<SEC-DOCUMENT>0000921895-24-001338.txt : 20240529
<SEC-HEADER>0000921895-24-001338.hdr.sgml : 20240529
<ACCEPTANCE-DATETIME>20240529144408
ACCESSION NUMBER:		0000921895-24-001338
CONFORMED SUBMISSION TYPE:	DFAN14A
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20240529
DATE AS OF CHANGE:		20240529

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Enhabit, Inc.
		CENTRAL INDEX KEY:			0001803737
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-HOME HEALTH CARE SERVICES [8082]
		ORGANIZATION NAME:           	08 Industrial Applications and Services
		IRS NUMBER:				472409192
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DFAN14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-41406
		FILM NUMBER:		24997413

	BUSINESS ADDRESS:	
		STREET 1:		6688 N. CENTRAL EXPRESSWAY, SUITE 1300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75206
		BUSINESS PHONE:		4696216419

	MAIL ADDRESS:	
		STREET 1:		6688 N. CENTRAL EXPRESSWAY, SUITE 1300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75206

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Encompass Health Home Health Holdings, Inc.
		DATE OF NAME CHANGE:	20200218

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AREX Capital Management, LP
		CENTRAL INDEX KEY:			0001800261
		ORGANIZATION NAME:           	
		IRS NUMBER:				815477716
		STATE OF INCORPORATION:			DE

	FILING VALUES:
		FORM TYPE:		DFAN14A

	BUSINESS ADDRESS:	
		STREET 1:		10 EAST 53RD STREET
		STREET 2:		11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		646-679-4000

	MAIL ADDRESS:	
		STREET 1:		10 EAST 53RD STREET
		STREET 2:		11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
</SEC-HEADER>
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<SEQUENCE>1
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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SCHEDULE 14A</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Rule 14a-101)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Information Required in Proxy Statement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Schedule 14a Information</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Amendment No. )</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Filed by the
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Filed by
a Party other than the Registrant &#9746;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Check the appropriate box:</P>

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Proxy Statement</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
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for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
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Proxy Statement</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
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Additional Materials</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
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Material Under Rule 14a-12</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-size: 10pt; border-collapse: collapse">
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    <TD STYLE="width: 100%">
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: Black 0.5pt solid"><FONT STYLE="text-transform: uppercase">ENHABIT,
INC.</FONT></P></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">(Name of Registrant as Specified in Its Charter)</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; font-size: 10pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>
<DIV STYLE="padding: 0in; border-bottom: Black 0.5pt solid">

