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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 2016 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-09848 ALMOST FAMILY, INC. (Exact name of Registrant as specified in its charter) Delaware 06-1153720 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 9510 Ormsby Station Road, Suite 300, Louisville, Kentucky 40223 (Address of principal executive offices) (502) 891-1000 (Registrant’s telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act Title of each class Name of each exchange on which registered Common Stock, par value $0.10 per share NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒ The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last day of the second fiscal quarter ended July 3, 2015 was $334,169,264 based on the last sale price of a share of the common stock as of July 2, 2015 ($39.21), as reported by the NASDAQ Global Market. Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Class Outstanding at March 2 , 2016 Common Stock, $0.10 par value per share 10, 299,575 Shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the 201 6 definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders are incorporated by reference in Part III to the extent described therein. Table of Contents TABLE OF CONTENTS PART I Item 1. 4 Business 4 Item 1A. Risk Factors 17 Item 1B. Unresolved Staff Comments 28 Item 2. Properties 28 Item 3. Legal Proceedings 28 Item 4. Mine Safety Disclosures 28 PART II 29 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 5. Item 7A. Quantitative and Qualitative Disclosures about Market Risk 50 Item 8. Financial Statements and Supplementary Data 51 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 77 Item 9A. Controls and Procedures 77 Item 9B. Other Information 77 PART III 77 Item 10. Directors, Executive Officers and Corporate Governance 77 Items 11, 12, 13 and 14. Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and Related Transactions; and Director Independence; and Principal Accountant Fees and Services 78 PART IV 80 Item 15. Exhibits and Financial State m ent Schedules 80 2 Table of Contents In this report, the terms “Company,” “we,” “us” or “our” mean Almost Family, Inc. and all subsidiaries included in our consolidated financial statements. Special Caution Regarding Forward-Looking Statements Certain statements contained in this annual report on Form 10-K, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” “assumes,” “trends” and similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company’s current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions; demographic changes; changes in, or failure to comply with, existing governmental regulations; legislative proposals for healthcare reform; changes in Medicare and Medicaid reimbursement levels; changes in laws and regulations with respect to Accountable Care Organizations; effects of competition in the markets in which the Company operates; liability and other claims asserted against the Company; potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation; ability to attract and retain qualified personnel; availability and terms of capital; loss of significant contracts or reduction in revenues associated with major payor sources; ability of customers to pay for services; business disruption due to natural disasters or terrorist acts; ability to successfully integrate the operations of acquired businesses and achieve expected synergies and operating efficiencies from the acquisition, in each case within expected time-frames or at all; ability to successfully develop investments made by our healthcare innovations segment, in light of the highly speculative nature of these early stage investments; significant deterioration in economic conditions and significant market volatility; effect on liquidity of the Company’s financing arrangements; and changes in estimates and judgments associated with critical accounting policies and estimates. For a detailed discussion of these and other factors that could cause the Company’s actual results to differ materially from the results contemplated by the forward-looking statements, please refer to Item 1A. “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this report. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Except as required by law, the Company does not intend to publicly release any revisions to forward-looking statements to reflect unforeseen or other events after the date of this report. The Company has provided a detailed discussion of risk factors within this annual report on Form 10-K and various filings with the Securities and Exchange Commission (“SEC”). The reader is encouraged to review these risk factors and filings. 3 Table of Contents PART I ITEM 1. BUSINES S Introduction Almost Family, Inc. TM and subsidiaries (collectively “ Almost Family ”) is a leading, regionally focused provider of home health services. We have service locations in Florida, Ohio, Tennessee, New York, Kentucky, Connecticut, New Jersey, Massachusetts, Indiana, Illinois, Pennsylvania, Georgia, Missouri, Mississippi and Alabama (in order of revenue significance in 2015). We were incorporated in Delaware in 1985. Through a predecessor merged into the Company in 1991, we have been providing health care services, primarily home health care, since 1976. We reported approximately $532 million of revenues for the year ended January 1, 2016 . Unless otherwise indicated, the financial information included in Part I is for continuing operations. Website Access to Our Reports Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.almostfamily.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information contained on Almost Family’s website is not part of this annual report on Form 10-K and is not incorporated by reference in this document. How We Are Currently Organized and Operate The Company has two divisions, Home Health care and Healthcare Innovations. The Home Health care division is comprised of two reportable segments, Visiting Nurse Services (VN or Visiting Nurse) and Personal Care Services (PC or Personal Care). Healthcare Innovations is also a reporting segment. Reportable segments have been identified based upon how management has organized the business by services provided to customers and the criteria in Accounting Standards Codification (ASC) Topic 280, Segment Reporting . Our VN segment provides a comprehensive range of Medicare-certified home health nursing services to patients in need of recuperative care, typically following a period of hospitalization or care in another type of inpatient facility. Our services are often provided to patients in lieu of additional care in other settings, such as long term acute care hospitals, inpatient rehabilitation hospitals or skilled nursing facilities. Our nurses, therapists, medical social workers and home health aides work closely with patients and their families to design and implement an individualized treatment response to a physician-prescribed plan of care. Under the umbrella of our “Senior Advocacy” mission, we offer special clinically-based protocols customized to meet the needs of the increasingly medically complex, chronic and co-morbid patient populations we serve. Examples include Optimum Balance, Silver Steps, Cardiocare, Orthopedic and Conjestive Heart Failure in the Home. VN Medicare revenues are generated on a per episode basis rather than a fee per visit or hourly basis. Approximately 94% of the VN segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs. Our PC segment provides services in patients’ homes primarily on an as-needed, hourly basis. These services include personal care, medication management, meal preparation, caregiver respite and homemaking. Our services are often provided to patients who would otherwise be admitted to skilled nursing facilities for long term custodial care. PC revenues are generated on an hourly basis. Approximately 83% of the PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. The Healthcare Innovations segment includes our developmental activity outside of the traditional home health business platform. 4 Table of Contents Additional financial information about our segments can be found in Part II, Item 8, “Notes to Consolidated Financial Statements” and related notes included elsewhere in this Form 10-K. Our View on Reimbursement and Diversification of Risk Our Company is highly dependent on government reimbursement programs which pay for the majority of the services we provide to our patients and customers. Reimbursement under these programs, primarily Medicare and Medicaid, is subject to frequent changes as policy makers balance constituents’ needs for health care services within the constraints of the specific government’s fiscal budgets. Medicare and Medicaid, respectively, are consuming a greater percentage of federal and states’ budgets, which is exacerbated in times of economic downturn. We believe that these financial issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services. Additionally, we believe our services offer the lowest cost alternative to institutional care and are a part of the solution to the federal government’s Medicare and states’ Medicaid financing problems. We believe that an important key to our historical success and to our future success is our ability to adapt our operations to meet changes in reimbursement as they occur. One important way in which we have achieved this adaptability in the past, and in which we plan to achieve it in the future, is to maintain some level of diversification in our business mix. The execution of our business plan will place primary emphasis on the development of our home health operations. As our business grows, we may evaluate opportunities for the provision of other health care services in patients’ homes that would be consistent with our Senior Advocacy mission. Our Business Plan Our future success depends on our ability to execute our business plan. Over the next three to five years we will try to accomplish the following: Generate meaningful same store sales growth through the focused provision of high quality services and attending to the needs of our patients; Drive our costs down, while continuing to provide high quality patient care, by improving the productivity of our work force through improved monitoring, tighter controls, workflow automation, use of technology and other opportunities for efficiency gains; Expand the significance of our home health services by selectively acquiring other quality providers, through the startup of new agencies and potentially by providing new services in patients’ homes consistent with our Senior Advocacy mission; Make additional strategic investments which expand our Healthcare Innovation segment in its mission to find solutions for more effective, efficient and appropriate delivery of homecare; and Expand our capital base through both earnings performance and by seeking additional capital investments in our Company. 5 Table of Contents Overview of Our Services Home Health Division Services Operating Locations Our operating locations for our VN and PC Segments in our home health division as of fiscal year end were as follows: Geographic Clusters Southeast Florida Tennessee Georgia Mississippi Alabama Northeast Pennsylvania New Jersey New York Massachusetts Connecticut Midwest Kentucky Ohio Indiana Missouri Illinois Total 2015 Branches Visiting Personal Nurse Care 48 23 9 2 1 6 6 5 5 4 2014 Branches Visiting Personal Nurse Care 7 8 — — — 51 23 9 2 1 2 8 6 — 7 — — 7 8 — — — 2 — — — 8 5 3 21 16 9 4 3 4 38 — — — 21 12 11 4 4 4 33 — — — 162 74 160 61 7 Late in the fourth quarter of 2015, we closed or merged certain underperforming locations in Florida, Pennsylvania, Indiana, and Illinois. On August 29 and on November 5 , 2015, we acquired operating locations in New York and Connecticut, and Ohio, respectively. Visiting Nurse Services Our VN segment services consist primarily of the provision of skilled in-home medical services to patients in need of short-term recuperative health care. Our patients are referred to us by their physicians or upon discharge from a hospital or other type of in-patient facility. We operate 94 Medicare-certified home health agencies with a total of 16 2 locations. In the fiscal year ended January 1, 2016 , approximately 94% of our visiting nurse segment revenues were derived from the Medicare program. Our Visiting Nurse segment provides a comprehensive range of Medicare-certified home health nursing services. We receive payment from Medicare, Medicaid and private insurance companies. Our professional staff includes registered nurses, licensed practical nurses, physical, speech and occupational therapists, and medical social workers. They fulfill medical treatment plans prescribed by physicians. Our professional staff is subject to state licensing requirements in the particular states in which they practice. Para-professional staff members (primarily home health aides) also provide care to these patients. 6 Table of Contents Our Visiting Nurse segment operations located in Florida normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. Personal Care Services Our PC segment services are also provided in patients’ homes. These services (generally provided by para-professional staff such as home health aides) are generally of a custodial rather than skilled nature. Generally, PC revenues are generated on an hourly basis. We currently operate 74 Personal Care locations. In the fiscal year ended January 1, 2016 , approximately 83% of our personal care segment revenues were derived from the Medicaid program. Healthcare Innovations Segment Our HealthCare Innovations (HCI) business segment was created to house and separately report on our developmental activities outside our traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit our patients and payers through the enhanced provision of home health services. HCI activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. These include, but are not limited to: technology, information, population health management, risk-sharing, assessments, care coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision making. We believe these activities help us discover valuable insight and experiences that would not otherwise be gained in the routine operation of our core home health business segments. Further, we believe these innovation activities, will play an important role in collaborating with policy makers, payers, providers, and anyone who assumes financial risk for managing patient populations, to seek to reduce costs , and improve quality by providing increasingly more care for more patients in their homes than ever before. As discussed further below, the HCI segment now includes: a) Imperium Health Management, an ACO enablement company, b) an investment in NavHealth, a population-health analytics company, c) Ingenios Health, a Nurse-Practitioner-oriented and mobile technology-enabled health risk assessment company primarily serving managed care organizations; and d) Long Term Solutions, an in-home assessment company serving the long-term care insurance industry. Some of these initiatives are highly speculative and have been made in development stage enterprises. There can be no assurance that we will receive any return on, or of, the capital we invest in these ventures. However, we believe these activities already have, and will continue to help us, discover valuable insigh ts and experiences we would not otherwise gain in the routine operation of our core home health business segments. These endeavors are part of a growing number of care-related innovations and reforms. We expect more will be attempted over the next several years. Imperium Imperium’s purpose is to assist independent primary care physician practices in establishing and successfully operating Accountable Care Organizations (“ACOs”) first made possible by 2010’s Affordable Care Act. Through improved care management, in a coordinated effort led by primary care physicians, with nurses and home health agencies using evidence-based clinical standards, we seek to reduce avoidable hospitalizations, emergent care, and non-impactful health care services. We seek to work together with primary care physicians to manage high-cost patients in lower-cost settings, with a goal of generating, and sharing in, savings to the Medicare program. By linking physicians with home health care through the ACO vehicle we seek to deliver meaningful savings to the healthcare system and participate in a share of those savings under the Medicare Shared Savings Program (“MSSP”) and such other similar models as may evolve in the future. In the past year, Imperium has rapidly expanded its customer base growing from 3 ACOs under contract in 2013, to 7 in 2014 , 11 in 2015 and 14 in 2016 . In terms of covered Medicare beneficiaries, Imperium has grown from 23,000 in 2013, to 45,000 in 2014 and 85,000 in 2015 and now has 124,000 in 2016 . While we intend to work together toward the development of additional ACO relationships in markets in which Almost Family also provides home health services, Imperium also currently has, and will continue to seek, ACO customers in other service territories. We own 61.5% of Imperium and consolidate its result in our financial statements. We report a provision for noncontrolling 7 Table of Contents interests (NCI) to reflect the income or losses attributable to the 38.5% interest that we do not own. Additionally, due to certain put-call arrangements we also reflect a mandatorily redeemable noncontrolling interest amount of $3.6 million related to Imperium between the liability and equity sections of our balance sheet. CMS announced the first year financial reconciliation and quality performance results for ACOs in September of 2014, in which, f ifty-three ACOs generated shared savings during their first performance year ended December 31, 2013. ACOs that generated savings earned a performance payment, if they met the quality standard. CMS announced the second year results in September of 2015. An Imperium serviced ACO received an MSSP payment in the first and second CMS results. Imperium received its share $1.4 million in 2015 for 2014 services and $1.6 million in 2014 for 2013 services. There can be no assurance that future payments will be made by CMS, the structure of MSSP payments will remain as currently deployed, or that an MSSP payment will be received in 2016 related to our 2015 services or any future period. NavHealth NavHealth is a development-stage enterprise whose business plan is focused on the development of technology-based tools designed to help health systems anticipate and inform a patient’s journey through the health care system. Among its other objectives, NavHealth seeks to develop and market a software platform designed to assist health care providers, managed care organizations and insurers in their efforts to aggregate patient data from various sources, improve patient engagement, satisfaction and outcomes and lower the overall cost of healthcare delivery. We are co-invested in NavHealth with founders Aneesh Chopra and Hunch Analytics which Chopra co-founded with Sanju Bansal. Mr. Bansal is the co-founder and former COO of MicroStrategy (MSTR), a worldwide provider of enterprise software for cloud business intelligence and big data services. We made an initial $1 million noncontrolling investment in NavHealth on January 29, 2015 and may, at our option, invest another $1 million. We account for this non-controlling investment under the cost method. Ingenios Health Co. Ingenios Health Co. (“Ingenios”) is a provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in seven states and Washington, D.C. We believe new health assessment capabilities provide the key element in the evolution of improved care planning and delivery as healthcare delivery and reimbursement models evolve. Long-Term Solutions On January 5, 2016, we acquired Long Term Solutions , Inc. ( “ LTS ” ). See “Acquisitions” for additional information. LTS performs in-home nursing assessments for the long-term care insurance industry. LTS also provides a suite of planning and support services to insurance companies, employers and direct to individuals and families throughout the United States. LTS, through its network of thousands of assessment service partners provides assessments in all 50 U.S. states and a number of foreign countries. LTS estimates that the majority of its assessments result in the patient ultimately receiving home health, assisted living or skilled nursing care in accordance with their long-term care insurance benefits. One of every four of LTS’s 2015 assessments was performed in territories currently served by our home health operations. The American Association for Long-Term Care Insurance ( “ AALTCI ” ) estimates that the industry paid over $7.5 billion in claims covering 273,000 beneficiaries across the US in its most recently studied year and that over two thirds of all newly-opened long term care insurance claims paid for care in the home or in an assisted living community setting. The AALTCI also reported total benefit payments increased by 13 percent and the number of long term care insurance policyholders on claim grew 3.4 percent. According to the National Association of Insurance Commissioners ( “ NAIC ” ) the top 100 plans in the US cover 7.2 million lives. 8 Table of Contents Compensation for Home Health Services We are compensated for our home health services by (i) Medicare (Visiting Nurse segment only), (ii) Medicaid, (iii) other third party payors (e.g., insurance companies and other sources), and (iv) private pay (paid by personal funds). The rates of reimbursement we receive from Medicare, Medicaid and other government programs are generally dictated by those programs. In determining charge rates for goods and services provided to our other customers, we evaluate several factors including cost and market competition. We sometimes negotiate contract rates with third party providers such as insurance companies. Our reliance on government sponsored reimbursement programs makes us vulnerable to possible legislative and administrative regulation changes and budget cut-backs that could adversely affect the number of persons eligible for such programs, the amount of allowed reimbursements or other aspects of the programs, any of which could materially affect us. In addition, loss of certification or qualification under Medicare or Medicaid programs could materially affect our ability to effectively market our services. The following table sets forth our revenues from operations derived from each major payor class during the indicated periods (by percentage of net revenues) for the fiscal years ended: Payor Group Medicare Medicaid and Other Government Programs Insurance and private pay January 1, 2016 December 31, 2014 December 31, 2013 71.4% 72.4% 71.2% 22.5% 6.1% 19.6% 8.0% 22.5% 6.3% Medicare revenues are earned in our VN segment, where they account for 94% of segment revenues. Historical changes in payment sources are primarily a result of changes in the types of customers we attract. See “Government Regulation” and “Risk Factors.” We will monitor the effects of such items and may consider modifications to our expansion and development strategy when and if necessary. Acquisitions The Company has completed several acquisitions over the past three years and will continue to seek to acquire other quality providers of Medicare-certified home health and/or personal care services, along with making investments in healthcare innovators through our Healthcare Innovations segment. Factors which may affect future acquisition decisions include, but are not limited to, the quality and potential profitability of the business under consideration, and our profitability and ability to finance the transaction. 2016 Acquisitions On January 5, 2016, we acquired 100% of the equity of Long Term Solutions, Inc. (“LTS”). LTS is a provider of in-home nursing assessments for the long-term care insurance industry. LTS provides assessments in all 50 U.S. states and a number of foreign countries. The purchase price of $37 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. LTS’s post acquisition operating results will be reported in our Healthcare Innovations business segment. On January 5, 2016, we purchased the assets of a Medicare-certified home health agency owned by Bayonne Visiting Nurse Association (‘Bayonne”) located in New Jersey. Bayonne’s post acquisition operating results will be reported in our VN segment. 2015 Acquisitions On November 5, 2015, we acquired the stock of Black Stone Operations, LLC (“Black Stone”). Black Stone is a provider of in-home personal care and skilled home health services in western Ohio and operates under the name “Home Care by Black Stone .” The purchase price of $40 million was funded through borrowings on the Company’s bank credit 9 Table of Contents facility, seller notes and issuance of the Company’s common stock. Black Stone’s post acquisition operating results are reported in our VN and PC segments. On July 22, 2015, we acquired 100% of the equity of Ingenios Health Co. (“Ingenios”) for approximately $11.4 million of the Company’s common stock plus $2 million in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in seven states and Washington, D.C. The post acquisition operating results of Ingenios are reported in our Healthcare Innovations business segment. On August 29, 2015, we acquired 100% of the equity of Bracor, Inc. (dba “WillCare”). Willcare, based in Buffalo, NY, owned and operated VN and PC branch locations in New York (1 2 ) and Connecticut (1). The purchase price was approximately $50.8 million. The transaction was funded by borrowings under the Company’s bank credit facility. WillCare’s New York and Connecticut post acquisition operating results are reported in our VN and PC segments. On March 1, 2015, we acquired the stock of WillCare’s Ohio operations for $3.0 million. WillCare’s Ohio post acquisition operating results are reported in our VN and PC segments. On January 29, 2015, we acquired a noncontrolling interest in a development stage analytics and software company, NavHealth, Inc. (“NavHealth”). The investment is an asset of our Health care Innovations segment. 2014 Acquisitions During 2014, we completed a small acquisition using cash on hand to expand existing VN segment operations in Kentucky. 2013 Acquisitions On December 6, 2013, we acquired the stock of Omni Home Health Holdings, Inc. (“SunCrest”). The total purchase price was $ 76.6 million . The transaction was funded primarily from borrowings from our senior secured revolving credit facility and cash on hand. SunCrest’s post acquisition operating results are included in our VN segment and our PC segment. On October 4, 2013, we acquired a controlling interest in Imperium Health Management, LLC (“Imperium”). Imperium is a development-stage enterprise that provides strategic health management services to Accountable Care Organizations (“ACOs”). We acquired 61.5% interest for a total of $5.8 million. The transaction was funded with cash on hand. Imperium’s post acquisition operating results are included in our Healthcare Innovations segment. On July 17, 2013, we acquired the assets of the Medicare-certified home agencies owned by Indiana Home Care Network (“IHCN”). IHCN operated six home health agencies primarily in northern Indiana. The total purchase price was $12.5 million and was funded with cash on hand and Almost Family, Inc. common stock. ICHN’s post acquisition operating results are reported in our VN segment. Competition, Marketing and Customers The visiting nurse industry is highly competitive and fragmented. Competitors include larger publicly held companies such as Amedisys, Inc. (NasdaqGS: AMED), Kindred Healthcare, Inc. (NYSE: KND), and LHC Group, Inc. (NasdaqGS: LHCG), and numerous privately held multi-site home care companies, privately held single-site agencies and a significant number of hospital-based agencies. Competition for customers at the local market level is very fragmented and market specific. Generally, each local market has its own competitive profile and no one competitor has significant market share across all our markets. To the best of our knowledge, no individual provider has more than 6% share of the national Medicare home health market. We believe the primary competitive factors are quality of service and reputation among referral sources. We market our services through our site managers and marketing staff. These individuals contact referral sources in their areas to 10 Table of Contents market our services. Major referral sources include: physicians, hospital discharge planners, Offices on Aging, social workers, and group living facilities. We also utilize, to a lesser degree, consumer-direct sales, marketing and advertising programs designed to attract customers. The personal care industry is likewise highly competitive and fragmented. Competitors include home health providers, senior adult associations, and the private hiring of caregivers. We market our services primarily through our site managers, and we compete by offering a high quality of care and by helping families identify and access solutions for care. Major referral sources include case managers, physicians and hospital discharge planners. Our healthcare innovations segment competes in new industries, some of which were created by the Patient Protection and Affordable Care Act (the “ACA”), signed into law in March 2010. In certain cases, we operate in relatively new and unproven markets which include new competitors that are identified regularly and which range in size from start-up companies to larger publicly held companies like Universal American Corp. (NYSE: UAM). We market our services directly to our customers. Government Regulation Medicare Home Health Program Payment Methodology As shown in “Compensation for Services” above, approximately 71% of our 2015 consolidated net service revenues were derived from the Medicare Program. Medicare reimburses home health care providers under the Prospective Payment System (“PPS”), which pays a fixed, predetermined rate for services and supplies under an episode of care. An episode of home health care spans a 60-day period, starting with the first day a billable visit is furnished to a Medicare beneficiary and ending 60 days later. If a patient is still in treatment on the 60 th day, a new episode begins on the 61 st day, commonly referred to as a recertification episode, regardless of whether a billable visit is rendered on that day and ends 60 days later. Payment rates are subject to adjustment based on certain variables including, but not limited to: (a) a case-mix adjustment, which drives the home health resource group (“HHRG”) to which the Medicare patient is assigned based on such factors as the patient’s clinical, functional, and services utilization characteristics; (b) geographic wage adjustment, including rural rate add-ons, if any; (c) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (d) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (e) an outlier payment if our patient’s care was unusually costly (capped at 10% of total reimbursement at the agency level); (f) a partial payment if our patient transferred to another provider or we received a patient from another provider before completing the episode; (g) the number of episodes of care provided to a patient; and (h) sequestration, a 2% legislated reduction pursuant to the Budget Control Act (“BCA”) signed into law on August 2, 2011, which was effective for episodes ended after March 31, 2013. In establishing payment rates for the last three years , the Medicare Program re calibrated the national average case-mix levels and maintained budget neutrality by making a corresponding adjustment to the National, Standardized 60-Day Episode Payment Rate (“Base Episode Payment Rate”). These nominal case-mix and payment rate recalibrations result in a lowe r case mix and higher base rates and are intended to have no effect on payments actually made. We have presented the Base Episode Payment Rate established by the Medicare Program for all episodes of care ended on or after 11 Table of Contents the applicable time periods, along with the Base Episode Payment Rate for each period as if the case-mix reset s were in effect for all prior periods below: Base Episode Payment Rate Adjusted for Case-mix Recalibrations (2) Base Episode Payment Rate (1) Period January 1, 2016 through December 31, 2016 January 1, 2015 through December 31, 2015 January 1, 2014 through December 31, 2014 January 1, 2013 through December 31, 2013 $ 2,965 2,961 2,869 2,138 $ 2,965 2,990 3,003 3,013 (1) Reflects the payment rates as published by the Medicare Program. (2) Presents the payment rates on a consistent basis as if the case-mix recalibrations had been in effect for all periods presented. As applicable, a djusted payment rates for each of the years 2013-2015 were calculated by multiplying the actual Base Episode Payment by 1.3464 (2014 Final Rule), then by 1.014 (2015 Final Rule) and then by 1.0097 (2016 Final Rule). After determining the appropriate PPS payment rate, we record net revenues as services are rendered to patients over the 60-day episode period. At the end of each month, a portion of our revenue is estimated for episodes that have not yet completed, which are generally referred to as episodes in progress. As a result, net service revenues recorded for an episode in progress is subject to change if the actual number of visits differs from the number anticipated at the start of care. Our revenue recognition under the Medicare reimbursement program is discussed in greater detail in Part II, Item 7 “Critical Accounting Policies” and Item 8, “Notes to Consolidated Financial Statements”. Rebasing and Other Statutory Rate Reductions The Patient Protection and Affordable Care Act (the “ACA”), signed into law in March 2010, has adversely impacted our business and it is reasonable to expect it to have an impact on our business in the future. Specifically, the ACA provisions: Outlined annual rate reductions from 2011 through 2017 for Medicare reimbursement rates for home health care services we provide to our patients; Established statutory reductions to the annual inflationary rate adjustments we would have otherwise received; Established certain “productivity” adjustments reducing the reimbursement rates we would have otherwise received; Required Centers for Medicare and Medicaid Services (“CMS”) to recalculate or “rebase” home health reimbursement to more closely align with the costs of providing care; Limited any reduction in reimbursement rates resulting from “rebasing” to a maximum of 3.5% per year in each of the four phase-in years; and Required the Medicare Payment Advisory Commission (“MedPac”) and the US Department of Health and Human Services (“HHS”) Secretary to assess and report on the impact of rebasing on access and quality of care. On October 29, 2015, CMS issued its 2016 Home Health Prospective Payment System Rate Update. CMS is implementing a 0.13% increase in the National, Standardized 60-Day Episode Payment Amount consisting of a 2.9% “market basket” increase minus a 0.6% productivity adjustment, a 2.71% ($80.95 per episode) rebasing cut, a 0.97% case mix creep cut and an increase of 1.87% to maintain budget neutrality with respect to recalibration of the home health case mix model for 2016. The impact of recalibration of the case-mix model on the Company results in 2016 will depend upon the Company’s actual patient mix in that period. CMS is also implementing a “Value Based Purchasing” (VBP) demonstration in 9 states (including Florida, Tennessee and Massachusetts where the Company generated 38.1% of its fiscal year 2015 revenues ) under which certain 2016 agency specific performance measures would be used to establish individual agency reimbursement rates for 2018. CMS estimates that two thirds of providers will be a plus or minus 1.5% adjus tment to 2018 revenue rates. Investors are encouraged to read the rule in its entirety at http://federalregister.gov/a/2015-27931 . 12 Table of Contents Potential Future Developments in Medicare Home Health While there have been many changes enacted over the past several years, the Congress and/or CMS may take future actions which could have an adverse impact on our business, including possible: Acceleration or compressing of the rebasing period to a period shorter than the currently legislated 2014-2017 four-year phase in; Changes in cost sharing between the Medicare program (“Program”) and beneficiaries (i.e., co-pays); Removal of or changes to codes in the case-mix system or recalibration of the case-mix system including further case-mix creep coding adjustments, all of which could result in changes to rates under the national standardized 60-day episodic payment; Post-acute care bundling; Removal or reductions to established statutory reductions to the annual inflationary rate adjustments we would have otherwise received; “Productivity” payment reductions to reimbursement rates we would have otherwise received; Changes that put providers “at risk” for patient outcomes, Addition of new pre-authorization requirements for home health services, and Other types of changes of which we may not currently be aware. We are unable to predict when or whether any of these types of changes may be enacted or what impact, if any, they may have on our business. Medicaid Reimbursement As shown in “Compensation for Services” above, approximately 22% of our 2015 consolidated net service revenues were derived from state Medicaid and Other Government Programs, with approximately 9. 1 %, 5. 5 %, 3.2% and 1.7 % generated from Medicaid reimbursement programs in the states of Ohio, Connecticut, Tennessee and Kentucky, respectively. Net service revenues under such state programs are derived from services provided under a per visit, per hour or unit basis (as opposed to episodic). Revenues are calculated and recorded using payor-specific or patient-specific fee schedules based on the contracted rates. The financial condition of the Medicaid programs in each of the states in which we operate is cyclical with some currently facing significant budget issues. States may be expected from time to time to take actions or evaluate taking actions to control the rate of growth of Medicaid expenditures. Among these actions are the following: redefining eligibility standards for Medicaid coverage, redefining coverage criteria for home and community based care services, slowing payments to providers by increasing the minimum time in which payments are made, limiting reimbursement rate increases or implementing rate cuts, increased utilization of self-directed care alternatives, shifting beneficiaries from traditional coverage to Medicaid managed care providers, and changing regulations under which providers must operate. Medicaid programs, while partially federally funded, are administered by the individual states under the broad supervision of CMS. Accordingly, developments typically occur on a state-by-state basis. Specific programs and changes are enacted regularly. Any such changes, if enacted, could adversely impact our operations. Medicare and Medicaid Reimbursement Summary The health care industry has experienced, and is expected to continue to experience, extensive and dynamic periods of change. In addition to economic forces and regulatory influences, continuing political debate subjects the health care industry to significant reform. Health care reforms have been enacted as discussed elsewhere in this document and 13 Table of Contents proposals for additional changes are continuously formulated by departments of the Federal government, Congress, and state legislatures. Such governmental payors provide for approximately 94% of our consolidated net service revenues, including Medicare Advantage plans run by private insurers which are also dependent on federal funding. We expect legislators and government officials to continuously review and assess alternative health care delivery systems and payment methodologies. Changes in the law or new interpretations of existing laws may have a dramatic effect on the definition of permissible or impermissible activities, the relative cost of doing business, and the methods and amounts of payments for medical care by both governmental and other payors. We expect legislative changes intended to “balance the budget” and slow the annual rate of growth of Medicare and Medicaid to continue. Such future changes may further impact reimbursement for our services. There can be no assurance that future legislation or regulatory changes will not have a material adverse effect on our results of operations. Governments might take or consider taking further actions because the number of Medicare and Medicaid beneficiaries and their related expenditures are growing at a faster rate than the governments’ revenue. Medicare and Medicaid are consuming increasing percentages of budgets and may expand further driven by state based exchanges resulting from the ACA and implementing regulations. Health care financing issues are exacerbated when revenues slow in a down economy. We believe that these financing issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services for the populations we serve. Additionally, we believe our services offer the lowest cost alternative to institutional care and are a critical part of the solution to our nation’s health care financing problems. Given the broad and far reaching implications of all the changes in the rapidly evolving environment in which we operate, the incomplete nature of these changes, the pace at which the changes are taking place and the prospects for future changes to be made, we cannot predict the ultimate impact, which may be material and adverse, that health care reform efforts and resulting Medicare and Medicaid reimbursement rates will have on our liquidity, our results of operations, the realizability of the carrying amounts of our intangible assets, including goodwill, or our financial condition. Further, we are unable to predict what effect, if any, such material adverse effect, if it were to occur, might have on our ability to continue to comply with the financial covenants of our revolving credit facility and our ability to continue to access debt capital through that facility. Permits and Licensure Many states require companies providing certain health care services to be licensed as home health agencies. In addition, certain health care practitioners employed by us require state licensure and/or registration and must comply with laws and regulations governing standards of practice. The failure to obtain, renew or maintain any of the required regulatory approvals or licenses could adversely affect our business. We believe we are currently licensed appropriately where required by the laws of the states in which we operate. There can be no assurance that either the states or the federal government will not impose additional regulations upon our activities which might adversely affect our results of operations, financial condition, or liquidity. Certificates of Need Certain states require companies providing health care services to obtain a certificate of need issued by a state health-planning agency. Where required by law, we have obtained certificates of need from those states. There can be no assurance that we will be able to obtain any certificates of need which may be required in the future, if we expand the scope of our services or if state laws change to impose additional certificate of need requirements, and any attempt to obtain additional certificates of need will cause us to incur certain expenses. Medicare and Medicaid Participation Effective March 25, 2011, CMS implemented new enrollment regulations which were a response to aspects of the ACA designed to enhance enrollment procedures to protect against fraud. The regulations authorize the establishment of risk categories with risk level dictating the enrollment screening activities, i.e., more rigorous screening as the perceived risk increases. For Medicare, there are three categories of providers i.e., “limited,” “moderate,” or “high” risk, and CMS has 14 Table of Contents placed newly enrolling home health agencies in the “high risk” category, with existing enrolled home health agencies categorized as “moderate risk.” In addition to the low risk provider screening procedures, providers in the moderate risk category will be subject to unannounced site visits. For high risk providers, any individual with a 5% or more ownership interest will be subject to fingerprint-based criminal history record checks. Additionally, the new regulations authorize Medicare and state Medicaid agencies to impose temporary enrollment moratoria for a particular type of provider if determined to be necessary to combat fraud, waste, or abuse. To the extent that home health agencies are subject to a moratorium, any newly enrolling home health agency, including any change of ownership subject to the 36 month rule, and any expansion to add a branch would be affected by the moratorium. Other Regulations A series of laws and regulations dating back to the Omnibus Budget Reconciliation Act of 1987 (“OBRA 1987”) and through the ACA and related subsequent legislation have been enacted and apply to us. Changes in applicable laws and regulations have occurred from time to time since OBRA 1987 including reimbursement reductions and changes to payment rules. Changes are also expected to occur continuously for the foreseeable future. As a provider of services under Medicare and Medicaid programs, we are subject to the Medicare and Medicaid anti-kickback statute and other “fraud and abuse laws.” The anti-kickback statute prohibits any bribe, kickback, rebate or remuneration of any kind in return for, or as an inducement for, the referral of Medicare or Medicaid patients. We may also be affected by the Federal physician self-referral prohibition, known as the “Stark” law, which, with certain exceptions, prohibits physicians from referring patients to entities in which they have a financial interest or from which they receive financial benefit. Penalties for violations of the federal Stark law include payment sanctions, civil monetary penalties, and/or program exclusion. Many states in which we operate have adopted similar self-referral laws, as well as laws that prohibit certain direct or indirect payments or fee-splitting arrangements between health care providers, if such arrangements are designed to induce or to encourage the referral of patients to a particular provider. As a result of the Health Insurance Portability and Accountability Act of 1996 and other legislative and administrative initiatives, Federal and state enforcement efforts against the health care industry have increased dramatically, subjecting all health care providers to increased risk of scrutiny and increased compliance costs. We are subject to routine and periodic surveys, audits and investigations by various governmental agencies. In addition to surveys to determine compliance with the conditions of participation, CMS has engaged a number of contractors (including Fiscal Intermediaries, Recovery Audit Contractors, Program Safeguard Contractors, Zone Program Integrity Contractors, and Medicaid Integrity Contributors) to conduct audits to evaluate billing practices and identify overpayments. In addition to audits by CMS contractors, individual states are implementing similar programs such as using Medicaid Recovery Audit Contractors. We believe that we are in material compliance with applicable laws. However, we are unable to predict what additional government regulations, if any, affecting our business may be enacted in the future, how existing or future laws and regulations might be interpreted or whether we will be able to comply with such laws and regulations either in the markets in which we presently conduct, or wish to commence, business. Medicare Accountable Care Organizations (ACOs) The ACA also established ACOs as a tool to improve quality and lower costs through increased care coordination in the Medicare fee-for-service (“FFS”) program, also known as “Original Medicare . ” The Medicare FFS program covers approximately 70% of the Medicare recipients or approximately 36 million eligible Medicare beneficiaries. ACOs are groups of doctors and other healthcare providers working together to provide high quality services and care for their patients. Provider and beneficiary participation in an ACO is purely voluntary and Medicare beneficiaries retain their current ability to seek treatment from any provider they wish. ACOs are legal entities that contract with CMS for three-year periods. Beneficiaries are assigned to ACOs using an “attribution” model based on a plurality of services provided by the primary care physician. Beneficiaries still have the right to use any doctor or hospital who accepts Medicare, at any time. In order to receive revenues from CMS under the MSSP, the ACO must meet certain minimum savings rates (i.e. save the federal government money) and meet certain quality measures. More specifically, the ACOs costs of medical expenses for its members during a relevant measurement year must be below the ACOs benchmark by a minimum amount as established by CMS for such ACO. 15 Table of Contents CMS established the MSSP to facilitate coordination and cooperation among providers to improve the quality of care for Medicare FFS beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers may participate in the MSSP by creating, participating in or contracting with an ACO. The MSSP is designed to improve beneficiary outcomes and increase value of care by (1) promoting accountability for the care of Medicare FFS beneficiaries; (2) requiring coordinated care for all services provided under Medicare FFS; and (3) encouraging investment in infrastructure and redesigned care processes. The MSSP will reward ACOs that reduce health care costs below their benchmark while also meeting performance standards on quality of care. Under the final MSSP rules, Medicare will continue to pay individual providers and suppliers for specific items and services as it currently does under the FFS payment methodologies. MSSP rules require CMS to develop a benchmark for savings to be achieved by each ACO, if the ACO is to receive shared savings or for ACOs that have elected to accept responsibility for losses. An ACO that meets the program’s quality performance standards will be eligible to receive a share of the savings to the extent its assigned beneficiary medical expenditures are below its own medical expenditure benchmark provided by CMS. Insurance Programs and Costs We bear significant risk under our large-deductible workers’ compensation insurance program and our self-insured employee health program. Under the workers’ compensation insurance program, we bear risk up to $400,000 per incident except for the recent Black Stone acquisition that had not yet been folded into our program that has a stop loss of $750,000, after which stop-loss insurance coverage is maintained. We purchase stop-loss insurance for the employee health plan that places a specific limit, generally $300,000, on our exposure for any individual covered life. The ACA also includes regulatory changes related to employer sponsored health insurance benefit plans, the most significant of which was initially effective for the Company January 1, 2015. However, certain components continue to evolve, be delayed or have additional developments. Management has implemented portions of its procedures and is currently working to evaluate the implications of these changes and to develop appropriate courses of action for the Company. At this time, we are unable to predict the full impact of such changes on our health insurance benefit programs or the costs of such programs to the Company. Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against us by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. We are aware of incidents that have occurred through January 1, 2016 , that may result in the assertion of additional claims. We currently carry professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. We also carry D&O coverage for potential claims against our directors and officers, including securities actions, with deductibles ranging from $1 75 ,000 to $ 5 00,000 per claim. Total premiums, excluding estimated exposure to claims and deductibles, for all our non-health insurance programs were approximately $4 .8 million for the contract year ended May 31, 2015. We record estimated liabilities for our insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. We monitor our estimated insurance-related liabilities and related insurance recoveries on a monthly basis and have recorded amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities in our consolidated balance sheets. As facts change, it may become necessary to make adjustments that could be material to our results of operations and financial condition. We believe that our present insurance coverage is adequate. As part of our on-going risk management, regulatory compliance and cost control efforts, we continually seek alternatives that might provide a different balance of cost and risk, including potentially accepting additional self-insurance risk in lieu of higher premium costs. 16 Table of Contents Executive Officers of the Registrant See Part III, Item 10 of this Form 10-K for information about the Company’s executive officers. Employees and Labor Relations As of January 1, 2016 , we had approximately 14,200 employees. None of our employees are represented by a labor organization. We believe our relationship with our employees is satisfactory. ITEM 1A. RISK FACTOR S Described below and elsewhere in this report are risks, uncertainties and other factors that can adversely affect our business, results of operations, cash flow, liquidity or financial condition. Investing in our common stock involves a degree of risk. You should consider carefully the following risks, as well as other information in this filing and the incorporated documents before investing in our common stock. Risks Related to Our Industry Complying with health care reform legislation and the implementing regulations and programmatic guidelines could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us. Part I, Item 1, “Government Regulation” summarizes US health care reform activities pertinent to our operations. Very often, sweeping new legislation is followed by subsequent legislation to address previously unanticipated consequences, or to further define provisions that were too vague to implement based on the language of the original legislation and by legal actions to challenge its constitutionality. In our view it is reasonable to expect this to occur over the next few years. As a result of the broad scope of the ACA and related legislation, the significant changes it will effect in the healthcare industry and society generally, and the complexity of the technical issues it addresses, we are unable to predict, at this time, all the ramifications the ACA and the implementing regulations may have on our business as a health care provider or a sponsor of an employee health insurance benefit plan. The ACA and implementing regulations and programmatic guidelines could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us. Additionally, we may be unable to take actions to mitigate any or all of the negative implications of the ACA and implementing regulations or programmatic guidelines which may result in unfavorable earnings, losses, or impairment charges. The ACA and related subsequent legislation may be modified through future legislative action or judicial challenge. We can provide you with no assurance that the ultimate outcome of the ACA, health care reform efforts and/or the federal budget and resulting Medicare reimbursement rates will not have a material adverse effect on our liquidity, our results of operation, the realizability of the carrying amounts of our intangible assets, including goodwill, or our financial condition. Further, we are unable to predict what effect, if any, such material adverse effect, if it were to occur, might have on our ability to continue to comply with the financial covenants of our revolving credit facility and our ability to continue to access debt capital through that facility. The current status of Federal and State budgets may have a material adverse effect on our future results of operations and financial condition, as well as our ability to access credit and capital. There can be no assurance that Federal and State governments will be able to operate balanced budgets. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on the Company. Historic economic conditions, stimulus efforts by the Federal government and costly new programs created by ACA have placed significant strain on Federal and state budgets, many of which are in a deficit position. Efforts to reduce spending at the Federal and/or state levels may result in reductions in reimbursement by Medicare, Medicaid and other third-party payors along with tax increases, which may in turn result in decreased revenue growth and a decrease in our profitability. 17 Table of Contents Our contractors and suppliers may also be negatively impacted by these conditions and our ability to provide patient care at a lower cost may diminish and reduce our profitability. Future disruptions in the credit and capital markets, if any, may restrict our access to capital. As a result, our ability to incur additional indebtedness to fund acquisitions and operations may be constrained. If the Federal and State budgets ’ conditions deteriorate or do not improve, our results of operations or financial condition could be materially and adversely affected. Our profitability depends principally on the level of government-mandated payment rates. Reductions in rates, or rate increases that do not cover cost increases, may adversely affect our business. We generally receive fixed payments from Medicare and Medicaid for our services based on the level of care that we provide patients. Consequently, our profitability largely depends upon our ability to manage the cost of providing services. Although current Medicare legislation provides for an annual adjustment of the various payment rates based on the increase or decrease of the medical care expenditure category of the Consumer Price Index, these Medicare payment rate increases may be less than actual inflation or could be eliminated or reduced in any given year. Consequently, if our cost of providing services, which consists primarily of labor costs, is greater than the respective Medicare or Medicaid payment rate, our profitability would be negatively impacted. If any of our agencies fail to comply with the conditions of participation in the Medicare program, that agency could be terminated from the Medicare program, which would adversely affect our net service revenue and profitability. Each of our home care agencies must comply with the extensive conditions of participation in the Medicare program. If any of our agencies fail to meet any of the Medicare conditions of participation, that agency may receive a notice of deficiency from the applicable state surveyor. If that agency then fails to institute a plan of correction to correct the deficiency within the correction period provided by the state surveyor, that agency could be terminated from the Medicare program. Additionally, failure to comply with the conditions of participation related to enrollment could result in a deactivation or revocation of billing privileges. To the extent that billing privileges are revoked there is a mandated one to three-year bar to re-enrollment. The failure to pass a site verification visit, for example, could result in a revocation of billing privileges with a mandated two-year bar to re-enrollment. Although the revocation would only immediately affect the particular enrollment subject to the revocation, CMS has indicated that following a revocation it will review the enrollment files for providers under common ownership or control to determine if a similar sanction is warranted for any of the other related providers. Any termination of one or more of our home care agencies from the Medicare program for failure to satisfy the program’s conditions of participation could adversely affect our net service revenue and profitability. Any changes to the laws and regulations governing our business, or the interpretation and enforcement of those laws or regulations, could cause us to modify our operations and could negatively impact our operating results. The federal government and the states in which we operate regulate our industry extensively. The laws and regulations governing our operations, along with the terms of participation in various government programs, regulate how we do business, the services we offer, and our interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws and regulations, or their interpretations, or the enactment of new laws or regulations could reduce our profitability by: increasing our liability; increasing our administrative and other costs; increasing or decreasing mandated services; forcing us to restructure our relationships with referral sources and providers; or requiring us to implement additional or different programs and systems. Violation of the laws governing our operations, or changes in interpretations of those laws, could result in the imposition of fines, civil or criminal penalties, the termination of our rights to participate in federal and state-sponsored programs, the suspension or revocation of our licenses, or claims for damages. If we become subject to material fines or if other sanctions or other corrective actions are imposed on us, we might suffer a substantial reduction in profitability. 18 Table of Contents We have been and could become the subject of governmental investigations, claims and litigation that could have a material adverse effect on our financial position, results of operation and liquidity. Over the years, we, and the industry as a whole, have been the subject of civil investigations, and qui tam or “whistleblower” suits relating to its Medicare-reimbursed oper ations. For further discussion , please refer to Part I, “Legal Proceedings” and Part II, Item 8, “Notes to Consolidated Financial Statements”. We may become, or unknown to us may already be, the subject of investigations, qui tams, or lawsuits that could have a material adverse effect on our financial position, results of operation and liquidity. Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the OIG, CMS and state Medicaid programs, conduct audits of our health care operations. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material adverse effect on our financial position, results of operation and liquidity. For example, home health providers, including the Company, have received pre-pay Additional Development Requests (“ADR”) in addition to Recovery Audit Contractor audits (“RAC”) from the Palmetto Government Benefits Administration (“PGBA”) as a result of additional CMS funding allocations to the Medicare Administrative Contractors (“MACs”) to conduct pre-payment reviews. ADR and RAC audits are both general and focused in nature. The PGBA acts as one of our four fiscal intermediaries, but processes the majority of our claims. We would expect ADR and RAC audits to continue in the future. If such ADR or RAC audits result in reimbursement adjustments, we may suffer reduced profitability. Further, our appeal rights related to such audits may lead to cash flow delays due to significant backlog at the Administrative Law Judge level. ADR and RAC backlog was so significant in the hospital industry that CMS agreed to settle all ADR and RAC denials at $0.6 8 for each dollar denied. There can be no assurances that CMS will settle such claims for home health providers. If we are unable to maintain relationships with existing patient referral sources or to establish new referral sources, our growth and profitability could be adversely affected. Our success depends significantly on referrals from physicians, hospitals, case managers and other patient referral sources in the communities that our home care agencies serve, as well as on our ability to maintain good relationships with these referral sources. Our referral sources are not contractually obligated to refer home care patients to us and may refer their patients to other providers. Our growth and profitability depend on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptance of the benefits of home care by our referral sources and their patients. We cannot assure you that we will be able to maintain our existing referral source relationships or that we will be able to develop and maintain new relationships in existing or new markets. Our loss of, or failure to maintain, existing relationships or our failure to develop new relationships could adversely affect our ability to expand our operations and operate profitably. We are subject to federal and state laws that govern our financial relationships with physicians and other healthcare providers, including potential or current referral sources. We are required to comply with federal and state laws, generally referred to as “anti-kickback laws,” that prohibit certain direct and indirect payments or fee-splitting arrangements between healthcare providers that are designed to encourage the referral of patients to a particular provider for medical services. We are also required to comply with the “Stark” law s , which places restrictions on physicians who refer patients to entities in which they have a financial interest or from which they receive financial benefit. In addition to the federal anti-kickback and Stark laws, some of the states in which we operate have enacted laws prohibiting certain business relationships between physicians and other providers of healthcare services. We currently have contractual relationships with certain physicians who provide consulting services to our Company. Many of these physicians are current or potential referral sources. Although we believe our physician consultant arrangements currently comply with state and federal anti-kickback and Stark laws, we cannot assure you that courts or regulatory agencies will not interpret these laws in ways that will implicate our physician consultant arrangements. Violations of anti-kickback and similar laws could lead to fines or sanctions, including under the False Claims Act, that may have a material adverse effect on our operations. 19 Table of Contents We may be subject to substantial malpractice or other similar claims. The services we offer involve an inherent risk of professional liability and related substantial damage awards. On any given day, we have thousands of nurses, therapists and other direct care personnel driving to and from patients’ homes where they deliver medical and other care. Due to the nature of our business, we and the caregivers who provide services on our behalf may be the subject of medical malpractice claims. These caregivers could be considered our agents, and, as a result, we could be held liable for their medical negligence. We cannot predict the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business , reputation , or on our ability to attract and retain patients and employees. We maintain malpractice and various other liability insurance or re-insurance policies and are responsible for deductibles and, as applicable, amounts in excess of the limits of our coverage. Although we contract with highly rated carriers, we cannot guarantee collection of amounts expected to be recovered under various insurance or reinsurance policies. Delays in reimbursement may cause liquidity problems. Our business is characterized by delays in reimbursement from the time we provide services to the time we receive reimbursement or payment for these services. Data submission requirements change from time to time for payors , payments to us may be delayed pending additional data or documentation requests by the fiscal intermediary, or our ability to effectively respond to such requirements may delay our payment cycle. If we have information system problems or issues that arise with Medicare or Medicaid, we may encounter delays in our payment cycle. Such a timing delay may cause working capital shortages. Working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. System problems, Medicare or Medicaid issues or industry trends may extend our collection period, adversely impact our working capital. Our working capital management procedures may not successfully negate this risk. There are often timing delays when attempting to collect funds from Medicaid programs. Delays in receiving reimbursement or payments from these programs may adversely impact our working capital. The home health care industry is highly competitive. Our home health care agencies compete with local and regional home health care companies, hospitals, nursing homes, and other businesses that provide home nursing services, some of which are large established companies that have significantly greater resources than we do. Our primary competition comes from local companies in each of our markets, and these privately-owned or hospital-owned health care providers vary by region and market. We compete based on the availability of personnel; the quality, expertise, and value of our services; and in select instances, on the price of our services. Increased competition in the future from existing competitors or new entrants may limit our ability to maintain or increase our market share. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse impact on our business, financial condition, or results of operations. Some of our existing and potential new competitors may enjoy greater name recognition and greater financial, technical, and marketing resources than we do. This may permit our competitors to devote greater resources than we can to the development and promotion of services. These competitors may undertake more far-reaching and effective marketing campaigns and may offer more attractive opportunities to existing and potential employees and services to referral sources. We expect our competitors to develop new strategic relationships with providers, referral sources, and payors, which could result in increased competition. The introduction of new and enhanced service offerings, in combination with industry consolidation and the development of strategic relationships by our competitors, could cause a decline in revenue or loss of market acceptance of our services or make our services less attractive. Additionally, we compete with a number of non-profit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us. We expect that industry forces will continue to have an impact on our business and that of our competitors. In recent years, the health care industry has undergone significant changes driven by efforts to reduce costs, and we expect these 20 Table of Contents cost containment measures to continue in the future. Frequent regulatory changes in our industry, including reductions in reimbursement rates and changes in services covered, have increased competition among home health care providers. If we are unable to react competitively to new developments, our operating results may suffer. Portions of our Healthcare Innovations segment competes in relatively new and developing markets. Portions of our Healthc are Innovations segment compete in new and developing markets with new competitors or solutions developed and introduced to the market regularly. Such new products may capture market share more quickly or may have access to more capital than the capital we have allocated for such projects. Our efforts to bring new solutions to the market may prove unsuccessful, may prove to be unprofitable or may prove to be more costly to bring to market than anticipated. Our investments in these activities are highly speculative in nature and subject to loss. A shortage of qualified registered nursing staff, physical therapists, occupational therapists and other caregivers could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs. We rely significantly on our ability to attract and retain caregivers who possess the skills, experience, and licenses necessary to meet the requirements of our patients. We compete for personnel with other providers of health care services. Our ability to attract and retain caregivers depends on several factors, including our ability to provide these caregivers with attractive assignments and competitive benefits and salaries. We cannot assure you that we will succeed in any of these areas. In addition, there are occasional shortages of qualified healthcare personnel in some of the markets in which we operate. As a result, we may face higher costs of attracting caregivers and providing them with attractive benefit packages than we originally anticipated, and if that occurs, our profitability could decline. Finally, although this is currently not a significant factor in our existing markets, if we expand our operations into geographic areas where healthcare providers have historically unionized, we cannot assure you that the negotiation of collective bargaining agreements will not have a negative effect on our ability to timely and successfully recruit qualified personnel. Generally, if we are unable to attract and retain caregivers, the quality of our services may decline, and we could lose patients and referral sources. Risks Related to Our Business We depend on government sponsored reimbursement programs with Medicare accounting for the largest portion of our revenues. For the years ended January 1, 2016, December 31, 2014 and 2013, we received 71% , 72% and 71%, respectively, of our revenue from Medicare. Reductions in Medicare reimbursement have historically and may continue to adversely impact our profitability. Such reductions in payments to us could be caused by: administrative or legislative changes to the base episode rate; the elimination or reduction of annual rate increases based on medical inflation; the imposition by Medicare of co-payments or other mechanisms shifting responsibility for a portion of payment to beneficiaries; adjustments to the relative components of the wage index; changes to or imposition of regulations impacting our case-mix or therapy thresholds; or other adverse changes to the way we are paid for delivering our services. Our non-Medicare revenues and profitability also are affected by the continuing efforts of third-party payors to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services, and negotiating reduced contract pricing. Any changes in reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. We can provide no assurance that we will continue to maintain the current payor or revenue mix. Our reliance on government sponsored reimbursement programs such as Medicare and Medicaid makes us vulnerable to possible legislative and administrative regulations and budget cut-backs that could adversely affect the number of 21 Table of Contents persons eligible for such programs, the amount of allowed reimbursements or other aspects of the programs, any of which could materially affect us. In addition, loss of certification or qualification under Medicare or Medicaid programs could materially affect our ability to effectively market our services. We have a significant dependence on state Medicaid reimbursement programs. Approximately 2 2 % , 20% and 23% of our fiscal years 2015, 2014 and 2013 revenues, respectively, were derived from state Medicaid and other government programs, many of which currently face significant budget issues. Further, the acquisitions completed by us in 2015 and 2013 increased our dependence on Medicaid reimbursement. Specifically, for the year ended January 1, 2016 , approximately 9.1%, 5.5%, 3.2% and 1.7% of our revenues were generated from Medicaid reimbursement programs in the states of Ohio, Connecticut, Tennessee and Kentucky, respectively and 8.8%, 5.5%, 2.5% and 1.8% for the year ended December 31, 2014 , respectively. Such amounts for Ohio, Connecticut and Kentucky were 11.7%, 7.1% and 2.3%, respectively for the year ended December 31, 2013 . The financial condition of the Medicaid programs in each of the states in which we operate is cyclical and many may be expected from time to time to take actions or evaluate taking actions to control the rate of growth of Medicaid expenditures. Among these actions are the following: redefining eligibility standards for Medicaid coverage, redefining coverage criteria for home and community based care services, slowing payments to providers by increasing the minimum time in which payments are made, limiting reimbursement rate increases, increased utilization of self-directed care alternatives, shifting beneficiaries from traditional coverage to Medicaid managed care providers, and changing regulations under which providers must operate. States may be expected to address these issues because the number of Medicaid beneficiaries and their related expenditures are growing at a faster rate than the government’s revenue. Medicaid is consuming a greater percentage of states’ budgets. This issue is exacerbated when revenues slow in a slowing economy. It is possible that the actions taken by the state Medicaid programs in the future could have a significant unfavorable impact on our results of operations, financial condition and liquidity. Migration of our Medicare beneficiary patients to Medicare managed care providers could negatively impact our operating results. Historically, we have generated a substantial portion of our revenue from the Medicare fee-for-service market. The Congress continues to allocate significant additional funds and other incentives to Medicare managed care providers in order to promote greater participation in those plans by Medicare beneficiaries. If these increased funding levels have the intended result, the size of the potential Medicare fee-for-service market could decline, thereby reducing the size of our potential patient population, which could cause our operating results to suffer. Our growth strategy depends on our ability to manage growing and changing operations. Our business plan calls for significant growth in our business over the next several years. This growth will place significant demands on our management and information technology systems, internal controls, and financial and professional resources. In addition, we will need to further develop our financial controls and reporting systems to accommodate future growth. This could require us to incur expenses for hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems, and expanding our information technology infrastructure. Our inability to manage growth effectively could have a material adverse effect on our financial results. 22 Table of Contents Our home health growth strategy depends on our ability to develop and to acquire additional agencies on favorable terms and to integrate and operate these agencies effectively. If we are unable to do so, our future growth and operating results could be negatively impacted. With regard to development, we expect to continue to open agencies in our existing and new markets. Our new agency growth, however, will depend on several factors, including our ability to: obtain locations for agencies in markets where need exists; identify and hire a sufficient number of sales personnel and appropriately trained home care and other health care professionals; obtain adequate financing to fund growth; and operate successfully under applicable government regulations. With regard to acquisitions, we are focusing significant time and resources on the acquisition of home healthcare providers, or of certain of their assets, in targeted markets. We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms. We may incur future liabilities related to acquisitions. Should any of the following problems, or others, occur as a result of our acquisition strategy, the impact could be material: difficulties integrating personnel from acquired entities and other corporate cultures into our business; difficulties integrating information systems; the potential loss of key employees or referral sources of acquired companies or a reduction in patient referrals by hospitals from which we have acquired home health care agencies; the assumption of liabilities and exposure to undisclosed liabilities of acquired companies; the acquisition of an agency with undisclosed compliance problems; the diversion of management attention from existing operations; difficulties in recouping partial episode payments and other types of misdirected payments for services from the previous owners; or an unsuccessful claim for indemnification rights from previous owners for acts or omissions arising prior to the date of acquisition. CMS has placed certain limitations on the sale or transfer of the Medicare Provider Agreement for any Medicare-certified home health agency that has been in existence for less than 36 months or that has undergone a change of ownership in the last 36 months. This limitation may reduce the number of home health agencies that otherwise would have been available for acquisition and may limit our ability to successfully pursue our acquisition strategy. We have invested in development stage companies which may require further funding to support their respective business plans, which may ultimately prove unsuccessful. Through our Imperium acquisition, we provide strategic health management services to ACOs that have been approved to participate in the Medicare Shared Savings Program (“MSSP”). In addition to our ownership interests in ACOs, we also have service agreements with ACOs that provide for sharing of MSSPs received by the ACO, if any. During 2013, we invested $5.8 million in our Imperium acquisition of which $3 million went to fund operations in pursuit of its business plan. In 2015, we also invested $1 .0 million for a noncontrolling interest in NavHealth and $1 3.1 million in Ingenios Health . These investments are highly speculative, are at risk and we may choose to make further investments, all of which may ultimately provide no return and could lead to a total loss of our investment. ACOs are entities that contract with CMS to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality performance measures are achieved. CMS made its first MSSP payments to ACOs for the first measurement periods ending December 31, 2013 in the third quarter of 2014, while issuing its second year payments in the third quarter of 2015 . Imperium received a MSSP 23 Table of Contents payment in the third quarters of 2015 and 2014 for $1.4 million and $1.6 million, respectively, while breaking even for the year at the operating income level. We expect our Imperium and Ingenios operations to negatively impact our cash flows. Notwithstanding our efforts, our ACOs may be unable to meet the required savings rates or may no t satisfy the quality measures and efforts to drive other revenue may not cover operating costs of these investments. In addition, as the MSSP is a new program, it presents challenges and risks associated with the timeliness and accuracy of data and interpretation of complex rules, which may have a material adverse effect on our ability to recoup any of our investments. Further, there can be no assurance that we will maintain positive r elations with our ACO partners or significant customers, which could result in a loss of our investment. In addition, CMS, the US Office of Inspector General, the Internal Revenue Service, the Federal Trade Commission, US Department of Justice, and various states have adopted or are considering adopting new legislation, rules, regulations and guidance relating to formation and operation of ACOs. Such laws may, among other things, require ACOs to become subject to financial regulation such as maintaining deposits of assets with the states in which they operate, the filing of periodic reports with the insurance department and/or department of health, or holding certain licenses or certifications in the jurisdictions in which the ACOs operate. Failure to comply with legal or regulatory restrictions may result in CMS terminating the ACOs agreement with CMS and/or subjecting the ACO to loss of the right to engage in some or all business in a state, payments fines or penalties, or may implicate federal and state fraud and abuse laws relating to anti-trust, physician fee-sharing arrangements, anti-kickback prohibitions, prohibited referrals, any of which may adversely affect our operations and/or profitability. We may require additional capital to pursue our acquisition strategy. At January 1, 2016, we had cash and cash equivalents of approximately $ 7.5 million and additional borrowing capacity of approximately $32.1 million. Based on our current plan of operations, including acquisitions, we cannot assure you that this amount will be sufficient, nor continue to be fully available, to support our current growth strategies. We cannot readily predict the timing, size, and success of our acquisition efforts and the associated capital commitments. If we do not have sufficient cash resources, our growth could be limited unless we obtain additional equity or debt financing. We last issued additional shares of our common stock in the third quarter of 2009, other than in conjunction with acquisitions in 2015 and 2013 and employee benefit plans. At some future point, we may elect to issue additional equity or debt securities in conjunction with raising capital or completing an acquisition. We cannot assure you that such issuances will not be dilutive to existing shareholders. Conversely, our board may approve stock repurchase programs in the future, which may use funds previously otherwise available for the pursuit of growth. Our business depends on our information systems. Our inability to effectively integrate, manage, and keep secure our information systems could disrupt our operations. Our business depends on effective and secure information systems that assist us in, among other things, monitoring utilization and other cost factors, processing claims, reporting financial results, measuring outcomes and quality of care, managing regulatory compliance controls, and maintaining operational efficiencies. These systems include software developed in-house and systems provided by external contractors and other service providers. To the extent that these external contractors or other service providers become insolvent or fail to support the software or systems, our operations could be negatively affected. Our agencies also depend upon our information systems for accounting, billing, collections, risk management, quality assurance, payroll, learning management and other information. If we experience a reduction in the performance, reliability, or availability of our information systems, our operations and ability to process transactions and produce timely and accurate reports could be adversely affected. Our information systems and applications require continual maintenance, upgrading, and enhancement to meet our operational needs. Our acquisitions require transitions and integration of various information systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain, or expand our systems properly, we could 24 Table of Contents suffer from, among other things, operational disruptions, regulatory problems, working capital disruptions and increases in administrative expenses. Our business requires the secure transmission of confidential information over public networks. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems and patient data stored in our information systems. Anyone who circumvents our security measures could misappropriate our confidential information or cause interruptions in our services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses or software programs that disable or impair computers have been distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems, or those of our providers or regulators, which could disrupt our operations or make our systems inaccessible to our providers or regulators. We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. Our security measures may be inadequate to prevent security breaches, and our business operations would be negatively impacted by cancellation of contracts and loss of patients if security breaches are not prevented. Further, our information systems are vulnerable to damage or interruption from fire, flood, natural disaster, power loss, telecommunications failure, break-ins and similar events. A failure to implement our disaster recovery plans or ultimately restore our information systems after the occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. Because of the confidential health information we store and transmit, loss of electronically-stored information for any reason could expose us to a risk of regulatory action, litigation, reputation damage, possible liability and loss. We face additional federal requirements in the transmission and retention and protection of health information. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) was enacted to ensure that employees can retain and at times transfer their health insurance when they change jobs and to simplify healthcare administrative processes. The enactment of HIPAA expanded protection of the privacy and security of personal medical data and required the adoption of standards for the exchange of electronic health information. Among the standards that the Secretary of Health and Human Services has adopted pursuant to HIPAA are standards for electronic transactions and code sets, unique identifiers for providers, employers, health plans and individuals, security and electronic signatures, privacy and enforcement. Failure to comply with HIPAA could result in fines and penalties that could have a material adverse effect on us. The Health Information Technology for Economic and Clinical Health Act (HITECH Act), effective February 22, 2010, sets forth health information security breach notification requirements. The HITECH Act requires patient notification for all breaches, media notification of breaches of over 500 patients and at least annual reporting of all breaches to the Secretary of HHS. The HITECH Act also includes 4 tiers of sanctions for breaches ($100 to $1.5 million). Failure to comply with HITECH could result in fines and penalties that could have a material adverse effect on us. We develop portions of our clinical software system in-house. Failure of, or problems with, our system could harm our business and operating results. We develop and utilize a proprietary clinical software system to collect assessment data, log patient visits, generate medical orders, and monitor treatments and outcomes in accordance with established medical standards. The system integrates billing and collections functionality as well as accounting, human resource, payroll, and employee benefits programs provided by third parties. Problems with, or the failure of, our technology and systems could negatively impact data capture, billing, collections, and management and reporting capabilities. Any such problems or failures could adversely affect our operations and reputation, result in significant costs to us, and impair our ability to provide our services in the future. The costs incurred in correcting any errors or problems may be substantial and could adversely affect our profitability. 25 Table of Contents We depend on outside software providers. We depend on the proper functioning and availability of our information systems in operating our business, some of which are provided and/or hosted by outside software providers. These information systems and applications require continual maintenance, upgrading, and enhancement to meet our operational needs. If our providers are unable to maintain or expand our information systems properly, we could suffer from operational disruptions and an increase in administrative expenses, among other things. The regulatory environment related to information security and privacy is evolving and increasingly demanding. Furthermore, we also rely on cloud computing and other similar hosted technologies that result in third parties holding significant amounts of customer or employee information on our behalf. If the security and information systems of our or of outsourced third party providers we use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected from security breaches or regulatory violations, which could impair our sales or ability to attract and keep qualified employees. Our insurance coverage may not be sufficient for our business needs and/or the cost of such coverage may adversely impact our results of operations. We bear significant insurance risk under our large-deductible workers’ compensation insurance program and our self-insured employee health program. We also carry D&O coverage for potential claims against our directors and officers, including securities actions. For additional information, please refer to Part I, Item 1, “Insurance Programs and Costs” and Part II, Item 8, “Notes to Consolidated Financial Statements.” Claims made to date or in the future may exceed the limits of such insurance, if any. Such claims, if successful and in excess of such limits, could have a material adverse effect on our ability to conduct business or on our assets. Benefits provided by our employer sponsored health insurance plan may require changes as a result of the ACA or other regulatory action. Such changes may have an adverse impact on our operating results. Our insurance coverage also includes fire, property damage, and general liability with varying limits. Although we maintain insurance consistent with industry practice, we cannot assure you that the insurance we maintain will satisfy claims made against us. In addition, as a result of operating in the home healthcare industry, our business entails an inherent risk of claims, losses , and potential lawsuits alleging employee accidents that may occur in a patient’s home. Finally, insurance coverage may not continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms. Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business. We estimate Medicare and Medicaid liabilities that may be payable by us in the future. These liabilities may be subject to audit or further review, and we may owe additional amounts beyond what we expect and have reserved. The Company is paid for its services primarily by federal and state third-party reimbursement programs, commercial insurance companies, and patients. Revenues are recorded at established rates in the period during which the services are rendered. Appropriate allowances are recorded when the services are rendered, if necessary, to give recognition to third party payment arrangements. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. It is common for issues to arise related to: 1) medical coding, particularly with respect to Medicare, 2) patient eligibility, particularly related to Medicaid, and 3) other reasons unrelated to credit risk, all of which may result in adjustments to recorded revenue amounts. Management continuously evaluates the potential for revenue adjustments and when appropriate provides allowances for losses based upon the best available information. There is at least a reasonable possibility that recorded estimates could change by material amounts in the near term. We depend on the services of our executive officers and other key employees. Our success depends upon the continued employment of certain members of our senior management team, including our Chairman and Chief Executive Officer, William B. Yarmuth, and our other named executive officers. We also depend 26 Table of Contents upon the continued employment of the individuals that manage several of our key functional areas, including operations, business development, accounting, finance, human resources, marketing, information systems, contracting and compliance. The departure of any member of our senior management team or inability to appropriately implement succession plans may materially affect our operations. Our operations could be affected by natural disasters. A substantial number of our agencies are located in Florida or coastal regions in the northeast, increasing our exposure to hurricanes and other natural disasters. The occurrence of natural disasters in the markets in which we operate could not only affect the day-to-day operations of our agencies but also could disrupt our relationships with patients, employees and referral sources located in the affected areas. In addition, any episode of care that is not completed due to the impact of a natural disaster will generally result in lower revenue for the episode. We cannot assure you that hurricanes or other natural disasters will not have a material adverse impact on our business, financial condition or results of operations in the future. Risks Related to Ownership of Our Common Stock The price of our common stock may be volatile and this may adversely affect our stockholders. The price at which our common stock trades may be volatile. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of health care companies. The market price of our common stock may be influenced by many factors, including: our operating and financial performance; variances in our quarterly financial results compared to expectations; the depth and liquidity of the market for our common stock; future sales of common stock or the perception that sales could occur; investor perception of our business and our prospects; developments relating to litigation or governmental investigations; changes or proposed changes in health care laws or regulations or enforcement of these laws and regulations, or announcements relating to these matters; or general industry, economic and stock market conditions. In addition, the stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of health care provider companies. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In the past, securities class-action litigation has often been brought against companies following periods of volatility in the market price of their respective securities. We may become involved in this type of litigation in the future. Litigation of this type is often expensive to defend and may divert our management team’s attention as well as resources from the operation of our business. Sales of substantial amounts of our common stock, or the availability of those shares for future sale, could adversely affect our stock price and limit our ability to raise capital. At January 1, 2016 , outstanding shares of our common stock totaled 10,021,395. In 2013, we established the 2013 Stock and Incentive Compensation Plan for the benefit of employees and directors providing for the issuance of up to 700,000 shares of common stock. As of January 1, 2016 , shares of our common stock remained reserved for issuance pursuant to our incentive compensation plans totaled 373,615 and shares of our common stock reserved for issuance pursuant to our employee stock purchase plan totaled 300,000. The market price of our common stock could decline as a result of sales of substantial amounts of our common stock to the public or the perception that substantial sales could occur. These sales also may make it more difficult for us to sell common stock in the future to raise capital. 27 Table of Contents We do not regularly pay dividends on our common stock and you should not expect to receive dividends on shares of our common stock. Although our board of directors declared a special cash dividend of $2.00 per common share to shareholders of record on December 20, 2012, we do not regularly pay dividends and intend to retain all future earnings to finance the continued growth and development of our business. In addition, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future payment of cash dividends will depend upon our financial condition, capital requirements, earnings, and other factors deemed relevant by our board of directors. Our Board of Directors may use anti-takeover provisions or issue stock to discourage control contests. We have implemented anti-takeover provisions or provisions that could have an anti-takeover effect, including advance notice requirements for director nominations and stockholder proposals. These provisions, and others that the Board of Directors may adopt hereafter, may discourage offers to acquire us and may permit our Board of Directors to choose not to entertain offers to purchase us, even if such offers include a substantial premium to the market price of our stock. Therefore, our stockholders may be deprived of opportunities to profit from a sale of control. ITEM 1B. UNRESOLVED STAFF COMMENT S NONE. ITEM 2. PROPERTIE S Our executive offices are located in Louisville, Kentucky, in approximately 33,000 square feet of space leased from an unaffiliated party. We have 274 real estate location leases ranging from approximately 100 to 33,000 square feet of space in their respective locations. See Part I, Item 1, “Business - Operating Segments” and Part II, Item 8, “Notes to Consolidated Financial Statements.” We believe that our facilities are adequate to meet our current needs, and that additional or substitute facilities will be available if needed. ITEM 3. LEGAL PROCEEDING S From time to time, we are subject to various legal actions arising in the ordinary course of our business, including claims for damages for personal injuries. In our opinion, after discussion with legal counsel, the ultimate resolution of any of these pending ordinary course claims and legal proceedings will not have a material effect on our financial position or results of operations. The Company is in the process of complying with a civil subpoena from the United States Department of Justice received in January of 2016 related to two locations acquired along with SunCrest in late 2013. SunCrest had previously acquired the locations in its merger with Omni Home Health in 2011. The subpoena seeks the production of various pre-acquisition business records limited to certain Omni operations in Sarasota and Tampa, Florida for the years 2007-2011. The Company is cooperating fully with this investigation. The subject operations generated less than 1% of the Company’s consolidated revenues in 2015. ITEM 4. MINE SAFETY DISCLOSURE S Not applicable. 28 Table of Contents PART I I ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NASDAQ Global Select market under the symbol “AFAM” Set forth below are the high and low sale prices for the common stock for the periods indicated as reported by NASDAQ: Closing Common Stock Prices Quarter Ended: High January 1, 2016 October 2, 2015 July 3, 2015 April 3, 2015 December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 44.70 49.74 47.76 46.55 30.30 28.76 24.29 33.27 Low 37.75 39.14 36.59 28.68 26.35 22.47 19.98 22.21 On March 1, 2016, the last reported sale price for the common stock reported by NASDAQ was $ 39.08 and there were approximately 312 holders of record of our common stock. We did not pay dividends in 2015 or 2014. We do not intend to pay additional dividends on our common stock and will retain our earnings for future operations and the growth of our business. 29 Table of Contents STOCK PERFORMANCE GRAPH The following stock performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates the performance graph by reference therein. The Performance Graph below compares the cumulative total stockholder return on our common stock, $0.10 par value per share, for the five-year period ended January 1, 2016 , with the cumulative total return on the Russell 2000 index and an industry peer group over the same period (assuming the investment of $100 in each on December 31, 2010 and the reinvestment of dividends, if any). The peer group we selected is comprised of: Amedisys, Inc. (AMED) and LHC Group, Inc. (LHCG). The cumulative total stockholder return on the following graph is historical and is not necessarily indicative of future stock price performance. 12/10 Almost Family, Inc. Russell 2000 Peer Group 100 100 100 12/11 43.15 95.82 36.30 30 12/12 12/13 12/14 12/15 57.98 111.49 47.33 92.52 154.78 57.19 82.85 162.35 95.63 109.40 155.18 132.01 Table of Contents ITEM 6. SELECTED FINANCIAL DAT A The following table sets forth selected financial information derived from the consolidated financial statements of the Company for the periods and at the dates indicated. The information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this and prior year Form 10-Ks. Fiscal Year ended January 1, 2016 (1) (In thousands except per share data) Results of operations data: Net service revenues Income from continued operations attributable to Almost Family, Inc. Discontinued operations Net income attributable to Almost Family, Inc. Per share: Basic: Number of shares Income from continued operations attributable to Almost Family, Inc. Discontinued operations Net income attributable to Almost Family, Inc. Calendar Year 2014 2011 532,214 $ 495,829 $ 356,912 $ 340,620 $ 329,644 $ 20,009 — $ 13,763 — $ 8,784 (558) $ 16,802 482 $ 19,337 1,465 $ 20,009 $ 13,763 $ 8,226 $ 17,284 $ 20,802 9,333 9,279 9,285 9,278 $ 2.11 — $ 1.47 — $ 0.95 (0.06) $ 1.81 0.05 $ 2.08 0.16 $ 2.11 $ 1.47 $ 0.89 $ 1.86 $ 2.24 9,745 Dividend declared per share 2012 $ 9,505 Diluted: Number of shares Income from continued operations attributable to Almost Family, Inc. Discontinued operations Net income attributable to Almost Family, Inc. 2013 9,462 9,374 9,324 9,360 $ 2.05 — $ 1.45 — $ 0.94 (0.06) $ 1.80 0.05 $ 2.07 0.16 $ 2.05 $ 1.45 $ 0.88 $ 1.85 $ 2.22 $ — $ — $ — $ 2 $ — (1) - See page 35 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015. January 1, December 31, 2016 Balance sheet data Working capital Total assets Long-term liabilities Total liabilities Noncontrolling interest-redeemable Healthcare Innovations Stockholders’ equity $ 54,643 464,769 136,048 190,869 2014 $ 3,639 270,261 40,274 345,258 60,432 112,066 3,639 229,553 31 2013 $ 44,148 354,362 83,436 136,669 3,639 214,054 2012 $ 62,541 249,259 17,846 44,944 — 204,315 2011 $ 63,394 251,160 15,708 44,863 — 206,297 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSI S OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company has two divisions, Home Health care and Healthcare Innovations. The Home Health care division is comprised of two reportable segments, Visiting Nurse Services (VN or Visiting Nurse) and Personal Care Services (PC or Personal Care). Our Healthcare Innovations division is also a reporting segment. Reportable segments have been identified based upon how management has organized the business by services provided to customers and the criteria in ASC Topic 280, Segment Reporting . Our VN segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. VN Medicare revenues are generated primarily on a per episode basis rather than a fee per visit or an hourly basis. Approximately 94% of the VN segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs. Our PC segment services are also provided in patients’ homes. These services (generally provided by paraprofessional staff such as home health aides) are generally of a custodial rather than skilled nature. PC revenues are generated primarily on an hourly basis. Approximately 83% of the PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. Our HealthCare Innovations ( “ HCI ” ) business segment was created to house and separately report on its developmental activities outside our traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit patients and payers through the enhanced provision of home health services. Its activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. These include, but are not limited to: technology, information, population health management, risk-sharing, assessments, care coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision making. We believe these activities help us discover valuable insight and experiences that would not otherwise be gained in the routine operation of its core home health business segments. Further, we believe these innovation activities, will play an important role in collaborating with policy makers, payers, providers, and anyone who assumes financial risk for managing patient populations, to seek to reduce costs and improve quality by providing increasingly more care for more patients in their homes than ever before. The HCI segment now includes: a) Imperium Health Management, an ACO enablement company, b) an investment in NavHealth, a population-health analytics company, c) Ingenios Health, a Nurse-Practitioner-oriented and mobile technology-enabled health risk assessment company primarily serving managed care organizations; and d) Long Term Solutions, an in-home assessment company serving the long-term care insurance industry. During 2015, we completed four acquisitions and made a cost based investment. On November 5, 2015, we completed the acquisition of Black Stone Operations, LLC (“Black Stone”). Black Stone owned and operated personal care and skilled home health services in western Ohio. On August 29, 2015, we completed the acquisition of Bracor, Inc. (dba “WillCare”). Willcare owned and operated VN and PC branch locations in New York (1 2 ) and Connecticut (1). On March 1, 2015 we acquired the stock of WillCare’s Ohio operations. On July 22, 2015, we acquired Ingenios Health Co. (“Ingenios”). Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in 7 states and Washington, D.C. The results of the Black Stone and WillCare acquisitions are reported in our VN and PC segments, while our Ingenios acquisition results are included in the Healthcare Innovations segment. On January 29, 2015, we acquired a noncontrolling interest in a development stage analytics and software company, NavHealth, Inc. (“NavHealth”). The investment is an asset of our Health care Innovations segment. During the second quarter of 2014, we acquired a small home health agency in southern Kentucky using cash on hand to expand existing VN segment operations. During 2013, we completed three acquisitions. On December 6, 2013, the Company completed the acquisition of Omni Home Health Holdings, Inc. (“SunCrest”). SunCrest subsidiaries owned 32 Table of Contents and operated 60 Medicare-certified home health agencies and 9 private duty agencies in Florida, Tennessee, Georgia, Pennsylvania, Kentucky, Illinois, Indiana, Mississippi and Alabama. On October 4, 2013, we acquired a controlling interest in Imperium Health Management, LLC (“Imperium”), a development-stage enterprise that provides strategic health management services to Accountable Care Organizations (“ACOs”). On July 17, 2013, the Company acquired the assets of the Medicare-certified home health agencies owned by Indiana Home Care Network (“IHCN”). The results of operations for SunCrest and IHCN are principally reported within the Company’s Visiting Nurse reportable segment, while Imperium results are included in the Healthcare Innovations segment. Our View on Reimbursement and Diversification of Risk Our Company is highly dependent on government reimbursement programs which pay for the majority of the services we provide to our patients. Reimbursement under these programs, primarily Medicare and Medicaid, is subject to frequent changes as policy makers balance their own needs to meet the health care needs of constituents while also meeting their fiscal objectives. Medicare and Medicaid are consuming a greater percentage of federal and states’ budgets, respectively, which is exacerbated in times of economic downturn. We believe that these financial issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services. Additionally, we believe our services offer the lowest cost alternative to institutional care and is a part of the solution to both balancing the federal budget and the states’ Medicaid financing problems. We believe that an important key to our historical success and to our future success is our ability to adapt our operations to meet changes in reimbursement as they occur. One important way in which we have achieved this adaptability in the past, and in which we plan to achieve it in the future, is to maintain some level of diversification in our business mix. The execution of our business plan will place primary emphasis on the development of our home health operations. As our business grows , we may evaluate opportunities for the provision of other health care services in patients’ homes that would be consistent with our Senior Advocacy mission. Our Business Plan Our future success depends on our ability to execute our business plan. Over the next three to five years we will try to accomplish the following: Generate meaningful same store sales growth through the focused provision of high quality services and attending to the needs of our patients; Drive our costs down, while continuing to provide high-quality patient care, by improving the productivity of our work force through improved monitoring, tighter controls, workflow automation, use of technology and other opportunities for efficiency gains; Expand the significance of our home health services by selectively acquiring other quality providers, through the startup of new agencies and potentially by providing new services in patients’ homes consistent with our Senior Advocacy mission; Make additional strategic investments which expand our Healthcare Innovation segment in its mission to find solutions for more effective, efficient and appropriate delivery of homecare; and Expand our capital base through both earnings performance and by seeking additional capital investments in our Company. Health Care Reform Legislation and Medicare Regulations The Federal Government has been pursuing a comprehensive reform of the US healthcare system since early 2009. Numerous changes have been enacted, proposed and continue to be debated, which are discussed in more detail in Part I, Item 1, “Government Regulation” and Part I, Item 1A, “Risk Factors.” Many of the change provisions do not take 33 Table of Contents effect for an extended period of time and most will require the publication of implementing regulations and/or the issuance of programmatic guidelines. It is reasonable to expect that the implementation of the ACA and other changes and potential changes described in Part I, Item 1, Government Regulation, might have a more immediate and negative impact on those providers generating lower margins than us, with more leverage relative to earnings than us, with less capital resources than us, or with less ability to adapt their operations. We believe this may result in a contraction of the number of home health providers. In the event of such a contraction in the number of providers, we believe the surviving providers may benefit from a higher rate of admissions growth than would have otherwise occurred. Those surviving providers may earn incremental margins on those higher admissions that may serve to offset a portion of the rate reduction from the Medicare program. However, there can be no assurance that we will be successful in attracting such higher admissions. It is also reasonable to expect that future rate cuts will present additional opportunities for us to make acquisitions of other providers at valuations and on terms that are attractive to us and enable us to spread our segment and unallocated corporate overhead expenses across a larger business base. However, there can be no assurance that we will be successful in making such acquisitions or that such opportunities will present themselves. As a result of the broad scope of health care reform, the significant changes it will effect in the healthcare industry and society generally, and the complexity of the technical issues it addresses, we are unable to predict, at this time, all the ramifications health care reform may have on our business as a health care provider or a sponsor of an employee health insurance benefit plan. These matters could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us. This may increase our costs, decrease our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business. Refer to the results of operations for the impact of these items on revenue, operating and net income for the years ended January 1, 2016, December 31, 2014 and 2013. Management is continuing its work to evaluate the implications of these changes and to develop appropriate courses of action for the Company. Additionally, we may be unable to take actions to mitigate any, or all, of the negative implications of these matters. We contemplate formulating and taking actions intended to mitigate or otherwise offset some of the negative effects of reimbursement changes. These actions may include any or all of the following: Attempting to increase our revenues by: investing more resources in sales and marketing activities, development of diagnosis related specialty programs and increasing our educational programs regarding the value of home health to drive admission growth, establishing startup branch operations to expand our service territories, and acquisitions of underperforming providers with strong referral relationships, Attempting to reduce our costs by: developing a more efficient delivery model, increasing the productivity standards for our staff, optimizing the appropriate use of different levels of professional staff, limiting or eliminating the growth in wage rates, limiting or reducing the size of our work force, closing unprofitable branch operations and accelerating our efforts to evaluate the use of various technological approaches to the delivery of patient care to improve patient outcomes and/or improve the productivity of our workforce, Evaluating the potential implications of health care reform on our employee benefit plans, and possible changes we may need to make to our plans, and Potentially other actions we deem appropriate including evaluation of potential additional service offerings in patients’ homes consistent with our Senior Advocacy mission or changing the mix of the types of services we provide. Although we will attempt to mitigate or otherwise offset the negative effect of health care reform on our revenue and our employee benefit plans, our actions may not ultimately be cost effective or prove successful. 34 Table of Contents Seasonality Our Visiting Nurse segment operations located in Florida (which generated approximately 2 4 % of that segment’s revenues in fiscal year 2015) normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. Fiscal Year End Effective with the first quarter of 2015, the Company adopted a 52-53 week fiscal reporting calendar under which it will report its annual results going forward in four equal 13-week quarters. Every fifth year, one quarter will include 14 weeks and that year will include 53 weeks of operating results. Once fully adopted, this approach will minimize the impact of calendar differences when comparing different historical periods. As a result of the change in the fiscal reporting calendar, fiscal year 2015 ended January 1, 2016 also included the New Year’s Day holiday observed January 1, 2016. As such the fiscal year ended January 1, 2016 is 366 days, one more day than it would have been if the change had not been made which reduced diluted earnings per share by $0.03. Critical Accounting Policies The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, we select the principle or method that is appropriate in the specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties; actual results could differ from these estimates. We evaluate our estimates, including those related to revenue recognition, collectability of accounts receivable, insurance reserves, goodwill, intangibles, income taxes, stock-based compensation, litigation, and contingencies on an on-going basis. We base these estimates on our historical experience and other assumptions that we believe are appropriate under the circumstances. In preparing these consolidated financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial statements. Revenue Recognition We recognize revenues when patient services are provided, primarily in our patients’ homes. Net service revenues are stated at amounts estimated by us to be their net realizable values. We are paid for our services primarily by federal and state third-party reimbursement programs and, to a lesser degree, commercial insurance companies and patients. Medicare Episodic Revenues Approximately 71% of our consolidated net service revenues are derived from the Medicare program. Net service revenues are recorded under the Medicare prospective payment program (“PPS”) based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) changes in the base episode payments established by the Medicare program; (b) adjustments to the base episode payments for case-mix and geographic wages; (c) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (d) a partial payment if our patient transferred to another provider or we received a patient from another provider before completing the episode; (e) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (f) an outlier payment if our patient’s care was unusually costly (capped at 10% of total reimbursement at the agency level); (g) the number of episodes of care provided to a patient; and (h) 2% sequestration reduction for episodes ending after March 31, 2013. At the beginning of each Medicare episode, we calculate an estimate of the amount of expected reimbursement based on the variables outlined above and recognize Medicare revenue on an episode-by-episode basis during the course of each episode over its expected number of visits. Over the course of each episode, as changes in the variables become known, we calculate and record adjustments as needed to reflect changes in expectations for that episode from those established at the start of the 60 day period until its ultimate outcome at the end of the 60 day period is known. 35 Table of Contents Non-Medicare Revenues Substantially all remaining revenues are derived from services provided under a per visit, per hour or unit basis (as opposed to episodic) for which revenues are calculated and recorded using payor-specific or patient-specific fee schedules based on the contracted rates in each third party payor agreement. Contingent Service Revenues Our Healthcare Innovations segment provides strategic health management services to ACOs that have been approved to participate in the “MSSP . ” In addition to having ownership interests in a few ACOs, we also have service agreements with ACOs that provide for sharing of MSSP payments received by the ACO, if any. ACOs are entities that contract with Centers for Medicare and Medicaid Services (CMS) to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality performance measures are achieved. The MSSP is relatively new and therefore has limited historical experience, which impacts the Company’s ability to accurately accumulate and interpret the data available for calculating an ACOs’ shared savings, if any. MSSP payments are not recognized in revenue until persuasive evidence of an arrangement exists, services have been rendered, the payment is fixed and determinable and collectability is assured, which generally is satisfied only upon cash receipt. Under such agreements, we recognized $1.4 million in MSSP payments for cash received during 2015 related to savings generated for the program period ended December 31, 2014 and $1.6 million for savings generated for the program period ended December 31, 2013, which accounted for 41% and 63%, respectively of our healthcare innovations segment revenues. No revenue has been recognized related to MSSP payments for savings generated through December 31, 2015, if any. Revenue Adjustments Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, we may adjust previously recorded revenue amounts due to issues related to: a) medical coding, particularly with respect to Medicare, b) patient eligibility, particularly with respect to Medicaid, and c) other reasons unrelated to credit risk. Revenue adjustments, if any, to reflect actual payment amounts for completed episodes or services provided under per visit, per hour or unit basis which differ from our estimates or audit adjustments are recorded when known and estimable. Historically, revenue adjustments have not been significant and as such, we believe that net service revenues and accounts receivable - net reflect their net realizable value. Changes in estimates related to prior periods (increased) decreased revenues by approximately ($365,000), ($320,000) and $114,000 in the years ended January 1, 2016 and December 31, 2014 and 2013, respectively. Accounts Receivable Accounts receivable are reported at their estimated net realizable value and are net of estimated allowances for uncollectible accounts and adjustments. Accounts receivable consist primarily of amounts due from third-party payors and patients. We evaluate the collectability of our accounts receivable based on certain factors, such as payor types, historical collection trends and aging categories. We calculate our reserve for uncollectible accounts based on the length of time that the receivables are past due. The percentage applied to the receivable balances for each payor’s various aging categories is based on historical collection experience, business and economic conditions and reimbursement trends. Insurance Programs We bear significant risk under our large-deductible workers’ compensation insurance program and our self-insured employee health program. Under the workers’ compensation insurance program, we bear risk up to $400,000 per incident, except for an acquisition that has not been folded into our program and carries a stop-loss of $750,000. We purchase stop-loss insurance for the employee health plan that places a specific limit, generally $300,000, on our exposure for any individual covered life. 36 Table of Contents Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against us by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. We are aware of incidents that have occurred through January 1, 2016 that may result in the assertion of additional claims. We currently carry professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. We also carry D&O coverage (also on a claims made basis) for potential claims against our directors and officers, including securities actions, with deductibles ranging from $1 75 ,000 to $ 5 00,000 per claim. We record estimated liabilities for our insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. We monitor our estimated insurance-related liabilities and recoveries, if any, on a monthly basis and as required by ASU 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries, record amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities in the consolidated balance sheets. As facts change, it may become necessary to make adjustments that could be material to our results of operations and financial condition. Goodwill and Other Intangible Assets Intangible assets are stated at fair value at the time of acquisition and goodwill represents the excess cost over the fair value of net assets acquired and liabilities assumed. Finite lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset. Goodwill and indefinite-lived assets are not amortized. We perform impairment tests of goodwill and indefinite lived assets as required by ASC Topic 350, Intangibles - Goodwill and Other on at least an annual basis. An impairment analysis requires numerous subjective assumptions and estimates to determine fair value of the respective reporting units. We estimate the fair value of the related reporting units using a combined market approach (guideline company and similar transaction method) and income approach (discounted cash flow analysis). These models are based on our projections of future revenues and operating costs and are reconciled to our consolidated market capitalization. Discounted cash flow models are highly reliant on various assumptions. Significant assumptions we utilize in these models for the current year included: projected business results and future industry direction, long-term growth factor of 3% and weighted-average cost of capital of 15%. We use assumptions that we deem to be reasonable estimates of likely future events and compares the total fair values of each reporting unit to our overall market capitalization, and implied control premium, to determine if the fair values are reasonable compared to external market indicators. Subsequent changes in these key assumptions could affect the results of future goodwill impairment reviews. Important to our overall impairment conclusion was the comparison of the aggregate fair values of the reporting units to our overall market capitalization at the annual assessment date, including the implied control premium, to determine if the fair values are reasonable compared to external market indicators. The aggregate fair value for each reporting unit did not exceed our market value as of the annual impairment testing date. A negative control premium indicates the high degree of conservatism built into our fair value models. Because the fair value results for each reporting unit did not indicate a potential impairment existed, we did not recognize any goodwill impairment during the fiscal years ending January 1, 2016, December 31, 2014 and December 31, 2013 . Specifically, our VN and PC reporting unit fair value s w ere significantly over their carrying value . Based on the sensitivity analysis performed on two key assumptions in the discounted cash flow model s of each reporting unit, a 100 basis point change in either assumption (either individually or in the aggregate) would not result in any impairment of our goodwill within either reporting unit. In calculating the fair value of VN within the model, we considered our cash flow projections and weighted average cost of capital to be conservative. Assuming no changes in the key assumptions identified and projected results, we currently anticipate the future fair value of both the VN and PC reporting units to increase over time; however, future declines in the operating results of either reporting unit could indicate a need to reevaluate the fair value of these businesses under U.S. GAAP requirements and may ultimately result in an impairment to goodwill. We will continue to monitor for any potential indicators of impairment. 37 Table of Contents Accounting for Income Taxes We account for taxes in accordance with ASC Topic 740, Income Taxes . As of January 1, 2016 , we have net deferred tax liabilities of approximately $13.1 million. The net deferred tax liability is composed of approximately $19.1 million of deferred tax assets and approximately $32.2 million of deferred tax liabilities. We have provided a valuation allowance against certain deferred tax assets based upon our estimates of realizability of those assets through future taxable income. This valuation allowance was based in large part on our history of generating operating income or losses in individual tax locales and expectations for the future. Our ability to generate the expected amounts of taxable income from future operations is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government. Further, we have book goodwill of $ 113.2 million which is not deductible for tax purposes. The remaining deductible goodwill provides an annual tax deduction approximating $10.0 million through 2021. We have considered the above factors in reaching our conclusion that it is more likely than not that future taxable income will be sufficient to fully utilize the deferred tax assets (net of the valuation allowance) as of January 1, 2016 . RESULTS OF OPERATIONS Year Ended January 1, 2016 Compared with Year Ended December 31, 2014 (In thousands) January 1, 2016 (2) Amount Consolidated Home Health Operations Net service revenues: Visiting Nurse Personal Care $ 401,051 127,712 528,763 75.8% 24.2% 100.0% 49,872 14,170 64,042 $ 380,788 112,497 493,285 77.2% 22.8% 100.0% 12.4% 11.1% 12.1% 42,899 12,453 55,352 3,451 100.0% (1,217) Change Amount $ % 5.3% 13.5% 7.2% 11.3% 11.1% 11.2% 6,973 1,717 8,690 16.3% 13.8% 15.7% 2,544 100.0% 907 35.7% -35.3 % (13) -0.5 % (1,204) 26,583 5.0% 25,558 5.2% 1,025 4.0% $ 4,139 32,103 (2,006) (10,556) 19,541 0.8% 6.0% -0.4 % -2.0 % 3.7% $ 5,304 24,477 (1,442) (9,511) 13,524 1.1% 4.9% -0.3 % -1.9 % 2.7% $ (1,165) 7,626 (564) (1,045) 6,017 -22.0 % 31.2% 39.1% 11.0% 44.5% $ 43,938 8.3% $ 35,841 7.2% $ 8,097 22.6% $ 21,411 4.0% $ 16,924 3.4% $ 4,487 26.5% Healthcare Innovations Revenue Operating income before noncontrolling interest Adjusted EBITDA-HHO (1) Adjusted Earnings-HHO (1) % Rev 20,263 15,215 35,478 Operating income before corporate expenses: Visiting Nurse Personal Care Corporate expenses Deal, transition and other costs Operating income Interest expense, net Income tax expense Net income December 31, 2014 Amount % Rev NM (1) See page 48 for GAAP reconciliation of Adjusted EBITDA from home health operations and Adjusted earnings from home health operations. (2) See page 35 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015. Approximately $31. 2 million of our $35. 5 million year over year increase in Home Health revenue was a result of our acquisition of WillCare and Black Stone. Refer to VN and PC segment discussions for further operating performance details. Refer to “Fiscal Year End” related to our 52-53 week reporting conversion. 38 Table of Contents Healthcare Innovations ’ operating loss was primarily due to the expected losses of our third quarter 2015 acquisition of Ingenios and to a lesser degree, higher losses in Imperium primarily related to a lower MSSP payments in 2015, as compared to 2014. Corporate expenses as a percentage of revenue decreased slightly to 5.0% in 2015 from 5. 2 % in 2014. Deal, transition and other costs for 2015 include a net benefit of $4.2 million related to legal settlements, which was offset by $2.5 million of deal and transition costs related to our 2015 acquisitions, the $1.8 million provision for the Chapter 7 bankruptcy filing of a specific payor and $1.4 million related to the fourth quarter of 2015 closure of underperforming branch locations in the VN segment. Deal and transition costs in 2014 primarily related to the completion of the transition of our 2013 acquisitions. Interest expense increased $0.6 million due to borrowings on our line of credit in conjunction with 2015 acquisitions. Our effective tax rate for 2015 was 34.5% compared to 41.0% for 2014. The lower effective tax rate for 2015 was primarily r elated to the tax treatment of a legal settlement . Excluding the non-taxable settlement and other nondeductible deal costs, our effective tax rate for 2015 would have been 40.5%. Visiting Nurse Segment-Years Ended January 1, 2016 and December 31, 2014 Approximately 94% of the VN segment revenues were generated from the Medicare program while the balance was generated from Medicaid and private insurance programs. In addition to our focus on operating income from the 39 Table of Contents Visiting Nurse segment, we also measure this segment’s performance in terms of admissions, episodes, visits, patient months of care, revenue per episode and visits per episode. (In thousands, except statistical information) January 1, 2016 (2) Amount Net service revenues $ Cost of service revenues Gross margin General and administrative expenses: Salaries and benefits Other Total general and administrative expenses Operating income before corporate expenses $ Average number of locations All payors: Patients Months Admissions Billable Visits Medicare: Admissions (1) Revenue (in thousands) $ Revenue per admission $ Billable visits (1) Recertifications Payor mix % of Admissions Traditional Medicare Episodic Replacement Plans Paid Episodically Replacement Plans Paid Per Visit Non-Medicare: Admissions (1) Revenue (in thousands) Revenue per admission Billable visits (1) Recertifications Payor mix % of Admissions Medicaid & other governmental Private payors December 31, 2014 Amount % Rev 401,051 194,098 206,953 100.0% 48.4% 51.6% 115,002 42,079 $ 380,788 186,837 193,951 100.0% 49.1% 50.9% 28.7% 10.5% 110,480 40,572 157,081 39.2% 49,872 12.4% $ Change Amount % Rev $ % 20,263 7,261 13,002 5.3% 3.9% 6.7% 29.0% 10.7% 4,522 1,507 4.1% 3.7% 151,052 39.7% 6,029 4.0% 42,899 11.3% 6,973 16.3% $ 163 167 (4) -2.4 % 333,343 102,381 2,621,443 319,430 98,634 2,507,067 13,913 3,747 114,376 4.4% 3.8% 4.6% 3,377 3.9% $ 12,649 3.5% $ (16) 96,791 124 -0.4 % 4.3% 0.3% 91,027 88.9% 377,724 94.2% 4,150 2,356,687 47,999 89.9% 87,650 88.9% $ 365,075 95.9% $ 4,165 2,259,896 47,875 90.1% 84.1% 84.0% 0.1% 4.1% 3.4% 0.7% 11.8% 12.6% (0.8) % 11,354 11.1% $ 23,327 5.8% $ 2,055 264,756 2,991 10.1% 30.6% 69.4% 10,984 11.1% $ 15,713 4.1% $ 1,431 247,171 1,865 9.9% 23.3% 76.7% 370 3.4% $ 7,614 48.5% $ 624 17,585 1,126 43.6% 7.1% 60.4% 7.3% (7.3) % (1) Percentages pertain to percentage of total admissions or total billable visits, as applicable. (2) See page 35 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015. VN segment net service revenues increased primarily due to the WillCare and Black Stone acquisitions which increased net service revenues by $15. 3 million. The acquisitions increased operating income before corporate expenses by $ 3.0 million. Substantially all of the changes in cost of service revenues and general and administrative expenses were due to the WillCare and Black Stone acquisitions. 40 Table of Contents Excluding the effects of the WillCare and Black Stone acquisitions, operating income before corporate expenses improved $ 3.9 million primarily due to higher volumes and an effective Medicare rate increase of about 1%. Gross margin as a percent of revenue de creased 0. 7 % primarily due to organic volume growth, the Medicare rate increase and lower cost per visit. Total general and administrative expenses declined slightly as a percentage of revenue to 39.2 % from 39.7 % in the prior year primarily due to organic volume growth and the Medicare rate increase. As a result, VN segment operating income before corporate expenses improved to $ 49.9 million from $42.9 million in the prior year, which VN segment operating income as a percentage of revenue increased to 12. 4 % from 11. 3 % in the prior year. Personal Care Segment-Years Ended January 1, 2016 and December 31, 2014 Approximately 83% of the PC segment revenues were generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. (In thousands, except statistical information) January 1, 2016 (1) Amount Net service revenues Cost of service revenues Gross margin General and administrative expenses: Salaries and benefits Other Total general and administrative expenses Operating income before corporate expenses $ $ Average number of locations Admissions Patient months of care Billable hours Revenue per billable hour $ December 31, 2014 Amount % Rev 127,712 100.0% 86,642 41,070 $ 112,497 100.0% 67.8% 32.2% 76,865 35,632 17,373 9,527 13.6% 7.5% 26,900 21.1% 14,170 11.1% $ Change Amount % Rev $ % 15,215 13.5% 68.3% 31.7% 9,777 5,438 12.7% 15.3% 14,523 8,656 12.9% 7.7% 2,850 871 19.6% 10.1% 23,179 20.6% 3,721 16.1% 12,453 11.1% 1,717 13.8% $ 65 61 4 6.6% 6,944 6,458 486 7.5% 110,082 5,792,106 89,880 5,304,089 20,202 488,017 22.5% 9.2% 0.84 4.0% 22.05 $ 21.21 $ (1) See page 35 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015. PC segment net revenue increased due to the WillCare and Black Stone acquisitions which increased net service revenues by $15. 9 million and operating income before corporate expenses by $2. 5 million. Excluding the effects of the WillCare and Black Stone acquisitions, net service revenues decreased $ 0.7 million or 0.6 %, to $111. 8 million in 2015 from $112. 5 million in 2014 primarily due to a rate reduction for a specific program in Ohio. Cost of service revenues as a percentage of net service revenues de creased slightly to 67.8 % in 2015 from 68.3% in 2014. Total general and administrative expenses in creased as a percent of net service revenues to 21.1 % from 20.6 % in 2014. As a result, PC segment operating income before corporate expenses in creased to $1 4 . 2 million from $ 12.5 million in 2014, while operating income before corporate expenses as a percentage of revenue was unchanged. 41 Table of Contents Year Ended December 31, 2014 Compared with Year Ended December 31, 2013 (in thousands) December 31, December 31, 2014 Consolidated Home Health Operations Net service revenues: Visiting Nurse Personal Care Amount $ Adjusted EBITDA-HHO(1) Adjusted Earnings-HHO(1) 77.2% 22.8% 100.0% 42,899 12,453 55,352 $ Change % Rev 263,789 92,927 356,716 73.9% 26.1% 100.0% 11.3% 11.1% 11.2% 28,393 11,411 39,804 2,544 100.0% (13) Amount $ % 44.4% 21.1% 38.3% 10.8% 12.3% 11.2% 14,506 1,042 15,548 51.1% 9.1% 39.1% 196 100.0% 2,348 1,198.0% -0.5 % (482) -245.9 % 469 NM % 25,558 5.2% 20,206 5.7% 5,352 26.5% 5,304 24,477 (1,442) (9,511) 1.1% 4.9% -0.3 % -1.9 % 4,321 14,795 (169) (6,020) 1.2% 4.1% 0.0 % -1.7 % 983 9,682 (1,273) (3,491) 22.7% 65.4% 753.3% 58.0% $ 13,524 2.7% $ 8,606 2.4% $ 4,918 57.1% $ 35,841 7.2% $ 23,637 6.6% $ 12,204 51.6% $ 16,924 3.4% $ 11,532 3.2% $ 5,392 46.8% Healthcare Innovations Revenue Operating (loss) income before noncontrolling interest 380,788 112,497 493,285 Amount 116,999 19,570 136,569 Operating income before corporate expenses: Visiting Nurse Personal Care Corporate expenses Deal, transition and other costs Operating income Interest expense, net Income tax expense Net income from continuing operations 2013 % Rev (1) See page 48 for GAAP reconciliation of Adjusted EBITDA from Home Health operations and Adjusted earnings from Home Health operations. Approximately $127.6 million of our $136.6 million year over year increase in Home Health revenue was a result of our acquisition of SunCrest. The balance was generated from organic growth, partially offset by Medicare rate cuts in the VN segment. Refer to VN and PC segment discussions for further operating performance details. Healthcare Innovations revenue increased $2.3 million year over year due to the receipt in 2014 of $1.6 million for Imperium’s share of an MSSP payment, as a part of the first ever payments from CMS to ACOs under the ACA. Additionally, Imperium earns certain fees from ACOs that are not subject to earning an MSSP payment. Our Healthcare Innovations segment operations broke even in 2014, while losing $0.5 million in 2013. Corporate expenses increased by $5. 4 million to $25. 6 million from $20.2 million in the prior year, while declining as a percentage of revenue to 5. 2 % from 5.7% last year. The 2014 period includes $4.4 million of incremental home office costs associated with the SunCrest acquisition. Additionally, 2014 included a $3.3 million provision for performance incentive programs while the prior year provision was zero. During 2014, we consolidated several overlapping-territory Florida branches related to the SunCrest acquisition and closed SunCrest’s Nashville based home office completing the last substantial steps of our integration plan. As a result, deal, transition and other include certain one-time lease and related abandonment charges. Deal, transition and other in 2014 also includes a $1.0 million benefit from insurance recoveries, net of costs incurred during 2014, related to legal defense costs incurred by the Company primarily in 2011 and 2010. The underlying cases were dismissed in 2014. 42 Table of Contents Interest expense increased $1.3 million due to borrowings on our line of credit in conjunction with the SunCrest acquisition. Our effective tax rate in 2014 was 41.0% compared to 41.9% for 2013. The lower income tax rate in 2013 occurred primarily due to the Work Opportunity Tax Credit (WOTC) not being extended for 2012 until 2013 which resulted in our 2013 effective tax rate including the WOTC benefit for 2 years (2013 and 2012). 43 Table of Contents Visiting Nurse Segment-Years Ended December 31, 2014 and 2013 Approximately 96 % of the VN segment revenues were generated from the Medicare program while the balance was generated from Medicaid and private insurance programs. (In thousands, except statistical information) December 31, December 31, 2014 Amount Net service revenues $ Cost of service revenues Gross margin General and administrative expenses: Salaries and benefits Other Total general and administrative expenses Operating income before corporate expenses $ Average number of locations All payors: Patients Months Admissions Billable Visits Medicare: Admissions (1) Revenue (in thousands) $ Revenue per admission $ Billable visits (1) Recertifications Payor mix % of Admissions Traditional Medicare Episodic Replacement Plans Paid Episodically Replacement Plans Paid Per Visit Non-Medicare: Admissions (1) Revenue (in thousands) Revenue per admission Billable visits (1) Recertifications Payor mix % of Admissions Medicaid & other governmental 2013 % Rev 380,788 186,837 193,951 100.0% 49.1% 50.9% 110,480 40,572 Amount $ 263,789 127,695 136,094 100.0% 48.4% 51.6% 29.0% 10.7% 80,337 27,364 151,052 39.7% 42,899 11.3% $ Change Amount % Rev $ % 116,999 59,142 57,857 44.4% 46.3% 42.5% 30.5% 10.4% 30,143 13,208 37.5% 48.3% 107,701 40.8% 43,351 40.3% 28,393 10.8% 14,506 51.1% $ 167 111 56 50.5% 319,430 98,634 2,507,067 214,279 64,304 1,759,864 105,151 34,330 747,203 49.1% 53.4% 42.5% 29,209 50.0% $ 111,063 43.7% $ (181) 591,550 14,278 -4.2 % 35.5% 42.5% 87,650 88.9% 365,075 95.9% 4,165 2,259,896 47,875 90.1% 58,441 90.9% $ 254,012 96.3% $ 4,346 1,668,346 33,597 94.8% 84.0% 91.9% (7.9) % 3.4% 2.6% 0.8% 12.6% 5.5% 7.1% 10,984 11.1% $ 15,713 4.1% $ 1,431 247,171 1,865 9.9% 23.3% 5,863 9.1% $ 9,777 3.7% $ 1,668 91,518 1,230 5.2% 24.1% 5,121 87.3% $ 5,936 60.7% $ (237) 155,653 635 -14.2 % 170.1% 51.6% (0.8) % Private payors 76.7% 75.9% 0.8% (1) Percentages pertain to percentage of total admissions or total billable visits, as applicable. Visiting Nurse segment net service revenues increased primarily due to the SunCrest acquisition which increased net service revenues by $111.3 million. The SunCrest acquisition increased operating income before corporate expenses by $15.6 million. 44 Table of Contents Substantially all of the changes in cost of service revenues and general and administrative expenses were due to the SunCrest acquisition. Excluding the effects of the SunCrest acquisition, operating income before corporate expenses improved $1.0 million as volume growth and cost improvements more than offset the impact of Medicare rate cuts which reduced revenue and operating income by $4.2 million. Medicare rate cuts were comprised of a 1.15% 2014 rate cut on episodes ending after December 31, 2013 and a 2.0% Medicare sequestration cut effective for episodes ended after March 2013. Salaries and wages in 2014 included approximately $0.5 million of costs associated with employee pay increases in effect for the last five months of the year. Personal Care Segment-Years Ended December 31, 2014 and 2013 Approximately 79% of the PC segment revenues were generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. (In thousands, except statistical information) December 31, December 31, 2014 Amount Net service revenues Cost of service revenues Gross margin General and administrative expenses: Salaries and benefits Other Total general and administrative expenses Operating income before corporate expenses $ $ Average number of locations Admissions Patient months of care Billable hours Revenue per billable hour $ 2013 % Rev 112,497 100.0% 76,865 35,632 Amount $ 92,927 100.0% 68.3% 31.7% 62,621 30,306 14,523 8,656 12.9% 7.7% 23,179 20.6% 12,453 11.1% $ Change Amount % Rev $ % 19,570 21.1% 67.4% 32.6% 14,244 5,326 22.7% 17.6% 12,349 6,546 13.3% 7.0% 2,174 2,110 17.6% 32.2% 18,895 20.3% 4,284 22.7% 11,411 12.3% 1,042 9.1% — 0.0% $ 61 61 6,458 4,723 1,735 36.7% 89,880 5,304,089 80,045 4,682,590 9,835 621,499 12.3% 13.3% 1.36 6.9% 21.21 $ 19.85 $ Net service revenues increased $19.6 million, or 21.1%, to $112.5 million in 2014 from $92.9 million in 2013, primarily due to the SunCrest acquisition which increased revenues by $16.2 million, with the remainder due to organic volume growth. Cost of service revenues as a percentage of net service revenues increased slightly to 68.3% in 2014 from 67.4% in 2013, primarily due to changes in business mix partially due to the SunCrest acquisition. Total general and administrative expenses as a percent of net service revenues increased to 20.6% in 2014 from 20.3% in 2013. As a result, PC segment operating income before corporate expenses increased to $12.5 million from $11.4 million in 2013, while operating income before corporate expenses as a percentage of revenue decreased 1.2 %. Liquidity and Capital Resources We believe that a certain amount of debt has an appropriate place in our overall capital structure, when reimbursement 45 Table of Contents visibility permits, and it is not our strategy to eliminate all debt financing. We believe that our cash flow from operations, cash on hand, and borrowing capacity on our bank credit facility, described below, will be sufficient to cover operating needs, future capital expenditure requirements and scheduled debt payments of miscellaneous small borrowing arrangements. In addition, it is likely that we will pursue growth from acquisitions, partnerships and other ventures that would be funded from excess cash from operations, cash on hand, credit available under the bank credit agreement and other financing arrangements that are normally available in the marketplace. Further, our board may pursue a stock repurchase program or may decide to pay special dividends in the future. Revolving Credit Facility We have a senior secured revolving credit facility with J.P. Morgan Securities LLC as Administrative Agent, Bank of America, N.A. as Syndication Agent, and certain other lenders (the “Facility”). The Facility consists of a $175 million credit line with a maturity date of November 15, 2020 and an “accordion” feature providing future expansion of the Facility to $250 million. Borrowings (other than letters of credit) under the credit facility generally will bear interest at a rate varying from London Interbank Offered Rate (LIBOR) rate plus 1.75% to LIBOR rate plus 3.00%, depending on leverage. The Facility is secured by substantially all of our assets and the stock of our subsidiaries. Debt issuance costs of $1.2 million are recorded in prepaid and other assets and is being amortized through November 15, 2020. Borrowings under the Facility are subject to various covenants including a multiple of 3.5 times earnings before interest, taxes, depreciatio n and amortization (“EBITDA”). EBITDA may include “Acquired EBITDA” from pro-forma acquisitions as defined. Borrowings under the Facility may be used for general corporate purposes, including acquisitions. Application of the Facility’s borrowing formula as of January 1, 2016 , would have permitted $ 43.4 million to be used. We had irrevocable letters of credit totaling $11.3 million outstanding in connection with our self-insurance programs, which resulted in a total of $ 32.1 million being available for use at January 1, 2016 . As of January 1, 2016 , we were in compliance with the various financial covenants. Under the most restrictive of its covenants, we were required to maintain minimum net worth of at least $177.5 million at January 1, 2016 . At such date, our net worth was approximately $270. 3 million. The effective interest rates on our borrowings were 3.5 % and 2.7% for 2015 and 2014, respectively. We believe the Facility will be sufficient to fund our operating needs and expansion plans for at least the next year. We will continue to evaluate additional capital, including possible debt and equity investments in the Company, to support a more rapid development of the business than would be possible with internal funds. Cash Flows Key elements to the Consolidated Statements of Cash Flows were as follows for the fiscal years: (in thousands): Net Change in Cash and Cash Equivalents (in thousands) Provided by (used in): Operating activities Investing activities Financing activities Discontinued operations Net increase (decrease) in cash and cash equivalents 2015 $ $ 21,206 (86,695) 66,125 — 636 2014 $ $ 6,986 (2,200) (10,146) — (5,360) 2013 $ $ 19,546 (90,967) 55,209 2,338 (13,874) 2015 Compared to 2014 Net cash provided by operating activities resulted primarily from current period net income of $19.5 million, plus certain non-cash items, net of changes in accounts receivable, accounts payable and accrued expenses. Accounts receivable days sales outstanding, which were 58 at January 1, 2016 and 55 at December 31, 2014, increas ing due to collection delays, primarily in the PC segment, as a result of changes in patient enrollment and billing requirements enacted by the Medicaid managed care providers in Tennessee. 46 Table of Contents The cash used in investing activities was primarily due to our 2015 acquisitions, capital expenditures of $3.1 million and a $1.0 million cost basis investment. The cash provided by financing activities resulted from $67.3 million of new borrowings on the revolving credit facility and $1.2 million debt issuance costs incurred with the new five year $175 million credit facility. 2014 Compared to 2013 Net cash provided by operating activities resulted primarily from 2014 period net income of $13.5 million, plus certain non-cash items, which was partially offset by a net cash outflow related to the acquired SunCrest business. Conversion of SunCrest payroll, payment of other liabilities in excess of acquired cash and payment of SunCrest transition and severance related costs reduced cash flow from operating activities by $11.6 million. In addition, SunCrest clinical system conversions, transition of billing and collection activities from the SunCrest home office to our Louisville home office at the end of third quarter of 2014 and some non-SunCrest payer specific conversions to managed care combined to increase accounts receivable by $10.8 million. Conversely, tax benefits related to the SunCrest acquisition increased operating cash flow by $7.8 million. Cash from operating activities for 2014 was also reduced due to payment delays related to the conversion to managed care payers with longer payment cycles in certain same store PC segment markets. The cash used in investing activities was primarily due to an April 2014 acquisition and capital expenditures. The cash used in financing activities was primarily related to a $9.6 million payment on the line of credit drawn in connection with the 2013 SunCrest acquisition. Acquisitions The Company completed several acquisitions over the past three years and will continue to actively seek to acquire other quality providers of home health services like our current operations. Factors which may affect future acquisition decisions include, but are not limited to, the quality and potential profitability of the business under consideration, potential regulatory limitations and our profitability and ability to finance the transaction. See Part II, Item 8, Notes 12 and 14 to the accompanying Notes to Consolidated Financial Statements for details regarding these acquisitions. 2016 Acquisitions On January 5, 2016, we acquired 100% of the equity of Long Term Solutions, Inc. (“LTS”). LTS is a provider of in-home nursing assessments for the long-term care insurance industry. LTS provides assessments in all 50 U.S. states and a number of foreign countries. The purchase price of $37 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. LTS’s post acquisition operating results will be reported in our Healthcare Innovations business segment. On January 5, 2016, we purchased the assets of a Medicare-certified home health agency owned by Bayonne Visiting Nurse Association (‘Bayonne”) located in New Jersey. Bayonne’s post acquisition operating results will be reported in our VN segment. 2015 Acquisitions On November 5, 2015, we acquired the stock of Black Stone Operations, LLC (“Black Stone”). Black Stone is a provider of in-home personal care and skilled home health services in western Ohio and operates under the name “Home Care by Black Stone”. The purchase price of $40 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. Black Stone’s post acquisition operating results are primarily reported in our VN and PC segments. On August 29, 2015, we acquired 100% of the equity of Bracor, Inc. (dba “WillCare”). WillCare, based in Buffalo, NY, reported $72 million in revenue for the year ended December 31, 2014 with VN and PC branch locations in New York (1 2 ) and Connecticut (1). The purchase price was approximately $50.8 million. The transaction was funded by 47 Table of Contents borrowings under the Company’s bank credit facility. On March 1, 2015, we acquired the stock of WillCare’s Ohio operations for $3.0 million. On July 22, 2015, we acquired 100% of the equity of Ingenios Health Co. (“Ingenios”) for approximately $11.4 million of the Company’s common stock plus $2 million in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in 7 states and Washington, D.C. On January 29, 2015, we acquired a noncontrolling interest in a development stage analytics and software company, NavHealth, Inc. (NavHealth). The investment is an asset of our Health care Innovations segment. 2014 Acquisitions During 2014, we completed a small acquisition using cash on hand to expand existing VN segment operations. 2013 Acquisitions During 2013, in conjunction with our SunCrest and IHCN Acquisitions, we acquired 60 VN and 13 PC branch locations in Tennessee, Pennsylvania, Georgia, Indiana, Mississippi, Illinois, Florida and Alabama (in order of revenue significance). We funded these acquisitions with cash on hand of $31.8 million, $0.5 million in stock, issuance of a $1.5 million promissory note and borrowings of $56.0 million on our senior secured revolving credit facility. In October of 2013, we also acquired a controlling interest in Imperium, a development-stage enterprise that provides strategic health management services to Accountable Care Organizations (“ACOs”). We acquired a 61.5% interest in Imperium for a total of $5.8 million of which $3 million went into Imperium for its general corporate purposes including pursuit of its business plan. The transaction was funded from cash on hand. Contractual Obligations The following table provides information about the payment dates of our contractual obligations at January 1, 2016 , excluding current liabilities except for the current portion of long-term debt and additional consideration related to acquisitions (in thousands): 2016 Revolving credit facility Notes payable Operating leases Total $ — 2017 $ — $ 8,439 8,439 — 2018 $ — $ 5,930 5,930 — 2019 $ 5,000 $ 3,698 8,698 2020 — $ 2,153 3,653 113,790 $ — 1,500 $ Thereafter $ 1,634 115,424 — Total $ — $ 2,793 2,793 Letters of Credit We have outstanding letters of credit totaling $11.3 million at January 1, 2016 , which benefit our third-party insurer/administrators for our self-insurance programs. The amount of such insurance program letters of credit is subject to negotiation annually upon renewal and may vary in the future based upon such negotiation, our historical claims experience and expected future claims. It is reasonable to expect that the amount of the letter of credit will increase in the future, however, we are unable to predict to what degree. We currently have no contingent obligations related to acquisition agreements. Our commitments and contingencies are also impacted by our general and professional liabilities, pending litigation and investigations, and health care reform discussed elsewhere in this form 10-K. Please refer to Part I, Item 1, “Government Regulation”, Part I, Item 1A, “Risk Factors”, Part I, Item 3 “Legal Proceedings”, 113,790 6,500 $ 24,647 144,937 Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Part II, Item 8, “Notes to Consolidated Financial Statements”. 48 Table of Contents Impact of Inflation We do not believe that inflation has had a material effect on income during the past several years. Non-GAAP Financial Measures The information provided in this Annual Report use certain non-GAAP financial measures as defined under SEC rules. In accordance with SEC rules, the Company has provided, in the supplemental information and the footnotes to the tables, a reconciliation of those measures to the most directly comparable GAAP measures. Adjusted Earnings from Home Health Operations Adjusted earnings from home health operations (“Adjusted Earnings-HHO”) is not a measure of financial performance under accounting principles generally accepted in the United States of America (“US GAAP”). It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. We believe the use of non-GAAP measures on a consolidated and business segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. The non-GAAP information provided is used by us and may not be determined in a manner consistent with the methodologies used by other companies. (in thousands) Net income attributable to Almost Family, Inc. Addbacks: Deal, transition and other, net of tax Loss on discontinued operations, net of tax Adjusted earnings Healthcare Innovations operating (gain) loss after NCI, net of tax Adjusted Earnings-HHO Per share amounts-basic: Average shares outstanding Net income attributable to Almost Family, Inc. Addbacks: Deal, transition and other, net of tax Loss on discontinued operations, net of tax Adjusted earnings Healthcare Innovations operating loss after NCI, net of tax Adjusted Earnings-HHO Per share amounts-diluted: Average shares outstanding Net income attributable to Almost Family, Inc. Addbacks: Deal, transition and other, net of tax Loss on discontinued operations, net of tax Adjusted earnings Healthcare Innovations operating loss after NCI, net of tax Adjusted Earnings-HHO January 1, 2016 $ 20,009 Fiscal Year ended December 31, 2014 $ 737 — 20,746 13,763 December 31, 2013 $ 3,156 — 16,919 8,226 2,572 558 11,356 $ 665 21,411 $ 5 16,924 $ 176 11,532 $ 9,505 2.11 $ 9,333 1.47 $ 9,279 0.89 0.08 — 2.18 $ $ 0.34 — 1.81 0.07 2.25 $ 0.00 1.81 $ 0.02 1.24 9,745 2.05 $ 9,462 1.45 $ 9,374 0.88 0.08 — 2.13 $ 0.28 0.05 1.22 0.07 2.20 0.33 — 1.79 $ 0.00 1.79 0.27 0.06 1.21 $ 0.02 1.23 (1) See page 35 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015. 49 Table of Contents Adjusted EBITDA from Home Health Operations Adjusted earnings before interest, income tax, depreciation, amortization, amortization of stock-based compensation, Healthcare Innovations operating loss and deal, transition and other from Home Health Operations (Adjusted EBITDA-HHO) is not a measure of financial performance under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from Adjusted EBITDA-HHO are significant components in understanding and evaluating financial performance and liquidity. Management routinely calculates and communicates Adjusted EBITDA-HHO and believes that it is useful to investors because it is commonly used as an analytical indicator within our industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. Adjusted EBITDA is used in certain covenants contained in our Credit Facility. The following table sets forth a reconciliation of net income to Adjusted EBITDA-HHO for the fiscal year (in thousands): (in thousands) Net income attributable to Almost Family, Inc. Add back: Interest expense, net Income tax expense Depreciation and amortization Stock-based compensation Deal, transition and other costs Adjusted EBITDA Healthcare Innovations operating (gain) loss Adjusted EBITDA-HHO January 1, 2016 (1) $ $ Fiscal Year ended December 31, 2014 December 31, 2013 20,009 $ 13,763 $ 8,226 2,006 10,556 3,628 2,121 4,139 42,459 1,442 9,511 4,103 1,814 5,304 35,937 167 6,020 2,862 1,465 4,323 23,063 1,479 43,938 $ (96) 35,841 $ 574 23,637 (1) See page 35 for discussion regarding the Company’s changed to a 52-53 week reporting calendar in 2015. ITEM 7A. Quantitative and Qualitative Disclosures About Market Ris k Derivative Instruments We do not use derivative instruments. Market Risk of Financial Instruments Our primary market risk exposure with regard to financial instruments is to changes in interest rates. At January 1, 2016 , a hypothetical 100 basis point increase in short-term interest rates would result in a reduction of approximately $ 1.2 million in our annual pre-tax earnings. 