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                                                                   EXHIBIT 10.1



               ASSET PURCHASE AND LIABILITIES ASSUMPTION AGREEMENT

                                  BY AND AMONG

                       TRINITY HUMAN SERVICES CORPORATION,

                         TRINITY REGIONAL HEALTH SYSTEM,

                      NEW AMERICAN HEALTHCARE CORPORATION,

                                       AND

                               NAHC OF IOWA, INC.


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<TABLE>
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                               TABLE OF CONTENTS

<S>                                                                           <C>
ARTICLE 1 PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES .....................2
     SECTION 1.1   Incorporation of Recitals ...................................2
     SECTION 1.2   Sale and Purchase of Assets .................................2
     SECTION 1.3   Condition of Assets .........................................2
     SECTION 1.4   Liabilities .................................................2
     SECTION 1.5   Assumption of Contracts, Agreements, and Leases .............3
     SECTION 1.6   Purchase Price; Adjustments to Purchase Price ...............3
     SECTION 1.7   Adjustment Procedure ........................................3
     SECTION 1.8   Tax Allocation ..............................................4
     SECTION 1.9   Costs and Expenses ..........................................4
     SECTION 1.10  Proration of Income and Expenses ............................4
     SECTION 1.11  Real Estate Taxes ...........................................4
     SECTION 1.12  Closing .....................................................4
     SECTION 1.13  Abandonment Date ............................................6

ARTICLE 2 OTHER AGREEMENTS .....................................................7
     SECTION 2.1   Due Diligence Review ........................................7
     SECTION 2.2   Real Property ...............................................7
     SECTION 2.3   Employees ...................................................9
     SECTION 2.4   Noncompetition Agreement ...................................10
     SECTION 2.5   Escrow Agreement ...........................................10
     SECTION 2.6   Collective Bargaining Agreement ............................11
     SECTION 2.7   Estoppel Certificates ......................................11
     SECTION 2.8   Storage Tank Removal and Replacement .......................11
     SECTION 2.9   Severance Payments to Senior Management ....................11
     SECTION 2.10  Further Assurances .........................................11
     SECTION 2.11  Management Information System ..............................11
     SECTION 2.12  Access to Information ......................................12
     SECTION 2.13  Billing Agent Agreement ....................................12
     SECTION 2.14  Assumption of DTC Agreement ................................13
     SECTION 2.15  Buyer's Participation in Seller's Preparation for
                   JCAHO Resurvey..............................................13

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND NAHC ...................13
     SECTION 3.1   Organization, Qualification, and Corporate Power of Seller..13
     SECTION 3.2   Subsidiaries and Shareholders ..............................13
     SECTION 3.3   Validity ...................................................13
     SECTION 3.4   Default ....................................................14
     SECTION 3.5   Title to Assets ............................................14
     SECTION 3.6   Contracts and Leasehold Interests ..........................14
     SECTION 3.7   Trademarks, Patents, and Other Rights ......................15
     SECTION 3.8   Proprietary Information of Third Parties ...................15
     SECTION 3.9   Litigation and Investigations . ............................15

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<TABLE>
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<S>                                                                           <C>
     SECTION 3.10  Approvals ..................................................16
     SECTION 3.11  Taxes ......................................................16
     SECTION 3.12  Insurance Coverage .........................................16
     SECTION 3.13  Fees and Commissions .......................................17
     SECTION 3.14  Insider Interests ..........................................17
     SECTION 3.15  Other Approvals ............................................17
     SECTION 3.16  Environmental Liabilities ..................................17
     SECTION 3.17  Employees ..................................................18
     SECTION 3.18  Disclosure .................................................18
     SECTION 3.19  FIRPTA .....................................................18
     SECTION 3.20  Condemnation ...............................................19
     SECT10N 3.21  Zoning .....................................................19
     SECTION 3.22  Bankruptcy .................................................19
     SECTION 3.23  Real Property Taxes ........................................19
     SECTION 3.24  Insurance Compliance .......................................19
     SECTION 3.25  Disability .................................................19
     SECTION 3.26  Independence ...............................................20
     SECTION 3.27  Licenses and Accreditation .................................20
     SECTION 3.28  Hill Burton and FEMA .......................................20
     SECTION 3.29  Payors .....................................................20
     SECTION 3.30  Medical Staff ..............................................21
     SECTION 3.31  Compliance with Medicare and Medicaid Programs .............21
     SECTION 3.32  Compliance with Programs - Generally .......................22
     SECT10N 3.33  Medicare/Medicaid Certification ............................22
     SECTION 3.34  Year 2000 Compliance .......................................22
     SECTION 3.35  Financial Statements .......................................22

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER AND TRHS ....................23
     SECTION 4.1   Organization, Qualification, and Corporate Power of Buyer ..23
     SECTION 4.2   Validity ...................................................23
     SECTION 4.3   Fees and Commissions .......................................24
     SECTION 4.4   Other Approvals ............................................24
     SECTION 4.5   Financial Statements .......................................24
     SECTION 4.6   Disclosure .................................................24

ARTICLE 5 COVENANTS OF NAHC AND SELLER ........................................24
     SECTION 5.1   Operation of Business ......................................24
     SECTION 5.2   Liens on Assets ............................................24
     SECTION 5.3   Litigation .................................................24
     SECTION 5.4   Non-Contravention ..........................................25
     SECTION 5.5   Standstill .................................................25
     SECTION 5.6   Insurance ..................................................25
     SECTION 5.7   Third-Party Consents .......................................25
     SECTION 5.8   Regulatory Approvals .......................................25
     SECTION 5.9   Non-Solicitation ...........................................25

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<TABLE>
<S>                                                                           <C>
     SECTION 5.10  General Cooperation ........................................25
     SECTION 5.11  Real Property ..............................................25
     SECTION 5.12  Board of Director and Lender Group Approvals ...............26

ARTICLE 6 COVENANTS OF TRHS AND BUYER .........................................26
     SECTION 6.1   Third-Party Consents .......................................26
     SECTION 6.2   Regulatory Approvals .......................................26
     SECTION 6.3   General Cooperation ........................................26
     SECTION 6.4   Employees of Seller ........................................26
     SECTION 6.5   Medical Staff ..............................................26
     SECTION 6.6   Board of Director and Other Approvals ......................27
     SECTION 6.7   Non-Contravention ..........................................27

ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF TRHS AND BUYER .....................27
     SECTION 7.1   Opinion of Sellers' Counsel ................................27
     SECTION 7.2   Representations and Warranties .............................27
     SECTION 7.3   Compliance with Covenants ..................................27
     SECTION 7.4   Corporate Proceedings ......................................27
     SECTION 7.5   No Adverse Change ..........................................27
     SECTION 7.6   Regulatory Approvals .......................................28
     SECTION 7.7   Supporting Documents .......................................28

ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF NAHC AND SELLER ....................28
     SECTION 8.1   Opinion of Buyer's Counsel .................................28
     SECTION 8.2   Representations and Warranties .............................28
     SECTION 8.3   Compliance with Covenants ..................................28
     SECTION 8.4   Supporting Documents .......................................28

ARTICLE 9 JOINT COVENANTS OF THE PARTIES ......................................28
     SECTION 9.1   Confidentiality of Business Information . ..................28
     SECTION 9.2   Confidentiality of this Agreement ..........................29
     SECTION 9.3   Return of Information ......................................29

ARTICLE 10 INDEMNIFICATION ....................................................29
     SECTION 10.1  Survival; Right to Indemnification Not Affected
                   by Knowledge ...............................................29
     SECTION 10.2  Indemnification and Payment of Damages by Seller and NAHC...29
     SECTION 10.3  Indemnification and Payment of Damages by Buyer ............30
     SECTION 10.4  Liability and Risk of Loss .................................31
     SECTION 10.5  Procedure for Indemnification - Third Party Claims .........31
     SECTION 10.6  Procedure for Indemnification - Other Claims ...............32
     SECTION 10.7  Time Limitations - General .................................32
     SECTION 10.8  Time Limitations for Buyer and Seller
                   Post-Closing Obligations ...................................33
     SECTION 10.9  Time Limitations for Seller's or NAHC's Breach
                   of Section 3.31 ............................................33
     SECTION 10.10 Initial Expenditure ........................................33
     SECTION 10.11 Maximum Amount - Seller and NAHC ...........................34
</TABLE>




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<TABLE>
<S>                                                                           <C>

     SECTION 10.12 Maximum Amount - Buyer .....................................34

ARTICLE 11 MISCELLANEOUS ......................................................34
     SECTION 11.1   Termination Events ........................................34
     SECTION 11.2   Notice ....................................................35
     SECTION 11.3   Survival of Provisions ....................................36
     SECTION 11.4   Amendment .................................................36
     SECTION 11.5   Assignment ................................................36
     SECTION 11.6   Severability ..............................................37
     SECTION 11.7   Choice of Law .............................................37
     SECTION 11.8   Binding Benefit ...........................................37
     SECTION 11.9   Headings ..................................................37
     SECTION 11.10  Counterparts ..............................................37
     SECTION 11.11  Expenses ..................................................37
     SECTION 11.12  Waiver ....................................................37
     SECTION 11.13  Construction ..............................................37
     SECTION 11.14  Cumulative Remedies .......................................37
     SECTION 11.15  Casualty or Condemnation ..................................38
     SECTION 11.16  Arbitration ...............................................38
     SECTION 11.17  Knowledge of NAHC and Seller ..............................38
     SECTION 11.18  Completion of Schedules ...................................39
     SECTION 11.19  Entire Agreement ..........................................39

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                               LIST OF SCHEDULES


SCHEDULE 1.2(a)      ASSETS

SCHEDULE 1.2(b)      EXCLUDED ASSETS

SCHEDULE 1.4         ASSUMED LIABILITIES

SCHEDULE 1.5         CONTRACTS

SCHEDULE 1.8         TAX ALLOCATION

SCHEDULE 1.12(a)     THE DEEDS

SCHEDULE 1.12(b)     PERMITTED EXCEPTIONS

SCHEDULE 2.4         NONCOMPETITION AGREEMENT

SCHEDULE 2.5         ESCROW AGREEMENT

SCHEDULE 2.7         FORM TENANT ESTOPPEL LETTER

SCHEDULE 2.9         SEVERANCE PACKAGE

SCHEDULE 2.11        SUBLICENSE AGREEMENT

SCHEDULE 2.13        BILLING AGENT AGREEMENT

SCHEDULE 2.14        DTC ASSIGNMENT AND ASSUMPTION AGREEMENT

SCHEDULE 3.0         SELLER'S AND NAHC'S DISCLOSURE SCHEDULE

SCHEDULE 3.12        SELLER'S INSURANCE

SCHEDULE 3.27        SELLER'S LICENSES AND PERMITS

SCHEDULE 3.30        SELLER'S MEDICAL STAFF

SCHEDULE 4.0         BUYER'S AND TRHS' DISCLOSURE SCHEDULE

SCHEDULE 7.1         OPINION OF SELLER'S COUNSEL

SCHEDULE 8.1         OPINION OF BUYER'S COUNSEL




                                       v
<PAGE>   7




               ASSET PURCHASE AND LIABILITIES ASSUMPTION AGREEMENT
                                  BY AND AMONG
                       TRINITY HUMAN SERVICES CORPORATION,
                         TRINITY REGIONAL HEALTH SYSTEM,
                      NEW AMERICAN HEALTHCARE CORPORATION,
                                       AND
                               NAHC OF IOWA, INC.
                              -------------------

         THIS ASSET PURCHASE AND LIABILITIES ASSUMPTION AGREEMENT (the
"AGREEMENT"), dated as of this 30th day of June, 1999 (the "Effective Date"), is
made by and among Trinity Human Services Corporation, a non-profit corporation
duly organized and validly existing under the laws of the State of Illinois
("Buyer"), Trinity Regional Health System, a non-profit corporation duly
organized and validly existing under the laws of the State of Illinois
("TRHS"), New American Healthcare Corporation, a for profit corporation duly
organized and validly existing under the laws of the State of Delaware ("NAHC"),
and NAHC of Iowa, Inc., d/b/a Davenport Medical Center, a for profit corporation
duly organized and validly existing under the laws of the State of Tennessee
("Seller").

         WHEREAS, Seller owns the assets of and operates a for profit acute care
hospital with an included skilled nursing unit, located at 1111 West Kimberly
Avenue, Davenport, Iowa (the "HOSPITAL FACILITY"), as well as three (3) medical
office buildings located as 3801 Marquette Street, Davenport, Iowa, 3904 Lillie
Avenue, Davenport, Iowa, and 3906 Lillie Avenue, Davenport, Iowa, respectively
(the "MEDICAL OFFICE BUILDINGS");

         WHEREAS, NAHC is the corporate parent of Seller;

         WHEREAS, TRHS is the parent corporation of certain health care
providers in the State of Illinois;

         WHEREAS, TRHS is the corporate parent of Buyer;

         WHEREAS, Seller desires to sell, and NAHC desires to cause Seller to
sell, certain of its assets to Buyer, all as set forth herein; and

         WHEREAS, Buyer desires to purchase, and TRHS desires to cause Buyer to
purchase, certain assets of Seller, all as set forth herein.

         NOW THEREFORE, in consideration of the premises and covenants as set
forth herein, and subject to the representations, warranties, and conditions
contained herein, the parties agree as follows:



<PAGE>   8




                                    ARTICLE I
                               PURCHASE OF ASSETS
                          AND ASSUMPTION OF LIABILITIES

         SECTION 1.1 INCORPORATION OF RECITALS. The recitals set forth above are
incorporated herein by reference.

         SECTION 1.2 SALE AND PURCHASE OF ASSETS. Subject to the terms and
conditions of this Agreement, and in reliance on the representations,
warranties, and covenants contained herein, on the Closing Date (as defined
below), Seller shall sell, convey, assign, transfer, and deliver, or cause to be
sold, conveyed, assigned, transferred, and delivered, to Buyer and Buyer shall
purchase and acquire from Seller, certain Assets (as defined below) of Seller,
free and clear of any title defect, mortgage, assignment, pledge, hypothecation,
security interest, title or retention agreement, levy, execution, seizure,
attachment, garnishment, deemed trust, lien, easement, option, right or claim of
others, or charge or encumbrance of any kind whatsoever (other than the
exceptions specifically set forth herein), in exchange for the Purchase Price
(as defined below) and Buyer's assumption of certain Assumed Liabilities (as
defined below). The term "ASSETS" shall mean certain parcels of land owned by
Seller, including all improvements and structures located on such parcels (the
"REAL PROPERTY"), a legal description of which is set forth Schedule 1.2(a),
attached hereto and incorporated by reference, and certain other tangible and
intangible assets also as specifically set forth on the incorporated Schedule
1.2(a). Specifically excluded from this Agreement, the Assets, and the purchase
obligations herein are those assets and properties set forth on Schedule 1.2(b),
attached hereto and incorporated by reference, including, without limitation,
cash and cash equivalents, insurance proceeds, accounts receivable, and rights
to claims of, and monies due, Seller if any.

