustments 16
2.4 Post-Closing Purchase Price Adjustment 17
2.5 Closing 19
2.6 Closing Obligations 19
2.7 Withholding 22
3. Representations and Warranties of SelleR Parent and Seller 22
3.1 Corporate Organization 22
3.2 Capitalization/ Ownership of Membership Interests 22
3.3 Authority; No Violation 23
3.4 Consents and Approvals 24
3.5 Financial Statements 24
3.6 Brokers or Finders 25
3.7 Absence of Certain Changes or Events 25
3.8 Condition and Sufficiency of Assets 27
3.9 Inventory 27
3.10 Legal Proceedings 27
3.11 Taxes and Tax Returns 28
3.12 Employees 30
3.13 Employee Benefits 31
3.14 Compliance with Applicable Law 33
3.15 Certain Contracts 34
3.16 Real Estate 36
3.17 Undisclosed Liabilities; Indebtedness 37
3.18 Insurance 37
3.19 Intellectual Property 38
3.20 Transactions with Related Persons 39
3.21 Environmental Liability 39
3.22 Healthcare Law Matters 40
3.23 Directors and Officers 44
3.24 Material Contracted Care Partners, Suppliers and Payors 44
3.25 No Further Representations 45
4. Representations and Warranties of Buyer 45
4.1 Organization and Good Standing 46
4.2 Enforceability and Authority; No Conflict 46
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4.3 Investment Intent 46
4.4 Certain Proceedings 46
4.5 Brokers or Finders 47
4.6 Due Diligence 47
4.7 Non-reliance of Buyer 47
4.8 Sufficiency of Funds 47
4.9 R&W Binder 47
5. Covenants of Seller Prior to Closing Date 48
5.1 Access and Investigation 48
5.2 Operation of the Businesses of the Acquired Companies 48
5.3 Filings and Notifications; Cooperation 48
5.4 Exclusive Dealing 49
5.5 Financial Information 49
5.6 401(k) Plan 49
6. Covenants of Buyer Prior to Closing Date 49
6.1 Filings and Notifications; Cooperation 49
6.2 R&W Binder 50
7. Post-Closing Covenants 51
7.1 Cooperation and Proceedings; Access to Records 51
7.2 Insurance 51
7.3 Confidentiality 51
7.4 Exculpation, Indemnification, D&O Insurance 52
7.5 Public Announcements 53
7.6 COBRA Liability 53
8. Conditions Precedent to Buyer’s Obligation to Close 54
8.1 Accuracy of Seller Parent’s and Seller’s Representations 54
8.2 Seller Parent’s and Seller’s Performance 54
8.3 Bring Down Certificate 54
8.4 Consents 54
8.5 Governmental Authorizations 54
8.6 No Legal Prohibition 54
8.7 Closing Deliveries 54
8.8 Frustration of Closing Conditions 55
9. Conditions Precedent to Seller ParenT’s and Seller’s Obligations to Close 55
9.1 Accuracy of Buyer’s Representations 55
9.2 Buyer’s Performance 55
9.3 Bring Down Certificate 55
9.4 Consents 55
9.5 No Legal Prohibition 55
9.6 Closing Deliveries 55
9.7 Frustration of Closing Conditions 55
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10. Termination 56
10.1 Termination Events 56
10.2 Effect of Termination 56
11. SURVIVAL; Remedies 56
11.1 Survival of Representations, Warranties and Covenants 56
11.2 Remedies; Specific Performance. 57
11.3 Exclusive Remedy 58
12. Tax Matters 58
12.1 General 58
13. Miscellaneous 60
13.1 Expenses 60
13.2 Seller’s Disclosure Statement 60
13.3 Further Assurance 60
13.4 Entire Agreement 61
13.5 Modification 61
13.6 Assignments and Successors 61
13.7 No Third Party Rights 61
13.8 Governing Law 61
13.9 Jurisdiction; Service of Process 61
13.10 Waiver of Jury Trail 62
13.11 Attorneys’ Fees 62
13.12 Enforcement of Agreement 62
13.13 No Waiver 62
13.14 Notices 62
13.15 Post-Closing Representation of Seller 63
13.16 Attorney Client Privilege Carve Out 64
13.17 Severability 64
13.18 Time of Essence 64
13.19 Counterparts and Electronic Signature 64
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Membership Interests Purchase Agreement
This Membership Interests Purchase Agreement (“Agreement”) is made as of June 28, 2023 by Addus HealthCare, Inc., an Illinois corporation (“Buyer”), American Health Companies, LLC, a Tennessee limited liability company (“Seller Parent”), HHH Newco Holding, LLC, a Michigan limited liability company (“Seller”), and each of the Acquired Companies (defined below). Buyer, Seller Parent, Seller, and each Acquired Company are sometimes referred to herein, collectively, as the “Parties” and, individually, as a “Party.”