50 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DAT A ALMOST FAMILY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOM E (In thousands, except per share data) January 1, 2016 Net service revenues Cost of service revenues (excluding depreciation and amortization) Gross margin General and administrative expenses: Salaries and benefits Other Deal, transition and other non-recurring costs Total general and administrative expenses Operating income Interest expense, net Income before income taxes Income tax expense Net income from continuing operations $ Discontinued operations: (Loss) gain from operations, net of tax of $882 Gain on sale, net of tax of $973 (Loss) gain on discontinued operations 532,214 Fiscal Year ended December 31, 2014 $ Per share amounts-basic: Average shares outstanding Income from continued operations attributable to Almost Family, Inc. Discontinued operations Net income attributable to Almost Family, Inc. 190,548 166,364 147,849 66,281 4,139 218,269 32,103 (2,006) 30,097 (10,556) 19,541 139,793 62,261 5,304 207,358 24,477 (1,442) 23,035 (9,511) 13,524 102,005 45,243 4,323 151,571 14,793 (167) 14,626 (6,020) 8,606 — — — 468 20,009 $ Per share amounts-diluted: Average shares outstanding Income from continued operations attributable to Almost Family, Inc. Discontinued operations Net income attributable to Almost Family, Inc. 2.11 — 2.11 $ $ 2.05 — 2.05 239 13,763 8,048 $ 9,333 $ $ 9,745 $ (729) 171 (558) 13,524 9,505 $ 356,912 263,994 231,835 19,541 $ $ 281,842 250,372 — — — Net income Net (income) loss attributable to noncontrolling interest Net income attributable to Almost Family, Inc. 495,829 December 31, 2013 1.47 — 1.47 9,279 $ $ 9,462 $ $ 1.45 — 1.45 178 8,226 0.95 (0.06) 0.89 9,374 $ $ 0.94 (0.06) 0.88 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 51 Table of Contents ALMOST FAMILY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET S (In thousands) January 1, 2016 December 31, 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable - net Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT - NET GOODWILL OTHER INTANGIBLE ASSETS OTHER ASSETS TOTAL ASSETS $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Accrued other liabilities Current portion - notes payable and capital leases TOTAL CURRENT LIABILITIES $ LONG-TERM LIABILITIES: Revolving credit facility Deferred tax liabilities Seller notes Other liabilities TOTAL LONG-TERM LIABILITIES TOTAL LIABILITIES NONCONTROLLING INTEREST - REDEEMABLE HEALTHCARE INNOVATIONS STOCKHOLDERS’ EQUITY: Preferred stock, par value $0.05; authorized 2,000 shares; none issued or outstanding Common stock, par value $0.10; authorized 25,000; 10,125 and 9,574 issued and outstanding Treasury stock, at cost, 103 and 94 shares Additional paid-in capital Noncontrolling interest - nonredeemable Retained earnings TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 7,522 92,270 9,672 109,464 10,000 277,061 64,629 3,615 464,769 $ 12,297 42,524 — 54,821 $ $ 6,886 74,602 10,420 91,908 5,575 192,523 54,402 850 345,258 9,257 42,326 51 51,634 113,790 13,094 6,556 2,608 136,048 190,869 46,447 11,280 1,500 1,205 60,432 112,066 3,639 3,639 — — 1,013 (2,731) 127,253 (730) 145,456 270,261 464,769 $ 957 (2,392) 105,862 (420) 125,546 229,553 345,258 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 52 Table of Contents ALMOST FAMILY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUIT Y (In thousands) NonAdditional Common Stock Shares Amount Balance, December 31, 2012 Stock award maturities, net of shares surrendered or withheld Share awards and related compensation Tax loss from stock-based compensation Stock provided in acquisitions Acquired noncontrolling interest Net loss noncontrolling interests - redeemable Noncontrolling interests - redeemable fair value accretion Net loss noncontrolling interests nonredeemable Net income attributable to Almost Family, Inc. Balance, December 31, 2013 Stock award maturities, net of shares surrendered or withheld Share awards and related compensation Tax gain from stock-based compensation Net loss noncontrolling interests - redeemable Noncontrolling interests - redeemable fair value accretion Net loss noncontrolling interests nonredeemable Net income attributable to Almost Family, Inc. Balance, December 31, 2014 Stock award maturities, net of shares surrendered or withheld Share awards and related compensation Tax gain from stock-based compensation Stock provided in acquisitions Net loss noncontrolling interests - redeemable Noncontrolling interests - redeemable fair value accretion Net loss noncontrolling interests nonredeemable Net income attributable to Almost Family, Inc. Balance, January 1, 2016 9,421 $ Treasury Stock Shares Amount 942 (91) 1 1 (1) (20) 52 5 — — — 26 2 $ (2,320) Paid-in Capital $ Retained Earnings 101,945 $ 103,748 $ Non- controlling Total controlling Interest - Nonredeemable Stockholders’ Equity Interest Redeemable — $ 204,315 — — (2) — — 1,460 — — 1,465 — — — (62) — — (62) — — — 498 — — 500 — 0 — (193) (193) 3,639 (185) — — — — — — — — — — — — — — — — (185) — (185) — — — — — — — — — — — 8,226 950 (92) 14 1 (2) (52) 60 6 — $ — 17 — 9,500 $ $ (2,340) $ 103,858 $ 111,789 7 — 8,226 — 7 — $ (186) $ 185 214,071 $ 3,639 156 — — 105 — — 1,808 — — 1,814 — 40 — — 40 — — — — — — — — — — — — — — — — — — (6) — (6) — — — — — — (234) (234) — — — — — — — 13,763 — 957 (94) 10 1 (9) (339) 100 11 — 9,574 $ — — 441 44 $ (2,392) $ 105,862 13,763 $ 125,546 $ (420) $ 229,553 (6) 6 $ 3,639 128 — — (210) — — 2,110 — — 2,121 — — — 215 — — 215 — — — 18,938 — — 18,982 (99) — — — — — — — — — — — — — (99) — (99) — — — — — — — (310) (310) — — — — — — — 20,009 — 1,013 (103) 10,125 $ $ (2,731) $ 127,253 20,009 $ 145,456 $ (730) $ 270,261 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 99 $ 3,639 53 Table of Contents ALMOST FAMILY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW S (in thousands) Fiscal Year ended December 31, 2014 January 1, 2016 Cash flows from operating activities: Net income Loss on discontinued operations, net of tax Net income from continuing operations Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization Provision for uncollectible accounts Stock-based compensation Deferred income taxes Change in certain net assets and liabilities, net of the effects of acquisitions: (Increase) decrease in: Accounts receivable Prepaid expenses and other current assets Other assets Accounts payable and accrued expenses Net cash provided by operating activities Cash flows from investing activities: Capital expenditures Cost basis investment Acquisitions, net of cash acquired Net cash used in investing activities Cash flows from financing activities: Credit facility borrowings Credit facility repayments Debt issuance fees Proceeds from stock option exercises Purchase of common stock in connection with share awards Tax impact of share awards Payment of special dividend Principal payments on notes payable and capital leases Net cash provided by (used in) financing activities Cash flows from discontinued operations: Operating activities Investing activities Net cash from discontinued operations Net change in cash and cash equivalents Cash and cash equivalents at beginning $ 19,541 — $ 13,524 — December 31, 2013 $ 8,048 (558) 19,541 13,524 8,606 4,208 12,743 2,121 3,914 42,527 4,103 9,417 1,814 5,500 34,358 2,862 5,378 1,465 2,099 20,410 (17,393) (25,613) (4,440) 2,402 (585) (647) 165 4,229 235 (5,745) (1,277) (888) 21,206 6,986 19,546 (3,117) (1,000) (82,578) (86,695) (1,231) — (969) (2,200) (2,502) — (88,465) (90,967) 233,425 (166,082) (1,161) 66,632 (76,185) — 56,000 — — 128 156 11 (338) 215 (50) (52) 40 (35) (20) (62) — (12) (702) (720) 66,125 (10,146) 55,209 — — — 636 6,886 — — — (5,360) 12,246 (742) 3,080 2,338 (13,874) 26,120 of period Cash and cash equivalents at end of period Supplemental disclosures of cash flow information: Cash payment of interest, net of amounts capitalized Cash payment of taxes Summary of non-cash investing and financing activities: Acquisitions funded by notes payable Acquisitions funded by stock $ 7,522 $ 6,886 $ 12,246 $ $ 1,890 4,651 $ $ 1,264 1,953 $ $ 97 6,084 $ $ 5,000 18,982 $ $ — — $ $ 1,500 500 The accompanying notes to consolidated financial statements are an integral part of these financial statements. 54 Table of Contents ALMOST FAMILY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT S (Unless otherwise indicated all dollar and share amounts are in thousands) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation and Description Of Business The consolidated financial statements include the accounts of Almost Family, Inc. (a Delaware corporation) and its wholly-owned subsidiaries (collectively “ Almost Family ” or the “Company”). The Company is a leading, regionally focused provider of home health services and has service locations in Florida, Ohio, Tennessee, New York, Kentucky, Connecticut, New Jersey, Massachusetts, Indiana, Illinois, Pennsylvania, Georgia, Missouri, Mississippi and Alabama (in order of revenue significance). The Company was incorporated in Delaware in 1985. Through a predecessor that merged into the Company in 1991, the Company has been providing health care services, primarily home health care, since 1976. All material intercompany transactions and accounts have been eliminated in consolidation. On November 5, 2015, the Company completed the acquisition of Black Stone Operations, LLC (“Black Stone”). Black Stone owned and operated personal care and skilled home health services in western Ohio. On August 29, 2015, the Company completed the acquisition of Bracor, Inc. (dba WillCare). WillCare owned and operated Visiting Nurse (“VN”) and Personal Care (“PC”) branch locations in New York (1 2 ), and Connecticut (1). On July 22, 2015, the Company acquired Ingenios Health (“Ingenios”). Ingenios is a leading provider of technology enabled in-house clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in seven states and Washington, D.C. On March 2, 2015, the Company acquired the stock of Willcare’s Ohio operations. On January 29, 2015, the Company acquired a noncontrolling interest in a development stage analytics and software company, NavHealth, Inc. (“NavHealth”). The results of operations for WillCare and Black Stone are reported in the Company’s VN and PC segments, while Ingenios results are included in the Company’s Healthcare Innovations segment. On December 6, 2013, the Company completed the acquisition of Omni Home Health Holdings, Inc. (“SunCrest”). Branded principally under the SunCrest name, its subsidiaries owned and operated 66 Medicare-certified home health agencies and 9 private duty agencies in Florida, Tennessee, Georgia, Pennsylvania, Kentucky, Illinois, Indiana, Mississippi and Alabama. On October 4, 2013, the Company acquired a controlling interest in Imperium Health Management, LLC (“Imperium”), a development-stage enterprise that provides strategic health management services to Accountable Care Organizations (“ACOs”). On July 17, 2013, the Company acquired the assets of the Medicare-certified home health agencies owned by Indiana Home Care Network (“IHCN”). The acquisitions are more fully described in Note 12, “Acquisitions”. The results of operations for SunCrest and IHCN are principally reported within the Company’s VN reportable segment, while Imperium results are included in the Company’s Healthcare Innovations segment. The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (US GAAP). All intercompany balances and transactions have been eliminated. Fiscal Year End Effective with the first quarter of 2015, the Company adopted a 52-53 week fiscal reporting calendar under which it will report its annual results going forward in four equal 13-week quarters. Every fifth year, one quarter will include 14 weeks and that year will include 53 weeks of operating results. New Accounting Pronouncements The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), during the second quarter of 2014. Topic 606 affects virtually all aspects of an entity’s revenue recognition, including determining the measurement of revenue and the timing of when it 55 Table of Contents is recognized for the transfer of goods or services to customers. Topic 606 is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the effect of the adoption of Topic 606 on its financial position and results of operations. In April 2014, the FASB issued ASU No. 2014-18, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which includes amendments of Accounting Standards Codification (ASC 205 Presentation of Financial Statements and ASC 360 Property, Plant and Equipment) which limits the requirement for discontinued operations treatment to the disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Additionally, this new guidance no longer precludes discontinued operations presentation based on continuing involvement or cash flows following the disposal. This guidance became effective prospectively for the Company on January 1, 2015, and will impact the Company’s determination and disclosure of discontinued operations treatment for subsequent qualifying divestitures, if any. In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In certain cases, Subtopic 835-30 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. Subtopic 835-30 is effective for annual and interim periods beginning after December 15, 2015. The Company does not expect ASU No. 2015- 03 to materially affect its financial position and results of operation. In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . Subtopic 350-40 provides guidance that all software licenses included in cloud computing arrangement be accounted for consistent with other licenses of intangible assets. However if a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract, the accounting for which did not change. Subtopic 350-40 is effective for annual and interim periods beginning after December 15, 2015. The Company does not expect ASU No. 2015-05 to materially affect its financial position and results of operations. In November 2015, the FASB issued ASU no. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The Company elected to early adopt this guidance with retrospective treatment which required reclassification of the consolidated balance sheet. Accordingly, $12.2 million was reclassified in the prior year presentation to confirm with the current year presentation. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Uninsured deposits at January 1, 2016 and December 31, 2014 were approximately $4,681 and $4,183 respectively. These amounts have been deposited with national financial institutions. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives (generally two to ten years for medical and office equipment and three years for internally developed software). Leasehold improvements are depreciated over the terms of the respective leases (generally three to ten years). Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, operating losses, unused capacity, market value declines and technological obsolescence. Recorded values of asset groups of property, plant and equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale). 56 Table of Contents Goodwill and Other Intangible Assets Goodwill and indefinite lived intangible assets acquired are stated at fair value at the date of acquisition. Subsequent to acquisition, the Company conducts annual reviews for impairment, or more frequently if circumstances indicate impairment may have occurred. The Company reviews goodwill for impairment based on its identified reporting units, which are the same as its reportable segments. The Company tests goodwill for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using a combination of the market approach (guideline company and similar transaction method) and income approach (discounted cash flow analysis). The Company annually tests its indefinite-lived intangible assets, principally trade names, certificates of need, provider numbers and licenses. Specifically trade names are tested using a “relief-from-royalty” valuation method compared to the carrying value. Significant assumptions inherent in the valuation methodologies for goodwill and other intangibles are employed and include, but are not limited to, such estimates as future projected business results, growth rates, legislated changes in payment rates, weighted-average cost of capital for a market participant, royalty and discount rates . The Company has completed its most recent annual impairment tests as of January 1, 2016 and determined that no impairment existed. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, such as the cost of non-compete agreements for which their estimated useful life is usually 3 years, beginning after the earn-out period, if any. The following table summarizes the activity related to the Company’s goodwill and other intangible assets: Other Intangible Assets Certificates of Need and Licenses Goodwill Balances at December 31, 2013 Acquisitions Changes Amortization Balances at December 31, 2014 Acquisitions Amortization Balances at January 1, 2016 Trade Names Non-compete Agreements Total $ 192,489 — 34 — $ 38,321 1,290 — — $ 14,781 — — (10) $ 72 — — (52) $ 53,174 1,290 — (62) $ 192,523 $ 39,611 $ 14,771 $ 20 $ 54,402 84,538 — $ 277,061 6,433 — $ 46,044 3,640 (10) $ 18,401 180 (16) $ 10,253 (26) 184 $ 64,629 See Note 12 for further discussion of acquisitions . The following table summarizes the Company’s goodwill and other intangible assets by segment: Other Intangible Assets Certificates of Need and Licenses Goodwill Trade Names Non-compete Agreements Total Visiting Nurse Personal Care Healthcare Innovations December 31, 2014 balance $ 147,368 37,571 7,584 $ 38,831 780 — $ 11,391 3,380 — $ 10 10 — $ 50,232 4,170 — $ 192,523 $ 39,611 $ 14,771 $ 20 $ 54,402 Visiting Nurse Personal Care Healthcare Innovations $ 186,384 72,773 17,904 $ 42,884 3,160 — $ 13,206 5,195 — $ 92 92 — $ 56,182 8,447 — January 1, 2016 balance $ 277,061 $ 46,044 57 $ 18,401 $ 184 $ 64,629 Table of Contents Capitalization Policies Maintenance, repairs and minor replacements are charged to expense as incurred. Major renovations and replacements are capitalized to appropriate property and equipment accounts. Upon sale or retirement of property, the cost and related accumulated depreciation are eliminated from the accounts and the related gain or loss is recognized in the consolidated statement of income. The Company capitalizes the cost of internally developed computer software for the Company’s own use. Software development costs of approximately $788 , $327 and $647 were capitalized in the years ended January 1, 2016 , December 31, 2014 and 2013, respectively. Insurance Programs The Company bears significant risk under its large-deductible workers’ compensation insurance program and its self-insured employee health program. Under the workers’ compensation insurance program, the Company bears risk up to $400 per incident, except for a recent acquisition that has not yet been folded into the Company’s program and has a stop-loss of $750, after which stop-loss coverage is maintained. The Company purchases stop-loss insurance for the employee health plan that places a specific limit, generally $300, on its exposure for any individual covered life. Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against the Company by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. The Company currently carries professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. The Company also carries D&O coverage (also on a claims made basis) for potential claims against the Company’s directors and officers, including securities actions, with deductibles ranging from $1 75 to $5 00 per claim. The Company records estimated liabilities for its insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. The Company monitors its estimated insurance-related liabilities and recoveries, if any, on a monthly basis and records amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities. As facts change, it may become necessary to make adjustments that could be material to the Company’s results of operations and financial condition. Accounting for Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the Company’s book and tax bases of assets and liabilities and tax carry-forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. Seasonality The Company’s VN segment operations located in Florida (which generated approximately 2 4 % of that segment’s revenues in the year ended January 1, 2016) normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. Net Service Revenues The Company is paid for its services primarily by federal and state third-party reimbursement programs, commercial insurance companies, and patients. Revenues are recorded at established rates in the period during which the services are 58 Table of Contents rendered. Appropriate allowances to give recognition to third party payment arrangements are recorded when the services are rendered. Approximately 71% of the Company’s consolidated net service revenues are derived from the Medicare program. Net service revenues are recorded under the Medicare prospective payment program (PPS) based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) changes in the base episode payments established by the Medicare program; (b) adjustments to the base episode payments for case-mix and geographic wages; (c) a low utilization payment adjustment (LUPA) if the number of visits was fewer than five; (d) a partial payment if a patient is transferred to another provider or if a patient is received from another provider before completing the episode; (e) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (f) an outlier payment if the patient’s care was unusually costly (capped at 10% of total reimbursement); (g) the number of episodes of care provided to a patient; and (h) a 2% reduction for sequestration. At the beginning of each Medicare episode the Company calculates an estimate of the amount of expected reimbursement based on the variables outlined above and recognizes Medicare revenue on an episode-by-episode basis during the course of each episode over its expected number of visits. Over the course of each episode, as changes in the variables become known, adjustments are calculated and recorded as needed to reflect changes in expectations for that episode from those established at the start of the 60 day period until its ultimate outcome at the end of the 60 day period is known. Substantially all remaining revenues are earned on a per visit, hour or unit basis (as opposed to episodic). For all services provided, the Company uses either payor-specific or patient-specific fee schedules for the recording of revenues at the amounts actually expected to be received. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. It is common for issues to arise related to: 1) medical coding, particularly with respect to Medicare, 2) patient eligibility, particularly related to Medicaid, and 3) other reasons unrelated to credit risk, all of which may result in adjustments to recorded revenue amounts. The Company continuously evaluates the potential for revenue adjustments and when appropriate provides allowances for losses based upon the best available information. There is at least a reasonable possibility that recorded estimates could change by material amounts in the near term. Changes in estimates related to prior periods (increased) decreased revenues by approximately ($365), ($320), and $114 in the years ended January 1, 2016 , December 31, 2014 and 2013, respectively. 59 Table of Contents Revenue and Receivable Concentrations The following table sets forth the percent of the Company’s revenues generated from Medicare, state Medicaid programs and other payors for the fiscal year ended: January 1, 2016 Medicare Medicaid & other government programs: Ohio Connecticut Tennessee Kentucky New York Florida Others Subtotal All other payors Total December 31, 2014 December 31, 2013 71.4% 72.4% 71.2% 9.1% 5.5% 3.2% 1.7% 1.7% 0.9% 0.4% 22.5% 6.1% 100.0% 8.8% 5.5% 2.5% 1.8% —% 0.6% 0.4% 19.6% 8.0% 100.0% 11.7% 7.1% 0.2% 2.3% —% 0.7% 0.5% 22.5% 6.3% 100.0% Concentrations in the Company’s accounts receivable were as follows: January 1, 2016 Amount Percent Medicare Medicaid & other government programs: Ohio Tennessee New York Kentucky Florida Connecticut Others Subtotal All other payors Subtotal Allowances Total $ 50,369 45.9% 7.9% 7.3% 2.9% 2.8% 2.5% 2.5% 1.1% 26.9% 27.3% 100.0% $ 8,627 8,038 3,207 3,055 2,702 2,693 1,156 29,478 29,937 109,784 (17,514) 92,270 December 31, 2014 Amount Percent $ 46,342 55.5% 11.1% 6.7% —% 4.4% 2.2% 4.8% 1.2% 30.4% 14.1% 100.0% $ 9,239 5,617 — 3,686 1,804 3,982 1,031 25,359 11,781 83,482 (8,880) 74,602 The ability of payors to meet their obligations depends upon their financial stability, future legislation and regulatory actions. The Company does not believe there are any significant credit risks associated with receivables from Federal and state third-party reimbursement programs. The allowance for uncollectible accounts principally consists of management’s estimate of amounts that may prove uncollectible for coverage, eligibility and technical reasons. 60 Table of Contents Payor Mix Concentrations and Related Aging of Accounts Receivable The approximate breakdown by payor classification as a percent of total accounts receivable, net of contractual allowances, if any, were as follows: Payor 0-90 Medicare Medicaid & Government Self Pay Insurance Total Payor 91-180 26% 12% 6% 7% 51% 0-90 Medicare Medicaid & Government Self Pay Insurance Total January 1, 2016 181-365 10% 4% 1% 2% 17% 91-180 36% 19% 1% 6% 62% >1 yr. 7% 8% 1% 5% 21% December 31, 2014 181-365 13% 6% 0% 3% 22% Total 3% 3% 1% 4% 11% 46% 27% 9% 18% 100% >1 yr. 7% 4% 2% 2% 15% Total 0% 1% 0% 0% 1% 56% 30% 3% 11% 100% Variations between years are largely attributable to the WillCare and Black Stone acquisitions. Allowance for Uncollectible Accounts by Payor Mix and Related Aging The Company records an estimated allowance for uncollectible accounts by applying estimated bad debt percentages to its accounts receivable aging. The percentages to be applied by payor type are based on the Company’s historical collection and loss experience. The Company’s effective allowances for uncollectible accounts as a percent of accounts receivable were as follows: Payor Medicare Medicaid & Government Self Pay Insurance Total Payor Medicare Medicaid & Government Self Pay Insurance Total 0-90 3% 4% 4% 3% 3% 0-90 0% 1% 1% 5% 1% January 1, 2016 181-365 91-180 6% 5% 3% 5% 5% 91-180 36% 44% 34% 36% 38% >1 yr. December 31, 2014 181-365 >1 yr. 0% 8% 12% 22% 6% 8% 31% 51% 46% 23% >2 yrs. 55% 46% 59% 56% 53% 100% 100% 100% 100% 100% >2 yrs. 75% 66% 74% 83% 74% 100% 100% 100% 100% 100% Variations between years are largely attributable to the WillCare and Black Stone acquisitions. The Company’s allowance for uncollectible accounts at January 1, 2016 and December 31, 2014 was approximately $17,514 and $8,880, respectively. The increase is primarily due to the timing of write-offs and to a lesser degree, the 2015 acquisitions. 61 Table of Contents Contingent Service Revenues The Company, through its Imperium acquisition, provides strategic health management services to ACOs that have been approved to participate in the Medicare Shared Savings Program (“MSSP”). In some cases, the Company also had ownership interests in ACOs beginning January 1, 2015. ACOs are entities that contract with CMS to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality performance measures are achieved. The MSSP is relatively new and therefore has limited historical experience, which impacts the Company’s ability to accurately accumulate and interpret the data available for calculating an ACOs’ shared savings, if any. MSSP payments are not recognized in revenue until persuasive evidence of an agreement exists, services have been rendered, the payment is fixed and determinable and collectability is insured, which is generally satisfied upon cash receipt. Under such agreements, the Company recognized $1.4 million and $1.6 million in MSSP payments for cash received during 2015 and 2014, respectively, related to savings generated for the program period ended December 31, 2013 and Decem ber 31, 2014, respectively , which is included in the Company’s Healthcare Innovations segment revenues. The Company has yet to recognize MSSP payments, if any, for savings generated through January 1, 2016 Weighted Average Shares Net income per share is presented as a unit of basic shares outstanding and diluted shares outstanding. Diluted shares outstanding is computed based on the weighted average number of common shares and common equivalent shares outstanding. Common equivalent shares result from dilutive stock options and unvested restricted shares. The following table is a reconciliation of basic to diluted shares used in the earnings per share calculation for the fiscal year ended: January 1, 2016 Basic weighted average outstanding shares Dilutive effect of outstanding compensation awards Diluted weighted average outstanding shares December 31, 2014 December 31, 2013 9,505 9,333 9,279 240 129 95 9,745 9,462 9,374 The assumed conversions to common stock of 20, 94, and 195 of the Company’s outstanding stock options were excluded from the diluted EPS computation in 2015, 2014, and 2013, respectively, because these items, on an individual basis, have an anti-dilutive effect on diluted EPS. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Statement Reclassifications Certain prior period amounts and data have been reclassified in the financial statements and related notes in order to conform to the 2015 presentation. Stock-Based Compensation Stock options and restricted stock are granted under various stock compensation programs to employees and independent directors. The Company accounts for such grants in accordance with ASC Topic 718, Compensation — Stock Compensation and amortizes the fair value of awards, after estimated forfeiture, on a straight-line basis over the requisite service periods. 62 Table of Contents Accounting for Leases The Company accounts for operating leases using the straight-line rents method, which amortizes contracted total rents due evenly over the lease term. Advertising Costs The Company expenses the costs of advertising, as incurred. Advertising expense was $39 3 , $3 0 6 and $326 for the years ended January 1, 2016 , December 31, 2014 and 2013, respectively. NOTE 2 - ACCRUED LIABILITIES Accrued liabilities consist of the following as of fiscal year ended: January 1, 2016 Wages and employee benefits Insurance accruals Accrued taxes Kentucky Medicaid cost report payable Accrued professional fees and other $ $ 20,687 14,541 643 616 6,037 42,524 December 31, 2014 $ $ 20,084 14,217 563 1,360 6,102 42,326 NOTE 3 - PROPERTY AND EQUIPMENT, NET Property and equipment, net, consist of the following as of the fiscal year ended: January 1, 2016 Leasehold improvements Medical equipment Computer equipment Internally developed software Office and other equipment Vehicles $ Less accumulated depreciation $ 2,312 1,561 14,633 1,744 6,369 162 26,781 (16,781) 10,000 December 31, 2014 $ $ 1,367 937 9,607 1,071 4,502 449 17,933 (12,358) 5,575 Depreciation and amortization expense related to property, plant and equipment is recorded in general and administrative expenses - other and was $3,321, $3,850 and $2, 594 for the years ended January 1, 2016 , December 31, 2014 and 2013, respectively. NOTE 4 - REVOLVING CREDIT FACILITY The Company has a senior revolving credit facility with J.P. Morgan Securities LLC as Administrative Agent, Bank of America, N.A. as Syndication Agent and certain other lenders (the “Facility”). The Facility consists of a $175 million credit line with a maturity date of November 15, 2020 and an accordion feature which permits expansion up to $250 million. Borrowings, other than letters of credit, under the credit facility generally will bear interest at a rate varying from London Interbank Offered Rate (“LIBOR”) rate plus 1.75% to LIBOR rate plus 3.00% , depending on leverage. The Facility is secured by substantially all of the Company's assets and the stock of its subsidiaries. Debt issuance costs of $1.2 million are recorded in prepaid and other assets and is being amortized through November 15, 2020. Borrowings under the Facility are subject to various covenants including a multiple of 3.5 times earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA may include “Acquired EBITDA” from pro-forma acquisitions as defined. Borrowings under the Facility may be used for general corporate purposes, including 63 Table of Contents acquisitions. Application of the Facility’s borrowing formula as of January 1, 2016 , would have permitted $43 . 4 million to be used. We had irrevocable letters of credit totaling $11.3 million outstanding in connection with our self-insurance programs, which resulted in a total of $ 32 . 1 million being available for use at January 1, 2016 . As of January 1, 2016 , we were in compliance with the various financial covenants. Under the most restrictive of its covenants, we were required to maintain minimum net worth of at least $177.5 million at January 1, 2016 . At such date, our net worth was approximately $270.2 million. The effective interest rates on our borrowings were 3 . 5 % and 2.7% for 2015 and 2014, respectively. NOTE 5 - FAIR VALUE MEASUREMENTS The Company’s financial instruments consist of cash, accounts receivable, payables and debt instruments. Due to their short-term nature, the book values of cash, accounts receivable and payables are considered representative of their respective fair values. The fair value of the Company’s debt instruments approximates their carrying values as substantially all of such debt instruments have rates which fluctuate with changes in market rates. As of January 1, 2016 , the Company does not have any assets or liabilities carried at fair value that are measured on a recurring basis. NOTE 6 - INCOME TAXES The provision for income taxes consists of the following as of the fiscal year ended: January 1, 2016 Federal - current State and local current Deferred December 31, 2014 $ 5,283 $ 1,359 3,914 10,556 December 31, 2013 $ 2,829 $ 1,182 5,500 9,511 $ 3,557 $ 364 2,099 6,020 A reconciliation of the statutory to the effective rate of the Company is as follows as of the fiscal year ended: January 1, 2016 Tax provision using statutory rate State and local taxes, net of Federal benefit Valuation allowance Noncontrolling interest related Legal settlement related Tax provision for continuing operations December 31, 2014 December 31, 2013 35.0% 35.0% 35.0% 4.4% 0.2% 4.7% 1.0% 5.7% -0.6 % 0.6% -5.1 % 0.4% -0.1 % 0.5% 1.3% 35.1% 41.0% 41.9% The Company has provided a valuation allowance against certain net deferred tax assets based upon management’s estimation of realizability of those assets through future taxable income. This valuation allowance was based in large part on the Company’s history of generating operating income or losses in individual tax locales and expectations for the future. The Company’s ability to generate the expected amounts of taxable income from future operations to realize its recorded net deferred tax assets is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government. There can be no assurances that the Company will meet its expectations of future taxable income. However, management has considered the above factors in reaching its conclusion that it is more likely than not that future taxable income will be sufficient to realize the deferred tax assets (net of valuation allowance) as of January 1, 2016 . During 2015, the valuation allowance increased by $0.02 million due to a change in expected realizability of deferred tax assets. 64 Table of Contents The principal tax carry-forwards and temporary differences were as follows as of the fiscal year ended: January 1, 2016 Deferred tax assets Non-deductible reserves and allowances Insurance accruals Net operating loss carryforwards $ 12,855 3,431 4,550 20,836 (1,762) 19,074 Valuation allowance Total deferred tax assets Deferred tax liabilities Goodwill & intangibles Accelerated depreciation Total deferred tax liabilities Net deferred tax liabilities December 31, 2014 (30,719) (1,449) (32,168) (13,094) $ $ 9,853 3,174 1,484 14,511 (1,746) 12,765 (23,038) (1,007) (24,045) (11,280) $ Total net deferred tax liabilities are reflected in the accompanying balance sheet as long-term liabilities. The Company had book goodwill of $1 13.2 million and $ 65.4 million at January 1, 2016 and December 31, 2014 , respectively, which was not deductible for tax purposes. State operating loss carryforwards totaling $ 28.8 million at January 1, 2016 are being carried forward in jurisdictions where the Company is permitted to use tax losses from prior periods to reduce future taxable income. If not used to offset future taxable income, these losses will expire between 2016 and 2035. Due to uncertainty regarding the Company’s ability to use some of the carryforwards, a valuation allowance has been established on $ 28.4 million of state net operating loss carryforwards. Based on the Company’s historical record of producing taxable income and expectations for the future, the Company has concluded that future operating income will be sufficient to give rise to taxable income sufficient to utilize the remaining state net operating loss carryforwards. US GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. The Company’s unrecognized tax benefits would affect the tax rate, if recognized. The Company includes the full amount of unrecognized tax benefits in other noncurrent liabilities in the consolidated balance sheets. The Company anticipates it is reasonably possible an increase or decrease in the amount of unrecognized tax benefits could be made in the next twelve months. However, the Company does not presently anticipate that any increase or decrease in unrecognized tax benefits will be material to the consolidated financial statements. C hanges in unrecognized tax benefits were as follows. January 1, 2016 Beginning of fiscal year Increases related to positions taken on items from prior years Decreases related to positions taken on items from prior years Increases related to positions taken in the current year Lapse of statute of limitations Settlement of uncertain tax positions with tax authorities $ 1,186 December 31, 2014 $ — December 31, 2013 $ — — — — — — — 1,284 — 1,186 — — — — — — Balance at end of fiscal year $ 2,470 $ 1,186 $ — For federal tax purposes, the Company is currently subject to examinations for tax years after 2011, while for state purposes, tax years after 2006 are subject to examination, depending on the specific state rules and regulations. The 65 Table of Contents Internal Revenue Service completed an examination of the December 31, 2011 tax year and is currently conducting an examination of Omni Home Health Holdings, Inc.’s federal tax returns for the year ended December 31, 2012 and the period ended December 6, 2013. The Company may from time to time be assessed interest and penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. Assessments for interest and/or penalties are classified in the financial statements as general and administrative - other. NOTE 7 - STOCKHOLDERS’ EQUITY Employee Stock Incentive Plans The Company has a 2000 Employee Stock Option Plan which initially provided for options to purchase up to 1,000 shares of the Company’s common stock to key employees, officers and directors. The Board of Directors determines the amount and terms of the options, which cannot exceed ten years. At January 1, 2016 , options for 96 shares were outstanding under this plan. There are no shares available for future grant. The 2007 Stock and Incentive Compensation Plan provided for stock awards up to 500 shares of the Company’s common stock to employees, non-employee directors or independent contractors, with a maximum number of full value restricted share awards up to 200 . As of January 1, 2016 , options for 237 shares were outstanding under this plan, while 162 restricted shares had been awarded. There are no shares available for future grant. The 2013 Stock and Incentive Compensation Plan provides for stock awards up to 700 shares of the Company’s common stock to employees, non-employee directors or independent contractors. As of January 1, 2016 , options for 134 shares had been granted and were outstanding under this plan, while 192 restricted shares had been awarded. There are 374 shares available for future grant. Historically, the Company has issued restricted share and/or option awards to employees and non-employee directors. The Board of Directors determines the amount and terms of the options, which cannot exceed ten years . Under both the 2013 and 2007 Stock and Incentive Compensation Plans, restricted share awards cliff vest on the third anniversary , while option share awards vest annually in 25% increments over four years . Changes in award shares outstanding are summarized as follows: Restricted shares Shares December 31, 2012 Granted Vested or Exercised Forfeited December 31, 2013 Granted Vested or Exercised Forfeited December 31, 2014 Granted Vested or Exercised Forfeited January 1, 2016 50 58 (8) — 100 61 (39) — 122 100 (45) — 177 Options Wtd. Avg. Grant Price $ $ $ $ 31.35 20.29 19.57 — 24.12 23.27 27.35 — 22.68 39.97 22.87 — 32.39 Shares 341 68 (2) (24) 383 70 (13) (13) 427 56 (12) (4) 467 Aggregate Intrinsic Value Wtd. Avg. Ex. Price $ $ $ $ 25.62 20.71 12.29 (30.29) 24.52 24.28 2.87 (24.57) 24.89 37.30 23.97 (26.35) 26.39 $ $ 4,300 1,191 (52) (1,644) 5,251 977 (460) (816) 5,696 52 (171) (258) 5,529 Aggregate intrinsic value represents the estimated value of the Company’s common stock at the end of the period in excess of the weighted average exercise price multiplied by the number of options outstanding or exercisable. 66 Table of Contents The following table summarizes information about stock options at January 1, 2016 : Options Outstanding Range of Exercise Price $0.00-20.00 $20.01-30.00 Over $30.00 Shares Wtd. Avg. Remaining Contractual Life 107 213 147 467 1.61 6.52 5.81 5.17 Options Exercisable Wtd. Avg. Exercise Price $ $ $ $ Wtd. Avg. Remaining Contractual Life Shares 19.41 22.92 36.46 26.39 100 122 90 312 Wtd. Avg. Exercise Price 1.39 5.47 3.81 3.69 $ $ $ $ 19.41 22.81 35.95 25.49 The following table details exercisable options and related information for year end: January 1, 2016 Exercisable at end of year Weighted average price Weighted average fair value of options granted during the year $ 312 25.49 $ 12.35 December 31, 2014 December 31, 2013 $ 273 25.59 $ 259 24.89 $ 11.61 $ 9.59 The following table details unvested option activity for the year ended January 1, 2016 : Wtd. Avg. Ex. Price Shares December 31, 2014 Vested Granted Forfeited January 1, 2016 154 55 56 — 155 $ $ 23.65 24.73 37.30 (24.08) 28.20 The fair value of each option award is estimated on the date of grant using the Monte Carlo option valuation model with suboptimal exercise behavior. The Monte Carlo model places greater emphasis on market evidence and predicts more realistic results because it considers open form information including volatility, employee exercise behaviors and turnover. Stock options have a contractual term of 10 years. The following assumptions were used in determining the fair value of option awards for 2015 , 2014 and 2013 : Grant date March 2, 2015 March 17, 2014 March 1, 2013 Equivalent Equivalent interest rate volatility 2.07% 2.68% 1.86% Implied expected lives 32.50% 40.00% 40.00% 6.86 8.32 8.33 Expected volatility is based on an analysis that looks at the unbiased standard deviation of the Company’s common stock over the option term as well as implied volatilities of all long-term exchange traded options for the Company. The expected life of the options represents the period of time that the Company expects the options granted to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option for the expected term of the instrument. A 0% dividend yield was assumed as no dividend payout over the term of the award is expected. As of January 1, 2016 , there was $3,589 of total unrecognized compensation cost, after estimated forfeitures, related to unvested share-based compensation granted under the plans. That cost is expected to be recognized over a weighted-average period of 2.37 years. The total fair value of option shares vested during the years ended January 1, 2016 and December 31, 2014 was $48 7 and $446 , respectively. 67 Table of Contents Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan (“2009 ESPP”) which, if implemented, could provide employees of the Company and its subsidiaries with an opportunity to participate in the growth of the Company and to further align the interest of the employees with the interests of the Company through the purchase of shares of the Company’s Common Stock. Under the 2009 ESPP, 300 shares of the Company’s Common Stock have been authorized for issuance. As of January 1, 2016 , all 300 shares remain available for issuance. NOTE 8 - RETIREMENT PLAN The Company administers a 401(k) defined contribution retirement plan for the benefit of the majority of its employees. Employees may participate in the plan immediately upon employment. The Company matches contributions in an amount equal to one-quarter of the first 5% of each participant’s contribution to the plan after completion of one year of service with the Company. 401(k) assets are held by an independent trustee, are not assets of the Company, and accordingly are not reflected in the Company’s balance sheets. The Company’s retirement plan expense was approximately $1,080, $910 and $550 for the years ended January 1, 2016 , December 31, 2014 , and 2013, respectively. NOTE 9 - COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases certain real estate, office space, and equipment under non-cancelable operating leases expiring at various dates through 202 5 and which contain various renewal and escalation clauses. Rent expense amounted to approximately $11,356, $12,846 and $8,619 for years ended January 1, 2016 , December 31, 2014 and 2013, respectively. At January 1, 2016 , minimum rental payments under these leases were as follows: 2016 2017 2018 2019 2020 Thereafter Total $ $ 8,439 5,930 3,698 2,153 1,634 2,793 24,647 Legal Proceedings From time to time, the Company is subject to various legal actions arising in the ordinary course of the Company’s business, including claims for damages for personal injuries. In the Company’s opinion, after discussion with legal counsel, the ultimate resolution of any of these pending ordinary course claims and legal proceedings will not have a material effect on the Company’s financial position or results of operations . The Company is in the process of complying with a civil subpoena from the United States Department of Justice received in January of 2016 related to two locations acquired along with SunCrest in late 2013. SunCrest had previously acquired the locations in its merger with Omni Home Health in 2011. The subpoena seeks the production of various pre-acquisition business records limited to certain Omni operations in Sarasota and Tampa, Florida for the years 2007-2011. The Company is cooperating fully with this investigation. The subject operations generated less than 1% of the Company’s consolidated revenues in 2015. NOTE 10 - SEGMENT DATA At January 1, 2016 , the Company has two divisions, Home Health care and Healthcare Innovations. The Home Health care division is comprised of two reportable segments, Visiting Nurses Services (VN or Visiting Nurse) and Personal Care Services (PC or Personal Care). Healthcare Innovations is also a reportable segment. 68 Table of Contents Consistent with information given to the chief operating decision maker, the Company does not allocate certain corporate expenses to the reportable segments. These expenses are included in Unallocated below. The Company evaluates the performance of its business segments based on operating income. Intercompany and intersegment transactions have been eliminated. Segment information within the consolidated financial statements have been recast for all periods presented to conform with the new segment reporting structure. The Company’s VN segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. VN Medicare revenues are generated on a per episode basis rather than a fee per visit or day of care. Approximately 94% of the VN segment revenues are generated from the Medicare program, while the balance is generated from Medicaid and private insurance programs. The Company’s PC segment services are also provided in patients’ homes. These services (generally provided by paraprofessional staff such as home health aides) are generally of a custodial rather than skilled nature. PC revenues are generated on an hourly basis. Approximately 83% of the PC segment revenues are generated from Medicaid and other government programs, while the balance is generated from insurance programs and private pay patients. The Company’s Healthcare Innovations business segment was created to house and separately report on our developmental activities outside the traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit the Company’s patients and payers through the enhanced provision of home health services. The activities all share a common goal of improving patient experiences and quality outcomes while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision. 69 Table of Contents Fiscal Year ended December 31, 2014 January 1, 2016 Net service revenues Home Health Visiting Nurse Personal Care Healthcare Innovations $ $ Operating income (loss) Home Health Visiting Nurse Personal Care Healthcare Innovations Unallocated $ $ Identifiable assets Home Health Visiting Nurse Personal Care Healthcare Innovations Unallocated $ $ Identifiable liabilities Home Health Visiting Nurse Personal Care Healthcare Innovations Unallocated Noncontrolling Interest Redeemable Healthcare Innovations Capital expenditures Home Health Visiting Nurse Personal Care Healthcare Innovations Unallocated $ 401,051 127,712 3,451 532,214 49,872 14,170 (1,217) (30,722) 32,103 310,317 111,524 22,024 20,904 464,769 31,570 24,425 $ $ $ $ $ $ $ 380,788 112,497 2,544 495,829 42,899 12,453 (13) (30,862) 24,477 $ $ 196 356,912 29,533 11,599 (482) (25,857) 14,793 28,180 19,498 $ $ $ 3,639 $ 3,639 $ 1,388 203 $ 465 149 $ $ 263,789 92,927 9,254 9,245 345,258 191 64,197 112,066 $ $ 259,521 67,238 1,525 133,349 190,869 108 1,418 3,117 December 31, 2013 — 617 1,231 3,639 $ $ 764 267 — 1,471 2,502 Depreciation and amortization Home Health Visiting Nurse Personal Care Healthcare Innovations Unallocated $ $ 1,210 264 97 2,637 4,208 $ $ 70 1,250 271 — 2,582 4,103 $ $ 1,004 224 — 1,634 2,862 Table of Contents NOTE 11 — DISCONTINUED OPERATIONS The Company follows the guidance in Accounting Standards Codification (ASC) 205-20, Discontinued Operations and, when appropriate, reclassifies operating units closed, sold or held for sale out of continuing operations and into discontinued operations for all periods presented. In 2013, the Company completed the sale of two Alabama locations, which operated in the VN segment. The operations and gain on sale related to the Alabama operations were reclassified from continuing operations into discontinued operations for all periods presented. The operations and any related gain on sale for these operations were reclassified from continuing operations into discontinued operations for all periods presented. The effective tax rate for discontinued operations is high in 2013 due primarily to the impact of writing off non-deductible goodwill in addition to providing a valuation allowance for Alabama net operating loss carryforwards. Unless otherwise noted, amounts in these Notes to Consolidated Financial Statements exclude amounts attributable to discontinued operations. NOTE 12 - ACQUISITIONS The Company completed each of the following acquisitions in pursuit of its strategy for operational expansion in the eastern United States through an expanded service base and enhanced position in certain geographic areas. The purchase price of each acquisition was determined based on the Company’s analysis of comparable acquisitions, expected cash flows and arm’s length negotiation with the sellers. Each acquisition was included in the Company’s consolidated financial statements from the respective acquisition date. Goodwill recognized from the acquisitions primarily relates to expected contributions of each entity to the overall corporate strategy in addition to synergies and acquired workforce, which are not separable from goodwill. Goodwill and other intangible assets generated in asset purchase transactions are expected to be amortizable for tax purposes on a straight-line basis over 15 years, unless otherwise noted. Goodwill and other intangible assets generated in stock purchase transactions are not amortizable, unless otherwise noted. On November 5, 2015, the Company acquired the stock of Black Stone Operations, LLC (“Black Stone”). Black Stone is a provider of in-home personal care and skilled home health services in western Ohio and operates under the name “Home Care by Black Stone”. The purchase price of $40 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. Black Stone’s post acquisition operating results are reported in the Company’s VN and PC segments and Healthcare Innovations segment. On August 29, 2015, the Company acquired 100% of the equity of Bracor, Inc. (dba “WillCare”). Willcare, based in Buffalo, NY, owned and operated VN and PC branch locations in New York (1 2 ) and Connecticut (1). The purchase price was approximately $50.8 million. The transaction was funded by borrowings under the Company’s bank credit facility. WillCare’ s post acquisition operating results are reported in the Company’s VN and PC segments. On July 22, 2015, the Company acquired 100% of the equity of Ingenios Health Co. (“Ingenios”) for approximately $11.4 million of the Company’s common stock plus $2 million in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in seven states and Washington, D.C. The post acquisition operating results of Ingenios are reported in the Company’s Healthcare Innovations business segment. On March 1, 2015, the Company acquired the stock of WillCare’s Ohio operations for $3.0 million. 71 Table of Contents The following table summarizes the preliminary fair value estimates as of the respective acquisition dates of the assets acquired and liabilities assumed for the Willcare, Ingenios and Black Stone acquisitions in 2015: Preliminary Purchase Price Allocation Accounts receivable Property, plant & equipment Other assets Goodwill Other intangibles Assets acquired Liabilities assumed Net assets acquired $ $ 13,039 4,654 1,818 84,538 10,810 114,859 (8,299) 106,560 On January 29, 2015, the Company acquired a noncontrolling interest in a development stage analytics and software company, NavHealth, Inc. (NavHealth). The investment is an asset of the Company’s Healthcare Innovations segment. During 2014, the Company completed a small acquisition using cash on hand to expand existing VN segment operations. On December 6, 2013, the Company acquired the stock of SunCrest. SunCrest and its subsidiaries owned and operated 66 Medicare-certified home health agencies and 9 private duty agencies in Florida, Tennessee, Georgia, Pennsylvania, Kentucky, Illinois, Indiana, Mississippi and Alabama. The total SunCrest purchase price for the stock was $ 76.6 million, subject to a working capital adjustment. The purchase price consisted of cash consideration of $75.1 million and a $1.5 million note payable, net of acquired cash balances of $2.2 million. On October 4, 2013, the Company acquired 61.5% of Imperium for $5.8 million, of which $3.0 million was working capital for Imperium. Imperium is a development-stage enterprise that provides strategic health management services to ACOs. Substantially all of the purchase price was allocated to goodwill. The Company is party to a put and call arrangement with respect to the remaining 38.5% non-controlling interest in Imperium. The redemption value for both the put and the call arrangement is equal to fair value. Due to the existing put and call arrangements, the non-controlling interest is considered to be redeemable and is recorded on the balance sheet as a redeemable non-controlling interest outside of permanent equity. The redeemable non-controlling interest is recognized at the higher of 1) the accumulated earnings associated with the non-controlling interest or 2) the redemption value as of the balance sheet date. On July 17, 2013, the Company acquired the assets of the Medicare-certified home agencies owned by IHCN. IHCN operated six home health agencies primarily in northern Indiana for a total purchase price of $12.5 million consisting of cash and $0.5 million of Almost Family, Inc. common stock. A preliminary allocation of purchase price resulted primarily in the allocation of $9.9 million to goodwill, $1.8 million to identified intangibles with the remainder primarily due to property plant and equipment and accounts receivable. 72 Table of Contents NOTE 13 - QUARTERLY FINANCIAL DATA— (UNAUDITED) Summarized quarterly financial data are as follows for the fiscal years ended January 1, 2016 and December 31, 201 4 : Net service revenues Gross margin Net income attributable to Almost Family, Inc. Jan. 1, 2016 Oct. 2, 2015 Jul. 3, 2015 $ $ $ 145,217 67,521 $ 2,760 131,232 61,757 $ 7,799 127,366 Apr. 3, 2015 $ 61,023 $ 5,010 128,399 Dec. 31, 2014 $ 60,072 $ 4,394 124,756 Sept. 30, 2014 $ 58,366 $ 4,747 125,540 Jun. 30, 2014 $ 59,020 $ 3,782 125,193 Mar. 31, 2014 $ 59,636 $ 3,961 120,340 54,813 $ 1,273 Average shares outstanding Basic Diluted 9,775 9,604 9,393 9,353 9,352 9,347 9,338 9,293 10,000 9,822 9,569 9,521 9,474 9,443 9,431 9,426 Net income attributable to Almost Family, Inc. per share Basic $ 0.27 $ 0.81 $ 0.53 $ 0.47 $ 0.50 $ 0.40 $ 0.42 $ 0.14 Diluted $ 0.27 $ 0.79 $ 0.52 $ 0.46 $ 0.49 $ 0.40 $ 0.42 $ 0.14 NOTE 14 - SUBSEQUENT EVENTS Management has evaluated all events and transactions that occurred after January 1, 2016. The following non-recognized subsequent events were noted: On January 5, 2016, the Company acquired 100% of the equity of Long Term Solutions, Inc. ( “ LTS ” ). LTS is a provider of in-home nursing assessments for the long-term care insurance industry. LTS provides assessments in all 50 U.S. states and a number of foreign countries. The purchase price of $37 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. LTS’s post acquisition operating results will be reported in the Company’s Healthcare Innovations business segment. On January 5, 2016, the Company purchased the assets of a Medicare-certified home health agency owned by Bayonne Visiting Nurse Association (Bayonne) located in New Jersey. Bayonne’s post acquisition operating results will be reported in the Company’s VN segment. 73 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Almost Family, Inc. and s ubsidiaries We have audited the accompanying consolidated balance sheets of Almost Family, Inc. and s ubsidiaries as of January 1, 2016 and December 31, 2014, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended January 1, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a) 2 . These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial posit ion of Almost Family, Inc. and s ubsidiaries at January 1, 2016 and December 31, 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 1, 2016, in conformity with U.S. generally accepted accounting principles . Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Almost Family, Inc. and subsidiaries’ internal control over financial reporting as of January 1, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 2, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Louisville, Kentucky March 2, 2016 74 Table of Contents Management’s Report on Internal Control over Financial Reporting The consolidated financial statements appearing in this Annual Report have been prepared by management that is responsible for their preparation, integrity and fair presentation. The statements have been prepared in accordance with U.S. generally accepted accounting principles, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time. Under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Principal Financial Officer (PFO), we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 1, 2016 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO) with the exception of the operations of WillCare Healthcare, Ingenios Health Holdings, Inc. and Black Stone Operations, LLC , which constituted 25 % of total assets as of January 2, 2016 and 6 % of net service revenues for the fiscal year then ended . Based on that evaluation, our management concluded our internal control over financial reporting was effective based on the criteria described above as of January 1, 2016. Ernst & Young LLP, an independent registered public accounting firm, has audited and reported on the effectiveness of our internal control over financial reporting. The report of Ernst & Young LLP is contained in this Annual Report. /s/ William B. Yarmuth William B. Yarmuth Chairman and Chief Executive Officer /s/ C. Steven Guenthner C. Steven Guenthner President & Principal Financial Officer Date: March 2, 2016 March 2, 2016 75 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Almost Family, Inc. and s ubsidiaries We have audited Almost Family, Inc. and s ubsidiaries’ internal control over financial reporting as of January 1, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Almost Family, Inc. and s ubsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Willcare HealthCare, Ingenios Health Holdings, Inc., and Black Stone Operations, LLC, which are included in the 2015 consolidated financial statements of Almost Family, Inc. and s ubsidiaries and constituted 25 % of total assets as of January 1, 2016 and 6% of net service revenues for the year then ended. Our audit of internal control over financial reporting of Almost Family, Inc. and s ubsidiaries also did not include an evaluation of the internal control over financial reporting of Willcare HealthCare, Ingenios Health Holdings, Inc., and Black Stone Operations, LLC. In our opinion, Almost Family, Inc. and s ubsidiaries maintained, in all material respects, effective internal control over financial reporting as of January 1, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Almost Family Inc. and s ubsidiaries as of January 1, 2016 and December 31, 2014 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2016 of Almost Family, Inc. and s ubsidiaries and our report dated March 2, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Louisville, Kentucky March 2, 2016 76 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT S ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURE S Disclosure Controls and Procedures — As of January 1, 2016 , the Company’s management, with participation of the Company’s Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of January 1, 2016 . Internal Control — Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have included a report that provides management’s assessment of our internal control over financial reporting as part of this Annual Report on Form 10-K for the year ended January 1, 2016 . Management’s report is included in Item 8 of this report under the caption entitled “Management’s Report on Internal Control Over Financial Reporting,” and is incorporated herein by reference. Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting. This attestation report is included in item 8 of this report under the caption entitled “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference. Changes in Internal Control Over Financial Reporting - There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2015 , that have materially affected, or are reasonably likely to materially affect, Almost Family, Inc.’s internal control over financial reporting. ITEM 9B. OTHER INFORMATIO N None. PART II I ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANC E The information required by this Item is set forth in the Registrant’s definitive proxy statement to be filed with the Commission no later than 120 days after January 1, 2016 , except for the information regarding executive officers of the Company. The information required by this Item contained in such definitive proxy statement is incorporated herein by reference. The following table sets forth certain information with respect to the Company’s executive officers. Name Age William B. Yarmuth (1) C. Steven Guenthner (2) P. Todd Lyles (3) 63 55 54 Daniel J. Schwartz (4) 49 Rajneesh Kaushal (5) Jeffrey T. Reibel (6) 55 44 Position with the Company Chairman of the Board and Chief Executive Officer President and Principal Financial Officer Senior Vice President — Administration Senior Vice President and Chief Operating Officer Senior Vice President and Chief Clinical Officer Vice President and Chief Accounting Officer Executive officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board of Directors with the exception of William B. Yarmuth who has an employment agreement with the Company. There are no family relationships between any director or executive officer. (1) William B. Yarmuth has been a director and officer of the Company since 1991 . Mr. Yarmuth became Chairman and C hief E xecutive O fficer in 1992 ; he also served as President until the appointment of Steve Guenthner as 77 Table of Contents President in 2012. Mr. Yarmuth has served as a member of the board of directors of Industrial Services of America, Inc. since June 2014. (2) C. Steven Guenthner has been President and Principal Financial Officer since June of 2012. Prior to which, Mr. Guenthner served as Senior Vice President and Chief Financial Officer of the Company for twenty years. From 1983 through 1992, Mr. Guenthner was employed as a C.P.A. with Arthur Andersen LLP. (3) P. Todd Lyles joined the Company as Senior Vice President Planning and Development in 1997 and now serves as Senior Vice President — Administration. Prior to joining the Company Mr. Lyles was Vice President Development for the Kentucky Division of Columbia/HCA, a position he had held since 1993. Mr. Lyles experience also includes 8 years with Humana Inc. in various financial and hospital management positions. (4) Daniel J. Schwartz joined the Company as Senior Vice President - Operations in April 2013, becoming Senior Vice President and Chief Operating Officer in December 2013. Mr. Schwartz’s healthcare operations management experience includes previously serving as Chief Operating Officer of Addus Healthcare, Inc. from January 2011 until November 2012; owner of New Paradigm Senior Services, LLC from April 2010 until January 2011; and Senior Vice President — North American Operations for Sunrise Senior Living, Inc. from 2006 until April 2010. Mr. Schwartz served Sunrise Senior Living, Inc. a total of 15 years. Mr. Schwartz also served as chief operating officer of New Perspective Senior Living from November 2012 until joining the Company. (5) Rajneesh Kaushal joined the company as Senior Vice President in October 2011 and now also serves as Chief Clinical Officer. Prior to joining the Company, Mr. Kaushal had served as Executive Vice President and Chief Clinical Officer for AccentCare, a national home health care company, which merged with Guardian Home Care Holdings (Guardian) in December of 2010. Mr. Kaushal joined Guardian in 2006 and his experience also includes hospital and post-acute care geriatrics. (6) Jeffrey T. Reibel, a C.P.A., joined the Company in September of 2010 as Vice President of Finance and became Vice President and Chief Accounting Officer in 2012. Prior to joining the Company, Mr. Reibel served as Chief Executive Officer of a private compliance company he founded in 2006. Mr. Reibel’s experience also includes three years as Controller and Principal Accounting Officer for a publicly traded company in addition to twelve years with Ernst & Young LLP, specializing in audits of public companies and various clients in the healthcare industry, including home health. Code of Ethics The Company has adopted a Code of Ethics for Senior Financial Officers that applies to its chief executive officer, principal financial officer, chief accounting officer and any person performing similar functions. The Company has made the Code of Ethics available on its website at www.almostfamily.com and will post any waivers to the Code of Ethics on the website. ITEMS 11, 12, 13 and 14. EXECUTIVE COMPENSATIO N; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE; AND PRINCIPAL ACCOUNTANT FEES AND SERVICES The Registrant intends to file a definitive proxy statement with the Commission pursuant to Regulation 14A (17 CFR 240.14a) not later than 120 days after the close of the fiscal year covered by this report. In accordance with General Instruction G(3) to Form 10-K, the information called for by Items 11, 12, 13 and 14 is incorporated herein by reference to portions of the definitive proxy statement. 78 Table of Contents Equity Compensation Plans As of January 1, 2016 , shares of common stock authorized for issuance under our equity compensation plans are summarized in the following table. See note 7 to the consolidated financial statements for a description of the plans. The table below is furnished pursuant to item 12. Plan Category Plans approved by shareholders Plans not approved by shareholders Total Shares to be Issued Upon Exercise Weighted Average Option Exercise Price Shares Available for Future Grants 466,752 $ 26.39 373,615 — 466,752 $ — 26.39 — 373,615 79 Table of Contents PART I V ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE S Page Number (a) The following items are filed as part of this report: 1. Index to Consolidated Financial Statements Consolidated Statements of Income for the years ended January 1, 2016, December 31, 2014 and 2013 51 Consolidated Balance Sheets as of January 1, 2016 and December 31, 2014 52 Consolidated Statements of Stockholders’ Equity for the years ended January 1, 2016 and December 31, 2014 and 2013 53 Consolidated Statements of Cash Flows for the years ended January 1, 2016 and December 31, 2014 and 2013 54 Notes to Consolidated Financial Statements 55 Report s of Independent Registered Public Accounting Firm 74 2. Index to Financial Statement Schedule Schedule II — Valuation and Qualifying Accounts All other Schedules have been omitted because they are either not required, not applicable or, the information has otherwise been supplied in the financial statements or notes thereto. (b) Exhibits required to be filed by Item 601 of Regulation S-K are set forth below: 80 86 Table of Contents Number Description of Exhibit 2.1 Share Purchase Agreement dated as of February 24, 2015 by and among Almost Family, Inc, National Health Industries, Inc., Bracor, Inc. and Bracor’s shareholders, Summer Street Capital II, L.P., Summer Street Capital NYS Fund II, L.P., David W. Brason, Todd W. Brason and David W. Brason Multi-Generational Irrevocable Trust . (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.) (incorporated by reference to the Exhibit 2.1 to Registrant’s Report on Form 10-K for the year ended December 31, 2014). 2.2 Stock Purchase Agreement dated as of February 24, 2015 by and among Almost Family, Inc, National Health Industries, Inc., and Bracor, Inc. (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.) (incorporated by reference to the Exhibit 2.1 to Registrant’s Report on Form 10-K for the year ended December 31, 2014). 2.3 Closing Letter Agreement dated August 28, 2015, as amendment to Share Purchase Agreement dated as of February 2 4 , 2015 by and among Almost Family, Inc., National Health Industries, Inc., Bracor, Inc. and Bracor’s shareholders, Summer Street Capital II, L.P., Summer Street Capital NYS Fund II, L.P., David W. Brason, Todd W. Brason and David W. Brason Multi-Generational Irrevocable Trust (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.) (incorporated by reference to Exhibit 2.2 to the Company’s C urrent Report on Form 8-K filed on September 2, 2015). 2.4 * Agreement and Plan of Merger dated as of November 3, 2015 by and among Almost Family, Inc., National Health Industries, Inc., AFAM Acquisition, LLC, Black Stone Operations, LLC, Black Stone Companies of Ohio, Inc., ERH Development, LLC, Warren County Community Services, LLC, LEC Community Services, Inc., Primrose Retirement Communities, LLC, Kimberly Payne and David Brixey. (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.) 2.5* Stock Purchase Agreement dated as of January 2, 2016 by and among National Health Industries, Inc., Almost Family, Inc., Long Term Solutions, Inc., and Anne Harrington, Noreen Guanci, Noreen Guanci 2009 Irrevocable Trust and Richard Guanci 2009 Irrevocable Trust. (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.) 3.1 Certificate of Incorporation, as amended, of the Registrant (incorporated by reference to Exhibit No. 3.1 of the Registrant’s Annual Report on Form 10-K for the year ended March 31, 1997 and Exhibit 3.1 of the Registrant’s Quarterly Report Form 10-Q for the quarter ended September 30, 2008) 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed on June 8, 2012) 81 Table of Contents 4.1 Form of Senior Indenture – (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on form S-3 filed on May 29, 2015, SEC File No. 333-204584.) 4.2 Form of Subordinated Indenture – (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on form S-3 filed on May 29, 2015, SEC File No. 333-204584.) 4. 3 Other Debt Instruments — copies of other debt instruments for which the total debt is less than 10% of assets will be furnished to the Commission upon request. 10.1+ Employment Agreement, dated January 1, 1996, between the Company and William B. Yarmuth (incorporated by reference to Exhibit 10.24 to the Registrant’s report on Form 10-K for the year ended March 31, 1996). 10.2+ 2007 Stock and Incentive Compensation Plan (incorporated by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A as filed on June 25, 2007). 10.3+ Amended and Restated 2000 Stock Option Plan (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 Reg. No. 333-88744). 10.4+ Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by reference to the Exhibit 10.13 to Registrant’s Report on Form 10-K for the year ended December 31, 2009). 10.5+ Forms of Stock Option Agreements and Restricted Stock Award Agreement pursuant to 2007 Stock and Incentive Plan (incorporated by reference to Exhibit 10.15 to the Registrant’s report on Form 10-K for the year ended December 31, 2008). 10.6+ Amendment dated January 1, 2009 to Employment Agreement effective January 1, 1996, between the Registrant and William B. Yarmuth (incorporated by reference to Exhibit 10.20 to the Registrant’s report on Form 10-K for the year ended December 31, 2008). 10.7+ Amendment to Amended and Restated 2000 Stock Option Plan dated January 1, 2009 (incorporated by reference to Exhibit 10.22 to the Registrant’s report on Form 10-K for the year ended December 31, 2008). 10.8+ Almost Family, Inc. 2009 Employee Stock Purchase Plan (incorporated by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A as filed on July 1, 2009). 10.9 Credit Agreement, dated as of December 2, 2010 among Almost Family, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and Bank of America, N.A., as Syndication Agent. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated December 2, 2010). 10.10+ 2013 Stock and Incentive Plan (incorporated by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A as filed on April 4, 2013). 10.11+ Forms of Stock Option Agreement and Restricted Stock Award Agreement pursuant to 2013 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013) 82 Table of Contents 10.12+ Offer of Employment letter dated March 12, 2013, between the Registrant and Daniel Schwartz (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013). 10.13 Third Amendment to Credit Agreement, dated as of February 12, 2015 among Almost Family, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and Bank of America, N.A., as Syndication Agent. ( i ncorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed February 18, 2015). 10.14 Consolidated Amended and Restated Guaranty and Ratification Agreement dated as of February 12, 2015 (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed February 18, 2015). Consolidated Amended and Restated Pledge of Equity Interests dated as of February 12, 2015 (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed February 18, 2015). Consolidated Amended and Restated Security Agreement dated as of February 12, 2015 (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed February 18, 2015) . Second Amendment to Credit Agreement dated as of December 6, 2013 by and among Almost Family, Inc. and JPMorgan Chase Bank, N.A., for itself and as Administrative Agent under the Credit Agreement dated as of December 2, 2010 (incorporated by reference to the Exhibit 10.14 to Registrant’s Report on Form 10-K for the year ended December 31, 2014). 10.15 10.16 10.1 7 10.1 8 Letter Agreement dated as of December 10, 2012 by and among Almost Family, Inc. and JPMorgan Chase Bank, N.A., for itself and as Administrative Agent under the Credit Agreement dated as of December 2, 2010 (incorporated by reference to the Exhibit 10. 15 to Registrant’s Report on Form 10-K for the year ended December 31, 2014). 10.1 9 * Fourth Amendment to Credit Agreement dated as of November 4 , 201 5 by and among Almost Family, Inc. and JPMorgan Chase Bank, N.A., for itself and as Administrative Agent under the Credit Agreement dated as of December 2, 2010. 21* List of Subsidiaries of Almost Family, Inc. 23.1* Consent of Ernst & Young LLP 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002. 83 Table of Contents 32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002. 101 * Financial statements from the annual report on Form 10-K of Almost Family, Inc. for the fiscal year ended January 1, 2016, filed on March 2, 2016, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Stockholders’ Equity, and (v) the Notes to Consolidated Financial Statements. * Denotes filed herein. + Denotes compensatory plan or management contract. 84 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALMOST FAMILY, INC. By: /s/ William B. Yarmuth March 2, 2016 William B. Yarmuth Chairman, Chief Executive Officer By: /s/ C. Steven Guenthner March 2, 2016 C. Steven Guenthner President and Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date By: /s/ William B. Yarmuth William B. Yarmuth Director, Chief Executive Officer (principal executive officer) March 2, 2016 By: /s/ C. Steven Guenthner C. Steven Guenthner President and Principal Financial Officer March 2, 2016 By: /s/ Jeffrey T. Reibel Vice President of Finance and Chief Accounting Officer March 2, 2016 Jeffrey T. Reibel By: /s/ Steven B. Bing Steven B. Bing Director March 2, 2016 By: /s/ Donald G. McClinton Donald G. McClinton Director March 2, 2016 By: /s/ Tyree G. Wilburn Tyree G. Wilburn Director March 2, 2016 By: /s/ Jonathan D. Goldberg Jonathan D. Goldberg Director March 2, 2016 By: /s/ W. Earl Reed, III W. Earl Reed, III Director March 2, 2016 By: /s/ Henry M. Altman, Jr. Henry M. Altman, Jr. Director March 2, 2016 85 Table of Contents ALMOST FAMILY, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS SCHEDULE I I (In thousands) Col. A Col. B Col. C Col. D Col. E (3) Deductions Balance at End of Period Additions/(Deductions) Description Balance at Beginning of Period (1) Charged to Costs and Expenses (2) Charged to Other Accounts Allowances: Year Ended January 1, 2016 $ 8,880 Year Ended December 31, 2014 $ 15,586 $ 9,413 $ — Year Ended December 31, 2013 $ 5,236 $ 5,526 $ 8,910 12,743 1,891 (6,000) $ 17,514 $ (16,119) $ 8,880 $ (4,086) $ 15,586 (1) Charged to bad debt expense. (2) Acquired uncollectible accounts reserves, primarily SunCrest acquisition related. (3) Write-off of accounts. 86 Exhibit 2. 4 Execution Copy AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (the " Agreement " ) is mad e and entered into as of November 3 , 2015 , by and among (i) Almost Family, Inc., a Delaware corporation ( " Parent " ), (ii) National Health Industries, Inc., a Kentucky corporation (" Acquiror "), (iii) AFAM Acquisition, LLC, an Ohio limited liability company ( " Merger Sub " ) , (iv ) Black Stone Operations, LLC, a n Ohio limited liability company ( " Target " ), ( v) Black Stone Companies of Ohio, Inc. , a n Ohio corporation , ERH Development, LLC, a n Ohio limited liability company, Warren County Community Services, LLC, a n Ohio limited liability company, LEC Community Services, Inc., a n Ohio corporation, Primrose Retirement Communities, LLC, a South Dakota limited liability company, and Kimberly Payne (each a " Sell ing Party " and collectively, the " Selling Parties "), and (vi ) David Brixey , an individual , as the representative for the Selling Parties ( " Selling Parties' Agent " ). RECITALS A. respective merger of Managers Target, Acquiror, Merger Sub and Selling Parties believe it is in the best interests of their companies that Target and Merger Sub combine into a single company through the statutory Merger Sub with and into Target (the " Merger " ) and, in furtherance thereof, the Boards of of Target and Merger Sub , and the Board of Directors of Acquiror, have approved the Merger. B. In connection with the Merger, the outstanding Target Units at the Effective Time will be converted into the right to receive a portion of the Merger Consideration , upon the terms and subject to the conditions of this Agreement. C. Acquiror will deposit the Escrow Amount with the Escrow Agent, the release of which will be contingent upon the occurrence of certain events and the satisfaction of certain conditions as set forth in this Agreement and in the Escrow Agreement. D. Target, Selling Parties, Acquiror and Merger Sub desire to make certain representations and warranties and other agreements in connection with the Merger. THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS: 1. Definitions . As used in this Agreement, and the attachments hereto, the following terms shall have the following meanings: " 409A Plan " has the meaning set forth in Section 3.23(j) . "ACA" means the Affordable Care Act. " Acquiror " has the meaning set forth in the introductory paragraph. " Acquiror Cap " has the meaning set forth in Section 9.7(d). " Acquiror Certificate " has the meaning set forth in Section 9.2(a). 1 " Acquiror Express Indemnification Clauses " means Sections 9.7(a)(iii) through (iv) of this Agreement. " Acquiror Financial Statements " has the meaning set forth in Section 5.5(b). " Acquiror Fundamental Representations " has the meaning set forth in Section 9.7(b). " Acquiror Indemnified Person " and " Acquiror Indemnified Persons " have the meanings set forth in Section 9.1(a). " Acquiror Notes " means th e promissory note s included among the Merger Consideration, substantially in the form of instrument attached as Attachment B . " Action " means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity. " Affiliate " with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person provided that, for purposes of this definition, " control " (including, with correlative meanings, the terms " controlled by " and " under common control with " ), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. " Agreed Accounting Principles " means GAAP as currently applied by the Company in accordance with the principals set forth on Attachment E . " Agreement " has the meaning set forth in the introductory paragraph. " Breach " has the meaning set forth in Section 3.14(g). " Business Day " means any day except Saturday, Sunday or any other day on which commercial banks located in Louisville, Kentucky are authorized or required by Law to be closed for business. " Cap " has the meaning set forth in Section 9.1(d) (i) . " Cavins Litigation " means Lisa C a v ins v. SB Health Care, Inc . dba Home Healthcare by Black Stone, Strobl & Associates, et al, Court of Common Pleas Montgomery County, Case No. 2013 CV 07540 , including without limitation, any appeal or other actions with respect thereto . " CERCLA " means the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended. " Certificate of Merger " has the meaning set forth in Section 2.1 (a) . " Claims Period " has the meaning set forth in Section 9.2(c) . 2 " Closing " has the meaning set forth in Section 2.2 (a) . " Closing Date " has the meaning set forth in Section 2.2 (a) . " Closing Statement " has the meaning set forth in Section 2.7(c) . " COBRA " has the meaning set forth in Section 3.23(b) . " Code " means the Internal Revenue Code of 1986, as amended. " Confidentiality Agreement " has the meaning set forth in Section 6.1. " Contract " means any contract, agreement or arrangement, whether written or oral. " Converted Units " has the meaning set forth in Section 2.6(a). " Copyrights " means all copyrights, copyrightable works and mask works (including all applications and registrations for each of the foregoing), and all other rights corresponding thereto throughout the world. " Damages " means any and all losses, costs, damages, diminution in value, liabilities, Taxes and reasonable expenses, including, without limitation, reasonable costs and expenses arising from claims, demands, actions and causes of action (including reasonable legal fees). " Deductible " has the meaning set forth in Section 9.1(b) . " Effective Time " has the meaning set forth in Section 2.2 (a) . " Encumbrance " means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, right of first negotiation, license, covenant not to assert/sue or other immunity from suit, equitable interest, preemptive right, community property interest, technology escrow, title retention or title reversion agreement, prior assignment, or any other encumbrance or restriction of any nature, whether accrued, absolute, contingent or otherwise (including without limitation any restriction on the transfer or licensing of any asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset) , excluding for purposes of this Agreement, Permitted Encumbrances. " Environmental Laws " means any applicable L aws (including common laws), statutes, ordinances, codes, regulations, rules, policies, permits, licenses, certificates, approvals, judgments, decrees, orders, directives, or requirements that pertain to the protection of the environment, protection of public health and safety, or protection of worker health and safety, or that pertain to the handling, use, manufacturing, processing, storage, treatment, transportation, discharge, release, emission, disposal, re-use, recycling, or other contact or involvement with Hazardous Materials, including, without limitation, CERCLA. 