    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AREX CAPITAL MASTER FUND, LP</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AREX CAPITAL PARTNERS, LP</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AREX CAPITAL, LTD.</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AREX CAPITAL GP, LLC</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">AREX
CAPITAL MANAGEMENT, LP</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">AREX
CAPITAL MANAGEMENT GP, LLC</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">ANDREW
RECHTSCHAFFEN</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">JAMES
T. CORCORAN</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">MEGAN
AMBERS</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">MAXINE
HOCHHAUSER</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">MARK
W. OHLENDORF</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">ANNA-GENE
O&rsquo;NEAL</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">DR.
GREGORY S. SHEFF</FONT></P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase">JUAN
VALLARINO</FONT></P>
</DIV></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Payment of Filing Fee (Check all boxes that apply):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9746;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">No
fee required</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9744;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Fee
paid previously with preliminary materials</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9744;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules &#9;14a-6(i)(1) and 0-11</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0pt 0 12pt; text-align: justify; text-indent: 0.5in">AREX Capital Master
Fund, LP, an exempted limited partnership organized under the laws of the Cayman Islands (&ldquo;<U>AREX Capital Master</U>&rdquo;), together
with the other participants named herein, has filed a preliminary proxy statement and accompanying WHITE universal proxy card with the
Securities and Exchange Commission (&ldquo;<U>SEC</U>&rdquo;) to be used to solicit votes for the election of its slate of highly-qualified
director nominees at the 2024 annual meeting of stockholders of Enhabit, Inc., a Delaware corporation (the &ldquo;<U>Company</U>&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 29, 2024, AREX Capital
Master issued the following press release:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AREX CAPITAL MANAGEMENT ISSUES LETTER TO ENHABIT
STOCKHOLDERS REGARDING THE NEED FOR DRAMATIC CHANGES TO BOARD COMPOSITION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Has Nominated Seven Highly Qualified Independent
Directors with Industry Expertise Who Can Help Drive Improved Operating Results</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Expresses Disappointment That Enhabit&rsquo;s
Board Has Chosen Not to Engage</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Details Enhabit&rsquo;s Dramatic Operational
Underperformance</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Reaffirms View of Substantial Unrecognized
Value of Enhabit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Files Preliminary Proxy Statement for 2024
Annual Meeting of Stockholders</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">New York (May 29, 2024) &mdash; AREX Capital Management,
LP, together with its affiliates, the owners of approximately 4.9% of the shares of Enhabit, Inc. (NYSE: EHAB) (&ldquo;Enhabit&rdquo;),
today issued an open letter to its fellow stockholders regarding the need for a major boardroom change at Enhabit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The full text of the letter is set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fellow Stockholders,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AREX Capital Management, LP and its affiliates
(together, &ldquo;AREX&rdquo; or &ldquo;we&rdquo;) are collectively the beneficial owners of approximately 2.4 million shares of Enhabit,
Inc. (&ldquo;Enhabit&rdquo; or the &ldquo;Company&rdquo;), representing approximately 4.9% of the Company&rsquo;s common shares outstanding.
We have been Enhabit stockholders since its spin-off from Encompass Health Corporation (&ldquo;Encompass&rdquo;) in July 2022.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are shocked that we are having to write
this letter today. Given the abysmal experience that Enhabit&rsquo;s stockholders have endured under the watch of its existing board
of directors (the &ldquo;Board&rdquo;), we would have expected the Board to constructively engage with us regarding our ideas and
rationale for nominating seven highly qualified director candidates, Megan Ambers, James T. Corcoran, Maxine Hochhauser, Mark W.
Ohlendorf, Anna-Gene O&rsquo;Neal, Dr. Gregory S. Sheff, and Juan Vallarino (collectively, the &ldquo;AREX Slate&rdquo;), for
election at the upcoming 2024 Annual Meeting of Stockholders (the &ldquo;Annual Meeting&rdquo;). We believe that it should be clear
to the Board that a significant reconstitution of its membership is required and warranted. A Board that has presided over a more
than 60% decline in the Company&rsquo;s share price over a two-year period, in our view, should have the humility to acknowledge
that it cannot and should not continue in its current form. Merely confirming the already-planned retirement of four directors who
we believe should never have been seated on the Board in the first place (and given retention grants not awarded to Enhabit&rsquo;s
non-legacy directors) is, from our perspective, a complete mockery of the term &ldquo;Board refreshment.&rdquo;<SUP>1</SUP></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Regrettably, the Board has not made any real effort
to engage with us in good faith. We believe Enhabit&rsquo;s stockholders have suffered from the Board&rsquo;s failure to adequately supervise
the Company&rsquo;s inexperienced management team, which has struggled both to navigate industry challenges as dexterously as peers and
to communicate effectively with investors. What the Board was, in fact, overseeing was the enormous destruction of stockholder value on
an absolute basis and dramatic underperformance versus peers and the market in general.<SUP>2</SUP> Nonetheless, since our confidential
nominations <I>three months ago</I>, there have only been brief and perfunctory interactions between our respective legal counsels, during
which no credible path towards substantive discussions or constructive settlement was presented. In fact, we have only spoken with non-executive
directors twice in the past year, while the Board was supervising Enhabit&rsquo;s apparent slow-moving train wreck: once last October
in the aftermath of what we believe to be the Company&rsquo;s embarrassing and harmfully clumsy disclosure surrounding its receipt of
a Limited Waiver of its leverage covenant from its lenders, and once in March when we advised the Board of our intention to nominate a
slate of directors. Both of those conversations were extremely one-sided, but we assumed that the Board would engage with us once the
strategic review blackout had ended. We were mistaken.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are disappointed that the Board has chosen
to continue its pattern of deflecting the valid and serious concerns of its stockholders. It seems that the Board is looking for ways
to spite its true owners rather than act in their best interests to maximize the value of the Company. This is at the core of why we feel
we have no other choice but to take the steps necessary to reconstitute the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>AREX Actual History with Enhabit </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are frustrated, but again not surprised, by
Enhabit&rsquo;s attempt to characterize the history of our involvement with the Company as being solely focused on a sale. This is a blatant
attempt to downplay our past efforts to help the Company, to bury the Board&rsquo;s miserable record of value destruction, and to distract
from the high-quality slate we have put forward that is objectively superior to the existing Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Enhabit&rsquo;s challenges as a standalone company
began immediately after its separation from Encompass. Enhabit&rsquo;s &ldquo;original sin&rdquo; was the replacement of a deeply experienced
senior management team with executives who lack prior hands-on involvement in the home health or hospice industries. This dearth of specialized
knowledge was exacerbated by a Board that was similarly devoid of <B><I><U>relevant</U></I></B> operating expertise. While the Board
possessed generally solid r&eacute;sum&eacute;s, it lacked the industry-specific familiarity to guide a novice management team through
industry-specific challenges. The risks of such a marriage quickly presented themselves. Starting with Enhabit&rsquo;s first quarterly
report just weeks after its public debut, the Company began a chronic pattern of missing consensus expectations and lowering financial
guidance. The impact of these missteps was then further amplified by a litany of debacles: a failure to file its first annual report
on time, a financial restatement, a revolving door of investor relations professionals, and persistently awful investor communications.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