         SECTION 1.3 CONDITION OF ASSETS. Other than with respect to the
representations and warranties herein provided, Seller shall transfer the Assets
to Buyer and Buyer shall accept the Assets from Seller AS IS WITH NO WARRANTY OF
HABITABILITY OR FITNESS FOR HABITATION, WITH RESPECT TO THE LAND, BUILDINGS AND
IMPROVEMENTS, AND WITH NO WARRANTIES, INCLUDING WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT
TO THE EQUIPMENT, INVENTORY AND SUPPLIES, AND ANY AND ALL OF WHICH WARRANTIES
SELLER HEREBY DISCLAIMS. All of the Assets shall be further subject to normal
wear and tear on the land, buildings, improvements and equipment and normal and
customary use and disposal of inventory and supplies in the ordinary course of
business up to the Closing Date.

         SECTION 1.4 ASSUMPTION OF LIABILITIES. Simultaneous with its purchase
of the Assets, Buyer shall assume the payment and performance of certain
obligations of Sellers from and after the Closing (as defined below), as are
specifically described on Schedule 1.4, attached hereto and incorporated by
reference. The foregoing described liabilities shall hereinafter be referred to
collectively as the "ASSUMED LIABILITIES." Except as set forth on Schedule 1.4,
Buyer shall not satisfy or assume any liability or obligation for any liability
not specifically identified or scheduled herein, including, without limitation,
any liabilities with respect to Seller's employees, employee




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benefit plans, salaries, any unpaid overtime, back wages, associated tax
liabilities, or other benefits or obligations.

         SECTION 1.5 ASSUMPTION OF CONTRACTS, AGREEMENTS, AND LEASES.
Simultaneous with the purchase of the Assets, Buyer will prospectively assume
all of the contracts, agreements, and leases of Seller, as disclosed on Schedule
1.5 (the "CONTRACTS"), to the extent such Contracts can be assumed. All
reasonable costs associated with the assignment of the Contracts to Buyer shall
be borne by Seller; provided, that Seller shall have no obligation to make such
payment. Notwithstanding the foregoing, Buyer shall have no obligation to assume
any Contract if the assumption thereof would require Buyer to make a payment in
consideration of the assignment in an amount that Buyer considers unreasonable,
unless Seller elects to make such payment instead.

         SECTION 1.6 PURCHASE PRICE; ADJUSTMENTS TO PURCHASE PRICE. Buyer shall
pay to Seller as consideration for the Assets the sum of five million seven
hundred thousand dollars ($5,700,000), plus the Adjustable Amount (the "PURCHASE
PRICE"). Three hundred fifteen thousand dollars ($315,000) of the Purchase
Price, less the sum (but not more than forty thousand dollars ($40,000)) of any
amount expended by Seller prior to the Closing for the purposes described in
Section 2.8 (the "DEPOSIT REDUCTION") shall be deposited with the Escrow Agent
(as defined below) pursuant to the Escrow Agreement (as defined below) (the
"DEPOSIT"). For purposes of this Section 1.6, the "ADJUSTABLE AMOUNT" means a
sum equal to the value (positive or negative) of the "Current Assets" listed on
Schedule 1.2(a), minus the value of the "Current Assumed Liabilities" listed on
Schedule 1.4, and minus the value of any long-term liabilities of Seller set
forth on Schedule 1.4 that Buyer agrees to assume, which shall be estimated by
the parties in good faith not earlier than five (5) days prior to the Closing
based on the most current interim financial statements with provisional
adjustments as shall be mutually agreed to by the parties and subject to the
adjustment procedure set forth below.

         SECTION 1.7 ADJUSTMENT PROCEDURE. No later than sixty (60) days after
the Closing, Buyer shall provide to Seller a balance sheet as of the Closing
Date, reflecting the items listed above determined in accordance with generally
accepted accounting principles applied consistently with prior periods (the
"FINAL CLOSING STATEMENT") and the recalculation of the Adjustable Amount based
on the Final Closing Statement (the "FINAL ADJUSTABLE AMOUNT"). Within ten (10)
days after Seller has received the Final Closing Statement and the Final
Adjustable Amount, Seller shall provide Buyer with notice, informing Buyer
whether or not it agrees with the Final Adjustable Amount ("Seller's Notice").
In the event that Seller agrees with Buyer's calculations and the Final
Adjustable Amount is greater than the Adjustable Amount paid by Buyer at
Closing, Buyer shall pay Seller the difference between the Final Adjustable
Amount and the Adjustable Amount within ten (10) days after Seller's Notice. In
the event that Seller agrees with Buyer's calculations and the Final Adjustable
Amount is less than the Adjustable Amount paid by Buyer at Closing, Seller shall
pay Buyer the difference between the Adjustable Amount and the Final Adjustable
Amount within ten (10) days after Seller's Notice. If Seller disagrees with
Buyer's calculations, the parties shall work in good faith to resolve any
disputes, as promptly as possible. If the parties have not agreed upon the Final
Closing Statement within thirty (30) days of Seller's delivery of notice of its
objection to the Final Closing Statement, then either party may submit the
dispute for resolution under Section 11.16 of this Agreement.




                                        3


<PAGE>   10




         SECTION 1.8 TAX ALLOCATION. The parties agree to allocate the Purchase
Price and the Assumed Liabilities among the Assets for all purposes (including
financial, accounting, and tax purposes) in accordance with the allocation set
forth on Schedule 1.8, attached hereto and incorporated by reference, and shall
make all necessary filings (including those required under Internal Revenue Code
Section 1060) in accordance with that allocation.

         SECTION 1.9 COSTS AND EXPENSES. Except as otherwise set forth herein
and except for expenses related to the sale of the Real Property to Buyer, each
party shall pay its own expenses associated with and incident to the
transactions contemplated hereby, including, without limitation, recording fees
at the Closing (as defined below). With respect to the expenses related to the
sale of the Real Property to Buyer (i.e., the Surveys (as defined below), the
Title Policies (as defined below), and transfer taxes), Buyer shall be
responsible for paying the first twenty thousand dollars ($20,000) of such
expenses and Seller shall pay all other expenses related to such sale. The costs
and expenses shall not include the cost of any additional endorsement to the
Title Policies (as defined below) requested by Buyer. The cost of such
additional endorsements to the Title Policies shall be the sole responsibility
of Buyer.

         SECTION 1.10 PRORATION OF INCOME AND EXPENSES. All rental income and
lease payments related to the Real Property and the tangible Assets shall be
prorated as of the date of the Closing (as defined below) and the Purchase Price
shall be adjusted in accordance with such proration.

         SECTION 1.11 REAL ESTATE TAXES. Seller shall pay in full and all real
estate tax bills issued by the Scott County Treasurer for all periods through
the Closing Date (as defined below) for tax parcels Z0019-86, P1408D01C,
P1408DO8A, P1409-01, P1409-02 at closing or, if not issued at time of closing,
within 10 days of the issuance of such property tax bills.

         SECTION 1.12 CLOSING. The closing of the transactions contemplated by
this Agreement shall be effective as of the later to occur of (i) 12:01 a.m.
(CST) on August 1, 1999, or (ii) the date fifteen (15) days after Buyer and/or
Seller have obtained all regulatory approvals and acknowledgments from federal
and state government agencies necessary for consummation of the transactions
contemplated hereby and for the operation of the Hospital Facility as an acute
care hospital with a skilled nursing unit and all waiting periods for transfer
of any license or permit to Buyer have expired (such closing being called the
"CLOSING" and such date being called the "CLOSING DATE"). At the Closing, Seller
shall deliver to Buyer the following:

            (a)  Bills of sale and assignments transferring to Buyer all of the
                 Assets (other than for the Real Property), together with
                 certificates or other evidence of title to the Assets (other
                 than for the Real Property), properly endorsed to Buyer; and

            (b)  Assignment and assumption agreements, transferring Seller's
                 rights and obligations with respect to the Contracts to
                 Buyer; and

            (c)  To the extent required and obtained, consents to the assignment
                 and assumption agreements from each of the other parties to
                 such Contracts; and




                                        4
<PAGE>   11


              (d)  To the extent not previously provided by Seller to Buyer,
                   copies of each such Contract; and

              (e)  An opinion of counsel to Seller and NAHC, regarding the due
                   organization and existence of Seller and NAHC, the authority
                   of Seller and NAHC to conclude the transactions provided for
                   herein, and the due execution of the instruments at the
                   Closing, and other matters set forth therein acceptable in
                   form and substance to Buyer and TRHS; and

              (f)  The Deeds (the "DEEDS") in form and substance as in Schedule
                   1.12(a) attached hereto and incorporated by reference, duly
                   executed and acknowledged by Seller, conveying to Buyer the
                   Real Property in marketable fee simple, free and clear of
                   any lien, encumbrance, or exception other than the Permitted
                   Exceptions (as defined in Schedule 1.12(b)) applicable to
                   the Real Property; and

              (g)  The Title Policies (as defined below) covering the Real
                   Property or assurance (in form satisfactory to Buyer) that
                   the Title Policies have been obtained by Seller and Buyer
                   will receive them as soon as possible after the Closing; and

              (h)  Ad valorem tax statements for the Real Property for the
                   calendar year prior to the Closing, if available and if not
                   previously presented; and

              (i)  Possession of the Real Property and all other tangible
                   assets; and

              (j)  To the extent obtained, the Tenant Estoppel Letters (as
                   defined below); and

              (k)  If not previously provided, Uniform Commercial Code financing
                   statement searches from the Secretary of State of Iowa and
                   from the county records of Scott County indicating that
                   there are no financing statements affecting any part of the
                   Real Property other than the Permitted Exceptions; and

              (1)  Such other evidence of the authority and capacity of Seller
                   and its representatives as the Title Company (as defined
                   below) may reasonably require; and

              (m)  Such other items as are set forth elsewhere in this
                   Agreement and as Buyer and its counsel may reasonably
                   request.

         If Seller is not a "foreign person," as defined in the Foreign
Investment in Real Property Tax Act of 1980 and the Internal Revenue Code of
1986, as amended (the "CODE"), then at the Closing it will deliver to Buyer a
certificate so stating. If it is a "foreign person" or if it fails to deliver
the required certificate at the Closing, then in either such event the payment
of the Purchase Price to Seller at the Closing will be adjusted to the extent
required to comply with the withholding provisions of the Code; and although the
amount withheld will still be paid at the Closing by Buyer,




                                        5


<PAGE>   12




it will be retained by a mutually acceptable escrow agent for delivery to the
Internal Revenue Service together with the appropriate Code forwarding forms
(and with copies being provided both to Seller and to Buyer). The following
parties are hereby approved as mutually acceptable escrow agents in the event
that withholding is warranted in accordance with the immediately preceding
sentence (listed in order of decreasing preference): the Title Company, Buyer's
"independent CPA" (i.e., a certified public accountant who is associated with an
independent CPA firm), and a mutually acceptable federally-insured financial
institution.

         At the Closing, Buyer shall deliver to Seller the following:

              (i)   Assignment and assumption agreements, pursuant to which
                    Buyer accepts assignment of Seller's rights and obligations
                    with respect to the Contracts; and

              (ii)  An opinion of counsel to Buyer and TRHS, regarding the due
                    organization and existence of Buyer and TRHS, the authority
                    of Buyer and TRHS to conclude the transactions provided for
                    herein, and the due execution of the instruments at the
                    Closing, and other matters set forth therein acceptable in
                    form and substance to Seller and NAHC; and

              (iii) By wire transfer of federal funds, the total amount of the
                    Purchase Price less the amount of the Deposit; and

              (iv)  By wire transfer of federal funds, the Buyer's Severance
                    Payment (as defined below); and

              (v)   Such other items as are set forth elsewhere in this
                    Agreement and as Seller and its counsel shall reasonably
                    request.

         At the Closing, Buyer shall deliver to Escrow Agent (as defined below)
the Deposit pursuant to the Escrow Agreement (as defined below).

         SECTION 1.13 ABANDONMENT DATE. Notwithstanding anything herein to the
contrary, if the Closing does not take place by the close of business on
September 1, 1999 (the "ABANDONMENT DATE"), any party shall have the option to
terminate this Agreement on or within five (5) working days after the
Abandonment Date, in which case this Agreement will terminate in its entirety as
to all parties hereto; provided, however, that if the Closing does not take
place as a result solely of any delay in obtaining any regulatory approval and
Buyer has diligently pursued the same, the Abandonment Date automatically shall
be extended for an additional fifteen (15) days; provided further, however, that
if such regulatory approval is not obtained or the Closing does not otherwise
occur within such extended period, any party may terminate this Agreement, in
which case this Agreement shall terminate in its entirety as to all parties
hereto. The foregoing shall not be construed to terminate or otherwise affect
any claims any party may have against any of the others for breach of any
obligation arising out of this Agreement, or any other agreement entered into in
connection herewith, prior to the Abandonment Date. The parties will seek and
use their reasonable



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<PAGE>   13


efforts to obtain all governmental and regulatory approvals for the consummation
of the transactions contemplated by this Agreement, and the parties will
cooperate with each other and their respective agents with respect to obtaining
such governmental and regulatory approvals.

                                    ARTICLE 2
                                OTHER AGREEMENTS

         SECTION 2.1 DUE DILIGENCE REVIEW. TRHS, Buyer, and their agents and
representatives shall have the right to review and inspect the Assets and the
Assumed Liabilities and to conduct, at TRHS' and Buyer's sole cost and expense,
such other due diligence as TRHS and Buyer shall deem appropriate. NAHC and
Seller shall cooperate with TRHS and Buyer by promptly providing reasonable
access to the Assets and all information and materials reasonably requested by
the TRHS and Buyer in connection therewith, and the Assumed Liabilities. Such
inspections shall not interfere with Seller's business and shall be conducted by
TRHS, Buyer, and their agents and representatives on business days during normal
business hours, unless otherwise agreed; provided, however, that in order to
minimize disruption of Seller's business, prior to any inspections or contacts
with Seller's employees, TRHS and Buyer shall coordinate such inspections and
contacts with Randy Starkweather or such other person designated by NAHC and
Seller for such purpose. Except as otherwise provided in Section 2.2(e), TRHS
and Buyer shall have the right to terminate this Agreement by written notice to
NAHC and Seller on or prior to July 1, 1999, if TRHS' and Buyer's due diligence
reveals questions or issues, in TRHS' and Buyer's sole discretion, as to the
nature or worth of the Assets, the nature or extent of the Assumed Liabilities,
the viable operation of the Hospital Facility as an acute care hospital with a
skilled nursing unit, or any other matter impacting the transactions
contemplated herein (the "DUE DILIGENCE TERMINATION DATE"). In the event this
Agreement is terminated pursuant to this Section 2.1, the parties shall have no
further liabilities or obligations to each other.