RECITALS
WHEREAS, Seller Parent owns directly all of the issued and outstanding membership interests in the Company (the “Membership Interests”);
WHEREAS, the Company provides home health and hospice services in Tennessee through one or more direct or indirect Subsidiaries (the “Business”);
WHEREAS, prior to the Closing and pursuant to the Pre-Closing Reorganization, Seller Parent shall contribute the Membership Interests of the Company to Seller such that at Closing, Seller shall own directly all of the Membership Interests of the Company; and
WHEREAS, Seller and Seller Parent desire to sell, and Buyer desires to purchase from Seller the Business via an acquisition of all of the Membership Interests.
The Parties, intending to be legally bound, agree as follows:
For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1.1:
“401(k) Plan”—as defined in Section 5.6.
“Acquired Companies”—means the Company and its subsidiaries, Homecare, LLC, a Tennessee limited liability company; Tennessee Valley Home Care, LLC (d/b/a Tennessee Quality Care – Home Health), a Tennessee limited liability company; and Tri-County Home Health and Hospice, LLC (d/b/a Tennessee Quality Care - Hospice), a Tennessee limited liability company. “Acquired Company” means any one of the Acquired Companies.
“Adjusted Closing Cash Amount” – a net amount equal to (A) the Gross Purchase Price, minus (B) the Final Closing Debt Amount, minus (C) the Final Seller’s Expenses Amount, plus (D) the Final Cash on Hand Amount, plus (E) the excess, if any, of the amount of Final Net Working Capital Amount over the amount of the Net Working Capital Target, minus (F) the excess, if any, of the amount of the Net Working Capital Target over the amount of the Final Net Working Capital Amount.
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“Affiliate” —of any Person means any Person directly or indirectly controlling, controlled by or under common control with such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of at least ten percent (10%) of the voting securities of such other Person, by contract or otherwise.
“Agreement”—as defined in the first paragraph of this Agreement.
“ARP Funds” means all stimulus funds received by any Acquired Company prior to the Closing pursuant to the American Rescue Plan Act.
“Business Day”—any day other than (a) Saturday or Sunday or (b) any other day on which national banks in Nashville, Tennessee, are generally permitted or required to be closed.
“Buyer”—as defined in the first paragraph of this Agreement.
“Buyer Prepared Returns”—as defined in Section 12.1(a).
“Buyer’s Closing Documents”—the documents required to be executed or delivered by Buyer at the Closing pursuant to Section 2.6(b).
“Cash on Hand” – all cash and cash equivalents (including marketable securities and short-term investments) held by the Acquired Companies as of the measurement date, including the amounts of any received but uncleared checks, drafts and wires received by the Acquired Companies or others on their behalf prior to such time, less the amount of any Restricted Cash.
“Closing”—as defined in Section 2.3.
“Closing Balance Sheet”—as defined in Section 2.4(a).
“Closing Cash Amount”—as defined in Section 2.2(b).
“Closing Date”—the date on which the Closing occurs.
“Closing Documents”—as defined in Section 11.1.
“Closing Statement”— as defined in Section 2.4(a).
“Code”—the Internal Revenue Code of 1986, as amended.
“Company”— means American Home Care, LLC, a Tennessee limited liability company.
“Company Benefit Plan” – as defined in Section 3.13(a).
“Company ERISA Affiliate” – as defined in Section 3.13(a).
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“Company Intellectual Property”—the Owned Intellectual Property, Intellectual Property subject to an IP Licenses and any other Intellectual Property used or held for use by the Acquired Companies or necessary for the operation of the business as currently conducted.
“Company Material Contract” —as defined in Section 3.15(a).
“Company Systems”—as defined in Section 3.19(c).
“Confidential Information”—as defined in Section 7.3(a).
“Consent”—any approval, consent, ratification, grant, waiver, exemption or other authorization.
“Contemplated Transactions”—the transactions contemplated by this Agreement.
“Contract”—any agreement, contract, lease, license or other legally binding instrument or obligation (whether written or oral).
“COVID-19 Assistance” — as defined in Section 3.17(b).
“Data Privacy and Security Laws” — all Legal Requirements governing, regulating, or protecting the privacy, security, use, disclosure, maintenance or transmission of Personal Information.