<HR ALIGN="LEFT" SIZE="1" STYLE="width: 33%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>1</SUP> In connection
with Enhabit&rsquo;s spin-off, the legacy Encompass directors each received &ldquo;Founder Awards&rdquo; of $187,500 in stock that were
not awarded to the other Enhabit directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>2</SUP> Enhabit&rsquo;s
total stockholder return since its spin-off through May 24, 2024 is -61.5% and its one-year total stockholder return through May 24,
2024, is -28.9%. The average total return for the compensation peer set outlined in Enhabit&rsquo;s preliminary proxy statement since
Enhabit&rsquo;s spin-off is -10.7% (one-year total return: -3.6%), while the total return for the Russell 2000 index since then is 24.6%
(one-year total return: 18.9%).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In an attempt to be collaborative and helpful
to a Company that we saw as clearly flailing, we recruited two director candidates with highly relevant experience, including one with
leadership roles at several large home health companies. In May 2023, we suggested that they be seated on Enhabit&rsquo;s Board to fill
what we then viewed and continue to view as the clear gap in the Board&rsquo;s skills matrix relating to relevant operating experience.
We felt strongly that their skillsets could help unlock value for all stockholders. Unfortunately, the Company ignored our recommendations.
It is unconscionable that the Board would reject such obvious assets to the Company while it was suffering acute operational challenges
and yet allow at least four &ldquo;lame duck&rdquo; directors (the &ldquo;legacy Encompass directors&rdquo;) to remain on the Board. The
Board should have followed the advice of its sole continuing legacy Encompass director, Charles M. Elson: &ldquo;The skills-based composition
of a corporate board is critically important to proper board function&hellip;a wide range of talents that are <I><U>tailored to the business
of the corporation</U></I> [emphasis added] is vital to effective management monitoring.&rdquo;<SUP>3</SUP> Furthermore, by removing
the legacy Encompass directors who had been foisted upon Enhabit stockholders (they had been in violation of the tenure limits in Encompass&rsquo;
Corporate Governance Guidelines), the Board would have rid itself of any residual taint of investor skepticism related to the strategic
review process resulting in its own spin-off.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our initial May 2023 letter to the Board that
included our director suggestions, we also stated our belief that the Company&rsquo;s many self-inflicted wounds had placed it in the
 &ldquo;penalty box&rdquo; with investors but that the recently announced acquisition of Amedisys had clearly demonstrated the continuing
strategic appeal and value of home health and hospice assets. We urged the Company to commit to a strategic review before the end of
the year, as we were concerned that even with flawless execution, the public markets were unlikely to reward the Company with a valuation
comparable to that which a competitive auction would bring.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">One might think that the Board chose to ignore
our efforts to enhance its composition because it had finally steadied the ship and stabilized the Company&rsquo;s operations. But one
would be wrong. <B><U>What the Company&rsquo;s preliminary proxy statement conveniently omits is that, after ignoring our efforts to
enhance the Board&rsquo;s composition, and prior to its announcement of a strategic review process in August 2023, Enhabit&rsquo;s home
health operations fell off the self-described &ldquo;Enhabit cliff.&rdquo;</U></B> Concurrent with its confusing announcement of a strategic
review process, management eviscerated Enhabit&rsquo;s standing full-year guidance and left investors completely baffled as the Company&rsquo;s
home health peers had reported relatively benign results.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>3</SUP> Charles
M. Elson, &ldquo;Editor&rsquo;s Note: Planes, Trains, and Corporate Governance,&rdquo; <I>Directors &amp; Boards</I>, August 9, 2023.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The unacceptably poor performance didn&rsquo;t
end there. In the months following the announcement of the strategic review process, the Company caused a panic in the market in early
October by bungling the disclosure of the Limited Waiver of its leverage covenant from its lenders. Then, in November 2023, the Company
lowered guidance yet again and disclosed yet another amendment to those same covenants after previously amending them five months before.
What was the 13-person Board doing while this disastrous chain of events was unfolding?</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Given the dynamic of a Company that was struggling
mightily under the oversight of a Board that we believe both lacked the skills necessary to guide management and seemed unwilling to truly
engage with us, we concluded that if the strategic review process failed, we would have no choice but to protect ourselves and all stockholders
by nominating directors with the operational expertise to help the Company. Considering the Board&rsquo;s woeful track record by this
point, only significant refreshment would suffice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>The Strategic Review Process </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In contrast to the Board&rsquo;s inaccurate and
reductive assertions about our singular focus being a sale of the Company, the reality is that our goal for our investment in Enhabit
is in fact the same as our goal for any of our investments: that value be maximized for all stockholders. After initially receiving shares
in Enhabit as a result of its spin-off from Encompass, our view of the Company&rsquo;s positioning in attractive end markets, seemingly
undemanding valuation, potential for earnings growth, and strategic value led us to increase our investment. <B><U>If the Company had
delivered operating results similar to those of its peers over the past two years, we would likely be very happy and passive stockholders.</U></B>
Unfortunately, as shown above, the Company quickly demonstrated a persistent inability to deliver on the operating potential of its businesses,
and our discussions with management left us deeply skeptical as to the prospects of their ability to drive improvement in a reasonable
time frame. As such, we concluded that the clear best path forward for Enhabit would be a competitive auction that should result in a
buyer compensating stockholders for the Company&rsquo;s significant unrecognized strategic value that seemed unlikely to surface for a
standalone Enhabit. The Company&rsquo;s recent disclosure of the substantial interest from potential acquirers only validates our initial
beliefs in this strategic value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Importantly, despite the Company&rsquo;s assertions
in its recent press release, our analysis and diligence have left us profoundly skeptical of the integrity and effectiveness of the Company&rsquo;s
strategic review process. Nonetheless, further debate about the outcome of the strategic review serves no useful purpose at this juncture.
<B><U>The only thing that matters now is setting the Company on a path that will unlock Enhabit&rsquo;s substantial value for all stockholders.</U></B>
That process begins by seating directors who have hands-on home health and hospice experience. We believe that the Board must have the
industry-specific knowledge to rigorously evaluate management&rsquo;s strategic and operational choices. Having these skills is necessary
to hold management accountable and to help drive better operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our view, Enhabit needs directors who possess
the expertise required to create value and who are specifically focused on that objective. These attributes are precisely what we believe
the AREX Slate brings. AREX has meticulously selected and nominated a diverse, highly qualified group of directors who can apply their
extensive industry-specific knowledge to help address Enhabit&rsquo;s challenges. The AREX Slate brings proven experience across all facets
of home health and hospice, including operations, clinical activity, and business development. The AREX Slate has a deep understanding
of managing payor relationships, and it has a comprehensive grasp of capital markets. If elected, the AREX Slate plans to form a dedicated
Transformation Committee that will aim to work seamlessly with management to rehabilitate Enhabit and maximize the operating potential
and value of its assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Enhabit&rsquo;s Current Reality</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Enhabit now faces an improving home health industry
backdrop, but we do not believe that the existing Board will be able to capitalize on it for the benefit of stockholders:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD><B>Slowing Payor &ldquo;Mix Shift&rdquo; Impact.
                                            </B>We expect a continued deceleration in the secular shift in home health payor mix from
                                            traditional Medicare Fee-for-Service (&ldquo;FFS&rdquo;) to lower-paying Medicare Advantage
                                            (&ldquo;MA&rdquo;) plans, particularly as MA plan sponsors scale back benefits and face prior
                                            authorization scrutiny and advertising restrictions.<SUP>4</SUP> Furthermore, with high referral
                                            rejection rates, these payors need home-health capacity that can alleviate their elevated
                                            medical loss ratios by reducing hospital readmissions. MA payors appear increasingly willing
                                            to negotiate higher reimbursement rates with large-scale providers possessing the data to
                                            prove the value of home health in enhancing patient outcomes and reducing readmission rates.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD><B>Demonstrated Regulatory Moderation.</B>
                                            The Centers for Medicare and Medicaid Services (&ldquo;CMS&rdquo;) has repeatedly demonstrated
                                            a reluctance to implement significant negative adjustments to reimbursement rates within
                                            a single year. Instead, its approach seems to be a draconian initial proposal softened with
                                            smoother and more industry-friendly phase-ins to avoid disrupting this critical service for
                                            elderly Americans.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD><B>Improving Labor Conditions.</B> The post-pandemic
                                            spike in clinical labor costs and turnover continues to abate.<SUP>5</SUP> Enhabit has recruited
                                            nearly 650 full-time nurses on a net basis over the last four quarters.<SUP>6</SUP></TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD><B>Home Health Utilization Recovery.</B> 2022&rsquo;s
                                            sharp decline in FFS utilization of home health services&mdash;likely due to reduced inpatient
                                            hospital care (often a precursor to home health need) among FFS beneficiaries&mdash;appears
                                            to have stabilized in 2023 and is likely currently normalizing.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that a successful Company must be
able to pursue several priorities simultaneously. It must be able to harness MA beneficiary growth with better contracts while also maintaining
its FFS revenue by taking market share. It must be able to solve staffing shortages and manage the sales process to avoid excess clinical
capacity. And it must be able to do all these things while maintaining a laser-like focus on overhead. Enhabit&rsquo;s peers have clearly
demonstrated that these are not unreasonable expectations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