3 " ERISA " has the meaning set forth in Section 3.23(a). " ERISA Affiliate " has the meaning set forth in Section 3.23(a). " Escrow Agent " shall have the meaning set forth in the Escrow Agreement. " Escrow Amount " shall have the meaning set forth in Section 2.1(c)(iii). " Escrow Agreement " means an escrow agreement in substantially the form attached hereto as Attachment C . " Escrow Fund " means the fund established pursuant to the Escrow Agreement, including only the Escrow Amount paid by Acquiror to the Escrow Agent at the Closing pursuant to Section 2.8 of this Agreement. " Exchange Agent " has the meaning set forth in Section 2.7(a) . " Express Indemnification Clauses " means Sections 9.1(a)( i ii ), 9.1(a) ( v ) and 9.1(a) ( vii) of this Agreement, and third party personal injury and property damage claims falling within the scope of Section 9.1(a)(vii) of this Agreement. " FMLA " has the meaning set forth in Section 3.23(h) . " Federal Anti-Kickback Statute " has the meaning set forth in Section 3.14(b). " Federal False Claims Act " has the meaning set forth in Section 3.14(b). " Fundamental Represe ntations " has the meaning set forth in Section 9.1(b). " GAAP " means United States generally accepted accounting principles. " Governmental Authority " means any United States federal or state government, governmental, regulatory or administrative agency, department, court, commission, board, bureau or other authority or instrumentality. " Governmental Order " means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. " Governmental Programs " has the meaning set forth in Section 3.14(i). " Hazardous Materials " means any material, chemical, compound, substance, mixture or by-product that is identified, defined, designated, listed, restricted or otherwise regulated under Environmental Laws as a " hazardous constituent, " " hazardous substance, " " hazardous material, " " acutely hazardous material, " " extremely hazardous material, " " hazardous waste, " " hazardous waste constituent, " " acutely hazardous waste, " " extremely hazardous waste, " " infectious waste, " " medical waste, " " biomedical waste, " " pollutant, " " toxic pollutant, " " contaminant " or any other formulation or terminology intended to classify or identify substances, constituents, materials or 4 wastes by reason of prope rties that are deleterious to the environment, natural resources, worker health and safety, or public health and safety, including without limitation ignitability, corrosivity, reactivity, carcinogenicity, toxicity and reproductive toxicity. The term " Hazardous Materials " shall include without limitation any " hazardous substances " as defined, listed, designated or regulated under CERCLA, any " hazardous wastes " or " solid wastes " as defined, listed, designated or regulated under RCRA, any asbestos or asbestos-containing materials, any polychlorinated biphenyls, and any petroleum or hydrocarbonic substance, fraction, distillate or by-product. " Health Care Laws " has the meaning set forth in Section 3.14(b). " Health Care Permits " has the mea ning set forth in Section 3.14(j ). " HIPAA " has the mea ning set forth in Section 3.14(b ). " HITECH Act " has the meaning set forth in Section 3.14(b). " Home Health Aid Timesheet Dispute " means the internal investigation initiated concerning possible falsification of client signatures on visit records by two (2) home health aides at Nursing Resources Corporation, which could result in potential liability , including without limitation , any self-reporting obligation or civil or criminal in vestigation related thereto. " Identified Tax Issues " means (a) the B lackstone Group, LLC QSUB election matter , whereby an election to be treated as an S Corporation was unexpectedly made by Blackstone Group, LLC in 2006 and QSUB election s ( necessary following the Target Group restructuring s of 2008 and 2014 ) cannot be located, but would have been required to maintain such election and may result in potential tax liability to the Blackstone Group, LLC ; and (b) the Nursing Resources Corporation 336(e) election matter, whereby Nursing Resources Corporation was to timely file a Section 336(e) election with the IRS following the closing of the stock purchase agreement between Nursing Resources Corporation and Black Stone of Northwest Ohio, LLC , but failed to do so , which may result in potential tax liability to Black Stone of Northwest Ohio, LLC . " Indebtedness " means (a) all obligations for borrowed money, advancement of funds or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit (upon which funds have been drawn ) , guarantees, prepayment penalties, fees or other charges related thereto, as well as any interest or other premium accrued thereon, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, as well as any interest or other premium thereon and (c) all capital leases. Indebtedness inclu des all convertible debt of Target that has not converted prior to Closing into Target Units , and with respect thereto, shall include all principal and accrued and unpaid interest and any other amounts payable to the holder necessary to cause such convertible debt to be paid and satisfied in full . " Independent Accountant " means a regional accounting firm that doesn't do the audit work for any of Target Group or Parent (or Parent's direct and indirect subsidiaries), selected by mutual agreement of Acquiror and Selling Parties' Agent. 5 " Information Systems " has the meaning set forth in Section 3.11(b) . " Intellectual Property Rights " means any and all of the following in any country: (a)(i) Patents, (ii) Trademarks, (iii) rights in domain names and domain name registrations, (iv) Copyrights, (v) Trade Secrets, and (vi) all other intellectual property rights (whether or not appropriate steps have been taken to protect such rights under a pplicable Law); and (b) the right (whether at law, in equity, by contract or otherwise) to use, practice or otherwise exploit any of the foregoing. " IRS " has the meaning set forth in Section 3.23(b) " Key Employee " means those employees of Target Group listed on Attachment A . " Knowledge " means, with respect to a party, such party’s actual knowledge . For purposes of this Agreement, "Knowl edge" of Target means the actual knowledge of the following individuals: David Tramontana, Jordan Broome, and Jenny Sand . " Law " means, collectively, all federal, state, provincial foreign or local statutes, laws, ordinances, regulations, rules, codes, orders, other requirements or rules of law. " Lease " or " Leases " has the meaning set forth in Section 3.16 . " Majority Holders " has the meaning set forth in Section 9.4(e) . " Material Adverse Effect " means any change, effect, event, circumstance or condition that is materially adverse to the business, financial condition, results of operations, assets or liabilities of the applicable Person and its subsidiaries, taken as a whole, but shall exclude any change, effect, event, circumstance or condition resulting or arising from: (i) changes or conditions affecting economic or capital markets in the United States or internationally, or any change in interest rates or general economic conditions in the industries or markets in which such Person operates, including an increase in competition; (ii) continuation or escalation of war, armed hostilities or national or international calamity; (iii) any act of God or natural disaster; ( iv ) any act of terrorism or change in geopolitical conditions ; (v) changes expected by Parent and/or Acquiror or for which Parent and/or Acquiror had knowledge; and ( v i ) any change in GAAP, except to the extent such change has a materially disproportionate effect on such Person as compared to any of the other companies in such Person ’s industry . " Material Contract " means any Contract to which any of Target Group is , and at Closing will remain, a party : (A) with receipts or expenditures (excluding payments of Indebtedness) in excess of $ 100 ,000 during calendar year 2014 or anticipated receipts or expenditures (excluding payments of Indebtedness) during calendar year 2015 ; (B) intentionally deleted ; (C ) requiring any of Target Group to indemnify any Person; (D ) granting any exclusive rights to any party (including any right of first refusal, right of first offer or right of first negotiation); (E ) evidencing Indebtedness of and to any of Target Group ; (F ) involving any partnership, joint venture or limited liability company agreement or concerning any equity or partnership interest in another Person; (G ) relating to the acquisition or disposition of any 6 business (whether by merger, sale of stock, sale of assets or otherwise) since January 1, 2014 ; (H ) which limits or purports to limit the ability of the Target Business to compete in any line of business or with any Person or in any geographic area or during any period of time; (I ) intentionally deleted ; (J ) which contains " most favored nation " or preferred pricing provisions; ( J) Lease s ; (K ) for which the execution of this Agreement and/or the consummation of the transaction contemplated hereby could reasonably be expected to (1) permit any other party to cancel or terminate the same (with or without notice of passage of time); (2) provide a basis for any other party to claim money damages (either individually or in the aggregate with all other such claims under that contract) from any of Target Group ; or (3) give rise to a right of acceleration of any material obligation or loss of any material benefit under such Materi al Contract, (L ) with a Private Program or Governmental Program with receipts in excess of $100,000 during calendar year 2014 or expected receipts in excess of $100,000 for calen dar year 2015 , or (M) providing any compensation or other benefits payable for referral of business to any of the Target Group. " Merger " has the meaning set forth in Recital A. " Merger Consideration " has the meaning set forth in Section 2.1(b). " Merger Sub " has the meaning set forth in the introductory paragraph. " Northwest Acquisition Earn Out " means the earn-out rights in connection with the Nursing Resources Corporation s tock p urchase a greement , dated March 5, 2015, whereby David Venzke , the seller of Nursing Resources Corporation, may be eligible to receive certain compensation based upon Black Stone of Northwest Ohio, LLC operations . " Ohio Law " has the meaning set forth in Section 2.1 (a). " PPACA " means Patient Protection and Affordable Care Act of 2010. " Parent Common Stock " means shares of Almost F amily, Inc. voting common stock. "Parent" has the meaning set forth in the introductory paragraph. " Patents " means all issued patents (including utility and design patents) and pending patent applications (including invention disclosures, records of invention, certificates of invention and applications for certificates of inventions and priority rights) filed with any Registration Office, including without limitation, all non-provisional and provisional patent applications, substitutions, continuations, continuations-in-part, divisions, renewals, revivals, reissues, re-examinations and extensions thereof. " Pension Plan " has the meaning set forth in Section 3.23(d). " Permitted Encumbrances " means (1) all statutory or other liens for taxes or assessments that are not yet due, (2) all workmen’s and repairmen’s liens and other similar liens imposed by L aw incurred in the ordinary course of business for sums not yet due, (3) other encumbrances to the extent fully reflected in the Target Financial Statements, and (4) other 7 encumbrances that do not materially detract from the value of, materially interfere with, or otherwise materially affect, the business operations involving the asset or property subject thereto or affected thereby. " Permits " has the meaning set forth in Section 3.10. " Person " means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated entity or Governmental Entity. " Personnel " has the meaning set forth in Section 3.14(b). " Pre-Closing Tax Period " has the meaning set forth in Section 9.1(a)(v). " Private Program " has the meaning set forth in Section 3.14(c). " Pro Rata Portion " means with respect to any Selling Party , an amount equal to the quotient obtained by divid ing (a) the number of Target Units held by such Selling Party as of the Effective Time by (b) the number of Target Units held by all Selling Parties as of the Effective Time. " RCRA " means the federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended. "Related Parties" and "Related Party" each ha ve the meaning s set forth in Section 10.12. " Representatives " means officers, directors, managers, partners, trustees, executors, employees, agents, attorneys, accountants and advisors. " Required Contract Consents " has the meaning set forth in Section 3.15(b). " Restricted Business " means a business engaged in providing home health services to patients, including services (i) that are paid for under Medicare, Medicaid, PASSPORT, or any other governmental program, private pay, any commercial insurance, or reimbursement, and (ii) that are in the fields of skilled home healthcare, unskilled assistive care, private duty, or nurse practitioner house calls or hospice services . " Retained Employee Liabilities " means (i) compensation and bonus amounts payable to current and former employees of the Target Group with respect to the pre-Closing period, (ii) any change in control, severance, stay bonus, transaction bonus, management fees, directors' fees, guaranty fees, or related or similar obligations related to or triggered by the Merger payable to a current or former employee or other service provider of the Target Group , (iii) Damages arising out of or relating to Target Employee Plans and relating to the period prior to the Closing Date, and (iv) any payroll, withholding or related costs and expenses associated with the items in (i) through (iii) above. " Returns " means Tax returns, estimates, information statements and reports required to 8 be filed with any taxing authority with respect to any Target Group Taxes . " Rule 144 " has the meaning set forth in Section 2.12(a). "SEC" means the Securities and Exchange Commission. "SEC Reports" has the meaning as set forth in Section 5.5(a). " Securities Act " means the Securities Act of 1933, as amended. " Selling Parties' Certificate " has the meaning set forth in Section 9.7(e). " Se lling Parties' Claims Period " has the meaning set forth in Section 9.7(e). " Sell ing Parties " has the meaning set forth in the introductory paragraph. " Selling Parties' Agent " has the meaning set forth in the introductory paragraph. " Selling Parties Noncompetition Agreements" has the meaning set forth in Section 6.6. " Stark Law " has the meaning set forth in Section 3.14(b). " Straddle Period " has the me aning set forth in Section 6.5(a ). " Sub Units " has the meaning set forth in Section 2.6(a). " Surviving Company " has the meaning set forth in Section 2.1 (a) . " Target " has the meaning set forth in the introductory paragraph. " Target Balance Sheet " has the meaning set forth in Section 3.7. " Target Balance Sheet Date " has the meaning set forth in Section 3.4 (a) . " Target Business " means the operation of the business of the Target Group as currently conducted, including without limitation, the operation of a Medicare and Medicaid -certified home health and assisted care provider business . " Target Charter Documents " has the meaning set forth in Section 3.1 (a) . " Target Disclosure Schedule " has the meaning set forth in Section 3 . " Target Employee Plans " has the meaning set forth in Section 3.23(a) . " Target's Equity Mirror Agreement " Target and Phyllis Atkinson. means the agreement dated October 1, 2012, between 9 " Target Financial Statements " has the meaning set forth in Section 3.4(a) . " Target Group " means Target and the Target Subsidiaries. " Target Group 's Current Facilities " has the meaning set forth in Section 3.21. " Target Group 's Facilities " has the meaning set forth in Section 3.21. " Target Group Intellectual Property " has the meaning set forth in Section 3.9(a). " Target Group Liabilities " has the meaning set forth in Section 2.1(e). "Target Indebtedness" means Indebtedness of any of the Target Group. " Target Indemnified Persons " has the meaning set forth in Section 10.9(a). " Target's Phantom Equity Agreements " means those two (2) agreements, both dated March 5, 2014, between Target and David Venzke and Target and Darren Horrigan, respectively. " Target Subsidiaries " means tho se business entities listed on Section 1 of the Target Disclosure Schedule. " Target Transaction Expenses " means Transaction Expenses . " Target Units " means Target's units of membership interest (as described in Target's operating agreement) . " Tax " and " Taxes " mean any and all federal, state and local taxes of any country, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, stamp, transfer, franchise, withholding, payroll, recapture, employment, escheat, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, whether disputed or not, and including any obligations to indemnify or succeed to such amounts with respect to any other Person (including any liability for Taxes of a predecessor entity ). " Third Party Claims " has the meaning as set forth in Section 9.6(a). " Third Party Payor " includes any entity charged with paying claims or reimbursing the Target Business for health care services provided to Governmental Programs or Private Program patients including but not limited to carriers and Private Program health insurance administrators or third party administrators. " Trade Secrets " means all proprietary, confidential and/or non-public information, however documented, including but not limited to all trade secrets within the meaning of a pplicable Law. 10 " Trademarks " means all material (common law or registered) (a) trademarks, service marks, logos, insignias, designs, trade dress, symbols, trade names and fictitious business names, emblems, signs, insignia, slogans, other similar designations of source or origin and general intangibles of like nature ( including all applications and registrations for each of the foregoing) , and (b) all goodwill associated with or symbolized by any of th e foregoing. " Transaction Expenses " means any fee, cost, expense, payment, expenditure, liability (contingent or otherwise) or obligation incurred by the Target Group relating to the Merger that: (a) relates directly or indirectly to (i) the proposed disposition of all or a portion of the Target Business, or the process of identifying, evaluating and negotiating with prospective purchasers of all or a portion of the Target Business, (ii) the investigation and review conducted by Acquiror and its Representatives, and any investigation or review conducted by other prospective purchasers of all of a portion of the Target Business, with respect to the Target Business (and the furnishing of information to Acquiror and its Representatives and such other prospective purchasers and their Representatives in connection with such investigation and review), (iii) the negotiation, preparation, review, execution, delivery or performance of the Agreement (including the Target Disclosure Schedule), or any certificate, opinion, agreement or other instrument or document delivered or to be delivered in connection with this Agreement or the transactions contemplated hereby, (iv) the preparation and submission of any filing or notice required to be made or given in connection with the Merger, and the obtaining of any consent required to be obtained in connection with any of such transactions, or (v) the consummation of the Merger or any of the transactions contemplated by this Agreement; or (b) arises, is triggered or becomes due or payable, in whole or in part, as result of the consummation (whether alone or in combination with any other event or circumstance) of the Merger or any of the other transactions contemplated by this Agreement, including in connection with any bonus, severance or change in control arrangement. " Transfer Agent " means Computershare, and any successor transfer agent employed by Parent. " Unconverted Convertible Debt " has the meaning set forth in Section 2.6(c). " WARN " has the meaning set forth in Section 3.23(l) . 2. The Merger . 2.1 The Merger; Merger Consideration . (a) At the Effective Time and subject to and upon the terms and conditions of this Agreement, the Certificate of Merger attached hereto as Attachment D (the " Certificate of Merger " ) and the appli cable provisions of the Ohio Limited Liability Company Act ( " Ohio Law " ), Merger Sub shall be merged with and into Target, the sep arate corporate existence of Merger Sub shall cease and Target shall continue as the Surviving Company (the " Surviving Company " ). (b) The aggregate consideration payable by Acquiror fo r Target in the 11 form of Parent Common Stock, Acquiror Notes and cash shall be $41 million ($41,000,000) , with the amount of merger consideration payable by Acq uiror to holders of Target Units i ncreased or decreased , pursuant to this Agreement, as follows (the " Merger Consideration " ): (i) decreased by the amount of Target Indebtedness; (ii) decreased by the Transaction Expenses; (iii) decreased by t he aggregat e Retained Employee Liabilities ; and (iv) decreased by the aggregate value of restricted Parent Common Stock actually granted to Key Employees at Closing, or expected to be granted within thirty (30) days of Closing, pursuant to the employment agreements, employment letters or other instruments executed by each Key Employee, with a maximum reduction in Merger Consideration of Nine Hundred Thousand Dollars ($900,000.00) . (c) The Merger Consideration shall be paid as follows: (i) Seven M illion Five Hundred Fifty Thousand Dollars ($ 7,550 ,000 .00 ) of the Merger Consideration shall be paid in the form of Parent Common Stock, to be divided among the Selling Parties as directed on the Closing Statement. For purposes of this Agreement, the value of Parent Common S tock shall be equal to the aver age closing price of Parent's publicly-traded common stock over the 20 trading days ending with Monday, November 2, 2015 ; provided , however , that pur suant to Section 2.12(c), the $7,550,000 of Merger Consideration otherwise payable in the form of Parent Common Stock shall be reduced by approximately $1 9 0,000, reflecting the agreement to pay non-accredited investors in cash rather shares of Parent Common Stock. (ii) $5 million ($5,000,000 .00 ) of the Merger Consideration shall be paid in the form of Acquiror Notes, bearing interest at an annual rate of five percent ( 5% ) payable quarterly with principal due and payable in a single balloon payment on the third anniversary of Closing Date, to be issued to the Selling Parties in the initial principal amounts directed on the Closing Statement; (iii) $3 million ($3,000,000 .00 ) of the Merger Consideration (the " Escrow Amount " ) shall be paid to the Escrow Agent by wire transfer of immediately available funds to an account designed by the Escrow Agent prior to the Closing Date; and (iv) the remaining balance of the Merger Consideration , increased or decreased pursuant to Section 2.1(b)(i) – (iv ) above , shall be paid in cash to the Selling Parties by wire transfer of immediately available funds , to be divided among the Selling Parties as di rected on the Closing Statement. (d) To the extent that after combining all shares of Parent Common 12 S tock to be received by a Selling Party in the Merger such Selling Party would be entitled to receive a fractional share of one-half or more of a share of Parent Common S tock, such Selling Party shall receive one additional whol e share, and if such Selling Party would be entitled to receive a fractional share of less than one-half of a share of Parent Common S tock such Selling Party shall not receive such fractional share. (e) Acquiror shall pay, or shall cause Target to pay and satisfy in connection with the consummation of the Closing : (i) the Target Indebtedness, (ii) the T arget Transaction Expenses, and (iii) the Retained Employee Liabilities (collectively, the " Target Group Liabilities " ). (f) In the event that less than Nine Hundred Thousand Dollars ($900,000.00) of restricted Parent Common Stock is granted to the Key Employees, at or within thirty (30) days of the Closing, as provided in 2.1(b)(iv) above, then Acquiror shall pay the Selling Parties, within forty five ( 45 ) days of Closing , on a pro-rata basis and as additional Merger Consideration ( in cash by wire transfer of immediately available funds) an amount equal to Nine Hundred Thousand Dollars ($900,000.00) minus the aggregate value ( as of the date such stock was actually issued) of all of the restricted Parent Common Stock actually granted to Key Employees at or within thirty (30) days of the Closing. 2.2 Closing; Effective Tim e . (a) The closing of the transactions contemplated hereby (the " Closing " ) shall take place on the date of this Agreement (the " Closing Date " ). The Closing shall be effected by electronic exchange of all documents required for the Closing. In connection with the Closing, the parties hereto shall cause the Merger to be consummated by filing the Certificate of Merger with the Ohio Secretary of State, in accordance with the relevant provisions of Ohio Law (the time of such filing being the " Effective Time " , which shall be deemed to have occurred at 12:01 a.m. on November 5, 2014 ). (b) At the Closing, the Selling Parties shall deliver to Acquiror and Merger Sub from Target’s Secretary a certificate having attached thereto (i) the Target Charter Documents, each as in effect immediately prior to the Effective Time, (ii) resolutions approved by Target’s Board of Managers authorizing the transactions contemplated hereby, (iii) the executed written consent of the members of Target (i.e., the Selling Parties ) approving the Merger, and (iv) for each member of the Target Group, certificates of existence issued by the Ohio Secretary of State and fo r each other state where such member of the Target Group is qualified to do business, in each case dated as of a date no more than two (2) Business D ays (fo r the certificate of existence). (c) At or prior to the Closing, the Selling Parties shall deliver to Acquiror a ll of the Required Contract Consents. (d) At the Closing, Target, the Selling Parties' Agent , Acquiror, Escrow Agent shall execute and deliver the Escrow Agreement. 13 and the (e) At the Closing, Target shall deliver to Acquiror a statement (in such form as may be reasonably requested by counsel to Acquiror) , dated as of the Closing Date and executed by Target’s Board of Managers, certifying that: (i) for purposes of satisfying Acquiror’s obligations under Treasury Regulation Section 1.1445-2(b)(2), Target is not a "foreign person" as defined in Section 1445 of the Code, and (ii) for purposes of satisfying Acquiror’s obligations under Treasury Regulation Section 1.1445-11T(d)(2), (A) 50% or more of the value of the gross assets of Target do not consist of "United States real property interests" under Section 897(c) of the Code, and (B) 90% or more of the value of the gross assets of Target does not consist of U.S. real property interest s plus cash or cash equivalents. (f) At the Closing , if requested by Acquiror, Target shall deliver to Acquiror written resignations , effective as of the Effective Time, of all officers , managers, members of the board of managers and directors of the Target Group. (g) A t or prior to Closing, (i) Target s hall have delivered to Acquiror all necessary payoff or similar letters with respect to the repayment and satisfaction, simultaneous with or prior to Closing, of th e Indebtedness , and (ii) Target Group's assets shall have been released , or be eligible for release, from all security interests thereon and Target shall have taken all steps necessary to terminate , or initiate the termination of, all UCC financing statements which have been filed with respect to such security interests. (h) At the Closing, the Selling Parties' Agent and Acquiror shall have agreed upon and executed the Closing Statement. The Selling Parties acknowledge that the allocation of Merger Consideration among the Selling Parties as set forth on the Closing Statement is a true and correct allocation of such Merger Consideration and that any post-Closing distributions or payments made pursuant to this Agreement or the Escrow Agreement by Acquiror to the Selling Parties' Agent shall satisfy the obligation of Acquiror or Escrow Agent to make such payment and the use or distribution of such proceeds shall be the sole responsibility of the Selling Parties' Agent. (i) At or prior to Closing, e ach of the Key Employees and Selling Parties shall have entered into a Key Employee Noncompetition Agreement or a Selling Parties Noncompetition Agreement, as applicable . (j) At or prior to Closing, e ach Selling Party s hall have delivered to Acquiror a general release by Selling Party of each member of the Target Group, excluding rights with respect to director's and officer's indemnification to the extent contemplated in this Agreement and rights under this Agreement. (k) Intentionally deleted . (l) Intentionally deleted . (m) At the Closing , the Exchange Agent will cause the Merger Consideration to be duly paid to such Selling Party as provided herein . 14 (n) At the Closing , Acquiror shall cause the Escrow A mount to be deposited with the Escrow Agent and shall complete the payments contemplated in the Closing Statement ( including, without limitation, with respect to any payment of Transaction Expenses, upon receipt of reasonably satisfactory evidence that each such Transaction Expense is the entire amount owed to such service provider , and with respect to any Retained Employee Liability, upon receipt from an applicable current or former employee of the Target Group of customary releases and acknowledgements of payment) . (o) At or prior to the Closing, Target shall deliver to Acquiror a full release by all holders of rights under Target's Equity Mirror Agreements , Target's Phantom Equity Agreements , and by parties to any o ther similar agreements , and participants in any compensation or equity plans , pursuant to which any of the Target Group grant s any rights with respect to equity or rights in equity, options, warrants, incentive compensation, phantom equity plans, equity appreciation rights, severance arrangements or other similar equity or bonus arrangements . (p) At or prior to the Closing, Target shall deliver to Acquiror evidence satisfactory to Acquiror that all convertible notes issued by any of the Target Group have been duly converted or are paid and satisfied in full as Target Indebtedness. (q) At or prior to the Closing, Target shall deliver to Acquiror evidence satisfactory to Acquiror that all warrants issued for the purchase of Target Units have been cancelled and that the holders of such warrants have released Target. (r) At or prior to Closing, Target shall deliver to Acquiror evidence satisfactory to Acquiror that the following agreements have been cancelled and that the parties to such agreements (other than the Target Group) have released the Target Group : (i) intentionally deleted , (ii) the Agreement dated January 1, 2011 with Episcopal Retirement Homes, Inc., (iii) the Agreement dated as of December 1, 2011 with ERH Development, LLC, (iv) the Right of First Refusal and Put Option Agreement dated August 1, 2014 among Black Stone Companies of Ohio, Inc. , Black Stone Operations, LLC, LEC Community Services, Inc. and ERH Development, LLC, and (v) the Agreement dated March 1, 2012 with LEC Community Services, Inc . (s) At the Closing, Acquiror shall deliver to Selling Parties ' Agent an executed guaranty whereby Acquiror shall assume, in place of Black Stone Companies of Ohio, Inc., the guaranty of obligations to CM Capital Partners, LLC with regard to the lease of the primary office of Target located at 4700 East Galbraith Road, Sycamore Township, Hamilton County, Ohio . (t) At the Closing, the Acquiror and Merger Sub shall deliver to Target, from Acquiror and Merger Sub’s applicable officer , a n executed certificate having attached thereto (i) resolutions approved by both Acquiror’s and Merger Sub’s Board of Directors and/or Board of Managers, as applicable, authorizing the transactions contemplated hereby , and (ii) for both Acquiror and Merger Sub, certificates of existence issued by the Ohio , or Kentucky, as applicable, Secretary of State where such entity was formed , in each case dated 15 as of a date no more than two (2) Business D ays (fo r the certificate of existence) prior to the Closing . 2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of Ohio Law . Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Target and Merger Sub shall vest in the Surviving Company , and all debts, liabilities and duties of Target and Merger Sub shall become the debts, liabilities and duties of the Surviving Company . 2.4 Articles of Organization; Operating Agreement . At the Effective Time, the Articles of Organization and Operating Agreement of the Surviving Company shall be the articles of organization and operating agreement of Target in effect immediately prior to the Effective Time, in each case until thereafter amended in accordance with their respective terms and Ohio Law . 2.5 Managers; D irectors and Officers . The manager(s), dire ctors and officers of Target immediately prior to the Effective Time shall, from and after the Effective Time, be the managers, directors and officers, respectively, of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Articles of Organization and Operating Agreement of the Surviving Company . 2.6 Effect on Equity . (a) Conversion of Merger Sub Units . At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, Target or the Selling Parties , each u nit of Merger Sub (the " Sub Units " ) issued and outstanding immediately prior to the Effective Time shall be converted into one unit of the Surviving Company (the " Converted Units " ). The Converted Units shall constitute the only membership interests of the Surviving Company at the Effective Time. From a nd after the Effective Time, any certificates representing Sub Units shall be deemed for all purposes t o represent the Converted Units until the Board of Direct ors of the Surviving Company issues new certificates in respect of such Converted Units . (b) Conversion of Target Units . Each Target Unit issued and outstanding at the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the share of Merger Consideration set forth on the Closing Statement , subject to the requirement that a portion of the Merger C onsideration be escrowed pursuant to Section 2.8. From a nd after the Effective Time, no Target Units shall be outstanding and all Target Units automatically shall be cancelled and retired and shall cease to exist, and each holder shall cease to have any rights w ith respect thereto, except the right to receive for each Target Unit the share of Merger Consideration set forth on the Closing Statement , without interest thereon . (c) Target Convertible Debt . Except for Target’s convertible debt listed on Section 3.5(a) of the Target Disclosure Schedule (the " Unconverted Convertible Debt " ), all of Target's convertible debt has been converted into Target Units and Target has no further liability or obligation with respect to Target's prior issued and outstanding convertible 16 debt. All of the Unconverted Convertible Debt shall be paid and satisfied at the Effective Time and the amounts payable with respect to such outstanding convertible debt shall be included in Indebtedness . 2.7 Surrender of Target Units . (a) Exchange Agent . The Surviving Company shall act as payment and exchange agent in the Merger (the " Exchange Agent " ). (b) Closing Statement . Prior to the Closing, Target shall deliver to Acquiro r a definitive Closing Statement (a flow of funds schedule) included in the Closing Statement (the " Closing Statement " ) certified by the Selling Parties' Agent and accurately setting forth: (i) the name of each holder of Target Units immediately prior to the Effective Time, (ii) the number of Target Units held by such holder immediately prior to the Effective Time, (iii) the share of the Merger Consideration which each holder of Target Units is eligible to receive (taking into account the portion of the Merger Consideration to be paid to the Escrow Agent) , and payment instru ctions for each holder, (iv) the calculation of Merger Consideration , (v) the amount of Target’s Indebtedness and the amount of Target Transaction Expenses, in each case as of the Closing Date, including a breakdown by individual or entity of amounts owed by each member of the Target Group , (vi ) a breakdown of the Retained Employees Liabilities, and with respect to any bonus or severance to be paid in connection with the transactions contemplated hereby, the name of the bonus or severance recipient, the amount of bonus or severance and the method of payment (e.g. payroll) ; (vi i) a breakdown of the Target Transaction Expenses, including the name and amount due with respect to each of the Target Transaction E xpenses and the method of payment (e.g., wire instructions) , and (vii ) setting forth the dollar value (and estimated number ) of shares of Parent Company Stock to be issued to shareholders of Black Stone Companies of Ohio, Inc . The parties shall in good faith attem pt to promptly resolve any dispute or questions regarding the Closing Statement . (c) Exchange Procedures . Commencing on the Closing Date , e ach holder of Target Units that have been convert ed into the right to receive Merger Consideration s hall be entitled to receive such holder's share of the Merger Consideration set forth in the Closing Statement (subject to the escrow of a portion of the consideration pursuant to Section 2.8) in respect of such Target Unit . (d) Transfers of Ownership . At the Effective Time, the equity transfer books of Target shall be closed, and there shall be no further registration of transfers of Target membership interests or options thereafter on the records of Target. (e) No Liability . Notwithstanding anything to the contrary in this Section 2.7 , neither the Exchange Agent nor any party hereto shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar L aw. (f) No Further Ownership Rights in Target Units . The Merger Consideration paid with respect to Target Units in accordance with the terms hereof shall be 17 deemed to have been issued in full satisfaction of all rights pertaining to such Target Units , and there shall be no further registration of transfers on the records of th e Surviving Company of Target Units which were outstanding immediately prior to the Effective Time . (g) Transaction Expenses and Other Professional Expenses . With respect to each professional firm or other vendor or service provider included among the Transaction Expenses , Selling Parties shall cause such professional or other vendor to deliver a letter to Target at or prior to Closing, confirming the outstanding balance of fees and expenses due to such professional or vendor for services through the Closing Date. 2.8 Escrow . (a ) On the Closing Date, Acquiror shall deposit the Escrow Amount with the Escrow Agent. The Escrow Amount shall be available to satisfy the indemnification obligations of the Selling Parties to the Acquiror Indemnified Persons as follows: (i) under Section 9.1(a)(vii ) with respect to the Identified Tax Issues, in an amount up to $2,000,000; (ii) under Section 9.1(a)(viii ) Earn-out, in an amount up to $625,000; with respect to the Northwes t Acquisition (iii) under Section 9.1(a)( i x) with respect to the Home Health Aid Timesheet Dispute, in an amount up to $225,000; and (iv) under Section 9.1(a)(x ) with respect to the Cavins Litigation, in an amount up to $250,000. (b) The Escrow Amount shall be held by Escrow Agent in trust and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any Person, and shall be held and disbursed solely for the purposes and in accordance with the terms of this Agreement and the Escrow Agreement. (c) The amounts identified in Sections 2.8(a)(i) through (iv) as being held in escrow with respect to the Identified Tax Issues, the Northwest Acquisition Earn-out, the Home Health Aid Timesheet Dispute and the Cavins Litigation shall either be disbursed to Acquiror , subject to the provisions of Section 9 and pursuant to valid indemnification claims under Sections 9.1(a)(vii) through (x) or disbursed to Selling Parties' Agent (for further disbursement by the Selling Parties' Agent to the Selling Parties) promptly following resolution of the respective matters described in Section 2.8(a)(i) through (iv) . For purposes of determining whether such indemnification matters have been resolved, the Parties agree as follows: (i) for the Identified Tax Issues, the Parties agree that resolution shall occur in stages based upon the processing and acceptance of the private letter requests filed, or to be filed, by Target and the acceptance of such requests by the IRS such that (a) for the Blackstone Group, LLC QSUB election matter, up to $800,000 shall be eligible for release upon acceptance by the IRS of the requests applicable to such matter, and (b) for the Nursing Resources Corporation 336(e) election 18 matter, up to $1,200,000 shall be eligible for release upon acceptance by the IRS of the requests applicable to such matter ; (ii) for the Northwest Acquisition Earn-out, the Parties agree that resolution shall occur when the 2015 financial reporting period for the applicable operating results is completed and the earn-out payment, if any is calculated, which is expected to be completed by March 2016 ; (iii) for the Home Health Aid Timesheet Dispute, the Parties anticipate that resolution shall occur when such investigation and any related criminal civil or investigations are complete d ; and (iv) for the Cavins Litigation, the Parties agree that resolution shall occur when the applicable appeals process is completed and no further appeals are filed and/or eligible to be filed , which is expected in approximately three (3) to nine (9) months from the Effective Time. (d) Selling Parties shall be treated , and authorize the Escrow Agent to treat, the Selling parties as the owner s of the Escrow Fund for income tax purposes and the Escrow Agent is authorized to report the amount of any and all e arnings on IRS Form 1099 to Selling Parties in accordance with their respective Pro Rata Portion, and to issue any other Form 1099s to Selling Parties' Agent with respect to such e arnings. (e) The fees and expenses of the Escrow Agent shall be paid in equal shares by Acquiror and the Selling Parties. The Selling Parties' 50% share of the Escrow Agent's $3,500 acceptance fee, as provided in the Escrow Agreement , shall be included on the Closing Statement as a payment out of the cash portion of the Merger Consideration payable to the Selling Parties. 2.9 Taking of Necessary Action; Further Action . Each of Acquiror, Merger Sub and Target will take all such reasonable and lawful action as may be necessary or desirable in order to effectuate the Merger and the other transactions contemplated by this Agreement in accordance with the terms hereof as promptly as possible. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Company with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Target and Merger Sub, the officers and directors of Target and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreeme nt. 2.10 Payment of Target Liabilities . To the extent not paid prior to Closing, Acquiror shall pay or cause Target to pay, at the Closing, the Target Transaction Expenses , Target Indebtedness and R etained Employee Liabilities in the amounts set forth on the Closing Statement and in accordance with the payment instructions included by the Selling Parties' Agent on the Closing Statement. 2.11 Withholding Rights . Each of Acquiror, the Surviving Company , and the Escrow Agent shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any consideration payable or otherwise deliverable pursuant to this Agreement or the Escrow Agreement to any Selling Party such amounts as are required to be deducted and withheld with respect to any such payments under the Code or any other applicable provision of U.S. federal, state, local or non-U.S. Tax L aw. To the extent that amounts are withheld in 19 a ccordance with this Section 2.11 and remitted to the applicable taxing authorities, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to such holders in respect of which such deduction and withholding was made. 2.12 Parent Common Stock . (a) All Parent Common S tock issued pursuant to this Agreement shall be unregistered shares and shall be "restricted securities" under Rule 144 promulgated under the Securities Act ( " Rule 144 " ) and Target and the Selling Parties acknowledge that the sale of the Parent Common S tock shall be subject to Rule 144 transfer restrictions . (b) In addition to the Rule 144 requirements, which Target and Selling Parties acknowledge apply to all Parent Common S tock separately and independently from any contractual restrictions on transfer , Target and Selling Parties agree to the following additional transfer restrictions on Parent Common S tock . At the Closing, each Selling Party receiving Parent Common S tock shall be required to acknowledge and agree that it may not transfer its Parent Common S tock (by assignment or distribution upon liquidation or otherwis e) during the period of six (6) months after issuance; provided, however, that the restriction period applicable to David Tramo ntana will be more than six (6) months and will be agreed-upon in connection with the negotiation of his employment terms. Certificates representing Parent Common S tock shall include a legend evidencing the restrictions on transfer set forth in this Section 2.12 , or if shares of Parent Common S tock are issued in electronic format, such shares shall be issued by the Transfer Agent subject to the notation of such ap plicable transfer restrictions. Parent shall direct its Transfer Agent to remove the legend referencing restrictions set forth in this paragraph from all such shares of Parent Common Stock upon the expiration of the six (6) month period , other than with respect to David Tramontana for whom such restrictive legend shall be removed at the expiration of three years. (c) The parties agree that Parent Common Stock may be issued directly to the shareholders of Black Stone Companies of Ohio, Inc., provided such shareholders complete a questionnaire confirming that they are accredited investors and are holding Parent Common Stock for investment purposes and not for resale and other customary matters. The parties acknowledge that no shares of Parent Common Stock will be issu ed to non-accredited investors. The portion of the Merger Consideration that would under the terms of this Agreement otherwise be payable in shares of Parent Common St ock to a non-accredited Selling Party (or shareholder of Black Stone Companies of Ohio, Inc.) shall instead be paid in cash . Selling Parties represent that the dollar amount of Parent Common Stock that shall instead be payable in cash is approximately $1 9 0,000 of the $7,550,000 otherwise payable in the form of Parent Common Stock pursuant to Section 2.1(c). 2.13 Intentionally Deleted . 2.14 Target Group 401(k) Plans . Prior to Closing, the Board of Directors of each applicable Target Group will adopt resolutions to terminate each of the Target Group's 401(k) plans as of a date prior to Closing. No contributions will be made to any Target Group 401(k) plans from wages ear ned from and after the Closing Date. Selling Parties will take all 20 actions necessary to correct all Target Group 401(k) plan errors for all years, including plan document errors, administrative errors, and any other errors known to Selling Parties or the Target Group , which actions will be taken in a manner consistent with the IRS’s Employee Plans Compliance Resolution System, which may include an IRS filing and payment of penalties. Selling Parties will work with Target Group's and Selling Parties' Agent's counsel on these corrections to ensure they are mad e in a proper manner, and Selling Parties and Selling Parties' Agent will ensure that the errors are corrected as promptly as possible, and that all plan accounts are then distributed to participants as promptly as possible. Selling Parties acknowledges that IRS rules require that assets be distributed without delay following a plan termination, so time is of the essence. Selling Parties' Agent will provide complete documentation to Acquiror of the correction of all plan errors. Selling Parties' Agent will arrange for final nondiscrimination testing (if required by Law) , filing Form 5500 annual reports, and distribution of Summary Annual Reports to participants, and will provide complete records of such actions to Acquiror . 2.15 "Black Stone" Name . Each of the Selling Parties acknowledges that by acquiring the Target Group, Acquiror has acquired the sole right to use the "Black Stone" name in connection wit h the operation of the Target Business, and that none of the Selling Parties shall use the "Black Stone" name in connection with the operation of any health care business in the State of Ohio or that otherwise competes with the Target Group's Target Business. 3. Representations and Warranties of Target . Target represents and warrants to Acquiror and Merger Sub that the statements contained in this Section 3 are true and correct in all material respects, except as disclosed in a document of even date herewith and delivered by Target to Acquiror on the date hereof referring to the representations and warranties in this Agreement (the " Target Disclosure Schedule " ). The Target Disclosure Schedule will be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Section 3 . 3.1 Organization, Standing and Power; Subsidiaries . (a) Target is a limited liability company duly organized and validly existing under the laws of the State of Ohio . Target has the requisite power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing could reasonably be expected to have a Material Adverse Effect on Target . None of the Target Group is qualified to do business as a foreign entity in any jurisdiction outside of Ohio. Target has delivered to Acquiror a true and correct copy of Target’s articles of organization and operating agreement and other organizational documents, as appli cable, of Target, each as amended to date (collectively, the " Target Charter Documents " ). Target is not in violation of any of the provisions of the Target Charter Documents. (b) Each of the Target Subsidiaries is a corporation or limited liability company, duly organized and validly existing under the laws of the State of Ohio. Each of the Target Subsidiaries has the requisite power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction where qualification to do busines s is required by applicable L aw . Target has 21 delivered to Acquiror a true and correct copy of the organizational documents of each of the Target Subsidiaries, as amended to date (collectively, the " Target Subsidiaries Charter Documents " ). None of the Target Subsidiaries is in violation of any of the provisions of the applicable Target Subsidiaries Charter Documents. (c) Ex cept as set forth on Section 3.1 of the Target Disclosure Schedule, none of the Target Group directly or indirectly owns any equity or similar interest in, or any int erest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity , which is not also part of the Target Group. 3.2 Authority . (a) Each of the Selling Parties and Target has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, have been duly authorized by all necessary action on the part of Target and each Selling Party . Under Ohio Law and the Target Charter Documents, the affirmative vote of the Board of Managers is the only approval necessary to approve and adopt this Agreement and the transactions contemplated hereby, including the Merger. This Agreement has been duly executed and delivered by Target and the Selling Parties and constitutes the valid and binding obligation of Target and the Selling Parties enforceable against Target and the Selling Parties in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar L aws affecting creditors’ rights generally and by general principles of equity . (b) The execution and delivery of this Agreement by Target does not, and the consummation of the transactions contemplated hereby will not result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any material obligation or loss of any material benefit under (i) any provision of the Targ et Charter Documents or Target Subsidiaries Charter Documents; or (ii) any Material Contract . (c) In connection with obtaining the Selling Parties' consent to the Merger and providing such Selling Parties and holders of Target's convertible notes w ith information regarding the Target Group and the Merger, other pre-Closing communications and notifications to the Selling Parties relating to matters contemplated by this Agreement, Target has complied with the terms of the Target Charter Documents, all applicable member agreements, and all a pplicable Law; provided, however, Target makes no representation or warrant y regarding (x) any information regarding Acquiror or Parent Common S tock or (y) Acquiror's compliance with any a pplicable Laws including without limitation all applicable federal and state securities L aws. Target has provided to the Selling Parties and its holders of convertible debt, all material information regarding Target, its financial information, properties and business and regarding the terms of the Merger and other transactions contemplated by this Agreement necessary for the making of all decisions relating the Merger and the other transactions contemplated by or referred to in this Agreement. 22 3.3 Governmental Authorization . Except as set forth on Section 3.3 of the Target Disclosure Schedule, no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other Governmental A uthority is required by or with respect to Target in connection with the execution and delivery of this Agreement or the Closing of the transactions contemplated hereby, except for the filing of the Certificate of Merger, as provided in Section 2.2 of this Agreement. Each member of the Target Group has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization of a Governmental Entity that is required by applicable L aw for the operation of the Target Business or the holding of any interest in any of its properties and all of such authorizations are in full force and effect . 3.4 Financial Statements . (a) Target has delivered to Acquiror its audited consolidated financial statements for the fiscal years ended December 31, 2014, 2013 and 2012, and its unaudited financial statements (balance sheet, statement of operations and statement of cash flows) on a consolidated basis for the 8 -month period ended August 31 , 2015 (the " Target Balance Sheet Date , " and such financial statements, collectively, the " Target Financial Statements " ). The Target Financial Statements have been prepared in accordance with Agreed Accounting Principles (except that the unaudited financial statements do not contain footnotes and are subject to normal recurring year-end audit adjustments, the effect of which will not, individually or in the aggregate, be materially adverse) applied on a consistent basis throughout the periods presented and consistent with each other. The Target Financial Statements fairly present in all material respects the consolidated financial condition, operating results and cash flow of Target Group as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments and the absence of footnotes in the case of the unaudited Target Financial Statement s. (b) Target maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformance with Agreed Accounting Principles and to maintain accountability for assets; and (iii) access to the ass ets of the Target Group is permitted only in accordance with management’s authorizati on. No member of the Target Group is a party to or otherwise involved in any " off-balance sheet arrangements " (as defined in Item 303 of Regulation S-K under the Securities Exchange Act of 1934, as amended ) . (c) The Closing Statement sets forth a true and correct schedule , in all material respects, of all Target Indebtedness, Transaction Expenses, and Retained Employee Liabilities and a true and correct allocation of the Merger Consideration among the Selling Parties based on the applicable Target Group organizational documents and applicable Law. The financial infor mation provided on Attachment I was prepared in accordance with the Agreed Ac counting Principles. 3.5 Capital Structure . The equity of Target consists of (i) ei ght thousand three hundred ninety (8,390) issued and outstanding Target U nits . Following the Closing, Target shall 23 ha ve no warrants or options outstanding. Except as set forth on Section 3.5(a) of the Target Disclosure Schedule, all of Target's convertible debt has been converted into Target Units and Target has no further liability or obligation with respect to Target's prior issued and outstanding convertible debt. Target has the right under applicable loan agreements to redeem all outstanding convertible debt that has not converted into Target Units in connection with the closing of transactions contemplated by this Agreement, and upon payment and satisfaction in full of amounts due pursuant to such convertible debt, Target will have no further obligations with respect to such convertible debt. All outstanding Target Units are duly authorized, validly issued, fully paid and non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or impose d upon the holders thereof, and , except as provided in the Target Charter Documents, are not subject to preemptive rights, right of participation, rights of first refusal, or similar rights, whether created by statute or any agreement to which Target is a party or by which it is bound. N o equity based compensation plan or agreement is currently in effect, and there are no Target Units reserved for issuance under any other equity based c ompensation plan or agreement. Target has delivered to Acquiror true and complete copies of each instrument and agreement evidencing convertible debt. E xcept for the rights disclosed in the preceding sentences, there are no other options, warrants, restricted equity awards, phantom equity awards, calls, rights, commitments or agreements of any character to which Target is a party or by which it is bound, obligating Target to issue, deliver, sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased or redeemed, any Target Units or other equity or obligating Target to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. Other than the Target Charter Documents, t here are no contracts, commitments or agreements relating to the voting or registration of, or restricting any holder from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), a ny Target Units or other Target equity. All Target Units were issued in all material respects in compliance with all applicable federal and state securities L aws. (a) The Selling Parties collectively hold all of the issued and outstanding equity interests of Target. Each Sell ing Party has good title to such Selling Party's Target Units, free and clear of any Encumbrances. With respect to each Selling Party , Section 3.5( a ) of the Target Disclosure Schedule sets forth the number of Target Units that each Selling Party holds of record, and the address and state of residence of such Selling Party . Target or a Target Subsidiary (as provided on Section 1 of the Target Disclosure Schedule) ha ve good title to 100% of the issued and outstanding equity of each Target Subsidiary, free and clear of any Encumbrances. (b) All of the information contained in the Closing Statement will be , in all material respects, accurate and complete immediately prior to the Effective Time, and, except as set forth on the Closing Statement , no other holder of Target Units , Target equity or options, warrants or other rights convertible into or exercisable for Target Units or other equity shall have any right, title or claim to any consideration payable in connection with the merger described in this Agreement. The allocation of the Merger Consideration as set forth in the Closing Statement complies and is in accordance with the Target Charter Documents and Ohio L aw . 24 (c) Section 3.5(d) of the Target Disclosure Schedule sets forth a true and correct schedule of the issued and outstanding equity of each of the Target Subsidiaries . No Target Subsidiary has any warrants, options or convertible debt outstanding. All outstanding equ ity interest of the Target Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights, right of participation, rights of first refusal, or similar rights, whether created by statute or any agreement to which the applicable Target Subsidiary is a party or by which it is bound. No equity based compensation plan or agreement is currently in effect with re spect to any of the Target Subsidiaries , and there are no equity interests reserved for issuance under any other equity based compensation plan or agreement. T here are no other options, warrants, restricted equity awards, phantom equity awards, calls, rights, commitments or agreements of any character to which any of the Target Subsidiary is a party or by which it is bound, obligating any of the Target Subsidiaries to issue, deliver, sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased or rede emed, any equity or obligating such Target Subsidiary to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no contracts, commitments or agreements relating to the voting or registration of, or restricting any holder from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any equity of a Target Subsidiary . All equity interests of the Target Subsidiaries were issued in all material respects in compliance with all applicable federal and state securities L aws. 3.6 Absence of Certain Changes . (a) Except as contemplated hereunder or as set f orth on Section 3.6(a) of the Target Disclosure Schedule , since August 31, 2015 , each member of the Target Group has conducted its business in the ordinary course consistent with past practi ce and there has not occurred (i ) any change, event or condition (whether or not covered by insurance) that has resulted in, or is reasonably expected to result in, a Material Adverse Effect on the Target Group ; (ii ) any acquisition, sale or transfer of any material asset of any of the Target Group other than in the ordinary course of business and c onsistent with past practice; (iii ) any change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by any of the Target Group or any revaluation by any of the Target Group of any of its assets; (iv ) any declaration, setting aside, or payment of a dividend or other distribution with respect to the equity of Target or any direct or indirect redemption, purchase or other acquisition by Target of an y of its equity; ( v ) any Material Contract entered into by any of the Target Group , other than as set forth on Section 3.16(a) of the Target Disclosure Schedule, or any material amendment to (other than in the ordinary course of business ) or termination of, or default under, any Material Contract; (vi ) any amendment or change to the Target Charter Documents; (vii ) any material increase in or material modification of the compensation or benefits payable or to become payable by any of the Target Group to any of its officers or employees; or (viii ) any negotiation or agreement by any of the Target Group to do any of the things descr ibed in the preceding clauses (i) through (vii ) (other than negotiations with Acquiror and its Representatives regarding the transactions contemplated by this Agreement). At the Effective Time, there will be no accrued or unpaid dividends or distributions with respect to any Target Units . 25 (b) Except as set forth on Section 3.6(b) of the Target Disclosure Schedule, since August 31 , 2015, there has not occurred any change in the financial condition, properties, assets (including intangible assets), liabilities, business, operations, results of operations o r prospects of any of the Target Group , that, individually or in the aggregate, would reasonably be expected to have a Material A dverse Effect on the Target Group . 3.7 Absence of Undisclosed Liabilities . None of the Target Group has any material liability that is of a type required to be disclosed as a liability on a balance sheet prepared in accordance with Agreed Accounting Principles , other than (a) those set forth or adequately provided for in the consolidated balance sheet of Target as of the Target Balance Sheet Date (the " Target Balance Sheet " ); (b) those incurred in the ordinary course of business since the Target Balance Sheet Date and consistent with past practice; (c) those incurred in connection with the execution of this Agreement; and (d) those set forth in Section 3.7 of the Target Disclosure Schedule . 3.8 Litigation . (a) Except as set forth on Section 3.8(a) of the Target Disclosure Schedule, t here is no private or governmental action, suit, proceeding, claim, arbitration or , to the Knowledge of Target, investigation , pending before any Governmental Entity, foreign or domestic, or, arbitrator, or, to the Knowledge of Target, threatened against any member of the Target Group , or any of their properties or any of its officers or directors (in their capacities as such). There is no judgment, injunction, decree or order against any member of the Target Group or, to Target’s Knowledge, any of their directors or officers (in their capacities as such). (b) To Target's Knowledge, no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger is in effect, nor is there pending any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing, nor has there been any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Merger, which makes the consummation of the Merger illegal. (c) Except as set forth on Section 3.8(c) of the Target Disclosure Schedule, t here is not pending or, to Target's Knowledge, threatened, any legal proceeding in which a Governmental Entity is or is threatened to become a party or is otherwise involved, and no member of the Target Group has received any communication from any Governmental Entity in which such Governmental Entity indicates the probability of commencing any legal proceeding or taking any other action: (i) challenging or seeking to restrain or prohibit the consummation of the Merger; (ii) relating to the Merger and seeking to obtain from Acquiror or any of its subsidiaries, or from any member of the Target Group , any damages or other relief; (iii) seeking to prohibit or limit in any material respect Acquiror’s ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the equity of Target; or (iv) that would adversely affect the right of Acquiror or the Target Group to own the assets or operate the Target Business. 26 3.9 Intellectual Property . (a) Section 3.9 (a) of the Target Disclosure Schedule sets forth a true and complete list, as of the date hereof, of all Intellectual Property Rights owned by the Targe t Group that is subject to an application or registration, including all pending applications and registrations therefor ( " Target Group I ntellectual Property " ). (b) Except as set forth on Section 3.9 (b) of the Target Disclosure Schedule or as would not, individually or in the aggregate, have a Material Adverse Effect, to the Knowledge of the Target , as of the date hereof, (i) the Target Group Intellectual Property is valid and enforceable, and the registrations therefor are subsisting , and (ii) Target Group owns the Target Group Intellectual Property free and clear of all Encumbrances other than licenses, agreements and other arrangements entered into in the ordinary course of business. (c) Except as set forth on Section 3.9( c ) of the Target Disclosure Schedule, t o the Knowledge of Target , the operation of the Target Business as it is currently conducted does not infringe on the intellectual property of any other Person . Since December 31, 2012, no member of the Target Group has received a written claim or demand of any Person which cha llenges the validity of Target Group's ownership of any Target Group Intellectual Property or asserts any such infringement, nor are there any Proceedings pending or threatened in writing. (d) To the Knowledge of the Target, (i) none of the products or services distributed, sold or offered by any member of the Target Group , nor any technology or materials used in connection therewith infringes upon, misappropriates or violates any Target Group Intellectual Property of any Person , and (ii) no Person is infringing, misappropriating or violating the Target Group Intellectual Property . 3.10 Permits . Each member of the Target Group holds, to the extent legally required to operate its business as it is being operated as of the date hereof, all permits, licenses, clearances, authorizations and approvals from the applicable Governmental Authority (collectively, " Permits " ) . No suspension or cancellation of a ny Permits of any of the Target Group is pending or, to the Knowledge of the Target, threatened. Each member of the Targ et Group is currently , and to the Knowledge of Target has been, in compliance in all material respects with the terms of all of its Permits. 3.11 Privacy; Security Measures . (a) Privacy . Except as set forth on Section 3.11(a) of the Target Disclosure Schedule, e ach member of the Target Group complied in all material respects with all a pplicable Law, contractual obligations and its privacy policies relating to the collection, storage, use, disclosure and transfer of any personally identifiable information collected by or on behalf of it, and has taken all measures required by a pplicable Law to protect and maintain the confidential nature of such personally identifiable information. The Target’s execution, delivery and performance of this Agreement and any ancillary agreement contemplated hereby will comply with all a pplicable Law relating to privacy . No member of the Target Group has 27 received a written information. notice of a complaint regarding its collection, use or disclosure of personally identifiable (b) Security Measures . Each member of the Target Group has implemented and maintained, consistent with industry standard practices and its contractual and other obligations to other Persons, all reasonable security and other reasonable measures necessary to protect all computers, networks, software and systems used in connection with the operation of the Target Business (the " Information Systems " ) from v iruses and unauthorized access, use, modification, disclosure or other misuse. Target has provided to Acquiror all of its disaster recovery and security plans, and procedures relating to Target’s Information Systems. To the Knowledge of Target, there have been no unauthorized intrusions or breaches of the security of the Target Group's Information S ystems. 3.12 Interested Party Transactions . Except as set forth i n Section 3.12 of the Target Disclosure Schedule, no member of the Target Group is indebted to any of its directors, officers, employees , members, managers or agents (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses). Exc ept as set forth in Section 3.12 of the Target Disclosure Schedule, or in the ordinary course of the Target Group’s business operations, no su ch director, officer, employee, member, manager or agent , described above, is indebted to any of Target Group . Except as set forth on Section 3.12 of the Target Disclosure Schedule , none of the Selling Parties or their respective Affiliates , nor any current di rector or officer of the Target Group, (a) has or during the last fiscal year has had any direct or indirect interest in, or is or during the last fiscal year was a directo r, officer or employee of, any p erson that is a client, customer, supplier, lessor, lessee, debtor, credi tor or competitor of any of the Target Group , or (b ) is the owner of in any material property, asset or right that is owned or used by the Target Group in th e conduct of its business, or (c ) is, or during the last fiscal year has been, a party to any material agreement or t ransaction with any of the Target Group . 3.13 Charter Document s . Target has made available to Acquiror true and correct copies of all Target Charter Documents and Target Subsidiaries Charter Documents, each as amended, and if available, true and correct copies of all written minutes or written actions of meeting by members, shareholders, offices or managers. 3.14 Compliance with Law; Health C are Matters . (a) No member of the Target Group has been or to Target’s K nowledge is currently in material violation of any a pplicable Law, and each member of the Target Group has conducted and is conducting its businesses in all material respects in accordance with a pplicable Law , and any and all Governmental Orders applicable to such member of the Target Group . Except as set forth on Section 3.14(a) of the Target Disclosure Schedule, or otherwise occurring in the normal course of business, n o investigation or audit by any Governmental Authority with respect to any member of the Target Group is pending or, to the Knowledge of Target, is threatened, nor, to the Knowledge of Target, has any Governmental Authority indicated an intention to conduct any such investigation or audit. (b) Except as set forth on Section 3.14(b) of the Target Disclosure 28 Schedule, e ach member of the Target Group and to Target's Knowledge, all of the officers, managers, directors and employees of any of Target Group , including without limitation all of its employees, contractors, nurses and physicians (collectively, the " Personnel " ), while employed by any of the Target Group , has complied in all material respects with a ll a pplicable Laws to which they are subject which deal in any way with any health care regulatory matters, including, but not limited to, 42 U.S.C. Sections 1320a-7 and 7(a) imposing sanctions and civil monetary penalties respectively (commonly referred to as the " Civil Monetary Penalties Law " ), 1320a-7b(b) (commonly referred to as the " Federal Anti-Kickback Statute " ) imposing criminal penalties for the knowing and willful solicitation, receipt, offer or payment, of any remuneration in return for referring an individual for any item or service for which payment may be made under any Governmental Program or under any other health benefits program using federal funds; 42 U.S.C. Section 1395nn (commonly referred to as the " Stark Law " ) prohibiting physicians from making referrals to certain entities for certain designated health services payable by any Governmental Program and imposing civil penalties on entities entering into certain arrangements with physicians with respect to such prohibited referrals; 31 U.S.C. Sections 3729-3733 (commonly referred to as the " Federal False Claims Act " ) prohibiting any individual or entity from knowingly presenting a false or fraudulent claim for payment to any Governmental Program or to any other health benefits program using federal funds and the Affordable Care Act (42 USC § 1320a-7K(d) creating liability under the Federal False Claims Act for person failing to disclose and refund Medicare and Medicaid overpayments within the later of 60 days after the date of the overpayment is identified or the next date the applicable report is due ; and the Health Insurance Portability and Accountability Act of 1996 (commonly referred to as " HIPAA " ), as amended by the Health Information Technology for Economic and Clinical Health Act (commonly referred to as the " HITECH Act " ), and the regulations thereunder, creating various rules regarding the privacy and security of individually identifiable health information, and, in each case, the applicable state statutory and regulatory counterparts to such federal statutes and regulations in each of the states in which any member of the Target Group conducts the Target Business (collectively, " Health Care Laws " ). Each member of the Target Group has maintained in all material respects all records required to be maintained by it under applicable Governmental Programs and Health Care Laws. Except as set forth on Section 3.14(b) of the Target Disclosure Schedule, t o the K nowledge of Target, t here are no presently existing circumstances which would result or would be reasonably expected to result in any material violation of any Health Care Laws by any member of the Target Group or, to the Knowledge of Target, by any of its Personn el. No member of the Target Group or any of the Personnel (while employed by Target Group ) has been sanctioned as not being in compliance with any applicable Health Care Laws. Except as set forth on Section 3.14(b) of the Target Disclosure Schedule, n o member of the Target Group or any of the Personnel (while employed by the Target Group ) has received any written notice or other communication from any Governmental Authority to the effect that it or any of them or any activity conducted by it or any of them is not in material compliance with any applicable Health Care Laws. (c) With respect to the Target Business, each member of the Target Group (A) is qualified for participation in all of the Governmental Program (s) in which it participates, and (B) has current provider numbers for the Governmental Programs and such private non-governmental programs (each, a " Private Program " ), including without limitation 29 any private insurance program, under which it directly or indirectly is presently receiving payments or is a participating provider. A list of all of the Company Group's existing Governmental Program provider agreements and numbers, or if such contracts do not exist, other documentation evidencing such participation is set forth on Section 3.14(c) of the Target Disclosure Schedule, current, true and complete copies of which have been made available to Parent. Section 3.14(c) of the Target Disclosure Schedule also sets forth each contractual arrangement with third party payors, including, but not limited to, private insurance, managed care plans and HMOs. E ach member of the Target Group is in compliance in all material respects with all requirements of each Governmental Program and each Private Program in wh ich such member of the Target Group participates. Except as set forth on Section 3.14(c) of the Target Disclosure Schedule, n o member of the Target Group or , to the Knowledge of Target, any of the Personnel, have received any notice indicating that such participation will be terminated, suspended, limited or withdrawn , unless action is taken by such member of the Target Group . No member of the Target Group has received any written communication from a Governmental Authority th at alleges that it or any of its Personnel is not in compliance with any Health Care Laws, other than statements of deficiencies from a Governmental Authority received in the ordinary course of business. No member of the Target Group , or to the Knowledge of Target, any of the Personnel has been subpoenaed or charged or investigated in connection with any possible violation of any of the Health Care Laws. Except for payment adjustment notices received in the ordinary course of business, there are no pending appeals, overpayment determinations, audits, litigation or notices of intent to open Governmental Program or other Third Party Payor claim determinations or cost reports with respect to the Target Business. True, correct and complete copies of all reports of all inspections and surveys of each member of the Target Group containing unresolved findings with respect to the Target Business, to Target's Knowledge , conducted in connection with Medicare or Private Program d uring the past three (3) years have been provided or made available to Acquiror. No member of the Target Group is in material default under any provider agreement or other contract with any Governmental Program, Private Program or Third Party Payor (collectively, " Program Agreements "). Each member of the Company Group is in material compliance with the rules and policies respecting each Program Agreement, including, but not limited to, all certification, billing, reimbursement and documentation requirements. (d) Exc ept as set forth on Section 3.14 ( d ) of the Target Disclosure Schedule, none of the Target Group or , to the Knowledge of Target, any of the Personnel, has been convicted of, charged with, or , to Target’s K nowledge , investigated for a Governmental Program related offense, or convicted of, charged with or, to the Knowledge of Target, investigated for a violation of any of the Health Care Laws, including without limitation those relating to improper billing, improper referrals, fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, obstruction of an investigation or abuse, mis - prescribing or improper distribution of any controlled substance . No member of the Target Group nor, to the Knowledge of Target, any of the Personnel, has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Governmental Program or excluded or suspended from participation in any applicable Governmental Program . N o member of the Target Group, or to the Knowledge of Target, any of the Personnel, has committed any offense which would reasonably serve as the basis for any such exclusion, suspension, 30 debarment or other ineligibility from any Governmental Program . To the Knowledge of Target, no member of the Target Group has arranged or contracted with any individual or entity that is suspended, excluded or debarred from participation in, or otherwise ineligible to participate in a Governmental Program with respect to anything relating to the Target Business . (e) To the Knowledge of Target, there are no current or pending payment or reimbursement withholds, payment recoupments or suspensions by any Governmental Program, Private Program or Third Party Payor relating to any of the Target Group or to the health care items or services furnished by any of the Target Group, other than payment or reimbursement withholds, or payment recoupments that are ordinary course adjustments to correct non-continuing, non-systemic errors and which, when taken together, are immaterial. (f) In accordance wi th 42 CFR § 424.550(b), none of the Target Group , with respect to its provider numbers, has experienced a change of majority ownership, as that term is interpreted under 42 CFR § 424.550(b), during the 24 months preceding the Closing Date. To the Knowledge of Target, there is no material violation, default, or deficiency that exists with respect to any Medicare provid er number issued to or held by the Target Group that would give cause for termination of any provider agreeme nt or the revocation of a Target Group member's enrollment with Medicar e or its right to bill Medicare. (g) No member of the Target Group has received any written communication, nor to the Knowledge of Target, any verbal notice, from any Governmental Authority or other source that alleges that it is not in material compliance with the HIPAA Privacy and Security Standards or the HITECH Act. To the Knowledge of Target, no Breach has occurred with respect to any unsecured protected health information (including electronic protected health information) maintained by or for either any of the Target Group that is subject to the notification requirements of 45 CFR Part 164, Subpart D, and no information security or privacy breach event has occurred that would require notification under any comparable state Laws. For purposes of this Section, " Breach " means a breach of unsecured Protected Health Information as defined in 45 CFR Section 164.402 and " Protected Health Information " means individually identifiable health information transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium as defined in 45 CFR Section 160.103. Each member of the Target Group has records retention policies and procedures that are required to be complied with under a pplicable Laws pertaining to retention of health care records, including records retention requirements imposed by Medicare, and it has materially complied with such policies and proced ures and such a pplicable Law . (h) No member of the Target Group is subject to a corporate integrity agreement, consent order or similar agreement with any Governmental Authority. No member of the Target Group or, to Target's Knowledge, any current Target Group employee has been excluded or is threatened with exclusion from participation in any Governmental Program. (i) Each member of the Target Group has filed all material claims, cost reports, or other reports required to be filed with respect to Target Group's provision of services, products and supplies covered under Medicare, Medicaid, TRICARE and other Federal 31 Health Care Programs, as such term is defined in section 1128B(f) of the Social Security Act, 42 U.S.C. § 1320a-7b(f) or state health care programs ( collectively " Governmental Programs ") , in which any member of the Target Group participates , in material compliance with all statutes, rules and regulations applicable to the Governmental Program, and all such claims and reports comply in all material respects with all statutes, rules and regulations applicable to the applicable Governmental Program s . Each member of the Target Group is and has been in material compliance with filing re quirements with respect to all reports, including cost reports, and such reports do not claim, and , to the Knowledge of Target, none of the Target Group has received, payment or reimbursement in material excess of the amount provided by applicable L aw , or any applicable agreement with a Private Program or a Governmental Program , except where excess reim bursement was noted on the rep ort or in an appeal of the report. True and correct copies of all such reports for the three most recent fiscal years of Target Group have been made available to Acquiror. Section 3.14(i ) of the Target Disclosure Schedule indicates which of such reports for cost reporting periods ended within the three most recent fiscal years have been audited by the fiscal intermediary and finally settled. To Target's Knowledge, there are no facts or circumstances which are reasonably be expected to give rise to any material disallowance under any such cost reports. To the Knowledge of Target, no validation review or program integrity review relating to any of the target Group has been conducted by any commission, board or agency in connection with any Governmental Program, and no such reviews are scheduled, pending or, to the Knowledge of target, threatened against or affecting any of the Company Group. (j) Section 3.14(j) of the Target Disclosure Schedule sets forth a true, complete and correct list of: (i) all healthcare services provided by each member of the Target Group, (ii) all geo graphic areas served by a Target Group member, and (iii) the Permits held each member of the Target Group . Each member of the Target Group possesses all Permits that are necessary or required to be obtained to carry on the health care operations of the Target Group in the manner presently conducted (collectively, " Health Care Permits ") , including without limitation, Permits from the Ohio Department of Health in connection with such Target Group member's participation in the Ohio Medicaid Program. Target has previously provided copies of all Health Care Permits to Acquiror . All Health Care Permits are valid and in full force and effect, no violations have occurred, and no action or proceeding is pending or, to the Knowledge of Target, threatened to revoke or limit any of those Health Care Permits. To the Knowledge of Target, no action has been taken or recommended by any Governmental Authority, either to revoke, withdraw or suspend any Health Care Permit. To the Knowledge of Target, n o event has occurred which, with the giving of notice, the passage of time, or both, would constitute grounds for a material violation of any Health Care Permit or to revoke, suspend, restrict or cancel any Health Care Permits. (k) To the K nowledge of Target, n o pre-Closing consents or approvals are required from any Governmental Authority or any health care provider or intermediary in connection with the consummation of the Merger . 