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2017/02/02 RESOLUTION TO SELL HOME HEALTH TO KINDRED HEALTHCARE, INC DBA KAH DEVELOPMENT Harnett czrCOUNTY NORTH CAROLINA Resolutions of the vnvw.harnettorg Harnett County Board of Commissioners February 20,2017 The following Resolutions were duly adopted by the Harnett County Board of Commissioners (the "Board"), the governing body of the County of Harnett (the "County"), in a duly called regular meeting on February 20, 2017. WHEREAS, the County currently owns certain assets, which assets are associated with and utilized in the operation of Harnett County Home Health(the"Agency"); WHEREAS, N.C. Gen. Stat. §131E-13 provides that if the County leases, sells, or conveys the Agency, or part thereof, the procedural requirements of N.C. Gen. Stat. §131E-13(d) shall apply; WHEREAS, the Board has carefully studied the future needs of the Agency and has held public hearings and obtained public comment on the present and future needs of the Agency in accordance with the requirements of N.C. Gen. Stat. §13IE-13(d); WHEREAS, the Board has substantially complied with the requirements of N.C. Gen. Stat. §131E-13(d)(l)through (6) and has: (i) at a regular meeting more than sixty(60) days prior to the date hereof, adopted a resolution declaring the intent of the County to sell the Agency (the "Resolution of Intent"); (ii) at said meeting, requested proposals for the sale of the Agency by direct solicitation of at least five (5) prospective purchasers; (iii) conducted a public hearing on the Resolution of Intent; (iv) required information on charges, services, and indigent care at similar facilities owned and operated by each proponent; (v) conducted a public hearing on the proposals to purchase the Agency; and (vi) made copies of the proposals with respect to the Agency available to the public at least ten (10)days before the public hearing on said proposals; WHEREAS, Kindred Healthcare, Inc., which is experienced in the operation and management of home health and hospice agencies, submitted a proposal on behalf of itself and its affiliates to purchase substantially all of the assets used in the operation of the Agency (the "Assets"); WHEREAS, the terms and conditions of the proposed sale of the Assets to KAH Development 12, L.L.C., a Delaware limited liability company that is affiliated with Kindred Healthcare, Inc., have been reduced to writing in the form of an Asset Purchase Agreement by and between the County and KAH Development 12, L.L.C. (the "Asset Purchase Agreement"), the form of which is attached hereto as Exhibit A WHEREAS, at least ten (10) days before this meeting, the County made copies of the Asset Purchase Agreement available to the public in accordance with the requirements of N.C. Gen. Stat. §131E-13(d)(8) and a legal notice of this regular meeting of the Board was published in accordance with the requirements of N.C. Gen. Stat. §131E-13(d)(7); and WHEREAS, in accordance with the requirements of N.C. Gen. Stat. §131E-13(d)(7), after considering whether the sale of the Assets to KAH Development 12, L.L.C., in accordance with the provisions of this Resolution, will meet the health-related needs of medically underserved groups, such as low income persons, racial and ethnic minorities, and handicapped persons,the Board finds that the.sale of the Assets is in the public interest. strong roots • new growth NOW, THEREFORE, be it resolved that in accordance with N.C. Gen. Stat. §131E- 13(d),the Board hereby authorizes,on behalf of the County,the following actions: 1. The County Manager to execute, on behalf of the County, the Asset Purchase Agreement and any other agreements, certificates, documents, and instruments to be executed by the County in connection with the Asset Purchase Agreement, including, without limitation, the Bill of Sale and Assignment, the Restricted Fund Agreement, the Assignment and Assumption Agreement, and the Medical Director Custodian Agreements in substantially the form presented to and approved by the Board; 2. The County Finance Officer to execute, on behalf of the County, the Asset Purchase Agreement, and to establish a restricted fund within the County's main operating account for the purposes of setting aside funds to secure the indemnification obligations of the County pursuant to the terms of the Asset Purchase Agreement; and 3. The County Manager and Chairman of the Board to take such other and further actions as may be necessary to conclude and implement the transaction described in this Resolution. This the 21 ,i:.--,,._ ebruary, 2017. F C MIS OP 'Gs :;co •',. i;co 1,, HARNETT COUNTY BOARD OF I rn / I ` ATTEST: c.v, C.Gor.on Springle,Chha'$ :.�n / L ! •. '• :. '!. .I Mar•: et Reg'..4 .eeler Clem o the Bo. 7.f Commissioners 2 EMT A ASSET PURCHASE AGREEMENT • • I ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of the _ day of February, 2017 (the "Effective Date"), by and between THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina ("Seller"), and KAH DEVELOPMENT 12,L.L.C., a Delaware limited liability company("Purchaser"). BACKGROUND AND PURPOSE Seller is licensed by the North Carolina Department of Health and Human Services ("NCDHHS") Division of Health Service Regulation, to provide home care services, including, without limitation, Medicare-certified home health services, pursuant to License Number • HC0503 (the "NC License") in Harnett County, North Carolina. Purchaser is duly authorized to do business in the State of North Carolina, and Seller desires to sell substantially all of its assets relating to the provision of the services currently provided by Seller, to Purchaser, and Purchaser has agreed to purchase the same on and subject to the terms and conditions of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, Seller and Purchaser agree as follows: ( 1. Sale and Transfer of Assets. In compliance with the terms of N.C. Gen. Stat. §131E-13, and subject to the terms and conditions of this Agreement, Seller shall sell, and Purchaser shall purchase for the consideration set forth herein, substantially all of the assets related to Seller's home health agency (the "Business"), other than the Excluded Assets (defined below), but otherwise including, without limitation, all of the property described as follows (collectively,the"Assets"): (a) All of Seller's right, title, and interest in and to those certain medical records of the active clients of the Business (the "Clients") existing as of the Closing Date (defined below), as described in that certain Medical Record Custodian Agreement, in substantially the form attached hereto as Exhibit A, designating Purchaser as custodian, including paper records and electronic records (together, the "Client Records"), subject to the rights of the Clients to authorize the transfer of the Client Records, the Clients' right of access to the information contained in their records, if applicable, and subject to all privacy and confidentiality requirements imposed by state or federal law or regulation; (b) Subject to any required consents or approvals, as applicable, and to the extent assignable, the certificate of need (or equivalent), all governmental provider numbers and payor agreements required to operate the Business, including, but not limited to, Seller's Medicaid provider agreement with the NCDHHS Division of Medical Assistance, as such agreement relates to Medicaid Provider Number 340-7089, Seller's Medicare provider agreement with the Centers for Medicare & Medicaid Services ("CMS"), as such agreement relates to Medicare Provider Number 34-7089 ("Seller's Medicaid/Medicare Numbers"), Seller's National Provider Identification ("NPP') number 1174520803 ("Seller's NPI Number")(collectively, "Seller's Provider Numbers and Agreements"), and other intangible rights of Seller necessary to operate the Business, in each case to the extent transferable to Purchaser; (c) MI inventory on hand and in-stock home health medical and office supplies used in the operation of the Business; (d) All prospective client mailing lists, subscriber and advertiser lists, subscriptions, processes, inventory records, budgets, and supplier records of Seller used in or relating to the Business; (e) All advertising, editorial, marketing, promotional, and ancillary materials used in or related to the Business; (f) The intellectual property of Seller used in the operation of the Business and identified on Schedule 1(f)attached hereto; (g) Any and all of Seller's goodwill in, and going concern value of, the Business and the Assets; (h) All of Seller's rights under the contracts identified on Schedule 1(h) attached hereto (collectively, the "Assigned Contracts"); and (f) All of Seller's right, title and interest in and to the employment records with respect to the Transferred Employees. Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement will not include the assumption of any liability or obligation in respect thereof. The Assets shall not include those items set forth on Schedule lA (collectively, the"Excluded Assets"). 2. Requirements of Sale. To the extent required by N.C. Gen. Stat. §131E-13(a), following the Effective Time (as defined below), and for so long as Purchaser operates the Business, and N.C. Gen. Stat. §131E-13 is not amended or deleted to permit the termination of the obligations set forth below as to this transaction, Purchaser shall: (a) Continue to provide the same or similar home health and related services, which Seller is licensed to provide prior to the Closing Date, to individuals in need of such services; (b) Ensure that indigent care is available to the population of the area served by the Business at levels related to need, as previously demonstrated and determined mutually by Seller and Purchaser; (c) Not enact financial admission policies that have the effect of denying essential medical services or treatment solely because of a patient's immediate inability to pay for the services or treatment; 2 (d) Ensure that admission to and services of the Business are available to beneficiaries of governmental reimbursement programs (Medicaid/Medicare) without discrimination; and (e) Prepare an annual report that shows compliance with the requirements of this Section 2, which report shall be sent in accordance with Section 31 of this Agreement. The report shall provide a brief summary description of the type of home health services provided in such fiscal year. Subject to patient confidentiality requirements, the report shall indicate the total number of patients served by the Business in such fiscal year, and the level of indigent care provided. In the event Purchaser fails to substantially comply with these conditions, or if it fails to operate the Business free of discrimination based on race, creed, color, sex, or national origin unless relieved of this responsibility by operation of law, or if Purchaser dissolves without a successor corporation to carry out the terms and conditions of this Agreement,then all ownership and other rights in the Business, including the Assets associated with the Business, shall revert to Seller, subject to the provisions of Section 3; provided that any building, land, or equipment associated with the Business that Purchaser has constructed or acquired after the Effective Time may revert only upon payment to Purchaser of a sum equal to the cost less depreciation of such building, land, or equipment. 3. Reversion Procedures. (a) If Seller believes that Purchaser has failed to substantially comply with the conditions listed in Section 2 above, Seller shall provide Purchaser written notice outlining the nature of such failure. Purchaser shall have ninety (90) days to cure such non-compliance and/or to develop a plan to i-mediate any such non-compliance prospectively. (b) The parties to this Agreement shall attempt in good faith to promptly resolve any dispute or disagreement regarding the existence of substantial non-compliance, the adequacy of a cure of such non-compliance, or the adequacy of the remediation plan that cannot be settled by mutual agreement, by confidential mediation in accordance with the Code of Ethics & Rules of Procedure for mediation by the American Health Lawyers Association ("AHLA") in effect on the date of this Agreement, before resorting to litigation. (c) Any dispute or disagreement regarding the existence of substantial non- compliance, the adequacy of a cure of such non-compliance, or the adequacy of the remediation plan that cannot be settled by mutual agreement or by mediation shall be settled by arbitration by AHLA. Each party shall be responsible for its own attorneys' fees and such other costs and expenses incurred related to the arbitration proceedings, except to the extent the applicable substantive law specifically provides otherwise. 4. Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES THAT SELLER HAS MADE NO REPRESENTATIONS OR WARRAN VIES WITH RESPECT TO THE ASSETS (INCLUDING, WITHOUT LIMITATION, THE INCOME TO BE DERIVED THEREFROM OR EXPENSES TO BE INCURRED WITH RESPECT THERETO). SELLER MAKES NO 3 REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE BUSINESS OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. 