Document:

Asset Acquisition and Contribution Agreement

 Exhibit 10.1 
  
 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT 
  
 by and between 
  
 FRIENDS HOSPITAL 
  
 as Seller, 
  
 and 
  
 FRIENDS BEHAVIORAL HEALTH SYSTEM, LP 
  
 as
Purchaser 
  
 Dated as of April 22, 2005 

 TABLE OF CONTENTS 
  

					
	 	  	Page No.

	 ARTICLE 1 DEFINITIONS; SALE AND TRANSFER OF ASSETS; CONSIDERATION; CLOSING; CONTRIBUTION
	  	2
	 1.1
	  	 Definitions
	  	2
	 1.2
	  	 Transfer of Seller Assets
	  	3
	 1.3
	  	 Excluded Assets
	  	5
	 1.4
	  	 Assumed Obligations
	  	6
	 1.5
	  	 Excluded Liabilities
	  	6
	 1.6
	  	 Purchase Price
	  	7
	 1.7
	  	 Closing Date
	  	8
	 1.8
	  	 Items to be Delivered by Seller at Closing
	  	8
	 1.9
	  	 Items to be Delivered by Purchaser at Closing
	  	10
	 1.10
	  	 Prorations and Utilities
	  	11
	 1.11
	  	 Working Capital Settlement.
	  	11
	 1.12
	  	 Escrow Deposit
	  	13
	 1.13
	  	 Membership Interest in FGP
	  	13
	 1.14
	  	 Limited Partner Interest in Purchaser
	  	13
	 1.15
	  	 Contribution by HMHM
	  	13
	 1.16
	  	 Risk of Loss
	  	14
		
	ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER	  	15
	 2.1
	  	 Authority
	  	15
	 2.2
	  	 Authorization/Execution
	  	15
	 2.3
	  	 Organization and Good Standing; No Subsidiaries; No Conflicts.
	  	16
	 2.4
	  	 Financial Statements; Changes.
	  	16
	 2.5
	  	 Tax and Other Returns and Reports.
	  	17
	 2.6
	  	 Material Contracts.
	  	19
	 2.7
	  	 Real and Personal Property; Title to Property; Leases.
	  	20
	 2.8
	  	 Intangible Property
	  	21
	 2.9
	  	 Legal Proceedings
	  	21
	 2.10
	  	 Accounting Records; Internal Controls.
	  	21
	 2.11
	  	 Insurance
	  	21
	 2.12
	  	 Employees.
	  	22
	 2.13
	  	 Employee Benefits.
	  	22
	 2.14
	  	 Certain Interests
	  	23
	 2.15
	  	 Intercompany Transactions
	  	23
	 2.16
	  	 Inventories
	  	23
	 2.17
	  	 Receivables
	  	23
	 2.18
	  	 Third Party Payors and Suppliers
	  	24
	 2.19
	  	 Workers Adjustment and Retraining Notification (WARN)
	  	24
	 2.20
	  	 Environmental Compliance
	  	24
	 2.21
	  	 Powers of Attorney
	  	25
	 2.22
	  	 Accreditation; Medicare and Medicaid; Third-Party Payors; Compliance with Health Care Laws.
	  	25

  

 - i - 

					
	 2.23
	  	 Compliance Program
	  	27
	 2.24
	  	 HIPAA
	  	28
	 2.25
	  	 Restricted Grant and Loan Programs
	  	28
	 2.26
	  	 Experimental Procedures
	  	28
	 2.27
	  	 Medical Staff; Physician Relations
	  	28
	 2.28
	  	 Solvency
	  	28
	 2.29
	  	 No Brokers or Finders
	  	28
	 2.30
	  	 Condition of Assets
	  	29
	 2.31
	  	 Condominium Matters.
	  	29
		
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER	  	29
	 3.1
	  	 Authority
	  	29
	 3.2
	  	 Authorization/Execution
	  	29
	 3.3
	  	 Organization and Good Standing; No Subsidiaries; No Conflicts.
	  	30
	 3.4
	  	 No Liabilities or Obligations
	  	30
	 3.5
	  	 Solvency
	  	30
	 3.6
	  	 Brokers and Finders
	  	30
	 3.7
	  	 Availability of Funds
	  	31
		