“Debt”— with respect to any Person without duplication, and solely to the extent not included in the calculation of Net Working Capital, (i) all obligations of such Person for borrowed money, whether current or long-term, secured or unsecured, (ii) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (iii) all deferred obligations of such Person to make payment for all or part of the purchase price of property or services, whether accrued, absolute, contingent, unliquidated or otherwise, known or unknown, whether due or to become due (including the maximum potential amount payable under notes, earn-out payments, change in control payments, or similar payments), (iv) all obligations under leases which shall have been or should be, in accordance with GAAP, recorded as finance or synthetic leases in respect of which such Person is liable as lessee, (v) any obligation of such Person in respect of bankers’ acceptances, performance bonds or letters of credit (whether drawn or undrawn), (vi) any obligations secured by Encumbrances on property acquired by such Person, whether or not such obligations were assumed by such Person at the time of acquisition of such property, (vii) obligations under any interest rate, currency or other hedging or swap agreement, (viii) the Pre-Closing Tax Accrual Amount, (ix) any obligation set forth on Section 1.1 of the Seller’s Disclosure Statement, (x) all obligations of a type referred to in clauses (i) through (viii) above which are directly or indirectly guaranteed by such Person or which it has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss, and (xi) interest, principal, prepayment penalty, fees, redemption costs, or expenses, to the extent due or owing in respect of those items listed in clauses (i) through (x) above, whether resulting from their payment or discharge or otherwise.
“Debt Payoff Letters”—as defined in Section 2.6(a)(vi).
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“Effective Time” — 12:01 a.m. central time on the Closing Date.
“Encumbrance”—any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal, or similar restriction, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
“End Date”—as defined in Section 10.1(d).
“Environment”—soil, land surface and subsurface strata, surface waters (including navigable and non-navigable inland and ocean waters), ground waters, drinking water supply, stream sediments, ambient air, indoor air, plant and animal life, and any other environmental medium or natural resource.
“Environmental Law”—any Legal Requirement that provides for or relates to: (i) the use of any Hazardous Material, the Release or Threat of Release of Hazardous Material, violation of discharge or emission limits or other prohibitions, or any Hazardous Activity or any activity, such as resource extraction or construction, that could have a significant effect on the Environment; (ii) preventing or reducing to acceptable levels the Release of Hazardous Material into the Environment; (iii) reducing the quantities, or minimizing or controlling the hazardous characteristics, of Hazardous Material that are generated; (iv) reducing the risks involved in the transportation of Hazardous Material; (v) the cleanup of Hazardous Material that has been Released, preventing its Release, or addressing the Threat of Release, or paying the costs of such actions; or (vi) making a Person compensate any other Person for damage done to its health or property or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets or resources.
“Equity Security”—in respect of any Person, (a) any capital stock or similar security, (b) any security convertible into or exchangeable for any security described in clause (a), (c) any option, warrant, or other right to purchase or otherwise acquire any security described in clauses (a), (b), or (c), and (d) any “equity security” within the meaning of the Exchange Act.
“ERISA”—the Employee Retirement Income Security Act of 1974, as amended.
“Estimated Closing Balance Sheet”—as defined in Section 2.3(a).
“Estimated Closing Debt Amount”—as defined in Section 2.3(a).
“Estimated Closing Statement”—as defined in Section 2.3(a).
“Estimated Net Working Capital Amount”—as defined in Section 2.3(a).
“Estimated Seller’s Expenses Amount”—as defined in Section 2.3(a).
“Exchange Act”—the Securities Exchange Act of 1934, as amended.
“Expense Payoff Letters”—as defined in Section 2.6(a)(vii).
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“Final Cash on Hand Amount”— Cash on Hand of the Acquired Companies as of the Effective Time as finally determined pursuant to Section 2.4.
“Final Closing Debt Amount”— Debt of the Acquired Companies as of the Effective Time as finally determined pursuant to Section 2.4.
“Final Net Working Capital Amount”— Net Working Capital as of the Effective Time as finally determined pursuant to Section 2.4.
“Final Seller’s Expenses Amount”— Seller’s Expenses as of the Effective Time as finally determined pursuant to Section 2.4.
“Financial Statements” – as defined in Section 3.5.
“Fraud”—actual (knowing, and not constructive) and intentional fraud with respect to the making of a representation or warranty set forth in Article 3 or Article 4. For the avoidance of doubt, the term “Fraud” does not include any claim for equitable fraud, promissory fraud, unfair dealings fraud, or any other tort (including a claim for fraud) based solely on negligence, gross negligence or reckless conduct.
“GAAP”—generally accepted accounting principles in the United States as in effect from time to time, as historically applied by the Acquired Companies.
“Governmental Authorization”—any (a) Consent, license, registration, certificate, grant, waiver, exemption, provider or supplier number, or permit issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.
“Governmental Body”—any:
For the avoidance of doubt, and without limitation, “Governmental Body” includes Medicare administrative contractors, zone program integrity contractors, unified program integrity contractors, supplemental medical review contractors and the like.