5. Accounts Receivable; Certain Receipts by Purchaser and Seller. (a) All deposit payments by Medicare, Medicaid, and other state and federal healthcare programs for services relating to the operation of the Business are deposited into Seller's main operating account (the "Account"). As of the Effective Time and continuing until the issuance of the Tie-In Notice (the "Transition Period"), Seller and Purchaser shall work together to ensure Purchaser receives all amounts deposited into the Account that relate to post- Effective Time services. (b) Inasmuch as the Business provides certain services that are reimbursed based upon "episodes of care" which generally span sixty (60) days (each, an "Episode of Care"), the parties acknowledge that the Business has received prior to Closing, and will receive after the Closing, aggregated payments (as aggregated, an "Episodic Payment") with respect to Episodes of Care that are open as of the Effective Time (that is, the Episode of Care will have commenced but will not have been completed as of the Effective Time). With respect to each such Episodic Payment, the parties acknowledge that (i) the portion of such Episodic Payment that is attributable to services rendered prior to the Effective Time will belong to Seller and (ii) the portion of such Episodic Payment that is attributable to services rendered after the Effective Time will belong to Purchaser, calculated as set forth below. (c) On a monthly basis after the Closing Date, Seller shall conduct a reconciliation with respect to all Episodes of Care that concluded during the preceding month and for which all aggregate Episodic Payments (including up-front RAP payments and any end- of-episode or other reconciliation payments) have been received. In conducting such reconciliation, Seller shall utilize the final remittance advice and other documentation provided by the applicable payor. The portion of each Episodic Payment attributable to services provided by Purchaser after the Effective Time will be calculated by (i) determining the per day reimbursement for the Episode of Care by dividing the aggregate Episodic Payment for such Episode of Care by the number of days (normallyY (60) days) in such Episode of Care (such rate, the "Per Diem Rate") and (ii) multiplying the Per Diem Rate by the number of days between the Closing Date and the last day in such Episode of Care (counting the day upon which the Effective Time falls as the first day and the last day of the Episode of Care as the last day). (d) Within ten (10) business days following completion of the reconciliation described in Section 5(c), Seller shall remit to Purchaser, by electronic funds transfer, those portions of the applicable Episodic Payments that are attributable to post-Effective Time services. Seller shall also provide Purchaser with supporting documentation of such amounts remitted with respect to post-Effective Time services. In the event that Purchaser has reasonable evidence to support its belief that any amount remitted is incorrect, Purchaser shall contact Seller's designated representative as soon as reasonably practicable, and Seller and Purchaser shall conduct a meeting (via telephone) to discuss the discrepancy. Upon reaching mutual agreement regarding the amount owed, within five (5) business days Seller shall send via electronic funds transfer the funds to Purchaser in the agreed upon amount. 4 (e) On a monthly basis following issuance of the Tie-In Notice, in the event that Purchaser receives any Episodic Payment a portion of which is attributable to pre-Effective Time services, Purchaser shall conduct a reconciliation. In conducting such reconciliation, Purchaser shall utili7P the final remittance advice and other documentation provided by the applicable payor. The portion of each Episodic Payment attributable to services provided by Seller prior to the Effective Time will be calculated by (i) determining the per day reimbursement for the Episode of Care by dividing the aggregate Episodic Payment for such Episode of Care by the number of days (normally sixty (60) days) in such Episode of Care (the "Seller Per Diem Rate") and (ii)multiplying the Seller Per Diem Rate by the number of days between the first day of the Episode of Care and the Closing Date (counting the first day of the Episode of Care as the first day and the Closing Date as the last day). (f) Within ten (10) business days following completion of the reconciliation described in Section 5(e), Purchaser shall remit to Seller, by electronic funds transfer, those portions of the applicable Episodic Payments that are attributable to pre-Effective Time services. Purchaser shall also provide Seller with supporting documentation of such amounts remitted with respect to pit-Effective Time services. In the event that Seller has reasonable evidence to support its belief that any amount remitted is incorrect, Seller shall contact Purchaser's designated representative as soon as reasonably practicable, and Seller and Purchaser shall conduct a meeting (via telephone) to discuss the discrepancy. Upon reaching mutual agreement regarding the amount owed, within five (5) business days Purchaser shall send via electronic funds transfer the funds to Seller in the agreed to amount. (g) Within a reasonable time following the other party's request, each party shall make available to the other party all bank records related to such party's bank account into which Episodic Payments and other payments for services are deposited in order to permit each party to confirm the other party's compliance with the foregoing obligations. 6. Purchase Price. In consideration of the sale and transfer of the Assets, Purchaser shall pay, as provided in Section 9 below, the sum of Two Million Dollars ($2,000,000.00) (the "Purchase Price"), which shall be paid in cash or immediately available funds to Seller as set forth below. Seller shall establish a restricted fund balance account in the amount of Two Hundred Thousand Dollars ($200,000.00) from either: (a) existing cash reserves of Seller; or (b) a portion of the transaction proceeds (the"Restricted Fund Balance Account"),for the purpose of securing the indemnification obligations of Seller, as set forth in Section 24 of this Agreement. The Restricted Fund Balance Account shall be maintained for twenty-four (24) months to secure such obligations, provided, however, on the twelfth (12) month anniversary of the Closing, the balance of the Restricted Fund Balance Account shall be reduced to an amount equal to One Hundred Thousand Dollars ($100,000.00) less any paid or pending claims. The parties shall enter into a"Restricted Fund Agreement," in substantially the form attached hereto as Exhibit B, which sets forth the terms related to the Restricted Fund Balance Account. 7. Closing. The closing of the transactions contemplated under this Agreement (the "Closing") shall be held on February 28, 2017, following the satisfaction or waiver of all closing conditions set forth in Sections 20 and 21 below, or at such later date and/or at such other place as the parties may mutually agree (the "Closing Date"), effective as of 12:01 a.m. (EST time) on 5 March I, 2017, or such other date and time as the parties may mutually designate in writing (the "Effective Time"). 8. Seller's Closing Obligations. In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing, Seller shall deliver to Purchaser: (a) an executed Bill of Sale and Assignment (the "Bill of Sale"), in substantially the form attached hereto as Exhibit C. conveying, as of the Effective Time, the Assets to Purchaser, free and clear of all claims, liabilities, obligations, liens, charges, security interests, and encumbrances; (b) a certificate executed by an officer of Seller certifying as to the accuracy of its representations and warranties herein as of the Effective Date and as of the Closing, and as to Seller's compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing; (c) updated versions of the patient lists referred to in Section 5(f); (d) copies of all consents required to be obtained by Seller in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby as required to be disclosed in Schedule 18(c); (e) an Assignment and Assumption Agreement (the "Assignment and Assumption Agreement") in substantially the form attached hereto as Exhibit D by and between Seller and Purchaser and executed by Seller; (g) the Medical Records Custodian Agreement executed by Seller; and (h) the Restricted Fund Agreement executed by Seller and documentation of the establishment and funding of the Restricted Fund Balance Account. • 9. Purchaser's Closing Obligations. In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing, Purchaser shall deliver to Seller: (a) the Purchase Price by wire transfer to Seller; (b) a certificate executed by an officer of Purchaser certifying as to the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing, and as to Purchaser's compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing; (c) the Assignment and Assumption Agreement executed by Purchaser; (d) the Medical Records Custodian Agreement executed by Purchaser; and (e) the Restricted Fund Agreement executed by Purchaser. 6 10. Additional Documents. From time to time, whether at or after the Closing and without further consideration, the parties shall execute and deliver such further instruments of conveyance and transfer and take such further action as they may reasonably request in order to convey and transfer the Assets. Purchaser and Seller each shall reasonably cooperate with the other in the timely completion of the documentation contemplated by this Agreement, as well as the other requirements of this Agreement, including such matters that may arise following the Closing. 11. Liabilities. Purchaser shall assume from Seller only those liabilities or obligations of Seller arising following the Effective Time under the Assigned Contracts that are effectively assigned to Purchaser hereunder (but specifically excluding all obligations or liabilities arising from any default, breach or violation of any such Assigned Contract occurring prior to the Closing Date, whether occurring as a result of the transactions contemplated by this Agreement or otherwise) (collectively, the "Assumed Liabilities"), and no other liabilities or obligations. Except for the Assumed Liabilities, all liabilities or obligations of Seller, known and unknown, and all liabilities or obligations relating to or arising out of the Business, including, but not limited to, (a) any liabilities or obligations associated with amounts payable to or by Seller, (b) any liabilities or obligations of Seller incurred or accrued with respect to periods, or relating to events occurring prior to the Effective Time arising under the terms of the Medicare, Medicaid, VA, or any other third-party payor programs, or (c) any liabilities or obligations of Seller incurred or accrued, or relating to Seller's operation of the Business prior to the Effective Time are referred to as the "Retained Liabilities." All of the Retained Liabilities will remain the sole responsibility of and will be retained, paid, performed, and discharged solely by Seller, and Seller shall indemnify and hold Purchaser harmless from all Retained Liabilities. Seller shall retain and discharge in the ordinary course all obligations of Seller, regardless of whether Purchaser provides Seller with any assistance in Seller's discharge of those liabilities and obligations. 12. Seller's Provider Numbers and Agreements. To the fullest extent permitted by law, Seller sells, assigns, and transfers to Purchaser, all right, title, benefit, privileges, and interest in, to, and under Seller's Provider Numbers and Agreements, each to the extent transferable. By virtue of the assignment and assumption of Seller's Provider Numbers and Agreements, following the Effective Time, Purchaser is entitled to full and exclusive use of Seller's Provider Numbers and Agreements. Notwithstanding the foregoing, Purchaser shall not assume or be deemed to have assumed and shall not be responsible for any liability or obligation of Seller under Seller's Provider Numbers and Agreements with respect to periods prior to the Closing Date. Purchaser shall be solely responsible for the operation by Purchaser of the Business on or after the Effective Time and for any liabilities of Purchaser or the Business which arise out of Purchaser's operation of the Business on or after the Effective Time, including those arising from the use of Seller's Provider Numbers and Agreements on or after the Effective Time. 13. Certain Covenants Regarding Medicare,Medicaid and Licensure Matters. (a) As soon as reasonably practical following the Closing (but not later than ten (10) business days following the Closing Date), Purchaser shall submit to CMS Form 855A for the assignment of Seller's Medicare provider number to Purchaser. Following the Closing, 7 Purchaser shall exercise all commercially reasonable efforts to diligently pursue the issuance of a tie-in notice by CMS assigning Seller's existing Medicare provider agreement and Medicare provider number with respect to the Business to Purchaser (the "Tie-In Notice"). Seller shall provide Purchaser with such assistance as Purchaser may reasonably request in connection with the approval of the CMS 855A and issuance of the Tie-In Notice. Except as set forth in Schedule 1A, effective as of the Effective Time, Seller sells, assigns, and transfers to Purchaser, to the fullest extent permitted by Law, all right, title, benefit, privileges, and interest in, to, and under Seller's Medicare provider agreement with CMS, to the extent transferable, to Purchaser. Except as set forth in Schedule lA, by virtue of the assignment and assumption of Seller's Medicare provider agreement and Medicare provider number, following the Effective Time, Purchaser is entitled to full and exclusive use of Seller's Medicare provider agreement. (b) Purchaser will file appropriate Medicaid enrollment forms with CSC Provider EVC Unit,NC Tracks Operations Center, to obtain the required approvals to participate as a Medicaid-approved home health provider in the North Carolina Medical Assistance Program. Following submission of such application, Purchaser shall exercise all commercially reasonable efforts to diligently pursue Medicaid approval status as a home health services provider in the North Carolina Medical Assistance program. Seller shall provide Purchaser with such assistance as Purchaser may reasonably request in connection with the approval of such assignment. (c) Purchaser has submitted to DHHS, Division of Health Service Regulation, Health Planning and Certificate of Need Section ("CON Section") a request for a determination that the transaction contemplated by this Agreement is exempt from certificate of need review. Purchaser shall provide Seller with copies of all correspondence to and from the CON Section related to such request (including a copy of such determination) promptly upon issuance or receipt. (d) Purchaser has submitted to DHHS, Division of Health Service Regulation, Acute and Home Care Licensure and Certification Section ("Acute and Home Care Section") an application for operation of the Business. Following submission of such application, Purchaser shall exercise all commercially reasonable efforts to diligently pursue the issuance of an approval of such application. Seller shall provide Purchaser with such assistance as Purchaser may reasonably request in connection with such application. 