	ARTICLE 4 COVENANTS OF SELLER	  	31
	 4.1
	  	 Access and Information; Inspection Period, Preparation of Exhibits and Schedules
	  	31
	 4.2
	  	 Conduct of Business
	  	31
	 4.3
	  	 Negative Covenants
	  	32
	 4.4
	  	 Consents.
	  	33
	 4.5
	  	 Additional Financial Information
	  	33
	 4.6
	  	 No-Shop.
	  	33
	 4.7
	  	 Seller’s Efforts to Close
	  	34
	 4.8
	  	 Title Matters.
	  	34
	 4.9
	  	 Updating of Disclosure Schedules.
	  	35
	 4.10
	  	 Environmental Remediation
	  	36
	 4.11
	  	 Seller’s 403(b) Program.
	  	36
		
	ARTICLE 5 COVENANTS OF PURCHASER	  	36
	 5.1
	  	 Purchaser’s Efforts to Close
	  	36
	 5.2
	  	 Required Governmental Approvals
	  	36
	 5.3
	  	 Excluded Assets
	  	37
	 5.4
	  	 Confidentiality
	  	37
	 5.5
	  	 Enforceability
	  	37
	 5.6
	  	 Waiver of Bulk Sales Law Compliance
	  	37
		
	ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER	  	38
	 6.1
	  	 Accuracy of Representations and Warranties and Compliance with Obligations
	  	38
	 6.2
	  	 Signing and Delivery of Instruments
	  	38
	 6.3
	  	 Unfavorable Action or Proceeding
	  	38
	 6.4
	  	 Opinion of Counsel for Purchaser
	  	38
	 6.5
	  	 Governmental Authorizations
	  	38
	 6.6
	  	 Post-Execution Matters
	  	38

  

 - ii - 

					
	ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER	  	39
	 7.1
	  	 Board Approval
	  	39
	 7.2
	  	 Accuracy of Representations and Warranties and Compliance with Obligations
	  	39
	 7.3
	  	 Governmental Authorizations
	  	39
	 7.4
	  	 Signing and Delivery of Instruments
	  	39
	 7.5
	  	 Unfavorable Action or Proceeding
	  	39
	 7.6
	  	 Opinion of Counsel
	  	39
	 7.7
	  	 Title Insurance Policy
	  	39
	 7.8
	  	 Survey
	  	39
	 7.9
	  	 No Material Adverse Change
	  	39
	 7.10
	  	 Required Consents
	  	40
	 7.11
	  	 Disclosure Schedules
	  	40
	 7.12
	  	 Bonds
	  	40
	 7.13
	  	 Condominium Declaration
	  	40
	 7.14
	  	 Environmental Remediation
	  	40
	 7.15
	  	 Change of Seller’s Name
	  	40
	 7.16
	  	 CHOW Exemption
	  	40
	 7.17
	  	 Post-Execution Matters
	  	40
		
	ARTICLE 8 TERMINATION	  	40
	 8.1
	  	 Termination
	  	40
	 8.2
	  	 Termination Consequences
	  	41
		
	ARTICLE 9 POST-CLOSING MATTERS	  	42
	 9.1
	  	 Excluded Assets and Excluded Liabilities
	  	42
	 9.2
	  	 Preservation and Access to Records After the Closing.
	  	42
	 9.3
	  	 Provision of Benefits of Certain Contracts and Personal Property Leases
	  	43
	 9.4
	  	 Employee Matters
	  	43
	 9.5
	  	 Misdirected Payments, Etc
	  	44
	 9.6
	  	 Government Receivables
	  	44
	 9.7
	  	 Tail Insurance
	  	45
	 9.8
	  	 Termination Cost Reports
	  	45
	 9.9
	  	 Certain Employee Matters.
	  	45
	 9.10
	  	 Gifts and Bequests
	  	46
	 9.11
	  	 Capital Expenditures
	  	46
		
	ARTICLE 10 SURVIVAL AND INDEMNIFICATION	  	46
	 10.1
	  	 Survival
	  	46
	 10.2
	  	 Indemnification of Purchaser by Seller.
	  	47
	 10.3
	  	 Indemnification of Seller by Purchaser.
	  	48
	 10.4
	  	 Method of Asserting Claims
	  	49
	 10.5
	  	 Exclusive Remedy
	  	51
		
	ARTICLE 11 TAX AND COST REPORT MATTERS	  	52
	 11.1
	  	 Tax Matters; Allocation of Purchase Price.
	  	52
	 11.2
	  	 Cost Report Matters.
	  	52

  