         SECTION 2.2 REAL PROPERTY.

            (a)  Seller shall order, as soon as possible and not later than
                 three (3) days after the Effective Date, from Chicago Title
                 and Trust Company, or such other company as agreed to by the
                 parties (the "TITLE COMPANY"), title commitments covering
                 each parcel of the Real Property (the legal descriptions of
                 the Real Property as set forth in Schedule 1.2(a), unless
                 and to the extent modified by the Surveys (as defined below)
                 applicable thereto, shall be deemed incorporated in this
                 Agreement), listing Buyer as the proposed insured and showing
                 the value allocated to the Real Property as set forth on
                 Schedule 1.8 as the proposed amount for each policy. The title
                 commitments shall contain the express commitment of the
                 Title Company to issue Owner's Policies of title insurance
                 (the "TITLE POLICIES") to Buyer in such amount, insuring such
                 title as is specified in each title commitment, with the
                 standard printed exceptions endorsed or deleted in accordance
                 with the provisions hereof and with an exception for tenants
                 in possession. At such time as Seller causes the title
                 commitments to be furnished to Buyer, Seller shall further
                 cause to be furnished to Buyer true, correct, and legible
                 copies




                                        7


<PAGE>   14




                 of all instruments referred to in the title commitments as
                 conditions or exceptions to title, including liens,
                 certificates from the Title Company (or such other certificates
                 as may be acceptable to Buyer) stating that searches have been
                 made of both the state and county records wherein financing
                 statements and security agreements are filed pursuant to the
                 Uniform Commercial Code of the state in which the Real
                 Property is located, and that such searches indicate that no
                 security interests or liens of any kind or nature, including,
                 but not limited to, any equipment financing or leasing
                 arrangements, are claimed by any person against the Real
                 Property, or any part thereof other than the Permitted
                 Exceptions. Further, Seller shall deliver to Buyer reissued
                 title commitments on or before the date which is ninety (90)
                 days after the effective date of the title commitments if the
                 Closing Date is more than ninety (90) days after such
                 effective date thereof. Seller shall order endorsements to
                 the Title Policies requested by Buyer; however, the cost of
                 all endorsements requested by Buyer shall be the sole
                 responsibility of the Buyer.

            (b)  At the Closing, Seller shall cause the Title Policies to be
                 furnished to Buyer or shall provide to Buyer an assurance
                 (in form acceptable to Buyer) that the Title Policies have
                 been obtained by Seller and Seller will furnish to Buyer the
                 Title Policies as soon as possible after the Closing. Each
                 Title Policy shall be issued in the amount set forth above
                 and shall insure fee simple, indefeasible title to the Real
                 Property covered thereby in Buyer. Each Title Policy may
                 contain the Permitted Exceptions applicable to the Real
                 Property covered thereby, but shall contain no additional
                 exceptions to title; provided, however, the exception for taxes
                 and assessments in each Title Policy shall be limited only
                 to "taxes and assessments for the year 1999 and subsequent
                 years, none of which are yet due and payable." All conditions
                 and requirements set forth on Schedule B of each title
                 commitment must be resolved or satisfied prior to or at
                 Closing and such items must not appear on the Title Policies
                 issued pursuant thereto.

            (c)  Seller shall, as soon as possible after the Effective Date,
                 cause to be prepared and furnished to Buyer and the Title
                 Company, five (5) copies of the ALTA/ACSM surveys covering
                 the Real Property (the "SURVEYS"), prepared by Verbecke-Meyer
                 (the "SURVEYOR"). The Surveys shall be dated after the
                 Effective Date, shall include a metes and bounds legal
                 description of the Real Property (which shall be deemed
                 incorporated in this Agreement and shall be used in the Title
                 Policies and the Deeds), shall accurately show the location
                 and dimensions of all the improvements, encroachments, uses
                 (including the location of all highways, streets, roads,
                 easements, alleys and rights-of-way upon or adjacent to the
                 Real Property) and encumbrances which are visible on the
                 ground or listed on the title commitment (identifying each by
                 volume and page reference, if applicable), shall recite the
                 area of the Real Property, shall show all building set-back
                 lines, shall contain certificates specifically



                                        8


<PAGE>   15




                 addressed to Buyer and the Title Company, and shall contain
                 a surveyor's certificate in a form acceptable to Buyer. The
                 Surveys shall be incorporated by reference in Schedule 1.2(a)
                 and to the extent the Surveys are inconsistent with the
                 description of the Real Property set forth in Schedule 1.2(a),
                 the Surveys shall prevail. The Surveys must be satisfactory
                 to the Title Company so as to permit it to amend the survey
                 exceptions in the Title Policies to be issued to Buyer as
                 required herein.

            (d)  If Buyer shall object to any such matters shown or referred to
                 in the title commitments or on the Surveys, Buyer shall
                 provide Seller with notice of its objections within ten (10)
                 days of the receipt of the title commitments and the surveys,
                 as the case may be, and Seller shall use its best efforts to
                 cure Buyer's objections prior to the Closing Date; provided,
                 that Seller shall not be obligated to pay to cure any of
                 Buyer's objections to the surveys. If Seller is unable to cure
                 Buyer's objections prior to the Closing Date, Buyer shall
                 have the option to (i) waive Buyer's objections and purchase
                 the Real Property as otherwise contemplated in this Agreement,
                 and Seller shall convey the Real Property to Buyer by the
                 Deed, (ii) accept an abatement of the Purchase Price
                 satisfactory to Buyer and Seller and purchase the Real Property
                 as otherwise contemplated in this Agreement, or (iii)
                 terminate this Agreement.

            (e)  TRHS and Buyer shall have the right to physically inspect the
                 Real Property any time prior to Closing, conduct such
                 feasibility studies as Buyer may elect, and determine whether
                 the Real Property is satisfactory for Buyer's contemplated
                 use thereof. TRHS and Buyer shall coordinate such inspections
                 and studies with Randy Starkweather or such other person
                 designated by NAHC and Seller for such purpose. Buyer or
                 Buyer's authorized representatives shall have the right from
                 and after the Effective Date to enter upon and make tests on
                 the Real Property, including, but not limited to, tests to
                 determine the presence of any Hazardous Materials (as defined
                 below), Petroleum Products (as defined below), or underground
                 storage tanks. Such inspections are to be conducted in a
                 manner as not to physically damage the Real Property or
                 unreasonably interfere with the usual operations on the Real
                 Property. In the event of the disapproval by Buyer of the
                 results of one or more of the inspections, studies and
                 inquiries concerning the Real Property, this Agreement, at
                 the election of Buyer, shall be terminated upon written
                 notice to Seller prior to the Due Diligence Termination Date.

         SECTION 2.3 EMPLOYEES. Buyer shall notify Seller in writing as soon as
reasonably possible, as to which of Seller's employees Buyer intends to hire as
of and effective upon the Closing. All such offers of employment, if any, and
the terms and conditions thereof, shall be at the discretion of Buyer and Buyer
makes no guarantees of employment or continued employment to any of Seller's
employees. Buyer makes no commitments to hire any of the employees of NAHC
assigned to Seller; however, Buyer shall extend binding offers of employment to
at least such



                                        9


<PAGE>   16




number of Seller's employees, and on such terms, as to relieve Seller of any
liability or obligation that otherwise would be imposed under the Worker's
Adjustment Retraining and Notification Act ("WARN ACT") and any comparable State
law.

         SECTION 2.4 NONCOMPETITION AGREEMENT. As of the Closing Date, Seller
and NAHC shall enter into and deliver to TRHS and Buyer a Noncompetition
Agreement, substantially in form and substance as set forth on Schedule 2.4,
attached hereto and incorporated by reference.

         SECTION 2.5 ESCROW AGREEMENT. On the Closing Date, NAHC, Seller, TRHS,
and Buyer shall enter into an Escrow Agreement with a mutually acceptable escrow
agent (the "ESCROW AGENT"), substantially in form and substance as set forth in
Schedule 2.5, attached hereto and incorporated by reference (the "ESCROW
AGREEMENT"), and Buyer shall make the Deposit to the Escrow Agent to hold such
Deposit in escrow.

         The Escrow Agreement shall provide that a sum equal to forty thousand
dollars ($40,000), less the Deposit Reduction shall be deposited with the Escrow
Agent to guarantee Seller's and NAHC's removal and replacement of the
underground storage tank located on the Real Property (the "STORAGE TANK REMOVAL
DEPOSIT"). In addition, twenty-five thousand dollars ($25,000) of the Deposit
shall be deposited with the Escrow Agent to guarantee Seller's remediation of
the underground storage tank site (as may be required by applicable law) (the
"REMEDIATION DEPOSIT"). Seller shall have the right to draw on the Storage Tank
Removal Deposit to pay for the removal and the replacement of the underground
storage tank as amounts become due to the contractor. Upon completion of the
removal and replacement of the underground storage tank, the remainder of the
Storage Tank Removal Deposit, if any, shall be held as an addition to the
Remediation Deposit. Upon completion of any remediation of the underground
storage tank site required by applicable law and delivery by the Seller to the
Buyer of the certificates and reports required by law to close the site of the
underground storage tank, Escrow Agent shall disburse the remaining balance of
the Remediation Deposit to Seller.

         In addition, the Escrow Agreement shall provide that if Buyer or TRHS
are obligated to spend any amount of money to fix, alter, repair, or improve any
of the Real Property, in order to correct life safety or similar code issues
identified by the JCAHO as a result of its resurvey scheduled to be conducted in
August 1999 or by any state or federal regulatory agency as a condition of the
transfer or reissuance of any license, permit, or certificate, including,
without limitation, Medicare, Medicaid, or the agency of the State of Iowa
responsible for licensing hospitals (the "NECESSARY REPAIRS"), after proper
notice to NAHC and Seller under the Escrow Agreement, Buyer will be entitled to
receive disbursement from the Repair Deposit (as defined below) in the amount of
fifty percent (50%) of the costs of such Necessary Repairs up to the amount of
the Repair Deposit, upon submission of an invoice for such Necessary Repairs to
the Escrow Agent. Notwithstanding any other provision of this Agreement,
recourse to the Repair Deposit, to the extent of the Repair Deposit, shall be
Buyer's sole and complete remedy for any and all Necessary Repairs or any breach
of a representation or warranty regarding the physical condition of the Real
Property, except for the representations and warranties set forth in Section
3.16 below. For purposes of this Agreement, the "REPAIR DEPOSIT" shall mean two
hundred fifty thousand dollars ($250,000) of the Deposit.




                                       10


<PAGE>   17




         SECTION 2.6 COLLECTIVE BARGAINING AGREEMENT. Seller hereby agrees that
it will not initiate negotiations with any labor union to enter into, amend, or
renew any collective bargaining agreement prior to August 1, 1999, without
Buyer's prior written consent, which consent shall not be unreasonably withheld.
In the event Seller is thereafter required by a labor union to enter into
negotiations to amend or renew a collective bargaining agreement, Seller shall
notify Buyer of such negotiations, provide Buyer the opportunity to participate
in such negotiations, and obtain the prior written consent of Buyer prior to
executing any collective bargaining agreement, amendment, or renewal.

         SECTION 2.7 ESTOPPEL CERTIFICATES. NAHC and Seller shall use their best
efforts to obtain a tenant estoppel letter executed by each tenant of the Real
Property (the "TENANT ESTOPPEL LETTERS"), substantially in the form and
substance of Schedule 2.7, attached hereto and incorporated by reference.

         SECTION 2.8 STORAGE TANK REMOVAL AND REPLACEMENT. NAHC and Seller
hereby agree that they will remove and replace the underground storage tank
located on the Real Property in accordance with applicable federal, state, and
local laws and regulations. To secure the performance of NAHC and Seller, Buyer
and Seller shall enter into the Escrow Agreement as described above in Section
2.5.

         SECTION 2.9 SEVERANCE PAYMENTS TO SENIOR MANAGEMENT. TRHS and Buyer
hereby agree to pay to Seller at the Closing one hundred fifty-three thousand
five hundred dollars ($153,500), which amount represents fifty percent (50%) of
the cost of the severance package of the Hospital Facility's chief executive
officer, chief financial officer, and director of nursing (the "BUYER'S
SEVERANCE PAYMENT"). A copy of the severance package shall be set forth on
Schedule 2.9, attached hereto and incorporated by reference.

         SECTION 2.10 FURTHER ASSURANCES. From time to time after the Closing
Date, to the extent retained by Seller, Seller and NAHC shall give to TRHS,
Buyer, and their representatives, auditors, and counsel reasonable access during
normal business hours to all of the properties, books, records, tax returns,
contracts, licenses, franchises and all of the documents of Seller relating to
the Assets, Contracts, and Assumed Liabilities, and shall furnish to TRHS and
Buyer all information with respect thereto as TRHS or Buyer may from time to
time reasonably request. From time to time after the Closing, at TRHS' and
Buyer's request and without further consideration, Seller and NAHC agree to
execute and deliver at Seller's or NAHC's reasonable expense such other
instruments of conveyance and transfer and take such other actions as TRHS and
Buyer reasonably may require more effectively to deliver and vest in Buyer, and
to put Buyer in legal and physical possession of, all of the Assets and the
Assumed Liabilities.

         SECTION 2.11 MANAGEMENT INFORMATION SYSTEM. As of the Closing Date,
NAHC shall enter into and deliver to Buyer a sublicense agreement, substantially
in form and substance as set forth on Schedule 2.11, attached hereto and
incorporated by reference (the "SUBLICENSE AGREEMENT"). The Sublicense Agreement
shall permit Buyer to use, for a period of six (6) months beginning on the
Closing Date and, at the option of Buyer, for six (6) additional one (1) month





                                       11
<PAGE>   18




periods, the management information system currently licensed to NAHC and
employed at the Hospital Facility.

         SECTION 2.12 ACCESS TO INFORMATION.

            (a)  Following the Closing, for a reasonable period, Buyer shall
                 permit Seller's representatives (including, without limitation,
                 their counsel and auditors), during normal business hours
                 and upon reasonable advance notice, to (i) have reasonable
                 access to, and examine and make copies of all books and records
                 of the Hospital Facility, including all medical records and
                 medical charts of any patient admitted to the Hospital
                 Facility, which are transferred to Buyer hereunder, and (ii)
                 have reasonable access to the Buyer's employees that were
                 formerly employed by Seller, relating to transactions or
                 events occurring prior to the Closing, to the maximum extent
                 permitted by law, as long as such requests do not unreasonably
                 interfere with the operation of the Buyer's business. For a
                 period of three (3) years after the Closing, Buyer agrees
                 that, prior to the destruction or disposition of any such books
                 or records Buyer shall provide at least forty-five (45) days'
                 prior written notice to Seller of such proposed destruction
                 or disposal. If Seller desires to obtain any of such documents,
                 it may do so by notifying Buyer in writing at any time prior
                 to the date scheduled for such destruction or disposal. In
                 such event, Buyer shall not destroy such documents and the
                 parties shall then promptly arrange for the delivery of such
                 documents to Seller, its successors, or assigns. All reasonable
                 documented out-of-pocket costs associated with the delivery
                 of the requested documents shall be promptly paid by Seller
                 to Buyer.