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“Government Program” means any United States federal, state or local health care or reimbursement program administered by a Governmental Body, including, without limitation, any “Federal Health Care Program” as defined in 42 U.S.C. §1320a-7b(f), including Medicare, state Medicaid programs, state CHIP programs, TRICARE and similar or successor programs with or for the benefit of, or sponsored, in whole or in part, by any Governmental Body.
“Gross Purchase Price” — as defined in Section 2.2(a).
“Hazardous Activity”— the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use of Hazardous Material and any other act, business, operation, or activity that increases the danger, or poses a risk of harm, to the Environment.
“Hazardous Material”— any substance, material, or waste that is or will foreseeably be regulated by any Governmental Body, including any material, substance, or waste that is defined or classified as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “pollutant,” “restricted hazardous waste,” “contaminant,” “toxic waste,” “pollutant,” or “toxic substance” under any provision of Environmental Law, including petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde, per- and polyfluoroalkyl substances or polychlorinated biphenyls.
“Healthcare Laws”—means all Legal Requirements that govern, regulate, restrict or relate to hospice, home health, and private duty nursing, prescribing or dispensing medicines or controlled substances, healthcare referrals, billing and submission of healthcare claims, conditions of participation and conditions of payment in Government Programs, fraudulent, abusive or unlawful practices in connection with the provision of healthcare items or services or the billing for or claims for reimbursement for such items or services, coding, coverage, reimbursement, claims submission, billing and collections, insurance fraud, the administration of health care claims or benefits, processing or payment for health care services or treatment, healthcare claims processing, medical necessity, medical privacy and security, patient confidentiality, confidentiality of health records, patient inducements, patient referrals, anti-kickback, anti-referral, fee-splitting, false claims, healthcare advertising and marketing, medical waste requirements, professional conduct, informed consent, quality and safety, standards of care, credentialing, licensure, and certification, or other healthcare-related matters, including HIPAA and state Legal Requirements governing the confidentiality or security of individual health information, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq. (the Medicare statute), including the Ethics in Patient Referrals Act, as amended, or Stark Law; Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. (the Medicaid statute), including, without limitation, Section 1128J(d) thereof; TRICARE, 10 U.S.C. § 1071 et seq.; the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. § 1320a 7b(b); the Beneficiary Inducement Statute, 42 U.S.C. § 1320a 7a(a)(5); the False Claims Act, as amended, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801 et seq.; the Anti Kickback Act of 1986, 41 U.S.C. §§ 51 58; the Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a 7a and 1320a 7b; the Exclusion Laws, 42 U.S.C. § 1320a 7; the Federal Controlled Substances Act, 21 U.S.C. § 801 et seq.; criminal false claim statutes, e.g., 18 U.S.C. § 1001, 42 U.S.C. § 1320a 7b(a); the Deficit Reduction Act of 2005, P.L. 109 171, 120 Stat. 4; the Affordable Care Act, P.L. 111 148 and 111 152; the CARES Act; state corporate practice of medicine Legal Requirements, all applicable licensing, survey, accreditation, and certificate of
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need Legal Requirements; all applicable regulations, rules, guidance, policies, ordinances and orders promulgated thereunder; and any similar state and local statutes, regulations, rules, guidance, policies, ordinances, orders or other Legal Requirements that address the subject matter of the foregoing.
“Healthcare Permits”—as defined in Section 3.22(b).
“HIPAA”—the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations set forth at 45 C.F.R. Parts 160, 162 and 164.
“HSR Act”—the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Intellectual Property” — any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) all patent applications, and all patents issuing thereon, and all inventions and improvements disclosed therein (b) trademarks, service marks, trade names, trade dress, corporate names, and other indicia of source, including all registrations, applications, and renewals in connection therewith, and all goodwill associated with the foregoing, (c) copyrights and works of authorship (whether or not copyrightable), rights of publicity, and all applications, registrations, and renewals in connection therewith, (d) domain names, social media accounts or user names (including “handles”) (whether or not they are trademarks), phone numbers, registrations for any of the foregoing, (e) trade secrets, know-how, databases, processes, techniques, protocols and confidential information, (f) any and all other intellectual property rights and/or proprietary rights in any form or medium known or later devised, and (g) all copies and tangible embodiments, goodwill, rights of priority and protection of interests therein, and rights to recover for past, present and future infringement associated with any of the foregoing.
“Interim Balance Sheet Date” — as defined in Section 3.5.
“Interim Financial Statements” — as defined in Section 3.5.