 - iii - 

					
	ARTICLE 12 MISCELLANEOUS PROVISIONS	  	53
	 12.1
	  	 Entire Agreement
	  	53
	 12.2
	  	 Further Assurances and Cooperation
	  	53
	 12.3
	  	 Successors and Assigns
	  	53
	 12.4
	  	 Governing Law
	  	53
	 12.5
	  	 Amendments
	  	53
	 12.6
	  	 Notices
	  	53
	 12.7
	  	 Headings
	  	54
	 12.8
	  	 Confidentiality and Publicity
	  	55
	 12.9
	  	 Third Party Beneficiary
	  	55
	 12.10
	  	 Expenses and Attorneys’ Fees
	  	55
	 12.11
	  	 No Waiver
	  	55
	 12.12
	  	 Severability
	  	55
	 12.13
	  	 Counterparts
	  	56
	 12.14
	  	 Waiver of Jury Trial
	  	56
	 12.15
	  	 Guaranty by HHC
	  	56

  
  

 - iv - 

 LIST OF EXHIBITS 
  

			
	EXHIBIT

	  	 DESCRIPTION

	A	  	Condominium Articles of Incorporation
	B	  	Condominium Bylaws
	C	  	Condominium Declaration
	D	  	Ground Lease
	E	  	License Agreement
	F	  	Bill of Sale
	G-1, G-2 and G-3	  	Assignment and Assumption Agreements
	H	  	Special Warranty Deed
	I	  	Post-Closing Escrow Agreement
	J	  	Opinion of Counsel for Seller
	K	  	Power of Attorney
	L	  	Assignment of Membership Interest
	M	  	Operating Agreement of FGP
	N	  	Assignment of Partnership Interest
	O	  	Limited Partnership Agreement of Purchaser
	P	  	Management Agreement
	Q	  	Opinion of Counsel for Purchaser
	R	  	Amendment to Condominium Declaration

  
  

 - v - 

 LIST OF SCHEDULES 
  

			
	SCHEDULE

	 	 DESCRIPTION

	1.2(f)	 	Contracts
	1.3(c)	 	Artifacts
	1.3(d)	 	Excluded Contracts
	1.3(j)	 	Other Excluded Assets
	1.4(e)	 	Other Assumed Obligations
	1.11	 	Net Working Capital
	2.3(b)	 	Subsidiaries/Investments
	2.3(c)	 	Consents/Conflicts
	2.4	 	Financial Statement Matters
	2.5	 	Tax Matters
	2.8	 	Intangible Property
	2.9	 	Litigation
	2.11	 	Insurance/Claims
	2.12	 	Employees
	2.13	 	Employee Plans
	2.14	 	Affiliate Transactions
	2.15	 	Intercompany Transactions
	2.18	 	Payor Contracts
	2.20	 	Environmental Matters
	2.22	 	Licenses and Permits
	2.27	 	Medical Staff Matters
	4.10	 	Environmental Remediation Measures
	6.6	 	Post-Execution Matters
	11.1(b)	 	Allocation of Purchase Price

  
 TABLE OF DEFINED
TERMS 
  

			
	 Term

	  	Page

	 403(b) Accounts
	  	38
	 403(b) Custodians
	  	38
	 Accounting Firm
	  	13
	 Accounts Receivable
	  	4
	 Affiliate
	  	35
	 Agency Settlements
	  	54
	 Aggregate Damage
	  	14
	 Agreement
	  	1
	 Anti-Kickback Law
	  	28
	 Assets
	  	3

  

 - vi - 

			
	 Assignment and Assumption Agreement
	  	8
	 Assignment of Membership Interest
	  	10
	 Assignment of Partnership Interest
	  	10
	 Assumed Obligations
	  	6
	 Base Net Working Capital
	  	12
	 Bill of Sale
	  	8
	 Bonds
	  	42
	 Claim Notice
	  	51
	 Claims
	  	22
	 Closing
	  	8
	 Closing Date
	  	8
	 Closing Purchase Price Payment
	  	8
	 COBRA Coverage
	  	48
	 Code
	  	19
	 Commonly Controlled Entity
	  	24
	 Condominium Articles
	  	2
	 Condominium Association
	  	2
	 Condominium Bylaws
	  	2
	 Condominium Declaration
	  	3
	 Condominium Plan
	  	36
	 Confidential Information
	  	39
	 Contract and Lease Consents
	  	9
	 Contracts
	  	4
	 Control
	  	35
	 Damages
	  	49
	 Disclosure Schedules
	  	3
	 Document Retention Period
	  	44
	 DPW
	  	27
	 Effective Time
	  	8
	 Environmental Laws
	  	25
	 Environmental Remediation Measures
	  	37
	 ERISA
	  	24
	 Escrow Agent
	  	8
	 Escrow Deposit
	  	14
	 Escrow Funds
	  	14
	 Estimated Net Working Capital
	  	12
	 Excluded Assets
	  	5
	 Excluded Contracts
	  	4
	 Excluded Liabilities
	  	7
	 Execution Date
	  	1
	 False Claims Act
	  	29
	 Fee Title Policy
	  	36
	 FGP
	  	1
	 Final Net Working Capital
	  	13
	 GAAP
	  	12
	 Government Programs
	  	6
	 Government Receivables
	  	6
	 Governmental Approvals
	  	10