            (b)  After the Closing, Buyer shall, in the ordinary course of
                 business and as required by law, keep, preserve, and maintain
                 in their original form all medical and other records of the
                 Hospital Facility existing as of the Closing. Buyer
                 acknowledges that as a result of entering into this Agreement,
                 it will gain access to patient and other information which
                 is subject to rules and regulations regarding confidentiality.
                 Buyer agrees to abide by any such rules and regulations
                 relating to the confidential information it acquires. Buyer
                 agrees to maintain the patient records delivered to Buyer at
                 the Closing after Closing, and such maintenance shall be (i)
                 in a manner consistent with the maintenance of patient records
                 generated at the Hospital Facility after Closing, and (ii)
                 in accordance with all applicable laws.

         SECTION 2.13 BILLING AGENT AGREEMENT. As of the Closing Date, Seller
shall enter into and deliver to Buyer a billing agent agreement, substantially
in form and substance as set forth on Schedule 2.13, attached hereto and
incorporated by reference, pursuant to which Buyer shall collect all pre-Closing
patient receivables of Seller.



                                       12


<PAGE>   19




         SECTION 2.14 ASSUMPTION OF DTC AGREEMENT. On or prior to the Closing
Date, Seller shall enter into and deliver to Buyer and Diversified Therapy
Corporation the Assignment and Assumption Agreement, attached hereto as Schedule
2.14 and incorporated by reference, assigning all of the rights and obligations
of Seller to Buyer under the DTC Agreement, and amending the same.

         SECTION 2.15 BUYER'S PARTICIPATION IN SELLER'S PREPARATION FOR JCAHO
RESURVEY. As soon as possible after the Effective Date, the parties will meet to
discuss and confer in regard to preparation for the resurvey of the Hospital
Facility by the JCAHO scheduled for August of 1999. NAHC and Seller hereby agree
that TRHS and Buyer shall actively participate in all of NAHC's and Seller's
efforts to prepare for the resurvey and NAHC and Seller shall cooperate with
TRHS and Buyer to the fullest extent possible to effectuate such active
participation. NAHC and Seller agree to continue to actively prepare for the
resurvey of the Hospital Facility.

                                    ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES
                               OF SELLER AND NAHC

         Seller and NAHC, jointly and severally, represent and warrant to TRHS
and Buyer that except as set forth on the Disclosure Schedule attached as
Schedule 3.0 hereto and incorporated by reference (which Disclosure Schedule
makes explicit reference to the particular representation or warranty as to
which exception is taken; however, if a disclosure is made with respect to one
representation or warranty, it shall apply with respect to any and all other
representations and warranties to which such disclosure may be applicable):

         SECTION 3.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER OF SELLER.
Seller (i) is a duly organized and validly existing corporation in good standing
under the laws of the State of Tennessee; (ii) has the requisite power and
authority to carry on its business as now conducted; (iii) is duly qualified to
do business as a foreign corporation and is in good standing under the laws of
the State of Iowa; and (iv) has all requisite power and authority and licenses,
permits, franchises, certificates, authorizations, approvals and consents and
rights to own the property which is the subject of this Agreement, and to be a
party to the contracts, leases, and other agreements which are the subject of
this Agreement.

         SECTION 3.2 SUBSIDIARIES AND SHAREHOLDERS. Seller does not (i) own of
record or beneficially, directly or indirectly, any shares of capital stock or
securities convertible into capital stock of any other corporation or any
participating or membership interest in any partnership, joint venture, limited
liability company, or other business enterprise, or (ii) control, directly or
indirectly, any other entity. NAHC is the sole shareholder of Seller and there
are no warrants, options, or commitments outstanding by which any third party
has the right to acquire capital stock of Seller.

         SECTION 3.3 VALIDITY. Seller and NAHC each have the full legal power
and authority to execute, deliver, and perform this Agreement and all other
agreements and documents necessary to consummate the contemplated transactions,
and all actions of NAHC and Seller necessary for such execution, delivery, and
performance have been or will have been duly taken by Closing. This




                                       13


<PAGE>   20




Agreement and all agreements related to this transaction have been duly executed
and delivered by NAHC and Seller and constitute the legal, valid, and binding
obligation of NAHC and Seller enforceable in accordance with their terms
(subject as to enforcement of remedies to the discretion of courts in awarding
equitable relief and to applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting the rights of creditors generally). Any
other agreement contemplated to be entered into by NAHC and Seller in connection
with this transaction, when executed and delivered, will constitute the legal,
valid, and binding obligation of NAHC and Seller enforceable in accordance with
its respective terms (subject as to enforcement of remedies to the discretion of
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium, and similar laws affecting the rights of
creditors generally). The execution and delivery by NAHC and Seller of this
Agreement, and the performance of their obligations hereunder, and the sale and
delivery of the Assets and delegation of the Assumed Liabilities, do not require
any action or consent of any party other than NAHC or Seller pursuant to any
contract, agreement, or other undertaking of NAHC or Seller, or pursuant to any
order or decree to which NAHC or Seller is a party or to which any of its
properties or assets are subject, and will not violate any provision of law, the
Articles of Incorporation or Bylaws of Seller, any order of any court or other
agency of the government, or any indenture, agreement, or other instrument to
which NAHC or Seller, or any of their properties or assets, are bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement, or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim, or encumbrance of any nature whatsoever upon any of the
properties or assets of Seller.

         SECTION 3.4 DEFAULT. Seller is not in default under, and no event has
occurred which, with the lapse of time or action by a third party, could result
in a default under, any outstanding mortgage, contract, or agreement that would
vest in a third party any rights in the Assets.

         SECTION 3.5 TITLE TO ASSETS. Other than the Permitted Exceptions,
Seller has good and marketable title to the Assets and all such Assets are free
and clear of any title defect, mortgage, assignment, pledge, hypothecation,
security interest, title or retention agreement, levy, execution, seizure,
attachment, garnishment, deemed trust, lien, easement, option, right or claim of
others, or charge or encumbrance of any kind whatsoever.

         SECTION 3.6 CONTRACTS AND LEASEHOLD INTERESTS. Schedule 1.5 is an
accurate list of all the Contracts (except for the Immaterial Contracts) and all
such Contracts have been disclosed and made available to TRHS and Buyer by
Seller and NAHC. Each such Contract is a valid and existing contract, lease, or
agreement without any default of Seller and to the knowledge of NAHC and Seller,
without any default thereunder of any other party thereto. No event has occurred
and is continuing which, with due notice or lapse of time or both, would
constitute a default or event of default by Seller under any Contract or, to the
knowledge of NAHC and Seller, by any other party thereto. Seller's possession of
any property has not been disturbed and no claim has been asserted or, to the
knowledge of NAHC and Seller, threatened against Seller adverse to its rights in
such leasehold interest. "IMMATERIAL CONTRACTS" shall mean all agreements (i) no
party of which is a referral source (including physicians), (ii) which require
expenditures of less than $100,000 in any 12-month period, or (iii) which
expires within ninety (90) days of Closing or which may be terminated without
cause upon ninety (90) days (or less) notice.




                                       14


<PAGE>   21




         SECTION 3.7 TRADEMARKS, PATENTS, AND OTHER RIGHTS. Seller and NAHC have
disclosed to TRHS and Buyer all of their patents, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names, copyrights, manufacturing processes, formulae, trade secrets, and
know how (collectively, "INTELLECTUAL PROPERTY"). Seller owns or possesses or
has the right to use the Intellectual Property. No claim is pending or, to the
knowledge of Seller and NAHC, threatened to the effect that the operations of
Seller infringe upon or conflict with the asserted rights of any other person
under any of the Intellectual Property and, to the knowledge of NAHC and Seller,
there is no meritorious basis for any such claim (whether or not pending or, to
the knowledge of NAHC and Seller, threatened). No claim is pending or, to the
knowledge of NAHC and Seller, threatened to the effect that any of the
Intellectual Property is invalid or unenforceable by Seller, and there is no
known basis for any such claim (whether or not pending or threatened).

         SECTION 3.8 PROPRIETARY INFORMATION OF THIRD PARTIES. No third party
has claimed or, to the knowledge of NAHC or Seller, has any meritorious reason
to claim that Seller's operation of the Assets and the conduct of its business
thereby (i) violated or may be violating any of the terms or conditions of such
third party's employment, non-competition, or non-disclosure agreement with
Seller; (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party; or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its current or former employees. No third party has
requested information from Seller or NAHC which suggests that such a claim might
be contemplated. No person employed by or affiliated with Seller has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and no person employed by or affiliated with
Seller has violated any confidential relationship which such person may have had
with any third party in connection with the development or sale of any product
or proposed product or the development or sale of any service or proposed
service of Seller, and Seller and NAHC do not have any reason to believe there
will be any such employment or violation. The execution, delivery, or
performance of this Agreement, the carrying on of Seller's business prior to the
Closing and the operation of the Assets by the Buyer after the Closing, has not
and will not conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under any contract, covenant, or
instrument under which any such person is obligated.

         SECTION 3.9 LITIGATION AND INVESTIGATIONS. There is no: (i) action,
suit, claim, proceeding, or investigation pending or, to the knowledge of NAHC
and Seller, threatened against or affecting NAHC or Seller or any of its
employees or agents, by any private party or any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, pending, threatened against, or affecting
persons or entities who perform professional services under agreement with them
in so far as the same concerns the operation of the Assets; (ii) arbitration
proceeding relating to Seller that is pending under collective bargaining
agreements or otherwise; or (iii) governmental or professional inquiry pending
or, to the knowledge of NAHC and Seller, threatened against or directly or
indirectly affecting Seller or NAHC (including without limitation any inquiry as
to the qualification of Seller or NAHC to hold or receive any license or
permit), and, to the knowledge of Seller and NAHC, there is no meritorious basis
for any of the foregoing as to Seller and NAHC, and, to the knowledge of NAHC
and Seller, their physician employees. Seller and NAHC have not received any
opinion, memorandum, or legal




                                       15


<PAGE>   22




advice from legal counsel to the effect that either of them is exposed, from a
legal standpoint, to any liability or disadvantage which may be material to the
operation of the Hospital Facility, Seller's business prospects, financial
condition, property, or affairs of Seller. Seller is not in default with respect
to any order, writ, injunction, or decree known to or served upon it of any
court or of any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
There is no action or suit by Seller pending or, to the knowledge of NAHC and
Seller, threatened against others. Upon the receipt of written approval for the
transactions contemplated herein from the applicable state regulatory bodies,
Seller will be in compliance in all respects with all laws, rules, regulations,
and orders applicable to the operation of the Hospital Facility and Seller's
properties, assets, products, and services, and Seller has all necessary
permits, licenses, and other authorizations required to operate the Hospital
Facility in the manner presently operated and as such will be operated prior to
the Closing.

         SECTION 3.10 APPROVALS. Seller is in Material compliance with all laws,
rules, regulations, and orders applicable to its business, operations,
properties, assets, products, and services, and Seller has all necessary
permits, licenses, and other authorizations required to operate the Hospital
Facility as presently operated and as such will be operated prior to Closing.
There is no existing order which would prohibit Seller from, or otherwise
Materially and adversely affect Seller in, conducting its business in any
jurisdiction in which it may conduct business prior to the Closing.

         SECTION 3.11 TAXES. Seller has filed all tax returns, federal, state,
county, and local including, without limitation, income, sales, single business,
payroll, employee benefit plan, premium, withholding, informational and personal
property tax returns, required to be filed by it and such returns have been duly
prepared and filed. All taxes due by reason of the business conducted by Seller
have been paid, including, without limitation, all taxes which Seller is
obligated to withhold from accounts owing to employees, creditors, and third
parties. All such taxes for which any such party has become obligated pursuant
to elections made in accordance with generally accepted practice have been paid
and adequate reserves have been established for all taxes accrued but not yet
payable. The federal income tax returns of Seller have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to any proposed
adjustment of Seller's federal, state, county, or local taxes is pending or, to
the knowledge of Seller and NAHC, threatened. There is no tax lien, whether
imposed by any federal, state, county, or local taxing authority outstanding
against the Assets or Seller's business. There is no pending proceeding or to
the knowledge of Seller and NAHC, examination by any authority or agency
relating to the assessment or collection of any such taxes, interest, or
penalties thereon, nor, to the knowledge of Seller and NAHC, do there exist any
facts that would provide a meritorious basis for any such assessment.

         SECTION 3.12 INSURANCE COVERAGE. Seller maintains and at all times has
maintained professional liability, casualty, property loss, and other insurance
coverage of the Assets. Schedule 3.12, attached hereto and incorporated by
reference, sets forth a complete and correct list of all insurance policies in
force with respect to Seller on the Closing Date and identifies the insurer,
type, and amount of coverage for each, and the anniversary date for each. If any
of Seller's professional liability insurance policies are "claims made"
coverage, Seller has purchased, or at Closing will purchase, and shall maintain
in force an extended reporting endorsement ("TAIL COVERAGE") for each




                                       16


<PAGE>   23




such policy with limits of coverage at least equal to those of the underlying
policy. Seller and NAHC shall promptly notify TRHS and Buyer of any material
changes in any insurance coverage of Seller prior to Closing.

         SECTION 3.13 FEES AND COMMISSIONS. Seller has not agreed to pay or
become liable to pay any broker's, finder's, or originator's fees or commissions
by reason of services alleged to have been rendered for, or at the instance of,
Seller in connection with this Agreement and the transactions contemplated
hereby.

         SECTION 3.14 INSIDER INTERESTS. No current employee, health care
provider, or ancillary health service provider of Seller: (i) owns, directly or
indirectly, in whole or in part, any of the Assets; (ii) has received a loan or
advance from Seller which is currently outstanding; (iii) has any obligation to
make any loan to Seller; or (iv) has any other business relationship with Seller
other than in his or her capacity as an employee, health care provider,
ancillary health service provider, or subscriber (except for those physicians or
medical practices that lease space located in the Medical Office Buildings).

         SECTION 3.15 OTHER APPROVALS. All consents, approvals, qualifications,
orders, or authorizations of, or filings with, any governmental authority,
including any court or other third party, required in connection with Seller's
valid execution, delivery, or performance of this Agreement, or consummation of
any transactions contemplated by this Agreement, have been duly made and
obtained and shall be effective on and as of the Closing Date.

         SECTION 3.16 ENVIRONMENTAL LIABILITIES.