<HR ALIGN="LEFT" SIZE="1" STYLE="width: 33%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>4</SUP> For
example, an equity research report from a major investment bank on April 8, 2024, states the following: &ldquo;With the latest [MA] rate
update, plans are more likely to cut member benefits, prioritize margins, and selectively exit unprofitable markets. As a result, our
preliminary view is that [MA enrollment] growth may slow to 3-4% over the next two years before normalizing back to 5-6%.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>5</SUP> <I>Home
Care Salary &amp; Benefits Report</I>, Hospital &amp; Healthcare Compensation Services, October 2023.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>6</SUP> Based on Company disclosures
as of March 31, 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is abundant evidence that Enhabit&rsquo;s
results have been inferior to those of its peers in each of its operating segments (home health, hospice, and home office). We briefly
outline these areas of subpar execution below but will soon be releasing a fuller presentation laying out Enhabit&rsquo;s operational
shortcomings along with our 100-day plan to rehabilitate Enhabit.</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To be clear, the responsibility for persistent
underperformance ultimately lies squarely with the Board. It is the Board&rsquo;s job to ensure the Company effectively navigates changing
industry conditions as its peers have and to hold management accountable. The Board has, we believe, utterly failed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>1. Enhabit is hemorrhaging FFS home health
market share.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Contrary to management&rsquo;s public statements,
it is apparent to the outside world that Enhabit&rsquo;s home health business has lost significant FFS market share.<SUP>7</SUP> Enhabit&rsquo;s
home health FFS revenue has declined by ~26% since the first quarter of 2021. In contrast, Enhabit&rsquo;s closest public peer Amedisys
has seen only a ~3% decline in home health FFS revenue over that same period. Providing home health services for FFS beneficiaries carries
far higher margins than providing those same services for MA beneficiaries, and during this period, Enhabit has seen a dramatic decline
in home health profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While management blames this precipitous loss
of FFS revenue on the Company&rsquo;s historical above-average FFS revenue share, its peer Amedisys has managed the secular shift in payor
mix responsibly by maintaining FFS revenue while also growing MA volumes. Enhabit, in contrast, has allowed its FFS volumes to collapse
in a mistaken belief that it is powerless to stop immediate industry mean reversion in its payor mix. We have come to suspect that management&rsquo;s
reliance upon specious &ldquo;mix shift&rdquo; arguments betrays an ignorance of the true causes of Enhabit&rsquo;s lackluster performance
in this area, and the Board clearly lacks the experience to help guide management through a controlled shift in payor mix while sustaining
its highest margin volumes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Enhabit&rsquo;s market share loss has come in
two distinct phases. First, the Company lost ~25% of its &ldquo;clinical collaboration&rdquo; referrals from its former parent in the
second half of 2022.<SUP>8</SUP> Based on Encompass management&rsquo;s stated confidence in Enhabit&rsquo;s CEO, who was the architect
of this &ldquo;clinical collaboration&rdquo; when she ran Encompass&rsquo; inpatient rehabilitation facility segment, this referral attrition
can only be the result of a failure to quickly identify the significant loss of referral volume and implement a mitigation plan.<SUP>9</SUP>
Why did the Board not ask for a detailed root cause analysis and direct management to develop a timely remediation strategy?</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">More troubling has been the ongoing, non-Encompass-related
loss of FFS market share, or the aforementioned &ldquo;Enhabit cliff.&rdquo; According to CMS, the number of FFS beneficiaries declined
in 2023 by ~4%, and our county-level analysis reveals that Enhabit&rsquo;s markets fared slightly better than the national average.<SUP>10
</SUP>While CMS has yet to release 2023 data, our diligence suggests that home health utilization has stabilized from 2022&rsquo;s historical
trough, indicating a low-single-digit percentage decline in FFS home health episodes. Recently released FFS admissions data, as well
as peer results, align with this estimate.<SUP>11,12</SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