  

 - vii - 

			
	Ground Lease	  	3
	Guaranteed Obligations	  	59
	Guaranty	  	59
	Hazardous Substances	  	25
	HHC	  	1
	HHC Pennsylvania	  	10
	Hired Employees	  	48
	HMHM	  	1
	Hospital	  	1
	Indemnified Party	  	51
	Indemnifying Party	  	51
	Indemnity Notice	  	53
	Independent Consultant	  	15
	Interim Balance Sheet Date	  	17
	Interim Net Working Capital	  	12
	Inventory	  	4
	Knowledge of Purchaser	  	3
	Knowledge of Seller	  	3
	Leased Real Property	  	3
	Leasehold Title Policy	  	35
	License Agreement	  	5
	Licenses	  	4
	Limited Partnership Agreement	  	10
	Management Agreement	  	10
	Material Adverse Change	  	3
	Material Adverse Effect	  	3
	Material Contract	  	20
	Net Working Capital	  	12
	Notice Period	  	51
	Objections	  	36
	Operating Agreement	  	10
	Original Closing Date	  	15
	Owned Real Assets	  	4
	Permitted Encumbrances	  	21
	Person	  	35
	Personal Property	  	4
	Personal Property Leases	  	4
	Plan	  	23
	Post-Closing Escrow Agreement	  	9
	Power of Attorney	  	9
	Prepaids	  	4
	Purchase Price	  	8
	Purchaser	  	1
	Real Property	  	4
	Relevant Claim	  	50
	Seller	  	1
	Seller Cost Reports	  	47
	Seller Tax Claims	  	49

  

 - viii - 

			
	Seller’s 403(b) Program	  	24
	Stark Law	  	29
	Submittal Date	  	15
	Superseded Agreements	  	55
	Survey	  	36
	Survival Period	  	48
	Tail Insurance Coverage	  	47
	Tax	  	20
	Third Party Claim	  	51
	Title Commitment	  	35
	Title Company	  	35
	Title Instruments	  	36
	Title Notice	  	36
	Title Policies	  	36
	WARN Act	  	25

  

 - ix - 

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT 
  
 This ASSET ACQUISITION AND CONTRIBUTION AGREEMENT (this
“Agreement”) is made and entered into as of the 22nd day of April, 2005 (the “Execution Date”) by and between FRIENDS HOSPITAL, a Pennsylvania nonprofit membership corporation (“Seller”), and FRIENDS
BEHAVIORAL HEALTH SYSTEM, LP, a Pennsylvania limited partnership (“Purchaser”). HORIZON MENTAL HEALTH MANAGEMENT, INC., a Texas corporation (“HMHM”), joins in the execution of this Agreement for the limited purposes
stated in Section 1.15, Section 9.11 and Section 12.15. FRIENDS GP, LLC, a Pennsylvania limited liability company (“FGP”), joins in the execution of this Agreement for the limited purposes stated in Sections 1.2 and 1.13.

  
 R E C I T A L S: 
  
 A. Seller owns and operates a 192 bed acute psychiatric hospital and a 26
bed adult residential treatment center located at 4641 Roosevelt Boulevard, Philadelphia, Pennsylvania 19124-2399 (collectively, the “Hospital”); 
  
 B. Horizon Health Corporation, a Delaware corporation (“HHC”), executed a letter of intent with Seller on January 20, 2005, which provided that
a mutually-agreed upon joint venture entity would be established by the parties to acquire the Hospital and related assets from Seller in exchange for Seller receiving $16,000,000 in cash and a 20% ownership interest in such entity; 
  
 C. In furtherance of such purposes, HHC caused its wholly-owned subsidiary,
HMHM, (i) to form FGP as its wholly-owned subsidiary, and (ii) to cause FGP to form Purchaser with FGP serving as the sole general partner of and owning a 0.1% general partner interest in Purchaser, and HMHM serving as the sole limited partner of
Purchaser and initially owning a 99.9% limited partner interest in Purchaser; 
  