3.15 Material Contracts . (a) All of the Material Contracts of any of the members of the 32 Target Group are listed in Section 3.15 (a) of the Target Disclosure Schedule (arranged according to the portion(s) of the definition of " Material Contract " under which such Contract qualifies) and a true, correct and complete copy of each such Material Contract has been delivered to Acquiror. Each Material Contract: (i) is legal, valid, binding and enforceable and in full force and effect with respect to any member of the Target Group , and to Target's Knowledge, is legal, valid, binding, enforceable and in full force and effect with respect to each other party thereto, in either case subject to the effect of bankruptcy, insolvency, moratorium or other similar L aws affecting the enforcement of creditors’ rights generally and except as the availability of equitable remedies may be limited by general principles of equity; (ii) has not been breached or defaulted in any material respect by any member of the Target Group and to Target's Knowledge, has not been defaulted or breached by any other party thereto . (b) No prior consent of any party to a Material Contract is required for the consummation by any of the Target Group of the transactions contemplated hereby to be in compliance with the provisions of such Material Contract or to avoid the loss of any right under or the incurrence of any obligation under, such Material Contract , other than those consents listed on Section 3.15 (b) of the Target Disclosure Schedule (the " Required Contract Consents ") . 3.16 Real Estate . To the Knowledge of Target, a ll leases for real property (each a " Lease " and collectively, " Leases " ) to which any member of the Target Group is a party are in full force and effect and are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar L aws affecting or relating to creditors’ rights generally; and general principles of equity, regardless of whether asserted in a proceeding in equity or at law. True and correct copies of all such Leases have been provided to Acquiror. All rents and service charges under each Lease have been paid to the extent such rents and charges are due and pay able under the Leases. None of the Target Group currently owns any real property. 3.17 Accounts Receivable . Subject to any reserves set forth therein, the Target Group's patient accounts receivable shown on the Target Balance Sheet are (a) valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance of services, or other business transactions in the ordinary course of business ( such business conducted consistent with past practices ) in each case with Pe rsons other than Affiliates , and to the Knowledge of Target, are not subject to valid defenses, set-offs or counter claims , and (b) collectible in the ordinary course of business . 3.18 Customers and Suppliers; Adequacy of Supply . Except in the ordinary course of business after the Target Balance Sheet Date, no material customer and no material supplier of any member of the Target Group has canceled or otherwise terminated or made any writ ten threat to any of the Target Group to cancel or otherwise termina te its relationship with any member of the Target Group or has at any time on or after the Target Balance Sheet Date, decreased materially its services or supplies to any member of the Target Group in the cas e of any such supplier, or its usage of the services o r products of any of the Target Group in the case of such customer, and to Target’s Knowledge, after the Target Balance Sheet Date, no such supplier or customer has indicated either orally or in writing that it intends to cancel or otherwise 33 terminate its rela tionship with any member of the Target Group or to decrease materially its services o r supplies to any member of the Target Group or its usage of the services or products of any of the Target Group, as the case may be. To Target's Knowledge, n o member of the Target Group has breached, so as to provide a benefit to a member of the Target Group that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of any member of the Target Group . 3.19 Employees and Consultants . Section 3.19 of the Target Disclosure Schedule contains a list of the names of all employees (including without limitation part-time employees and temporary employees), leased employees, independent contractors and consultants of a ny member of the Target Group , together with their respective salaries or wages, other compensation, dates of employment, leave of absence status, current positions, and an indication of whether such individual is an employee of any member of the Target Group . 3.20 Title to Property . (a) Each member of the Target Group has good title to all of its tangible and intangible assets, including without limitation those assets which are reflected in the Target Balance Sheet or acquired in the normal course of business after the Target Balance Sheet Date , other than properties, interests in properties and assets sold or otherwise disposed of since the Target Balance Sheet Date in the ordinary course of business, or with respect to leased tangible personal properties and assets, valid leasehold interests therein, free and clear of all Encumbrances except Permitted Encumbrances. The plants, property and equipment of a ny member of the Target Group that are used in the day-to-day operations of the Target Business are in all material respects in adequate working condition and repair, subject to normal wear and tear. All assets used in the day-to-day operations of Target Group are ref lected in the Target Balance Sheet to the extent required by Agreed Accounting Principles. (b) Upon Acquiror's payment to the holders of the security interests in the assets of Target Group in the amounts set forth on the Closing Statement , each of the assets of Target Group will be eligible to be released from all security interests thereon, and Target Group , in conjunction with such holders, shall be able to take all steps necessary to terminate all UCC financing statements which have been filed with respect to such security interests. 3.21 Environmental Matters . Each member of the Target Group is and has been in material compliance with all Environmental Laws relating to the properties or facilities used, leased or occupied by it at any time (collectively, " Target Group ’s Facilities ; " such properties or facilities currently used, leased or occupied by a ny of the Target Group are defined herein as " Target Group ’s Current Facilities " ), and no member of the Target Group has discharged, emitted, released, leaked or spilled Hazard ous Materials at any of Target Group's Facilities that may or will give rise to liability of Target Group under Environmental Laws. To Target’s Knowledge, there are no Hazardous Materials (including without limitation asbestos) present in the surface waters, structures, ground waters or soil s of or beneath any of Target Group's Current Facilities. To Target’s Knowledge, there neither are nor have been any aboveground or underground storage tanks for Hazardous Materials at Target Group's Current Facilities. To Target’s Knowledg e, no employee of Target Group or other Person has claimed 34 that any member of the Target Group is liable for alleged injury or illness resulting from an alleged exposure to a Hazardous Material. No civil, criminal or administrative action, proceeding or to Target’s K nowledge, investigation is pend ing against any member of the Target Group or, to Target’s Knowledge, t hreatened against any member of the Target Group , with respect to Hazardous Materials or Environmental La ws . 3.22 Taxes . (a) Except as provided in Section 3.22(a) of the Target Disclosure Schedule, e ach member of the Target Group has prepared and timely filed (subject to applicable extensions) all material Returns relating to any and all material Taxes concerning or attributable to it or its operations due prior to the Closing Date and such Returns are true and correct in all material respects and , to the Knowledge of Target, have been completed in accordance with a pplicable Law. Target has made available to Acquiror copies of all Returns filed for all periods since its inception. All Taxes due and owing (whether or not shown on any Return) by any member of the Target Group have been paid when due . (b) As of the date hereof, each member of the Target Group has (i) timely withheld from its employees, independent contractors, customers, Selling Parties , and other Persons from whom it is required to withhold Taxes in compliance with all a pplicable Law, and (ii) timely paid all amounts so withheld to the appropriate Governmental Entity or taxing authority. (c) Except as provided in Section 3.22(c) of the Target Disclosure Schedule, d uring the period of all unexpired applicable statutes of limitations, no member of the Target Group has been delinquent in the payment of any material Tax. There is no material Tax deficiency outstanding or assessed or to Target’s knowledge, proposed against any of the Target Group that is not reflected as a liability on the Target’s Financial Statements, nor has any member of the Target Group executed any agreements or waivers extending any statute of limitations on or extending the period for the assessment or collection of any Tax . Except as provided in Section 3.22(c) of the Target Disclosure Schedule, n one of the Target Group's Returns have been audited by a government or taxing authority, nor is any such audit in process or pending, and no member of the Target Group has been notified of any request for such an audit or oth er examination. No member of the Target Group is party to any administrative or legal action relating to Taxes and no claims asserting any deficiencies in Taxes have been made by any taxing authority with respect to the Target Group . (d) No member of the Target Group has any material liabilities for unpaid Taxes that have not been accrued for or reserved on the face of the Target Balance Sheet (rather than in any notes thereto), whether asserted or unasserted, contingent or otherwise, and Target has no Knowledge of any basis for the assertion of any such liabilit y attributable to any of the Target Group , or its assets or operations. (e) Except as provided in Section 3.22 (e) of the Target Disclosure Schedule, n o member of the Target Group is a party to any tax-sharing agreement or similar arrangement with any other pa rty, and none of the Target Group has assumed any obligation to 35 pay any Tax obligations of, or with respect to any transaction relating to, any other Person or agreed to indemnify any other Person with respect to any Tax. (f) Target has disclosed to Acquiror : (i) any Tax exemption, Tax holiday or other Tax- sharing arrangement that any of the Target Group has in any jurisdiction, including the nature, amount and lengths of such Tax exemption, Tax holiday or other Tax-sharing arrangement; and (ii) any expatriate tax programs or policies affecting it. Each member of the Target Group is in compliance with all terms and conditions required to maintain such Tax exemption, Tax holiday or other Tax-sharing arrangement or order of any Governmental Entity and the consummation of the transactions contemplated hereby will not have any adverse effect on the continuing validity and effectiveness of any such Tax exemption, Tax holiday or other Tax-sharing arrangement or order. (g) Target is not a " foreign person " as defined in Section 1445 of the Code, and within the meaning of Treasury Regulation 1.1445-11T(d), and neither (i) 50% or more of the value of the gross assets of Target consists of " United States real property interests " under Section 897(c) of the Code, nor (ii) 90% or more of the value of the gross assets of Target consists of U.S. real property interests plus cash or cash equivalents. (h) No member of the Target Group has agreed to make, nor is required to make, any adjustment under Section 481 of the Code or corresponding provision of L aw by reason of any change in accounting method. (i) Except fo r Target's ownership of the Target Subsidiaries , or as otherwise described o n Section 3.1 of the Target Disclosure Schedule , no member of the Target Group directly or indirectly owns, and has directly or indirectly owned, any equity interest in any corporation, partnership, limited liability company, trust or any other entity or arrangement that is treated as a " business entity " within the meaning of Section 301.7701-2 of the Treasury Regulations . (j) There are no liens or encum brances on the assets of any member of the Target Group relating to or attributable to Taxes, other than liens for Taxes not yet due and payable. (k) Exc ept as provided in Section 3.22 (k) of the Target Disclosure Schedule, n o member of the Target Group has requested nor received any private letter ruling from the Internal Revenue Service or comparable rulings from any other government or taxing agency (domestic or foreign). (l) Exc ept as provided in Section 3.22 (l) of the Target Disclosure Schedule , n o power of attorney with respect to Taxes is currently in effect with respect to any member of the Target Group . (m) Target’s Returns have never been subject to a Code Section 482 adjustment or corresponding provision of L aw. To the Knowledge of Target, e ach member of the Target Group is in compliance with all transfer pricing requirements in all jurisdictions in 36 which it does business. (n) Section 3.22 (n) of the Target Disclosure Schedule lists all of th e jurisdictions in which any member of the Target Group files income, franchise or unincorporated business Returns (to the extent applic able to it), and to Target’s Knowledge no member of the Target Group is (and never has been) subject to any material income, franchise or unincorporated business Taxes in any jurisdiction that is not listed in Section 3.2 2 (n) of the Target Disclosure Schedule. (o) No claim has been made by a taxing authority (domestic or foreign) in a jurisdiction where Target Group does not file Returns to the effect that Target may be subject to Tax by that jurisdiction. No member of the Target Group has had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and such foreign country. (p) Exc ept as provided in Section 3.22 (p) of the Target Disclosure Schedule, e ach member of the Target Group uses (and has used since its formation or, if acquired, since the date that the Target Subsidiary was acquired ) the accrual method of accounting in computing its taxable income for federal incom e Tax purposes, and each member of the Target Group uses the calendar year as its taxable year for federal income Tax purposes . (q) No membe r of the Target Group or Acquiror, or any of their respective Affiliates , will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (A) change in method of accounting for a taxable period ending on or prior to the Closing Date, (B) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (C) " closing agreement " as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (D) installment sale or open transaction disposition made on or prior to the Closing Date; (E) prepaid amount received on or prior to the Closing Date or (F) any similar election, action, or agreement that would have the effect of deferring any liability for Taxes of any member of the Target Group from any period ending on or before the Closing Date to any period ending after such date. (r) No member of the Target Group is a party to any understanding or arrangement described in Section 6662(d)(2)(C)(ii) of the Code as a " tax shelter " , or has participated in a " reportable transaction " within the meaning of Treasury Regulations Section 1.6011-4. (s) No member of the Target Group has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code Sections 355 or 361. (t) Target (i) has not been a member of an affiliated group (under Code Section 1504(a)) filing a consolidated federal income Return (other than a group the common parent of which was Target); or (ii) has any liability for the Taxes of any Person (other 37 than Target) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-U.S. Law), as a transferee or successor, by contract, or otherwise. (u) For periods beginning January 1, 2013, all required estimated Tax payments sufficient to avoid any underpayment penalties have been timely made by or on behalf of any of the Target Group . None of the Returns fil ed by or with respect to any member of the Target Group contains a disclosure statement under Section 6662 of the Code (or any similar provision of state, local or foreign Tax law). (v) Except as provided in Section 3.22(v) of the Target Disclosure Schedule, s ince December 31, 2012, Target has not made or changed any tax election, changed an annual accounting period, adopted or changed any accounting method, filed any amended federal Return, entered into any closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law), settled any Tax claim or assessment, surrendered any right to claim a refund of Taxes, or consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to Target . (w) Each member of the Target Group has the status for federal income tax purposes described on Section 3.22( w ) of the Target Disclosure Schedule . 3.23 Employee Benefit Plans ; Labor and Employment Matters . (a) Section 3.23(a) of the Target Disclosure Schedule contains in all material respects an accurate and complete list, with respect to Target and any other Person within the controlled group of corporations with Target or any of its subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code, and the regulations issued thereunder (collectively an " ERISA Affiliate " ) of each plan, program, policy, practice, contract, agreement or other arrangement providing for direct or indirect compensation, severance benefits, termination pay, deferred compensation, performance awards, stock or stock-related options or awards, pension benefits, retirement benefits, profit-sharing benefits, savings benefits, disability benefits, medical insurance, dental insurance, health insurance, life insurance, death benefit, other insurance, repatriation or expatriation benefits, tax gross ups, welfare benefits, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including, but not limited to, each " employee benefit plan, " within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ( " ERISA " ), which is or has been maintained, contributed to, or required to be contributed to, by Target, any of its subsidiaries or any ERISA Affiliate for the benefit of any current or former employee, director or consultant (collectively, the " Target Employee Plans " ). None of Target, its subsidiaries and their ERISA Affiliates has made any plan or commitment to establish any new Target Employee Plan, to modify any Target Employee Plan (except to the extent required by L aw or to conform any such Target Employee Plan to the requirements of any a pplicable Law, in each case as previously disclosed to Acquiror in writing, or as required by this Agreement). Kathy Ferriell is no longer an employee of the Target Group and none of the Target Group has any further liability or obligation under her Equity Mirror Agreement. 38 (b) Documents . Except a s provided in Section 3.23 (b) of the Target Disclosure Schedule, Target has provided to Acquiror (i) current, correct and complete copies of all documents embodying each Target Employee Plan including all amendments thereto and all related trust documents (or a summary of any oral Target Employee Plan), (ii) the three (3) most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Target Employee Plan, (iii) if the Target Employee Plan is funded, the most recent annual and periodic accounting of Target Employee Plan assets, (iv) the most recent summary plan description together with the summary(ies) of material modifications thereto, if any, with respect to each Target Employee Plan, (v) all material written agreements and contracts relating to each Target Employee Plan, including administrative service agreements and group insurance contracts, (vi) each affirmative action plan, if applicable, (vii) all communications material to any employee or employees relating to any Target Employee Plan and any proposed Target Employee Plan, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any liability to Target or any of its subsidiaries, (viii) all correspondence to or from any governmental agency relating to any Target Employee Plan, (ix) all model Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ( " COBRA " ) forms and related notices, (x) all policies pertaining to fiduciary liability insurance covering the fiduciaries for each Target Employee Plan, (xi) all discrimination tests for each applicable Target Employee Plan for the three most recent plan years, (xii) all registration statements, annual reports (Form 11-K and all attachments thereto) and prospectuses prepared in connection with each Target Employee Plan, to the extent applicable, (xiii) all HIPAA privacy notices and all business associate agreements to the extent required under HIPAA, (xiv) the most recent Internal Revenue Services (" IRS ") determination or opinion letter issued with respect to each Target Employee Plan and (xv) all rulings or notices issued by a governmental agency with respect to each Target Employee Plan. (c) Target Employee Plan Compliance . Ex cept as provided in Section 3.23 (c) of the Target Disclosure Schedule, Target has performed in all material respects all obligations required to be performed by it under and is not in material default or violation of any Target Employee Plan , and to Target’s Knowledge each Target Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with applicable Law, including ERISA or the Code. Each Target Employee Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code has either (i) applied for a favorable determination letter, prior to the expiration of the requisite remedial amendment period under applicable Treasury Regulations or IRS pronouncements, but has not yet received a response; (ii) obtained a favorable determination, notification, advisory and/or opinion letter, as applicable, on which the employer is entitled to rely, as to its qualified status from the IRS; or (iii) still has a remaining period of time to apply for such a determination letter from the IRS and to make any amendments necessary to obtain a favorable determination, and to Target’s Knowledge nothing has occurred since the date of the most recent determination that could reasonably be expected to cause any such Target Employee Plan or trust to fail to qualify under § 401(a) or 501(a) of the Code. Except as provided in Section 3.23(c) of the Target Disclosure Schedule, n o " prohibited transaction, " within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, 39 and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Target Employee Plan. There are no actions, suits or claims pending or, to the Knowledge of Target or any ERISA Affiliates, threatened or reasonably anticipated (other than routine claims for benefits) against any Target Employee Plan or against the assets of any Target Employee Plan and, to the Knowledge of Target or any ERISA Affiliates, no fact or circumstance exists that would make such an action, suit or claim reasonably likely to occur. Each Target Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to Acquiror, Target or any ERISA Affiliate (other than ordinary administration expenses), other than those Target Employee Plans identified on Section 3.24(a) of the Target Disclosure Schedule that require assent of a participant thereof to effect an amendment or termination. There are no audits, inquiries or proceedings pending or that have been initiated, or to the Knowledge of Target, are reasonably likely to be initiated, by the IRS, United States Department of Labor, or any other Governmental Authority with respect to any Target Employee Plan. N either Target nor any ERISA Affiliate is subject to any material fine, assessment, penalty or other Tax or liability with respect to any Target Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code or otherwise by operation of law or contract. Target has timely made in all material respects all contributions and other payments required by and due under the terms of each Target Employee Plan. Except as provided in Section 3.23(c) of the Target Disclosure Schedule, Target has no Knowledge of any event that would give rise to loss of the tax-qualified or tax-exempt status of any Target Employee Plan. (d) No Pension Plan . No member of the Target Group or any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, or incurred an obligation to contribute to any Target Employee Plan that is (i) an " employee pension benefit plan, " within the meaning of Section 3(2) of ERISA (a " Pension Plan " ) subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, (ii) a " funded welfare plan " within the meaning of Section 419 of the Code, (iii) a " multiple employer welfare arrangement " (as defined under Section 3(40)(A) of ERISA (without regard to Section 514(b)(6)(B) of ERISA)), or (iv) a Target Employee Plan in which stock of the Target or any ERISA Affiliate is or was held as a plan asset. (e) No Self-Insured Target Employee Plan . N o member of the Target Group or any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to or incurred an obligation to contribute to any self-insured " group health plan " (within the meaning of Section 5000(b)(1) of the Code) that provides benefits to employees (other than a medical flexible spending account, health reimbursement arrangement or other similar program, including any such plan pursuant to which a stop-loss policy or contract applies). (f) Collectively Bargained, Multiemployer and Multiple-Employer Plan . At no time has any member of the Target Group or any ERISA Affiliate contributed to or been obligated to contribute to any multiemployer plan (as defined in Section 3(37) of ERISA). No member of the Target Group or any ERISA Affiliate has at any time ever maintained, established, sponsored, participated in or contributed to any multiple employer plan or to any 40 plan described in Section 413 of the Code. (g) No Post-Employment Obligations . Except as provided in Section 3.23 (g) of the Target Disclosure Schedule, n o Target Employee Plan provides, or reflects or represents any liability to provide, post-termination or retiree life insurance, health or other employee welfare benefits to any Person for any reason, except as may be required by COBRA or other applicable L aw , and Target has not represented, promised or contracted (whether in oral or written form) to any employee (either individually or to employees as a group) or any other Person that such employee(s) or other Person would be provided with life insurance, health or other employee welfare benefits, except to the extent required by statute. (h) COBRA; FMLA; HIPAA . To Target’s Knowledge, Target and each ERISA Affiliate has complied in all material respects with COBRA, the Family Medical Leave Act of 1993, as amended ( " FMLA " ), HIPAA, the Women’s Health and Cancer Rights Act of 1998, the Newborns’ and Mothers’ Health Protection Act of 1996, and any similar provisions of the law s of Ohio applicable to its employees. To the extent required under HIPAA and the regu lations issued thereunder, each member of the Target Group has performed in all material respects all obligations under the medical privacy rules of HIPAA, the electronic data interchange requirements of HIPAA, and the security requirements of HIPAA. No member of the Target Group has unsatisfied obligations to any employees or qualified beneficiaries pursuant to COBRA, HIPAA or any Ohio law governing health care coverage or extension. (i) Effect of Transaction . Exc ept as set forth on Section 3.2 3 (i) of the Target Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby or any termination of employment or service in connection therewith will (i) result in any payment (including severance, golden parachute, bonus, tax gross up, or otherwise), becoming due to any current or former employee, director or consultant, (ii) result in any forgiveness of indebtedness of any current or former employee, director or consultant, (iii) materially increase any benefits otherwise payable by Target or any of its subsidiaries or ERISA Affiliates to any current or former employee, director or consultant or (iv) result in the acceleration of the time of payment or vesting of any such benefits to any current or former employee, director or consultant except as required under Section 411(d)(3) of the Code. (j) Deferred Compensation . No compensation shall be includable in the gross income of any current or former employee, director or consultant of any member of the Target Group or any of its ERISA Affiliates as a result of the operation of Sections 409A or 457A of the Code with respect to any applicable arrangements or agreements in effect prior to the Effective Time. No stock options, stock appreciation rights or other equity-based awards issued or granted by Target are treated as deferred compensation arrangements subject to the requirements of Sections 409A or 457A of the Code. Each " nonqualified deferred compensation plan " (as such term is defined under Section 409A(d)(1) of the Code and the guidance thereunder and under Section 457A of the Code and the guidance thereunder) under which any member of the Target Group or any of its ERISA Affiliates makes, is obligated to make or promises to make, payments (each, a " 409A Plan " ) to Target’s Knowledge complies in all material respects, in both form and operation, with the requirements of Sections 409A and 457A of the Code and 41 the guidance thereunder. Section 3.23(j) of the Target Disclosure Schedule lists each 409A Plan under which Target or its ERISA Affiliates makes, is obligated to make or promises to make, payments. No payment to be made under any 409A Plan is, or to the Knowledge of Target will be, subject to the penalties of Section 409A(a)(1) of the Code or 457A of the Code. (k) Employment Matters . E ach member of the Target Group is in material compliance with all applicable L aws, rules and regulations respecting employment, employment practices, terms and conditions of employment, employee safety and health, wages and hours, overtime compensation, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or ben efits, immigration , child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence and unemployment insurance , and in each case, with respect to employees: (i) has withheld and reported all material amounts required by applicable L aw or by agreement to be withheld and reported with respect to wages, salaries and other payments to employees, (ii) is not liable for any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing, and (iii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any G overnmental A uthority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistent with past practice ) . There are no actions, suits, claims or administrative matters pending, or to Target’s Knowledge threatened, or reasona bly anticipated, against any member of the Target Group or any of their respective ERISA Affiliates relating to any employee or Target Employee Plan. There are no pending or to Target’s Knowledge threatened, or reasonably anticipated, claims or actions against any member of the Target Group or any trustee under any worker’s compensation policy. The services provided by each of Tar get and their ERISA Affiliates’ employees are terminable at the will of Target and its ERISA Affiliates. Section 3.23 (k) of the Target Disclosure Schedule lists any employees who are employed pursuant to a written employment agreement by Target or any of its ERISA Affiliates. Section 3.23(k) of the Target Disclosure Schedule lists all contractual liabilities of each member of the Target Group and its ERISA Affiliates to any employee, director or consultant, that result from the termination by Acquiror or Target of such Person’s employment or provision of services, a change of control of Target, or a combination thereof. To Target’s Knowledge, n o member of the Target Group or any ERISA Affiliate has direct or indirect liability with respect to any misclassification of any Person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer. A ll employees of the Target Business classified as exempt under the Fair Labor Standards Act and applicable Ohio and local wage and hour laws are prop erly classified. There are no actions against any of the Target Group pending, or to Target's Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant or independent contractor of the Business, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wages and hours or any other employmen t related matter arising under a pplicable Law. (l) Labor . No work stoppage or labor strike against any of the Target 42 Group is pending, or, to the Knowledge of Target, threatened, or reasonably anticipated. Target has no Knowledge of any activities or proceedings of any labor union to organize any employees of any of the Target Group . There are no actions, suits, claims, labor disputes or grievances pending or, to Target’s Knowledge, threatened, or reasonably anticipated relating to any labor matters involving any employee of any of the Target Group , including charges of un fair labor practices. No member of the Target Group has engaged, to the extent material, in any unfair labor practices within the meaning of the National Labor Relations Act. No member of the Target Group is presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement, works council agreements or procedures, or union contract with respect to employees and no collective bargaining agreement is being negotiated by any of the Target Group . Within the past y ear, no member of the Target Group has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act ( " WARN " ) or any similar applicable Ohio or local law that remains unsatisfied, nor shall any terminations prior to the Closing Date result in unsatisfied liability or obligation under WARN or any similar applicable Ohio or local law. (m) No Interference or Conflict . To the Knowledge of Target, no stockholder, director, officer, manager, member, employee or consultant of any member of the Target Group is obligated under any contract or agreement, subject to any judgment, decree, or order of any court or administrative agency that would interfere with such Person’s efforts to promote the interests of the Target Group or that would interfere with the business of the Target Group . To the Knowledge of Target, neither the execution nor delivery of this Agreement, nor the carrying on of the business of the Target Group as presently conducted nor any activity of such officers, directors, employees or consultants in connection with the carrying on of such business as presently conducted will, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract or agreement under which any of such officers, directors, employees, or consultants is now bound. (n) For purposes of satisfying requirements under the Affordable Care Act ( " ACA " ), and to the extent applicable, each of the Target Group has (i) offered minimum essential coverage that is affordable and provides minimum value to all full-time employees (as defined by the ACA); (ii) has tracked and recorded employee hours data in order to accurately determine employee full-time status for purposes of offering proper coverage and avoiding employer mandate penalties under the ACA and to ensure complete and accurate reporting under Code Sections 6055 and 6056 (as applicable); (iii) ensured that any " grandfathered plan " under the ACA that it offers has continually satisfied the requirements to remain grandfathered since March 23, 2010; (iv) determined that all of its workers have been properly classified and, specifically, all workers who are common law employees within the meaning applicable to the ACA and Code Section 4980H have been classified as employees; (v) satisfied the requirements of the Patient Centered Outcomes Research Institute fee under Code Section 4376 for its self-funded plans, including the proper filing of IRS Form 720 to report and pay the fee for all years required under the ACA; (vi) satisfied the requirements of the Transitional Reinsurance Program fee under Code Section 1341 of the ACA for all years required under the ACA; and (vii) timely distributed Summaries of Benefits and Coverage to proper parties since the requirement began for open and special enrollments beginning on or after September 23, 2012. 43 3.24 Insurance . Each member of the Target Group has the policies of insurance and bonds of the type and in the policy a mounts set forth on Section 3.24 of the Target Disclosure Schedule. There is no material claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bo nds have been paid, and to Target’s Knowledge each member of the Target Group is otherwise in all material respects in compliance with the terms of such policies and bonds. Target has no Knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. 3.25 Brokers’ and Finders’ Fee . Except as set forth on Section 3.25 of the Target Disclosure Schedule, no broker, finder or investment banker is entitled to brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with the Merger, this Agreement or any transaction contemplated hereby , as a result of any action by any member of the Target Group or its Representatives. 3.26 Restrictions on Business Activities . There is no agreement, judgment, injunction, order or decree binding upon any member of the Target Group that has or could reasonably be expected to have the effect of prohibiting or materially impairing any current practice of its, any acquisition of property by it or the conduct of its business as presentl y conducted. 3.27 Absence of Unlawful Payments . No member of the Target Group , or to the Knowledge of Target, any of their directors, officers, employees, agents or representatives in their capacity as such, or Person acting on behalf of any of the aforementioned, has offered, authorized, made, paid or received, or will in the future offer, authorize, make, pay or receive, directly or indirectly, any bribes, kickbacks, or other similar payments or offers or transfers of value in connection with obtaining or retaining business or to secure an improper advantage to or from any Person; nor have any of them, directly or indirectly, committed any violation of any applicable anti-corruption law or regulation, including the U.S. Foreign Corrupt Practices Act, 15 U.S.C. 78dd et seq. 3.28 Compliance with Rights of First Refusal . Neither the execution, delivery and performance of this Agreement, nor the consummation of the Merger or any other transaction contemplated by this Agreement, will result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, any agreement to which Target is a party that provides for any right of notice, right of first refusal, right of first offer, right of first negotiation or similar right directly or indirectly applicable to this Agreement, the consummation of the Merger or any other transaction contemplated by this Agreem ent . 3.29 Disclaimer of Other Representations and Warranties . Except for the representations a nd warranties contained in Section s 3 or 4, no member of the Target Group or the Selling Parties or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of any of the Target Group , and any such other representations and warranties are hereby disclaimed. 4. Representations and Warranties of Selling Partie s . Each of the Selling Parties , 44 severally but not jointly, represents and warrants to the Acquiror and Merger Sub as follows: (a) The Parent Common S tock to be received by such Selling Party will be acquired for investment for such Selling Party's own account, not as a nominee or agent, and not with a view to a public distribution of any part thereof, and such Selling Party has no present intention of selling, granting any participation in, or otherwise distributi ng the same. Such Selling Party has no need for liquidity with respect to its investment in Parent Common stock . (b) Acquiror has delivered to Target for distribution to its Sel ling Parties a reasonable time before the date of this Agreement true and complete copies of Acquiror’s (i) Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the " SEC " ); (ii) all periodic reports on Form 8-K filed with the SEC since December 31, 2014 to the date hereof; and (iii) all Forms 10-Q filed with the SEC since December 31, 2014 to the date hereof. Each Selling Party , or a representative thereof, has received a draft of this Agreement and has confirmed that all documents, books and records pertaining to such Selling Party 's investment in Parent Common S tock and requested by Target or such Selling Party have been made available. (c) Such Selling Party is an experienced investor in securities and acknowledges that it bears the complete economic risk of its investment and has such knowledge and experience in financial or business matters that such Selling Party is capable of evaluating the merits and risks of the investment in Parent Common S tock . Such Selling Party is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act. (d) The purchase of Parent Common S tock by such Selling Party is consistent with the general investment objectives of such Selling Party . Such Selling Party understands that the purchase of Parent Common S tock involves a high degree of risk (e) Such Selling Party acknowledges that such Selling Party has been advised to seek his, her or its own tax and legal advice in connection with this Agreement and the Merger, including with respect to the treatment of the Merger for Federal, foreign, state and local income tax purposes and the treatment of the Selling Party for tax purposes in connection therewith . Each Selling Party acknowledges that none of the parties to this Agreement has (i) made any representations and warranties to such Selling Party or to any of the other parties hereto regarding the treatment of the Merger for Federal, foreign, state or local tax purposes, or (ii) provided any tax opinion or advice regarding the treatment of the Merger for Federal, foreign, state or local tax purposes or the treatment of the Selling Party for tax purposes in connection ther e with. (f) The Parent Common S tock issued to such Selling Party shall not be registered under the Securities Act at the time of issuance, and as such shall constitute "restricted securities" within the meaning of Rule 144 and, unless sold pursuant to an effective registration statement, the Paren t Common S tock shall be available for sale in the public market only in compliance with Rule 144. Such Selling Party understands that in connection with exchanging Target Units for Parent Common S tock , it will be required to agree that it will not 45 transfer or dispose of any Parent Common stock unless and until, if requested by Acquiror, such Selling Party shall have furnished to Acquiror (at the expense of such Selling Party or its transferee) a customary opinion of counsel or other evidence, reasonably satisfactory to Acquiror, to the effect that such transfer may be made without restrictions under the Securities Act. Such Selling Party further understands that Section 2.12 places additional restrictions on the transfer of Parent Common S tock . Certificates representing the Parent Common S tock shall bear a legend substantially as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN AN AGREEMENT AND PLA N OF MERGER DATED NOVEMBER 3, 2015 , A COPY OF WHICH IS MAINTAINED IN THE OFFICE OF THE SECRETARY OF THE CORPORATION. (g) T he Selling Party's Target Units are not represented by certificates. The Selling Party h as full power and authority to execute and deliver this Agreement and to surrender its Target Units pursuant to this Agreement. The Selling Party has duly executed and delivered this Agreement which constitutes the valid and legally bindi ng obligation of the Selling Party , enforceable in accordance with its terms and conditions. I f the Selling Party is an entity, the execution and delivery of this Agreement by the Selling Party and the performance by the Selling Party of its obligations under this Agreement have been duly author ized by all necessary action on the part of the Selling Party (including by any managing body o f the Selling Party, if required). The Selling Party is not required to give any notice to, make any filing or registration with, or obtain any authorization, waiver, license, consent, or approval of any G overnmental A uthority or third party in connection with the execution and delivery of this Agreement by the Selling Party and the performance by the Selling Party of i ts obligations hereunder or the consummation of the transactions contemplated by this Agreement. The Selling Party is the true and lawful owner of, and has good and valid title to, the Target Units representing by Selling Party's certificates , free and clear of all liens, pledges, restrictions, charges or claims, or any other encumbrances of any kind (other than limitations on transfers imposed by applicab le securities laws). Upon consummation of the Merger , Acquiror shall hold good and valid title to the Target Units, subject to the terms and conditions of this Agreement . No Selling Party is an individual resident of any state that is subject to community property laws. 5. Representations and Warranties of Acquiror and Merger Sub . Acquiror and Merger Sub represent and warrant to Target that the statements contained in this Section 4 are true and correct in all material respects. 5.1 Organization, Standing and Power . Acquiror is a corporation duly 46 organized, validly existing and in good stan ding under the laws of the Commonwealth of Kentucky . Merger Sub is a limited liability company duly organized and validly existing under the laws of the State of Ohio . Each of Acquiror and Merger Sub has the corporate (if applicable) power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing could reasonably be expected to have a Material Adverse Effect on Acquiror or Merger Sub, as applicable . 5.2 Authority . (a) Acquiror and Merger Sub have all requisite corporate or limited liability company (as applicable) power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corpor ate or limited liability company (as applicable) action on the part of Parent, Acquiror , and Merger Sub. Each of this Agreement and the other agreements contemplated hereby has been duly executed and delivered by Acquiror and Merger Sub and constitutes the valid and binding obligations of Parent, Acquiror , and Merger Sub enforceable against Parent, Acquiror , and Merger Sub, as applicable, in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar L aws affecting or relating to creditors’ rights generally, and subject to general principles of equity. The execution and delivery of this Agreement by Parent, Acquiror, and Merger Sub do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both) any provision of the their respective organizational and governing documents. (b) In connection with obtaining the consent to the Merger, Parent, Acquirer, and Merger Sub have each complied with the terms of their respective organizational and governing documents and all applicable Law . (c) No consent, approval, order or authorization of or registration, declaration or filing with any Governmental Entity is required by or with respect to Parent, Acquiror, Merger Sub or any of Parent’s or Acquiror's subsidiaries in connection with the execution and delivery of this Agreement and the other agreements contemplated hereby by Parent, Acquiror , and Merger Sub or the consummation by Parent, Acquiror , and Merger Sub of the transactions contemplated hereby and thereby, except for (i) the filing of the Certificate of Merger ; and (ii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not reasonably be expected to have a Material Adverse Effect on Acquiror and would not prevent, materially alter or delay any of the transactions contemplated by this Agreement . 5.3 Issuance and Validity of Parent Common S tock . Parent Common S tock , when issued in compliance with the provisions of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, will be free of any liens or E ncumbrances, and will not be subject to any preemptive rights, rights of firs t refusal or redemption r ights. 47 5.4 Financial Ability to Perform . Acquiror has, as of the date of this Agreement, and shall have at Closing, all available cash funds, credit facilities or other sources of immediately available funds sufficient to timely and fully consummate the transactions contemplated by this Agreement. 5.5 SEC Rep o rts . (a) Since January 1, 2 012, Parent has timely filed all required (by Law or otherwise) reports, schedules, and forms with the SEC (collectively, and in each case including all amendments, exhibits and schedules thereto and documents incorporated by reference therein, the " SEC Reports " ). As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such filing), each SEC Report complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be. As of their respective filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such filing), none of the SEC Reports contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed SEC Report. (b) The consolidated financial statements (including any related notes) included in the SEC Reports (the " Acquiror Financial Statements " ) fairly present in all material respects the consolidated financial position, statements of equity, cash flows a nd changes in equity of Parent for the respective fiscal periods or as of the respective dates therein set forth; and each of such statements (including the related notes, where applicable) complies in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto, and provided that unaudited interim financial statements may not contain footnotes and may be subject to normal year-end audit adjustments. 5.6 No Material Adverse Ch ange . Since December 31, 2014 , except as disclosed in the SEC Reports, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of Parent , and no event has occurred or circumstance exists that may result in such a material adverse change. 5.7 Investment Intent . Acquiror is acquiring the Target Units for its own account for investment purposes only and not with a view to any public distribution thereof or with any intention of selling, distributing or otherwise disposing of the Target Units in a manner that would violate the registration requirements of the Securities Act or any similar provisions of any a pplicable Law. Acquiror agrees that Target Units may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act and any other applicable securities Laws, except pursuant to an exemption from such registration under the Securities Act and such Laws. Acquiror is able to bear the economic risk of holding the Target Units for an indefinite period (including total loss of its investment), and 48 (either alone or together with its Representatives) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment. Acquiror qualifies as an " accredited investor, " as such term is defined in Rule 501(a) promulgated pursuant to the Securities Act. 5.8 Acquiror Information . The information regarding Acquiror and Parent Common S tock that Acquiror has provided to Target for delivery to Target's Selling Parties and holders of convertible stock satisfies the information requirements of paragraph (b)(2)(ii) of Rule 502 of the Securities Act . 5.9 Brokers’ and Finders’ Fee . N o broker, finder or investment banker is entitled to brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with the Merger, this Agreement or any transaction contemplated hereby, as a result of any action by Parent, Acquiror, Merger Sub or their Representativ es. 6. Additional Agreements . 6.1 Confidentiality . Parent and Target shall hold, and shall cause their respective Affiliates , and Representatives to hold, in confidence all documents and information furnished to it by or on behalf of the other party in connection with the transactions contemplated hereby pursuant to the terms of the confidentiality agreement dated May 22, 2015 between Parent and Target (the " Confidentiality Agreement " ), which shall continue in full force and effect until the Closing Date, at which time such Confidentiality Agreement and the obligations of the parties under this Section 6.1 shall terminate; provided, however, that after the Closing Date, the Confidentiality Agreement shall terminate only in respect of that portion of the confidential i nformation exclusively relating to the transactions contemplated by this Agreement. 6.2 Public Disclosure . Target shall consult with Acquiror before issuing any press release or otherwise making any public statement or making any other public (or non-confidential) disclosure (whether or not in response to an inquiry) regarding the terms of this Agreement and the transactions contemplated hereby, and shall not issue any such press release or make any such statement or disclosure without the prior approval of Acquiror, except as may be required by applicable L aw. 6.3 Regulatory Approval; Further Assurances . (a) Each party shall use commercially reasonable efforts to file, as promptly as practicable after the date of this Agreement, all notices, reports and other documents required to be filed by such pa rty with any Governmental Authority with respect to the Merger and the other transactions contemplated by this Agreement, and to submit promptly any additional information requested by any such Governmental Authority . Each of Target and Acquiror shall : (i) give the other party prompt notice of the commencement of any legal proceeding by o r before any Governmental Authority with respect to the Merger or any of the other transactions contemplated by this Agreement, (ii) keep the other party informed as to the status of any such legal proceeding, and (iii) promptly inform the other party of any communication to or from any Governmental Authority regarding the Merger. 49 (b) Acquiror and Target shall use commercially reasonable efforts to take, or cause to be taken, all actions necessary to effectuate the Merger and make effective the other transactions contemplated by this Agreement. Each party shall promptly deliver to the other a copy of each filing made pursuant to Section 6.3(a), and each notice given and consent obtained by such party during the period prior to the Effective Time. Each party, at the reasonable request of the other party, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. Upon execution and delivery of this Agreement, Acquiror will file the Certificate of Merger with the Ohio Secretary of State. 6.4 Notification of Certain Matters . Each of Target and Acquiror shall give immediate notice to the other if any of the following occurs after the date of this Agreement and prior to the termination of this Agreement or the Effective Time: (a) receipt of any notice of, or other communication relating to, a default, or event which with notice or lapse of time or both would become a default, under any Material Contract; (b) receipt of any notice or other communication in writing from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (c) receipt of any notice or other communicat ion from any Governmental Authority in connection with the transactions contemplated by this Agreement; (d) the occurrence or non-occurrence of any fact or event which could reasonably be expected to cause any covenant, condition or agreement hereunder not to be complied with or satisfied; (e) the commencement or threat of any material action involving or affecting Target or any of its properties or assets; (f) the occurrence or non-occurrence of any fact or event that causes or is reasonably likely to cause a breach by Target or Acquiror of any provision of this Agreement applicable to it; (g) the occurrence of any fact or event of which such party becomes aware that results in the inaccuracy in any representation or warranty of such party in this Agreement; and (h) the occurrence of any event that, had it occurred prior to the date of this Agreement without any additional disclosure hereunder, would have constituted a Material Adverse Effect of Target or Acquiror; provided , that the delivery of any notice by any party pursuant to this provision shall not modify any representation or warranty of such party, cure any breaches thereof or limit or otherwise affect the rights or remedies available hereunder to the other parties and the failure of the party receiving such information to take any action with respect to such notice shall not be deemed a waiver of any breach or breaches to the representations or warranties of the party disclosing such information. 6.5 Tax Matters . (a) Allocation of Taxes . In the case of any Tax period that includes (but does not end on) the Closing Date (the " Straddle Period " ), the portion of Tax which relates to the Pre-Closing Tax Period shall (i) in the case of any Taxes other than Taxes based upon or related to income, gains, receipts, or payroll, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and (ii) in the case of any Tax based upon or related to income, gains, receipts, or payroll be deemed equal to the amount which would be payable if the relevant Straddle Period 50 ended on the Closing Date. The Selling Parties will be responsible for the payme nt of any Taxes of the Target Group accruing with respect to the period pr ior to the Effective Time. For income tax purposes, t he transactions contemplated by this Agreement shall be treated by the parties for tax purposes as a sale of partnership interests by the Selling Parties and a purchase of assets by Acquiror. The Selling Parties shall file a final partnership R eturn for the Target Group for the period ending at the Effective Time. (b) Preparation of Returns . All Returns of Target to be filed after the Effective Time for any Tax period shall be prepared and filed by Acquiror or the Surviving Company , as applicable, provided that all such Returns shall be prepared in a manner consistent with a pplicable Law, and to the extent consistent with the foregoing, past practice. Acquiror or the Surviving Company , as the case may be, shall provide drafts of any such Returns that show Taxes for which the Selling Parties are responsible for indemnification to the Selling Parties' Agent at least 10 Business D ays prior to the due date for such Return. If the Indemnifying Selling Parties' Agent objects to any such draft Return as it relates to Taxes for which the Selling Parties are responsible for indemnification, the parties shall negotiate in good faith to resolve such dispute . (c) Cooperation . Acquiror, the Surviving Company and the Selling Parties' Agent shall cooperate fully as and to the extent reasonably requested by the other party in connection with the preparation and filing of any Return required of Target, and the defense of any examination, claim, audit, litigation or other proceeding, with respect to Taxes which may be payable by Target for a Pre-Closing Tax Period or a Straddle Period. Acquiror, and the Surviving Company agree to abide by all record retention requirements of, or record retention agreements entered into with, any Tax authority. (d) Certain Taxes and Fees . All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement shall be borne and paid by the Selling Parties when due. The party responsible under a pplicable Law for submitting payment of such Taxes to the applicable Tax authority shall file all necessary Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees. If required by a pplicable Law, Acquiror or the Surviving Company shall join in the execution of any suc h Returns and other documentatio n . (e) Allocation of Merger Consideration . The Merger Consideration (and all other items of consideration for federal income T ax purposes, including any adjustments thereto) shall be allocated for all T ax purposes, among the assets of the Target Group in accordance with Attachment F . The parties hereto (a) agree to be bound, and to cause their respective Affiliates and Representatives to be bound, by such allocation as finally determined pursuant to this Section 6.5(e) (including adjustments thereto pursuant to this Agreement), (b) shall act, and cause their respective Affiliates and Representatives to act, in accordance with such allocation (including any adjustments thereto pursuant to this Agreement) in preparation, filing and audit of any Return and for all other T ax and accounting purposes, and (c) shall not take any position or action inconsistent with such allocation (including any adjustment thereto pursuant to 51 this Agreement). 6.6 Noncompetition Agreements . A s a condition and inducement for Acquiror’s willingness to have entered into this Agreement, prior to the Effective time, each of the Selling Parties and each of the equity holders of Black Stone Companies of Ohio, Inc. shall execute and deliver a Noncompetition and Nonsolicitation Agreement in the form attached hereto as Attachment H , with such modifications as are agreed upon by each Selling Party and Acquiro r (the " Selling Parties Noncompetition Agreement ") to become effective at the Effective Time. 6.7 Approval of Merger . Each Selling Party agrees to approve the Merger and to otherwise use its best efforts to cause a closing of the transactions contemplated by this Agreement . 6.8 Intentionally Deleted . 6.9 Intentionally Deleted . 7. Intentionally Deleted . 8. Intentionally Deleted . 9. Indemnification . 9.1 Indemnification by the Selling Parties . (a) From and after the Effective Time and s ubject to the limitations set forth in this Section 9, the Selling Parties shall , severally and not jointly, indemnify and hold harmless Acquiror and Target Group and their respective officers, directors, manager s, employees, agents and other R epresentatives and Affiliates (individually an " Acquiror Indemnified Person " and collectively the " Acquiror Indemnified Persons " ) from and against any and all Damages resulting from or arising out of: (i) any misrepresentation or breach of any of the representations and wa rranties given or made by the Selling Parties or Target in this Agreement; Party (ii) any breach of any covenant or agreement made by Target or any Selling in this Agreement , at or prior to the Effective Time; (iii) Damages arising from: (A) any post-payment review by, or claims, actions, audits, investigations, or proceedings conducted by or on behalf of, any Third Party Payors or Medicare administrative contractors or intermediaries, recovery auditors (formerly, recovery audit contractors), long-term care audits, zone program integrity contractors or specialty medical review contractors, but only with respect to Damages relating to the performance of such services by Target Group prior to the Effective Time; (B) audits, investigations, claims, actions, proceedings or lawsuits filed by the U.S. Department of Health and Human Services Office of Inspector General, U.S. Department of Justice, or any state 52 attorney general or state licensing agency or other agencies or persons with respect to health care fraud or False Claims Act Matters, qui tam or whistle blower actions, relating solely to the provision of health care services or the submission of health care claims by Target Group and with dates of service prior to the Effective Time; (C) any review by, or claims, actions, audits, investigations, or proceedings conducted by any Governmental Authority or Third Party Payor , but limited to Damages relating to the operation of the Target Business or its participation in Medicare or any Private Programs prior to the Effective Time; (D) medical malpractice claims arising out of the operation of the Target Business prior to the Effective Time , including without limitation, the malpractice claims disclosed on Section 3.24 of the Target Disclosure Schedule ; or (E) the failure of Target Group to obtain or maintain necessary Health Care Licenses for periods prior to the Effective Time; (iv) any worker's compensation claims , for occurrenc es prior to the Effective Time , or the failure of Target Group to comply , prior to the Effective Time, with all applicable requirements of the Patient Protection and Affordable Care Act of 2010 ( " PPACA " ), including, without limitation, offering affordable coverage to a sufficient number of Company Employees to avoid penalties under the PPACA; (v) any Damages resulting from or arising out of (a) all Taxes (or the non-payment thereof) of any of the Target Group or Selling Parties for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period ( " Pre-Closing Tax Period " ), (b) all Taxes of any member of an affiliated, consolidated, combi ned or unitary group of which any member of the Target Group (or any predecessor of a member of the Target Group ) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state, local, or non-U.S. law or regulation, (c) any and all Taxes of any Person imposed on any member of the Target Group as a transferee or successor, by contract or pursuant to any a pplicable Law, which Taxes relate to an event or transaction occurring before the Closing, and (d) any Taxes that are the responsibility of the Selling Parties under Section 6.5(d). For the avoidance of doubt, the employer’s share of all employment, payroll and similar Taxes incurred by a member of the Target Group with respect to any compensatory payments made in connection with the Merger, whether such Taxes are incurred prior to, at, or following the Effective Time, shall be treated as arising in the Pre-Closing Tax Period; (vi) any Damages arising out of or relating to any services provided by any of the Target Group prior to the Effective Time or the operation of the Target Group's business or ownership o f its properties prior to the Effective Time ; (vii) any Damages arising out of the Identified Tax Issues , including without limitation, (A) any Damages arising out of the failure of Acquiror to obtain a cost basis in the assets of those members of the Target Group referred to in the definition of Identified Tax Issues; (B ) any additional taxes, penalties and interest payable by any of members of the Target Group arising out of the failure of the applicable Target Group members to make the tax elections referenced the definition of Identified Tax Issues, and (C ) any reasonable expenses actually incurred, including reasonable and necessary professional fees and expenses, associated with obtaining rulings from the IRS or oth erwise dealing with the tax matters 53 described in the definition of Identified Tax Issues and this clause. (viii) any amounts payable by Target Group in connection with the Northwest Acquisition Earn-out; (ix) any Damages arising out of or relating to the Home Health Aid Timesheet Dispute; (x) any Damages arising out of or relating to the Cavins Litigation; (xi) any Damages that arise out of the failure to include in Retained Employee Liabilities or in the Closing Statement payable at Closing any change in control, severance, transaction or " stay around " bonus or related or similar obligations, management fees, directors' fees, guaranty fees, costs or expenses of Target incurred in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby, including for services rendered by third party brokers, bankers, a ttorneys, accountants or other R epresentatives, and any associated payroll, withholdin g an d similar expenses or costs; (xii) any obligation of any of the Target Group to indemnify Target Indemnified Persons for events occurring prior to the Effective Time that are not fully covered by the Target Group's directors and officers liability insurance coverage obtained pursuant to Section 10.9 ; (xiii) any Damages arising out of or related to any Target Employee Plans or other "employee benefit plan" (as defined in ERISA) for which any of the Target Group has legal responsible for under ERISA, including, without limitation, Damages incurred in connection with making corrections , tax deficiencies arising out of the loss of deductions by Target Group, taxation of investment earnings and other penalties and interest and professional and oth er expenses associated therewith and Damages arising out of the Target Employee Plans compliance issues disclosed on Section 3.23(c) of the Target Disclosure Schedule ; (xiv) any amounts payable to David Venzke pursuant to any phantom equity or other compensation or equity arrangements with an y member of the Target Group, Damages associated with any outstanding obligations under contracts with David Venzke or expenses, including attorneys' fees, arising out of pursuing funds escrowed by the Target Group in connection with transactions with David Venzke ; and (xv) defending any third party claim alleging the occurrence of facts or circumstances that, if true, would entitle an Acquiror Indemnified Person to indemnification hereunder; provided, however, that if the applicable third party claim is only one of several claims pursued by a third party, defense expenses shall be divided pro rata among the parties based on a reasonable determination of the relative potential liability associated with the claims. 54 (b) Survival of Representations and Warranties . All representations and warranties made by Target in this Agreement, or in any certificate, schedule or exhibit delivered pursuant hereto, and representations and warranties of the Selling Parties in Section 4 shall survive the execution an d delivery of this Agreement and the Closing until the date eighteen ( 18 ) months after the Effective Time ; provided , however , that any claims for indemnification involving (i) any breach of any of the representations and warranties contained in Section 3.1 (Organization, Standing and Power; Subsidiaries), Section 3.2(a) (Authority), Section 3.5 (Capital Structure) , Section 3.25 (Brokers' and Finders' Fee) , Section 3.20 (Title to Assets) (collectively, the " Fundamental Representations " ) and Section 3.14 (Compliance with L aw and Healthcare Standards) shall survive for a period of thirty six ( 36 ) months after the Effective Time, and (ii) fraud and intentional misrepresentation , Section 3.22 (Taxes), and Section 3.23 (Employee Benefit Plans; Labor and Employment Matters) shall survive (A) until the expiration of the statute of limitations applicable to such claims (and thereafter until resolved if a claim in respect thereof has been made prior to such date) with respect to such matters , or (B) until the tenth anniversary of the Closing, if no statute of limitations apply. There shall be no termination of any representation or warranty as to which a claim has been asserted by any Acquiror Indemnified Person prior to the termination of such survival period. All covenants and agreements survive indefinitely unless otherwise specified in their terms. (c) Threshold for Claims . No claim for Damages shall be made under Section 9 .1 unless the aggregate of Damages for which claims are made hereunder by the Acquiror Indemni fied Persons exceeds $2 00,000 (the " Deductible " ) ; provided , however , the Deductible shall not apply to Damages arising out of indemnification claims under Section 9.1(a)(xiii) or 9.1(a)(xiv) . If the total amount of all Damages exceeds the Deductible , then the Selling Parties ’ obligations under Section 9 .1 (subject to the exceptions noted above) shall be limited to the amount by which the aggregate amount of all such Damages exceeds the Deductible . (d) Further Limitations on Indemnification Claims . (i) T he aggregate amount to be paid by the Selling Parties for any Damages arising out of or relating to any indem nification obligation under Section 9 .1 or otherwise arising out of or relating to this Agreement , including, without limitation, all Damages referenced in Sections 9.1(d)(iii) through (vi), will not exceed $5,000,000 (the " Cap " ) ; provided , however , that th e Cap shall not apply to Damages arising out of : (A ) fraud or intentional misrepresentation, (B ) breach of a Fundamental Representation, or (C ) Damages arising out of indemnification claims falling within the scope of the Express Indemnification Clauses , as such matters are capped in Section 9.1(d)(ii) below . (ii) T he aggregate amount to be paid by the Selling Parties for any Damages arising out of or relating to claims for indemnification for : (A ) fraud or intentional misrepresentation, (B ) breach of a Fundamental Representation, or (C ) Damages arising out of the indemnification claims falling within the scope of the Express Indemnification Clauses , will not exceed an amount eq ual to the Merger Consideration. (iii) The first $2,000,000 of Damages payable pursuant to this 55 Article 9 with respect to Identified Tax Issues shall be paid out of the Escrow Amount and any Damages in excess of $2,000,000 shall be subject to offset against the Acquiror Notes . The parties acknowledge that professionals representing the Target Group shall handle matters relating to the Identified Tax Issues at the sole expense of the Selling Parties ( which may be paid by the Selling Parties directly, or if not so paid, they will be payable first out of the Escrow Amount and then as a set-off against the Acquiror Notes ) and the Selling Parties' Agent shall be kept informed of the status of the Target Group's ruling requests and shall manage and direct the professionals representing the Target Group with regard to handling such matters . If the aggregate Damages relating to the Identified Tax Issues is less than $2,000,000, then the difference between the aggregate Damages payable or paid pursuant to this Article 9 with respect to the Identified Tax Issues and $2,000,000 shall be distributed out of escrow to the Selling Parties' Agent. (iv) Target Group shall be reimbursed for up to $625,000 payable with respect to the Northwest Acquisition Earn-out out of the Escrow Amount. If the amount payable by the Target Group with respect to the Northwest Acquisition Earn-out is less than $625,000, then the difference between the actual earn-out payment amount and $625,000 shall be distributed out of escrow to the Selling Parties' Agent. The parties acknowledge that professionals representing the Target Group shall handle matters relating to the Northwest Acquisition Earn-out at the sole expense of the Selling Parties ( which may be paid by the Selling Parties directly, or if not so paid, they will be payable first out of the Escrow Amount and then as a set-off against the Acquiror Notes ) and the Selling Parties' Agent shall be kept informed of the status of the Target Group's ruling requests and shall manage and direct the professionals representing the Target Group with regard to handling such matters. (v) The first $225,000 of Damages payable pursuant to this Article 9 with respect to Home Health Aid Timesheet Dispute shall be paid out of the Escrow Amount , and any Damages in excess of $225,000 shall be subject to offset against the Acquiror Notes . If the aggregate Damages relating to the Home Health Aid Timesheet Dispute is less than $225,000, then the difference between the aggregate Damages payable or paid pursuant to this Article 9 with respect to the Home Health Aid Timesheet Dispute and $225,000 shall be distributed out of escrow to the Selling Parties' Agent. The parties acknowledge that professionals representing the Target Group shall handle matters relating to the Home Health Aid Timesheet Dispute at the sole expense of the Selling Parties ( which may be paid by the Selling Parties directly, or if not so paid, they will be payable first out of the Escrow Amount and then as a set-off against the Acquiror Notes ) and the Selling Parties' Agent shall be kept informed of the status of the Target Group's ruling requests and shall manage and direct the professionals representing the Target Group with regard to handling such matters. (vi) The first $250,000 of Damages payable pursuant to this Article 9 with respect to the Cavins L itigation shall be paid out of the Escrow Amount, and any Damages in excess of $250,000 shall be subject to offset against the Acquiror Notes. If the aggregate Damages relati ng to the Cavins L itigation is less than $25 0,0 00, then the difference between the aggregate Damages payable or paid pursuant to this Article 9 with respect to the Cavins litigation and $250,000 shall be distributed out of escrow to the Selling Parties' Agent. 