<HR ALIGN="LEFT" SIZE="1" STYLE="width: 33%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>7</SUP> &ldquo;I
don&rsquo;t think we are losing market share,&rdquo; said Enhabit CFO Crissy Carlisle on the 4Q 2023 earnings call on March 7, 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>8</SUP> Based upon Encompass and
Company disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>9</SUP> &ldquo;Barb
[Jacobsmeyer] was really responsible for driving the clinical collaboration across the platform. So the operators on the IRF side know
Barb very well, and Barb has a complete understanding of what is important to any kind of hospital, but specifically in IRF, in terms
of transitioning a prospective home health patient to another side of care,&rdquo; said Douglas Coltharp, Encompass CFO, at the Barclays
Global Healthcare Conference on March 16, 2022.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>10</SUP> Based
upon average annual enrollment of FFS Medicare beneficiaries with both Parts A and B.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>11</SUP> Trella
Health indicates FFS admissions declined by ~2% in the first half of 2023. See <I>Post-Acute Industry Trends Quarterly</I>, https://www.trellahealth.com/post-acute-industry-trends-quarterly/.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>12</SUP> Amedisys
saw its same-store FFS home health revenue decline by ~3% in 2023, suggesting a low-single-digit decline in FFS home health episodes.
Consistent with this, Pennant&rsquo;s same-store Medicare home health admissions fell by ~3% in 2023.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Had Enhabit maintained its already reduced FFS
market share after its bungled separation from Encompass, it would likely have met its initial 2023 EBITDA guidance of $125-140 million
rather than the $98 million it ultimately delivered. In contrast, peers Amedisys and Pennant both achieved or exceeded their initial 2023
guidance. Clearly, something Enhabit-specific occurred during the first half of 2023, and management&rsquo;s explanation of an exogenous
and unavoidable &ldquo;Enhabit cliff&rdquo; lacks credibility to industry participants. Moreover, none of our discussions with management
suggest that a thorough analysis into the root causes of the lost FFS market share has been undertaken.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Fortunately, we do not believe this loss
is permanent.</U></B> Once Amedisys is acquired by Optum, a subsidiary of UnitedHealth Group, Enhabit will be by far the largest independent
home health provider. As similarly sized captive providers allocate capacity away from FFS and towards their own beneficiaries, Enhabit
should be able to take FFS market share. Furthermore, we believe this dynamic will enhance Enhabit&rsquo;s competitive position as remaining
payors will have fewer high-quality providers with which to negotiate. Enhabit&rsquo;s quality-of-care advantage with national averages
has largely <I>increased</I> since its spin-off almost two years ago, and its home health 60-Day Acute Care Hospitalization rate of 13.8%
is significantly lower than those of most competitors (and is even lower than that of Amedisys at 14.5%). There is simply no reason why
Enhabit should not be gaining market share rather than losing it. As Enhabit&rsquo;s CEO correctly opined early last year, &ldquo;With
our low cost of care and high-quality outcomes, we believe we&rsquo;re well positioned to gain market share in both home health and hospice.&rdquo;<SUP>13</SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>2. Enhabit&rsquo;s hospice business continues
to lag.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We suspect that the hospice business is largely
an afterthought for the Board given the many other challenges facing the Company, but we believe it can be a tremendous asset if run
properly. The same demographic trends supporting the outlook for home health also support the outlook for hospice, and hospice is not
grappling with the same &ldquo;mix shift&rdquo; issue. Nearly all of Enhabit&rsquo;s hospice branches are situated within its home health
markets, and there is a significant opportunity to build or acquire additional co-located branches, which benefit from both brand recognition
as well as predictive analytics that identify when home health patients would benefit from hospice care.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