14. Employees. (a) Purchaser will offer each of the employees of Seller currently involved in the operation of the Business and listed in Schedule 14(a) attached hereto (sometimes referred to herein collectively as the"Employees") the opportunity to interview for at least one position with Purchaser. Such employees electing to interview will be provided an opportunity to submit information on his or her skills, experience and background, and will be evaluated in terms of • Purchaser's standards of employment. Purchaser shall, subject to criminal background checks, drug screening, and current unencumbered licensure standards (as applicable) conducted pursuant to Purchaser's personnel policies, offer employment to each of the Employees. Purchaser agrees to employ the Employees hired by Purchaser (subject to each such Employee's right to voluntarily terminate his or her employment and Purchaser's right to terminate his or her 8 employment for cause), under the same employment status (F1/PT/PRN) as such Employees are employed by Seller as of the Effective Date. The Employees shall have no obligation to accept employment with Purchaser. The Employees who are offered and accept new employment with Purchaser effective as of the Effective Time shall be referred to as the "Transferred Employees" and, upon becoming Transferred Employees and termination of their employment with Seller, shall cease to be employees of Seller. (b) Seller agrees to remain solely liable for all accrued benefits, including without limitation retirement benefits, health benefits, paid time off, and other employee benefits or liabilities attributable to the service of any Employee while he/she is an employee of Seller. From and after the Effective Time, Transferred Employees shall accrue paid time off under Purchaser's personal leave time ("PLT")policies, as then in effect;provided, however, Purchaser agrees to credit each Transferred Employee for his/her years of service to the Business prior to the Closing Date and to account for such years of service when determining each Transferred Employee's eligibility for PLT. From and after the Effective Time, Seller shall be solely responsible for any and all benefit liability relating to or arising in connection with any applicable legal requirements to provide continuation of health care coverage to Employees and their covered dependents under any health care coverage plan maintained by Seller for the benefit of its Employees. (c) To ensure no lapse in coverage, from and after the Effective Time, Transferred Employees receiving medical benefits coverage under Seller's benefit plan(s) will be eligible to receive medical benefits coverage under Purchaser's benefit plan(s), subject to the terms and conditions of Purchaser's plan(s), including, without limitation, plan eligibility requirements. 15. Cost Report Matters. Seller shall timely prepare, execute, and file all Cost Reports for periods ending on the Closing Date or required as a result of the consummation of the transactions set forth herein, including terminating cost reports for the Medicare and the Medicaid programs (the "Terminating Cost Reports"). Seller will provide the fiscal intermediary or CMS with any information needed to support claims for reimbursement made by Seller either in the Terminating Cost Reports or in any cost reports filed for prior cost reporting periods, it being specifically understood and agreed that the intent and purpose of this provision is to ensure that the reimbursement paid to Purchaser after it becomes the licensed operator of the Business is not reduced or offset in any manner as a result of Seller's failure to timely file, or filing an inaccurate or incomplete, fmal cost report or supporting documentation with respect to any past reimbursement claims, including, but not limited to, those included in the Terminating Cost Reports. Purchaser shall, promptly after receipt by Purchaser, forward to Seller any demand for payments relating to government cost report settlements, Seller's cost reports, and/or any Seller cost report reopened prior to the Effective Time, but only to the extent such demand for payment relates to an Excluded Liability. Seller agrees to deliver to Purchaser a copy of any action, order, notice(including,any notice of program reimbursement), or other correspondence from the fiscal • intermediary or CMS received by Seller relating to Seller's cost reports. 9 16. Misdirected Payments. (a) Purchaser and Seller covenant and agree that Seller and Purchaser shall remit, with reasonable promptness, to the other any payments received, which payments are on or in respect of accounts or notes receivable owned by (or are otherwise payable to) Seller or Purchaser, as applicable. Seller agrees to remit to Purchaser, within fifteen (15) days of receipt by Seller, any payments received by Seller for services rendered by Purchaser after the Effective Time, and Purchaser also agrees to remit to Seller, within fifteen (15) days of receipt by Purchaser, any payments received by Purchaser for the services rendered by Seller prior to the Effective Time. In addition, and without limitation, in the event of a determination by any governmental or third-party payor that payments to Seller for the Business resulted in an overpayment or other determination that funds previously paid by any program or plan to Seller for the Business must be repaid, Seller shall be responsible for repayment of said monies (or defense of such actions) if such overpayment or other repayment determination was for the services rendered prior to the Effective Time and Purchaser shall be responsible for repayment of said monies (or defense of such actions) if such overpayment or other repayment determination was for the services rendered after the Effective Time. (b) In the event that, following the Closing, Purchaser suffers any offsets against reimbursement under any third-party payor or reimbursement programs owed to Purchaser, relating to amounts owing under any such programs by Seller for the services rendered prior to the Effective Time, Seller shall within fifteen (15) days of receipt of a written demand from Purchaser pay to Purchaser the amounts so billed or offset. From the Effective Time to such date as CMS issues a tie-in notice to Purchaser with respect to the Business (the "Tie-In Notice"), Seller hereby grants Purchaser the right to submit claims, reports, documents and other information to CMS using Medicare Provider Number 34-7089 and other information, for the services provided to patients through the Business during such period, as necessary to receive payment for such services. Seller acknowledges and agrees that all such receivables arising from the services rendered after the Effective Time are the sole property of Purchaser. (c) In the event that, following the Closing, Seller suffers any offsets against reimbursement under any third-party payor or reimbursement programs owed to Seller, relating to amounts owing under any such programs by Purchaser or any of its affiliates for the services rendered after the Effective Time, Purchaser shall within fifteen (15) days of receipt of a written demand from Seller pay to Seller the amounts so billed or offset. 17. Notice to Clients. Prior to the Effective Time, Purchaser and Seller shall jointly notify the Clients of the transactions contemplated by this Agreement. Neither Purchaser nor Seller shall send any notices to the Clients regarding this transaction without the other party's approval as to the content and manner of such notice, which approval shall not be unreasonably withheld,conditioned or delayed. 18. Representations and Warranties of Seller. To induce Purchaser to enter into this Agreement, Seller represents and warrants to Purchaser that (which representations and warranties are limited only as they apply to Seller's operation of the Business or as they relate to the Assets): 10 (a) Organization and Good Standing. Seller is a North Carolina body corporate and politic that has full power and authority to own the Assets and to carry on the Business as it is now being conducted, including the services provided by the Business. (b) Authority. Seller has full power, authority, and legal capacity to enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery, and performance of this Agreement (i) does not conflict with any provision contained in any agreement, instrument, judgment, order, or laws to which Seller is a party or by which Seller is bound, (ii) has been duly executed and delivered by Seller and constitutes a valid and legally binding obligation of Seller, enforceable in accordance with its terms, (iii) does not and will not violate any laws applicable to Seller, or orders, writs, or injunctions of the United States, or any state or other jurisdiction or any judgment, decree or order of any court or other judicial body specifically naming Seller,or require Seller to obtain any approval, consent or waiver of, or make any registration, declaration or filing with, or provide notice to, any individual, trustee, corporation, limited liability company, general partnership, limited partnership, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority, or any similar entity ("Person"), and (iv) does not and will not result in a breach of, constitute a default under, accelerate any obligation under, require a consent under, or give rise to a right of termination or revocation of, any indenture or loan or credit agreement or any other contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination, or arbitration award to which Seller is a party or by which the property of Seller is bound or affected, or result in the creation or imposition of any liens on any of the Assets. (c) Notices and Consents. Except as set forth in Schedule 18(c) Seller is not and will not be required to give any notice to or obtain any consent from any person in connection with the execution and delivery of this Agreement or the consummation or performance of the transactions contemplated hereby. All notices and consents set forth on Schedule 18(c)have been or shall have been obtained by the parties prior to the Closing Date. (d) Changes in Representations and Warranties. All information of Seller furnished and to be furnished to Purchaser is and will be accurate as of the date thereof. None of the information contained in the representations and warranties of Seller set forth in this Agreement or in any of the exhibits, lists, documents, schedules, or other instruments delivered or to be delivered to Purchaser as contemplated by any provision of this Agreement, contains or will contain any untrue statement of material fact or omits or will omit a material fact necessary to make the statements contained herein or therein not misleading. (e) Assets. Seller owns and has good and marketable title to the Assets, free and clear of all obligations, charges, security interests, conditional sales contracts, leases, claims, encumbrances, and liens whatsoever. The Assets (other than the Excluded Assets and the non- assignable licenses, permits and certifications) constitute all of the assets constituting, used or being held for use in the conduct of the Business as currently conducted. (t) Licenses, Authorizations and Provider Programs. Seller, with respect to the Business, is: (i) the holder of all valid licenses and other rights, permits, and authorizations required by any legal requirement or any governmental authority necessary to operate the 11 Business (collectively the "Governmental Authorizations"), (ii) certified for participation and reimbursement under Titles XVIII and XIX of the Social Security Act (the "Medicare and Medicaid Programs") (The Medicare and Medicaid programs and such other similar federal, state, or local reimbursement or governmental programs for which Seller is eligible to receive payments on account of the services provided by the Business are hereinafter referred to collectively as the "Government Programs"), and (Hi) the holder of current provider agreements for such Government Programs. Set forth on Schedule 18(f) as to the Business, is a correct and complete list of all such licenses, permits, and other authorizations, and provider agreements under all Government Programs, and each such license, permit, authorization, and agreement is valid and in full force and effect. (g) Account. Seller represents and warrants to Purchaser that