“IP Licenses” — collectively (1) all Contracts to which any member of the Acquired Companies is a party and pursuant to which any member of Acquired Companies is authorized to use any third-party Intellectual Property or pursuant to which any Person is authorized to use, exploit, or is granted a license or any other rights to any Owned Intellectual Property, and (2) any Contracts pursuant to which any member of the Acquired Companies has agreed to any transfer of any Owned Intellectual Property by any member of the Acquired Companies or restriction of that member of the Acquired Companies’ right to use or enforce any Owned Intellectual Property.
“IRCA” — as defined in Section 3.12(d).
“IRS”—the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.
“Key Employee”— Nichole McClain and Kelly Nichols.
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“Knowledge”— A Person will be deemed to have Knowledge of a particular fact or other matter if that Person has actual knowledge of that fact or matter, or would reasonably be expected to be aware of that fact or matter following a reasonable inquiry with that Person’s direct reports concerning the factor or matter at issue.
“Knowledge of Seller” or “Knowledge of the Company”—Knowledge of Michael Bailey, Jeff Bogle, Robin Bradley or Philip Clark or the Knowledge of Laura Carrico, Barry Shermer, Jonathan Cooper, Nichole McClain and Kelly Nichols solely with respect to the subject matters reasonably associated with their job responsibilities.
“Lease”—as defined in Section 3.16(a).
“Leased Real Property” —as defined in Section 3.16(b).
“Legal Requirement”—any constitution, law, ordinance, principle of common law, code, rule, regulation, statute, act, treaty, directive, ordinance, decree or order of general applicability or other legally enforceable requirement, including Data Privacy and Security Laws, including as set forth in guidance, manuals, and policy, of any Governmental Body, including rules and regulations promulgated thereunder.
“Lookback Period”—six (6) years prior to the date hereof.
“Loss”—any cost, loss, liability, obligation, claim, cause of action, damage, deficiency, expense (including reasonable costs of investigation and defense and reasonable attorneys’ fees and expenses), Tax, fine, penalty, judgment, award or assessment.
“Management Agreements”—means that certain Management Agreement, dated effective as of January 1, 2021, by and between Tri-Country Home Health and Hospice, LLC and American Health Partners Management, LLC and that certain Management Agreement, dated effective as of January 1, 2021, by and between Tennessee Valley Home Care, LLC and American Health Partners Management, LLC.
“Material Adverse Effect”—with respect to an Acquired Company, shall mean any change, effect, event, circumstance or development that, individually or when taken together with all other such similar or related changes, effects, events, circumstances or developments (x) has had, or would reasonably be expected to have, a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Acquired Companies, taken as a whole, or (y) has, or would reasonably be expected to have, a material adverse effect on the ability of Seller, and/or an Acquired Company to consummate the transactions contemplated hereby, excluding in each case the impact of any changes, effects, events, circumstances or developments arising from: (i) general economic, capital or financial markets or industry conditions (including changes in interest rates or reimbursement rates or bank or other financial institution failures and responses of Governmental Bodies to such events); (ii) acts of God, natural disasters, calamities, national or international political or social conditions, including the engagement by any country in hostility (whether commenced before, on or after the date hereof, and whether or not pursuant to the declaration of a national emergency or war), or the occurrence of a military or terrorist attack; (iii) the impact of epidemics, pandemics and other similar health emergencies, including COVID-19, and responses of health officials and Governmental Bodies to
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such events; (iv) changes in or reinterpretations of applicable Legal Requirements, regulatory, political, economic or business conditions, or GAAP (or, in each case, any interpretation thereof) after the date hereof; (v) actions that Seller can demonstrate resulted from Buyer unreasonably withholding, delaying or conditioning its consent with respect to any action requiring Buyer’s consent hereunder; (vii) any publicly available statement made by Buyer or any of its Related Persons or Representatives concerning the Acquired Companies or otherwise relating to the Contemplated Transactions; (viii) the announcement, pendency or consummation of the Contemplated Transactions or (ix) any failure, in and of itself, by the Acquired Companies to meet any budgets, projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement.
“Material Consents”—as defined in Section 8.4.
“Membership Interests”—as defined in the Recitals of this Agreement.
“Net Working Capital”— the current assets (excluding Cash on Hand, but including accounts receivable, prepaid expenses, and inventory) of the Acquired Companies minus the current liabilities (including accounts payable, accrued payroll benefits, and accrued expenses, but excluding intercompany balances, accrued interest, unearned revenue, and accrued taxes) of the Acquired Companies, in each case calculated in a manner consistent with the Acquired Companies’ past practices in preparing its financial statements and the assumptions, principles and procedures set forth on Exhibit A of this Agreement, and in accordance with GAAP to the extent not inconsistent with the assumptions, principles and procedures set forth on Exhibit A. Exhibit A sets forth an example, along with the assumptions, principles and procedures relating to the adjustments contained therein, of how Net Working Capital would have been calculated as of the end of the fiscal period of the Acquired Companies set forth therein. Notwithstanding the foregoing, Net Working Capital shall not include any amount or item included in the calculation of Debt.