               3.16.1 Seller has not used, stored, treated, transported,
manufactured, refined, handled, produced, or disposed of any Hazardous Materials
(as defined below) or Petroleum Products (as defined below), on, under, at,
from, or in any way affecting any of its properties or assets, or otherwise, in
any manner which at the time of the action in question violated any
Environmental Laws (as defined below), governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production, or disposal of
Hazardous Materials or Petroleum Products, and to the knowledge of NAHC and
Seller, no prior owner of such property or asset or any tenant, subtenant, prior
tenant, or prior subtenant thereof has used Hazardous Materials or Petroleum
Products on, from, or affecting such property or asset, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Laws governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production, or disposal of Hazardous Materials or
Petroleum Products.

               3.16.2 No pending claims have been made against Seller and no
currently outstanding citations or notices have been issued against it and
Seller has no obligations or liabilities, matured or not matured, absolute or
contingent, assessed or unassessed, where such could reasonably be expected to
have a material adverse affect, which in the case of any of the foregoing have
been or are imposed by reason of or based upon any provision of any
Environmental Laws.



                                       17


<PAGE>   24




               3.16.3 As used herein, "ENVIRONMENTAL LAWS" shall mean any and
all federal, state, local, or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or requirements of any federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality, or other court or arbitrator, in each case whether of the
United States or foreign, regulating, relating to, or imposing liability or
standards of conduct concerning any Hazardous Material or Petroleum Products or
environmental protection, as now or may at any time hereafter be in effect,
together, in each case, with any amendment thereto, and the regulations adopted
and publications promulgated thereunder and all substitutions thereof.

               3.16.4 As used herein, "HAZARDOUS MATERIALS" shall mean any
hazardous materials, hazardous wastes, infectious medical wastes, hazardous or
toxic substances, asbestos, asbestos fibers, friable asbestos, any PCB's, or
constituents of the foregoing, defined or regulated as such in or under any
Environmental Laws.

               3.16.5 As used herein, "PETROLEUM PRODUCTS" shall mean gasoline,
diesel fuel, motor oil, waste or used oil, heating oil, kerosene, and any other
petroleum products.

         SECTION 3.17 EMPLOYEES. Seller is not a party to any written or verbal
employment agreements, commitments or understandings, and all personnel are
employed "at-will." There is no pending or, to the knowledge of NAHC and Seller,
threatened employee strike, work stoppage or labor dispute. No union
representation question exists respecting any employees of Seller. No collective
bargaining agreement exists or is currently being negotiated by Seller, no
demand has been made for recognition by a labor organization by or with respect
to any employees of Seller is taking place, and none of the employees of Seller
is represented by any labor union or organization in connection with their
employment by Seller. There is no unfair practice claim against Seller before
the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending, existing, or, to the knowledge of Seller or NAHC, threatened
against or involving Seller. Seller is in compliance with all federal and state
laws respecting employment and employment practices, terms and conditions of
employment, and wage and hours including compliance with any Internal Revenue
Service guidelines on employees and independent contracts. Seller has complied
with all requirements with respect to the employment of any person who is not a
citizen of the United States. Seller is not engaged in any unfair labor
practices (as defined in federal and state labor laws). There is no pending or,
to the knowledge of Seller and NAHC, threatened equal employment opportunity
claims, wage and hour claims, unemployment compensation claims, workers'
compensation claims, Department of Labor or ERISA related claims, OSHA claims,
or employment related civil claims against or involving Seller.

         SECTION 3.18 DISCLOSURE. No representation or warranty by NAHC or
Seller in this Agreement, and no exhibit, schedule, or certificate furnished or
to be furnished by NAHC or Seller pursuant hereto, (i) contains any untrue
statement of a fact, or (ii) omits to state a fact required to be stated therein
or necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not materially misleading.

         SECTION 3.19 FIRPTA. Seller is not a "foreign person" but is a
"United States person" as such terms are defined in the Foreign Investment in
Real Property Tax Act of 1980 and ss.ss. 1445




                                       18


<PAGE>   25




and 7701 of the Code; that is to say, Seller is a citizen or resident of the
United States, a domestic partnership, a domestic corporation, or an estate or
trust which is not a foreign estate or foreign trust within the meaning of ss.
7701 (a)(31) of the Code.

         SECTION 3.20 CONDEMNATION. There is no pending condemnation or similar
proceeding affecting the Real Property or any portion thereof, and Seller has
not received any written notice and has no knowledge that any such proceeding is
contemplated.

         SECTION 3.21 ZONING. There are no pending or, to the knowledge of
Seller and NAHC, threatened requests, applications or proceedings to alter or
restrict the zoning or other use restrictions applicable to the Real Property.
Neither NAHC nor Seller has received notice from any governmental authority of
zoning, building, fire, water, use, health, environmental or other violations of
applicable law issued in respect of the Real Property which have not been
heretofore corrected, and, to the knowledge of Seller and NAHC, no such
violations exist. The Real Property is not subject to any zoning variance or
other waiver of zoning or use restriction that would terminate upon transfer to
Buyer.

         SECTION 3.22 BANKRUPTCY. There are no attachments, executions,
assignments for the benefit of creditors, receiverships, conservatorships or
voluntary or involuntary proceedings in bankruptcy or pursuant to any other
debtor relief laws contemplated or filed by Seller or pending against Seller or
the Real Property.

         SECTION 3.23 REAL PROPERTY TAXES. The parcels of Real Property are each
individual tax parcels, taxed separately from any other property by the
applicable taxing authority. Neither NAHC nor Seller has received notice of any
proposed change in the valuation of the Real Property for real estate taxes from
that assessed for the current assessment period, nor does NAHC or Seller have
any other knowledge of any action or proceeding designed to levy any special
assessment against the Real Property. Neither NAHC nor Seller has received
notice of, and has no other knowledge of, any planned improvements by a
governmental instrumentality, any part of the cost of which will be assessed
against the Real Property, or of any contemplated future assessments of any
kind. There is no proceeding pending or presently being prosecuted for the
reduction of the assessed valuation or taxes or other impositions payable in
respect of any portion of the Real Property.

         SECTION 3.24 INSURANCE COMPLIANCE. Neither NAHC nor Seller has
received, and has knowledge of, any notice from any insurance company or board
of fire underwriters requesting the performance of any work or alteration with
respect to the Real Property, or requiring an increase in the insurance rates
applicable to the Real Property. To the knowledge of NAHC and Seller, the Real
Property complies with the requirements of all insurance carriers providing
insurance therefor.

         SECTION 3.25 DISABILITY. To the extent applicable, the improvements on
the Real Property are in full compliance with all federal, state, and local
legal requirements, including, without limitation, the Americans with
Disabilities Act, relative to architectural barriers or accommodations of
disabled persons.



                                       19


<PAGE>   26




         SECTION 3.26 INDEPENDENCE. Each parcel of Real Property is an
independent unit which does not rely on any facilities located on any property
that is not part of the Real Property to fulfill any municipal or other
governmental requirement, or for the furnishing to the Real Property of any
essential building systems or utilities (including drainage facilities, catch
basins, and retention ponds). No other building or other property that is not
part of the Real Property relies upon any part of the Real Property to fulfill
any municipal or other governmental requirement, or to provide any essential
building systems or utilities. Without limiting the generality of the foregoing,
no reciprocal easement agreements affect the Real Property.

         SECTION 3.27 LICENSES AND ACCREDITATION. Seller, its activities and
business as currently conducted, the use of its properties and assets, and all
premises occupied by Seller, are and remain in sufficient compliance with all
requirements of all governmental bodies or agencies having jurisdiction over the
same, including any agency exercising authority over hospitals in the State of
Iowa, to allow Seller to operate the Hospital Facility and all services
currently provided in the Hospital Facility, and to continue doing so. Without
limiting the foregoing, Seller has all licenses, certificates, accreditations,
authorizations and permits necessary for the conduct of Seller's business and
the use of its properties and the premises occupied by it. A list of all of
Seller's licenses and permits is set forth on Schedule 3.27, attached hereto and
incorporated by reference. The Hospital Facility is licensed as a hospital, and
its skilled nursing unit is licensed as a skilled nursing unit pursuant to the
applicable provisions of the Iowa Code and the regulations promulgated
thereunder as such may be amended from time to time The total number of duly
licensed beds in the Hospital is one hundred forty-nine (149). The Hospital
Facility as presently operated, including the skilled nursing unit, is fully
accredited by the JCAHO and the American Osteopathic Association ("AOA"). Seller
and NAHC have delivered to Buyer true and correct copies of the letters of JCAHO
and AOA accreditation and the two (2) most recent survey reports in connection
with such accreditation. Seller and NAHC have prepared and continue to prepare
for inspection and resurvey by any licensing authority or accreditation agency.

         SECTION 3.28 HILL BURTON AND FEMA. Except as disclosed on Schedule 3.0
hereto, Seller has no outstanding loan, grant or loan guarantee pursuant to the
Hill-Burton Act (42 U.S.C. ss.291 a, et seq.), or under the Federal Emergency
Management Administration, or any other federal, state, or local law or
governmental program whatsoever, or noncompliance with the terms and conditions
or the same. The Hospital has no Hill-Burton community service obligation
currently in force.

         SECTION 3.29 PAYORS. Except as set forth on Schedule 3.0 hereto, and
except for normal turnover in the ordinary course of business consistent with
past experience, neither Seller nor NAHC has received any notice, or has any
current, actual knowledge of any threatened, termination, cancellation, or
limitation of, or material adverse modification or change in, the relationship
of the Hospital or any affiliate of the Hospital with any insurance company,
health maintenance organization, or employer or third party payor for health
care items and services, where such change in relationship will have a material
adverse change or effect on the financial condition or results of operation of
the Hospital Facility prior to the Closing.




                                       20


<PAGE>   27


         SECTION 3.30 MEDICAL STAFF. Seller and NAHC have delivered to Buyer (i)
a true and correct copy of the blank forms used with respect to medical staff
membership and clinical privileges application or delineation of clinical
privileges; and (ii) all current medical staff bylaws, rules, and regulations
and amendments thereto respecting the Hospital. With regard to the medical staff
of the Hospital, except as disclosed in Schedule 3.0, which disclosure shall be
made on an anonymous basis, there are no pending or, to the knowledge of Seller
and NAHC, threatened disciplinary or corrective actions or appeals therefrom
involving physician applicants or medical staff members and there are no
disputes, suits, actions, arbitration proceedings, or investigations pending or,
to the knowledge of NAHC, threatened with applicants, medical staff members, or
health professional affiliates. Since June 1, 1999, there have been no
resignations of medical staff members who, individually or collectively, account
for more than ten percent (10%) of the admissions to the Hospital. Schedule 3.30
sets forth a true, correct, and complete list and description of (a) the name of
each member of the medical staff of the Hospital; and (b) the specialty, if any,
of each medical staff member. All members of the organized medical staff of the
Hospital Facility and all other persons providing clinical services to patients
have been credentialed in substantial compliance with the applicable bylaws,
policies, standards, and procedures of the Hospital Facility and the medical
staff, and are providing services within the permitted scope of their
privileges.

         SECTION 3.31 COMPLIANCE WITH MEDICARE AND MEDICAID PROGRAMS. Seller has
filed all cost reports required to be filed in connection with all state and
federal Medicare and Medicaid programs due on or before the Effective Date,
which are complete and correct. True and correct copies of all such reports in
possession of Seller have been furnished to Buyer on or before the Effective
Date. There are no claims, actions, or appeals pending before any commission,
board or agency, including, without limitation, any intermediary or carrier, the
Provider Reimbursement Review Board or the Administrator of the Health Care
Financing Administration, or the Iowa Department of Public Health, with respect
to any federal or state Medicare or Medicaid cost reports or claims filed by
Seller on or before the Effective Date or any disallowances by any commission,
board, or agency in connection with any audit of such cost reports, which would
adversely affect Seller or its operations, or the consummation of the
transactions contemplated hereby, except as specifically described and set forth
on Schedule 3.0 hereto. No validation review, program integrity review, or, to
the knowledge of NAHC and Seller, other investigation related to Seller or its
operations has been conducted by any commission, board, or agency, including,
without limitation, the Office of the Inspector General of the U.S. Department
of Health and Human Services, the U.S. Department of Justice, or the Iowa
Attorney General, in connection with any federal or state Medicare or Medicaid
program, and no such reviews or, to the knowledge of NAHC and Seller,
investigations are scheduled, pending, or, to the knowledge of NAHC and Seller,
threatened against or affecting Seller or its operations or the consummation of
the transactions contemplated hereby. NAHC and Seller and, to the knowledge of
NAHC and Seller, physician employees of Seller, have not engaged in any
activities which are prohibited under any federal, state, or local laws,
regulations, orders, and requirements in all respects, including, without
limitation, the federal Medicare and Medicaid statutes (42 U.S.C. Section
1320a-7b, 1320a-7a, or 1320a-7(b)), or the regulations promulgated pursuant to
such statutes or related state or local statutes or regulations or which are
prohibited by rules of professional conduct. Neither NAHC, nor Seller, nor, to
the knowledge of NAHC or Seller, physician employees of Seller, have received
any written claim or notice from any




                                       21


<PAGE>   28


federal, state, or local government agency that they have or Seller's business
and its activities and properties have violated any such federal, state, or
local statute, regulation, order, or requirement.

         SECTION 3.32 COMPLIANCE WITH PROGRAMS - GENERALLY. To the knowledge of
NAHC and Seller, no validation review, program integrity review, or other
investigation related to Seller or its operations has been conducted by any
commission, board, or agency, including, without limitation, the Office of the
Inspector General of the U.S. Department of Health and Human Services, the U.S.
Department of Justice, or the Iowa Attorney General and no such reviews or
investigations are scheduled, pending, or, to the knowledge of NAHC or Seller,
threatened against or affecting Seller or its operations or the consummation of
the transactions contemplated hereby.

         SECTION 3.33 MEDICARE/MEDICAID CERTIFICATION. The Hospital and its
skilled nursing unit, as presently operated by Seller, are certified for
participation in the Medicare and Medicaid programs and Hospital is a party to a
participation agreement with Wellmark Blue Cross and Blue Shield of Iowa.

         SECTION 3.34 YEAR 2000 COMPLIANCE. Seller has provided to TRHS and
Buyer all of the information it has obtained or received, regarding whether the
Hospital Facility's technologies (including, without limitation, hardware,
software, building mechanical devices, biomedical devices, and Assets that
perform date processing, used in the present operation of the Hospital Facility)
are Year 2000 compliant ("Y2K COMPLIANT"). For purposes of this Agreement, Y2K
Compliant means that the computer software will accurately receive, provide, and
process date and time data from, into, and between the 20th and 21st centuries,
including the years 1999 and 2000 and leap-year calculations, and will not
malfunction, cease to function, or provide invalid or incorrect results as a
result of date and time data.