Seller has directed the Government Programs to electronically deposit all payments owed by the Government Programs for the services provided by the Business into the Account, and Seller represents and warrants that the Government Programs do not (i) send any payments for the services provided by the Business to any other entity or person, or (ii) deposit (electronically or otherwise) any payments for goods and services provided by the Business into any bank account other than the Account. Seller agrees that it will not change, cause to be changed, or permit to be changed,the instructions to the Government Programs regarding payments to the Account. (h) No Conflict. Except as set forth in Schedule 18(h), neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will, directly or indirectly (with or without notice of lapse of time) (i) violate any constitution, statute, regulation, rule, injunction,judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Seller is subject, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Seller is a party or by which it is bound or to which any of its assets is subject. Other than as specifically set forth in this Agreement, Seller does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement. (i) Litigation. There are no actions, suits, labor disputes or arbitrations, or legal or administrative proceedings or investigations pending against Seller for the operation of the Business, and no such actions or proceedings have been commenced within the last three (3) years. To best of Seller's knowledge, no such actions, suits, labor disputes or arbitrations, or legal or administrative proceedings or investigations are contemplated or threatened against Seller for the operation of the Business nor, to the best of Seller's knowledge, is there any basis therefore. To best of Seller's knowledge, no event has occurred or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement by any person of any action, suit,proceeding or investigation against Seller relating to the operation of the Business. (j) Compliance with Laws. Seller is in compliance with all applicable laws, statutes, ordinances, orders,judgments, decrees, injunctions, and rules and regulations ("Law" or "Laws")promulgated by any Governmental Entity which apply to Seller for the use of the Assets 12 or for the conduct of the Business, and Seller has not received notice of a violation or alleged violation of any such Law. (k) Insurance. The Asset and property used in the operation of the Business, as well as employees of Seller are insured in a manner customary for a business similar to the Business, and all insurance policies and arrangements of Seller (which include general liability, professional liability, property, casualty, fire and workers' compensation insurance policies, and arrangements) are in full force and effect, all premiums due with respect thereto are currently paid, and Seller is in compliance in all material respects with the terms thereof Said insurance is adequate and customary for the Business and is sufficient for compliance by Seller with all requirements of Law and all contracts to which Seller is a party. Each such insurance policy shall continue to be in full force and effect immediately prior to Purchaser's purchase of the Assets. (I) Health Care Compliance. (i) Seller is participating in or otherwise authorized to receive reimbursement from or is a party to agreements with the Government Programs. All necessary certifications and contracts required for participation in such programs are in full force and effect and have not been amended or otherwise modified, rescinded, revoked, or assigned as of the date hereof, and no condition exists or event has occurred which in itself or with the giving of notice or the lapse of time or both would result in the suspension, revocation, impairment, forfeiture, exclusion, or non-renewal of any such programs. Seller has been and continues to be in compliance with the requirements of such program applicable thereto. Seller has neither billed nor received any payment or reimbursement from such programs in excess of amounts allowed by law. Seller has not received any notice of any pending or threatened governmental investigations or surveys. (ii) With respect to the Business, neither Seller nor any person providing services on behalf of Seller has engaged in any activities that are prohibited under any legal-requirement-including,-but-not-limited-to,-42-U:S:C.-§-1-320a-7b,-42-U.S:C.-§-1395nn,-or-31 U.S.C. §§ 3729-3733 (or other federal or state legal requirements related to false or fraudulent claims) or the regulations promulgated thereunder pursuant to such statutes, or related state or local legal requirements related to professional conduct. (iii) Seller has been and is currentlyin compliance with the applicable � P � PP � provisions of the Health Insurance Portability and Accountability Act of 1996, as amended by the HITECH Act of the American Recovery and Reinvestment Act of 2009 ("HIPAA") and its implementing regulations, including without limitation, the Standards for Electronic Transaction and Code Set (45 C.F.R. Parts 160 and 162), the Standards for Privacy of Individually Identifiable Health Information (45 C.F.R. Parts 160 and 164), the Security Standards for the Protection of Electronic Protected Health Information (45 C.F.R. Parts 160 and 164) and such other regulations that may, from time to time, be promulgated thereunder. Seller has not received any notice from any governmental authority that such governmental authority has imposed or intends to impose any enforcement actions, fines or penalties for any failure or alleged failure to comply with HIPAA or its implementing regulations. 13 (iv) Seller has no liabilities with respect to, and there are no claims against Seller by any customer, insurer or third party payor with respect to, overpayments made to Seller in connection with the operation of the Business. Seller is not aware of any pending or threatened claims against Seller by any customer, insurer or third party payor for overpayments in connection with the operation of the Business. Seller has no liabilities associated with any third party audits or denials by any third party payors in connection with the operation of the Business. (v) All of Seller's professional staff used in the operation of the Business are qualified and licensed to practice without restriction or limitation in such capacity in the State of North Carolina. (m) Indebtedness. With the exception of the Retained Liabilities, Seller will not have, as of Closing, any direct or indirect liabilities, indebtedness, obligations, penalties or debts (collectively, the "Indebtedness") related to the operation of the Business. The accounts payable were incurred in the ordinary course of business will be paid and satisfied by Seller, and Seller is not in default or late on any payable. (n) Satisfaction of Conditions. Seller promptly shall proceed to satisfy all conditions set forth in Section 20 below, and shall notify Purchaser upon Seller's discovery or belief that Seller will be unable to meet such conditions. (o) Disclosure. The representations, warranties, and statements contained in this Agreement and in each other agreement executed and delivered pursuant hereto and in the certificates, Exhibits and Schedules delivered to Purchaser by Seller pursuant to this Agreement do not contain any untrue statement of a material fact, and, when taken together, do not omit to state a material fact required to be stated therein in order to make such representations, warranties, or statements not misleading in light of the circumstances under which they were made. 19. Representations of Purchaser. To induce Seller to enter into this Agreement, Purchaser represents and warrants to Seller that: (a) Organization and Good Standing. Purchaser is a limited liability company duly organized, validly existing, and authorized to transact business in the State of Delaware and in the State of North Carolina, with full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. (b) No Conflict. The execution, delivery, and performance of this Agreement does not conflict with any provision contained in the governing documents of Purchaser or with any provision of any agreement, instrument, judgment, order, or law to which Purchaser is a party or is subject or by which it is bound. This Agreement has been duly executed and delivered by Purchaser and constitutes a valid and legally binding obligation of Purchaser, enforceable in accordance with its terms. (c) Changes in Representations. All information of Purchaser furnished and to be furnished to Seller is and will be accurate as of the date thereof. None of the information contained in the representations and warranties of Purchaser set forth in this Agreement or in any 14 of the exhibits, lists, documents, schedules, or other instruments delivered or to be delivered to Seller as contemplated by any provision of this Agreement, contains or will contain any untrue statement of material fact or omits or will omit a material fact necessary to make the statements contained herein or therein not misleading. (d) Satisfaction of Conditions. Purchaser promptly shall proceed to satisfy all conditions set forth in Section 21 below, and shall notify Seller upon Purchaser's discovery or belief that Purchaser will be unable to meet such conditions. 20. Conditions to Purchaser's Performance. The obligations of Purchaser under this Agreement shall be subject to each of the following conditions, any one or more of which may be waived by Purchaser: (a) All representations and warranties of Seller contained in this Agreement or in any other document delivered by Seller pursuant to this Agreement shall be true, correct, and complete on and as of the date when made and on and as of the Closing Date; (b) Seller shall have observed, kept, or performed all of the terms and conditions of this Agreement to be observed, kept, or performed by Seller; (c) Purchaser shall have received a determination by the CON Section, that Seller's sale, and Purchaser's acquisition, of the Assets is exempt from certificate of need review, and that such other licenses, permits, and authorizations required by law to operate the Business will be issued as of Closing, except for such licenses, permits, and authorizations that, due to the requirements of applicable law or regulation, Purchaser can obtain only after the Closing; and (d) Seller shall have delivered the documents and instruments required by Section 8. 21. Conditions to Seller's Performance. The obligations of Seller under this Agreement shall be subject to the following conditions, any one or more of which may be waived by Seller: (a) All representations and warranties of Purchaser contained in this Agreement or in any other document delivered by Purchaser pursuant to this Agreement shall be true, correct, and complete on or as of the date when made and on or as of the Closing, as if made on the Closing; (b) Purchaser shall have observed, kept, or performed all of the terms and conditions of this Agreement to be observed,kept, or performed by Purchaser; (c) Purchaser shall have paid the Purchase Price to Seller; and (d) Purchaser shall have delivered the documents and instruments required by Section 9. • 15 22. Termination. (a) Termination Events. By written notice given prior to or at the Closing, subject to Section 22(b), this Agreement may be terminated as follows: (i) by Purchaser, in the event a material breach of this Agreement has been committed by Seller and such breach has not been cured within thirty (30) days by Seller or waived in writing by Purchaser; (ii) by Seller, in the event a material breach of this Agreement has been committed by Purchaser, and such breach has not been cured within thirty (30) days by Purchaser or waived in writing by Seller; (iii) by Purchaser, if the satisfaction of any of the conditions to Purchaser's obligation to close the transactions contemplated hereby as set forth in Section 20 becomes impossible (other than through the failure of Purchaser to comply with its obligations under this Agreement), and Purchaser has not waived such condition in writing; (iv) by Seller, if the satisfaction of any of the conditions to Seller's obligation to close the transactions contemplated hereby as set forth in Section 21 becomes impossible (other than through the failure of Seller to comply with its obligations under this Agreement), and Seller has not waived such condition in writing; (v) by mutual written consent of Purchaser and Seller; and (vi) by Purchaser or Seller, if the Closing has not occurred on or before March 1, 2017, or such later date as the parties may agree upon in writing, unless the terminating party is in material breach of this Agreement. (b) Effect of Termination. Each party's right of termination under Section 22(a) is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of such right of termination will not be an election of remedies. If the Agreement is terminated pursuant to Section 22(a), all obligations of the parties under this Agreement will terminate, except that the obligations in this Section 22 will survive; provided, however, that if this Agreement is terminated by a party because of the breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. 