“Net Working Capital Target” — means zero dollars ($0.00).
“Objection Notice” — as defined in Section 2.4(b).
“Objection Notice Period” — as defined in Section 2.4(b).
“Order”—any order, writ, stipulation, consent, injunction, judgment, decree, ruling, assessment, determination or arbitration award of any Governmental Body or arbitrator.
“Ordinary Course of Business”—an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business if that action is generally consistent with the past practices of such Person and is taken in the ordinary course of its operations.
“Organizational Documents”—(a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles of organization and limited liability company agreement, operating agreement, or like agreement of a limited liability company; (c) the partnership agreement and any statement of partnership of a general partnership; (d) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (e) any charter or
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agreement or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (f) any amendment to or restatement of any of the foregoing.
“Owned Intellectual Property”—as defined in Section 3.19(a).
“Permitted Encumbrances”—(a) Encumbrances for Taxes and other governmental charges and assessments that are not yet due and payable; (b) Encumbrances of carriers, warehousemen, mechanics, and materialmen and other like Encumbrances arising in the Ordinary Course of Business (provided lien statements have not been filed or such Encumbrances otherwise perfected); and (c) statutory Encumbrances in favor of lessors arising in connection with any property leased to any Acquired Company.
“Person”—an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture, other entity, or a Governmental Body.
“Personal Information” — any information processed, collected or otherwise used or disclosed by the Acquired Companies (or any third party on behalf of the Acquired Companies) that identifies a specific natural person, or when used in combination with other data elements is capable of identifying a specific natural person, including, without limitation: (a) a natural person’s first and last name, in combination with a (i) social security number or tax identification number, or (ii) credit card number, bank account information and other financial account information, or financial customer or account numbers, account access codes and passwords; (b) Protected Health Information as defined under HIPAA, and (c) any information pertaining to an individual that is regulated or protected by one or more Legal Requirements, including any Data Privacy and Security Laws.
“Pre-Closing Income Tax Return”—as defined in Section 12.1(a).
“Pre-Closing Non-Income Tax Return”—as defined in Section 12.1(a).
“Pre-Closing Reorganization”—means (i) the contribution of the Membership Interests to Seller by Seller Parent, (ii) the distribution by Seller Parent of Seller to Seller Parent’s indirect sole member, MFO AHP LLC, a Michigan limited liability company, and (iii) the distribution, assignment, or other transfer of each of Seller Parent, Seller, or certain of the Acquired Companies’ interests in Nova Home Care, LLC to Michigan Quality Care Home Health, LLC, a Michigan limited liability company, or another affiliate of Mark T. Mitchell.
“Pre-Closing Straddle Period” means the portion of the Straddle Period that ends at the end of the day on the Closing Date.
“Pre-Closing Tax Accrual Amount” means the aggregate liability for unpaid Taxes of the Acquired Companies attributable to any Pre-Closing Tax Period (calculated, in the case of Straddle Period, in accordance with Section 12.1(b)), determined on a jurisdiction-by-jurisdiction basis with zero dollars ($0) being the lowest amount for a jurisdiction.
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion of any Straddle Period ending on and including the Closing Date.
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“Privacy Consents”—as defined in Section 3.22(k).
“Proceeding”—any action, arbitration, mediation, audit, (including any additional development request and any audit or review conducted by any zone program integrity contractor, unified program integrity contractor, supplemental medical review contractor or similar contractor or agent conducted by or on behalf of a Governmental Body), hearing, investigation, complaint, charge, consent decree, appeal, adjustment, challenge, review, notice of violation, citation, summons subpoena, inquiry, inspection, litigation, suit, claim, proceeding, cause of action, demand of any nature (whether civil, criminal, administrative, judicial, or investigative) and whether at law or in equity.
“Provider Relief Funds”—the funds received by the Acquired Companies from the U.S. federal Department of Health and Human Services (the “DHHS”) Provider Relief Fund under the CARES Act in the aggregate amount of $1,112,777.25.
“Provider Relief Fund Terms and Conditions”—the terms and conditions established by the DHHS for the receipt of the Provider Relief Funds
“Purchase Price”—as defined in Section 2.2(a).
“Record”—information that is inscribed on a tangible medium or that is stored in an electronic or other medium.
“Related Person”—
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“Release”—any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching, or migration on or into the Environment, or into or out of any property.
“Representative”—with respect to a particular Person, includes any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, or legal counsel of such Person.