<HR ALIGN="LEFT" SIZE="1" STYLE="width: 33%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>13</SUP> Comments
made at the CJS Securities &ldquo;New Ideas for the New Year&rdquo; Investor Conference on January 11, 2023.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management conveniently blames its multi-year
hospice underperformance on previous leadership. Yet it&rsquo;s worth mentioning that Enhabit&rsquo;s same-store admissions growth consistently
exceeded that of public peers prior to the current management team taking over in June 2021. We also note that it took the new team a
year to hire its first Executive Vice President of Hospice Operations in June 2022 despite hospice admissions declining at double-digit
rates beginning in 3Q 2021. Although management has recently taken appropriate steps to improve clinical capacity (e.g., using contract
labor temporarily to alleviate referral rejections, adding on-call and triage nurses to reduce clinician turnover, and increasing overall
nursing staffing), results have remained poor as Enhabit has been unable to convert excess clinical capacity into admissions. And even
with what management described as &ldquo;good sales coverage&rdquo; in each of its markets for one year (more than enough time for new
salespeople to fully ramp), and with no branches operating with staffing constraints, same-store admissions still dropped by ~5% in 1Q
2024. In fact, Enhabit has now suffered twelve straight quarters of negative same-store admissions growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Meanwhile, competitors have had far greater success
in addressing the challenges of the past few years stemming from staffing shortages and the pandemic-era &ldquo;excess deaths&rdquo; of
patients who might otherwise be in hospice now. Specifically, on a stacked same-store growth basis, Amedisys 1Q 2024 hospice admissions
were ~6% below 1Q 2021 levels, while Pennant&rsquo;s were ~12% above. By contrast, on the same basis, Enhabit&rsquo;s 1Q 2024 admissions
were ~25% lower than they were three years ago. Hospice industry peers now forecast healthy growth going forward. The hospice industry
is clearly recovering, and there is no reason why Enhabit should perennially underperform its peers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that Enhabit&rsquo;s hospice sales
organization needs to be reinvigorated to restore volumes to pre-pandemic levels and ultimately surpass them. While management seemed
to acknowledge this reality recently by announcing the centralization of its referral admission process and hiring three business development
leaders with significant hospice experience, many such similarly promising initiatives that have been announced by Enhabit&rsquo;s leadership
team have failed to meaningfully improve the business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>3. Enhabit&rsquo;s overhead is not optimized.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Enhabit&rsquo;s home office costs are simply unacceptable.
The Board must acknowledge the absurdity of home office overhead consuming over half of the Company&rsquo;s pre-corporate EBITDA. The
adage &ldquo;what gets measured gets managed&rdquo; is unquestionably relevant to Enhabit, and its overwhelmed management team has failed
to rationalize the Company&rsquo;s cost structure despite revenue shortfalls. Astonishingly, home office overhead costs ballooned by ~19%
in the second half of 2023 even as revenue fell by ~2%.<SUP>14</SUP> Despite management paying lip service to potential overhead savings,
there appears to have been no genuine effort to rein in costs even as the Company&rsquo;s revenue outlook declined. In fact, the Company&rsquo;s
disclosed standalone expenses actually came in ~15% below the midpoint of its initial 2023 guidance, so why have home office costs in
the aggregate not come down?</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management must prioritize cost control across
the entire Company in a largely fixed-rate reimbursement environment, and an analysis of Enhabit&rsquo;s public peers suggests that there
are significant cost-saving opportunities within Enhabit&rsquo;s home office. While the Company&rsquo;s public peers typically manage
home office overhead to ~8% of revenues, Enhabit&rsquo;s current ratio is above 10%.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>