23. Indemnification by Purchaser. Purchaser agrees to indemnify Seller and hold Seller harmless from and against any and all losses, damages, fines, penalties, costs, liabilities, and expenses (including all reasonable attorneys' fees, court costs, costs of defense and expert witness fees) (collectively, "Losses") arising from claims resulting from, or incident to: (a) Any breach by Purchaser of any of its obligations or duties under this Agreement or the incorrectness of any representation or warranty made by Purchaser in this Agreement or any document executed in connection herewith; 16 (b) The operation of the Business by Purchaser on and after the Effective Time, including, but not limited to, billing, clinical or professional practices, other than with respect to actions of Seller (including, without limitation, any default, breach or violation by Seller occurring prior to or following the Closing); (c) Any failure by Purchaser to comply with all laws, regulations, and orders applicable to its business and operations; and (d) Any and all professional liability incurred by Purchaser or Purchaser's employees on or after the Effective Time, other than with respect to actions of Seller (including, without limitation, any default, breach or violation by Seller occurring prior to or following the Closing). 24. Indemnification by Seller. Seller agrees to indemnify Purchaser and hold Purchaser harmless from and against any and all Losses arising from claims resulting from, or incident to: (a) Any breach by Seller of any of its obligations or duties under this Agreement or the incorrectness of any representation or warranty made by Seller in this Agreement or any document executed in connection herewith (determined in each case without regard to any qualification with respect to materiality); (b) The operation of the Business by Seller prior to the Effective Time including, but not limited to, billing, clinical or professional practices, other than with respect to actions of Purchaser; (c) Any failure by Seller to comply with all laws, regulations, and orders applicable to the Business and its operations prior to the Effective Time; (d) Any Retained Liabilities or Excluded Assets; and (e) Any and all professional liability incurred by Seller or Seller's employees relating to the operation of the Business prior to the Effective Time. 25. Method of Asserting Claims. The party seeking indemnification (the "Indemnified Party") shall give prompt written notice to the other party (the "Indemnifying Party") within the applicable survival period set forth in Section 26, if any, of any claim which it discovers or of which it receives notice after the Closing and which might give rise to a claim by it against Indemnifying Party, stating the nature, basis and (to the extent known) amount of such claim; provided that failure to give prompt notice shall not jeopardize the right of any Indemnified Party to indemnification except to the extent such failure shall have materially prejudiced the ability of the Indemnifying Party to defend such claim. 26. Survival of Representations. The representations and warranties made by Seller, on the one hand, and by Purchaser, on the other hand, under this Agreement shall survive until the date that is twenty-four (24) months after the Closing Date, except that the representations and warranties set forth in Section 180) (Health Care Compliance) shall survive the Closing until the expiration of the applicable statute of limitations. 17 27. Access. Between the date of this Agreement and the Closing Date, and upon reasonable advance notice received from Purchaser, Seller shall afford Purchaser and its agents reasonable access to the Business to facilitate the transition of the Business operations from Seller to Purchaser. Purchaser shall not unreasonably interfere with the operations of the Business. In the event of the termination of this Agreement, all of Seller's information shall remain confidential and not be used by Purchaser, its members, officers, directors, employees or agents, and all copies thereof shall be returned to Seller. 28. Licenses. Should Seller receive notice or become aware of any adverse actions or deficiencies in the maintenance of any of Seller's provider numbers, Seller shall provide Purchaser with written notice within five (5) business days of its receipt of such notices. Notwithstanding the foregoing, Purchaser shall be solely responsible for the operation by Purchaser of the Business after the Closing Date, and any liabilities of Purchaser or the Business which arise out of Purchaser's operation of the Business after the Closing Date, subject to the provisions contained herein. 29. Sales and Transfer Taxes. All sales, transfer, purchase, use, value added, excise, income or similar taxes, fees, and duties under applicable Law incurred in connection with this Agreement or the transactions contemplated hereby shall be borne solely by Seller. 30. Allocation of Purchase Price. Seller and Purchaser agree to allocate the Purchase Price among the Assets in accordance with the provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). Such allocation shall be binding on Seller and Purchaser and Seller and Purchaser shall use such allocation in satisfying any and all reporting requirements of the Internal Revenue Service ("IRS") and any state, local, or other taxing authority. 31. Miscellaneous Provisions. (a) Notices; Demands; Requests. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by facsimile with confirmation of transmission by the transmitting equipment, (iii) received by the addressee, if sent by certified mail, return receipt requested, or (iv) received by the addressee, if sent by a nationally recognized overnight delivery service, in each case to the appropriate addresses or facsimile numbers set forth below (or to such other addresses or facsimile numbers as a party may designate by notice to the other parties): As to Seller: Harnett County Attn: Joseph Jeffries County Manager P.O. Box 759 Lillington,NC 27546 As to Purchaser: KAH Development 12, L.L.C. Attn: Douglas Cumutte Senior Vice President,Corporate Development 18 680 South Fourth Street Louisville, KY 40202 With a copy to Kindred Healthcare, Inc. (which shall not Attn: Jeffrey P. Stod•hill constitute notice): Vice President and Corporate Counsel 680 South Fourth Street Louisville, KY 40202 Any such addresses may be changed at any time upon written notice of such change sent by the means stated above,to the other party by the party effecting the change. (b) Severability. If any one or more of the agreements or provisions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, the invalidity of such covenants, agreements, and provisions shall in no way affect the validity or effectiveness of the remainder of this Agreement, and this Agreement shall continue in force to the fullest effect permitted by law. (c) State Law Controlling. This Agreement shall be construed and enforced in accordance with the substantive laws of the State of North Carolina. (d) Venue. The parties agree that any litigation necessary to resolve a dispute arising under this Agreement shall be brought in the General Court of Justice in the County of Harnett and the State of North Carolina. (e) Successors; Assignment. This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors, and permitted assigns of the parties. Neither party may assign this Agreement without the prior written consent of the other. (f) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter and may not be changed, modified, or amended, except by an instrument in writing signed by the party against whom such change, modification, or amendment is asserted. (g) Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. (h) Execution of Agreement; Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. [SIGNATURE PAGE FOLLOWS] 19 IN WITNESS WHEREOF, the duly authorized officers of the parties hereof have executed this Agreement as of the date first written above. SELLER: THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina By: Name: J seph J s Title: County Manager The terms of this Agreement are in compliance with the requirements of the Fiscal Control Act. Nam . berly oneycutt Title: County Fi4ance Officer PURCHASER: KAH DEVELOPMENT 12, L.L.C.,a Delaware limited liability company By: Name: Douglas Cumutte Title: Senior Vice President, Corporate Development 20 IN WITNESS WHEREOF, the duly authorized officers of the parties hereof have executed this Agreement as of the date first written above. SELLER: THE COUNTY OF HARNETT,a body corporate and politic authorized by the laws of North Carolina Na: .hJ Name: J sepJ Title: County Manager The terms of this Agreement are in compliance with the requirements of the Fiscal Control Act. • Na ~Kimberly`:oneycutt Title: County Fi ce Officer PURCHASER: RAH DEVELOPMENT 12, 1 L.L.C.,a Delaware limited liability company By: f / Nam%T._ : • •'utte Title: eni ice President,Corporate Development 1 20 • 1i List of Exhibits and Schedules Exhibits Exhibit A - Medical Records Custodian Agreement Exhibit B - Restricted Fund Agreement Exhibit C - Bill of Sale and Assignment Exhibit D - Assignment and Assumption Agreement Schedules Schedule 1(f) - Intellectual Property Schedule 1(h) - Assigned Contracts Schedule lA - Excluded Assets Schedule 14(a) - Employees Schedule 18(c) - Notices and Consents Schedule 18(f) - Governmental Authorizations Schedule 18(h) - Conflicts A EXHIBIT A MEDICAL RECORDS CUSTODIAN AGREEMENT Attached. MEDICAL RECORDS CUSTODIAN AGREEMENT THIS MEDICAL RECORDS CUSTODIAN AGREEMENT ("Agreement") is entered into and effective March 1, 2017, by and between KAH DEVELOPMENT 12, L.L.C., a Delaware limited liability company ("Kindred"), and 1HE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina("County"). Recitals: A. County currently provides home health and related services to patients in Harnett County, North Carolina through its agency known as "Harnett County Home Health Agency" (the"Business"); B. County is selling certain of the assets of the Business to Kindred pursuant to that certain Asset Purchase Agreement by and between County and Kindred (the "Asset Purchase Agreement"), effective as of the Effective Time (as such term is defined in the Asset Purchase Agreement). Thereafter, Kindred shall retain and act as custodian of the medical records of all patients of the Business that have not been discharged prior to the Effective Time but are current active patients of the Business as of the Effective Time (the"Active Records"); C. Kindred, acting in its capacity as custodian, agrees to provide such custodial services to County under the terms and conditions hereinafter set forth; and D. All capitalized terms not otherwise defined herein shall have the meaning attributed to them in the Asset Purchase Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties hereto do hereby agree as follows: ' ARTICLE I SERVICES TO BE PROVIDED A. Medical Records Custodial Services. 1. In General. During the term of this Agreement, Kindred, acting in its capacity as custodian of the Active Records, shall provide the services described herein for County. Kindred shall provide medical records custodial services for those Active Records of County pertaining to the patients of County, whether in paper or electronic form, and including the business and accounting records for such patients to the extent the same are commingled with the medical records (each a "Record" and collectively, the "Records"). Specifically, Kindred in its capacity as custodian shall do the following: • a. Maintain the physical safety, security, and integrity of the Records at a site to be agreed upon by Kindred and County. Further, Kindred shall implement reasonable safeguards against unauthorized use of, disclosure of, access to, damage to or destruction of the Records. b. Allow County representatives reasonable access to the Records during regular business hours (in person or through use of electronic systems) for the purposes of billing and collection, or making or defending any claim, action or allegation related to patient care, billing, professional conduct, or similar issues which depend upon or are related to the Records or the care reflected in the Records, and will establish a procedure to enable County representatives to gain reasonable access to the Records after regular business hours and on weekends, and to reproduce same, at County's sole cost and expense. c. Maintain a system to account for the "check-in" and "check-out" of the Records by County personnel. d. Maintain insurance covering the site at which the Records are stored, including coverage for"all hazards." e. Maintain the Records so as to comply with applicable provisions of federal law, the laws of the State of North Carolina, and in particular the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5, and the regulations promulgated thereunder(collectively, "HIPAA"). f. Upon the written request of any patient of County (or the authorized legal representative of any patient of County), make copies of such patient's Record(s) and shall charge the patient therefor in accordance with the provisions of HIPAA and applicable state law, unless Kindred elects to waive such charge. Kindred shall retain a copy of all such Records. g. Kindred shall retain each Record for a period of at least eleven (11) years from the last date of treatment for an adult and for seven (7) years after a minor has reached the age of majority. 2. Representations and Warranties of Kindred. a. Kindred agrees that, in its performance of services under this Agreement, it shall not obligate County financially or make any financial undertaking on behalf of County or enter into any contract requiring County to undertake liability, or perform services without the prior written approval of County of such obligation, liability,or undertaking. b. Kindred and its employees, agents, and independent contractors shall comply with all applicable laws or regulations regarding the confidentiality of the Records and agrees that such records shall not be used or disclosed except as provided under this Agreement or as may be required by applicable state or federal law. c. Kindred agrees to indemnify and hold County harmless from and against any and all liability, claims, demands, suits, proceedings, actions, damages, costs, and expenses (including actual reasonable attorneys' fees) incurred by County as a result of Kindred's performance or failure to perform its obligations under this Agreement, so long as such is not the result of the negligence or misconduct of County or its officers, directors, employees, or agents. 