 D. The parties hereto intend for Purchaser to be the entity to acquire the Hospital and its related assets, as described in Recital B above; 
  
 E. Purchaser desires to purchase and lease from Seller, and Seller desires to sell and lease to Purchaser, as more fully set
forth in this Agreement, all of the assets owned by Seller used in connection with the operation of the Hospital, other than certain excluded assets, for the consideration and upon the terms and conditions contained in this Agreement; and

  
 F. Upon consummation of the transactions contemplated herein,
(i) Seller will own a 20% membership interest in FGP and a 19.98% limited partner interest in Purchaser, (ii) HMHM will own an 80% membership interest in FGP and a 79.92% limited partner interest in Purchaser, and (iii) FGP will continue to own a
0.1% general partner interest in Purchaser. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 1 

 A G R E E M E N T: 
  
 NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained in this
Agreement, the parties hereto, intending to be legally bound, agree as follows: 
  
 ARTICLE 1 
 DEFINITIONS; SALE AND TRANSFER OF ASSETS; 
 CONSIDERATION; CLOSING; CONTRIBUTION 
  
 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, 

 
 (a) The defined terms used in this Agreement shall include the plural as
well as the singular. 
  
 (b) All accounting terms not otherwise
defined herein have the meanings assigned under GAAP (as defined herein). 
  
 (c) All references in this Agreement to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of the body of this Agreement.

  
 (d) Pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms. 
  
 (e) The words
“including” and “include” shall be deemed to mean in each instance “including, without limitation.” 
  
 (f) The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole,
including the Exhibits and Schedules attached hereto, and not to any particular Article, Section or other subdivision. 
  
 (g) “Condominium” shall mean that certain condominium regime to be created pursuant to the Pennsylvania Uniform Condominium Act, 68 Pa. C.S.A.
§§3101, et seq., to subject to the condominium form of ownership all of the Real Property together with all of Seller’s other real property adjacent to the Real Property, the total of all of which being approximately
99.0508 acres. 
  
 (h) “Condominium Association” shall
mean that certain condominium association to be created by Seller for the Condominium and to be known as Friends Campus Condominium Association. 
  
 (i) “Condominium Articles” shall mean the Articles of Incorporation of the Condominium Association attached hereto as Exhibit A.

  
 (j) “Condominium Bylaws” shall mean the Bylaws of
the Condominium Association attached hereto as Exhibit B. 
  
 (k) “Condominium Declaration” shall mean that certain Declaration of Condominium to be filed by Seller in the Philadelphia Department of Records to create the Condominium, and attached hereto as Exhibit C, as the same may
be amended prior to or simultaneously with the Closing in order to subdivide Units 1A, 1B, 1C, 2A and 3A identified therein. 
  
 (l) “Disclosure Schedules” shall mean the schedules attached to and constituting a part of this Agreement. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 2 

 (m) “Knowledge of Purchaser,” and similar variations thereof, shall mean the actual knowledge,
as of the relevant date, of David K. White, Donald W. Thayer, Anthony J. Vadella and N. Matthew Lisagor after reasonable inquiry of employees or agents of Purchaser that were involved in its due diligence review of Seller and the Hospital.

  
 (n) “Knowledge of Seller,” and similar variations
thereof, shall mean the actual knowledge, as of the relevant date, of Joseph Pyle, Arris S. Veronie, Peter Schwartz and David Liddle. 
  
 (o) “Material Adverse Change” or “Material Adverse Effect,” when used with respect to the Seller, the Hospital or the Real Property,
shall mean any material adverse change in or effect on the Hospital taken as a whole or the Assets taken as a whole; other than changes or effects that are or result from occurrences relating to the United States economy generally, the Southeastern
Pennsylvania economy generally, the United States health care industry generally, the Southeastern Pennsylvania health care industry generally, the United States behavioral health care industry generally or the Southeastern Pennsylvania behavioral
health care industry generally. 
  
 Capitalized terms used in this
Agreement shall have the definitions assigned to such terms elsewhere in this Agreement. For ease of reference, the section containing the definition of each such capitalized term is set forth in the table of defined terms included elsewhere as a
part of this Agreement. 
  