<HR ALIGN="LEFT" SIZE="1" STYLE="width: 33%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>14</SUP> 2H
2023 to 2H 2022 growth rates used to avoid comparison issues with pre-spin corporate allocations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>The Solution: The AREX Slate</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A successful turnaround of Enhabit will require
a highly engaged Board with relevant operational expertise. We believe the past two years have demonstrated that Enhabit&rsquo;s current
Board lacks the necessary understanding of the home health and hospice businesses to fulfill its oversight responsibilities. We are also
concerned that a passive culture of accepting underwhelming results may have taken root within Enhabit, making it essential to have a
strong and proactive Board that enforces accountability for subpar management performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In sharp contrast to the existing Board, the AREX
Slate consists of a diverse group of directors with extensive home health and hospice industry experience that can immediately contribute
strategic insights to all areas of the Company&rsquo;s operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I><U>Megan Ambers</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ms. Ambers brings a deep understanding of home
health and hospice labor strategies, operations, payor models, utilization, and organizational optimization.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Chief People Officer of Ivy Rehab Network, an industry-leading
outpatient and pediatric healthcare provider offering physical, occupational, speech and ABA therapy.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as the Interim Chief Human Resources Officer of Amedisys, Inc. (NASDAQ: AMED), a leading provider of healthcare in the
home, from March 2022 to October 2022, as well as its Senior Vice President of Workforce Strategy, HR Innovation &amp; Total Rewards,
from 2018 to 2022.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>James T. Corcoran</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mr. Corcoran brings extensive knowledge of
capital markets and corporate governance practices.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Partner at AREX Capital Management.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously a member of the board of directors of Tuesday
Morning Corporation (NASDAQ: TUES), an off-price retailer, from 2017 to 2020, where he served on the Audit and Nominating and Governance
Committees.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Maxine Hochhauser</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ms. Hochhauser brings more than 30 years of
experience as a healthcare executive, focused mainly on home health and home care operations, and has a history of successfully navigating
challenging financial, regulatory, and payor transitions.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Chief Executive Officer of HealthPRO Heritage, a national
rehabilitation and health innovations company.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as President of the Home and Community
Based Services Division of LHC Group, a provider of in-home healthcare services and innovations for communities around the nation, from
2019 to 2023.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Chief Operating Officer of Addus HomeCare
Corporation (NASDAQ: ADUS), a leading provider of home care services that include personal care services that assist with activities
of daily living, from 2014 to 2017.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Senior Vice President of Enterprise
Operations of Amedisys from 2012 to 2014, and AllianceCare, a private equity owned home healthcare company, from 2008 to 2012.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P>&nbsp;<BR>
<B><I><U>Mark W. Ohlendorf</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mr. Ohlendorf brings 30 years of diverse experience
in senior-related healthcare, including in the home health, hospice, and senior housing markets, in addition to his financial and accounting
expertise.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Most recently served as the Managing Member of Four Peaks
Advisors, LLC, a consulting practice focused on post-acute healthcare and related businesses, from 2016 to 2023.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as President of Brookdale Senior Living,
Inc. (&ldquo;Brookdale&rdquo;) (NYSE: BKD), the largest operator of senior living communities in the United States. During his tenure
at Brookdale, he served in a variety of executive leadership roles for Brookdale and one of its predecessor companies from 1997 to 2016,
including serving as Brookdale&rsquo;s Chief Financial Officer from 2007 to 2015.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Vice President and CFO for VITAS Healthcare
Corporation,a leading hospice and palliative care provider, from 1990 to 1997.</TD>
</TR></TABLE>