         SECTION 3.35 FINANCIAL STATEMENTS. Seller has provided Buyer with its
unaudited, year end financial statements dated March 31, 1999 ("MARCH FINANCIAL
STATEMENTS") and with its unaudited financial statements dated May 31, 1999 (the
"MAY FINANCIAL STATEMENTS"). Prior to Closing, Seller will provide Buyer with
unaudited financial statements dated June 30, 1999 (the "JUNE FINANCIAL
STATEMENTS") (the March Financial Statements, the May Financial Statements, and
the June Financial Statements are collectively referred to herein as the
"FINANCIAL STATEMENTS"). The Financial Statements fairly represent the financial
condition and the results of operations, changes in stockholders' or members'
equity, and cash flow of Seller as of the period ending on the last date of the
month preceding the Effective Date of this Agreement, all in accordance with
generally accepted accounting principles ("GAAP"). The Financial Statements
reflect the consistent application of such accounting principles throughout the
period involved.




                                       22
<PAGE>   29


                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES
                                OF BUYER AND TRHS

         Buyer and TRHS, jointly and severally, represent and warrant to NAHC
and Seller that except as set forth on the Disclosure Schedule attached as
Schedule 4.0 and incorporated by reference (which Disclosure Schedule makes
explicit reference to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole representation
and warranty as to which such exception shall apply):

         SECTION 4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER OF BUYER.
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Illinois and is duly authorized to conduct
business in the State of Iowa. Buyer has the full right, power, and authority to
execute and deliver this Agreement, to perform its obligations hereunder, and to
carry out the transactions contemplated in this Agreement, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting creditors' rights generally. Without limiting the generality of
the foregoing, Buyer has taken all action necessary to authorize, and has duly
authorized, the execution, delivery, and performance of this Agreement by Buyer.
This Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with these terms and conditions.

         SECTION 4.2 VALIDITY. TRHS and Buyer have the full legal power and
authority to execute, deliver, and perform this Agreement and all other
agreements and documents necessary to consummate the contemplated transactions,
and all actions of TRHS and Buyer necessary for such execution, delivery, and
performance have been or will have been duly taken by Closing. This Agreement
and all agreements related to this transaction have been duly executed and
delivered by TRHS and Buyer and constitute the legal, valid, and binding
obligation of TRHS and Buyer enforceable in accordance with their terms (subject
as to enforcement of remedies to equitable principles and to the discretion of
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium, and similar laws affecting the rights of
creditors generally). Any other agreement contemplated to be entered into by
TRHS and Buyer in connection with this Agreement and the transactions
contemplated hereby, when executed and delivered, will constitute the legal,
valid, and binding obligation of TRHS and Buyer enforceable in accordance with
its respective terms (subject as to enforcement of remedies to equitable
principles and to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium, and similar laws
affecting the rights of creditors generally). The execution and delivery by TRHS
and Buyer of this Agreement, and the performance of their obligations hereunder,
will not violate any provision of law, the Articles of Incorporation and the
Bylaws of Buyer, any order of any court or other agency of the government, or
any indenture, agreement, or other instrument to which TRHS and Buyer, or any of
their properties or assets are bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim, or encumbrance of any nature
whatsoever upon any of the properties or assets of Buyer.




                                       23
<PAGE>   30




         SECTION 4.3 FEES AND COMMISSIONS. Buyer has not agreed to pay or become
liable to pay any broker's, finder's, or originator's fees or commissions by
reason of services alleged to have been rendered for, or at the instance of,
Buyer in connection with this Agreement and the transactions contemplated
hereby.

         SECTION 4.4 OTHER APPROVALS. All consents, approvals, qualifications,
orders, or authorizations of, or filings with, any governmental authority,
including any court or other third party, required in connection with Buyer's
valid execution, delivery, or performance of this Agreement, or the consummation
of any transaction contemplated by this Agreement, shall have been duly made and
obtained and shall be effective on and as of the Closing Date.

         SECTION 4.5 FINANCIAL STATEMENTS. TRHS has delivered to Seller and NAHC
the audited consolidated balance sheet of TRHS as of December 31, 1998. TRHS
has, as and when required, the funds necessary to consummate the transactions
contemplated hereby in accordance with the terms hereof.

         SECTION 4.6 DISCLOSURE. No representation or warranty by TRHS or Buyer
in this Agreement, and no exhibit, schedule, or certificate furnished or to be
furnished by TRHS or Buyer pursuant hereto, (i) contains any untrue statement of
a fact, or (ii) omits to state a fact required to be stated therein or necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not materially misleading.

                                    ARTICLE 5
                          COVENANTS OF NAHC AND SELLER

         Between the Effective Date and the Closing Date, NAHC and Seller
covenant to TRHS and Buyer as follows:

         SECTION 5.1 OPERATION OF BUSINESS. Seller shall operate and manage the
Hospital Facility until the Closing in substantially the same manner as such
Hospital Facility has been operated and managed by Seller in the past and shall
maintain the physical condition of the Assets, reasonable wear and tear
excepted.

         SECTION 5.2 LIENS ON ASSETS. Seller shall not sell, dispose of assign,
or create, or agree to sell dispose of, assign or create, any right, title,
easement, or interest whatsoever in or to the Assets or create, or permit to
exist, or agree to create or permit to exist, any lien, encumbrance, option,
right, claim, or charge thereon, other than disposals in the ordinary course of
business.

         SECTION 5.3 LITIGATION. Seller shall advise TRHS and Buyer promptly
upon notification to Seller of any pending or, to the knowledge of Seller and
NAHC, threatened Material litigation or other legal or regulatory action
affecting the Assets, the Assumed Liabilities, NAHC, Seller, or Seller's
business.




                                       24


<PAGE>   31




         SECTION 5.4 NON-CONTRAVENTION. Neither NAHC nor Seller shall take any
action or omit to take any action, which action or omission would have the
effect of violating any of the covenants of this Agreement or warranties or
representations of NAHC or Seller in this Agreement.

         SECTION 5.5 STANDSTILL. Between the Effective Date and the Closing
Date, (a) without prior written consent of Buyer (which consent shall not be
unreasonably withheld), Seller will not execute, renew, or amend any Material
contact, agreement, or lease; and (b) Seller will not agree to do any of the
foregoing. For the purposes of Articles 3, 4, 5, and Article 7, an action is
"MATERIAL" if (x) its occurrence or failure to occur would have an economic cost
of one hundred thousand dollars ($100,000) or more in a consecutive twelve (12)
month period; (y) it has an associated cost or obligation that cannot be
terminated upon notice of thirty (30) days or less, or (z) its occurrence or
failure to occur would result in a substantial change in services, including
without limitation, a change in licensed bed capacity of the Hospital, or the
initiation or discontinuation of a major clinical service.

         SECTION 5.6 INSURANCE. Seller shall cause all policies of insurance for
fire, casualty, and extended coverage risks and liability in effect on the date
of this Agreement to be maintained in full force and effect through and
including the Closing Date.

         SECTION 5.7 THIRD-PARTY CONSENTS. Seller shall use its best efforts to
obtain all required approvals and consents of third parties to the assignment
and assumption of the contracts, leases, and agreements included among the
Assets and the Estoppel certificates.

         SECTION 5.8 REGULATORY APPROVALS. Seller shall cooperate in Buyer's
efforts to obtain the issuance or transfer of licenses, permits, certificates of
need, Medicare and Medicaid certification, JCAHO accreditation, and/or other
necessary regulatory approvals for consummation of the transactions contemplated
hereby and the operation by Buyer of the Hospital Facility in the same uses as
presently operated by Seller.

         SECTION 5.9 NON-SOLICITATION. NAHC and Seller shall not negotiate with
any other party for the sale of the Assets and Seller shall notify Buyer of the
fact of any unsolicited offer to purchase the Assets and the identity of the
offeror.

         SECTION 5.10 GENERAL COOPERATION. NAHC and Seller shall cooperate in
good faith with TRHS and Buyer in addressing other matters necessary to
consummate the transaction contemplated by this Agreement. Without limiting the
foregoing, NAHC and Seller shall cooperate in good faith with TRHS and Buyer (i)
in maintaining a sufficient number of employees for Buyer to operate the Assets
as of the Closing Date; and (ii) in effecting a smooth transition of those
employees of Seller who are hired by Buyer.

         SECTION 5.11 REAL PROPERTY. During the period between the Effective
Date and the Closing Date:



                                       25


<PAGE>   32


            (a)  The improvements on the Real Property will be maintained in as
                 good condition and state of repair as that existing on the
                 Effective Date, subject, however, to normal wear and tear.

            (b)  Subject to any adjustments prescribed herein, other than the
                 Assumed Liabilities, Seller will cause to be paid all trade
                 accounts and costs and expenses of operation and maintenance
                 of the Real Property incurred or attributable to a period
                 prior to the Closing Date, in accordance with Seller's usual
                 and customary procedures.

            (c)  Seller will not, without the prior written consent of Buyer,
                 permit any structural modifications or additions to the Real
                 Property, or sell or permit to be sold or otherwise dispose
                 of any item or group of items constituting a portion of the
                 Real Property.

         SECTION 5.12 BOARD OF DIRECTOR AND LENDER GROUP APPROVALS. NAHC and
Seller shall each obtain any and all approvals from their Board of Directors and
lender groups that may be required for either of them to consummate the
transactions contemplated hereby.

                                    ARTICLE 6
                           COVENANTS OF TRHS AND BUYER

         Between the Effective Date and the Closing Date, Buyer and TRHS
covenant to Seller and NAHC as follows:

         SECTION 6.1 THIRD-PARTY CONSENTS. TRHS and Buyer shall cooperate with
Seller and NAHC to obtain all required consents of third parties to assignment
and assumption of the contracts, leases, and agreements included among the
Assets.

         SECTION 6.2 REGULATORY APPROVALS. Buyer shall take all steps necessary
for it to obtain all required consents and approvals to the issuance or transfer
of licenses, permits, certificates of need, Medicare and Medicaid
certification, JCAHO accreditation, or other necessary regulatory approvals for
consummation of the transactions contemplated hereby or the operation by Buyer
of the Hospital Facility as an acute care hospital with a skilled nursing unit.

         SECTION 6.3 GENERAL COOPERATION. TRHS and Buyer shall cooperate in good
faith with Seller and NAHC in addressing other details necessary to consummate
the transaction.

         SECTION 6.4 EMPLOYEES OF SELLER. Buyer shall extend binding offers of
employment to at least such number of Seller's employees, and on such terms, as
to relieve Seller of any liability or obligation that otherwise would be imposed
under the WARN Act and any state law or similar purpose.

         SECTION 6.5 MEDICAL STAFF. Subject to the limitations herein stated, as
of the Closing Date, Buyer shall continue the structure and composition of the
medical staff of the Hospital Facility.



                                       26


<PAGE>   33




Buyer reserves the right, at any time subsequent to the Closing Date, to impose
its own credentialing process pursuant to medical staff bylaws adopted by Buyer.
No current medical staff member will be guaranteed continuing privileges on
Buyer's medical staff.

         SECTION 6.6 BOARD OF DIRECTOR AND OTHER APPROVALS. TRHS and Buyer shall
obtain any and all further approvals as may be required for them, or either of
them, to consummate the transactions contemplated hereby.

         SECTION 6.7 NON-CONTRAVENTION. TRHS and Buyer shall not take any
action or omit to take any action, which action or omission would have the
effect of materially violating any of the covenants of this Agreement or
warranties or representations of Buyer in this Agreement.

                                    ARTICLE 7
                 CONDITIONS TO THE OBLIGATIONS OF TRHS AND BUYER

         The obligation of TRHS and Buyer to purchase and pay for the Assets and
assume the Assumed Liabilities on the Closing Date, and consummate any other
transaction contemplated by this Agreement, is, at their option, subject to the
satisfaction, on or before the Closing Date, of the following conditions:

         SECTION 7.1 OPINION OF SELLERS' COUNSEL. TRHS and Buyer shall have
received from counsel for Seller an Opinion dated as of the Closing Date,
substantially identical to the form set forth in Schedule 7. 1, attached hereto
and incorporated by reference.

         SECTION 7.2 REPRESENTATIONS AND WARRANTIES. All the representations and
warranties contained in Article 3 of this Agreement (considered collectively),
and each of those representations and warranties (considered individually) must
have been materially accurate as of the date of this Agreement, and must be
materially accurate as of the Closing Date (provided that representations which
are expressly confined to a certain date shall speak only as of such date and
provided further that notwithstanding any exceptions or disclosures to those
representations and warranties, the Assets shall be conveyed to Buyer free and
clear of any Claim whatsoever other than the Permitted Exceptions), and Seller
and NAHC shall have certified to such effect to Buyer in writing.

         SECTION 7.3 COMPLIANCE WITH COVENANTS. Seller and NAHC shall have
performed and complied in all material respects with all agreements contemplated
herein that are required to be performed or complied with by them prior to or at
the Closing Date.

         SECTION 7.4 CORPORATE PROCEEDINGS. All corporate and other proceedings
to be taken by Seller and NAHC in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory in form and
substance to TRHS, Buyer, and their counsel, and TRHS, Buyer, and their counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they reasonably may request.

         SECTION 7.5 NO ADVERSE CHANGE. There shall have been no Material
Adverse Change in the results of operations of the Hospital Facility between the
May Financial Statements and the




                                       27


<PAGE>   34




June Financial Statements. For the purpose of this Section 7.5, "MATERIAL
ADVERSE CHANGE" means a monthly decrease in EBITDA of eighty-three thousand
dollars ($83,000) or more from the end of the period reported in the
aforementioned Financial Statements.

         SECTION 7.6 REGULATORY APPROVALS. All necessary corporate and
regulatory approvals for the transactions contemplated by this Agreement shall
have been obtained and must be in full force and effect.

         SECTION 7.7 SUPPORTING DOCUMENTS. TRHS' and Buyer and its counsel shall
have received copies of all supporting documents reasonably requested by them.

                                    ARTICLE 8
                CONDITIONS TO THE OBLIGATIONS OF NAHC AND SELLER

         The obligation of NAHC and Seller to sell the Assets and transfer the
Assumed Liabilities on the Closing Date, and consummate any other transactions
contemplated by this Agreement, is, at its option, subject to the satisfaction,
on or before the Closing Date, of the following conditions:

         SECTION 8.1 OPINION OF BUYER'S COUNSEL. NAHC and Seller shall have
received from counsel for Buyer an Opinion dated as of the Closing Date,
substantially identical to the form set forth in Schedule 8.1, attached hereto
and incorporated by reference.

         SECTION 8.2 REPRESENTATIONS AND WARRANTIES. All the representations and
warranties contained in Article 4 of this Agreement (considered collectively),
and each of those representations and warranties (considered individually) must
have been materially accurate as of the date of this Agreement, and must be
materially accurate as of the Closing Date (provided that representations which
are expressly confined to a certain date shall speak only as of such date); and
TRHS and Buyer shall have certified to such effect to Seller and NAHC in
writing.