2 d. Kindred represents and warrants to County that Kindred (i) is not currently excluded, debarred, or otherwise ineligible to participate in the federal health care programs as defined in 42 U.S.C. §1320a-7b(f) (the "federal health care programs"); (ii) has not been convicted of a criminal offense related to the provision of health care items or services and has not been excluded, debarred, or otherwise declared ineligible to participate in the federal health care programs; and (iii) is not under investigation or otherwise aware of any circumstances that may result in Kindred being excluded from participation in the federal health care programs. This shall be an ongoing representation and warrant during the term of the Agreement. Kindred shall immediately notify County of any change in the status of the representation and warranty set forth in this section. Any breach of this section shall give County the right to terminate the Agreement immediately for cause, the other provisions of this Agreement to the contrary notwithstanding. e. Kindred shall promptly notify County in the event it changes the location(s) where the Records are maintained. f. Kindred shall, during the term of this Agreement,permit County to have reasonable access to the Records and to reproduce the same, at its sole cost and expense. ARTICLE II CONSIDERATION The parties agree that the services to be provided to Kindred by County as custodian under that certain Medical Records Custodian Agreement of even date herewith ("Reciprocal Agreement") and the services to be provided to County by Kindred as custodian under this Agreement are of approximately equal value, are consideration one for the other, and such rights have been negotiated at arms' length by the parties hereto. Kindred shall be responsible for all costs incurred in its operations as custodian of the Records. Kindred shall have no obligation to pay any costs incurred by County, and County shall have no obligation to make any payment to Kindred in consideration for the services provided hereunder. Notwithstanding the preceding sentence, County shall be required to pay Kindred for copies of the Records made at the request of any duly authorized officer of County at the rate established by North Carolina law, or if no such rate applies, then at a reasonable rate, including any storage and retrieval fees specified therein. ARTICLE III TERM AND TERMINATION A. Term. The term of this Agreement shall begin on the Effective Time and end on the eleventh (11th) anniversary of the Effective Time, unless sooner terminated in accordance with the provisions of this Agreement. B. Termination for Cause. Either County or Kindred shall have the right to terminate this Agreement upon written notice to the other effective the date of the notice, upon the occurrence of any of the following events: 3 a i 1. A party's voluntary or involuntary filing of a petition for bankruptcy, reorganization, or receivership under federal or state law that is not dismissed within sixty (60) days after the commencement of such filing; or 2. The breach by a party of any of its obligations, warranties, or representations contained in this Agreement and such breach has not been cured within thirty (30) days after the non-breaching party gives the breaching party written notice thereof or, if such breach is incapable of cure within thirty (30) days, if the breaching party does not commence to cure such breach within such thirty (30) day period and continuously prosecute the performance of the same to completion with due diligence; or 3. A party breaches a warranty contained in this Agreement; or 4. A party has been adjudicated or pled guilty (by a plea of nolo contendere or otherwise) of or to a felony or any other criminal charges that relate to a party's billing and collection or professional medical activities. C. Termination by Notice. Notwithstanding any other provision of this Agreement to the contrary, County may terminate this Agreement upon ninety (90) days' written notice to Kindred. D. Actions Following Termination. Upon the termination of this Agreement prior to the expiration of the term, County shall have reasonable access to the Records during regular business hours (in person or through use of electronic systems), and Kindred will establish a procedure to enable County representatives to gain reasonable access to the Records after regular business hours and on weekends, and to reproduce same, at County's sole cost and expense for the purposes set forth in Section 1(b). ARTICLE IV • MISCELLANEOUS • Kindred and County further agree as follows: A. Consequential Damages. Neither party shall be liable to the other for lost profits or revenues, or any indirect, incidental, consequential, or similar damages arising or alleged to arise out of this Agreement. B. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters described herein and shall supersede any prior agreement and understanding relating to the subject matter of this Agreement. C. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party hereto, which consent shall not be unreasonably withheld; provided, however, either party may freely assign this Agreement to any parent corporation, affiliate, or governmental sub-unit, as the case may be. This Agreement shall inure to the benefit of and be binding on each party's heirs, representatives, successors, and permitted assigns. 4 D. Amendment. This Agreement may only be amended by a written agreement executed by both parties. E. Notice. Any notice required under this Agreement shall be in writing, and delivered by registered or certified mail to the other party at the address set forth in the Asset Purchase Agreement unless one party gives notice in writing to the other party of another address to which such notice shall be sent. Hand delivery to such address shall also suffice if signed for by a representative of the party receiving the notice. F. Waiver. Any party may waive its right to insist upon full performance of one or more provisions of this Agreement, but no such waiver shall prevent such party from insisting on full performance of each such provision thereafter. G. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the substantive laws of the State of North Carolina without regard to its conflict of laws principles. H. Severance. Each provision of this Agreement shall be interpreted, to the extent reasonably practicable, so as to be effective and valid under applicable law. To the extent, however, that any such provision is determined to be ineffective, then this Agreement shall be ineffective only to the extent of such invalidity, and the remaining provisions of this Agreement shall be given full force and effect and construed so as to secure to each party the purposes and benefits hereof. I. Headings. The headings contained in this Agreement have been provided for convenience only and shall not be deemed to constitute a part of this Agreement. J. Relationship of Parties. The parties hereby expressly understand and agree that this Agreement is not intended and shall not be construed to create the relationship of agent (except as is expressly set forth herein), servant, employee, partnership, joint venture, or • association between the parties. K. Future Amendments. Notwithstanding any provision herein to the contrary, the parties agree to modify this Agreement, if necessary, to comply with the requirements of any future safe harbor regulation or other change in applicable law. If the parties are unable to reach such agreement prior to the effective date of such future regulation or change in law, then this Agreement shall terminate upon written notice by either party to the other. L. Destruction of Records. Nothing herein shall be deemed to preclude the destruction of Records in accordance with an established document destruction policy consistent with retention requirements under state and federal laws and regulations; provided that no Records may be destroyed if either party knows or should know that access to such Records may reasonably be required by the other party due to pending litigation, an ongoing or anticipated investigation or audit,patient care or other needs. [SIGNATURE PAGE FOLLOWS] 5 IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date above written KINDRED: ICAH DEVF.L 2, L.L.C., a Delaware limited lico/ C / By: Douglas Cumutte Senior Vice President, Corporate Development COUNTY: THE COUNTY OF HARNEIT, a body corporate and politic authorized by the laws of North Carolina By: Jose Jeffries County Manager 6 MEDICAL RECORDS CUSTODIAN AGREEMENT THIS MEDICAL RECORDS CUSTODIAN AGREEMENT ("Agreement") is entered into and effective March 1, 2017, by and between KAH DEVELOPMENT 12, L.L.C., a Delaware limited liability company ("Kindred"), and THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina("County"). Recitals: A. County currently provides home health and related services to patients in Harnett County, North Carolina through its agency known as "Harnett County Home Health Agency" (the`Business"); B. County is selling certain of the assets of the Business to Kindred pursuant to that certain Asset Purchase Agreement by and between County and Kindred (the "Asset Purchase Agreement"), effective as of the Effective Time (as such term is defined in the Asset Purchase Agreement). Thereafter, County shall retain and act as custodian of the medical records of all patients of the Business that have been discharged prior to the Effective Time ("Discharged Records"); C. County, acting in its capacity as custodian agrees to provide such custodial services to Kindred under the terms and conditions hereinafter set forth; and D. All capitalized terms not otherwise defined herein shall have the meaning attributed to them in the Asset Purchase Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein,the parties hereto do hereby agree as follows: ARTICLE I SERVICES TO BE PROVIDED A. Medical Records Custodial Services. 1. In General. During the term of this Agreement, County, acting in its capacity as custodian of the Discharged Records, shall provide the services described herein for Kindred. County shall provide medical records custodial services for those Discharged Records of County pertaining to the patients of County, whether in paper or electronic form, and including the business and accounting records for such patients to the extent the same are commingled with the medical records (each a "Record" and collectively, the "Records"). Specifically, County in its capacity as custodian shall do the following: a. Maintain the physical safety, security, and integrity of the Records at a site to be agreed upon by Kindred and County. Further, County shall implement reasonable safeguards against unauthorized use of, disclosure of, access to, damage to or destruction of the Records. b. Allow Kindred representatives reasonable access to the Records during regular business hours (in person or through use of electronic systems) for the purposes of billing and collection, or making or defending any claim, action or allegation related to patient care, billing, professional conduct, or similar issues which depend upon or are related to the Records or the care reflected in the Records, and will establish a procedure to enable Kindred representatives to gain reasonable access to the Records after regular business hours and on weekends, and to reproduce same, at Kindred's sole cost and expense. c. Maintain a system to account for the "check-in" and "check-out" of the Records by Kindred personnel. d. Maintain insurance covering the site at which the Records are stored, including coverage for"all hazards." e. Maintain the Records so as to comply with applicable provisions of federal law, the laws of the State of North Carolina, and in particular the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5, and the regulations promulgated thereunder(collectively, "HIPAA"). f. Upon the written request of any patient of Kindred (or the authorized legal representative of any patient of Kindred), make copies of such patient's Record(s) and shall charge the patient therefor in accordance with the provisions of HIPAA and applicable state law, unless County elects to waive such charge. County shall retain a copy of all such Records. g. County shall retain each Record for a period of at least eleven (11) years from the last date of treatment for an adult and for seven (7) years after a minor has reached the age of majority. 2. Representations and Warranties of County. a. County agrees that, in its performance of services under this Agreement, it shall not obligate Kindred financially or make any financial undertaking on behalf of Kindred or enter into any contract requiring Kindred to undertake liability, or perform services without the prior written approval of Kindred of such obligation, liability, or undertaking. b. County and its employees, agents, and independent contractors shall comply with all applicable laws or regulations regarding the confidentiality of the Records and agrees that such records shall not be used or disclosed except as provided under this Agreement or as may be required by applicable state or federal law. c. County agrees to indemnify and hold Kindred harmless from and against any and all liability, claims, demands, suits, proceedings, actions, damages, costs, and expenses (including actual reasonable attorneys' fees) incurred by Kindred as a result of County's performance or failure to perform its obligations under this Agreement, so long as such is not the result of the negligence or misconduct of Kindred or its officers, directors, employees, or agents. 