56 The Selling Parties' Agent shall be responsible for making decisions with respect to the appeal of the judgment in the Cavins litigation and the expense of such appeal shall be paid directly by the Selling Parties. Acquiror shall not be responsible for any damages, fees and expenses arising out of such appeal. (vii) Notwithstanding anything in this Agreement to the contrary, each Selling Party's personal liability for payment of indemnification claims payable pursuant to this Agreement shall be limited to such Selling Party's Pro R ata Portion of each applicable individual limitation set forth in this Agreement . (viii) Notwithstanding anything in this Agreement to the contrary, p ayments by Selling Part ies for any Damages arising out of or relating to any indemnification obligations under Section 9.1 , shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by , or payable to, the applicable Acquiror Indemnified P erson in respect of any such claim ; provided, however, that the amount of insurance proceeds deemed received by an Acquiror Indemnified Person shall be net of any related costs and expenses, including the aggregate cost of pursuing any related insurance claims and any related increases in insurance premiums or other chargebacks proximately caused by such claims. The applicable Acquiror Indemnified Person shall use it s reasonable commercial efforts to recover under any applicable insurance policies or indemnity, contribution or other similar agreement for any Damages prior to seeking indemnification under this Agreement (it being agreed that promptly after the realization of any insurance proceeds, indemnity, contribution or other similar payment, the Acquiror Indemnified Person shall reimburse the Selling Parties for such reduction in Damages for which the Acquiror Indemnified Person was indemnified prior to the realization of reduction of such Damages) . (ix) Notwithstanding anything in this Agreement to the contrary, p ayments by Selling Part ies for any Damages arising out of or relating to any indemnification obligations under Section 9.1, shall be reduced by an amount equal to any T ax benefit actually realized by the applicable Acquiror Indemnified P erson in respect of such Damages by the Acquiror Indemnified Person. (x) I n no event shall any of the Sell ing Parties be liable to any Acquiror Indemnified P erson for any punitive , indirect or special D amages . (e) Limitations on Selling Parties' Indemnification Obligations . Notwithstanding anything in this Agreement to the contrary, the referen ce to "severally and not joint ly " and the limitation on a Selling Party's indemnification obligation set forth in Section 9.1( d )(vii) shall not be interpreted or construed to place any limitation on the right of the Acquiror Indemnified Persons to be compensated from the Escrow Fund or as a set off against the Acquiror Note s for the full amount of all Damages arising out of or relating to any indemnificat ion claim . (f) Set-o ff Against Acquiror Note s . Except as otherw ise provided in this Agreement , and except for indemnification claims with respect to the Identified Tax Issues, 57 the Northwest Acquisition Earn-out, the Home Health Aid Timesheet Dispute and the Cavins Litigation , Acquiror shall , subject to the provisions of this Section 9, fi rst set off any Damages payable pursuant to this Agreement against the outstanding balance of the Acquiror Note s , as among the Selling Parties on a pro-rata basis, prior to seeking payment of Damages directly from the Selling Parties. 9.2 Indemnification Claims by Acquiror . (a) Upon receipt by the Selling Parties' Agent of a certificate signe d by any officer of Acquiror (a n " Acquiror 's Certificate " ) stating that Damages exist with respect to the indemnification obligations of the Selling Parties set forth in Section 9.1 , and specifying in reasonable detail the individual items of such Damages included in the amount so stated, the date each such item was paid, or properly accrued or arose, and the nature of the misrepresentation, breach of warranty, covenant or claim to which su ch item is related, Acquiror shall, subject to the provisions of this Section 9, be entitled to set off against the outstanding principal balance of the Acquiror Note s, recover from the Escrow Fund or recover from the Selling Parties, as applicable, the amount of such Damages and such amount shall no longer be payable to the Selling Parties ; provided , however , if the validity of the claim or amount of Damages set forth in the Acquiror's Certificate is disputed by the Selling Parties' Agent, then no set-off or deduction shall be permitted against an Acquiror Note or the Escrow Fund until there is a final determination as provided in this Agreement of the validity of the claim an d amount of Damages allowable. But, with respect to a set-off or deduction against an Acquiror Note with respect to an indemnification claim which has been determined to be valid and the amount of Damages determined , set-off or deduction against the principal of the Acquiror Note shall be deemed to have occurred as of the date of the delivery of the Acquiror's Certificate for purposes of calculating interest accruing on the Acquiror Note. (b) The Selling Parties' Agent shall have a period of thirty ( 30 ) days from a nd after delivery of any Acquiror ’s Certificate to deliver to Acquiror a response, in which the Selling Parties' Agent shall: (i) agree that Acquiror is entitled to be indemnified for all of the requested Damages (in which case the response shall be accompanied by written notice executed by the Selling Parties' Agent instructing the Escrow Agent to disburse the requested Damages to Acquiror) or (ii) dispute that Acquiror is entitled to be indemnified for the requested Damages. (c) If the Selling Parties' Agent disputes any claim or claims made in any Acquiror 's Certificate, Acquiror shall have thirty ( 30 ) days to respond in a written statement to the objection of the Selling Parties' Agent . If after such thirty ( 30 ) day period there remains a dispute as to any claims, the Selling Parties' Agent and Acquiror shall attem pt in good faith for thirty ( 30 ) days to agree upon the rights of the respective parties with respect to each of such claims (the " C laims Period " ). If the Selling Parties' Agent and Acquiror should so agree, a memorandum setting forth such agreement shall be prepared and signed by Acquiror and the Selling Parties' Agent and shall be delivered to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum for the release of any Escrow Amount to Acquiror in accordance with the terms of such memorandum and the Escrow Agreement. 9.3 Resolution of Conflicts . If no agreement can be reached after good faith 58 negotiation between the parties pursuant to Section 9.2(c) during the Claims Period, either Acquiror or the Selling Parties' Agent may initiate formal legal action with the applicable court in accordance with Section 10.5 to resolve such dispute. The final judgment or decree of any court of competent jurisdiction as to the validity and amount of any claim in such Acquiror 's Certificate shall be binding and conclusive upon the parties to this Agreement, and notwithstanding anything in this Section 9 , the parties shall be entitled to act in accordance with such decision. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined. 9.4 Selling Parties' Agent . (a) The Selling Parties' Agent shall be constituted and appointed as agent and attorney-in-fact for and on behalf of the Selling Parties and shall have full power and authority to represent, to give and receive notices and communications, to authorize the Escrow Agent to release any portion of the Escrow Fund to Acquiror in satisfaction of claims by Acquiror, to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such claims and to take all actions necessary or appropriate in the judgment of the Selling Parties' Agent for the interpretation of the Escrow Agreement and this Agreement and accomplishment of the foregoing , and, in addition to the above matters arising pursuant to the Agreement, to manage and direct other matters of interest to the Selling Parties including, without limitation, the private letter rulings relating to the Indemnified tax Issues, the wrap up 401(k) matters for terminated plans, the legal/regulatory matters, including litigation, appeals and/ or settlement discussions, relating to the Cavins Litigation, the Home Health Aid Timesheet Dispute, and the Northwest Acquisition Earn out, and the Target final partnership tax return . Acquiror , and the Escrow Agent under the Escrow Agreement, shall be entitled to deal exclusively with Selling Parties' Agent on all matters relating to this Agreement and the Escrow Agreement and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Selling Party by Selling Parties' Agent , and on any other action taken or purported to be taken on behalf of any Selling Party or by the Selling Parties' Agent , as being fully binding upon such Person. Notices or communications to or from Selling Parties' Agent shall constitute notice to or from each of the Selling Parties . Any decision or action by the Selling Parties' Agent hereunder, including any agreement between Selling Parties' Agent and Acquiror relating to the defense, payment or settlement of any claims for indemnification hereunder, shall constitute a decision or action of all Selling Parties and shall be final, binding and conclusive upon each such Person. No Selling Party shall have the right to object to, dissent from, protest or otherwise contest the same. The provisions of this Section, including the power of attorney granted hereby, are independent and severable, are irrevocable and coupled with an interest and shall not be terminated by any act of any one or any Selling Party , or by operation of a pplicable Law, w hether by death or other event. No bond shall be required of the Selling Parties' Agent . (b) The Selling Parties' Agent shall not be liable for any act done or omitted hereunder as Selling Parties' Agent while acting in good faith and in the exercise of 59 reasonable judgment and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith. The Selling Parties shall severally indemnify and hold the Selling Parties' Agent harmless against any loss, liability, claims, actions, damages or expense incurred without gross negligence or bad faith on the part of the Selling Parties' Agent and arising out of or in connection with the acceptance or administration of its duties hereunder. (c) The Selling Parties' Agent shall have reasonable access to information about Target and the reasonable assistance of Target’s officers and employees for purposes of performing its duties and exercising its rights hereunder, provided that the Selling Parties' Agent shall treat confidentially and not disclose any nonpublic information from or about Target to anyone (except on a need to know basis to individuals who agree to treat such information confidentially). (d) Acquiror acknowledges that the Selling Parties' Agent may have a conflict of interest with respect to its duties as Selling Parties' Agent , and in such regard the Selling Parties' Agent has informed Acquiror that it will act in the best interests of the Selling Parties . (e) The Selling Parties' Agent may resign at any time, and may be removed for any reason or no reason by the vote or written consent of the holders of a majority of the shares of Target Units immediately prior to the Closing (the " Majority Holders " ); provided, however, in no event shall the Selling Parties' Agent resign or be removed without the Majority Holders having first appointed a new Selling Parties' Agent who shall assume such duties immediately upon the resignation or removal of Selling Parties' Agent . In the event of the death, incapacity, resignation or removal of Selling Parties' Agent , a new Selling Parties' Agent shall be appointed by the vote or written c onsent of the Majority Holders. Notice of such vote or a copy of the written consent appointing such new Selling Parties' Agent shall be sent to Acquiror, such appointment to be effective upon the later of the date indicated in such consent or the date such notice is received by Acquiror; provided, that until such notice is received, the parties shall be entitled to rely on the decisions and actions of the prior Selling Parties' Agent as described above. 9.5 Actions of the Selling Parties' Agent . A decision, act , consent or instruction of the Selling Parties' Agent shall constitute a decision of all Selling Parties for whom the Merger Consideration otherwise payable to them is released to Acquiror from the Escrow Fund with respect to the matters set forth in this Section 9 and shall be final, binding and conclusive upon each such Selling Party , and Acquiror and the Escrow Agent under the Escrow Agreement may rely upon any decision, act, consent or instruction of the Selling Parties' Agent as being the decision, act, consent or instruction of each and every such Selling Party . Acquiror is hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Selling Parties' Agent . 9.6 Third Party Claims . (a) In the event an Acquiror Indemnified Person receives notice of the assertion or commencement of an Action made or brought by any Person who is not a party to 60 this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a " Third Party Claim ") against such Acquiror Indemnified Person with respect to which the Selling Parties are obligated to provide indemnification under this Agreement, the Acquiror Indemnified Person shall give the Selling Party's Agent reasonably prompt written notice thereof, but in any event not later than fifteen (15) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Selling Parties of their indemnification obligations, except and only to the extent that the Selling Parties forfeit rights or defenses by reason of such failure. Such notice by the Acquiror Indemnified Person shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Acquiror Indemnified Party. (b) The Selling Party's Agent shall have the right to participate in, or by giving written notice to the Acquiror Indemnified Person, to assume the defense of any Third Party Claim at the Selling Parties' sole expense and by the Selling Parties' own counsel, and the Acquiror Indemnified Person shall cooperate in good faith in such defense; provided, that the Selling Parties shall not have the right to defend or direct the defense of any such Third Party Claim that (x) is asserted directly by or on behalf of a Person that is a supplier or customer of the Target Group, or (y) seeks an injunction or other equitable relief against the Acquiror Indemnified Party. In the event that the Selling Parties assume the defense of any Third Party Claim, subject to Section 9.6(d) , it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Acquiror Indemnified Person. The Acquiror Indemnified Person shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Selling Parties' right to control the defense thereof. The fees and disbursements of such counsel shall be at the sole expense of the Acquiror Indemnified Person, provided, that if in the reasonable opinion of counsel to the Acquiror Indemnified Person, (A) there are legal defenses available to an Acquiror Indemnified Person that are different from or additional to those available to the Selling Parties; or (B) there exists a conflict of interest between the Selling Parties and the Acquiror Indemnified Person that cannot be waived, the Selling Parties shall be liable for the reasonable fees and expenses of counsel to the Acquiror Indemnified Person in each jurisdiction for which the parties counsel is required, but , with respect to such additional legal defenses , only those fees and expenses associated with the pursuit of such additional legal defenses . (c) If the Selling Parties' Agent elects not to compromise or defend such Third Party Claim, fails to notify the Acquiror Indemnified Person in writing , and within thirty (30) days, of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Acquiror Indemnified Person may, subject to Section 9.6(d ), pay, compromise, defend such Third Party Claim and seek indemnification for any and all Damages based upon, arising from or relating to such Third Party Claim. Selling Parties and Acquiror shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket 61 expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claims. (d) Notwithstanding any other provision of this Agreement, the Selling Parties shall not enter into settlement of any Third Party Claim without the prior written consent of the Acquiror Indemnified Person, except a s provided in this Section 9.6(d ). If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Acquiror Indemnified Person and provides, in customary form, for the unconditional release of each Acquiror Indemnified Person from all liabilities and obligations in connection with such Third Party Claim and the Selling Parties desire to accept and agree to such offer, the Selling Parties shall give written notice to that effect to the Acquiror Indemnified Person. If the Acquiror Indemnified Person fails to consent to such firm offer within ten (10) days after its receipt of such notice, the Acquiror Indemnified Person may , following written notice to the Selling Parties’ Agent, which shall be provided within such same ten (10) day period, continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Selling Parties as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Acquiror Indemnified Person fails to consent to such firm offer and also fails to notify Selling Parties’ Agent, within the preceding ten (10) day period, that the Acquiror Indemnified Person intends to assume defense of such Third Party Claim, than the Selling Parties may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Acquiror Indemnified Person has assumed the defense pursuant to this Section 9.6 , it shall not agree to any settlement without the written consent of the Selling Parties' Agent, which consent shall not be unreasonably withheld or delayed. 9.7 Indemnification by Acquiror and Surviving Company . (a) Indemnification . From and after the Effective Time and subject to the limitations set forth in this Section 9, Acquiror and the Surviving Company , jointly and severally, hereby agree to indemnify and hold harmless the Selling Parties from and against any and all Damages, resulting from or arising out of: (i) any misrepresentation or breach of any of the representations and warranties given or made by Acquiror or Merger Sub in this Agreement; (ii) any breach of any covenant o r agreement made by Parent Acquiror , Merger Sub, or Surviving Company in this Agreement at or prior to the Effective Time ; (iii) Damages arising from: (A) any post-payment review by, or claims, actions, audits, investigations, or proceedings conducted by or on behalf of, any Third Party Payors or Medicare administrative contractors or intermediaries, recovery auditors (formerly, recovery audit contractors), long-term care audits, zone program integrity contractors or specialty medical review contractors, but only with respect to Damages relating to the performance of such services by Target Group after the Effective Time ; (B) audits, investigations, claims, actions, proceedings or lawsuits filed by the U.S. Department of Health and Human Services Office of Inspector General, U.S. Department of Justice, or any state 62 attorney general or state licensing agency or other agencies or persons with respect to health care fraud or False Claims Act Matters, qui tam or whistle blower actions, but limited to Damages relating to the provision of health care services or the submission of health care claims by Target Group re lating to dates of service after to the Effective Time; (C) any review by, or claims, actions, audits, investigations, or proceedings conducted by any Governmental Authority or Third Party Payor and relating to the operation of the Target Business or its participation in Medica re or any Private Programs after to the Effective Time; (D) medical malpractice claims arising out of the operat ion of the Target Business after to the Effective Time; or (E) the failure of Target Group to obtain or maintain nece ssary Health Care Licenses after to the Effective Time; (iv) any Damages arising out of or relating to any services provided by any of the Target Group after the Effective Time, or the operation of the Target Group's business or o wnership of its properties after the Effective Time ; and (v) defending any third party claim alleging the occurrence of facts or circumstances that, if true, would entitle a Selling Party to indemnification hereunder; provided, however, that if the applicable th ird party claim is only one of several claims pursued by a third party, defense expenses shall be divided pro rata among the parties based on a reasonable determination of the relative potential liabi lity associated with the claims. (b) Survival of Representations and Warranties . All representations and warranties made by Acquiror and Merger Sub in this Agreement, or in any certificate, schedule or exhibit delivered pursuant hereto shall survive the execution and delivery of this Agreement and the Closing and shall survive until the Escrow Termination Date; provided , however , that any claims for indemnification involving (i) fraud or intentional misrepresentation and (ii) any breach of any of the representations and warranties contained in Section 5.1 (Organization, Standing and Power) and Section 5.2 (Authority) (collectively, the " Acquiror Fundamental Representations " ) shall survive (A) until the expiration of the statute of limitations applicable to such claims (and thereafter until resolved if a claim in respect thereof has been made prior to such date) with respect to such matters, or (B) indefinitely if no statute of limitations apply. There shall be no termination of any representation or warranty as to which a claim has been asserted by any Indemnified Cash Recipient prior to the termination of such survival period. All covenants and agreements survive indefinitely unless otherwise specified in their terms. (c) Threshold for Claims . No claim for Damages shall be made under Section 9 .7 unless the aggregate of Damages for which claims are made hereunder by the Selling Parties exceeds the Deductible . If the total amount of all such Damages exceeds the Deductible , then the Acquiror ’s and Surviving Company’s obligations under Section 9 .7 shall be limited to the amount by which the aggregate amount of all such Damages exceeds the Deductible . (d) Acquiror Cap on Indemnification Claims . T he aggregate amount to be paid by the Acquiror and Surviving Company for any Damages arising out of or relating to any indemnification obligation under this Section 9.7 or otherwise arising out of or relating to this Agreement will not exceed $5,000,000 (the " Acquiror Cap " ); provided , however , that the 63 maximum aggregate limit for claims involving (i) fraud or intentional misrepresentation , (ii) an y breach of any of an Acquiror Fundamental Representation , or (iii) an indemnification claim made pursuant to the Acquiror Express Indemnification Clauses, shall be an amount equal to the Merger Consideration. (e) Indemnification Claims by Selling Parties . Upon receipt by Acquiror of a certificate sign ed by Selling Parties’ Agent (a " Selling Parties' Certificate ") stating that Damages exist with respect to the indemnification obligations of the Acquiror and Surviving Company set forth in Section 9. 7 , and specifying in reasonable detail the individual items of such Damages included in the amount so stated, the date each such item was paid, or properly accrued or arose, and the nature of the misrepresentation, breach of warranty, covenant or claim to which such item is related, Selling Parties’ shall, subject to the provisions of this Section 9, be entitled to recover from the Acquiror and Surviving Company, the amount of such Damages. The Acquiror and Surviving Company shall have a period of thirty (30) days from and after delivery of any Selling Parties' Certificate to deliver to Selling Parties’ Agent a response, in which the Acquiror and Surviving Company shall: (i) agree that the Selling Parties are entitled to be indemnified for all of the requested Damages (in which case the response shall be accompanied by payment in full of such Damages); or (ii) dispute that the Selling Parties are entitled to be indemnified for the requested Damages. If the Acquiror and Surviving Company dispute any clai m or claims made in any Selling Parties' Certificate, Selling Parties’ Agent shall have thirty (30) days to respond in a written statement to the objection of the Acquiror and Surviving Company. If after such thirty (30) day period there remains a dispute as to any claims, the Selling Parties' Agent and Acquiror shall attempt in good faith for thirty (30) days to agree upon the rights of the respective parties with respect to each of such claims (the " Selling Parties' Claims Period "). If the Selling Parties' Agent and Acquiror should so agree, a memorandum setting forth such agreement shall be prepared and signed by Acquiror and the Selling Parties' Agent and any payment required thereunder shall be made by Acquiror and Surviving Company upon the execution of such memorandum. (f) Resolution of Conflicts . If no agreement can be reached after good faith negotiation between the parties pursuant to Section 9.7(e) during the Selling Parties' Claims Period, either Acquiror or the Selling Parties' Agent may initiate formal legal action with the applicable court in accordance with Section 10.5 to resolve such dispute. The final judgment or decree of any court of competent jurisdiction as to the validity and amount of any claim in a Sell ing Parties' Certificate shall be binding and conclusive upon the parties to this Agreement, and notwithstanding anything in this Section 9, the parties shall be entitled to act in accordance with such decision. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined. 9.8 Tax Effect of Indemnification Payments . All amounts paid to any indemnified person under this Section 9 (including from the Escrow Fund) shall be treated for all Tax purposes as adjustments to Merger Consideration , unless otherwise required by a pplicable Law. 9.9 Exclu sive Remedies . The parties acknowledge and agree that, after the 64 Effective Time, except for remedies that cannot be waived as a matter of a pplicable Law, their sole and exclusive remedy with respect to any and all monetary damages for any breach of any re presentation, warranty, covenant, agreement or obligation set forth in this Agreement or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Section 9. But nothing in this Section 9.9 shall limit any Person's rights under Section 10.7. 9.10 Effect of Investigation . The representati ons, warranties and covenants of a Person, and a Person's right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation made by or on behalf of a Person (including by any of it s R epresentatives or by reason of the fact the Person seeking indemnification, or any of its R epresentatives , knew or should have known that any such representation or warranty is, was or might be inaccurate ), including as a result of Target's or any Selling Party 's notification to Acquiror of specific matters prior to Closing . 9.11 Materiality Scrape . Notwithstanding anything in this Agreement to the contrary, for the purposes of the determination of Damages pursuant to Section 9 (but not for purposes of determining whether a representation and warranty has been breached), the representations and warranties of Target in this Agreement that are qualified by materiality or Material Adverse Effect or similar materiality qualifiers shall be deemed to be made without such Material Adverse Effect or other materiality qualifiers. 10. General Provisions . 10.1 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly delivered: (i) upon receipt if delive red personally; (ii) three (3) B usine ss D ays after being mailed by registered or certified mail, postage prepaid, return re ceipt requested; (iii) one (1) Business D ay after it is sent by commercial overnight courier service; or (iv) upon transmission if sent via facsimile with confirmation of receipt to the parties at the following address (or at such other address for a party as shall be specified upon like notice): (a) if to Acquiror or Merger Sub, to: c/o Almost Family, Inc. 9510 Ormsby Station Road, Suite 300 Louisville, Kentucky 40223 Attention: President Fax : (502) 891-8067 Tel: (502) 891-1042 Email: [email protected] with a copy to: Frost Brown Todd LLC 400 West Market Street, 32nd Floor Louisville, Kentucky 40202 65 Attention: Scott Dolson Fax: (502) 581-1087 Tel: (502) 568-0203 Email: [email protected] (b) if to Target, to: David Tramontana 4700 E. Galbraith Road, Suite 302 Cincinnati, OH 45236 Fax: (937) 299-2213 Tel: (513) 924-3690 Email: DTramontana@ blackstonehc.com with a copy to: Coolidge Wall Co., L.P.A. 33 West First Street Suite 200 Dayton, Ohio 45402 Attention: Sam Warwar, Esq. Fax: 937-223-6705 Tel: 937-223-8177 Email: [email protected] (c) if to Selling Parties' Agent, to: David Brixey 2991 Newmark Drive Miamisburg, OH 45342 Fax : (937) 291-4120 Tel: (937) 291-4110 Email: [email protected] 10.2 Counterparts; Facsimile . This Agree ment may be executed in one or more counterparts, all of which s hall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart and such counterparts may be delivered by the parties hereto via facsimile or electronic (PDF) transmission (each of which shall be deemed an original). 10.3 Entire Agreement; Nonassignability; Parties in Interest . This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, including the Target Disclosure Schedule , (a) together constitute the entire agreement among the parties with respect 66 to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof except for the Confidentiality Agreement, which shall continue in full force and effect, and shall survive any termination of this Agreement or the Closin g, in accordance with its terms, and (b) are not intended to confer upon any other Person any rights or remedies hereunder and shall not be assigned by operation of law or otherwise without the written consent of the other party. 10.4 Severability . In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 10.5 Governing Law ; Venue; Waiver of Jury Trial . (a) This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Kentucky applicable to parties residing in Kentucky , without regard to applicable principles of conflicts of law . The parties to this Agreeme nt agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the Kentucky Court of Justice , Jefferson County , Kentucky, or, if that court does not have jurisdiction, a federal court sitting in Louisville, Kentucky , and that any case of action arising out of this Agreement shall be deemed to have arisen from a transac tion of business in the State of Kentucky , and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. (b) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY IRREVOCABLY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN WHOLE OR IN PART UNDER, RELATED TO, BASED ON OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10 . 5 WITH ANY COURT AS WRITTEN EVIDENCE OF THE 67 CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. 10.6 Rules of Construction . Each party acknowledges that such party has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived. 10.7 Specific Enforcement . (a) Acquiror acknowledges and agrees that the Selling Parties would be irreparably harmed and the Selling Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed by Acquiror in accordance with their specific terms or were otherwise breached. Accordingly, Acquiror agrees that each Selling Party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which such Selling Party is entitled at law or in equity. (b) Target and the Selling Parties acknowledges and agrees that Acquiror would be irreparably harmed and Acquiror would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed by Target in accordance with their specific terms or were otherwise breached. Accordingly, Target and the Selling Parties agree that Acquiror shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which Acquiror is entitled at law or in equity. 10.8 Amendment; Waiver . (a) Acquiror and the Selling Parties’ Agent may cause this Agreement to be amended only by execution of an instrument in writing signed on behalf of Acquiror and the Selling Parties' Agent. (b) Any waiver of any of the terms or conditions of this Agreement must be in writing and must be duly executed by or on behalf of the party to be charged with such waiver. The failure of a party to exercise any of its rights hereunder or to insist upon strict adherence to any term or condition hereof on any one occasion shall not be construed as a waiver or deprive that party of the right thereafter to insist upon strict adherence to the terms and conditions of this Agreement at a later date. Further, no waiver of any of the terms and conditions of this Agreement shall be deemed to or shall constitute a waiver of any other term of condition hereof (whether or not similar). 10.9 Directors’ and Officers’ Indemnification and Insurance . (a) All rights relating to indemnification, exculpation and 68 advancement of expenses by Target existing in favor of those Persons who are directors and officers of Target as of the date of this Agreement (the " Target Indemnified Persons " ) for their acts and omissions occurring prior to the Effective Time, as provided in the Target Charter Documents (as in effect as of the date of this Agreement) or in any agreement, shall survive the Merger and shall be observed by the Surviving Company to the fullest extent available under a pplicable Law, and any claim made requesting indemnification pursuant to such indemnification rights shall continue to be subject to this Section 10.9(a) and the indemnification rights provided under this Section 10.9(a) until the disposition of such claim. This Section 10.9(a) shall not limit or otherwise adversely affect any rights any Target Indemnified Person may have under any agreement with the Target or any of its subsidiaries, under the Target Charter Documents or other organization documents or otherwise under a pplicable Law. (b) Target shall purchase a " tail policy " for directors’ and officers’ liability insurance, in each case covering Persons who are currently covered by such insurance on terms no less favorable than those in effect on the date hereof for a period of at least six years after the Closing, and if the premium for such insurance is not paid prior to Closing, the full amount of the premium shall be treated as a Transaction Expense. (c) The provisions of this Section 10.9 are intended to be for the benefit of, and enforceable by, each Target Indemnified Person and such Target Indemnif ied Person’s estate, heirs and r epresentatives . ( d) The obligations of the Surviving Company under this Section 10.9 shall continue in full force and effect for a period commencing as of the Closing and ending as of the earlier of (i) the six (6) year anniversary of the Closing and (ii) the date that all applicable statute of limitation periods have expired for any claim or claims for which a Target Indemnified Person may be entitled to indemnification under this Section 10.9; provided, that all rights to indemnification in respect of any claim for indemnification under this Section 10.9 asserted or made within such period shall continue until the final disposition of such claim. 10.10 Expenses . Except as otherwise set forth herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such costs and expenses, whether or not the Closing will have occurred. 10.11 No Third-Party Beneficiaries . Except as otherwise expressly provided in this Agreement, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing in this Agreement expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such successors and permitted assigns, any legal or equitable rights under this Agreement. 10.12 No Recourse . Notwithstanding anything that may be expressed or implied in this Agreement, each party hereto covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any of Parent's, Acquiror's or any of the Target Group's respective former, 69 current or future direct or indirect directors, officers, employees, agents or managers (each a " Related Party " and collectively, the " Related Parties " ), in each cas e other than Selling Parties, Acquiror, Parent or any of the Target Companies or any of their respective successors and permitted assignees under this Agreement, whether by the enforcement of any assessment or by any legal or equitable p roceeding, or by virtue of any a pplicable Law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any of the Related Parties, as such, for any obligation or liability of Selling Parties, Acquiror, Parent or any of the Target Group under this Agreement or any documents or instruments delivered in connection herewith for any claim based on, in respect of or by reason of such obligations or liabilities or their creation; provided, ho wever, nothing in this Section 10 .12 shall relieve or otherwi se limit the liability of Selling Parties, Parent, Acquiror or any of the Target Group , as such, for any breach or violation of its obligations under such agreements, documents or instruments. 10.13 Pronouns . All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require . [signature pages follow] 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed and delivered by each of them or their respective officers thereunto duly authorized, all as of the date first written above. ALMOST FAMILY, INC. By: /s/ C. Steven Guenthner C. Steven Guenthner, President NATIONAL HEALTH INDUSTRIES, INC. By: /s/ C. Steven Guenthner C. Steven Guenthner, President AFAM ACQUISITION, LLC By: /s/ C. Steven Guenthner C. Steven Guenthner, President BLACK STONE OPERATIONS, LLC. By: /s/ David Tramontana David Tramontana CEO BLACK STONE COMPANIES OF OHIO, INC. By /s/ David Tramontana David Tramontana CEO 71 ERH DEVELOPMENT, LLC By /s/ R. Douglas Spitler R. Douglas Spitler President WARREN COUNTY COMMUNITY SERVICES, LLC By /s/ Eugene B. Rose Eugene B. Rose CEO LEC COMMUNITY SERVICES, INC. By /s/ Scott M. McQuinn Scott M. McQuinn President and CEO By /s/ James L. Bowersox James L. Bowersox Treasurer and CFO PRIMROSE RETIREMENT COMMUNITIES, LLC By /s/ William J Schefbauer II William J Schaefbauer II President /s/ Kimberly Payne KIMBERLY PAYNE 72 SELLING PARTIES' AGENT: /s/ David Brixey DAVID BRIXEY 73 Attachments and Schedules Attachment A Key Employees of Target Group * Attachment B Acquiror Notes (Promissory Notes to Sellers) * Attachment C Escrow Agreement * Attachment D Certificate of Merger * Attachment E Agreed Accounting Principles * Attachment F Allocation of Merger Consideration * Attachment G Intentionally Deleted Attachment H Form of Selling Parties Noncompetition Agreement * Attachment I Target Group Project Working Capital Statement * Disclosure Schedule – Exceptions to Representations and Warranties of Sellers and the Company and Certain Other Exceptions and Disclosures * * * The information scheduled at this Attachment has been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. **Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. 74 Exhibit 2.5 Execution Copy STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this " Agreement ") dated as of January 4, 2016, is entered into by and among (i) National Health Industries, Inc. (" Buyer "), (ii) Almost Family, Inc. (" Parent "), (iii) Long Term Solutions, Inc. (the " Company "), and (iv) Anne Harrington, Noreen Guanci, Noreen Guanci 2009 Irrevocable Trust and Richard Guanci 2009 Irrevocable Trust (each a " Seller " and collectively, " Sellers " ) . Each of Buyer, Parent, the Company and Sellers is referred to in this Agreement individually as a " Party " and together as the " Parties ." Capitalized terms not otherwise defined in this Agreement have the meanings given to such terms in Article I. RECITALS A. Sellers own all of the Sellers’ Shares (as defined below). B. The Parties desire that, upon the terms and subject to the conditions set forth in this Agreement, Buyer will purchase from Sellers, and Sellers will sell to Buyer, all of the Sellers' Shares. THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS : ARTICLE I DEFINITIONS Unless otherwise expressly provided in this Agreement, the following terms, as used in this Agreement, have the following meanings: " 409A Plan " is defined in Section 5.20(h). " Accounting Policies and Principles " means GAAP using and applying the same accounting principles, practices, procedures, policies and methods (with consistent classifications, judgments, elections, inclusions, exclusions and valuation and estimation methodologies) used and applied by the Company in the preparation of the Most Recent Reviewed Financial Statements. " Accrued PTO " is defined in Section 6.13(c). " Action " means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity. " Affiliate " means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person and, in the case of an individual, includes the individual’s immediate family, and the trustees of a trust the beneficiaries of which include any one or more of the foregoing. " Agreement " is defined in the preamble to this Agreement. " Ancillary Documents " means the Buyer Notes, the Guaranty and the other agreements, documents, instruments and certificates contemplated by this Agreement to be executed in connection with the consummation of the transactions contemplated by this Agreement. " Articles of Incorporation " means the Articles of Incorporation of the Company, as amended. " Balance Sheet Date " means December 31, 2014. " Business " means conducting in-person health assessments and undertaking assessment review and documentation, care plan development and ongoing care coordination, in each case throughout the United States for insurance providers, healthcare providers and employers. " Business Day " means any day other than a Saturday, a Sunday or a United States federal or Kentucky state banking holiday. " Buyer " is defined in the preamble to this Agreement. " Buyer’s Fundamental Representations " is defined in Section 8.1(a)(i). " Buyer Indemnitees " is defined in Section 8.2. " Buyer Notes " means the promissory notes included among the Purchase Price consideration, substantially in the form of instrument s attached as Attachment A . " Buy-Sell Agreement " means the Buy-Sell Agreement dated as of May 14, 2008, between the Sellers. " Claim for Indemnification " means a good faith written notice by Buyer or any Seller asserting a claim for Losses under Article VIII. Such notice shall provide, in reasonable detail: (i) a specific description of the Losses that the Indemnified Party has suffered, or is reasonably likely to suffer; (ii) the dollar amount of such Losses (to the extent known or ascertainable, or if not, a good faith estimate of the amount thereof with reasonable explanation of the basis for the estimate); (iii) the representation, warranty or covenant set forth in this Agreement the breach of which is giving rise to such Losses; and (iv) the facts and circumstances underlying such asserted breach. " Closing " is defined in Section 2.6. " Closing Company Indebtedness " means the Company's Company Indebtedness as of the close of business on the Business Day immediately preceding the Effective Time. " Closing Date " means the date of the Closing. " COBRA " is defined in Section 5.20(b). 2 " Code " means the Internal Revenue Code of 1986, as amended. " Commitment " means any: (i) option, warrant, convertible security, exchangeable security, subscription right, conversion right, exchange right or other contract that requires the Company to issue any of its stock other equity interests; (ii) other security convertible into, exchangeable or exercisable for, or representing the right to subscribe for, any stock or other equity interests of the Company; (iii) statutory pre-emptive right or pre-emptive right granted under the Company's Organizational Documents; and (iv) stock appreciation right, phantom stock, profit participation or other similar right with respect to the Company " Company " is defined in the preamble to this Agreement. " Company Employee " means an employee of the Company as of the Effective Time. " Company Employee Plans " is defined in Section 5.20(a). " Company Indebtedness " means, as of any particular time, with respect to the Company, the outstanding principal amount of, accrued and unpaid interest on, and other payment obligations (including any prepayment fees, make-whole premiums or other similar fees or premiums payable as a result of the repayment of such i ndebtedness on the Closing Date) arising under, without duplication: (i) indebtedness for borrowed money, including all liabilities generally regarded as indebtedness for borrowed money in accordance with GAAP; (ii) indebtedness evidenced by any note, bond, debenture, mortgage or other debt security; (iii) obligations under capitalized leases determined under GAAP; (iv) indebtedness secured by an Encumbrance on assets or properties; (v) accrued and unpaid director and management fees; (vi) obligations under any performance bond or letter of credit, but only to the extent drawn or called prior to the Closing Date; and (vii) guarantees with respect to any indebtedness, obligation or liability of any other Person of a type described in clauses (i) through (vi) above. " Company Intellectual Property " means the Owned Intellectual Property and the Licensed Intellectual Property. " Company Transaction Expenses " means, without duplication, all amounts due and payable (and not previously paid) for costs and expenses incurred by the Company in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby, including (i) for services rendered by third party brokers, bankers, attorneys, accountants or other representatives and (ii) sale, "stay around", retention or similar bonuses or payments to employees in connection with the consummation of such transactions. " Company Technology " means all Technology that is used by or on behalf of the Company that is used in connection with the conduct of the Business. " Contract " means any contract, agreement or other legally binding commitment, whether written or oral, to which the Company is a party and which is in effect as of the date of this Agreement. 3 " Copyrights " means all copyrights, copyrightable works and mask works (including all applications and registrations for each of the foregoing), and all other rights corresponding thereto throughout the world. " Customer Contracts " is defined in Section 5.16(d). " D&O Indemnified Parties " is defined in Section 6.14(a). " Decree " means any injunction, judgment, order, decree or ruling of any applicable Governmental Authority. " Deductible Amount " is defined in Section 8.6(a)(i). " Disclosure Schedule " shall mean the disclosure schedule provided by Sellers and the Company to Buyer and Parent on the date hereof. " Effective Time " means 12:01 a.m. on the day immediately following the Closing Date. " Encumbrance " means, with respect to any asset, any mortgage, pledge, lien, encumbrance, easement, right of way, property right or interest, restriction on transfer, security interest, or defect in title in respect of such asset other than liens disclosed on the Disclosure Schedule but released prior to Closing. For the avoidance of doubt, the term "Encumbrance" shall not include any license of any Intellectual Property. " Entity " means a partnership, a corporation, a limited liability company, an association, a trust, a joint venture or an unincorporated organization. " Environment " means surface or ground water, water supply, soil, the ambient air, oceans, rivers or other bodies of water. " Environmental Laws " means all Laws that relate to the prevention, abatement or elimination of pollution or the protection of the Environment. " Equity Interest " means: (i) with respect to a corporation, any share of its capital stock; (ii) with respect to a limited liability company, any of its units or other limited liability company interests; and (iii) any other direct equity ownership in an Entity. " Employment Agreements " is defined in Section 7.1(s). " ERISA " is defined in Section 5.20(a). " ERISA Affiliate " is defined in Section 5.20(d). " Escrow Agreement " is defined in Section 7.1(t). 4 " Estimated Balance Sheet " means an estimated balance sheet of the Company as of the close of business on the Business Day immediately preceding the Effective Time, prepared by the Company in accordance with the Accounting Policies and Principles. " Estimated Closing Company Indebtedness " means the aggregate amount of the Closing Company Indebtedness, as set forth on the Estimated Balance Sheet; provided , that , any amount of such i ndebtedness taken into account in determining the Estimated Working Capital Adjustment shall not be taken into account in determining the Estimated Closing Company Indebtedness. " Estimated Closing Statement " is defined in Section 2.3. " Estimated Company Transaction Expenses " means the aggregate unpaid amount of Company Transaction Expenses as set forth on the Estimated Balance Sheet; provided , that , any Company Transaction Expenses taken into account in determining the Estimated Working Capital Adjustment shall not be taken into account in determining the Estimated Company Transaction Expenses. " Estimated Working Capital " means the Working Capital of the Company as of the close of business on the Business Day immediately preceding the Effective Time, calculated based on the Estimated Balance Sheet . " Estimated Working Capital Adjustment " means (i) the Estimated Working Capital minus (ii) the Target Working Capital. " Exchange Act " is defined in Section 4.5. " Final Adjustment Amount " is defined in Section 2.5(c). " Final Balance Sheet " means a balance sheet of the Company as of the Effective Time, which shall be prepared by Buyer in accordance with the Accounting Policies and Principles. " Final Closing Company Indebtedness " means the aggregate amount of the Closing Company Indebtedness, as set forth on the Final Balance Sheet; provided , that , any amount of Closing Company Indebtedness taken into account in determining the Final Working Capital Adjustment shall not be taken into account in determining the Final Closing Company Indebtedness. " Final Closing Statement " is defined in Section 2.5(a). " Final Company Transaction Expenses " means the aggregate amount of Company Transaction Expenses, as set forth on the Final Balance Sheet; provided , that , any Company Transaction Expenses taken into account in determining the Final Working Capital Adjustment shall not be taken into account in determining the Final Company Transaction Expenses. " Final Purchase Price " is defined in Section 2.2. 5 " Final Working Capital " means the Working Capital of the Company as of the close of business on the Business Day immediately preceding the Effective Time, calculated based on the Final Balance Sheet. " Final Working Capital Adjustment " means (i) the Final Working Capital minus (ii) the Target Working Capital. " Financial Statements " is defined in Section 5.8(a). " GAAP " means United States generally accepted accounting principles as in effect from time to time. " Governmental Authority " means any agency, authority, board, bureau, commission, court, tribunal, department, office or other governmental unit of a federal, state, county, district, city, other political subdivision or taxing district, whether foreign or domestic. " Governmental Order " means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. " Guanci Shareholders " mean Noreen Guanci, Noreen Guanci 2009 Irrevocable Trust and Richard Guanci 2009 Irrevocable Trust . " Guaranty " is defined in Section 7.2(h). " Hazardous Substance " means any liquid, gaseous or solid material, substance or waste that is defined or listed as hazardous or toxic under any applicable Environmental Law. " Health Care Laws " is defined in Section 5.10(b). " Indemnified Party " is defined in Section 8.4(a). " Indemnifying Party " is defined in Section 8.4(a). " Information Systems " is defined in Section 5.23(b). " Insurance Policies " is defined in Section 5.17. " Intellectual Property Rights " means any and all of the following in any country: (a)(i) Patents, (ii) Trademarks, (iii) rights in domain names and domain name registrations, (iv) Copyrights, (v) Trade Secrets, and (vi) all other intellectual property rights (whether or not appropriate steps have been taken to protect such rights under Law); and (b) the right (whether at law, in equity, by contract or otherwise) to use, practice or otherwise exploit any of the foregoing. " Interim Balance Sheet Date " means September 30, 2015. " IRS " is defined in Section 5.20(b). 6 " Knowledge of the Company " or " Company’s Knowledge " means the actual knowledge of Noreen Guanci and Anne Harrington. " Law " means any constitution, statute, treaty, code, ordinance, law, rule or regulation of any applicable Governmental Authority. " Leased Property " is defined in Section 5.6(b). " Licensed Intellectual Property " means Intellectual Property Rights owned by any Person other than the Company (i) that are licensed to the Company, (ii) for which the Company has received from such Person a covenant not to sue or assert or other immunity from suit, or (iii) where such Person has undertaken an obligation to the Company to assert such Intellectual Property Rights against one or more other Persons prior to asserting such Intellectual Property Rights against the Company, or an obligation to exhaust remedies as to such Intellectual Property Rights against one or more Persons prior to seeking remedies against the Company. " Losses " is defined in Section 8.2. " Material Adverse Change " or " Material Adverse Effect " means a change, event or occurrence that individually, or together with any other change, event or occurrence, has a material adverse effect on the financial condition, business or results of operations of the Company; provided , that , none of the following events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts shall be taken into account in determining whether there has been or may be a Material Adverse Change or Material Adverse Effect: (i) any change or development in global or national economic, monetary or financial conditions, including changes or developments in prevailing interest rates, credit markets, securities markets, general economic or business conditions or currency exchange rates, or political or regulatory conditions; (ii) any act of God, war, armed hostilities or terrorism; (iii) any change or development applicable in general to the industry in which the Company operates; (iv) any change in Law or GAAP or the interpretation or enforcement of either by a Governmental Authority after the date hereof; or (v) any failure of the Company to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates of earnings or revenues, or business plans (it being understood that the facts and circumstances giving rise or contributing to any such failure may, unless otherwise excluded by another clause in this definition of "Material Adverse Change" and "Material Adverse Effect," be taken into account in determining whether a "Material Adverse Change" or a "Material Adverse Effect" has occurred or could be reasonably be expected to occur), so long as in the case of clauses (i), (ii), (iii) or (iv) such events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts do not adversely affect the Company in a materially disproportionate manner relative to other comparable participants in the industry in which the Company operates. " Material Contracts " is defined in Section 5.16(a). " Most Recent Balance Sheet " is defined in Section 5.8(a). " Most Recent Financial Statements " is defined in Section 5.8(a). 7 " Most Recent Reviewed Financial Statements " means the Financial Statements as of and for the fiscal year ended December 31, 2014. " Multiemployer Plan " means a multiemployer plan as defined in Section 3(37) of ERISA. " Neutral Auditor " is defined in Section 2.5(b). " Objection Notice " is defined in Section 2.5(b). " Off-the-Shelf Software " means any software (other than Public Software) that is made generally and widely available to the public on a commercial basis and is licensed on a non-exclusive basis. " Open License Terms " means terms in any license, distribution model or other agreement for a Work which require, as a condition of use, reproduction, modification and/or distribution of the Work (or any portion thereof) or of any Related Software, any of the following: (a) the making available of source code or any information regarding the Work or any Related Software; (b) the granting of permission for creating modifications to or derivative works of the Work or any Related Software; (c) the granting of a royalty-free license, whether express, implied, by virtue of estoppel or otherwise, to any Person under Intellectual Property Rights (including without limitation Patents) regarding the Work alone, any Related Software alone or the Work or Related Software in combination with other hardware or software; (d) the imposition of restrictions on future Patent licensing terms, or other abridgement or restriction of the exercise or enforcement of any Intellectual Property Rights through any means; (e) the obligation to include or otherwise communicate to other Persons any form of acknowledgement and/or copyright notice regarding the origin of the Work or Related Software; or (f) the obligation to include disclaimer language, including warranty disclaimers and disclaimers of consequential damages. By means of example only and without limitation, Open License Terms includes any versions of the following agreements, licenses or distribution models: (i) the GNU General Public License (GPL); (ii) Lesser/Library GPL (LGPL); (iii) the Common Development and Distribution License (CDDL); (iv) the Artistic License (including without limitation PERL); (v) the Netscape Public License; (vi) the Sun Community Source License (SCSL) or the Sun Industry Standards License (SISL); (vii) the Apache License; (viii) the Common Public License; (ix) the Affero GPL (AGPL); (x) the Berkeley Software Distribution (BSD) license; (xi) the Mozilla Public License (MPL); (xii) the Microsoft Limited Public License; or (xiii) any licenses that are defined as OSI (Open Source Initiative) licenses as listed on the site www.opensource.org. " Ordinary Course of Business " means the conduct of the Business in a manner substantially consistent with the regular conduct thereof by the Company, including any activities associated with, or in anticipation of, this Agreement or the transactions contemplated by this Agreement. " Organizational Documents " means articles or certificates of incorporation and bylaws. " Owned Intellectual Property " means any material Intellectual Property Rights in which the Company has any ownership interest (other than a license interest). 8 " Parent Common Stock " means shares of Almost Family, Inc. voting common stock. " Parent Reports " is defined in Section 4.5. " Parent " is defined in the preamble to this Agreement. " Parent Benefit Plan " is defined in Section 6.13(a). " Parties " is defined in the preamble to this Agreement. " Patents " means all issued patents (including utility and design patents) and pending patent applications (including invention disclosures, records of invention, certificates of invention and applications for certificates of inventions and priority rights) filed with any Registration Office, including without limitation, all non-provisional and provisional patent applications, substitutions, continuations, continuations-in-part, divisions, renewals, revivals, reissues, re-examinations and extensions thereof. " Permitted Liens " means statutory liens for Taxes, special assessments or other governmental and quasi-governmental charges not yet due and payable. " Person " means an individual, an Entity or a Governmental Authority. " Post-Closing Sale Proceeds " means, with respect to each Seller, the amount of the Final Adjustment Amount (if any) that such Seller is entitled to receive based on such Seller's Pro Rata Share. " PPACA " is defined in Section 5.20(l). " Pre-Closing Tax Periods " means all Tax periods (or portions thereof) ending on or before the Effective Time, and the portion through the Effective Time for any Tax period that includes (but does not end on) the Effective Time. " Pre-Closing Taxes " means all Taxes of the Company for Pre-Closing Tax Periods. " Preliminary Purchase Price " is defined in Section 2.2. " Proceeding " means any action, litigation, suit, claim, dispute, demand, investigation, review, hearing, charge, complaint or other judicial or administrative proceeding, at law or in equity, before or by any Governmental Authority or arbitration or other dispute resolution proceeding. " Pro Rata Share " means each Seller's pro rata share of the applicable item based on such Seller's percentage share of Sellers' Shares. " Protected Health Information " is defined in Section 5.10(c). 9 " Public Software " means any software, libraries or other code that is licensed under or is otherwise subject to Open License Terms. Software distributed under less restrictive free or open source licensing and distribution models such as those obtained under the MIT, Boost Software License, and the Beer-Ware Public Software licenses or any similar licenses, and any software that is a public domain dedication are also "Public Software." " Purchase Price " is defined in Section 2.2. " Real Property Lease " is defined in Section 5.6(b). " Representative " means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person. " Registered Intellectual Property " means all Intellectual Property Rights for which registrations have been obtained or applications for registration have been filed with a Registration Office. " Registration Office " means, collectively, the United States Patent and Trademark Office, United States Copyright Office and all equivalent foreign patent, trademark, copyright offices or other Governmental Authority. " Related Software " means, with respect to a Work, any other software, libraries or other code (or a portion of any of the foregoing) in each case that is incorporated into or includes, relies on, is linked to or with, is derived from in any manner (in whole or in part), or is distributed with such Work. " Required Consents " is defined in Section 6.1(b). " SEC " is defined in Section 3.1(a). " Securities Act " is defined in Section 3.1(b). " Seller Indemnitees " is defined in Section 8.3. " Sellers " is defined in the preamble to this Agreement. " Sellers' Fundamental Representations " is defined in Section 8.1(a)(i). " Sellers' Shares " means all of the issued and outstanding capital stock of the Company. " Sellers' Taxes " is defined in Section 6.10(d). " Source Code " means the source code (i.e., software code in its original, human readable, un-compiled, form) of all Owned Intellectual Property that is comprised of software, together with all extracts, portions and segments thereof. " Straddle Period " is defined in Section 6.10(a). 10 " Tail Policy " is defined in Section 6.14(b). " Target Working Capital " means $ 900,000 . " Tax " or " Taxes " means any federal, state, local, or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. " Tax Benefit " means any refund of Taxes paid or reduction in the amount of Taxes which otherwise would have been paid, in each case computed at the highest marginal tax rates applicable to the recipient of such benefit. " Tax Return " means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. " Technology " means all tangible items constituting, disclosing or embodying any Intellectual Property Rights, including all versions thereof and all technology from which such items were or are derived, including but not limited to (a) works of authorship (including software, firmware, games and middleware in source code and executable code form, architecture, databases, plugins, libraries, APIs, interfaces, algorithms and documentation); (b) inventions (whether or not patentable), designs, discoveries and improvements; (c) proprietary, confidential and/or technical data and information, Trade Secrets and know how; (d) databases, data compilations and collections, and customer and technical data; (e) methods and processes; and (f) devices, prototypes, designs, specifications and schematics. " Territory " is defined in Section 6.11(a). " Third Party Claim " means any Proceeding by or before any Governmental Authority or any arbitration or other alternative dispute resolution proceeding made or brought by any Person who is not a Party or an Affiliate of a Party. " Trade Secrets " means all proprietary and confidential information, however documented, that constitutes a "trade secret" within the meaning of applicable Law. " Trademarks " means all material (common law or registered) (a) trademarks, service marks, logos, insignias, designs, trade dress, symbols, trade names and fictitious business names, emblems, signs, insignia, slogans, other similar designations of source or origin and general intangibles of like nature (including all applications and registrations for each of the foregoing), and (b) all goodwill associated with or symbolized by any of the foregoing. " WARN " is defined in Section 5.20(k). 11 " Work " means any software, libraries or other code (including without limitation middleware and firmware). " Working Capital " means an amount (which may be a positive or negative number) equal to: (i) the current assets of the Company, excluding all cash and deferred Tax assets, minus (ii) the current liabilities of the Company, excluding any deferred Tax liabilities, in each case determined under Accounting Policies and Principles. Notwithstanding the foregoing, Company Transaction Expenses are excluded from Working Capital for purposes of this Agreement and the purchase price adjustments set forth in Sections 2.3 and 2.5. ARTICLE II PURCHASE AND SALE OF SELLERS' SHARES 2.1 Basic Transaction . Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from each Seller, and each Seller agrees to sell to Buyer, all of such Seller’s Sellers' Shares for the consideration specified in this Article II. 2.2 Purchase Price . In consideration for all of the issued and outstanding Sellers' Shares, Buyer shall pay, in accordance with the terms of this Article II, the sum of $37,000,000 (the " Purchase Price "), adjusted initially pursuant to Section 2.3 (as so adjusted, the " Preliminary Purchase Price "), and adjusted thereafter pursuant to Section 2.5 (as so adjusted, the " Final Purchase Price "). 2.3 Pre-Closing Adjustments . P rior to the Closing, the Company shall deliver to Buyer the Estimated Balance Sheet and a statement prepared in good faith (the " Estimated Closing Statement ") setting forth the Estimated Working Capital Adjustment, the Estimated Closing Company Indebtedness, the Estimated Company Transaction Expenses, and the calculation of such amounts. The Estimated Closing Statement shall be used to determine the Preliminary Purchase Price, by adjusting the Purchase Price as follows: (a) the Preliminary Purchase Price shall be increased on a dollar-for-dollar basis by: (i) an amount equal to the Estimated Working Capital Adjustment, if such amount is positive (the " Positive Estimated Working Capital Adjustment "); and (ii) the amount of all cash that is held by the Company at the close of business on the Business Day immediately preceding the Closing Date. (b) the Preliminary Purchase Price shall be decreased on a dollar-for-dollar basis by an amount equal to the Estimated Working Capital Adjustment, if such amount is negative. 2.4 Payment of Preliminary Purchase Price . The Preliminary Purchase Price shall be paid as follows: 12 (a) $11,000,000 of the Preliminary Purchase Price shall be paid in the form of Parent Common Stock, to be divided among the Sellers based on their Pro Rata Share. For purposes of this Agreement, the value of Parent Common Stock shall be equal to the average closing price of Parent's publicly-traded common stock over the 20 trading days ending with trading day immediately preceding the Closing Date. To the extent that after combining all shares of Parent Common Stock to be received by a Seller pursuant to this Agreement, such Seller would be entitled to receive a fractional share of one-half or more of a share of Parent Common Stock, such Seller shall receive one additional whole share, and if such Seller would be entitled to receive a fractional share of less than one-half of a share of Parent Common Stock such Seller shall not receive such fractional share; (b) $6,000,000 in the form of Buyer Notes, bearing interest at an annual rate of five percent (5%) payable quarterly, and with principal due and payable in a single balloon payment on the third anniversary of the Closing Date, and with the aggregate principal amount to be divided between the Sellers based on their Pro Rata Shares; (c) as set forth on the Estimated Closing Statement, amounts equal to the Estimated Closing Company Indebtedness and the Estimated Company Transaction Expenses shall be paid in cash to the appropriate payees by wire transfer of immediately available funds; and; (d) an amount equal to the Positive Estimated Working Capital Adjustment, if any, shall be escrowed with Fifth Third Bank, pending determination of the post-Closing adjustments to the Preliminary Purchase Price pursuant to Section 2.5; and (e) the remaining balance of the Preliminary Purchase Price, increased or decreased pursuant to Section 2.3, and after deducting amounts paid pursuant to Sections 2.4(a) through (d), shall be paid in cash to the Sellers by wire transfer of immediately available funds, to be divided among the Sellers based on their Pro Rata Share. 2.5 Post-Closing Adjustments to the Preliminary Purchase Price . (a) No later than 90 days following the Closing Date, Buyer shall prepare and deliver to Sellers the Final Balance Sheet and a written statement (such statement, as it may be adjusted pursuant to this Section 2.5, the " Final Closing Statement ") setting forth the Final Working Capital Adjustment, the Final Closing Company Indebtedness and the Final Company Transaction Expenses, and detail on the calculation of such amounts. The Final Closing Statement shall be used to determine the Final Purchase Price, by adjusting the Purchase Price as follows: (i) the Purchase Price shall be increased on a dollar-for-dollar basis by an amount equal to the Final Working Capital Adjustment, if such amount is positive, plus any amount by which the Estimated Company Closing Indebtedness is more than the Final Company Closing Indebtedness, plus any amount by which Estimated Company Transaction Expenses are more than Final Company Transaction Expenses; and 13 (ii) the Purchase Price shall be decreased on a dollar-for-dollar basis by the sum of (A) an amount equal to the Final Working Capital Adjustment, if such amount is negative; (B) any amount by which Final Closing Company Indebtedness exceeds Estimated Company Closing Indebtedness; and (C) any amount by which Final Company Transaction Expenses exceed Estimated Company Transaction Expenses; provided , that , no adjustments shall be made to the Purchase Price under subsections (B) and (C) above to the extent that such amounts have been taken into account in determining the Final Working Capital Adjustment. (b) Within 45 days following delivery of the Final Balance Sheet and the Final Closing Statement to Sellers, Sellers shall notify Buyer (i) that Sellers accept the Final Balance Sheet and the Final Closing Statement or (ii) that Sellers object (an " Objection Notice ") to an item or items reflected thereon. Such Objection Notice, if any, shall set forth Sellers’ objections to the Final Balance Sheet and the Final Closing Statement in reasonable detail. If Buyer and Sellers are unable to resolve the issues in dispute within 30 days after delivery of the Objection Notice, such disputed issues will be submitted for resolution to RSM US LLP (f/k/a McGladrey LLP) , independent certified public accountants (the " Neutral Auditor "). The Neutral Auditor shall be engaged within 30 days after delivery of the Objection Notice. If either Party fails to take action such that the Neutral Auditor may be jointly engaged by the Parties pursuant to the prior sentence of this Section 2.5(b), then the other Party may engage the Neutral Auditor on behalf of both Parties. The Neutral Auditor shall make such review and examination of the relevant facts and documents as the Neutral Auditor deems appropriate, and shall permit each of Buyer and Sellers to make a written presentation of their respective positions; provided , however , that the Neutral Auditor shall require all facts, documents and written presentations from Buyer and Sellers to be completely submitted within 30 days after the Neutral Auditor has been engaged. Within 30 days after the date required for submission of such facts, documents and written presentations, and regardless of whether such submissions shall have been made, the Neutral Auditor shall resolve all disputed items in writing and shall prepare and deliver its decision, which shall be final and binding upon the Parties without further recourse or collateral attack and, as to each disputed matter, which shall accept (x) either Buyer’s or Sellers’ position on each disputed matter set forth in the Objection Notice or (y) the stipulated position of Buyer and Sellers with respect to any matter which prior to such stipulation was disputed. All costs of the dispute resolution process contemplated by this Section 2.5(b) (including the Neutral Auditor’s fees, but exclusive of attorneys’ fees) shall be borne by the Party who is the least successful in such process, which shall be determined by comparing (A) the position asserted by each Party on all disputed matters taken together to (B) the final decision of the Neutral Auditor on all disputed matters taken together. For purposes of the immediately preceding sentence, the "disputed matters" shall be all matters raised in the Objection Notice, and the "position asserted" by each of Buyer and Sellers shall be determined by reference to their respective written presentations submitted to the Neutral Auditor pursuant to this Section 2.5(b). The Neutral Auditor shall neither preside over any hearing of the Parties nor permit the Parties to make any oral arguments to the Neutral Auditor. (c) As used in this Agreement, " Final Adjustment Amount " means: (i) if Sellers fails to deliver an Objection Notice or accepts the Final Balance Sheet and the Final Closing Statement in accordance with Section 2.5(b), an amount (which may be a positive or a 14 negative number) equal to (x) the Final Purchase Price as set forth in the Final Closing Statement, minus (y) the Preliminary Purchase Price; or (ii) if the amount of the Final Purchase Price is resolved by Buyer and Sellers or by submission of any Disputed Matters to the Neutral Auditor in accordance with Section 2.5(b), then an amount (which may be a positive or a negative number) equal to (x) the Final Purchase Price as so resolved, minus (y) the Preliminary Purchase Price. If the Final Adjustment Amount is a positive number, then Buyer shall promptly, but in any event within five Business Days after the final and binding determination of the Final Purchase Price in accordance with Section 2.5(b), pay to each Seller such Seller’s Pro Rata Share of the Final Adjustment Amount plus the amount held in escrow pursuant to Section 2.4(d). If the Final Adjustment Amount is a negative number, then, as appropriate Buyer shall be paid all or part of the amount escrowed pursuant to Section 2.4(d), and if the amount due to Buyer exceeds such escrowed amount, Sellers shall promptly, but in any event within five Business Days after the final and binding determination of the Final Purchase Price in accordance with Section 2.5(b), pay to Buyer such Seller's Pro Rata Share of the Final Adjustment Amount (net of the amount paid to Buyer out of escrow). All amounts to be paid pursuant to this Section 2.5(c) shall be made by wire transfer of immediately available funds to such bank accounts as the respective receiving Parties shall specify within three Business Days after the final and binding determination of the Final Purchase Price in accordance with Section 2.5(b). (d) Except as set forth in this Section 2.5, each of Buyer and Sellers shall bear its own expenses incurred in connection with the preparation and review of the Estimated Balance Sheet, the Estimated Closing Statement, the Final Balance Sheet and the Final Closing Statement. 2.6 Closing . The closing of the transactions contemplated by this Agreement (the " Closing ") shall take place at the offices of Frost Brown Todd LLC, Louisvil le, Kentucky, commencing at 4:15 p .m., local time within three Business Days following the satisfaction or waiver of the last of the conditions to the obligations of the Parties to consummate the transactions contemplated by this Agreement (other than conditions with respect to actions each Party will take at the Closing itself), or such other place or date as the Parties may mutually determine. The Parties may mutually agree to consummate the Closing via electronic exchange of execution versions of the agreements and documents contemplated by this Agreement and the signed signature pages thereto via facsimile or via email by PDF. The Closing shall be deemed to have occurred for Tax and business purposes as of the Effective Time. 2.7 Deliveries at Closing . At Closing: (a) Buyer will deliver to Sellers the certificates, instruments, and documents referred to in Section 7.2; (b) Sellers and the Company will deliver to Buyer the certificates, instruments, and documents referred to in Section 7.1; (c) each Seller will deliver to Buyer stock certificates and duly executed assignment instruments with respect to such Seller's Sellers' Shares; 15 (d) each Seller will deliver a W-9 to Parent's exchange agent; and (e) Buyer will make the payments specified in Section 2.4, including the issuance of the Buyer Notes (the Parties acknowledge that Anne Harrington has directed that her Buyer Note be issued to Anne M. Harrington as Trustee of the Anne M. Harrington Revocable 1999 Trust) , the wiring of the cash portion of the Purchase Price, and the issuance of the Parent Common Stock (which issuance shall be handled through Parent's exchange agent) (the Parties acknowledge that Anne Harrington has directed that Parent's exchange agent issue her Parent Common Stock in the name of Anne M. Harrington, as Trustee of the Anne M. Harrington Revocable 1999 Trust) . Buyer shall instruct the exchange agent to issue the Parent Common Stock within five Business Days after Closing. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS Each Seller severally and not jointly represents and warrants to Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article III are correct and complete as concerns such Seller as of the date of this Agreement. 3.1 Investment Representations and Acknowledgements . The Parent Common Stock to be received by Seller will be acquired for investment for Seller's own account, not as a nominee or agent, and not with a view to a public distribution of any part thereof, and Seller has no present intention of selling, granting any participation in, or otherwise distributing the same. (a) Buyer has delivered to Seller a reasonable time before the date of this Agreement true and complete copies of Parent's (i) Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the " SEC " ); (ii) all periodic reports on Form 8-K filed with the SEC since December 31, 2014 to the date hereof; and (iii) all Forms 10-Q filed with the SEC since December 31, 2014 to the date hereof. Seller, or a representative thereof, has received a draft of this Agreement and has confirmed that all documents, books and records pertaining to Seller's investment in Parent Common Stock and requested by Seller have been made available. (b) Seller acknowledges that it bears the complete economic risk of its investment and has such knowledge and experience in financial or business matters that Seller is capable of evaluating the merits and risks of the investment in Parent Common Stock. Seller is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act of 1933, as amended (the " Securities Act "). (c) The purchase of Parent Common Stock by such Seller is consistent with the general investment objectives of Seller. Seller understands that the purchase of Parent Common Stock involves a high degree of risk. (d) Seller acknowledges that she or it has been advised to seek her or its own tax and legal advice in connection with this Agreement, including with respect to the treatment of the transactions contemplated by this Agreement for Federal, foreign, state and local income 16 tax purposes and the treatment of Seller for tax purposes in connection therewith. Seller acknowledges that none of the Parties has (i) made any representations and warranties to her or it regarding the treatment of the transactions contemplated by this Agreement for Federal, foreign, state or local tax purposes, or (ii) provided any tax opinion or advice regarding the treatment of the transactions contemplated by this Agreement for Federal, foreign, state or local tax purposes or the treatment of Seller for tax purposes in connection therewith. (e) Seller acknowledges that the Parent Common Stock issued to Seller shall not be registered under the Securities Act at the time of issuance, and as such shall constitute "restricted securities" within the meaning of Rule 144 and, unless sold pursuant to an effective registration statement, the Parent Common Stock shall be available for sale in the public market only in compliance with Rule 144. In addition to the Rule 144 restrictions on the sale of the Parent Common Stock, Seller agrees that, except in connection with the acquisition or other c hange of control involving the sale by Parent's shareholders of their shares of Parent C ommon S tock , she or it (or in the case of Anne Harrington, the Anne M. Harrington Revocable 1999 Trust) shall not sell or transfer any of the Parent Common Stock for a period of 36 months after the Closing Date, provide d , however, that Seller (or in the case of Anne Harrington, the Anne M. Harrington Revocable 1999 Trust) may sell or transfer her or its Pro Rata Share of up to $2 million in sale value of the shares of Parent Common Stock issued by Parent to Seller as consideration pursuant to Section 2.4(a) prior to the 36 th month anniversary of the Closing Date. Certificates representing the Parent Common Stock shall bear a legend substantially as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR OTHER EVIDENCE SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN A STOCK PURCHASE AGREEMENT DATED JANUARY 4, 2016, A COPY OF WHICH IS MAINTAINED IN THE OFFICE OF THE SECRETARY OF THE CORPORATION. (f) Seller has full power, capacity and authority to execute and deliver this Agreement and the Ancillary Documents and to surrender her or its Sellers' Shares pursuant to this Agreement. Seller has duly executed and delivered this Agreement and the Ancillary Documents which constitutes the valid and legally binding obligation of Seller, each enforceable in accordance with its terms and conditions. Except as set forth in the Buy-Sell Agreement, Seller is not required to give any notice to, make any filing or registration with, or obtain any authorization, waiver, license, consent, or approval of any Governmental Authority or third party in connection with the execution and delivery of this Agreement by Seller and the performance by Seller of her or its obligations hereunder or the consummation of the transactions contemplated by this Agreement. 17 3.2 Ownership of Sellers' Shares . Seller holds of record and owns beneficially all of the Sellers' Shares set forth opposite her or its name in Section 3.2 of the Disclosure Schedule, free and clear of any restrictions or Encumbrances (other than as set forth in the Buy-Sell Agreement and restrictions of general applicability imposed by federal or state securities laws). Seller is not a party to any agreement (other than the Buy-Sell Agreement) restricting Seller’s ability to sell, transfer or otherwise dispose of any of her or its Sellers' Shares. Seller is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any of her or its Sellers' Shares. Upon consummation of the transactions contemplated by this Agreement, Buyer shall hold good and valid title to all of the Sellers' Shares, subject to the terms and conditions of this Agreement. Seller is a resident of Massachusetts. Seller is not an individual resident of a state that is subject to community property laws. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER Parent and Buyer represent and warrant to Sellers that the statements contained in this Article IV are correct and complete as of the date of this Agreement. 