“Restricted Cash”— means any (a) Cash on Hand of the Acquired Companies, wherever and however held, where usage of such Cash on Hand is restricted by any Legal Requirement, contract (including customer deposits and security deposits and the ARP Funds) or otherwise, plus (b) Cash on Hand equal to the amount of all outstanding checks or drafts written on an account of the Acquired Companies that have not yet cleared, plus (c) Cash on Hand, wherever and however held, where such amounts have been received but additional goods or services are required to be supplied in order for the Acquired Companies to be entitled to keep such Cash on Hand.
“R&W Binder”—the Binder Agreement for the R&W Policy issued by the R&W Insurer, a copy of which is attached as Exhibit B attached hereto.
“R&W Insurer”—the insurer under the R&W Policy.
“R&W Policy”—the Representations and Warranties Insurance Policy, together with endorsements related thereto, issued by the R&W Insurer, a draft of which is attached as an exhibit to the R&W Binder, as in effect on the Closing Date.
“Securities Act”—the Securities Act of 1933, as amended.
“Seller”—as defined in the first paragraph of this Agreement.
“Seller’s Closing Documents”—the documents required to be executed or delivered by Seller at the Closing pursuant to Section 2.6(a).
“Seller’s Expenses”—any and all transaction related fees, costs and expenses incurred by or on behalf of the Seller Parent, Seller or any of the Acquired Companies, including without
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limitation fees, costs, commissions and expenses of any brokers, investment bankers, attorneys, accountants, financial advisors and other advisors, consultants or service providers, as well as any payments owing under any appreciation rights, phantom equity or similar plans or any deferred compensation, retention, severance, deferred purchase price, annual or special bonus or profit sharing payments attributable to pre-Closing periods and all bonuses and other payments payable by Seller Parent, Seller or any Acquired Company to any employee of an Acquired Company as a result of the transactions contemplated by this Agreement, including without limitation, those bonus payments contemplated by that certain Incentive Bonus Agreement, dated February 2023, by and between Brandy McClain and Tennessee Valley Home Care, LLC, and the Incentive Bonus Agreement, dated February 2023, by and between Kelly Nichols and American Health Partners Management, LLC, plus the employer’s share of any payroll Taxes due in connection with such payments, and all vacation, sick-time and other paid time off as of the Closing to the extent not included in the calculation of Net Working Capital. Seller’s Expenses shall also include obligations to provide any compensation, benefits or other amounts due to any current or former employee, officer, director, independent contractor or consultant of the Acquired Companies under any Company Benefit Plan that relate to events or any time period on or prior to the Closing Date, which amounts shall include, but not be limited to, the satisfaction of all claims for medical, dental, life insurance, health accident or disability benefits that relate to events occurring on or prior to the Closing Date. Further, Seller’s Expenses shall also include any fees owned to Mitchell Family Office, Inc., a Michigan corporation and Affiliate of Seller Parent, pursuant to that certain Agreement for Management Assistance Services, dated April 6, 2021 to the extent not included in the calculation of Net Working Capital.
“Software”— all computer software, programs, operating systems, applications, firmware, and similar systems owned by or licensed to the Acquired Companies or used in the conduct of the business of the Acquired Companies.
“Straddle Period” means any taxable year or period beginning before the Closing Date and ending after the Closing Date.
“Straddle Period Return”—as defined in Section 12.1(a).
“Subsidiary”—with respect to any Person (the “Owner”), any other Person of which securities or other interests having the power to elect a majority of that other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that other Person (other than Equity Securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person.
“Tax”— means (i) any and all taxes, fees, levies, duties, tariffs, imposts and other similar charges, imposed by any taxing authority or other Governmental Body, including taxes or other charges on, measured by, or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, escheat, unclaimed property, unemployment compensation or net worth; and taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customs duties, tariffs and similar charges; (ii) any and all interest, penalties, additions to tax and additional amounts imposed in
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connection with or with respect to the foregoing; (iii) any liability for payment of amounts described in clauses (i) or (ii), whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any taxable period (including, without limitation, any liability pursuant to Treasury Regulations Section 1.1502-6 or any similar provision of state, local, or non-U.S. Legal Requirement), by Contract, or otherwise through operation of any Legal Requirement; (iv) any liability for the payment of amounts described in clauses (i), (ii) or (iii) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other agreement to pay any Taxes of any other Person.
“Tax Proceeding” means any pending or, to the Knowledge of Seller, threatened, in writing, federal, state, local or foreign Tax audits, examinations or assessments relating to Taxes or Tax Returns of the Acquired Companies or Seller for the Pre-Closing Tax Period.
“Tax Return”— any return, report, information return or other document (including schedules or any related or supporting information) filed or required to be filed with any Governmental Body or other authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.