<P>&nbsp;<BR>
<B><I><U>Anna-Gene O&rsquo;Neal</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ms. O&rsquo;Neal brings 35 years of healthcare
experience, including leadership positions in home health and hospice operations, and a track record of driving business growth and improving
the quality of patient care.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Senior Vice President of Home Health, Hospice, and Palliative
Care at HarmonyCares, a Michigan-based provider of comprehensive home-based healthcare services.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as the President of Brookdale&rsquo;s Health
Care Services division, where she was responsible for home health, hospice, and outpatient therapy, from 2019 to 2021. She subsequently
served as President, Hospice Service Line for HCA Healthcare, Inc. (NYSE: HCA) (&ldquo;HCA&rdquo;) from 2021 to 2022, following HCA&rsquo;s
acquisition of a majority stake in the business.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as President and CEO of Alive Hospice,
a Tennessee-based non-profit hospice provider consistently ranked among the best in the nation, from 2012 to 2019.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Dr. Gregory S. Sheff</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dr. Sheff brings extensive knowledge of home
health and hospice operations and insight into large payors along with more than 20 years of healthcare experience, both as a practicing
physician and executive, with a particular focus on home- and value-based care.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Interim President, Home Solutions, at
Humana, Inc. (NYSE: HUM) from 2021 to 2022, as well as Chief Medical Officer, Home Solutions, from 2020 to 2022. He oversaw Humana&rsquo;s
home-focused delivery segment, where he was responsible for operations, partnerships, and integration of multiple home-based care assets,
from primary care to hospital at home to Medicare-certified home health.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Executive Vice President and Chief Medical
Officer of AccentCare, one of the nation&rsquo;s leaders in home-based healthcare services, from 2015 to 2019.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Juan Vallarino</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mr. Vallarino brings more than 40 years of
experience in the healthcare industry, and has extensive knowledge of multifaceted home health and post-acute experience, as well as a
deep understanding of managed care payor negotiations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>President and Chief Executive Officer of myLaurel, a leader
in providing high-acuity, high-complexity care in patients&rsquo; homes.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously served as Chief Executive Officer of myNEXUS,
a leading provider of comprehensive home-based nursing management to health insurers, from 2019 until its successful sale in 2021 to
Anthem (now known as Elevance Health, Inc. (NYSE: ELV)). He also served myNEXUS as a Vice Chairman and in a strategic advisor role from
2018 to 2019.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD>Previously spent over two decades with HCA and its predecessor
companies from 1993 to 2016. Most recently he served as Senior Vice President of Employer and Payer Engagement with responsibility for
over $30 billion in net revenue.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Conclusion</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although we are disappointed that Enhabit has
not been sold, our belief in Enhabit&rsquo;s value has never been stronger. We are confident that both of the Company&rsquo;s end markets
will continue to grow steadily in the future, and the utilization pressures currently faced by MA plans only emphasize the importance
of providers like Enhabit to payors who need greater control over healthcare costs. Whatever Enhabit&rsquo;s future ultimately entails,
it is abundantly clear that a new Board is needed to ensure that the Company realizes its full potential. We believe that the AREX Slate
offers the best chance to achieve that result and to ensure that value is maximized for all stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We look forward to being in touch in the coming
weeks with more information about our highly qualified director candidates and their vision for Enhabit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Best regards,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-size: 10pt; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; font-size: 10pt"></TD>
    <TD STYLE="width: 50%; font-size: 10pt"><FONT STYLE="font-family: Sans-Serif; font-size: 9pt; color: Red"><B></B></FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt"><IMG SRC="image_001.jpg" ALT=""></TD>
    <TD STYLE="font-size: 10pt"><IMG SRC="image_002.jpg" ALT="">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt"></TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Andrew Rechtschaffen<BR>
Managing Partner</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">James T. Corcoran<BR>
Partner</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>About AREX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AREX Capital Management, LP is a value-oriented
investment firm based in New York City. AREX takes a long-term, opportunistic approach to investing and focuses primarily on publicly
traded companies with significant, unrealized potential.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 13 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P></DIV>
    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt; text-align: right; font-size: 8pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white"><B>Investor Contact</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">Saratoga Proxy Consulting<BR>
John Ferguson<BR>
(212) 257-1311<BR>
rehabEHAB@saratogaproxy.com</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Media Contact</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Longacre Square Partners</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Greg Marose / Charlotte Kiaie</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(646) 386-0091</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">rehabEHAB@longacresquare.com</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: #FEFEFE"><B>CERTAIN INFORMATION
CONCERNING THE PARTICIPANTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: #FEFEFE">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">AREX Capital Master
Fund, LP, an exempted limited partnership organized under the laws of the Cayman Islands (&ldquo;<U>AREX Capital Master</U>&rdquo;), together
with the other participants named herein, has filed a preliminary proxy statement and accompanying WHITE universal proxy card with the
Securities and Exchange Commission (&ldquo;<U>SEC</U>&rdquo;) to be used to solicit votes for the election of its slate of highly-qualified
director nominees at the 2024 annual meeting of stockholders of Enhabit, Inc., a Delaware corporation (the &ldquo;<U>Company</U>&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">AREX CAPITAL MASTER
STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT&nbsp;<U>HTTP://WWW.SEC.GOV</U>.
IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">The participants in
the proxy solicitation are AREX Capital Master, AREX Capital Partners, LP, a Delaware limited partnership (&ldquo;<U>AREX
Capital Partners</U>&rdquo;), AREX Capital, Ltd., a Cayman Islands exempted company (&ldquo;<U>AREX Limited</U>&rdquo;), AREX Capital
GP, LLC, a Delaware limited liability company (&ldquo;<U>AREX Capital GP</U>&rdquo;), AREX Capital Management, LP, a Delaware limited
partnership (&ldquo;<U>AREX Capital Management</U>&rdquo;), AREX Capital Management GP, LLC, a Delaware limited liability company (&ldquo;<U>AREX
Capital Management GP</U>&rdquo;), Andrew Rechtschaffen, Megan Ambers, James T. Corcoran, Maxine Hochhauser, Mark W. Ohlendorf, Anna-Gene
O&rsquo;Neal, Dr. Gregory S. Sheff, and Juan Vallarino.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">As of the date hereof,
AREX Capital Master directly beneficially owns 566,234 shares of common stock, par value $0.01 per share, of the Company (the &ldquo;<U>Common
Stock</U>&rdquo;) and has economic exposure to an aggregate of 71,929 notional shares of Common Stock pursuant to certain cash-settled
total return swap agreements. Each of AREX Capital Partners and AREX Limited, as feeder funds of AREX Capital Master, may be deemed to
beneficially own the 566,234 shares of Common Stock owned by AREX Capital Master. AREX Capital GP, as the general partner of AREX Capital
Master, may be deemed to beneficially own the 566,234 shares of Common Stock owned by AREX Capital Master. AREX Capital Management, as
the investment advisor of each of AREX Capital Master and certain accounts separately managed by AREX Capital Management (the &ldquo;<U>AREX
Managed Accounts</U>&rdquo;), may be deemed to beneficially own the 2,446,162 shares of Common Stock owned in the aggregate by AREX Capital
Master and held in the AREX Managed Accounts. AREX Capital Management GP, as the general partner of AREX Capital Management, may be deemed
to beneficially own the 2,446,162 shares of Common Stock owned in the aggregate by AREX Capital Master and held in the AREX Managed Accounts.
Mr. Rechtschaffen, as the Managing Member of each of AREX Capital GP and AREX Capital Management GP, may be deemed to beneficially own
the 2,446,162 shares of Common Stock owned in the aggregate by AREX Capital Master and held in the AREX Managed Accounts. As of the date
hereof, none of Mses. Ambers, Hochhauser nor O&rsquo;Neal, nor Messrs. Corcoran, Ohlendorf nor Vallarino, nor Dr. Sheff own any shares
of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #FEFEFE">&nbsp;</P>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