2 d. County represents and warrants to Kindred that County (i) is not currently excluded, debarred, or otherwise ineligible to participate in the federal health care programs as defined in 42 U.S.C. §1320a-7b(f) (the "federal health care programs"); (ii) has not been convicted of a criminal offense related to the provision of health care items or services and has not been excluded, debarred, or otherwise declared ineligible to participate in the federal health care programs; and (iii) is not under investigation or otherwise aware of any circumstances that may result in County being excluded from participation in the federal health care programs. County shall immediately notify Kindred of any change in the status of the representation and warranty set forth in this section. Any breach of this section shall give Kindred the right to terminate the Agreement immediately for cause, the other provisions of this Agreement to the contrary notwithstanding. e. County shall promptly notify Kindred in the event it changes the location(s) where the Records are maintained. f. County shall, during the term of this Agreement, permit Kindred to have reasonable access to the Records and to reproduce the same, at its sole cost and expense. ARTICLE II CONSIDERATION The parties agree that the services to be provided to County by Kindred as custodian under that certain Medical Records Custodian Agreement of even date herewith ("Reciprocal Agreement") and the services to be provided to Kindred by County as custodian under this Agreement are of approximately equal value, are consideration one for the other, and such rights have been negotiated at arms' length by the parties hereto. County shall be responsible for all costs incurred in its operations as custodian of the Records. County shall have no obligation to pay any costs incurred by Kindred, and Kindred shall have no obligation to make any payment to County in consideration for the services provided hereunder. Notwithstanding the preceding sentence, Kindred shall be required to pay County for copies of the Records made at the request of any duly authorized officer of Kindred at the rate established by North Carolina law, or if no such rate applies, then at a reasonable rate, including any storage and retrieval fees specified therein. ARTICLE III TERM AND TERMINATION A. Term. The term of this Agreement shall begin as of the Effective Time and end on the eleventh (11'") anniversary of the Effective Time, unless sooner terminated in accordance with the provisions of this Agreement. B. Termination for Cause. Either County or Kindred shall have the right to terminate this Agreement upon written notice to the other effective the date of the notice, upon the occurrence of any of the following events: 3 ' I 1. A party's voluntary or involuntary filing of a petition for bankruptcy, reorganization, or receivership under federal or state law that is not dismissed within sixty (60) days after the commencement of such filing; or 2. The breach by a party of any of its obligations, warranties, or representations contained in this Agreement and such breach has not been cured within thirty (30) days after the non-breaching party gives the breaching party written notice thereof or, if such breach is incapable of cure within thirty (30) days, if the breaching party does not commence to cure such breach within such thirty (30) day period and continuously prosecute the performance of the same to completion with due diligence; or 3. A party breaches a warranty contained in this Agreement; or 4. A party has been adjudicated or pled guilty (by a plea of nolo contendere or otherwise) of or to a felony or any other criminal charges that relate to a party's billing and collection or professional medical activities. I C. Termination by Notice. Notwithstanding any other provision of this Agreement to the contrary, Kindred may terminate this Agreement upon ninety (90) days' written notice to County. D. Actions Following Termination. Upon the termination of this Agreement prior to the expiration of the term, Kindred shall have reasonable access to the Records during regular business hours (in person or through use of electronic systems), and County will establish a procedure to enable Kindred representatives to gain reasonable access to the Records after ff� regular business hours and on weekends, and to reproduce same, at Kindred's sole cost and expense for the purposes set forth in Section 1(b). ARTICLE IV MISCELLANEOUS • Kindred and County further agree as follows: A. Consequential Damages. Neither party shall be liable to the other for lost profits or revenues, or any indirect, incidental, consequential, or similar damages arising or alleged to arise out of this Agreement. B. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters described herein and shall supersede any prior agreement and understanding relating to the subject matter of this Agreement. C. Assignment. This Agreement may not be assigned by either party without the • prior written consent of the other party hereto, which consent shall not be unreasonably withheld; provided, however, either party may freely assign this Agreement to any parent corporation, affiliate, or governmental sub-unit, as the case may be. This Agreement shall inure to the benefit of and be binding on each party's heirs, representatives, successors, and permitted assigns. 4 D. Amendment. This Agreement may only be amended by a written agreement executed by both parties. E. Notice. Any notice required under this Agreement shall be in writing, and delivered by registered or certified mail to the other party at the address set forth in the Asset Purchase Agreement unless one party gives notice in writing to the other party of another address to which such notice shall be sent. Hand delivery to such address shall also suffice if signed for by a representative of the party receiving the notice. F. Waiver. Any party may waive its right to insist upon full performance of one or more provisions of this Agreement, but no such waiver shall prevent such party from insisting on full performance of each such provision thereafter. G. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the substantive laws of the State of North Carolina without regard to its conflict of laws principles. H. Severance. Each provision of this Agreement shall be interpreted, to the extent reasonably practicable, so as to be effective and valid under applicable law. To the extent, however, that any such provision is determined to be ineffective, then this Agreement shall be ineffective only to the extent of such invalidity, and the remaining provisions of this Agreement shall be given full force and effect and construed so as to secure to each party the purposes and benefits hereof I. Headings. The headings contained in this Agreement have been provided for convenience only and shall not be deemed to constitute a part of this Agreement. J. Relationship of Parties. The parties hereby expressly understand and agree that this Agreement is not intended and shall not be construed to create the relationship of agent (except as is expressly set forth herein), servant, employee, partnership, joint venture, or association between the parties. K. Future Amendments. Notwithstanding any provision herein to the contrary, the Parties agree to modifythis Agreement, if necessary, to comply with the requirements of any future safe harbor regulation or other change in applicable law. If the parties are unable to reach such agreement prior to the effective date of such future regulation or change in law, then this Agreement shall terminate upon written notice by either party to the other. L. Destruction of Records. Nothing herein shall be deemed to preclude the destruction of Records in accordance with an established document destruction policy consistent with retention requirements under state and federal laws and regulations; provided that no Records may be destroyed if either party knows or should know that access to such Records may reasonably be required by the other party due to pending litigation, an ongoing or anticipated investigation or audit,patient care or other needs. 5 • • • IN WITNESS WHEREOF, the parties have executed this Agreement effective the as of date above written. • KINDRED: KAH DEVELO' ,11 12, L.L.C., a Delaware limited l':•' comp. y By: d%/tte- Dou_ :- S I. Vice President,Corporate Development COUNTY: • THE COUNTY OF H.4RNETT, a body corporate and politic authorized by the laws of North Carolina By: e Joeffri�(/ County Manager 6 EXHIBIT B RESTRICTED FUND AGREEMENT Attached. 1 1 RESTRICTED FUND AGREEMENT THIS RESTRICTED FUND AGREEMENT (this "Agreement") is effective the 1st day of March, 2017, by and between THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina ("Seller"), and KAH DEVELOPMENT 12, L.L.C., a Delaware limited liability company("Purchaser"). A. Seller and Purchaser have entered into that certain Asset Purchase Agreement dated February? ,, 2017 (the "APA"), pursuant to which Purchaser is acquiring certain assets of Seller as described within the APA; B. Pursuant to Section 6 of the APA, Two Hundred Thousand Dollars ($200,000.00) of the Purchase Price is to be placed in a Restricted Fund Balance Account (the "Account") pursuant to this Restricted Fund Agreement; and C. Capitali7Pd terms used herein but not otherwise defined shall have the meanings ascribed to them in the APA. NOW, 111112REFORE, in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Establishment of Restricted Fund Balance Account. Seller has established a restricted fund within its main operating account for the purpose of serving as the Account. The Account is being created in order to secure indemnification obligations of Seller pursuant to the APA. Simultaneously with the Closing pursuant to the terms of the APA, Seller shall deposit,by wire transfer, immediately available funds in the amount of Two Hundred Thousand Dollars ($200,000.00) into the Account to be held pursuant to the terms of this Agreement. The Account shall consist only of the amounts placed in the Account pursuant to this Agreement, and shall not be comingled with any other accounts of Seller, and shall only be drawn upon in accordance with the terms of this Agreement. 2. Ownership and Restricted Fund Balance Account. Seller shall, at all times, be owner of the Account, subject to the contractual rights and obligations as described herein. Any investment earnings or income on the Account shall be the property of Seller and shall not become part of the Account and may be disbursed to Seller at Seller's direction. 3. Disbursement. Pursuant to Section 6 of the APA, Seller shall be permitted to withdraw funds from the Account as follows: (a) on the first (1) anniversary of the Closing, Seller shall be permitted to withdraw any funds in excess of One Hundred Thousand Dollars ($100,000.00) from the Account; on the second (2nd) anniversary of the Closing, Seller shall be permitted to withdraw any remaining funds held in the Account less the amount of any pending Purchaser's Claims (as defined below). 4. Account Access. Seller shall provide Purchaser with a copy of all monthly statements to verify account balance and activity, and all statements and notifications related to the Account within five (5) days of Seller's receipt of the same during the term of this Agreement. 5. Claims Procedure. In the event that Purchaser has a claim for indemnification pursuant to the APA that would constitute a claim against the Account (a "Purchaser's Claim"), Purchaser shall provide written notice to Seller specifying the factual basis for the claim and the amount of the claim. Upon receipt of the notice of Purchaser's claim, Seller shall have thirty (30)days to investigate Purchaser's Claim (the "Review Period"), and to work with Purchaser in resolving the claim. If the claim is resolved and an amount is due, Seller shall promptly distribute such amount from the Account to Purchaser. In the event that the parties cannot agree upon the amount of such claim within the Review Period, then Purchaser may institute legal action with respect to Purchaser's Claim, and the amount of such claim shall be treated as a pending Purchaser's Claim until finally resolved. In the event that Purchaser does not institute legal action within thirty (30) days following the expiration of the Review Period, then Purchaser's Claim shall no longer be treated as a pending claim against the Account, although Purchaser shall retain the right to sue Seller to enforce such claim. 6. Miscellaneous Provisions. (a) Notices; Demands; Requests. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt); (ii) received by the addressee, if sent by certified mail, return receipt requested; or (iii) received by the addressee, if sent by a nationally recognized overnight delivery service, in each case to the appropriate addresses or facsimile numbers set forth below (or to such other addresses or facsimile numbers as a party may designate by notice to the other parties): As to Seller: Harnett County Attn: Joseph Jeffries, County Manager P.O. Box 759 Lillington,NC 27546 As to Purchaser: KAH Development 12, L.L.C. Attn: Douglas Curnutte Senior Vice President, Corporate Development 680 South Fourth Street Louisville, KY 40202 With a copy to: Kindred Healthcare, Inc. Attn: Jeffrey P. Stodghill Vice President and Corporate Counsel 680 South Fourth Street Louisville,KY 40202 Any such addresses may be changed at any time upon written notice of such change sent by the means stated above,to the other party by the party effecting the change. (b) Severability. If any one or more of the agreements or provisions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, the invalidity of such covenants, agreements, and provisions shall in no way affect the validity or effectiveness 2 of the remainder of this Agreement, and this Agreement shall continue in force to the fullest effect permitted by law. (c) State Law Controlling. This Agreement shall be construed and enforced in accordance with the substantive laws of the State of North Carolina. (d) Venue. The parties agree that any litigation necessary to resolve a dispute arising under this Agreement shall be brought in the General Court of Justice in the County of Harnett and the State of North Carolina. • (e) Successors; Assignment. This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors, and permitted assigns of the parties. Neither party may assign this Agreement without the prior written consent of the other. (t) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter and may not be changed, modified, or amended, except by an instrument in writing signed by the party against whom such change, modification, or amendment is asserted. • (g) Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. (h) Execution of Agreement; Counterparts. This Agreement may be executed in one or more counterparts (including, without limitation, by electronic or facsimile signatures and transmission), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. [SIGNATURE PAGE FOLLOWS] • 3 IN WITNESS WHEREOF, the duly authorized officers of the parties hereof have • executed this Agreement as of the date first written above. SELLER: THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina By: Name: Jo ph J Title: County Manager PURCHASER: I(AH DEVELOPMENT 12, L.L.C.,a De!, limited liability company By: 1/ Name:DTA :• Cumutte Its: S .'or Vice President,Corporate Development 4 C EXHIBIT C i BILL OF SALE AND ASSIGNMENT Attached. i BILL OF SALE AND ASSIGNMENT THIS BILL OF SALE AND ASSIGNMENT (this "Bill of Sale") is entered into and made effective as of the 1' day of March, 2017 (the "Effective Date") by THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina ("Seller"), in favor of and KAH DEVELOPMENT 12, L.L.C., a Delaware limited liability company ("Purchaser"). RECITALS: A. Seller and Purchaser are parties to that certain Asset Purchase Agreement dated February , 2017 (the "Asset Purchase Agreement"). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Asset Purchase Agreement. B. Pursuant to the Asset Purchase Agreement, Seller has agreed to assign, transfer, sell and convey to Purchaser, and Purchaser has agreed to purchase, accept and assume from Seller, all of Seller's right, title, interests and obligations to and under the Assets other than the Excluded Assets. NOW, 1'HLREFORE, for and in consideration of the mutual covenants contained herein and in the Asset Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and Purchaser agree as follows: 1. Transfer and Conveyance. On the terms and subject to the conditions, representations, warranties, covenants and indemnities contained in the Asset Purchase Agreement, Seller hereby sells, conveys, assigns, transfers, and delivers to Purchaser, free and clear of all pledges, security interests, mortgages, liens and encumbrances, and Purchaser hereby accepts and assumes from Seller, all legal, beneficial and other rights, title, benefit, privileges, and interest in and to the Assets. 2. Seller Liabilities. Seller shall remain liable and shall discharge all liabilities and obligations arising prior to the Effective Time under or in connection with the Assets. Notwithstanding anything contained herein or in the Asset Purchase Agreement to the contrary, the Excluded Assets (and all liabilities and obligations thereunder) are not subject to this Agreement and shall be retained by Seller following the Effective Time. 3. Binding Effect. This instrument shall inure to the benefit of Purchaser and its successors and assigns and shall be binding upon Seller and its successors and assigns. 4. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute a single instrument. 5. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of North Carolina, without regard to its conflict of law principles. I• ( f . ia8eus ri o, `sauja; qdasof •OF, .Ag I . eugonD Tt1ToN I . jo mei am Aq pazuoglns opirod pus mate:ioo APoq s `I L�NUVH AO A.LNIlOG RL :liarYlaS { •aleQ anpaajjg alp 3o se paiangap pus palnoaxa Atop uaaq seg alas 3o mg sup`3O32I3HAA S.M. N.I IAA Air •8uT1ouuoo aq ip qs ;uauiaaJSy assgamd gassy aql Jo suorsrno.d am `lualsisuoour am Lam lualxa atp of 3r pus `luauiaai2y asegoand gassy am jo suorsinoid alp of laafgns aq!isms luauiaai2y sup jo suorstnoid I am Valmuoo am of uraiaq 8unpAue 8urpuelsglimloN •suuai nupalpuo0 •9 i.. L IEXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT R� Attached. ' I 'l rI °- ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is effective as of the 1st day of March, 2017, by and between THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina ("Assignor"), and KAH DEVELOPMENT 12,L.L.C., a Delaware limited liability company("Assignee"). °I Recitals: A. Contemporaneously with the execution of this Assignment, Assignee has purchased f Assignor's home health agency, which operates within the geographic boundaries of Harnett County, North Carolina, pursuant to that certain Asset Purchase Agreement by and between Assignor and Assignee, dated February 202017 (the"Asset Purchase Agreement"); B. Section 1(h) of the Asset Purchase Agreement requires that Assignor shall assign, and that Assignee shall assume, all of Assignor's obligations pursuant to the contracts listed on Schedule 1(h) of the Asset Purchase Agreement; C. Attached hereto as Exhibit A is a listing of the contracts subject to and a part of this Assignment(collectively,the"Assigned Contracts"); D. Assignee desires that Assignor transfer and assign to Assignee all of Assignor's right, title, and interest in, and under the Assigned Contracts, and Assignee accepts such assignment as herein stated; and E. All capitalized terms not otherwise defined herein shall have the meanings attributed to them in the Asset Purchase Agreement. NOW, THEREFORE, in consideration of the mutual premises, agreements, and mutual covenants set forth herein and in the Asset Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby irrevocably acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows: 1. Assignment and Assumption of Assigned Contracts. Assignor hereby assigns to Assignee, its successors and assigns all of its right, title, and interest in, to, and under the Assigned Contracts, and Assignee hereby accepts and assumes all obligations of Assignor arising under the Assigned Contracts on or after the Effective Time, but specifically excluding all obligations or liabilities arising from any default, breach or violation of any such Assigned Contract occurring on or prior to the Effective Time, whether occurring as a result of the transactions contemplated by the Asset Purchase Agreement or otherwise). Notwithstanding the foregoing, if the assignment, attempted to be made hereunder of any Assigned Contract, would be ineffective as between Assignor and Assignee without the consent of a third party, or would constitute a cause for terminating or invalidating such Assigned Contract, then such Assigned Contract is excluded from this Assignment and Assignor shall cooperate with Assignee to obtain all required consents to facilitate the assignment of said contract. Upon obtaining such consents, no further assignment or conveyance shall be required, but rather full and complete title to such Assigned Contract shall automatically become vested in Assignee by virtue of this instrument. If all required consents are TI 1 r I not obtained with respect to any Assigned Contract, Assignor shall cooperate with Assignee in any reasonable arrangement designed to provide for Assignee the benefits of such Assigned Contract. 2. Further Assurances. Assignor shall do, execute, acknowledge, and deliver all such further acts, deeds, instruments, transfers, powers of attorney, or assurances as may be reasonably requested by Assignee from time to lime for the purpose of confirming the assignment of the Assigned Contracts, and Assignee shall do, execute, acknowledge, and deliver all such PI further acts, deeds, instruments, transfers, powers of attorney, or assurances as may be reasonably requested by Assignor from time to time for the purpose of confirming the assumption by Assignee of the Assigned Contracts, subject to the limitations set forth in this Assignment and in the Asset { Purchase Agreement. ! 3. Successors and Assigns.- This Assignment shall be binding upon, and inure to the I benefit of, and be enforceable by, the parties hereto and their respective successors and assigns, except that none of the parties shall have the right to assign any of its obligations hereunder without the prior written consent of the other party hereto. ' 4. Section Headings. The section headings herein have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. I5. Governing Law. This Assignment shall be governed by and construed and enforced in accordance with the substantive laws of the State of North Carolina. Iit 6. Counterparts. This Assignment may be executed in counterparts, each of which is an original and all of which taken together shall constitute a single instrument. 7. Conflicting Terms. Notwithstanding anything herein to the contrary, the I provisions of this Assignment shall be subject to the provisions of the Asset Purchase Agreement, and if to the extent they are inconsistent, the provisions of the Asset Purchase Agreement shall be controlling. [SIGNATURE PAGE FOLLOWS] I I I I I 2 I 1 r1 71 `1 IN WITNESS WHEREOF,the duly authorized officers of the parties hereof have VI executed this Assignment and Assumption Agreement as of the date first written above. 1 ASSIGNOR THE COUNTY OF HARNETT, a body corporate 'I and politic authorized by the laws of North Carolina I By. Name:Jo J e Its: County Manager ASSIGNEE: KAH DE I PMENT 12, L.L.C., a Delaware limited • mpany By: \ / ://7 Name: I./. Cumutte Its:Seni•r Vice President,Corporate Development 1 3 I , z� vi EXHIBIT A Assigned Contracts Pi Blue Cross and Blue Shield of North Carolina UNC United Healthcare T Humana '1 . I 44847-5302-9699 v.3- Pi II r SCHEDULE 1(f) INTELLECTUAL PROPERTY °I Main Number: (910)893-7544 Fax Number: (910)814-8266 'I r1 t1 I I 1 rl vt rl SCHEDULE 1(h. ASSIGNED CONTRACTS Blue Cross and Blue Shield of North Carolina ri UNC ` United Healthcare Humana ' I 1 ri r1 r SCHEDULE 1A EXCLUDED ASSETS `I 1. Seller's accounts receivable, cash, and cash equivalents owned by Seller associated with the Business. ' 1 2. Seller's bank accounts. 3. Seller's furniture, furnishings, and equipment used in the operation of the IBusiness. 4. Seller's real or personal property used in the operation of the Business. { 5. Seller's computer hardware, software, and other information technology used in the operation of the Business, except that Seller agrees that such assets shall remain available for Purchaser's use through the date of the Tie-In Notice. 6. Seller's vehicles used by staff to serve patients. I I I I I . I 1 I I rl rl SCHEDULE 14(a) EMPLOYEES T Marva Walden, RN ,I ' I ' I ' I . I I � 1 I SCHEDULE 18(c) NOTICES AND CONSENTS fiA determination by the CON Section, that Seller's sale, and Purchaser's acquisition, of the Assets is exempt from certificate of need review. Written notice to the Acute and Home Care Section of a contemplated licensure change of ownership. { Written notice to CMS, in the manner prescribed by CMS, of a contemplated change of ownership pursuant to 42 C.F.R. § 489.18. , E • I . I . I } cl vi v SCHEDULE 18(f) GOVERNMENTAL AUTHORIZATIONS North Carolina Home Health License: HC0503 Medicare Provider Number: 34-7089 IMedicaid Provider Number: 3407089 National Provider Identifier Number: 1174520803 I . I I I . I I 1 Ti I SCHEDULE 18(h' CONFLICTS I A determination by the CON Section, that Seller's sale, and Purchaser's acquisition, of the Assets is exempt from certificate of need review. I Change of Ownership Licensure Application, which will be processed by the Acute and Home Care Section. CMS Tie-In Notice. ' I . I . I I .1 rl THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina r I CERTIFICATE PURSUANT TO ASSET PURCHASE AGREEMENT r Pursuant to Section 8(b) of the Asset Purchase Agreement, dated February J 2017 (the "Asset Purchase Agreement"), by and between THE COUNTY OF HARNETT, a body corporate and politic authorized by the laws of North Carolina ("Seller"), and KAH DEVELOPMENT 12, L.L.C., a Delaware r I limited liability company("Purchaser"),the undersigned does hereby certify that: 1. The representations and warranties of Seller contained in the Asset Purchase Agreement are true and correct as of the date hereof,and I2. Seller has performed in all material respects all covenants and agreements required to be performed by it at or prior to the date hereof. ' I IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of the 28th day of February, 2017 on behalf of Seller and in the capacity indicated below. THE COUNTY OF HARNETT,a body corporate and politic authorized by the laws of North Carolina • By: SS ei Print Na : Jose Tide: County Manager . I � Ii RALEIGH 512748.1 .1