 1.2 Transfer of Seller Assets.
On the Closing Date, Seller shall assign, transfer, convey and deliver (or, to the extent applicable, cause to be assigned, transferred, conveyed and delivered) or lease to Purchaser, in each case as specified below, and Purchaser shall acquire, all
right, title and interest or a leasehold interest in and to all assets and properties of Seller, in each case as specified below, as such assets and properties shall exist on the Closing Date, that are utilized in any respect in connection with the
operation of the Hospital, other than the Excluded Assets (collectively, the “Assets”), such transfer being deemed to be effective at the Effective Time, including, but not limited to, the following: 
  
 (a) a leasehold interest for forty (40) years in those certain condominium
units identified as Units 1A-L, 1B-L, 1C-L, 2A-L and 3A-L in the Condominium Declaration, as amended pursuant to Section 7.13 hereof, together with all right, title and interest appurtenant thereto (collectively, the “Leased Real
Property”); which lease shall be deemed fully prepaid for the entire forty-year initial term beginning at the Effective Date, and an option to lease the Leased Real Property for an additional forty (40) years, all of which is more fully
described in the Ground Lease attached hereto as Exhibit D (the “Ground Lease”); 
  
 (b) a fee simple interest in those certain condominium units identified as Units 1A-I, 1B-I, 1C-I, 2A-I and 3A-I in the Condominium Declaration, as
amended pursuant to Section 7.13 hereof, which consist of all buildings, improvements and fixtures located on the Leased Real Property (and all easements and appurtenances thereto), including without limitation, all construction in progress,
together with all right, title and interest appurtenant thereto (collectively, the “Owned Real Assets,” and together with the Leased Real Property, collectively, the “Real Property”); 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 3 

 (c) all of the tangible personal property owned by Seller with respect to the operation of the Hospital,
including all equipment, furniture, fixtures, machinery, vehicles, office furnishings, and leasehold improvements (collectively, the “Personal Property”); 
  
 (d) all of Seller’s rights, to the extent assignable or transferable, to all licenses, permits, approvals, franchises,
accreditations and registrations and other governmental licenses, permits or approvals issued to Seller with respect to the operation of the Hospital and the ownership of the Owned Real Assets (collectively, the “Licenses”); 
  
 (e) all of Seller’s interest, to the extent assignable or transferable,
in and to all personal property leases with respect to the operation of the Hospital (collectively, the “Personal Property Leases”); 
  
 (f) all of Seller’s and, to the extent applicable, its Affiliates’ interest, to the extent assignable or transferable, in and to all contracts
and agreements relating to the operation of the Hospital or the ownership of the Owned Real Assets which are listed in Schedule 1.2(f) and all contracts and agreements executed after the date hereof which Purchaser or HHC Pennsylvania agrees
to assume, or which Seller enters into in the ordinary course of business and which do not involve the expenditure of more than $25,000 per contract year and are terminable by Purchaser without penalty on not more than ninety (90) days prior written
notice (collectively, the “Contracts“); provided, however, the term “Contracts” as used in this Agreement shall exclude all other contracts and agreements relating to the Hospital, including, without limitation, the
contracts listed in Schedule 1.3(d) (collectively, the “Excluded Contracts”); 
  
 (g) all accounts, notes, interest and other receivables of Seller, and all claims, rights, interests and proceeds related thereto, including all accounts and other receivables arising from the rendering of services to
patients at the Hospital, billed and unbilled, recorded and unrecorded, for services provided by Seller while owner or operator of the Assets (collectively, the “Accounts Receivable”); provided, however, that, to the extent not included in
the calculation of Net Working Capital, the Accounts Receivable shall not include the Government Receivables. 
  
 (h) all advance payments, prepayments, prepaid expenses, deposits, refunds and the like which exist as of the Closing Date (collectively, the
“Prepaids”); 
  
 (i) all inventories of supplies, drugs,
food, janitorial and office supplies and other disposables and consumables located or held for use at the Hospital (collectively, the “Inventory”); 
  
 (j) to the extent assignable or permitted by applicable law, all documents, records, policy and procedure manuals, compliance programs, staff bylaws,
operating manuals, files and computer software owned by Seller with respect to the operation of the Hospital, including all patient records, medical records, employee records, financial records with respect to the operation of the Hospital,
equipment records, construction plans and specifications, medical staff and peer review records and medical and administrative libraries; 
  
 (k) to the extent assignable, all rights in all warranties of any manufacturer or vendor in connection with the Personal Property; 
  
 (l) all goodwill and other intangible assets used or useful in connection
with the business of the Hospital; 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 4 

 (m) subject to the provisions of Section 1.16 hereof, all insurance proceeds arising in connection with
property damage to the Assets occurring after the Execution Date and prior to the Effective Time, to the extent not expended on the repair or restoration of the Assets; 
  