4.1 Organization . Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Buyer is a corporation duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Kentucky. Parent and Buyer are qualified to do business and are in good standing in each jurisdiction where such qualification is required. 4.2 Authorization of Transaction . Each of Parent and Buyer has the requisite power and authority to execute and deliver this Agreement and each of the Ancillary Documents to which it is a party , and to perform its obligations under this Agreement and each such Ancillary Document. This Agreement has been, and the Ancillary Documents to which Parent and Buyer is a party, when entered into by Parent and/or Buyer, as applicable, will be, duly and validly executed and delivered by Parent and Buyer, as applicable, and , assuming the due authorization, execution and delivery by the other Parties hereto and thereto, this Agreement constitutes, and the Ancillary Documents to which Parent and Buyer are a party, when entered into by Parent and/or Buyer, as applicable, will constitute, Parent’s and Buyer’s valid and legally binding obligation, enforceable against Parent and Buyer in accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting creditors’ rights generally and general principles of equity. 4.3 Capitalization . As of the date of this Agreement, the authorized capital stock of Parent consists of (a) 25,000,000 shares of Parent Common Stock, par value of $.10 per share, of which 10,021,395 shares are issued and outstanding, and (b) 2,000,000 shares of preferred stock, par value $0.05 per share, none of which are issued and outstanding. All of the issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. All of the Parent Common Stock issued to Sellers will be, when issued in accordance with this Agreement, duly authorized, validly issued, fully paid and nonassessable, and will not be subject to any preemptive rights or rights of first refusal created by statute, the Organizational Documents of Parent or any agreement to which 18 Parent is a party. As of the date of this Agreement, except for benefit plans maintained by Parent, or as previously publicly disclosed in the Parent Reports, a press release or otherwise, there are outstanding no rights, warrants or options to purchase Parent Common Stock, respectively. 4.4 Non-Contravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will: (a) violate any Law, Decree, or other restriction of any Governmental Authority to which Parent or Buyer is subject or any provision of their respective Organizational Documents; or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of any obligation under, 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 Parent or Buyer is a party or by which either is bound or to which any of their respective assets are subject. Neither Parent nor Buyer is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order to consummate the transactions contemplated by this Agreement. 4.5 Reports and Financial Statements . Parent and Buyer have previously furnished or made available to the Sellers complete and accurate copies, as amended or supplemented, of Parent's (a) Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC; (b) all periodic reports on Form 8-K filed with the SEC since December 31, 2014 to the date hereof; (c) all Forms 10-Q filed with the SEC since December 31, 2014 to the date hereof; and (d) all other reports filed by Parent under Section 13 or subsections (a) or (c) of Section 14 of the Securities Exchange Act of 1934, as amended (the " Exchange Act ") with the SEC since December 31, 2014 (the reports listed in subsections (a) through (d) of this Section 4.5 are collectively referred to herein as the " Parent Reports "). The Parent Reports constitute all of the documents required to be filed by Parent under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC from December 31, 2014 through the date of this Agreement. The Parent Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder when filed. As of their respective dates, the Parent Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements included in the Parent Reports (i) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly present the consolidated financial condition, results of operations and cash flows of Parent as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent with the books and records of Parent. Except as set forth in the Parent Reports, neither Parent nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be recognized or disclosed on a consolidated balance sheet of Parent and its subsidiaries or in the notes thereto, except (A) liabilities reflected in the audited consolidated balance sheet of the Parent as of September 30, 19 2015, and (B) liabilities incurred since September 30, 2015, in the ordinary course of business consistent with past practice. 4.6 Brokers’ Fees . Neither Parent nor Buyer has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. 4.7 Investment . Each of Parent and Buyer, individually and together with their Affiliates, as applicable: (a) is an informed, sophisticated entity with sufficient knowledge and experience in investment and financial matters so as to be capable of evaluating the risks and merits of a purchase of the Sellers' Shares; (b) has determined that the purchase of the Sellers' Shares is consistent with its general business and investment objectives; (c) understands that the purchase of the Sellers' Shares involves business and other risks; (d) is financially able to bear the risks of purchasing the Sellers’ Shares; (e) is acquiring the Sellers' Shares, directly or indirectly, for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof; (f) understands that the Sellers' Shares have not been registered under the Securities Act or the securities laws of any state and, accordingly, must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or qualified under such state laws or is exempt from such registration or qualification; and (g) is an "accredited investor" as defined in Rule 501(a) under the Securities Act. 4.8 Financial Ability to Perform . Parent and Buyer have, and will have as of the Closing, available cash funds, credit facilities or other sources of immediately available funds sufficient to consummate the transactions contemplated by this Agreement. Each of Parent’s and Buyer’s obligations to consummate the transactions contemplated by this Agreement are not subject to any financing condition. 4.9 Litigation . There is no Proceeding pending, or to Parent’s and Buyer’s knowledge, threatened, against Parent or Buyer which would have a material adverse effect on the financial condition, results of operations or business of Parent or Buyer, or which seeks to enjoin, challenge, alter, delay, restrict or prohibit the consummation of the transactions contemplated by this Agreement. 4.10 Sole Representations . Each of Parent and Buyer acknowledges that the Sellers and the Company have not made and are not making any representations or warranties whatsoever, express or implied, regarding the subject matter of this Agreement or the accuracy and completeness of any books or records delivered to Parent and Buyer, except as provided in Article III and Article V, any Ancillary Document and any certificate delivered at the Closing pursuant hereto or thereto, and Parent and Buyer specifically disclaim any such other representations and warranties that may have been made by any other Person. Each of Parent and Buyer acknowledges that it is not relying and has not relied on any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied, except for the representations and warranties in Article III, Article V, any Ancillary Document and any certificate delivered at the Closing pursuant hereto or thereto, and is entering into the transactions contemplated by this Agreement and the Ancillary Documents subject only to such representations and warranties, as limited by the terms of this Agreement and such Ancillary 20 Documents as applicable. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY DOCUMENT, NO REPRESENTATION OR WARRANTY HAS BEEN MADE OR IS BEING MADE HEREIN TO PARENT OR BUYER OR ANY OTHER PERSON (I) WITH RESPECT TO ANY PROJECTIONS, FORECASTS, BUSINESS PLANS, ESTIMATES OR BUDGETS DELIVERED TO OR MADE AVAILABLE TO PARENT OR BUYER, OR (II) WITH RESPECT TO ANY OTHER INFORMATION OR DOCUMENTS MADE AVAILABLE AT ANY TIME TO PARENT, BUYER OR ANY OTHER PERSON. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article V are (i) correct and complete as of the date of this Agreement or (ii) to the extent made as of or with respect to a specific date, correct and complete as of such date. 5.1 Organization, Qualification, Corporate Power and Authorization . The Company is duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation or formation. The Company is qualified to do business and is in good standing in the states listed on Section 5.1 of the Disclosure Schedule, which list represents each jurisdiction where such qualification is required. The Company has full corporate power and authority to carry on the Business and to own and use the properties owned and used by it. 5.2 Authorization of Transaction . The Company has the requisite power and authority to execute and deliver this Agreement and each of the Ancillary Documents to which it is a party , and to perform its obligations under this Agreement and each such Ancillary Document. This Agreement has been, and each of the Ancillary Documents to which it is a party, when entered into by the Company, will be, duly and validly executed and delivered by the Company and , assuming the due authorization, execution and delivery by the other parties hereto and thereto, this Agreement constitutes, and each of the Ancillary Documents to which the Company is a party, when entered into by the Company, will constitute, the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting creditors’ rights generally and general principles of equity. 5.3 Capitalization . Section 5.3 of the Disclosure Schedule sets forth: (a) the number of authorized shares for each class of the Company’s capital stock; and (b) the number of issued and outstanding shares of each class of the Company’s capital stock, all of which have been duly authorized and are validly issued, fully paid and non-assessable. There are no outstanding Commitments that would require the Company to issue, sell or otherwise cause to become outstanding any of stock or other equity interests. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the Sellers' Shares. 5.4 Non-Contravention . Except as set forth in Section 5.4 of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the 21 transactions contemplated hereby, will: (a) violate any Law, Decree or other restriction of any Governmental Authority to which the Company is subject or any provision of the Organizational Documents of the Company; (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of any obligation under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any Material Contract; or (c) result in the imposition of an Encumbrance on any of the material assets of the Company except for Permitted Liens . Except as set forth in Section 5.4 of the Disclosure Schedule, the Company is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Person in order for the Parties to consummate the transactions contemplated by this Agreement. 5.5 Brokers’ Fees . Except for the fees arising out of the Company’s engagement of Covington Associates, LLC, the Company does not have any liability or obligation to pay any fees or commissions to any broker, finder, or similar agent with respect to the transactions contemplated by this Agreement. 5.6 Real Property . (a) The Company does not own, nor has it ever owned, any real property. (b) Section 5.6(b) of the Disclosure Schedule contains a list of each real property lease to which the Company is a party (each, a " Real Property Lease ," and all real property under such leases being collectively, the " Leased Property "). Each Real Property Lease is valid, binding and enforceable and in full force and effect. The Company is not in default under any Real Property Lease. (c) The Leased Property constitutes all of the real property used, in any material respect, in connection with the operation of the Business, and is adequate to conduct the Business as currently conducted. 5.7 No Subsidiaries . The Company has no subsidiaries and owns no equity interest, or right to acquire any equity interest, in any Person. 5.8 Financial Statements . (a) Section 5.8 of the Disclosure Schedule sets forth the following financial statements (collectively, the " Financial Statements "): (i) the unaudited balance sheets and statements of income and cash flow of the Company as of and for the fiscal year ended on the Balance Sheet Date; and (ii) the unaudited balance sheet (the " Most Recent Balance Sheet ") and income statement of the Company (together with the Most Recent Balance Sheet, the " Most Recent Financial Statements ") as of and for the month ended on the Interim Balance Sheet Date. Except as may be indicated in the notes thereto and except for the Most Recent Financial Statements, which are subject to normal year-end adjustments and do not contain all footnotes and other presentation items required under GAAP, each of the Financial Statements has been prepared (A) from the books and records of the Company consistent with past practices, and (B) in accordance with the Accounting Policies and Principles, applied on a consistent basis 22 throughout the periods covered thereby, and presents fairly, in all material respects, the financial condition and results of operations and cash flows of the Company as of the respective dates and for the respective periods covered thereby. (b) The Company has implemented and maintains a system of internal control over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements and that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP. The Company maintains internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (c) All classifications, judgments, elections, inclusions, exclusions and valuation and estimation methodologies used and applied by the Company in the preparation of the Most Recent Reviewed Financial Statements, the Estimated Balance Sheet and the Estimated Working Capital Adjustment are in accordance with Accounting Policies and Principles. 5.9 Absence of Certain Changes and Events . From the Balance Sheet Date to the date of this Agreement there has not been any Material Adverse Change. Except as set forth in Section 5.9 of the Disclosure Schedule, and without limiting the generality of the immediately preceding sentence, from the Balance Sheet Date to the date of this Agreement, the Company has not: (a) amended its Organizational Documents; (b) issued, sold or otherwise disposed of any of its stock or other equity interests, or granted any Commitments; (c) effected any recapitalization, reclassification, stock split or like change in its capitalization; (d) incurred any Company Indebtedness other than in the Ordinary Course of Business; (e) sold, assigned, leased or transferred any of its tangible assets outside the Ordinary Course of Business; (f) made any capital expenditure (or series of related capital expenditures) outside the Ordinary Course of Business; 23 (g) made any capital investment in, any loan to, or any acquisition of the securities of, any other Person (or series of related capital investments, loans or acquisitions) outside the Ordinary Course of Business; (h) granted any increase in the base compensation of or bonuses payable to any of its directors, managers, officers or employees, made any change in employment or severance terms for any of its directors, managers or officers, or any material change in the employment, severance or payment terms for any of its other employees, consultants or independent contractors, in each case, other than in the Ordinary Course of Business, or as required pursuant to the terms and conditions of any existing Contract, except for retention and similar arrangements entered into in contemplation of the transactions contemplated by this Agreement; or (i) made any material change in its accounting methods, principles or practices for financial accounting (except for those changes required to comply with GAAP or applicable Law or as disclosed in the notes to the Financial Statements) . 5.10 Compliance with Laws . (a) Except as set forth in Section 5.10(a) of the Disclosure Schedule, the Company has not been and is not in violation in any material respect of any applicable Law, and has conducted and are conducting the Business in all material respects in accordance with, applicable Laws and Governmental Orders. Except as set forth in Section 5.10(a) of the Disclosure Schedule, no investigation, audit, inquiry or review by any Governmental Authority with respect to the Company is pending or, to the Knowledge of the Company, threatened, nor, to the Knowledge of the Company, has any Governmental Authority indicated an intention to conduct any such investigation, audit, inquiry or review. (b) The Company and all of its officers, directors and employees have complied in all material respects with all applicable Laws to which they are subject with respect to healthcare regulatory matters (including The Social Security Act, Sections 1128, 1128A and 1128B, 42 U.S.C. Sections 1320a-7, 7(a) and 7(b), including Criminal Penalties Involving Medicare or State Health Care Programs, commonly referred to as the "Federal Anti-Kickback Statute" and The Social Security Act, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as the "Stark Statute," the statute commonly referred to as the "Federal False Claims Act," the Health Insurance Portability and Accountability Act of 1996 (commonly referred to as "HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act (commonly referred to as the "HITECH Act") (collectively, " Health Care Laws "). The Company has maintained in all material respects all records required to be maintained by the Laws of all applicable federal, state and local Governmental Authorities as required by applicable Health Care Laws. Neither the Company nor any Seller, or, to the Knowledge of the Company, any of their respective officers, directors, employees, consultants or agents, has been materially sanctioned as not being in compliance with any Health Care Laws. Neither the Company nor, to the Knowledge of the Company, any of its officers, directors or employees, has since December 31, 2012, received any written notice or other communication from any Governmental Authority to the effect that it or 24 any activity conducted by the Company is not in material compliance with any Health Care Laws. (c) The Company is in material compliance with the applicable privacy, security, transaction standards, breach notification, and other provisions and requirements of HIPAA, the HITECH Act and any comparable state Laws. The Company has established and implemented such policies, programs, procedures, contracts and systems as are necessary to comply with HIPAA and the HITECH Act. The Company has not received any written communication, or to the Company's Knowledge, any verbal notice, from any Governmental Authority that alleges that the Company is not in material compliance with the HIPAA Privacy and Security Standards or the HITECH Act. Except as set forth in Section 5.10(c) of the Disclosure Schedule, no Breach has occurred with respect to any unsecured Protected Health Information (including electronic Protected Health Information) maintained by or for the Company that is subject to the notification requirements of 45 CFR Part 164, Subpart D, and no information security or privacy breach event has occurred that would require notification under any comparable state Laws. For purposes of this Section, " Breach " means a breach of unsecured Protected Health Information as defined in 45 C.F.R. Section 164.402 and " Protected Health Information " means individually identifiable health information transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium as defined in 45 CFR Section 160.103. The Company has record retention policies and procedures that require compliance with all records retention Laws pertaining to retention of health care records, and the Company has materially complied with such policies and procedures and such Law. (d) There are no health care regulatory consents or notifications required to be made to any Governmental Authority in connection with the consummation of the transactions contemplated by this Agreement. (e) Notwithstanding any other provisions of this Agreement, Section 5.13 contains the Company’s sole representations and warranties regarding Environmental Matters, Section 5.14 contains the Company’s sole representations and warranties regarding Taxes, and Section 5.20 contains the Company’s sole representations and warranties regarding ERISA and employee benefit plan matters, in each case with respect to compliance with applicable Law . 5.11 Undisclosed Liabilities . Except for: (a) liabilities reflected on or reserved against in the Financial Statements or disclosed in the notes thereto ; (b) liabilities that have arisen since the Interim Balance Sheet Date in t he Ordinary Course of Business ; or ( c) the Company Transaction Expenses , the Company does not have any material liabilities. 5.12 Permits . The Company possesses all material permits, licenses and authorizations necessary to carry on the Business in the manner presently conducted. Section 5.12 of the Disclosure Schedule sets forth those permits, licenses and authorizations necessary to carry on the Business in the manner presently conducted, which permits, licenses and authorizations are valid and in full force and effect except as set forth therein. The Company is not in default under, or violation of, any material permit, license or authorization held by it. 25 5.13 Environmental Matters . The Business is presently conducted, in all material respects, in compliance with all applicable Environmental Laws. Since December 31, 2013, the Company has not received any written citation or other notification from any Governmental Authority or any other Person that the Company is in violation, in any material respect, of any Environmental Laws. The Company is not subject to any Decree issued by any Governmental Authority with respect to Environmental Laws or violations thereof. The Company has not generated, used, transported, treated, stored, released or disposed of any Hazardous Substances in material violation of any applicable Environmental Laws. 5.14 Taxes . (a) Except as set forth in Section 5.14 of the Disclosure Schedule, all income Tax Returns filed or required to be filed (after giving effect to extensions) on or before the date of this Agreement by or on behalf of the Company have been duly filed or extended and each such Tax Return is true, correct and complete in all material respects. All income and other material Taxes owed by the Company that are due and payable have been paid in full. (b) The Company has provided to Buyer true, correct, and complete copies of all income Tax Returns of the Company filed for every taxable period for which the applicable statutory periods of limitations has not expired. No claim concerning Taxes of the Company has been raised in writing by a Taxing authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. (c) There are no Encumbrances with respect to Taxes on any of the assets of the Company except for Permitted Liens. (d) The Company has withheld from salaries, wages and other amounts paid or owing and deposited with and reported to the appropriate taxing authorities all material Taxes required to be so withheld, deposited or reported under Tax information reporting and withholding provisions of applicable Law. (e) The Company is not a beneficiary of any extension of time that remains in effect (other than an automatic extension of time not requiring the consent of any Tax authority) within which: (i) to file any Tax Return or make any election, designation or similar filing relating to Taxes for which it is liable or (ii) to pay or remit any Taxes for which it is liable. The Company has not extended any statute of limitations that remains in effect with respect to any material amount of Taxes for which it is liable. (f) The Company has not been a party to any "listed transaction" as defined in Code Section 6707A(c)(2) and Treasury Regulations Section 1.6011-4(b)(2). (g) The Company has not distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code Sections 355 or 361. 26 (h) The Company is not a party to or bound by any Tax allocation or Tax sharing agreement other than any agreement entered into in the Ordinary Course of Business, the primary focus of which is not Taxes (including leases, loans or purchase and sale contracts that include ancillary Tax provisions). (i) The Company (i) has not been a member of an affiliated group (under Code Section 1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company); or (ii) has no liability for the Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-U.S. Law), as a transferee or successor, by contract, or otherwise. (j) The Company is not a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (k) The Company has been a validly electing S corporation within the meaning of Code Sections 1361 and 1362 at all times during its existence, and the Company will be an S corporation up to and including the Closing Date. (l) The Company shall not be liable for any Tax under Code Section 1374 in connection with the deemed sale of the Company's assets (caused by the Section 338(h)(10) Election. (m) Each Person classified as an independent contractor or employee by the Company is properly classified as such in accordance with applicable Law. The Company is in full compliance with applicable Law with respect to its treatment of Persons classified as independent contractors or employees. To the Company’s Knowledge, each Person subject to service agreement with the Company who is not an individual and who has classified Persons performing assessments on such Person's behalf under such service agreement as an independent contractor has properly classified such Person in accordance with applicable Law. The representations and warranties set forth in this Section 5.14(m) apply both to worker classification issues for Tax purposes and for labor and employment law purposes. 5.15 Intellectual Property . (a) Disclosure of Certain Intellectual Property . Section 5.15(a)(i) of the Disclosure Schedule is a complete and accurate list of all Registered Intellectual Property, grouped by Patents (including withdrawn, lapsed, abandoned or expired Patents), Trademarks, Copyrights, and domain names, and the title, application number, filing date, jurisdiction, and registration number for each item . Section 5.15(a)(ii) of the Disclosure Schedule is a complete and accurate list of all Licensed Intellectual Property (other than Off-the-Shelf Software). There is no item of Licensed Intellectual Property to which the Company has an exclusive license of any kind. Section 5.15(a)(iii) of the Disclosure Schedule is a complete and accurate list of all Owned Intellectual Property. (b) Enforceability; No Challenges . Each item of Registered Intellectual Property is subsisting and in good standing, and to the Knowledge of the Company valid and 27 enforceable. To the Knowledge of the Company, there are no facts, information, or circumstances, including any facts or information that would constitute prior art, that would render any of the Registered Intellectual Property invalid or unenforceable, or would preclude the issuance of or otherwise affect any pending application for any Registered Intellectual Property. The Company has not misrepresented, or failed to disclose, any facts or information in any application for any Registered Intellectual Property that would constitute fraud or a misrepresentation with respect to such application or that, to the Knowledge of the Company, would otherwise affect the enforceability of any Registered Intellectual Property. (c) Proper Filing . Except as disclosed in Section 5.15(c) of the Disclosure Schedule, with respect to each item of Registered Intellectual Property, all necessary filing, examination, registration, maintenance, renewal and other fees and taxes have been paid, and all necessary documents and certificates have been filed with all relevant Registration Offices for the purposes of maintaining such Intellectual Property Rights, in each case in accordance with Law. Section 5.15(c) of the Disclosure Schedule is a complete and accurate list of all actions that must be taken by the Company within 120 days of the Closing Date with respect to any of the Registered Intellectual Property, including payment of any filing, examination, registration, maintenance, renewal and other fees and taxes or the filing of any documents, applications or certificates for the purposes of maintaining, perfecting, preserving or renewing such Intellectual Property Rights, in each case in accordance with Law. (d) Domain Names . No domain name included in the Registered Intellectual Property has lapsed, expired or been abandoned. (e) Trade Secrets . The Company has taken reasonable measures and precautions to protect and maintain the confidentiality of the material Trade Secrets included in the Intellectual Property. To the Company's Knowledge, the Company has not disclosed any material Trade Secrets to any Person without having such Person execute a written agreement regarding the non-disclosure and non-use thereof. All use, disclosure or appropriation by the Company of any Trade Secret not owned by it has been pursuant to the terms of a written agreement between it and the owner of such Trade Secret, or is otherwise lawful. The Company has not received a notice from any Person that there has been an unauthorized use or disclosure of any Trade Secrets included in the Owned Intellectual Property. No Person that has received any material Trade Secrets from the Company has refused to provide to the Company, after the Company’s request therefor, a certificate of return or destruction of any documents or materials containing such Trade Secrets. (f) Ownership of and Right to Use Intellectual Property; No Encumbrances . The Company is the sole and exclusive owner of and has good title to all Owned Intellectual Property, free and clear of all Encumbrances. The Company has the sole and exclusive right to bring a claim or suit against any other Person for past, present or future infringement of Owned Intellectual Property. The Company has not transferred ownership of, or granted any exclusive license with respect to, any Owned Intellectual Property or permitted the rights of the Company in any Owned Intellectual Property to enter into the public domain. The Company has a valid, legally enforceable right to use, practice and otherwise exploit all Licensed Intellectual Property, subject to the terms of each applicable license agreement. Subject to the terms of the applicable 28 license agreement, each item of Licensed Intellectual Property (including without limitation any interest therein acquired through a license or other right to use, but excluding any Off-the-Shelf Software) is free and clear of Encumbrances created or granted by or to the Company. The Company has not received any written notice that any portion of the Licensed Intellectual Propert y is subject to any Encumbrance. (g) Disclosure of Inbound Licenses . Section 5.15(g) of the Disclosure Schedule is a complete and accurate list of all Contracts pursuant to which any Person granted or is required to grant to the Company any right under or license to, any covenant not to assert or sue or other immunity from suit under or any other rights to any current or future Intellectual Property Rights, or where the Company is the beneficiary of a covenant or obligation not to assert any Intellectual Property Rights against the Company prior to asserting such Intellectual Property Rights against any other Person or a covenant or obligation to exhaust remedies as to particular Intellectual Property Rights against any Person prior to seeking remedies against the Company . (h) Disclosure of Other Intellectual Property Agreements . Section 5.15(h) of the Disclosure Schedule is a complete and accurate list, grouped by subsection, of all Contracts as follows: (i) regarding joint development with third parties of any products or Company Technology; (ii) by which the Company, granted or is required to grant any ownership right or title to any Intellectual Property Rights, (iii) by which the Company is assigned or granted an ownership interest in any Intellectual Property Rights (other than written agreements with employees and independent contractors that assign or grant to the Company ownership of Intellectual Property Rights developed in the course of providing services to the Company); (iv) under which the Company grants or receives an option or right of first refusal or negotiation relating to any Intellectual Property Rights; (v) under which any Person is granted any right to access Company Source Code or to use Company Source Code, including without limitation the right to create derivative works of the Company's products; (vi) pursuant to which the Company has deposited or is required to deposit with an escrow agent or any other Person Company Source Code or other Company Technology or the execution of this Agreement or the consummation of any of the transactions contemplated hereby could reasonably be expected to result in the release or disclosure of the Company Source Code; or (vii) that restricts the use, sale, transfer, delivery or licensing of Intellectual Property Rights, including without limitation any covenant not to compete having such implications. (i) Royalties . The Company does not have any contractual obligation to pay any royalties, license fees or other amounts or provide or pay any other consideration to any Person by reason of ownership, use, exploitation, practice, sale or disposition of any Intellectual Property Rights (or any tangible embodiment thereof) or reproducing, making, using, selling, offering for sale, distributing or importing any Company product. (j) Indemnification . Except as set forth in Section 5.15(j) of the Disclosure Schedule, the Company has not entered into any Contract to defend, indemnify or hold harmless any Person against any charge of infringement of any Intellectual Property Rights. 29 (k) No Breach . The Company is not in breach in any material respect of any Contract described in this Section. To the Knowledge of the Company, no other Person is in breach in any material respect of any Contract described in this Section. (l) Public Software . Section 5.15(l) of the Disclosure Schedule provides a summary of the following: (i) all Public Software used by the Company in any manner in the conduct of the Business; (ii) a description of each item of Public Software identified in the foregoing subpart (i); (iii) the Open License Terms applicable to such Public Software and a reference to where such Open License Terms may be found; (iv) whether such Public Software has been distributed by the Company to any Person or only used internally by the Company; (v) whether (and if so, how) such Public Software has been modified by the Company; and (vi) the Company software in which any Public Software is used. No Public Software was or is used in connection with the development of any Company product. The Company is in compliance with all Open License Terms applicable to any Public Software. The Company has not received any notice alleging that it is in violation or breach of any Open License Terms. (m) No Joint Ownership . The Company does not jointly own, license or claim any right, title or interest with any other Person of any Owned Intellectual Property. (n) No Employee Ownership . No current or former officer, manager, director, equity holder, member, employee, consultant or independent contractor of the Company has any right, title or interest in, to or under any Company Intellectual Property that has not been either irrevocably assigned or transferred to it or licensed (with the right to grant sublicenses) to it under an exclusive, irrevocable, worldwide, royalty free, fully paid and assignable license and disclosed in Section 5.15(n) of the Disclosure Schedule. (o) No Challenges . No Person has challenged, or to the Company's Knowledge, threatened to challenge, and no Person has asserted, or to the Company's Knowledge, threatened a claim or made a demand, nor is there any pending proceeding or, to the Company's Knowledge, threatened any such challenge, claim, demand or proceeding, which would adversely affect (i) the Company’s right, title or interest in, to or under the Owned Intellectual Property, (b) any Contract, license or other arrangement under which either Company claims any right, title or interest under the Owned Intellectual Property or restricts the use, manufacture, transfer, sale, delivery or licensing by it of any Owned Intellectual Property, or (c) the validity, enforceability or claim construction of any Patents that are part of the Owned Intellectual Property. The Company has not received any written notice regarding any such challenge, claim, demand or proceeding. (p) No Restrictions . The Company is not subject to any proceeding or outstanding decree, order, judgment or stipulation restricting in any manner the use, transfer or licensing by it of the Owned Intellectual Property, or, with respect to any such proceeding, the use, manufacture, transfer, sale, importation or licensing of any Company product, or that if determined adversely to it would adversely affect the validity, use or enforceability of any Owned Intellectual Property. 30 (q) No Infringement by Other Persons . To the Company's Knowledge, no Owned Intellectual Property or Licensed Intellectual Property that is exclusively licensed to the Company is being or has been infringed, misappropriated or violated by any Person. (r) No Infringement by the Company . To the Company's Knowledge, the conduct of the Business, including without limitation the making, using, offering for sale, selling, distributing and/or importing of any Company product does not and will not infringe, constitute contributory infringement, inducement to infringe, misappropriation or unlawful use of Intellectual Property Rights of any Person. No Person has asserted in writing or to the Company's Knowledge threatened a claim, nor has any Company received any written notification, that the Business or any Owned Intellectual Property (or that any Intellectual Property Rights embodied in the Owned Intellectual Property) infringes, constitutes contributory infringement, inducement to infringe, misappropriation or unlawful use of any Person’s Intellectual Property Rights. No Person has notified the Company in writing that the Company requires a license to any Person’s Intellectual Property Rights and the Company has not received any unsolicited written offer to license (or any other notice of) any Person’s Intellectual Property Rights. The Company has not obtained any non-infringement, freedom to operate, clearances or invalidity opinions from counsel (inside or outside counsel) regarding the Business. (s) Employee and Contractor Agreements . Except as disclosed in Section 5.15(s) of the Disclosure Schedule, all current and former employees, consultants and independent contractors of the Company who are or were involved in, or who have contributed in any manner to the creation or development of any Owned Intellectual Property have executed and delivered to the Company a written agreement regarding the protection of proprietary information and the irrevocable assignment to the Company of any Owned Intellectual Property, the form(s) of which agreements are substantially identical to those made available by the Company. To the Knowledge of the Company, no current or former employee, consultant or independent contractor is in violation of any term of any such agreement. Section 5.15(s) of the Disclosure Schedule also sets forth a complete and accurate list of all consultants and independent contractors used by the Company in connection with the conception, reduction to practice, creation, derivation, development, or making of the Owned Intellectual Property. (t) No Release of Source Code . The Company has not, delivered or licensed to any Person, agreed to disclose, deliver or license to any Person, or permitted the disclosure or delivery to any escrow agent or other Person, any Source Code with respect to any Owned Intellectual Property, except for disclosures to employees, independent contractors or consultants under binding written agreements that prohibit use or disclosure except in the performance of services for the Company. To the Company's Knowledge, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the disclosure or delivery to any Person of such Source Code. (u) No Standards Bodies . The Company is not now, nor has ever been, and no previous owner of any Owned Intellectual Property owned or purported to be owned by the Company was during the duration of their respective ownership, a member or promoter of, or a contributor to or made any commitments or agreements regarding any patent pool, industry standards body, standard setting organization, industry or other trade association or similar 31 organization, in each case that could or does require or obligate the Company or the previous owner to grant or offer to any other Person any license or other right to the Owned Intellectual Property, including without limitation any future Intellectual Property Rights developed, conceived, made or reduced to practice by the Company after the Closing Date. (v) No Government Funding . No funding, facilities, resources or personnel of any Governmental Authority or any university, college, other educational institution, multi-national, bi-national or international organization or research center was used in connection with the development or creation, in whole or in part, of any Owned Intellectual Property. (w) No Limits on the Company’s Rights . The execution, delivery or performance of this Agreement or any Ancillary Document contemplated hereby, the consummation of the transactions contemplated by this Agreement or such Ancillary Document and the satisfaction of any Closing condition set forth herein will not contravene, conflict with or result in any termination of or new or additional limitations on the Company's post-Closing right, title or interest in or to the Owned Intellectual Property, nor will it cause: (i) a Company to grant to any other Person any right to or with respect to any Intellectual Property, (ii) the Company to be bound by, or subject to, any non-compete or other restriction on the operation or scope of its Business, or (iii) the Company to be obligated to pay any royalties or other fees or consideration with respect to Intellectual Property Rights of any Person in excess of those payable by it in the absence of this Agreement or the transactions contemplated hereby, except as set forth in the terms of license arrangements for Off-the-Shelf Software or as required by Parent or Buyer. (x) Registered Intellectual Property . The Company does not have any Registered Intellectual Property oth er than as set forth on Section 5.15(a)(i) of the Disclosure Schedule. 5.16 Contracts . (a) Section 5.16(a) of the Disclosure Schedule lists and, the Company has made available to Buyer copies of, the following Contracts with respect to which the Company has ongoing obligations as of the date hereof (collectively, the " Material Contracts "): (i) all Contracts with customers, suppliers or vendors providing for annual expenditures or receipts or payments by the Company of $50,000 or more; (ii) all Contracts relating to Company Indebtedness; (iii) all Contracts relating to employment or compensation of any employee of the Company with an aggregate annual salary and cash bonus in excess of $50,000 or containing any change-in-control or severance payment obligations; (iv) all Contracts providing for commission or equity or non-equity incentive payments; 32 (v) all lease agreements (whether of real or personal property) providing for annual lease payments in excess of $50,000; (vi) all Contracts relating to the acquisition or disposition of any equity, business or assets (whether by merger, sale of stock, sale of assets or otherwise); (vii) all Contracts relating to the Intellectual Property Rights or the license or ownership thereof (other than Off-the-Shelf Software); (viii) all Contracts to which the Company is a party that provide for any joint venture, partnership or similar arrangement by the Company; (ix) all Contracts relating to the issuance of equity or debt in the Company or rights to acquire equity or debt interests in the Company; (x) all Contracts to which the Company, on the one hand, and any of the Company’s Affiliates, on the other hand, are parties or by which they are bound that relate to or are connected in any way with the Business; (xi) all Contracts with any Governmental Authority; (xii) all Contracts restricting the ability of the Company to engage in any line of business or to compete with any Person; which limits or purports to limit the ability of the Company’s Business to compete in any line of business or with any Person or in any geographic area or during any period of time; (xiii) all Contracts which contains "most favored nation" or preferred pricing provisions; (xiv) all Contracts for which the execution of this Agreement and/or the consummation of the transaction contemplated hereby could reasonably be expected to (A) permit any other party to cancel or terminate the same (with or without notice of passage of time); (B) provide a basis for any other party to claim money damages (either individually or in the aggregate with all other such claims under that contract) from the Company; or (C) give rise to a right of acceleration of any material obligation or loss of any material benefit under such Material Contract; and (xv) all Contracts relating to the prospective acquisition or disposition of any material assets, product line or service offering outside the Ordinary Course of Business. (b) Each of the Material Contracts is in full force and effect, is a valid and binding obligation of the Company, and is enforceable in accordance with its terms (except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting creditors’ rights generally and general principles of equity). The Company is not in breach of, or default under, any Material Contract in any material respect. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer. 33 (c) Except as set forth on Section 5.16(c) of the Disclosure Schedule, no prior consent of any party to a Material Contract is required for the consummation by the Sellers or the Company of the transactions contemplated hereby to be in compliance with the provisions of such Material Contract or to avoid the loss of any right under or the incurrence of any obligation under, such Material Contract . (d) Section 5.16(d) of the Disclosure Schedule sets for th a list of customer contracts (including written work orders) where the customer relationship has generat ed at least $50,000 in aggregate revenues during calendar year 2014 or 2015 (the " Customer Contracts "). Sellers have made available to Buyer a true and correct copy, including all amendments and written work orders, with respect to each Customer Contract. The Company has performed in all material respects its obligations and otherwise complied in all material respects with the terms of such Customer Contracts (including any work orders delivered in connection therewith) and is not currently in default in any material respect under any such Customer Contracts. The Company has not receive d any written communication from any customer who is a par ty to a Customer Contracts that either alleg es or notif ies the Company that the Company or any Company employees or contractors ha s breached in any material respect any of the terms of a Customer Contract. Except as set forth on Section 5.16(d) of the Disclosure Schedule, t he Company has not received any communication from a ny customer who is a party to a Customer Contract stating that such customer intends to terminate , suspend or modify in any material respects the customer relationship , or reduce in any material respect the volume of assessments made by the Company for such customer . Except for payment adjustments or inquiries occurring in the ordinary course of business, there are no pending payment disputes with any party to a Customer Contract. 5.17 Insurance . Section 5.17 of the Disclosure Schedule sets forth a list of each material insurance policy (collectively, the " Insurance Policies ") maintained by the Company. No written notice of cancellation or termination of any of the Insurance Policies has been received by the Company, and all premiums due on the Insurance Policies have been paid. Such Insurance Policies are in full force and effect and shall remain in full force and effect following the consummation of the transactions contemplated by this Agreement. Neither the Seller nor any of its Affiliates (including the Company) has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if due and payable prior to Closing, will be paid prior to Closing in accordance with the payment terms of each Insurance Policy. The Insurance Policies do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Company. All such Insurance Policies (a) are valid and binding in accordance with their terms; and (b) have not been subject to any lapse in coverage. Except as set forth in Section 5.17 of the Disclosure Schedule, there are no claims related to the business of the Company pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. The Company is not in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such Insurance Policy. The Insurance Policies are of the type and in the amounts customarily carried by Persons 34 conducting a business similar to the Company and are sufficient for compliance with all applicable Laws and Contracts to which the Company is a party or by which it is bound. 5.18 Litigation . (a) Except as set forth on Section 5.18(a) of the Disclosure Schedule, there is no Proceeding pending before any Governmental Authority, foreign or domestic, or, arbitrator, or, to the Knowledge of the Company, threatened against the Company, or any of their properties or any of its officers or directors (in their capacities as such). There is no judgment, injunction, decree or order against the Company or, to the Company's Knowledge, any of their directors or officers (in their capacities as such). (b) To the Company's Knowledge, no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement is in effect, nor is there pending any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing, nor has there been any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement, which makes the consummation of such transactions illegal. (c) There is not pending or, to the Company's Knowledge, threatened, any Action in which a Governmental Authority is or is threatened to become a party or is otherwise involved, and the Company has not received any communication from any Governmental Authority in which such Governmental Authority indicates the probability of commencing any legal proceeding or taking any other action: (i) challenging or seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement; (ii) relating to this Agreement and seeking to obtain from Buyer, Buyer's Affiliates, or from the Company, any damages or other relief; or (iii) that would adversely affect the right of Buyer or the Company to own the assets or operate the Business. 5.19 Labor Matters . (a) Section 5.19(a) of the Disclosure Schedule sets forth for each employee of the Company whose annual base salary exceeds $50,000, such employee’s name, title or position held, and base salary, wage or other pay rate. (b) The Company is not a party to any collective bargaining agreement or other labor union contract and, to the Knowledge of the Company, no petition has been filed, nor has any proceeding been instituted by any employee or group of employees with any labor relations board or commission seeking recognition of a collective bargaining representative. (c) The Company is, in all material respects, in compliance with all applicable Laws pertaining to employment and employment practices, including all such Laws relating to labor relations, equal employment, fair employment practices, entitlements, workers 35 compensation, prohibited discrimination, employment eligibility, immigration or other similar employment practices or acts. (d) There are no pending nor, to the Knowledge of the Company, threatened labor strikes, work stoppages, slowdowns or refusals to work or similar material labor disruption or dispute affecting the Company, and, to the Knowledge of the Company, there are no labor disputes currently subject to any grievance procedure or Proceeding. (e) All Persons performing services directly or indirectly for the Company is properly classified for Tax and employment purposes as employees or independent contractors. To the Company's Knowledge, no Governmental Authority has challenged the classification of any Person who is directly or indirectly providing services to or on behalf of the Company. (f) The Company is in compliance in all material respects with the Immigration Reform and Control Act of 1986, as amended. 5.20 Employee Benefit Plans . (a) Company Employee Plans . Section 5.20(a) of the Disclosure Schedule contains in all material respects an accurate and complete list of each plan, program, policy, practice, contract, agreement or other arrangement providing for direct or indirect compensation, severance benefits, termination pay, deferred compensation, performance awards, stock or stock-related options or awards, pension benefits, retirement benefits, profit-sharing benefits, savings benefits, disability benefits, medical insurance, dental insurance, health insurance, life insurance, death benefit, other insurance, repatriation or expatriation benefits, tax gross ups, welfare benefits, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including, but not limited to, each "employee benefit plan," within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (" ERISA "), which is or has during the last three years been maintained, contributed to, or required to be contributed to, by the Company for the benefit of any current or former employee, director or consultant (collectively, the " Company Employee Plans "). The Company has not made any plan or commitment to establish any new Company Employee Plan, to modify any Company Employee Plan (except to the extent required by law or to conform any such Company Employee Plan to the requirements of any applicable Law, in each case as previously disclosed to Buyer in writing, or as required by this Agreement). (b) Documents . The Company has provided to Buyer, in each case, to the extent applicable, (i) current, correct and complete copies of all documents embodying each Company Employee Plan including all amendments thereto and all related trust documents (or a summary of any oral Company Employee Plan), (ii) the three (3) most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan, (iii) if the Company Employee Plan is funded, the most recent annual and periodic accounting of Company Employee Plan assets, (iv) the most recent summary plan description together with the summary(ies) of material modifications thereto, if any, with respect to each Company Employee Plan, (v) all communications material to any employee or employees relating to any Company 36 Employee Plan and any proposed Company Employee Plan, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any liability to the Company, (vii) all material written agreements and contracts relating to each Company Employee Plan, including administrative service agreements and group insurance contracts, (vi) all material correspondence to or from any Governmental Authority relating to any Company Employee Plan, (vii i ) all model Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (" COBRA ") forms and related notices, (ix ) all policies pertaining to fiduciary liability insurance covering the fiduciaries for each Company Employee Plan, (x) all discrimination tests for each applicable Company Employee Plan for the three most recent plan years, (x i ) all registration statements, annual reports (Form 11-K and all attachments thereto) and prospectuses prepared in connection with each Company Employee Plan, to the extent applicable, (xi i ) all HIPAA privacy notices and all business associate agreements to the extent required under HIPAA, (xii i ) the most recent Internal Revenue Service (" IRS ") determination or opinion letter issued with respect to each Company Employee Plan and (xiv ) all rulings or notices issued by a governmental agency with respect to each Company Employee Plan. (c) Company Employee Plan Compliance . The Company has performed in all material respects all obligations required to be performed by it under, is not default or violation of, and the Company has no Knowledge of any default or violation of any other party to, any Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with applicable Law, including ERISA or the Code. Each Company Employee Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code has either (i) applied for a favorable determination letter, prior to the expiration of the requisite remedial amendment period under applicable Treasury Regulations or IRS pronouncements, but has not yet received a response; (ii) obtained a favorable determination, notification, advisory and/or opinion letter, as applicable, on which the employer is entitled to rely, as to its qualified status from the IRS; or (iii) still has a remaining period of time to apply for such a determination letter from the IRS and to make any amendments necessary to obtain a favorable determination, and nothing has occurred since the date of the most recent determination that could reasonably be expected to cause any such Company Employee Plan or trust to fail to qualify under § 401(a) or 501(a) of the Code. No "prohibited transaction," within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan. There are no actions, suits or claims pending or, to the Knowledge of the Company, threatened (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan and, to the Knowledge of the Company or any ERISA Affiliates, no fact or circumstance exists that would make such an action, suit or claim likely to occur. Each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to Buyer or the Company (other than ordinary administration expenses), other than those Company Employee Plans identified on Section 5.20(a) of Disclosure Schedule that require assent of a participant thereof to effect an amendment or termination. There are no audits, inquiries or proceedings pending or that have been initiated, or to the Knowledge of the 37 Company or any ERISA Affiliates, by the IRS, United States Department of Labor, or any other Governmental Authority with respect to any Company Employee Plan. The Company is not subject to any material fine, assessment, penalty or other Tax or liability with respect to any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code or otherwise by operation of law or contract. The Company has timely made in all material respects all contributions and other payments required by and due under the terms of each Company Employee Plan. (d) Pension Plan; Collectively Bargained, Multiemployer and Multiple-Employer Plan . Neither the Company nor any entity that is treated as a "single employer" with the Company pursuant to Section 414(b), 414(c), 414(m), or 414(o) of the Code (an " ERISA Affiliate ") has within the last six (6) years maintained, established, sponsored, participated, in, contributed to, or could other incur any liability with respect to: (i) any "multiemployer plan," as defined in Section 3(37) or 4001(a)(3) of ERISA or 414(f) of the Code; (ii) any "multiple employer plan", within the meaning of Section 210, 4063 or 4064 of ERISA or Section 413(c) of the Code; (iii) any employee benefit plan that is subject to Section 302 of ERISA, Title IV of ERISA or Sections 412 of the Code; or (iv) any "multiple employer welfare arrangement," as defined in Section 3(40) of ERISA. (e) No Self-Insured Company Employee Plan . Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to or incurred an obligation to contribute to any self-insured "group health plan" (within the meaning of Section 5000(b)(1) of the Code) that provides benefits to employees (other than a medical flexible spending account, health reimbursement arrangement or other similar program, including any such plan pursuant to which a stop-loss policy or contract applies). (f) No Post-Employment Obligations . No Company Employee Plan provides, or reflects or represents any liability to provide, post-termination or retiree life insurance, health or other employee welfare benefits to any Person, except as may be required by COBRA or other applicable statute, and the Company has not represented, promised or contracted (whether in oral or written form) to any employee (either individually or to employees as a group) or any other Person that such employee(s) or other Person would be provided with life insurance, health or other employee welfare benefits, except to the extent required by statute. (g) Effect of Transaction . Excluding the payment of the Purchase Price to the Sellers, n either the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby or any termination of employment or service in connection therewith will (i) result in any material payment (including severance, golden parachute, bo nus, tax gross up, or otherwise ), becoming due to any current or former employee, director or consultant, (ii) result in any forgiveness of indebtedness of any current or former employee, director or consultant, (iii) materially increase any benefits otherwise payable by the Company to any current or former employee, director or consultant, or (iv) result in the acceleration of the time of payment or vesting of any such benefits to any current or former employee, director or consultant except as required under Section 411(d)(3) of the Code. 38 (h) Deferred Compensation . No compensation shall be includable in the gross income of any current or former employee, director or consultant of either Company or any of its ERISA Affiliates as a result of the operation of Sections 409A or 457A of the Code with respect to any applicable arrangements or agreements in effect prior to the Effective Time. No stock options, stock appreciation rights or other equity-based awards issued or granted by the Company are treated as deferred compensation arrangements subject to the requirements of Sections 409A or 457A of the Code. Each "nonqualified deferred compensation plan" (as such term is defined under Section 409A(d)(1) of the Code and the guidance thereunder and under Section 457A of the Code and the guidance thereunder) under which either Company or any of its ERISA Affiliates makes, is obligated to make or promises to make, payments (each, a " 409A Plan ") complies in all material respects, in both form and operation, with the requirements of Sections 409A and 457A of the Code and the guidance thereunder. Section 5.19(f)(h) of the Disclosure Schedule lists each 409A Plan under which the Company or its ERISA Affiliates makes, is obligated to make or promises to make, payments. No payment to be made under any 409A Plan is, or to the Knowledge of the Company will be, subject to the penalties of Section 409A(a)(1) of the Code or Section 457A of the Code. (i) COBRA; FMLA . The Company has complied in all material respects with COBRA, the Family Medical Leave Act of 1993, as amended, the Women’s Health and Cancer Rights Act of 1998, the Newborns’ and Mothers’ Health Protection Act of 1996, and any similar provisions of state law applicable to its employees. The Company has no unsatisfied obligations to any employees or qualified beneficiaries pursuant to COBRA, HIPAA or any state law governing health care coverage or extension. (j) Employment Matters . The Company is in material compliance with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment, employee safety and health and wages and hours, and in each case, with respect to employees: (i) has withheld and reported all material amounts required by law or by agreement to be withheld and reported with respect to wages, salaries and other payments to employees, (ii) is not liable for any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing, and (iii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any governmental authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no actions, suits, claims or administrative matters pending, or to the Company's Knowledge threatened, or reasonably anticipated, against the Company relating to any employee or Company Employee Plan. There are no pending or to the Company's Knowledge threatened, or reasonably anticipated, claims or actions against the Company or any trustee under any worker’s compensation policy. The services provided by the Company are terminable at the will of the Company. No employees of the Company are employed pursuant to a written employment agreement by the Company. There are no contractual liabilities of the Company to any employee, director or consultant, that result from the termination by Buyer or the Company of such Person’s employment or provision of services, a change of control of the Company, or a combination thereof. The Company has no direct or indirect liability with respect to any 39 misclassification of any Person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer. (k) Labor . No work stoppage or labor strike against the Company is pending, or, to the Knowledge of the Company, threatened, or reasonably anticipated. The Company has no Knowledge of any activities or proceedings of any labor union to organize any employees of the Company. There are no actions, suits, claims, labor disputes or grievances pending or, to the Company's Knowledge, threatened, or reasonably anticipated relating to any labor matters involving any employee of the Company, including charges of unfair labor practices. The Company has not engaged, to the extent material, in any unfair labor practices within the meaning of the National Labor Relations Act. The Company does not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement, works council agreements or procedures, or union contract with respect to employees and no collective bargaining agreement is being negotiated by the Company. Within the past year, the Company has not incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act (" WARN ") or any similar state or local law that remains unsatisfied, nor shall any terminations prior to the Closing Date result in unsatisfied liability or obligation under WARN or any similar state or local law. (l) PPACA . The Company has complied in all material respects with all applicable requirements of the Patient Protection and Affordable Care Act of 2010 (" PPACA "), including, without limitation, offering affordable coverage to a sufficient number of employees of the Company to avoid penalties under the PPACA. (m) No Interference or Conflict . To the Knowledge of the Company, no stockholder, director, officer, employee or consultant of the Company is obligated under any contract or agreement, subject to any judgment, decree, or order of any court or administrative agency that would interfere with such Person’s efforts to promote the interests of the Company or that would interfere with the Business. To the Knowledge of the Company, neither the execution nor delivery of this Agreement, nor the carrying on of the Business as presently conducted nor any activity of such officers, directors, employees or consultants in connection with the carrying on of such Business as presently conducted will, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract or agreement under which any of such officers, directors, employees, or consultants is now bound. (n) Termination of 401(k) Plan . The Company has adopted resolutions and any related amendments providing for the termination of the Long Term Solutions 401(k) Profit Sharing Plan and Trust , effective at least one day prior to the Closing Date . 5.21 Accounts Receivable . Subject to any reserves set forth therein, the accounts receivable shown on the Financial Statements are valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance of services, and other business transactions in the Ordinary Course of Business consistent with past practices in each case with Persons other than Affiliates, are not subject to any prior assignment, lien or security interest, and are not subject to valid defenses, set-offs or counter claims. The accounts receivable are collectible in 40 accordance with their terms at their recorded amounts, subject only to the reserve for doubtful accounts on the Financial Statements. 5.22 Absence of Unlawful Payments . The Company has not, and to the Knowledge of the Company, none of its directors, officers, employees, agents or representatives in their capacity as such, or Person acting on behalf of any of the aforementioned, have offered, authorized, made, paid or received, or will in the future offer, authorize, make, pay or receive, directly or indirectly, any bribes, kickbacks, or other similar payments or offers or transfers of value in connection with obtaining or retaining business or to secure an improper advantage to or from any Person; nor have any of them, directly or indirectly, committed any violation of any applicable anti-corruption law or regulation, including the U.S. Foreign Corrupt Practices Act, 15 U.S.C. 78dd et seq. 5.23 Privacy; Security Measures . (a) Privacy . Except as set forth in Section 5.23(a) of the Disclosure Schedule, the Company has complied in all material respects with all applicable Law, contractual obligations and its privacy policies relating to the collection, storage, use, disclosure and transfer of any personally identifiable information collected by or on behalf of it, and has taken all appropriate and industry standard measures to protect and maintain the confidential nature of such personally identifiable information. The execution, delivery and performance of this Agreement and any Ancillary Document contemplated hereby will comply with all applicable Law relating to privacy and with the Companies' privacy policies. The Company has not received a written complaint regarding its collection, use or disclosure of personally identifiable information. (b) Security Measures . The Company has implemented and maintained, consistent with industry standard practices and its contractual and other obligations to other Persons, all reasonable security and other reasonable measures necessary to protect all computers, networks, software and systems used in connection with the operation of the Business (the " Information Systems ") from viruses and unauthorized access, use, modification, disclosure or other misuse. The Company has provided to Buyer all of its disaster recovery and security plans, and procedures relating to the Company's Information Systems. To the Knowledge of the Company, there have been no unauthorized intrusions or breaches of the security of the Company's Information System s. 5.24 Restrictions on Business Activities . There is no Decree binding upon the Company that has or could reasonably be expected to have the effect of prohibiting or materially impairing the conduct of its Business as presently conducted. 5.25 Title to Property . (a) The Company has good title to all of its properties, interests in properties and assets reflected in the Most Recent Balance Sheet or acquired after the date of the Most Recent Balance Sheet or properties, interests in properties and assets sold or otherwise disposed of since the date of the Most Recent Balance Sheet in the Ordinary Course of Business), or with 41 respect to leased properties and assets, valid leasehold interests therein, free and clear of all Encumbrances except for Permitted Liens . The plants, property and equipment of the Company that are used in the operations of the Business are in all material respects in adequate working condition and repair, subject to normal wear and tear. All properties used in the operations of the Company are reflected in the Financial Statements to the extent required by Accounting Principles and Policies. (b) Upon Buyer's payment to the holders of the security interests in the assets of the Company in the amounts set forth on the Estimated Closing Statement, each of the assets of the Company will be released from all security interests thereon, and the Company shall be able to take all steps necessary to terminate all UCC financing statements which have been filed with respect to such security interests. 5.26 Full Disclosure . To the Knowledge of the Company, no representation or warranty by Sellers or the Company in this Agreement and no statement contained in the Disclosure Schedule to this Agreement or any certificate or other document furnished or to be furnished to Bu yer pursuant to this Agreement , contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. ARTICLE VI CERTAIN COVENANTS AND AGREEMENTS 6.1 Cooperation ; Required Consents . (a) Subject to the terms and conditions of this Agreement, each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including the satisfaction, but not waiver, of the closing conditions set forth in Article VII). (b) As soon as practicable, the Parties shall commence all reasonable actions to make the notifications and obtain the consents, provide the notices, and make the filings set forth in Section 6.1(b) of the Disclosure Schedule (collectively, the " Required Consents ") required to consummate the transactions contemplated by this Agreement. 6.2 Access . Prior to the Closing, the Company will permit representatives of Buyer to have reasonable access, during normal business hours and in a manner so as not to interfere with the normal business operations of the Company, to the premises, properties, books, records, contracts and documents of or pertaining to the Business as Buyer may reasonably request. All requests for information made pursuant to this Section 6.2 shall be directed to Anne Harrington or Noreen Guanci, or such other officers of the Company as may be designated in writing by Ms. Harrington or Ms. Guanci. 6.3 Expenses . Except as otherwise provided in this Agreement, each of the Parties shall pay their respective costs and expenses in connection with the negotiation and preparation 42 of this Agreement and the Ancillary Documents, and their respective performance hereunder and thereunder, including fees, expenses and disbursements of third party brokers, attorneys, accountants and other service providers. 6.4 Intentionally Omitted . 6.5 No Public Announcement . Unless otherwise required by applicable Law, no press release or public announcement related to this Agreement or the transactions contemplated hereby, or, prior to the Closing, any other announcement or communication to the employees or Persons having business relations with the Company, shall be issued or made by any Party, in each case without the joint approval of Buyer and Sellers, which approval shall not be unreasonably withheld, delayed or conditioned; provided that the foregoing restrictions shall not restrict or prohibit: (a) any Party from making any announcement to its employees, equity holders, customers and other business relations to the extent such Party reasonably determines in good faith that such announcement is necessary or advisable; or (b) Parent or Buyer from providing general information about the subject matter of this Agreement and the transactions contemplated hereby in connection with their fundraising, marketing, informational or reporting activities. 6.6 Preservation of Books and Records . After the Closing Date, Buyer shall, and shall cause its Affiliates to, until the seventh anniversary of the Closing Date, retain all books, records and other documents of the Company relating to periods prior to the Closing and make the same available for inspection and copying by each Seller (at such Seller’s expense) during normal business hours, upon reasonable request and upon reasonable notice. Buyer shall not, and shall cause each of its Affiliates to not, destroy or permit to be destroyed any such books, records or documents after the seventh anniversary of the Closing Date without first advising Sellers in writing and giving Sellers a reasonable opportunity to obtain possession thereof. 6.7 Transfer Taxes . All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be shared by Sellers when due, and Sellers will file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable Law, Buyer will, and will cause its Affiliates to, join in the execution of any such. The Sellers, on the one hand, and the Buyer, on the other hand, will each be responsible for one-half of any such Taxes and related expenses, and promptly upon the request of the Sellers, but in any event within five Business Days of receipt of a written statement setting forth such Taxes and related expenses, Buyer shall remit to Sellers an amount equal to one-half of any such amounts. Each of the parties hereto shall prepare and file, and shall fully cooperate with the other party with respect to the preparation and filing of, any Tax Returns and other filings relating to any such Taxes or charges as may be required. 6.8 Further Assurances . Subject to the terms and conditions of this Agreement, each Party agrees, from time to time as and when requested by any other Party, to execute and deliver, or cause to be executed and delivered, all such documents, and to use its commercially reasonable efforts to take, or cause to be taken, all such further or other appropriate actions and 43 to do, or cause to be done, all other things, as such other Party may reasonably deem necessary or desirable to carry out the provisions of this Agreement and give effect to the transactions contemplated hereby. 6.9 Closing Conditions . From the date of this Agreement until the earlier of the Closing and the termination of this Agreement, each Party shall, and Sellers shall cause the Company to, use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article VII. 6.10 Tax Matters . (a) The Company and each Seller shall join with Buyer in making an election under Code Section 338(h)(10) (and any corresponding election under state and local law) with respect to the purchase and sale of the Sellers' Shares under this Agreement (collectively, a " Section 338(h)(10) Election "). Sellers shall include any income, gain, loss, deduction, or other tax item resulting from the Section 338(h)(10) Election on their tax returns to the extent required by applicable Law. Sellers shall also pay any Tax imposed on the Company attributable to the making of the Section 338(h)(10) Election, including (i) any Tax imposed under Code Section 1374, (ii) any Tax imposed under Regulation Section 1.338(h)(10)-1(d)(2), and any state or local Tax imposed on the Company arising out of the Section 338(h)(10) Election. In particular, and not by way of limitation, in order to effect such election, on or prior to the Closing Date, Buyer and Sellers shall cooperate to prepare and jointly execute necessary copies of Internal Revenue Service Forms 8023 and 8883 and all attachments required to be filed therewith pursuant to applicable Treasury Regulations and Sellers shall deliver such documents to Buyer at or prior to Closing. Sellers acknowledge and agree that the Form 8883 will be included with the filing of the Company's final S corporation tax return. (b) Parent, Buyer, the Company and the Sellers agree that the Purchase Price and the liabilities of the Company (plus other relevant items) will be allocated to the assets of the Company in a manner consistent with Code Sections 338 and 1060 and the regulations thereunder. Buyer, the Company and the Sellers shall file all Tax returns and information reports in a manner consistent with such allocations. Buyer shall prepare a completed set of Internal Revenue Service Forms 8883 (and any comparable forms required to be filed under state and local Tax law) and any additional data or materials required to be attached to Form 8883 pursuant to Treasury Regulations promulgated under Section 338 of the Code. (c) The Company and Sellers shall not revoke the Company's election to be taxed as an S corporation within the meaning of Code Sections 1361 and 1362. Company and the Sellers shall not take or allow any action that would result in the termination of the Company's status as a validly electing S corporation within the meaning of Code Sections 1361 and 1362. (d) To the extent permitted or required by law or administrative practice, the taxable year of the Company that includes the Closing Date shall be treated as closing on (and including) the Closing Date. In the case of any Taxes of the Company that are payable with respect to any Tax period that includes (but does not end on) the Closing Date (a " Straddle 44 Period "), the portion of any such Taxes that are allocable to the portion of the Straddle Period ending on the Closing Date shall: (i) in the case of Taxes that are either (A) based upon or related to income, activities, events, receipts or expenditures, or (B) imposed in connection with any sale, transfer or assignment or any deemed sale, transfer or assignment of property (real or personal, tangible or intangible), will be determined based on an interim closing of the books as of the close of business on the Closing Date; and (ii) in the case of all other Taxes, be deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding Tax period) multiplied by a fraction, the numerator of which is the number of calendar days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of calendar days in the entire Straddle Period. Without limiting the generality of the immediately preceding sentence, any retention or transaction bonuses or other compensatory payments or payment obligations of the Company to employees or other Persons that will become due and payable as a result of the consummation of the transactions contemplated by this Agreement shall be considered to have been paid prior to the Closing Date, but only to the extent that such compensation is included as a Transaction Expense or otherwise included as a current liability in the calculation of Working Capital. (e) Subject to Section 6.10, following the Closing, Sellers shall prepare or cause to be prepared all Tax Returns for the Company that relate to (or include) any Pre-Closing Tax Period and that are due after the Closing Date. Buyer or the Company shall file or cause to be filed such Tax Returns. Buyer shall be permitted to review any such Tax Return prior to the filing thereof. Sellers shall pay or cause to be paid the Taxes shown as due on any such Tax Return to the extent such Taxes relate to (or include ) any Pre-Closing Tax Period. Notwithstanding anything to the contrary in this Agreement, the Sellers shall have no liability under this Agreement with respect to (and Buyer shall pay or cause to be paid) (i) any Taxes that were taken into account in the calculation of Closing Working Capital, (ii) Taxes incurred as a result of actions outside the ordinary course taken after the Closing, or (iii) Taxes incurred after the Closing Date. Notwithstanding anything to the contrary anywhere in this Agreement, the parties agree that all losses, deductions, credits and any other Tax Benefits available on account of the payment or incurrence of the Transaction Expenses, the payment of the Company Indebtedness, and the other transactions are payments contemplated by this Agreement shall be reported in Pre-Closing Tax Periods (and otherwise treated as attributable to Pre-Closing Tax Periods and for the economic benefit of the Sellers). Buyer shall prepare and timely file (or cause to be prepared and timely filed) all other Tax Returns of the Company required to be filed with any Governmental Authority after the Closing Date, and shall pay (or cause to be paid) any Taxes due in respect of such Tax Returns. With respect to any Tax Returns filed with respect to any Pre-Closing Taxable Period, or with respect to any Straddle Period, Sellers shall be responsible for the Pre-Closing Taxes due in respect of such Tax Returns (collectively, " Sellers' Taxes "). (f) Buyer shall not (and shall not cause or permit Parent or the Company to) (i) amend any Tax Return that relates to any Pre-Closing Tax Period or with respect to any Straddle Period or (ii) make any Tax election that has retroactive effect to any such Pre-Closing Tax Period or to any Straddle Period, in each case without the prior written consent of Sellers, 45 which consent shall not be unreasonably withheld, conditioned or delayed. Buyer shall, if the Sellers request and at the expense of the Sellers, cause the Company to file for and obtain any refunds or credits to which Sellers may be entitled hereunder. Buyer shall permit Sellers to control (at the expense and in the sole discretion of the Sellers) the prosecution and content of any such refund or credit claim. (g) Any refunds (including, for the avoidance of doubt, overpayments of estimated Taxes) of, or credits against, Taxes of, or with respect to, the Company for any Pre-Closing Tax Period will be for the benefit of Sellers, and Buyer or the Company will forward the amount of any such refunds (whether received as a refund or as a credit against or an offset of Taxes otherwise payable), together with any interest thereon, as directed by Sellers within 10 days of receipt. (h) Buyer, the Company and Sellers will, and will cause their respective Affiliates to, provide each other with such cooperation and information as any of them reasonably may request in connection with any Tax matters relating to the Company. Buyer will retain, or cause the Company to retain, all Tax Returns, schedules and work papers, records and other documents in its possessions relating to Tax matters of the Company for all Pre-Closing Tax Periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate or (ii) six years following the due date (without extension) for such Tax Returns. (i) Buyer shall promptly notify Sellers in writing of the commencement of any audit or examination of any Tax Return of the Company for any Pre-Closing Tax Period and any proposed change or adjustment, claim, dispute, arbitration or litigation that, if sustained, would reasonably be expected to give rise to a claim for indemnification in respect of Taxes under this Agreement (a “Tax Claim”). Such notice shall describe the asserted Tax Claim in reasonable detail and shall include copies of any notices and other documents received from any Taxing authority in respect of any such asserted Tax Claim. Sellers shall have the right to control any Tax Claims in the Tax audit, examination, and settlement stage, and, if not settled, in any further contest; provided, however, that Sellers shall inform Buyer of the status and progress of such Tax Claim and that Buyer will have the opportunity to participate in such Tax Claim at its expense. Sellers may not settle any Tax Claim (either at the audit or examination stage or thereafter) without first obtaining Buyer’s consent (which concsent shall not be unreasonably withheld, conditioned or delayed). 