         SECTION 8.3 COMPLIANCE WITH COVENANTS. TRHS and Buyer shall have
performed and complied in all material respects with all agreements contemplated
herein that are required to be performed or complied with by TRHS and Buyer
prior to or at the Closing Date.

         SECTION 8.4 SUPPORTING DOCUMENTS. NAHC, Seller and their counsel shall
have received copies of all supporting documents reasonably requested by them.

                                    ARTICLE 9
                         JOINT COVENANTS OF THE PARTIES

         SECTION 9.1 CONFIDENTIALITY OF BUSINESS INFORMATION. The parties
heretofore have received and hereafter may receive various financial and other
information concerning its and their respective activities, business, assets,
and properties. The parties agree that:

              9.1.1 all such information heretofore received by the parties
related to this transaction and in prior discussions between the parties
regarding other transactions shall not at any



                                       28


<PAGE>   35




time, or in any way or manner, be utilized by the parties for its and their
respective advantage or disclosed by the parties to others for any purpose
whatsoever; and

              9.1.2 the parties shall take all reasonable measures to assure
that no employee or agent under its and their respective control shall at any
time use or disclose any information described in this Section; and

              9.1.3 this Section shall not apply to (i) any such information
that was known to the parties prior to its disclosure to the parties in
accordance with this Section or was, is, or becomes generally available to the
public other than by disclosure by the parties or any of its and their
respective employees or agents in violation of this Section; (ii) any such
information necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated hereby; or (iii) any such information required by legal
proceedings.

         SECTION 9.2 CONFIDENTIALITY OF THIS AGREEMENT. The existence and
contents of this Agreement and its Schedules and the nature and status of the
transactions described herein and therein are confidential. Without the prior
written consent of the other parties, no party will disclose to any person,
other than to its and their respective shareholders, directors, officers, and
key employees, affiliates, accounting, investment banking, and legal advisers,
any such confidential information unless, in the written opinion of counsel to
the party seeking to make the disclosure, such a disclosure is required by
applicable corporation or securities laws. The timing and content of any
announcements, press releases, or other public statements concerning the
transactions contemplated by this Agreement will occur upon, and be determined
by, the mutual agreement and consent of the parties.

         SECTION 9.3 RETURN OF INFORMATION. In the event this Agreement is
terminated pursuant to Section 11.1, the parties agree that they shall promptly
return to the originating party the confidential information of the other.

                                   ARTICLE 10
                                 INDEMNIFICATION

         SECTION 10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. The right of any party to indemnification, payment of damages, or
other remedy pursuant to this Article 10 will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of, or compliance with, any such representation, warranty, covenant,
or obligations. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.

         SECTION 10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND NAHC.
Seller and NAHC, jointly and severally, shall indemnify and hold harmless TRHS
and Buyer and their members, shareholders, officers, employees, agents,
directors, trustees, representatives, controlling




                                       29


<PAGE>   36




persons, subsidiaries, and affiliates (collectively, the "TRHS INDEMNIFIED
PERSONS") for, and will pay to the TRHS Indemnified Persons the amount of, any
loss, liability, claim, damage (excluding incidental and consequential damages),
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim,
arising, directly or indirectly, from or in connection with:

               (a)  any breach of any representation or warranty made by Seller
                    or NAHC in this Agreement or any other certificate or
                    document delivered by Seller or NAHC pursuant to this
                    Agreement;

               (b)  any federal, state or local tax or fee incurred, accrued,
                    or assessed in connection with the Assets or the operation
                    of the Hospital Facility by Seller with respect to any
                    period prior to the Closing;

               (c)  except for the Assumed Liabilities, any liability or
                    obligation related to or in connection with the Assets or
                    the operation of the Hospital Facility by Seller, including
                    those liabilities and obligations set forth on Schedule 3.0
                    or as otherwise disclosed to TRHS or Buyer, which are or
                    were incurred with respect to any period prior to the
                    Closing or which relate to the operation of the Business
                    with respect to any period prior to the Closing; or

               (d)  any breach by Seller or NAHC of any covenant or obligation
                    of Seller or NAHC in this Agreement.

          The remedies provided in this Section 10.2 shall be the exclusive
remedy of TRHS, Buyer, or the TRHS Indemnified Persons with respect to the above
described matters, except for (i) claims arising from the insolvency or
bankruptcy of NAHC or Seller; (ii) claims arising from fraud of Seller or NAHC;
(iii) claims arising from the failure of Seller or NAHC to perform any of their
individual or collective obligations set forth in Sections 2.6, 2.8, 2.10, 5.2,
9.1, and 9.2; (iv) claims arising under the Noncompetition Agreement; and (v)
claims arising from any breach of this Agreement by NAHC or Seller, the result
of which is Seller's inability to transfer all or substantially all of the
Assets to Buyer pursuant to Section 1.2.

          SECTION 10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. TRHS and
Buyer, jointly and severally, shall indemnify and hold harmless Seller and NAHC
and their shareholders, officers, employees, agents, directors, representatives,
controlling persons, subsidiaries, and affiliates (collectively, the "NAHC
INDEMNIFIED PERSONS") for, and will pay to the NAHC Indemnified Persons the
amount of, any loss, liability, claim, damage (excluding incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim, arising, directly or indirectly, from or in connection
with:

               (a)  any breach of any representation or warranty made by TRHS
                    or Buyer in this Agreement or any other certificate or
                    document delivered by TRHS or Buyer pursuant to this
                    Agreement; or




                                       30


<PAGE>   37




               (b)  any liability or obligation related to or in connection with
                    the Assets or the Buyer's business, which are or were
                    incurred with respect to any period as of or after the
                    Closing or which relate to the operation of the Hospital
                    Facility with respect to any period as of and after the
                    Closing; or

               (c)  any breach by TRHS or Buyer of any covenant or obligation
                    of TRHS or Buyer in this Agreement and this transaction, any
                    breach by TRHS or Buyer of any covenant or obligation
                    contained in any operative document for the Assumed
                    Liabilities, and any failure by TRHS or Buyer to satisfy the
                    Assumed Liabilities.

         The remedies provided in this Section 10.3 shall be the exclusive
remedy of Seller, NAHC or the NAHC Indemnified Persons, except for (i) claims
arising from the insolvency or bankruptcy of TRHS or Buyer; (ii) claims arising
from fraud of Buyer or TRHS; (iii) claims arising from the failure of Buyer or
TRHS to perform any of their individual or collective obligations set forth in
Sections 2.12, 9.1, and 9.2; and (iv) claims arising under the Noncompetition
Agreement.

         SECTION 10.4 LIABILITY AND RISK OF LOSS. Except for the Assumed
Liabilities, NAHC and Seller shall remain liable for all obligations and
liabilities, costs and expenses, fixed or contingent, arising out of the
operation or ownership of any of the Assets or the Hospital Facility and out of
the conduct of any business related to the Assets or the Hospital Facility prior
to the Closing, and shall remain liable for all such obligations and liabilities
not assumed by Buyer pursuant to this Agreement following the Closing. All risk
of loss of, and related to, the Assets or the Hospital Facility shall remain
with Seller through the Closing.

         SECTION 10.5 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.

               (a)  Promptly after receipt by an indemnified party under either
                    Section 10.2, 10.3, or 10.4 of notice of the commencement of
                    any proceeding against it, such indemnified party will, if a
                    claim is to be made against an indemnifying party under
                    either such Section, give notice to the indemnifying party
                    of the commencement of such claim, but the failure to notify
                    the indemnifying party will not relieve the indemnifying
                    party of any liability that it may have to any indemnified
                    party, except to the extent that the indemnifying party
                    demonstrates that the defense of such action is prejudiced
                    by the indemnifying party's failure to give such notice.

               (b)  If any proceeding is brought against an indemnified party
                    and it gives notice to the indemnifying party of the
                    commencement of such proceeding, the indemnifying party will
                    be entitled to participate in such proceeding and, to the
                    extent that it wishes to assume the defense of such
                    proceeding with counsel satisfactory to the indemnified
                    party and, after notice from the indemnifying party to the
                    indemnified party of its or their election to assume the
                    defense of such proceeding, the indemnifying party will not,
                    as long as



                                       31


<PAGE>   38




                    it diligently conducts such defense, be liable to the
                    indemnified party under this Section 10 for any fees of
                    other counsel or any other expenses with respect to the
                    defense of such proceeding, in each case subsequently
                    incurred by the indemnified party in connection with the
                    defense of such proceeding, other than reasonable costs of
                    investigation. If the indemnifying party assumes the defense
                    of a proceeding, (i) no compromise or settlement of such
                    claims may be effected by the indemnifying party without the
                    indemnified party's consent (which consent may not be
                    unreasonably withheld) unless (A) there is no finding or
                    admission of any violation of legal requirements or any
                    violation of the rights of any person and no effect on any
                    other claims that may be made against the indemnified party,
                    and (B) the sole relief provided is monetary damages that
                    are paid in full by the indemnifying party; and (ii) the
                    indemnified party will have no liability with respect to any
                    compromise or settlement of such claims effected without its
                    or their consent, which consent may not be unreasonably
                    withheld. If notice is given to an indemnifying party of the
                    commencement of any proceeding and the indemnifying party
                    does not, within ten (10) days after the indemnified party's
                    notice is given, give notice to the indemnified party of its
                    or their election to assume the defense of such proceeding,
                    the indemnifying party will be bound by any determination
                    made in such proceeding or any compromise or settlement
                    effected by the indemnified party.

               (c)  Notwithstanding the foregoing, if an indemnified party
                    determines in good faith that there is a reasonable
                    probability that a proceeding may adversely affect it, or
                    its affiliates other than as a result of monetary damages
                    for which it would be entitled to indemnification under this
                    Agreement, the indemnified party, at its sole cost and
                    expense, may, by notice to the indemnifying party, assume
                    the exclusive right to defend, compromise, or settle such
                    proceeding, but the indemnifying party will not be bound by
                    any determination of a proceeding so defended or any
                    compromise or settlement effected without its, his, her, or
                    their consent (which may not be unreasonably withheld).

         SECTION 10.6 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.

         SECTION 10.7 TIME LIMITATIONS - GENERAL.

               (a)  Except as provided in the following sentence, if the Closing
                    occurs, Seller and NAHC will have no liability (for
                    indemnification or otherwise) under this Agreement, unless
                    on or before the date two (2) years from the Closing Date,
                    TRHS and Buyer notify Seller or NAHC of a claim specifying
                    the factual basis of that claim in reasonable detail to the
                    extent then known by TRHS or Buyer. The time limitation
                    stated in the preceding sentence shall not apply to claims
                    based on or arising out of (a) the representations and
                    warranties set



                                       32


<PAGE>   39




                    forth in Section 3.31; (b) fraud by Seller or NAHC in
                    regard to the transaction contemplated hereby; and (c) and
                    any Seller Post-Closing Obligations. For purposes of this
                    Article 10, "SELLER POST-CLOSING OBLIGATIONS" shall mean
                    those obligations of Seller set forth in Section 2.10,
                    Article 9, the obligation to deliver Title Policies, and the
                    performance of NAHC under the Sublicense Agreement.

               (b)  Except as provided in the following sentence, if the Closing
                    occurs, Buyer and TRHS will have no liability (for
                    indemnification or otherwise) under this Agreement, unless
                    on or before the date two (2) years from the Closing Date,
                    NAHC and Seller notify Buyer or TRHS of a claim specifying
                    the factual basis of that claim in reasonable detail to the
                    extent then known by NAHC and Seller. The time limitation
                    stated in the preceding sentence shall not apply to claims
                    based on or arising out of (a) fraud by Buyer and TRHS in
                    regard to the transaction contemplated hereby; (b) the
                    failure of Buyer to perform on the Contracts, which, as of
                    the Closing Date, expire or renew on a date that is more
                    than two (2) years from the Closing Date; and (c) those
                    obligations of Buyer set forth in Section 2.12 or Article 9
                    ("BUYER POST-CLOSING OBLIGATIONS").

         SECTION 10.8 TIME LIMITATIONS FOR BUYER AND SELLER POST-CLOSING
OBLIGATIONS. If the Closing occurs, Seller and NAHC will have no liability (for
indemnification or otherwise) under this Agreement for any claim of a breach of
a Seller Post-Closing Obligation, unless on or before the date two (2) years
from the date Buyer or TRHS becomes aware of such breach, TRHS and Buyer
notifies Seller or NAHC of a claim, specifying the factual basis of that claim
in reasonable detail to the extent then known by Buyer or TRHS. Likewise, if the
Closing occurs, Buyer and TRHS will have no liability (for indemnification or
otherwise) under this Agreement for any claim of a breach of a Buyer
Post-Closing Obligation, unless on or before the date two (2) years from the
date Seller or NAHC becomes aware of such breach, Seller and NAHC notifies Buyer
or TRHS of a claim, specifying the factual basis of that claim in reasonable
detail to the extent then known by Seller or NAHC.

         SECTION 10.9 TIME LIMITATIONS FOR SELLER'S OR NAHC'S BREACH OF SECTION
3.31. Except as provided in the following sentence, if the Closing occurs,
Seller and NAHC will have no liability (for indemnification or otherwise) under
this Agreement for any claim of a breach of Section 3.31, unless on or before
the date three (3) years from the Closing Date, TRHS and Buyer notify Seller or
NAHC of a claim specifying the factual basis of that claim in reasonable detail
to the extent then know by TRHS or Buyer. The time limitation stated in the
preceding sentence shall not apply to claims based on or arising out of fraud by
Seller or NAHC in regard to the transaction contemplated hereby.

         SECTION 10.10 INITIAL EXPENDITURE. Seller and NAHC shall have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, until the total of all damages with respect to such matters
exceeds the Initial Expenditure; however, TRHS and Buyer shall have




                                       33


<PAGE>   40




no obligation to make or satisfy the Initial Expenditure with respect to any
fees, fines, or penalties imposed with respect to Seller's failure to register
the underground storage tank located on the Real Property. Likewise, Buyer and
TRHS shall have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, until the total of all damages with
respect to such matters exceeds the Initial Expenditure. For purposes of this
Article 10, "INITIAL EXPENDITURE" means twenty-five thousand dollars ($25,000)

         SECTION 10.11 MAXIMUM AMOUNT - SELLER AND NAHC.

               (a)  After the Initial Expenditure requirement is met, Seller and
                    NAHC will have no liability (for indemnification or
                    otherwise) with respect to any representation or warranty,
                    or covenant or obligation to be performed and complied with
                    prior to the Closing Date exceeding one million dollars
                    ($1,000,000); provided, however, that this section will not
                    apply to (i) any breach of any of Seller's or NAHC's
                    representations or warranties contained in Section 3.31; or
                    (ii) any fraud by Seller or NAHC in regard to the
                    transactions contemplated hereby.