 (n) the name, symbols, telephone numbers, facsimile numbers, domain names, trademarks, trade names, service marks and
copyrights used with respect to the operation of the Hospital, excluding the name “Friends Hospital,” all variants thereof and all common law trademark rights associated therewith; 
  
 (o) a license to use the name “Friends Hospital” pursuant to the
License Agreement in the form attached hereto as Exhibit E (the “License Agreement”); 
  
 (p) all of Seller’s rights with respect to its Medicare, Medicaid and other third-party provider numbers; 
  
 (q) all claims of Seller against third-parties relating to the Assets, choate
or inchoate, known or unknown, contingent or otherwise, but excluding such claims related to Excluded Liabilities; and 
  
 (r) any other assets of Seller with respect to the operation of the Hospital or the ownership of the Owned Real Assets (which are not otherwise
specifically described above in this Section 1.2); 
  
 provided, however,
that the Assets shall not include the Excluded Assets as defined in Section 1.3 below. Notwithstanding any other provision of this Agreement, the parties hereto acknowledge and agree that a 0.02% undivided interest in the Assets plus a 0.02%
undivided interest in the Assumed Obligations shall be sold and transferred by Seller to FGP at the Effective Time in exchange for the 20% membership interest in FGP as described in Sections 1.6(d) and 1.13, and FGP will simultaneously contribute
such 0.02% undivided interest in the Assets and the Assumed Obligations to Purchaser as a capital contribution to Purchaser. FGP hereby consents to the documentation of its purchase of the 0.02% undivided interest in the Assets and the Assumed
Obligations as being made directly by Purchaser pursuant to this Agreement. 
  
 1.3 Excluded Assets. Notwithstanding anything to the contrary in Section 1.2, Seller shall retain the following assets, whether owned directly or indirectly by Seller (or any of Seller’s Affiliates)
(collectively, the “Excluded Assets”): 
  
 (a) All real
property owned by Seller other than the Owned Real Assets; 
  
 (b)
cash and cash equivalents; 
  
 (c) the artifacts of Seller listed
in Schedule 1.3(c); 
  
 (d) the Excluded Contracts;

  
 (e) (i) all Accounts Receivable arising from the rendering
services and provision of medicine, drugs and supplies to patients at the Hospital, billed or unbilled, recorded or unrecorded, for services provided by Seller while the owner or operator of the Assets prior to the Effective Time and relating to any
Federal Health Care Program as such term is defined in 72 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 5 

 U.S.C. § 1320a-7b(f) (the “Government Programs”) or any other third-party payor which by law is not
assignable, (ii) any rights of Seller to settlement and retroactive adjustments, if any, for all cost reporting periods ending on or prior to the Closing Date (whether open or closed) arising from or against any Government Programs or other
third-party payor programs that settle on a cost-report basis, and (iii) any right to receive disproportionate share payments or enhanced payments from any Government Program (subsections (i), (ii) and (iii) above, collectively, the “Government
Receivables”); 
  
 (f) all Seller records relating to the
Excluded Assets and Excluded Liabilities to the extent that Purchaser does not reasonably need the same in connection with the ongoing activities of the Hospital, the Assets, or the Assumed Obligations, as well as all records which by law Seller is
required to maintain in its possession; 
  
 (g) any reserves or
prepaid expenses to the extent related to Excluded Assets and Excluded Liabilities; 
  
 (h) all rights of Seller under or pursuant to this Agreement; 
  
 (i) all of Seller’s corporate minute books and tax returns; and 
  
 (j) any other assets of Seller identified in Schedule 1.3(j). 
  
 1.4 Assumed Obligations. On the Closing Date, Seller shall assign, and Purchaser shall assume and agree to discharge
on and after the Effective Time, only the following liabilities and obligations of Seller (collectively, the “Assumed Obligations”): 
  
 (a) the Contracts, but only to the extent of the obligations either arising thereunder with respect to events or periods after the Effective Time or
included in the calculation of Net Working Capital; 
  
 (b) the
Personal Property Leases but only to the extent of the obligations either arising thereunder with respect to events or periods after the Effective Time or included in the calculation of Net Working Capital; 
  
 (c) accounts payable, accrued expenses (other than as described in subsection
(d) below) and other current liabilities, but only to the extent included in the calculation of Net Working Capital; 
  
 (d) obligations and liabilities as of the Closing Date in respect of accrued, unpaid vacation and sick pay (whether accrued or unaccrued) of Seller’s
employees who are hired by Purchaser as of the Closing Date, and related taxes but, in the case of unpaid vacation pay and related taxes, only to the extent included in the calculation of Net Working Capital, and in the case of sick pay, only to the
extent set forth on Schedule 1.11; and 
  
 (e) any other
obligations and liabilities identified in Schedule 1.4(e), but only to the extent included in the calculation of “Net Working Capital.” 
  