6.11 Non-Competition and Non-Solicitation . (a) For a period beginning on the Closing Date and ending on the fifth anniversary of the later of (i) the termination of such Seller's employment with the Company, Parent or an Affiliate of Parent or (ii) the Closing Date, each Seller shall not, except in her capacity as an officer or employee of the Company, engage in or assist others in engaging in the Business within the United States (the " Territory "), as a stockholder, partner, member, owner, joint venturer, investor, employee, officer, director, sole proprietor, or similar capacity (other than as a holder of not more than two percent (2%) of the total outstanding stock of a publicly held company). 46 (b) For a period beginning on the Closing Date and ending on later of (i) the fifth anniversary the Closing Date, or (ii) three years after termination of such Seller's employment with Parent or an Affiliate of Parent, each Seller agrees that she or it shall not, directly or indirectly, for herself or on behalf of any other Person: (A) induce, persuade or encourage any customer or supplier of the Business in the Territory to cease doing business with the Company, Buyer or any Affiliate thereof; (B) solicit or procure the business of any Person that is a customer of the Company as of the Closing Date in the Territory in connection with any activities which are in competition with the Business; (C) accept or procure any business from any Person that is a customer of the Company as of the Closing Date in the Territory in connection with any activities which are in competition with the Business; or (D) supply or procure any services to any Person that is a customer of the Company as of the Closing Date in the Territory in connection with any activities which are in competition with the Business. (c) For a period beginning on the Closing Date and ending on later of (i) the fifth anniversary the Closing Date, or (ii) three years after termination of such Seller's employment with Parent or an Affiliate of Parent, each Seller agrees that she or it shall not, directly or indirectly, for herself or on behalf of any other Person, (A) hire or solicit for employment any employee of the Company (defined to include for purpose of this Section an individual who was employed during the Restriction Period or during the 12 months preceding the Closing Date), Buyer or any Affiliate thereof who was, as of the Closing Date, an employee of the Company, or (B) induce, persuade or encourage any employee of the Company to terminate such employee’s position with the Company . (d) Each Seller acknowledges that: (i) an essential part of the acquisition contemplated by this Agreement is the purchase by Buyer of goodwill, and that to protect and preserve such goodwill, the covenants set forth in this Section 6.11 are not only reasonable and necessary but required as a condition to Buyer’s consummation of the transactions contemplated by this Agreement; (ii) the provisions of this Section 6.11 are the product of arm’s-length negotiations and are reasonable and necessary to protect and preserve Buyer’s interests in and right to the ownership, use and operation of the Business from and after the Closing Date; and (iii) Buyer would be irreparably damaged if such Seller breached her or its covenants set forth in this Section 6.11. (e) The Parties recognize that damages in the event of a breach by any Seller of any provision of this Section 6.11 would be difficult, if not impossible, to ascertain, and that such breach would give rise to irreparable harm to Buyer and the Company, and it is therefore agreed that Buyer, in addition to and without limiting any other remedy or right it may have, shall have the right to seek an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach. The existence of this right shall not preclude any other rights or remedies at law or in equity which Buyer may have relating to a breach of this Section 6.11. (f) The parties agree that the restrictions set forth herein are reasonable and necessary to preserve the Business and that the maximum protection available under the law shall be provided to Buyer by this Agreement to protect Buyer's interests in the Business and its confidential and trade secret information and that, if the restrictions imposed hereby are held by 47 any court to be invalid, illegal or unenforceable as to time, territory, scope or otherwise, this Agreement shall be construed to impose restrictions which are valid, legal and enforceable as to time, territory, scope or otherwise, as the case may be, to the maximum extent permitted under applicable law. (g) For purposes of this Section 6.11, with respect to the term of each Guanci Shareholder's obligations, a Se ller 's employment shall mean Noreen Guanci's employment with the Company, Parent or an Affiliate. 6.12 Use of Corporate Name or Trade Name . After the Closing, except in connection with services provided on behalf of the Company, Parent, Buyer or her or its respective Affiliates, neither any Seller nor any of their respective Affiliates will use commercially any of the legal or trade names associated with the Company or the Business, or any other trade name included within the Company Intellectual Property, any derivative or variation thereof or any name similar thereto. 6.13 Employees . (a) For purposes of eligibility and vesting of a Company Employee in a benefit plan of Parent or its subsidiaries (including Buyer or, after the Closing, the Company) (a " Parent Benefit Plan "), to the extent allowed under the applicable Parent Benefit Plans, each Company Employee shall be credited with all years of service for which such Company Employee was credited before the Closing Date under any comparable Company Employee Plans in which such Company Employee participated immediately prior to the Closing Date, except that the foregoing shall not apply to the extent such credit would result in a duplication of benefits for the same period of service. In addition, and without limiting the generality of the foregoing, subject to any eligibility requirements: (i) each Company Employee shall given the opportunity to participate, without any waiting time, in any and all Parent Benefit Plans made available to similarly situated employees of Parent's Affiliates, (ii) for purposes of each Parent Benefit Plan providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, Parent shall cause to the extent permitted under such Parent Benefit Plan, all pre-existing condition exclusions and actively-at-work requirements of such Parent Benefit Plan to be waived for such Company Employee and his or her covered dependents (except to the extent such pre-existing condition or actively-at-work requirement applied under a comparable Company Employee Plan in which such Company Employee participated immediately prior to the Closing Date), and (iii) to the extent allowed under such Parent Benefit Plans, during the remaining portion of the applicable Parent Benefit Plan year following the Closing, Parent shall cause any eligible expenses incurred by such Company Employee and his or her covered dependents during the portion of the plan year of the Company Employee Plan ending on the date such Company Employee’s participation in the corresponding Parent Benefit Plan begins to be taken into account under such Parent Benefit Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Company Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such Parent Benefit Plan. 48 (b ) Parent, Buyer or the Company (post-Closing) shall (i) credit each of the Company Employees with an amount of paid vacation and sick leave days following the Closing Date equal to the amount of vacation time and sick leave days each such Company Employee has accrued but not yet used or cashed out as of the Closing Date under the Company’s vacation and sick leave policies applicable to such Company Employee as in effect immediately prior to the Closing Date (collectively " Accrued PTO "), and (ii) allow each of the Company Employees to use such Accrued PTO at such times as each would have been allowed under the Company’s vacation and sick leave policies applicable to such Company Employees as in effect immediately prior to the Closing Date. ( c ) No provision of this Agreement shall create any third party beneficiary rights in any employee, individual independent contractor, or former employee or individual independent contractor of the Company (including any beneficiary or dependent thereof) in respect of continued employment by Parent, Buyer, the Company or otherwise. Nothing herein shall (i) guarantee employment for any period or preclude the ability of Parent or the Company, as applicable, to terminate the employment or service of any Company Employee for any reason, subject to applicable Law, (ii) require Parent, Buyer or the Company to continue any Company Employee Plan or other employee benefit plans or arrangements, or prevent the amendment, modification or termination thereof after the Closing Date, or (iii) amend any Company Employee Plan or Parent Benefit Plan or other employee benefit plan or arrangement. 6.14 Indemnification of Directors and Officers . (a) From and after the Closing Date, Parent shall cause the Company to fulfill and honor in all respects the obligations of the Company to its directors and officers pursuant to any indemnification provisions under the Articles of Incorporation or bylaws of the Company as in effect on the date of this Agreement (the persons entitled to be indemnified pursuant to such provisions being referred to collectively as the " D&O Indemnified Parties "). From and after the Closing Date through the sixth (6 th ) anniversary of the Closing Date, Parent shall cause the Company to maintain the provisions with respect to indemnification and exculpation from liability as set forth in the Articles of Incorporation or bylaws of the Company as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified during such period in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party. This Section 6.14 shall survive the Closing Date, is intended to benefit and may be enforced by the D&O Indemnified Parties, and shall be binding on all successors and assigns of Parent, Buyer and the Company. Notwithstanding anything to the contrary, the Sellers acknowledge that sole source for recover y by a D&O Indemnified Party shall be under the coverage provided by the Tail Policy. (b) Prior to the Closing, Seller shall cause the Company to purchase and maintain in effect, without any lapses in coverage, a "tail" policy providing directors' and officers' liability insurance coverage for the benefit of those Persons who are covered by the Company's directors' and officers' liability insurance policies as of the date of this Agreement (the " Tail Policy ") , for a period of six years from the Closing Date, with respect to matters occurring prior to the Closing . The cost of the Tail Policy for the six year period shall be borne 49 by Sellers and if it is not paid prior to Closing, such expense will be treated as a Transaction Expense. ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Obligation of Parent and Buyer . The obligations of Parent and Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction or waiver of the following conditions: (a) (i) each of the representations and warranties of Sellers set forth in Article III, and of the Company set forth in Article V (other than the representations and warranties listed in clause (ii) of this Section 7.1(a)), shall be true and correct in all respects (without giving effect to any materiality qualifiers, including references to "Material Adverse Change" or "Material Adverse Effect," contained therein) on and as of the Closing Date as though such representation and warranty were made on and as of the Closing Date (except with respect to any such representation or warranty that is expressly made or speaks only as of the date of this Agreement or another specific date, which need only be true and correct on and as of the date of this Agreement or such other date, as applicable), except where the failure of any of such representations and warranties to be so true and correct, individually or in the aggregate, would not have a Material Adverse Effect; and (ii) each of the representations and warranties of Sellers set forth in Sections 3.1 (Investment Representations and Acknowledgements), and 3.2 (Ownership of Sellers' Shares), and of the Company set forth in Sections 5.1 (Organization, Qualification, Corporate Power and Authorization), 5.2 (Authorization of Transaction), 5.3 (Capitalization), and 5.5 (Brokers’ Fees), shall be true and correct in all respects on and as of the Closing Date, as though such representation and warranty were made on and as of the Closing Date; (b) Sellers and the Company shall have performed and complied with, in all material respects, all covenants, agreements and obligations required to be performed or complied with by Sellers and the Company under this Agreement at or prior to the Closing; (c) the Required Consents shall have been obtained or made; (d) no Decree of any Governmental Authority shall be in effect, and no Law shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Authority that prohibits or makes illegal the consummation of the transactions contemplated by this Agreement; (e) [Reserved]; (f) Buyer shall have received a certificate of a Secretary of the Company certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of the Company authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement; 50 (g) Buyer shall have received a certificate of the Secretary of the Company certifying the names and signatures of the officers of the Company authorized to sign this Agreement and any other documents to be delivered pursuant to this Agreement; (h) Sellers shall have delivered to Buyer a good standing certificate (or its equivalent) for the Company from the Massachusetts Secretary of State and in each state where the Company is qualified as a foreign corporation; (i) each Seller shall have delivered to Buyer a certificate pursuant to Treasury Regulation Section 1.1445-2(b) that Seller is not a foreign person within the meaning of Section 1445 of the Code; (j) Sellers shall have delivered to Buyer the deliveries set forth in Section 2.7; (k) the Company shall have delivered to Buyer payoff or similar letters with respect to the repayment and satisfaction, simultaneous with or prior to Closing, of the Company Indebtedness listed in Section 7.1(k) of the Disclosure Schedule ; (l) from the date of this Agreement, there shall not have occurred any Material Adverse Effect; (m) Sellers shall have delivered to Buyer written resignations, effective as of the Closing Date, of the officers and directors of the Company; (n) Sellers shall, if requested by Buyer, deliver to Buyer a certified copy of resolutions terminating the Company's 401(k) plan, in form and content satisfactory to Buyer; (o) Sellers shall have executed and delivered general releases in favor of the Company , in form reasonably satisfactory to Buyer ; (p) [ Reserved ]; (q) Sellers shall execute and deliver Form 8023 with respect to the Section 338(h)(10) Election; (r) the acquisition of 100% of the Sellers' Shares; (s) each of Noreen Guanci and Anne Harrington shall have entered into employment agreements in a form satisfactory to such individual and Buyer (the " Employment Agreements "); and (t) each of Sellers shall have entered into an escrow agreement with Fifth Third Bank and Buyer, if applicable, as contemplated by Section 2.4(d) (the " Escrow Agreement "). 51 7.2 Conditions to Obligation of Sellers . The obligation of Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction or waiver of the following conditions: (a) each of the representations and warranties of Parent and Buyer set forth in Article IV shall be true and correct in all material respects on and as of the Closing Date, as though such representation and warranty were made on and as of the Closing Date; (b) Parent and Buyer shall have performed and complied with, in all material respects, all covenants, agreements and obligations required to be performed or complied with by Parent and Buyer under this Agreement at or prior to the Closing; (c) the Required Consents shall have been obtained or made; (d) no Decree shall be in effect, and no Law shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Authority, that prohibits or makes illegal the consummation of the transactions contemplated by this Agreement; (e) [Reserved]; (f) Sellers shall have received a certificate of a Secretary of each of Parent and Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors and bank group of Parent and the board of directors of Buyer, respectively, authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement; (g) Sellers shall have received a certificate of the Secretary of each of Parent and Buyer certifying the names and signatures of the officers of Parent and Buyer, respectively, authorized to sign this Agreement and any other documents to be delivered pursuant to this Agreement; (h) Parent shall have executed and delivered to Sellers a guaranty in the form of Guaranty Agreement attached as Attachment B (the " Guaranty "); (i) Parent and Buyer shall have delivered to Sellers the deliveries set forth in Section 2.7; (j) Parent and Buyer shall have executed and delivered the Employment Agreements with each of Noreen Guanci and Anne Harrington; (k) Sellers shall have received a copy of the letter of instruction to the Parent’s transfer agent with respect to the issuance of the Parent Common Stock contemplated hereby and confirmation of its transmission to such transfer agent; and (l) from the date of this Agreement, there shall have not been a change, event or occurrence that individually, or together with any other change, event or occurrence, has a 52 material adverse effect on the financial condition, business or results of operation of Parent or Buyer; and (m) Parent and Buyer shall have executed and delivered, if applicable, the Escrow Agreement in a form satisfactory to the Sellers. 7.3 Frustration of Closing Conditions . No Party may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such Party’s failure to use commercially reasonable efforts to cause the Closing to occur, as required by Section 6.1. ARTICLE VIII REMEDIES 8.1 Survival of Representations, Warranties and Covenants . (a) All of the representations and warranties contained in Articles III, IV and V shall survive the Closing and continue in full force and effect for a period of 18 months thereafter; provided that: (i) the representations and warranties of Sellers and the Company contained in Sections 3.1 (Investment Representations and Acknowledgements), 3.2 (Ownership of Sellers' Shares), 5.1 (Organization, Qualification, Corporate Power and Authorization), 5.2 (Authorization of Transaction), 5.3 (Capitalization), and 5.5 (Brokers' Fees) (collectively, the " Sellers' Fundamental Representations ") shall survive the Closing and continue in full force and effect for a period of three years after Closing; (ii) the representations and warranties of Parent and Buyer contained in Sections 4.1 (Organization), 4.2 (Authorization of Transaction), 4.3 (Capitalization), 4.6 (Brokers' Fees) and 4.7 (Investment) (collectively, the " Buyer Fundamental Representations ") shall survive the Closing and continue in full force and effect for a period of three years after Closing ; and (iii) the representations and warranties of the Company contained in Sections 5.14 (Taxes) and claims arising out of Sellers' or the Company's fraud, criminal activity or willful misconduct shall survive for the applicable statute of limitation associated with the subject matter of such claims. (b) Except as otherwise specifically provided in this Agreement, all covenants contained in this Agreement to be performed before or at the Closing shall not survive the Closing and all covenants contained in this Agreement to be performed after the Closing shall survive the Closing in accordance with their respective terms or if there is no term associated with such covenant, then such covenants shall survive indefinitely. Sellers' obligation to indemnify Buyer Indemnities pursuant to Sections 8.2(e) and (f) shall survive for the statute of limitations applicable to the underlying claims. Parent’s and Buyer's obligation to indemnify 53 Sellers pursuant to Section 8.3(c) shall survive for the statute of limitations applicable to the underlying claims. (c) The Parties acknowledge and agree that no claim may be brought in respect of a breach of any representation or warranty or express indemnification clause contained in this Agreement after the expiration of the survival period applicable to such representation and warranty or express indemnification clause, as set forth in Sections 8.1(a) or (b). Notwithstanding anything in this Agreement to the contrary, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty or express indemnification clause and such claims shall survive until finally resolved. 8.2 Claims Against Seller s . From and after the Closing and subject to the provisions of this Article VIII, Buyer and its respective Affiliates (which shall include, following the Closing, the Company), directors, officers, managers, employees, and agents (collectively, the " Buyer Indemnitees ") shall be entitled to make a Claim for Indemnification against Sellers in respect of any and all losses, assessments, adjustments, recoupment, suspensions, offsets, damages, liabilities, costs and expenses (including reasonable attorney fees) (collectively, " Losses ") incurred by Buyer Indemnitees arising out of or resulting from, and Sellers shall severally and not jointly and in accordance with their respective Pro Rata Share (except that as among the Guanci Shareholders, their indemnification obligations and liability under this Agreement shall be joint and several ) agree to indemnify, defend and hold Buyer Indemnitees harmless from any Losses arising out of or resulting from: (a) a breach of any representation or warranty of any Seller contained in Article III; (b) a breach of any representation or warranty of the Company contained in Article V; (c) a breach of any covenant or agreement of any Seller contained in this Agreement; (d) a breach of any covenant or agreement of the Company contained in this Agreement ; (e) (i) all Taxes (or the non-payment thereof) of the Company for the Pre-Closing Tax Periods, provided, for the avoidance of doubt, the employer’s share of all employment, payroll and similar Taxes incurred by the Company with respect to any compensatory payments made in connection with the transaction contemplated by this Agreement, whether such Taxes are incurred prior to, at, or following the Closing Date, shall be treated as arising in the Pre-Closing Tax Periods; (ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of the Company) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state, local, or non-U.S. law or regulation; (iii) 54 any and all Taxes of any Person imposed on the Company as a transferee or successor, by contract or pursuant to any Law, which Taxes relate to an event or transaction occurring before the Closing; (iv) any Sellers' Taxes; and (v) any Tax imposed on the Company attributable to the making of the Section 338(h)(10) Election, including (A) any Tax imposed under Code Section 1374, (B) any Tax imposed under Regulation Section 1.338(h)(10)-1(d)(2), and (C) any state or local Tax imposed on the Company or Sellers arising out of the Section 338(h)(10) Election; (f) subject to the limitations set forth in Section 8.6(i) hereof , the misclassification of the Company’s workers for Tax, employment or labor purposes, including without limitation, resulting in wage and hour claims, unemployment claims, claims relating to under-withholding of Taxes, Tax or business nexus claims, and any Action by a third party or Governmental Authority relating thereto , but only with respect to Losses relating to services performed with dates of service prior to the Effective Time (whether the Action or third party claim giving rise to the Losses occurs prior to or after the Effective Time). Buyer acknowledges that the scope of Seller's indemnification obligation under this Section 8.2(f) excludes Losses relating to Losses relating to services performed with dates of service after the Effective Ti me; an d (g) defending any third party claim alleging the occurrence of facts or circumstances that, if true, would entitle an Buyer Indemnitee to indemnification hereunder. 8.3 Claims Against Buyer . From and after the Closing and subject to the provisions of this Article VIII, Sellers and each of their respective Affiliates, directors, officers, managers, employees (collectively, the " Seller Indemnitees ") shall be entitled to make a Claim for Indemnification against Buyer in respect of any and all Losses incurred by Seller Indemnitees arising out of or resulting from, and Buyer shall indemnify, defend and hold Seller Indemnitees harmless from and against any Losses arising out of or resulting from: (a) a breach of any representation or warranty of Parent or Bu yer contained in Article IV; (b) a breach of any covenant or obligation of Parent or Buyer contained in this Agreement; (c) the misclassification of the Company’s workers for Tax, employment or labor purposes, including without limitation, resulting in wage and hour claims, unemployment claims, claims relating to under-withholding of Taxes, and any Action by a third party or Governm ental Authority relating thereto , but in each case, (i) only with respect to Losses relating to services performed with dates of service after the Effective Time , and (ii) only with respect to Losses relating to Actions against Sellers arising in their capacity as Company shareholders prior to the Effective Time ; and (d) defending any third party claim alleging the occurrence of facts or circumstances that, if true, would entitle a Seller Indemnitee to indemnification hereunder. 55 8.4 Matters Involving Third Party Claims . (a) If any third party shall notify any Party (the " Indemnified Party ") with respect to a Third Party Claim which may give rise to a Claim for Indemnification against any other Party (the " Indemnifying Party ") under this Article VIII, then the Indemnified Party shall promptly provide a Claim for Indemnification to the Indemnifying Party; provided , however , that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent) the Indemnifying Party is prejudiced by such delay. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly following receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to any such Third Party Claim. (b) Any Indemnifying Party shall have the right (but not the obligation), upon written notice to the Indemnified Party delivered no later than 30 days after receipt by the Indemnifying Party of the Claim for Indemnification, to assume the conduct and control, through counsel of its choice reasonably satisfactory to the Indemnified Party, and at the expense of the Indemnifying Party, of the settlement or defense of the Third Party Claim. The Indemnified Party shall cooperate with the Indemnifying Party and its counsel in connection therewith and the Indemnifying Party shall permit the Indemnified Party to participate in such settlement or defense through counsel chosen by the Indemnified Party; provided that the fees and expenses of such counsel shall be borne solely by such Indemnified Party. So long as the Indemnifying Party is reasonably contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle such Third Party Claim. If the Indemnifying Party does not notify the Indemnified Party in writing within 30 days after receipt of the Claim for Indemnification that it elects to undertake the defense of the Third Party Claim, then the Indemnified Party shall have the right to contest, settle or compromise such Third Party Claim with the prior written consent of the Indemnifying Party, not to be unreasonably withheld; provided , that , (i) no such consent shall be required in connection with a settlement for monetary damages (A) in an amount less than or equal to $50,000 and (B) which does not contain an admission on liability on the part of any Indemnifying Party, and (ii) the Indemnified Party shall not, by virtue of its election to undertake such defense pursuant to this sentence, be deemed to have waived any right to seek indemnity therefor pursuant to this Article VIII. Any settlement or compromise of any Third Party Claim by the Indemnifying Party shall require the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed; provided that no such consent shall be required for any such settlement or compromise that (x) is exclusively monetary and (y) does not contain an admission of liability on the part of any Indemnified Party (c) All of the Parties shall reasonably cooperate in the defense or prosecution of any Third Party Claim in respect of which indemnity may be sought hereunder and Parent, Buyer and each Seller (or a duly authorized representative of such Party) shall (and Buyer shall cause the Company to) furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 8.5 Matters Not Involving Third Party Claim s . 56 Buyer Indemnitees or Seller Indemnitees may make a claim under this Article VIII that does not involve a Third Party Claim in any amount to which they may be entitled under this Article VIII by providing a Claim for Indemnification against the appropriate Indemnifying Party promptly (but in no event more than 10 Business Days) after such Indemnified Party has notice of any Losses that may give rise to a Claim for Indemnification; provided , however , that no delay on the part of a Buyer Indemnitee or Seller Indemnitee in notifying such Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent) such Indemnifying Party is actually prejudiced by such delay. Such Indemnifying Party shall have 30 days to object to the Claim for Indemnification by delivery of a written notice of such objection to the Indemnified Party. If an objection is delivered by the Indemnifying Party, then the Indemnified Party and the Indemnifying Party shall negotiate in good faith for a period of 20 Business Days from the date the Indemnified Party receives such objection prior to commencing any Proceeding with respect to such Claim for Indemnification. 8.6 Limitations on Indemnification . (a) Notwithstanding anything to the contrary in this Agreement, the right of Buyer Indemnitees to indemnification in respect of Losses under this Article VIII shall be subject to the following limitations: (i) Buyer Indemnitees shall not be entitled to assert any Claim for Indemnification pursuant to Sections 8.2(b) and (d) (or Claims pursuant to Section 8.2(g) with respect to matters arising in Section 8.2(b) or (d)) in respect of any Losses, or series of related Losses, until the aggregate amount of all Losses actually incurred by Buyer Indemnitees exceeds an amount equal to $185,000 (the " Deductible Amount "), in which case Buyer Indemnitees shall have the right to seek indemnification for the amount of Losses in excess of the Deductible Amount; provided , however , that the limitation set forth in this Section 8.6(a)(i) shall not apply to Losses based upon, arising out of or resulting, directly or indirectly, from (A) a breach of Sellers' Fundamental Representations, or (B) fraud, criminal activity or willful misconduct ; (ii) the aggregate maximum amount available to Buyer Indemnitees for Claims for Indemnification pursuant to Sections 8.2 shall be limited to $5,000,000; provided , however , that the limitation set forth in this Section 8.6(a)(ii) shall not apply to Losses based upon, arising out of or resulting, directly or indirectly, from (A) a breach of Sellers' Fundamental Representations, (B) fraud , criminal activity or willful misconduct, or (C) indemnification claim s made under Sections 8.2(e) or Section 8.2(f), or Section 8.2(g) as it relates to third party claims giving rise to an indemnification claim under Sections 8.2(e) or Section 8.2 (f); (iii) in no event shall the Sellers' aggregate liability under this Article VIII exceed the Purchase Price; (iv) notwithstanding anything in this Agreement to the contrary, each Seller's aggregate personal liability arising out of or resulting from this Agreement shall be several and not joint and shall be limited to such Seller’s Pro Rata Share of the aggregate liability for indemnification under this Agreement; provided , however , that any liability or 57 indemnification obligation of a Guanci Shareholder under this Agreement is joint and several with all Guanci Shareholders ; and (v) with respect to any Claim for Indemnification arising under Section 8.2(a) or Section 8.2(c), Buyer Indemnitees shall only be permitted to assert a Claim for Indemnification against the actual Seller who is in breach of such representation, warranty, covenant or agreement and not against any other Seller, and shall look only to such breaching Seller for recovery with respect thereto; provided, however, if the Claim for Indemnification against a Guanci Shareholder, then such Claim for Indemnification may be made against all Guanci Shareholders. For the avoidance of doubt, none of the Sellers will be responsible to indemnify any Buyer Indemnified Party pursuant to Sections 8.2(a) or 8.2(c) for any violation by another Seller of any representation, warrant, covenant or agreement personal to such other Seller; provided, however, that each of the Guanci Shareholders shall be jointly and severally obligated to indemnify a Buyer Indemnified Party for any violation by any Guanci Shareholder. (b) No Buyer Indemnitee shall be entitled to be indemnified with respect to Losses that (i) were included as a liability in the calculation of the Final Adjustment Amount or (ii) such Buyer Indemnitee has otherwise been compensated for pursuant to consideration adjustments under Article II. (c) Notwithstanding anything to the contrary in this Agreement, the right of Seller Indemnitees to indemnification in respect of Losses under this Article VIII shall be subject to the following limitations: (i) Seller Indemnitees shall not be entitled to assert any Claim for Indemnification pursuant to Sections 8.3 in respect of any Losses, or series of related Losses, until the aggregate amount of all Losses actually incurred by Seller Indemnitees exceeds an amount equal to the Deductible Amount, in which case Seller Indemnitees shall have the right to seek indemnification for the amount of Losses in excess of the Deductible Amount; provided , however , that the limitation set forth in this Section 8.7(c)(i) shall not apply to Losses based upon, arising out of or resulting, directly or indirectly, from (A) a breach of Buyer’s Fundamental Representations, (B) any failure to make payment of any portion of the Purchase Price, including, without limitation, under the Buyer Notes, (C) fraud, criminal activity or willful misconduct; or (D) indemnification claim s made under Section 8.3(c). (ii) the aggregate maximum amount available to Seller Indemnitees for Claims for Indemnification pursuant to Sections 8.3 shall be limited to $5,000,000; provided , however , that the limitation set forth in this Section 8.7(c)(ii) shall not apply to Losses based upon, arising out of or resulting, directly or indirectly, from (A) a breach of Buyer’s Fundamental Representations, (B) any failure to make payment of any portion of the Purchase Price, including, without limitation, under the Buyer Notes, (C) fraud, criminal activity or willful misconduct; or (D) indemnification claim s made under Section 8.3(c); and (iii) in no event shall Parent’s and Buyer’s aggregate liability under this Article VIII exceed the Purchase Price. 58 (d) Notwithstanding anything to the contrary in this Agreement, all materiality qualifications (whether by reference to "material", "all material respects", "Material Adverse Change" or "Material Adverse Effect") contained in the representations and warranties set forth in this Agreement shall be disregarded solely for purposes of determining, under this Article VIII, the amount of any Losses arising out of or resulting from a breach of any such representation or warranty; provided that none of such materiality qualifications shall be disregarded for purposes of determining whether any such representation or warranty has been breached. (e) Notwithstanding anything contained herein to the contrary, no Indemnifying Party shall be liable for punitive or exemplary damages. (f) The amount of Losses subject to indemnification under this Article VIII shall be calculated net of any amounts recovered by the Indemnified Party under applicable insurance policies of from any other Person alleged to be responsible therefore; provided , however , that in no event shall an Indemnified Party be required to first proceed against applicable insurance coverage before proceeding against the Indemnifying Party pursuant to this Article VIII. If the amount of the Losses is reduced by recovery, settlement or otherwise under any insurance coverage or pursuant to any claim, recovery, settlement or payment by or against any other Person, the amount of such reduction (net of increased future premiums, in the case of insurance coverage or expenses, including reasonable attorneys' fees, incurred in connection with such recovery, settlement or payment) will be applied to such claim or promptly repaid by the Indemnified Party to the Indemnifying Party (or added back to the Deductible), as applicable. (g) Any calculation of Losses for purposes of this Article VIII shall be reduced to take account of any net Tax benefit actually realized by the Indemnified Party as a result of any such Losses. Any payment hereunder shall initially be made without regard to this Section 8.6(g) and shall be reduced to reflect any such net Tax benefit only after the Indemnified Party has actually realized such benefit. For purposes of this Agreement, the Indemnified Party shall be deemed to have “actually realized” a net Tax benefit to the extent that, and at such time as, the amount of Taxes required to be paid by the Indemnified Party is reduced below the amount of Taxes that it would have been required to pay but for deductibility of such Losses, in each case: (i) during the Tax year as the year in which the relevant Losses occurred and the two immediately succeeding tax years; (ii) calculated so that the items related to the Indemnifying Party’s indemnification obligations are the last to be recognized; and (iii) as reasonably determined by the Indemnified Party. The amount of any reduction hereunder shall be adjusted to reflect any final determination with respect to the Indemnified Party’s liability for Taxes, consistent with the foregoing. (h) Any liability for indemnification under this Article VIII will be determined without duplication of recovery for the Indemnified Party by reason of either the state of facts giving rise to such liability constituting a breach of more than one representation, warranty, covenant or agreement or the fact that such representation, warranty, covenant, or agreement was made by more than one Party. (i) For the avoidance of doubt and notwithstanding anything to the contrary 59 contained in this Article VIII, Sellers shall have no liability to Buyer or any Buyer Indemnitee for any Losses relating to the operation of the Business after the Effective Time attributable to a Buyer Indemnitee’s determination to continue any classification of the Company’s workers for Tax, employment or labor purposes following the Closing, including without limitation, any Losses resulting from wage and hour claims, unemployment claims, claims relating to under-withholding of Taxes, Tax or business nexus claims, and any Action by a third party or Governmental Authority relating thereto, and any ensuing liability Buyer or its Affiliates (including the Company) incur as a result thereof. 8.7 Exclusive Remedy . After the Closing, the rights of the Parties pursuant to the provisions of this Article VIII shall be the sole and exclusive remedy for the Parties, and each Party hereby waives all other remedies, with respect to any claim or matter arising from or relating to this Agreement and the transactions contemplated by this Agreement, other than claims arising from fraud, criminal activity or willful misconduct on the part of a Party hereto in connection with the transactions contemplated by this Agreement. Nothing in this Section 8.7 shall limit any Party's right to seek and obtain any equitable relief to which any Party shall be entitled or to seek any remedy on account of any Party's fraudulent, criminal or willful misconduct . 8.8 Set-off Against Buyer Notes . Except as otherwise provided in this Agreement, Buyer shall first set off any Losses payable pursuant to Article VIII of this Agreement against the outstanding balance of the Buyer Notes, and as among the Buyer Notes (to the extent applicable) based on each Seller's Pro Rata Share, prior to seeking payment of amounts due with respect to an indemnification claim directly from the Sellers. 8.9 Adjustments to Final Purchase Price . All indemnification payments under this Article VIII shall be deemed adjustments to the Final Purchase Price. ARTICLE IX [ RESERVED ] ARTICLE X MISCELLANEOUS 10.1 No Third Party Beneficiaries . This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns; provided , that f rom and after the Closing, the D&O Indemnified Parties shall be third party beneficiaries of the provisions of Section 6.14, with the right to pursue claims for damages and other relief (including specific performance or other equitable relief) in the event of any breach thereof. 10.2 Entire Agreement . This Agreement and the Ancillary Documents entered into by and between the Parties constitute the entire agreement between the Parties with respect to the subject matter of this Agreement and such Ancillary Documents, and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the 60 extent they related in any way to the subject matter of this Agreement and such Ancillary Documents. 10.3 Succession and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign either this Agreement or any of her or its rights, interests, or obligations hereunder without the prior written approval of the other Parties. 10.4 Counterparts; Signatures . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A manual signature on this Agreement or any Ancillary Document, an image of which has been transmitted electronically, shall constitute an original signature for all purposes. The delivery of copies of this Agreement or any Ancillary Document, including executed signature pages where required, by electronic transmission will constitute effective delivery of this Agreement or such Ancillary Document for all purposes. 10.5 Headings . The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 10.6 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly delivered: (i) upon receipt if delivered personally; (ii) three Business Days after being mailed by registered or certified mail, postage prepaid, return receipt requested; (iii) one Business Day after it is sent by commercial overnight courier service; or (iv) upon transmission if sent via facsimile with confirmation of receipt to the parties at the following address (or at such other address for a party as shall be specified upon like notice): (a) if to Buyer or the Company , to: c/o Almost Family, Inc. 9510 Ormsby Station Road, Suite 300 Louisville, Kentucky 40223 Telephone: (502) 891-1042 Facsimile: (502) 891-8067 Email: [email protected] Attention: President with a copy to: Frost Brown Todd LLC 400 West Market Street, 32nd Floor Louisville, Kentucky 40202 Attention: Scott Dolson Telephone: (502) 568-0203 Facsimile: (502) 581-1087 Email: [email protected] 61 (b) if to Noreen Guanci: 11 Hillside Place Sudbury, MA 01776 Telephone: ( 508) 335 -7101 Facsimile: ( 508) 720-3201 Email: [email protected] (c) If to Noreen Guanci 2009 Irrevocable Trust 11 Hillside Place Sudbury, MA 01776 Attn: Richard Guanci, Trustee Telephone: (508) 395-0035 Email: [email protected] (d) If to Richard Guanci 2009 Irrevocable Trust 11 Hillside Place Sudbury, MA 01776 Attn: Noreen Guanci, Trustee Telephone: ( 508) 335-9135 Facsimile: ( 508) 720-3201 (e) if to Anne Harrington: 4 Pettees Pond Lane Walpole, Ma 02081 Telephone: ( 508) 907-7102 Facsimile: ( 508) 720-320 2 Email: aharrington @longtermsol.com (f) If to (b) through (e), with copy to: Nutter, McClennen & Fish, LLP Seaport West 155 Seaport Boulevard Boston, Massachusetts 02210 Attention: Alex S. Glovsky Tel ephone : ( 617 ) 439 - 2618 Facsimile : ( 617 ) 310 - 9618 Email: [email protected] 62 10.7 Governing Law and Venue . This Agreement shall be governed by and construed in accordance with the internal laws of Delaware applicable to parties residing in Delaware, without regard to applicable principles of conflicts of law. The Parties agree that any suit, Action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the Court of Chancery of the State of Delaware, New Castle County, or, if that court does not have jurisdiction, a federal court sitting in Wilmington, Delaware, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, Action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, Action or proceeding in any such court or that any such suit, Action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, Action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. 10.8 Waiver of Jury Trial . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES AND COVENANTS THAT IT SHALL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING IN WHOLE OR IN PART OUT OF, RELATED TO, BASED UPON, OR IN CONNECTION HEREWITH OR THE SUBJECT MATTER HEREOF OR THE CONTEMPLATED TRANSACTIONS (WHETHER SOUNDING IN CONTRACT, TORT, STATUTE OR OTHERWISE). ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.8 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. 10.9 Amendments and Waivers . No amendment or waiver of any provision of this Agreement shall be valid unless the same shall be in a writing referring to this Agreement signed by Buyer and Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 10.10 Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 10.11 Construction . Any reference to any federal, state, local, or foreign Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" (and variations thereof) shall mean "including, without limitation." All accounting terms used in this Agreement shall have the meanings given to them in accordance with GAAP. All monetary amounts set forth in this Agreement are in United 63 States Dollars. All words used in this Agreement will be construed to be of such gender or singular or plural as the circumstances require. All references to "Section" or "Article" shall be deemed to refer to the provisions of this Agreement unless otherwise expressly provided. The words "this Agreement," "hereof," "hereunder," "herein," "hereby," or words of similar import shall refer to this Agreement as a whole and not to a particular section, subsection, clause or other subdivision of this Agreement, unless the context otherwise requires. The word "or" shall not be construed in its exclusive sense. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. For the avoidance of doubt, documents posted by the Company or the Sellers or their respective attorneys, representatives or agents in the electronic or virtual data room maintained in connection with the transactions contemplated hereby are deemed to have been made available and provided and delivered to Buyer and Parent. 10.12 Incorporation of Exhibits and Schedules . The Attachments and Disclosure Schedule identified in this Agreement are incorporated into this Agreement by reference and made a part of this Agreement. 10.13 Specific Performance . Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled, in addition to any other remedy at law or in equity, to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce the terms of this Agreement, in any Delaware State or Federal court sitting in Dover, Delaware by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. Each party hereby waives any requirement for securing or posting of any bond in connection with such remedy. With respect to any matter contemplated by this Section 10.13, each Party agrees and consents to the exclusive jurisdiction of any Delaware State or Federal court sitting in Dover, Delaware, waives all objections based on lack of venue and forum non conveniens, and irrevocably consents to the personal jurisdiction of all such courts. 10.14 Counterparts; Facsimile . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all parties need not sign the same counterpart and such counterparts may be delivered by the Parties via facsimile or electronic (PDF) transmission (each of which shall be deemed an original). 10.15 Legal Representation . Each of the parties to this Agreement acknowledges that Nutter, McClennen & Fish, LLP currently serves as counsel to both (a) the Company and (b) the Sellers, including in connection with the negotiation, preparation, execution and delivery of this Agreement, the Ancillary Documents and the consummation of the transactions contemplated hereby. There may come a time, including after consummation of the Closing, when the interests of the Sellers and the Company may no longer be aligned or when, for any reason, the 64 Sellers, Nutter or the Company believes that Nutter cannot or should no longer represent both the Sellers and the Company. The parties understand and specifically agree that Nutter may withdraw from representing the Company and continue to represent the Sellers, even if the interests of the Sellers and the interests of the Company are or may be adverse, including in connection with any dispute arising out of or relating to this Agreement, any of the Ancillary Documents, and even though Nutter may have represented the Company in a matter substantially related to such dispute or may be handling ongoing matters for the Company or any of its Affiliates, and Parent, Buyer and the Company hereby consent thereto and waive any conflict of interest arising therefrom. Each of the parties further agrees that, as to all communications among Nutter, the Company and the Sellers, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to the Sellers and shall not pass to or be claimed by the Company or any of its Affiliates. In addition, if the Closing occurs, the Company shall have no right of access to or control over any of Nutter’s records related to the transactions contemplated by this Agreement, which shall become the property of (and be controlled by) the Sellers. Furthermore, in the event of a dispute between the Sellers and the Company arising out of or relating to any matter in which Nutter acted for them both, none of the attorney-client privilege, the expectation of client confidence or any other rights to any evidentiary privilege will protect from disclosure to the Sellers any information or documents developed or shared during the course of Nutter’s joint representation of the Sellers and the Company. Notwithstanding the foregoing, in the event that after the Closing a dispute or Legal Proceeding arises between Parent, Buyer or any Subsidiary thereof and a Person other than the Sellers, then the Company or such Subsidiary, as applicable, may assert the attorney-client privilege to prevent disclosure of confidential communications to or from Nutter to such Person. (signature page follows) 65 IN WITNESS WHEREOF , the Parties have caused this Stock Purchase Agreement to be duly executed as of the date first above written. BUYER : NATIONAL HEALTH INDUSTRIES, INC. By /s/ C. Steven Guenthner C. Steven Guenthner, President PARENT : ALMOST FAMILY, INC. By: /s/ C. Steven Guenthner C. Steven Guenthner, President COMPANY : LONG TERM SOLUTIONS, INC. By: Title: /s/ Noreen Guanci CEO SELLERS : /s/ Noreen Guanci Noreen Guanci /s/ Anne Harrington Anne Harrington /s/ Richard Guanci Richard Guanci, as Trustee of the Noreen Guanci 2009 Irrevocable Trust /s/ Noreen Guanci Noreen Guanci, as Trustee of the Richard Guanci 2009 Irrevocable Trust 66 Attachments and Schedules Attachment A Buyer Notes* Attachment B Parent Guaranty Agreement* Disclosure Schedule – Exceptions to Representations and Warranties of Sellers and the Company and Certain Other Exceptions and Disclosures** *The information scheduled at this Attachment has been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. **Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. 67 Exhibit 10.19 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ” ) is made and entered in to effective as of November 4 , 2015 , by and among : [i] ALMOST FAMILY, INC. , a Delaware corporation ( “ AFI” ) ; [ii] JPMORGAN CHASE BANK, N.A. , a national banking association , as Administrative Agent and for itself as a Lender described in the Credit Agreement defined below ( the “ Agent” ) ; [iii ] BANK OF AMERICA, N.A. , a national banking association , as Syndication Agent and for itself as a Lender ( “ BOA ” ) ; [iv ] FIFTH THIRD BANK , an Ohio banking corporation , as Documentation Agent and for itself as a Lender ( “ FTB ” ) ; and [ v ] REGIONS BANK , an Alabama banking corporation for itself as a Lender ( “ RB ” ) ( Agent, BOA, FTB and RB are collectively referred to herein as the “ Lenders ” ) . RECITALS : A. AFI, Agent and each of the Lenders entered into that certain Credit Agreement dated as of December 2, 2010 (the “ Original Credit Agreement ” ), as modified by each of the following: [i] that certain letter agreement dated as of December 10, 2012 (the “ Letter Agreement ” ) ; [ii] that certain Second Amendment to Credit Agreement dated as of December 6, 2013 (the “ Second Amendment ” ); and [iii] that certain Third Amendment to Credit Agreement dated as of February 12, 2015 (the “ Third Amendment ” )(the Original Credit Agreement, as modified and amended by the Letter Agreement, the Second Amendment and the Third Amendment , are collectively referred to herein as the “ Credit Agreement ” ). Certain initially capitalized terms used in this Amendment shall have the respective meaning s set forth in the Credit Agreement unless expressly otherwise defined herein. B. AFI has informed Agent that it intends to acquire (the “ Black Stone Acquisition ” ) one hundred percent (100%) of the issued and outstanding shares of capital stock of Black Stone Home Health care, an Ohio corporation ( “ Black Stone ” ) , and has requested that Agent and each Lender consent to the Black Stone Acquisition and that in connection therewith each of the Lenders make an advance of a Revolving Borrowing as a part of their respective Commitments as described i n the Credit Agreement . C. T he Credit Agreement contains certain requirements in order for an A cquisition (such as the Black Stone Acquisition) to be deemed to be a Permitted Acquisition including (but not limited to) the following ( hereinafter collectively referred to as the “ Unfulfilled Conditions ” ) : [ i ] the personal property assets that are acquired have been pledged and granted (unless the pledge or grant is prohibited by Governmental Authority or the provisions of contracts governing the same) as part of the Collateral (the “ Personal Property Pledge Requirement ” ) ; [ ii ] if Equity Interests of the Target Person have been acquired, the Target Person at the time such Equity Interests are acquired, must have executed and delivered a Guaranty Agreement and Agent shall have received an exclusive first priority pledge and grant of such Equity Interest of the Target Person as part of the Collateral (the “ Guaranty and Pledge of Equity Interest Requirement ” ) ; and [ iii ] if the Acquisition for which the Acquisition Consideration paid by the Acquirer exceeds the Acquisiti on Information Threshold Amount , AFI shall have furnish ed the requisite Proforma Acquisition Information to the Administrative Agent and each of the Lenders at least ten (10) Business Days Acquisition (the “ Notice Requirement ” ) . prior to the consummation of the D . AFI has furnished to Agent the requisite Proforma Acquisition Information pursuant to that certain Project Knight Transaction Information Package dated as of October 2015 (the “ Transaction Package ” ) . E . AFI has informed Agent that, given the timing of the closing of the Black Stone Acquisition on or about November 3, 2015 (the “ Acquisition Closing Date ” ), AFI will be unable to fulfill the Personal Property Pledge Requirement or the Guaranty and Pledge of Equity Interest Requirement , nor will AFI be able to comply with the Notice Requirement . F. AFI desires to consummate the Black Stone Acquisition on the Acquisition Closing Date notwithstanding the Unfulfilled Conditions , and has requested that Agent and each Lender consent to the Black Stone Acquisition and that in connection therewith each of the Lenders make an advance of a Revolving Borrowing on the Acquisition Closing Date as a part their respective Commitments as described in the Credit Agreement . E. Lenders are agree able, notwithstanding the Unfulfilled Conditions, to consent to the Black Stone Acquisition , to advance to AFI a Revolving Borrowing for the purposes set forth in the Transaction Package , and to deem the Black Stone Acquisition a Permitted Acquisition under the Credit Agreement , so long as AFI furnishes to Agent the Additional Loan Documents (as defined below) on or before the Post-Black Stone Acquisition Documents Delivery Date (as defined below). NOW THEREFORE , in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, it is hereby agreed as follows: ARTICLE 1 Amendment to Credit Agreement AFI and Lenders each hereby agree that, subject to satisfaction of the conditions stipulated in Article 3 of this Amendment, the Credit Agreement is hereby modified so that, u pon consummation of the Black Stone Acquisition , Black Stone shall be deemed to be a Subsidiary and added to the Schedule 3.01 attached to the Third Amendment and made part of the Credit Agreement. Upon Agent’s request, AFI shall promptly furnish to Agent a complete, accurate and current Schedule 3.01 that includes the state of formation, tax identification number, organizational identification number and the identity of the owners of all of the Equity Interests of each Subsidiary including Black Stone, in form and substance satisfactory in all respects to Agent in its sole discretion . 2 ARTICLE 2 Consent, Acknowledgement and Limited Waiver of Agent and Lenders As evidenced by their respective signatures to this Amendment as set forth below, but subject to and conditioned upon the fulfillment and satisfaction of the Conditions to Effectiveness at the time and in the manner set forth below and the delivery of the Additional Loan Documents described below , Agent and each of the Lenders hereby: [i] consents to the Black Stone Acquisition ; [ii] waives the provisions of the Credit Agreement relating to the Personal Property Pledge Requirement , the Guaranty and Pledge of Equity Interest Requirement and the Notice Requirement only with respect to the Black Stone Acquisition; and [iii] agrees to make an advance of its portion of a Revolving Borrowing on the Acquisition Closing Date as a part their respective Commitments as described in and otherwise in accordance with the Credit Agreement solely for the purposes of allowing AFI to consummate the Black Stone Acquisition . From and after the consummation of the Black Stone Acquisition, notwithstanding the Unfulfilled Conditions, Agent and each of the Lenders acknowledges and agrees that the Black Stone Acquisition shall be deemed to be a Permitted Acquisition as described in the Credit Agreement subject to AFI delivering to Agent and each of the Lenders the Additional Loan Documents described below. ARTICLE 3 Conditions to Effectiveness This Amendment shall become effective when, and only when, Agent shall have received this Amendment signed by no less than the Required Lenders and AFI and e vidence satisfactory to Agent that the closing of the Black Stone Acquisition has occurred and, in conjunction therewith, that any Lien encumbering the assets of Black Stone or any subsidiary of Black Stone that is not a Permitted E ncumbrance has been terminated or will be terminated on the Acquisition Closing Date , and no Event of Default under the Credit Agreement or under or with respect to any of the oth er Loan Documents shall exist at the time AFI makes a request for the applicable Revolving Borrowing as provided below and in the Credit Agreement . ARTICLE 4 Post-Closing Documents AFI hereby agrees to furnish to Agent on or before December 3, 2015 (the “ Post-Black Stone Acquisi ti on Documents Delivery Date ” ) , each of the documents or instruments set forth below (collectively, for purposes of this Amendment, the “ Additional Loan Documents ” ) , each executed by each of the parties hereto and the parties thereto where provided, respectively, all of which shall be in such form and substance satisfactory to Agent and Lenders in a ll respects in their sole discretion and upon the satisfaction of all the conditions set forth in Article 3 shall be deemed part of the “Loan Documents” referred to in the Credit Agreement : A . The Transaction Package and all other documents and information relating thereto, as may be reasonably requested by Agent or any Lender. 3 B. A Guaranty Agreement (the “ Black Stone Guaranty Agreement ” ) entered into by Black Stone and each subsidiary of Black Stone (collectively, the “ Black Stone Subsidiaries ” ) , containing the absolute, joint and several guarantee of payment by each of them, respectively, of the Obligations, and which shall be supplemental to any and each Guaranty Agreement heretofore given by any other Subsidiary Guarantor. C . A Pledge of Equity Interests containing the grant to Agent for the ratable benefit of the Lenders, as part of the Collateral for the Obligations in each c ase, by AFI of one hundred percent (100%) of the issued and outstanding shares of capital stock of Black Stone , and by Black Stone and the applicable subsidiaries of Black Stone of all of t he Equity Interests of each of the Black Stone Subsidiaries owned by them (if any) , respectively, including delivery, in conjunction with or promptly following such pledge, of all certificates evidencing any such ownership and related stock or membership unit powers, as applicable, endor sed by the entity pledging same. D . A security agreement ( the “ Black Stone Security Agreement ” ) pursuant to which Black Stone and each of the Black Stone Subsidiaries shall grant to Agent for the ratable benefit of the Lenders a continuing first priority security interest in all of the personal property of each as part of the Collateral for the Obligations, which Black Stone Security Agreement shall be supplemental to any other Security Agreement he retofore executed and delivered. E . An Incumbency Certificate and Certi fied Copy of Resolutions for AFI, Black Stone and each of the Black Stone Subsidiaries, authorizing the execution and delivery of this A mendment and the other Additional Loan Documents to which each is a party, respectively, and including a copy of the organization documents for Black Stone and each of the Black Stone Subsidiaries , and evidence of the valid existence of each and of AFI . F . An opinion of legal counsel to AFI addressed to Agent and each of the Lenders as to the due authorization, execution, delivery and enforceability of this Amendment and the Additional Loan Docume nts by and with respect to AFI, Black Stone and each of the Black Stone Subsidiaries , and such other matte rs as Agent may reasonably request. G. Agent and Lenders shall have receive d such other documents, instruments and certificates, if any, as Agent may reasonably request to insure the binding effect in accordance with the terms thereof of the Credit Agreement as modified by this Amendment, and the Additional Loan Documents. AFI hereby expressly acknowledges and agrees that failure by AFI to furnish the Additional Loan Documents to Agent by and no later than the Post-Black Stone Acquisition Documents Delivery Date or the failure by AFI to use the Revolving Borrowing funds advanced to AFI by the Lenders for the purposes set forth in the Transaction Package shall constitute a default by AFI under the Credit Agreement and under each of the Loan Documents , whereupon Agent and Lenders shall be free to pursue all of their respective rights and remedies as set forth in t he Credit Agreement and the Loan Documents . 4 ARTICLE 5 Representations and Warranties AFI hereby restates, reaffirms, confirms and incorporates herein by this reference as of the date first written above each of the representations, warranties and covenants contained in the Credit Agreement and the other Loan Documents, as modified by this Amendment, and confirms and agrees that it has no defenses, offsets or counterclaims with respect thereto. Without limitation of the preceding sentence, AFI represents and warrants that: [i] this Amendment has been executed and delivered by a representative of AFI who is duly authorized to do so and that this Amendment is valid and binding on AFI; [ii] the Additional Loan Documents shall be executed and delivered by a representative executed and delivered by a representative of AFI and each Subsidiary Guarantor that is a party thereto who is duly authorized to do so and that the same shall be valid and binding on each ; and [iii] this Amendment and each of the Additional Loan Documents are (and will be) the enforceable obligations of the parties thereto in accordance with their respective terms . With out limitation of the forgoing and except ing only the Unfulfilled Conditions, AFI specifically represents , warrants and covenants to Agent and each of the Lenders that all of the conditions and requirements contained in the Credit Agreement and all of the other Loan Documents for the Black Stone Acquisition to be deemed to be a Permitted Acquisition as described in the Credit Agreement have been satisfied or will be satisfied on the Acquisition Closing Date. ARTICLE 6 Other Provisions 4.1 AFI acknowledges and agrees that neither it nor any other party has any defenses or offsets to the payment of any amount due to Agent or any of the Lenders under the Credit Agreement or under any of the other Loan Documents and, further, that neither it nor any other party has any defenses, claims or counterclaims with respect to the performance of any of the obligations arising under or in connection with any of the Loan Documents. 4.2 AFI hereby agrees to reimburse Agent for all expenses incurred by Agent and Lenders in connection with the preparation, execution, delivery and performance of this Amendment, including without limitation for reasonable fees of legal counsel to Agent. 4.3 This Amendment is not intended to be and shall not be deemed to be a novation of any of the Loan Documents or any part thereof, but rather shall be supplemental to each of the Loan Documents and shall be entitled to the benefit of the same priority of each of the Loan Documents, to the maximum extent permitted by law. None of the Loan Documents are intended to be released, altered or changed in any manner except as expressly set forth herein, and such documents shall continue to be in full force and effect from and after the date of this Amendment as they were prior to the date hereof 4. 4 Except as expressly modified by this Amendment, all terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect as they were immediately prior to the execution and delivery of this Amendment, and those terms and conditions as modified are incorporated herein by this reference and shall govern this 5 Amendment in all respects. Upon the effectiveness of this Amendment, each reference in the Credit Agreement and the other Loan Documents to the “Credit Agreement” shall mean and be deemed a reference to the Credit Agreement as modified by this Amendment. 4. 5 This Amendment may not be modified in any respect except in writing signed by the party c harged with such modification. This Amendment constitutes the final, complete and exclusive agreement among Agent, Lenders and AFI concerning its subject matter and neither the Agent, Lenders nor AFI are relying on any oral agreements or understandings of any nature whatsoever with respect thereto. 4. 6 This Amendment shall be effective notwithstanding that it is executed in counterparts, and a facsimile or other reproduction of a signature of any party to it shall be effective to the same extent as the manual signature of such party, but such party shall furnish its manually signed signature pages to each other party promptly upon request of such other party. 4. 7 This Amendment shall be governed by and shall construed in accordance with the laws of the Commonwealth of Kentucky in all respects . IN TESTIMONY WHEREOF , witness the signatures on behalf of AFI, Agent, BOA, FTB and RB, all effective as of the date first above written. “AFI” ALMOST FAMILY, INC. , a Delaware corporation By: /s/ C. Steven Guenthner C. Steven Guenthner, President, Principal Financial Officer, Secretary and Treasurer [COUNTERPART SIG NATURE PAGES FOR AGENT AND LENDERS CONTAINED ON THE FOLLOWING FOUR PAGES] 6 [ COUNTERPART SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT ] “AGENT” JPMORGAN CHASE BANK, N.A., as Administrative Agent and for itself as a Lender By: /s/ J. Duffy Baker, Jr. (signature) Name: J. Duffy Baker, Jr. (print) Title: 7 Executive Director [ COUNTERPART SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT ] /s/ “BOA” BANK OF AMERICA, N.A., as Syndication Agent and for itself as a Lender By: /s/ E. Mark Hardison (signature) Name: E. Mark Hardison (print) Title: 8 Senior Vice President [ COUNTERPART SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT ] /s/ “FTB” FIFTH THIRD BANK, as Documentation Agent and for itself as a Lender By: /s/ Vera B. McEvoy (signature) Name: Vera B. McEvoy (print) Title: 9 Vice President [COUNTERPART SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT ] “RB” REGIONS BANK , for itself as a Lender By: /s/ Joseph A. Miller (signature) Name: Joseph A. Miller (print) Title: 10 Managing Director Exhibit 21 ALMOST FAMILY, INC. AND SUBSIDIARIES LIST OF SUBSIDIARIES AS OF JANUARY 1, 2016 NAME OF STATE OF INCORPORATION OR ORGANIZATION ENTITY I. Almost Family, Inc . directly owned subsidiaries Adult Day Care of America, Inc. AFAM Merger, Inc. AFAM Acquisition, LLC National Health Industries, Inc. Imperium Health Management, LLC Pricare ACO, LLC Bluegrass Clinical Partners, LLC Commonwealth Clinical Partners, LLC ACO Clinical Partners, LLC Bluegrass Accountable Care LLC Colorado Clinical Partners, LLC Eastern Kentucky Clinical Partners, LLC Greater Tallahassee Clinical Partners, LLC Integrity Clinical Partners, LLC Kentuckiana Clinical Partners, LLC Kentucky Accountable Care LLC Kentucky Clinical Partners, LLC Kentucky Physicians for Accountable Care LLC Physicians Accountable Care, LLC Physicians Accountable Care of Kentucky LLC Physicians Accountable Care of Tennessee, LLC Tennessee Clinical Partners, LLC Utah Clinical Partners, LLC Western Kentucky Clinical Partners, LLC Ingenios Health Holdings, Inc. Ingenios Health Co. Delaware Delaware Kentucky Kentucky Kentucky Kentucky Kentucky Kentucky Kentucky Kentucky Colorado Kentucky Florida Minnesota Kentucky Kentucky Kentucky Kentucky Kentucky Kentucky Tennessee Tennessee Utah Kentucky Delaware Delaware II. National Health Industries, Inc. directly and indirectly owned subsidiaries AFAM Acquisition Ohio, LLC Almost Family ACO Services of Kentucky, LLC Almost Family ACO Services of South Florida, LLC Almost Family PC of Ft. Lauderdale, LLC Almost Family PC of Kentucky, LLC Almost Family PC of SW Florida, LLC Almost Family PC of West Palm, LLC BHC Services, Inc. Black Stone Operations, LLC Advanced Geriatric Education & Consulting, LLC Blackstone Group, LLC Blackstone Health Care, LLC S&B Health Care, LLC Black Stone of Cincinnati, LLC Assisted Care by Black Stone of Cincinnati, LLC Home Health Care by Black Stone of Cincinnati, LLC Care Advisors by Black Stone, LLC MJ Nursing at Black Stone, LLC Black Stone of Dayton, LLC Assisted Care by Black Stone of Dayton, LLC Home Health Care by Black Stone of Dayton, LLC Black Stone of Central Ohio, LLC Assisted Care by Black Stone of Central Ohio, LLC Kentucky Kentucky Florida Florida Kentucky Florida Florida New York Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Home Health Care by Black Stone of Central Ohio, LLC Black Stone of Northwest Ohio, LLC Ohio Ohio Assisted Care by Black Stone of Northwest Ohio, LLC Home Health Care by Black Stone of Northwest Ohio, LLC Black Stone of Northeast Ohio, LLC Bracor, Inc. WillCare, Inc. Litson Health Care, Inc. Western Region Health Corporation Litson Certified Care, Inc. Patient’s Choice Homecare, LLC Connecticut Home Health Care, Incorporated Cambridge Home Health Care Holdings, Inc. Cambridge Home Health Care, Inc. Cambridge Home Health Care, Inc./Private Caretenders Mobile Medical Services, LLC Caretenders of Cleveland, Inc. Caretenders of Columbus, Inc. Caretenders of Jacksonville, LLC Caretenders Visiting Services of Columbus, LLC Caretenders Visiting Services of District 6, LLC Caretenders Visiting Services of District 7, LLC Caretenders Visiting Services Employment Company, Inc. Caretenders Visiting Services of Gainesville, LLC Caretenders Visiting Services of Hernando County, LLC Caretenders Visiting Services of Kentuckiana, LLC Caretenders Visiting Services of Ocala, LLC Caretenders Visiting Services of Orlando, LLC Caretenders Visiting Services of Pinellas County, LLC Caretenders Visiting Services of Southern Illinois, LLC Caretenders Visiting Services of St. Augustine, LLC Caretenders Visiting Services of St. Louis, LLC Caretenders VNA of Ohio, LLC Caretenders VS of Boston, LLC Caretenders VS of Central KY, LLC Caretenders VS of Lincoln Trail, LLC Caretenders VS of Louisville, LLC Caretenders VS of Northern KY, LLC Caretenders VS of Ohio, LLC Caretenders VS of SE Ohio, LLC Caretenders VS of Western KY, LLC IN Homecare Network Central , LLC IN Homecare Network North , LLC Mederi Caretenders VS of Broward, LLC Mederi Caretenders VS of SE FL, LLC Mederi Caretenders VS of SW FL, LLC Mederi Caretenders VS of Tampa, LLC Princeton Home Health, LLC OMNI Home Health Holdings, Inc. Omni Home Health Services, LLC Ohio Ohio Ohio New York New York New York New York New York Connecticut Connecticut Delaware Ohio Ohio Ohio Kentucky Kentucky Florida Ohio Kentucky Kentucky Kentucky Florida Florida Kentucky Florida Kentucky Florida Illinois Florida Missouri Ohio Massachusetts Kentucky Kentucky Kentucky Kentucky Ohio Ohio Kentucky Indiana Indiana Florida Florida Florida Florida Alabama Delaware Delaware Home Health Agency — Broward, Inc. Home Health Agency — Brevard, LLC Home Health Agency — Central Pennsylvania, LLC Home Health Agency — Collier, LLC Home Health Agency — Hillsborough, LLC Home Health Agency — Illinois, LLC Home Health Agency — Indiana, LLC Home Health Agency — Palm Beaches, LLC Home Health Agency — Pennsylvania, LLC Home Health Agency — Philadelphia, LLC Home Health Agency — Pinellas, LLC OMNI Health Management, LLC OMNI Home Health — District 1, LLC OMNI Home Health — District 2, LLC OMNI Home Health — District 4, LLC OMNI Home Health — Hernando, LLC OMNI Home Health — Jacksonville, LLC SunCrest Healthcare, Inc. Almost Family ACO Services of Tennessee, LLC BGR Acquisition, LLC SunCrest Companion Services, LLC SunCrest Healthcare of East Tennessee, LLC SunCrest Healthcare of Middle TN, LLC SunCrest Healthcare of West Tennessee, LLC SunCrest Home Health of AL, LLC SunCrest Home Health of Central FL, LLC SunCrest Home Health of Georgia, LLC SunCrest Home Health — Southside, LLC SunCrest Home Health of Manchester, Inc. SunCrest Home Health of MO, Inc. SunCrest Home Health of Nashville, Inc. SunCrest Home Health of North Carolina, Inc. SunCrest Home Health of South GA, Inc. SunCrest Home Health of Tampa, LLC SunCrest LBL Holdings, Inc. Trigg County Home Health, Inc. SunCrest Home Health of Claiborne County, Inc. Tennessee Nursing Services of Morristown, Inc. SunCrest Outpatient Rehab Services of TN, LLC SunCrest Outpatient Rehab Services, LLC SunCrest TeleHealth Services, Inc. III. AFAM Acquisition, LLC directly and indirectly owned subsidiaries Patient Care, Inc. Patient Care Medical Services, Inc. Patient Care New Jersey, Inc. Patient Care of Hudson County, LLC Patient Care Pennsylvania, Inc. Priority Care, Inc. Patient Care Connecticut, LLC Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Georgia Tennessee Florida Tennessee Tennessee Tennessee Tennessee Alabama Florida Georgia Georgia Tennessee Missouri Tennessee North Carolina Georgia Florida Tennessee Kentucky Tennessee Tennessee Tennessee Tennessee Tennessee Delaware New Jersey Delaware New Jersey Delaware Connecticut Connecticut Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements: Registration Statement (Form S-8 No. 333-43631) pertaining to the Non-Employee Directors Deferred Compensation Plan, Registration Statement (Form S-8 No. 333-88744) pertaining to the Almost Family, Inc. 2000 Stock Option Plan, Registration Statement (Form S-8 No. 333-149674) pertaining to the Almost Family, Inc. 2007 Stock and Incentive Compensation Plan, Registration Statement (Form S-8 No. 333-161484) pertaining to the Almost Family, Inc. 2009 Employee Stock Purchase Plan, and Registration Statement (Form S-8 No. 333-188398) pertaining to the Almost Family, Inc. 2013 Stock and Incentive Compensation Plan; Registration Statement (Form S-3 No. 333-204584) of Almost Family, Inc.; of our reports dated March 2, 2016, with respect to the consolidated financial statements and schedule of Almost Family, Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of Almost Family, Inc. and Subsidiaries included in this Annual Report (Form 10-K) of Almost Family, Inc. for the year ended January 1, 2016. /s/ Ernst & Young LLP Louisville, Kentucky March 2 , 2016 Exhibit 31.1 CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT I, William B. Yarmuth, certify that: 1. I have reviewed this annual report on Form 10-K of Almost Family, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 2 , 2016 By /s/ William B. Yarmuth William B. Yarmuth Chairman of the Board, Chief Executive Officer 1 Exhibit 31.2 CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT I, C. Steven Guenthner, certify that: 1. I have reviewed this annual report on Form 10-K of Almost Family, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 2 , 2016 By /s/ C. Steven Guenthner C. Steven Guenthner President and Principal Financial Officer 1 Exhibit 32.1 CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) I, William B. Yarmuth, Chief Executive Officer of Almost Family, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) The Annual Report on Form 10-K of the Company for the annual period ended January 1, 2016 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 6 Date: March 2 , 2016 By /s/ William B. Yarmuth William B. Yarmuth Chairman of the Board, Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 1 Exhibit 32.2 CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) I, C. Steven Guenthner, Principal Financial Officer of Almost Family, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) The Annual Report on Form 10-K of the Company for the annual period ended January 1, 2016 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 2 , 2016 By /s/ C. Steven Guenthner C. Steven Guenthner President & Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 1