               (b)  After the Initial Expenditure requirement is met, Seller
                    and NAHC will have no liability (for indemnification or
                    otherwise) with respect to the representations and
                    warranties set forth in Section 3.31 exceeding one million
                    dollars ($1,000,000); provided, however, that this Section
                    will not apply to any fraud by Seller or NAHC or regard to
                    the transactions contemplated hereby.

         SECTION 10.12 MAXIMUM AMOUNT - BUYER. After the Initial Expenditure
requirement is met, Buyer and TRHS will have no liability (for indemnification
or otherwise) with respect to any representation, or warranty, or covenant or
obligation to be performed or complied with prior to the Closing Date, exceeding
one million dollars ($1,000,000); provided, however, that this Section will not
apply to (i) Buyer's obligation to pay to Seller the Purchase Price, assume the
Assumed Liabilities, or assume the Contracts; (ii) any breach of any of Buyer's
representations and warranties of which Buyer had knowledge at any time prior to
or on the date on which such representation and warranty is made or (iii) any
intentional breach by Buyer of any of its covenants or obligations.

                                   ARTICLE 11
                                  MISCELLANEOUS

         SECTION 11.1 TERMINATION EVENTS. This Agreement may, by notice given
prior to or at the Closing, be terminated:

               (a)  by TRHS and Buyer if a material breach of this Agreement has
                    been committed by Seller or NAHC and such breach has not
                    been expressly waived by TRHS and Buyer in writing and has
                    not been cured by the earlier




                                       34


<PAGE>   41


                    of (a) ten (10) days after written notice of such breach has
                    been provided to Seller and NAHC, or (b) the Closing Date;

               (b)  by Seller and NAHC if a material breach of this Agreement
                    has been committed by TRHS or Buyer and such breach has not
                    been expressly waived by Seller and NAHC in writing and has
                    not been cured by the earlier of (a) ten (10) days after
                    written notice of such breach has been provided to TRHS and
                    Buyer, or (b) the Closing Date;

               (c)  by TRHS and Buyer if any of the conditions in Article 7 have
                    not been satisfied as of the Closing Date or if satisfaction
                    of such condition is or becomes impossible (other than
                    through failure of TRHS and Buyer to comply with its
                    obligations under this Agreement) and TRHS and Buyer have
                    not expressly waived such condition in writing on or before
                    the Closing Date;

               (d)  by written mutual consent of Seller, NAHC, TRHS and Buyer;

               (e)  by either party in accordance with Section 1.10 or 11.15 of
                    this Agreement; and

               (f)  by Buyer in accordance with Section 2.1 or 2.2(e) of this
                    Agreement.

         Termination of this Agreement shall be without prejudice to any other
right or remedy of any of the parties hereto. Notwithstanding the above, the
parties agree that Sections 9.1, 9.2, and 9.3 shall survive termination for any
reason.

         SECTION 11.2 NOTICE. Whenever notice must be given under the provisions
of this Agreement, such notice must be in writing and will be deemed to have
been duly given by (a) hand-delivery (with written confirmation of receipt)
addressed to the parties at their respective addresses set forth below; (b)
certified mail, return receipt requested, postage prepaid, and addressed to the
parties at their respective addresses set forth below; or (c) telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, addressed to the parties at their respective
addresses set forth below:

               If to Seller or NAHC:

               New American Healthcare Corporation
               Suite 440
               109 West Park Drive
               Nashville, Tennessee 37214
               Fax: 615-221-5009
               Attn: Chief Executive Officer




                                       35


<PAGE>   42




               with a copy to:

               Harwell Howard Hyne Gabbert & Manner, P.C.
               18th Floor, First American Center
               315 Deaderick Street
               Nashville, Tennessee 37238
               Fax: 615/251-1059
               Attn: Michael R. Hill, Esquire

               If to TRHS and Buyer:

               Trinity Medical Center-West Campus
               2701 17th Street
               Rock Island, IL 61201
               Fax: (309) 779-2298
               Attn: Eric Crowell, CEO

               with a copy to:

               Green, Stewart, Farber & Anderson, P.C.
               2600 Virginia Avenue, N.W.
               Suite 1111
               Washington, D.C. 20037
               Attn: Robert W. McCann, Esquire
               Fax: (202) 342-8734

         SECTION 11.3. SURVIVAL OF PROVISIONS. All warranties, representations,
hold harmless, and indemnity obligations and restrictions made, undertaken, and
agreed to by the parties hereto under this Agreement shall survive the Closing
and the execution and delivery of the documents and instruments executed and
delivered at the Closing.

         SECTION 11.4 AMENDMENT. No modification, waiver, amendment, discharge,
or change of this Agreement shall be valid, unless in writing and signed by the
party against whom enforcement of such modification, waiver, amendment,
discharge or change is sought.

         SECTION 11.5 ASSIGNMENT. This Agreement shall not be assignable by any
party without the prior written consent of the others, except that TRHS and
Buyer may assign their rights and obligations under this Agreement in whole or
in part, and from time to time, to any affiliate or affiliates of TRHS or Buyer
upon written notice to Seller and NAHC, and such assignee shall be considered
the TRHS or Buyer, as the case may be, for purposes of this Agreement and all
related documents; provided, that such assignment shall not release TRHS or
Buyer of their obligations hereunder. Except as noted above, no other person or
corporate entity shall acquire or have any rights under or by virtue of this
Agreement.




                                       36




<PAGE>   43




         SECTION 11.6 SEVERABILITY. If any one or more of the provisions of this
Agreement should be ruled wholly or partly invalid or unenforceable by a court
or other government body of competent jurisdiction, then: (a) the validity and
enforceability of all provisions of this Agreement not ruled to be invalid or
unenforceable shall be unaffected; (b) the effect of the ruling shall be limited
to the jurisdiction of the court or other government body making the ruling; (c)
the provision(s) held wholly or partly invalid or unenforceable shall be deemed
amended, and the court or other government body is authorized to reform the
provision(s), to the minimum extent necessary to render them valid and
enforceable in conformity with the parties' intent as manifested herein and a
provision having a similar economic effect shall be substituted; and (d) if the
ruling and/or the controlling principle of law or equity leading to the ruling,
is subsequently overruled, modified, or amended by legislative, judicial, or
administrative action, the provision(s) in question as originally set forth in
this Agreement shall be deemed valid and enforceable to the maximum extent
permitted by the new controlling principle of law or equity.

         SECTION 11.7 CHOICE OF LAW. The interpretation of this Agreement and
the rights and obligations of Buyer and Seller hereunder shall be governed by
the laws of the State of Iowa, without regard to choice of law provisions.

         SECTION 11.8 BINDING BENEFIT. The provisions, covenants and agreements
herein contained shall inure to the benefit of, and be binding upon, the parties
hereto and its respective legal representatives, successors and assigns.

         SECTION 11.9 HEADINGS. All headings contained in this Agreement are for
reference purposes only and are not intended to affect in any way the meaning or
interpretation of this Agreement.

         SECTION 11.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.

         SECTION 11.11 EXPENSES. Except as otherwise provided herein, each of
the parties shall bear its own expenses in connection with this Agreement.

         SECTION 11.12 WAIVER. The waiver by any party of a breach or violation
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach of such provision or any other provision of this
Agreement.

         SECTION 11.13 CONSTRUCTION. This Agreement shall not be construed more
strictly against any party hereto by virtue of the fact that the Agreement may
have been drafted or prepared by such party or its counsel, it being recognized
that all of the parties hereto have contributed substantially and materially to
its preparation and that this Agreement has been the subject of and is the
product of negotiations between the parties.

         SECTION 11.14 CUMULATIVE REMEDIES. Any right, power, or remedy provided
under this Agreement to any party hereto shall be cumulative and in addition to
any other right, power or




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<PAGE>   44




remedy provided under this Agreement now or hereafter existing at law or in
equity, and may be exercised singularly or concurrently.

         SECTION 11.15 CASUALLY OR CONDEMNATION. If prior to the Closing there
shall occur: (i) damage to any of the Real Property caused by fire or other
casualty; or (ii) the taking or condemnation of all or any portion of the Real
Property as would materially interfere with the use thereof; then in any such
event, TRHS and Buyer, within twenty (20) days after TRHS and Buyer have actual
knowledge or such damage, taking, or condemnation, may at their option (x)
negotiate with Seller for an abatement of the Purchase Price and proceed to
Closing on such terms as may be agreed to, or (y) proceed to Closing without an
abatement of the Purchase Price and accept assignment from Seller and NAHC all
interest of Seller and NAHC in and to any insurance proceeds (subject to
confirmation by Seller and NAHC that such assignment will not impair Seller's or
NAHC's insurance) or condemnation awards which may be equal to any insurance
proceeds which would be payable on account of such occurrence. If such
assignment would impair Seller's or NAHC's insurance, then Seller or NAHC shall
be obligated to pay Buyer, at Closing, an amount equal to any insurance proceeds
which would be payable to Seller or NAHC on account of such occurrence. In the
event that the damage, taking, or condemnation would Materially interfere with
the operation of the Hospital Facility as an acute care hospital, in addition to
their options set forth above, TRHS and Buyer shall have the right to terminate
this Agreement upon notice to Seller and NAHC.

         SECTION 11.16. ARBITRATION. In the event of a dispute between the
parties arising from or relating to this Agreement, including, but not limited
to, construction, interpretation, implementation, or enforcement of this
Agreement or the performance or breach of any provision in this Agreement (but
specifically excluding disputes arising under any agreement among the parties
appearing as a schedule hereto, which shall be resolved according to the terms
of each such scheduled agreement), the parties shall meet and confer in good
faith to resolve such dispute. In the event such efforts do not resolve the
dispute within fifteen (15) days from the date the dispute arises, either party
may demand arbitration by the American Arbitration Association, before one (1)
arbitrator, under its Commercial Arbitration Rules, such arbitration to be
final, conclusive, and binding. Such arbitration shall be conducted in Rock
Island County, Illinois. Judgment on the award rendered by the arbitrator may be
entered by any court having proper jurisdiction. Notwithstanding the foregoing,
any party may seek or assert entitlement to injunctive relief or specific
performance in court as an initial matter and shall have no prior obligation to
establish in arbitration the entitlement to injunctive relief or specific
performance. Further, neither party shall have an obligation to arbitrate any
claim against the other party arising from the bankruptcy or insolvency of such
other party or any claim arising as a third party claim in a judicial or other
proceeding.

         SECTION 11.17. KNOWLEDGE OF NAHC AND SELLER. For purposes of this
Agreement, NAHC and Seller will be deemed to have "knowledge" of a particular
fact or matter, if the Seller's Representatives (as defined below) have actual
knowledge of such fact or matter or reasonably should know of such fact or
matter upon due inquiry. For purposes of this definition, "SELLER'S
REPRESENTATIVES" shall mean the following persons: (i) Jim Fraser, Chief
Executive Officer of the Hospital Facility; (ii) Randy Strickland, the Chief
Financial Officer of the Hospital Facility; (iii)




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<PAGE>   45




Judy Moseley, the Chief Operating/Nursing Officer of the Hospital Facility; (iv)
Mary Michalek, the Business Development Director of the Hospital Facility; (v)
Ken Anderson, the Home Health Administrator of the Hospital Facility; (vi) Jeff
Wendell, the Director of Plant Operations of the Hospital Facility; (vii) Tom
Singleton, Chief Executive Officer of NAHC; (viii) Randy Starkweather, Chief
Financial Officer of NAHC; (ix) Timothy Hill, Vice President of Finance of NAHC;
(x) Dana McClendon, Corporate Compliance Officer of NAHC; (xi) Ann Price,
Manager of Operations and Administration; and (xii) any other person who is
known by NAHC or Seller to have knowledge.

         SECTION 11.18 COMPLETION OF SCHEDULES. The Schedules have not been
prepared in their draft or final form at the time of execution of this
Agreement. Input by Seller and Buyer is necessary to finalize the Schedules and
each party agrees to use commercially reasonable efforts to finalize them. The
parties shall use their best efforts to complete the Schedules and submit such
Schedules to the other parties by July 10, 1999. The submitted Schedules shall
be deemed accepted and thereby become Schedules to this Agreement unless: (i) a
proposed Schedule would, individually or in aggregate with the effect of items
disclosed in other Schedules which were first submitted after signing of this
Agreement, constitute a Material Adverse Effect on the receiving party in the
receiving party's sole discretion, and (ii) within five (5) business days after
receipt of a proposed Schedule, such receiving party provides written notice to
opposing counsel reasonably detailing the objection thereof and changes in such
proposed Schedule which would make the same acceptable. Should the parties not
be able to resolve written objections within ten (10) business days thereafter,
then either party may withdraw from this Agreement and terminate it without any
obligation or liability of any sort and this Agreement shall be treated as never
having been executed or delivered. Acceptance of Schedules shall not mean that
the underlying information is acceptable. At or prior to Closing, either party
may supplement the Schedules by written notice, and the recipient shall have
five business days from receipt of such notice to accept such supplements. If
the recipient accepts the supplements, the Schedules shall be deemed to be
revised to reflect the supplements. If the recipient reasonably rejects any such
supplement by notice or by failing to respond within the required time period,
the recipient may withdraw from the Agreement and terminate the Agreement
without any obligation or liability of any sort and the agreement shall be
treated as never having been executed or delivered.

         SECTION 11.19. ENTIRE AGREEMENT. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
Letter of Intent dated May 13, 1999) and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement among the parties with respect to its subject matter.




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<PAGE>   46




         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
  date first above written.


  TRINITY HUMAN                              TRINITY REGIONAL HEALTH SYSTEM
  SERVICES CORPORATION

  /s/ Eric Crowell                           /s/ Eric Crowell
  ------------------------------             ----------------------------------
  Signature                                  Signature

  Eric Crowell                               Eric Crowell
  ------------------------------             ----------------------------------
  Print Name                                 Print Name

  President/CEO                              President/CEO
  ------------------------------             ----------------------------------
  Office or Title                            Office or Title



  NEW AMERICAN HEALTHCARE                    NAHC OF IOWA, INC.
  CORPORATION

  /s/ Thomas W. Singleton                    /s/ Thomas W. Singleton
  ------------------------------             ----------------------------------
  Signature                                  Signature

  Thomas W. Singleton                        Thomas W. Singleton
  ------------------------------             ----------------------------------
  Print Name                                 Print Name


  President & CEO                            President
  ------------------------------             ----------------------------------
  Office or Title                            Office or Title



   [Signature Page for the Asset Purchase and Liabilities Assumption Agreement
    by and among Trinity Human Services Corporation, Trinity Regional Health
      System, New American Healthcare Corporation, and NAHC of Iowa, Inc.]





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