“Third-Party Payor”—any fiscal intermediary acting on behalf of any Government Program, or any private, commercial or other non-governmental insurance program, managed care organization or other third‑party payor, including, without limitation, the Medicare Advantage and the Medicaid Managed Care programs.
“Threat of Release”—a reasonable possibility of a Release that could require action (including triggering notification or reporting under Environmental Law) in order to prevent or mitigate damage to the Environment that could result from such Release.
“Transfer Taxes”—as defined in Section 12.1(g).
“Transition Services Agreement”—as defined in Section 2.6(a)(xiii).
“Treasury Regulations” — means the proposed, temporary and final regulations promulgated under the Code by the U.S. Department of the Treasury, as amended.
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Any payments made under this Section 2.4 shall be treated by the Parties as an adjustment to the Purchase Price for income Tax purposes, unless a final determination (which is to include the execution of an IRS Form 870-AD or successor form) with respect to such payment causes any such payment not to be treated as an adjustment to the Purchase Price for Tax purposes. Nothing in this Section 2.4 is intended to diminish Seller’s and Seller Parent’s obligations for all Seller’s Expenses and Debt of the Acquired Companies.
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Except as disclosed in, and subject to disclosures contained in, Seller’s Disclosure Statement attached hereto, Seller Parent and Seller jointly and severally represent and warrant to Buyer as follows:
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Since May 31, 2022 and except, in each case, as set forth on Section 3.7 of Seller’s Disclosure Statement or as contemplated or permitted by this Agreement (including, without limitation, the transactions contemplated by the Pre-Closing Reorganization), the Acquired Companies have conducted their business only in the Ordinary Course of Business consistent with past practice and none of the Acquired Companies has:
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Each Contract of the type described in this Section 3.15(a), whether or not set forth in Seller’s Disclosure Statement, is referred to herein as a “Company Material Contract.”
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under any of the terms of the Leases; and
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Except as disclosed in Buyer’s Disclosure Statement attached hereto, Buyer represents and warrants to Seller Parent and Seller as follows:
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The provisions of this Section 7.4 shall survive the Closing and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.
Buyer’s obligations to purchase the Membership Interests and to take the other actions required pursuant to this Agreement to be taken by Buyer at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in whole or in part by Buyer):
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Seller Parent and Seller’s obligations to sell the Membership Interests and to take the other actions required pursuant to this Agreement to be taken by Seller Parent or Seller at the Closing, as applicable, are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in whole or in part by Seller or Seller Parent):
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Following the Closing, the sole and exclusive remedy for any and all claims against the Seller Parent or Seller arising under, out of, or related to this Agreement or the Closing Documents (excluding the Restrictive Covenant Agreements and the Transition Services Agreement), except in the case of Fraud by the Seller Parent or Seller, shall be the limited remedies provided in Section 11.1. The Seller Parent and Seller in approving this Agreement has specifically relied upon the provisions of this Section 11.3 and the limited remedies provided in Section 11.1 in agreeing to the Purchase Price and the terms and conditions of this Agreement.
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Seller Parent or Seller:
American Health Companies, LLC
201 Jordan Road, Suite 200
Franklin, TN 37067
Attention: President
Email: MBailey@amhealthpartners.com
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with a copy to:
Philip Clark
General Counsel
201 Jordan Road, Suite 200
Franklin, TN 37067
Email: PClark@amhealthpartners.com
and to
Bradley Arant Boult Cummings LLP
Attention: John W. Titus
1600 Division Street, Suite 700
Nashville, TN 37203
E-mail address: jtitus@bradley.com
Buyer:
Addus HealthCare, Inc.
6303 Cowboys Way, Suite 600
Frisco, Texas 75034
Attn: Sean Gaffney, EVP & Chief Legal Officer
Email: sgaffney@addus.com
with a copy to:
Bass, Berry & Sims PLC
150 Third Ave. South, Suite 2800
Nashville, Tennessee 37201
Attn: David Cox
Email: dcox@bassberry.com
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[signatures on following page]
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IN WITNESS WHEREOF, the Parties have executed and delivered this Membership Interests Purchase Agreement as of the date first written above.
Buyer:
Addus HealthCare, Inc.
By: /s/ R. Dirk Allison
Name: R. Dirk Allison
Title: Chief Executive Officer
Seller Parent:
American Health Companies, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer
Seller:
HHH Newco Holdings, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer
Acquired Companies:
American Home Care, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer
Homecare, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer
Tri-County Home Health and Hospice, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer
Tennessee Valley Home Care, LLC
By: /s/ Michael Bailey
Name: Michael Bailey
Title: Chief Executive Officer