 1.5 Excluded Liabilities. Notwithstanding anything to the contrary in Section 1.4, Purchaser shall not assume or become responsible for any of
Seller’s duties, obligations or liabilities that are not expressly assumed by Purchaser pursuant to the terms of this Agreement or 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 6 

 the Bill of Sale (the “Excluded Liabilities”), and Seller shall remain fully and solely responsible for all
Excluded Liabilities. The Excluded Liabilities shall include: 
  
 (a) any liabilities of Seller with respect to the operation of the Hospital incurred prior to the Effective Time which are not otherwise specifically included in the Assumed Obligations; 
  
 (b) all liabilities of Seller arising out of or relating to any act,
omission, event or occurrence connected with the use, ownership or operation by Seller of the Hospital or any of the Assets prior to the Effective Time, other than as specifically included in the Assumed Obligations; 
  
 (c) all liabilities of Seller in connection with claims of professional
malpractice to the extent arising out of or relating to acts, omissions, events or occurrences prior to the Effective Time; 
  
 (d) all liabilities of Seller for matching contributions for eligible beneficiaries’ 403(b) plans, Section 125 plans and other Seller Plans and all
administrative costs associated with such welfare benefit plans other than as specifically included in the Assumed Obligations; 
  
 (e) all liabilities of Seller relating to Seller Cost Reports with respect to periods ending prior to the Effective Time and all liabilities of Seller
with respect to refund, recoupment, set-off and other liabilities arising out of the billings to third party payors, including Medicare and Medicaid, for services rendered to patients of the Hospital prior to the Effective Time; 
  
 (f) all liabilities of Seller for violations of any law, regulation or rule
to the extent arising from acts or omissions prior to the Effective Time, including those pertaining to Medicare and Medicaid fraud or abuse; 
  
 (g) all liabilities of Seller under the Excluded Contracts; 
  
 (h) all liabilities of Seller for commissions or fees owed to any finder or broker in connection with the transactions contemplated hereunder; and

  
 (i) all other liabilities or obligations of Seller and/or the
Hospital which are not Assumed Obligations. 
  
 1.6 Purchase
Price. Subject to the terms and conditions of this Agreement, the aggregate purchase price to be paid by Purchaser to Seller for the purchase of the Assets (the “Purchase Price”) shall consist of: 
  
 (a) Fourteen Million and No/100 Dollars ($14,000,000.00) (the “Closing
Purchase Price Payment”), which includes $500,000 in prepaid rent under the Ground Lease and which shall be payable in cash at the Closing; 
  
 (b) the Working Capital Payment which shall be the payment determined as set forth in Section 1.11 and shall, as applicable, be added to or be deducted
from the Closing Purchase Price Payment at Closing, as set forth in Section 1.11; 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 7 

 (c) Two Million and No/100 Dollars ($2,000,000.00) which shall be deposited by Purchaser in an escrow
account with Wachovia Bank, N.A. (the “Escrow Agent”), as described in Section 1.12; 
  
 (d) a 20% membership interest in FGP, as described in Section 1.13, which the parties deem to be valued at $4,000.00; and 
  
 (e) a 19.98% limited partner interest in Purchaser, as described in Section 1.14, which the parties deem to be valued at $3,996,000.00. 
  
 1.7 Closing Date. The consummation of the transactions contemplated by
this Agreement (the “Closing”) shall take place at 10:00 a.m. at the offices of Duane Morris LLP, One Liberty Place, Philadelphia, Pennsylvania 19103-7396, on or before the date that is five (5) business days after all conditions precedent
and other matters required pursuant to this Agreement to be completed as of the Closing Date have been or will be completed on such date, or such other date, time and place as the parties shall mutually agree (the “Closing Date”). The
Closing with respect to the transfer of the Assets, shall be deemed to have occurred and to be effective as between the parties as of 12:01 a.m. (Philadelphia time) on the Closing Date (the “Effective Time”). 
  
 1.8 Items to be Delivered by Seller at Closing. At or before the
Closing, Seller shall deliver to Purchaser the following, duly executed by Seller where appropriate and in the form provided for below or otherwise reasonably satisfactory to Purchaser and counsel for Purchaser: 
  
 (a) The Ground Lease; 
  
 (b) Bill of Sale in the form of Exhibit F attached hereto (the
“Bill of Sale”); 
  
 (c) Assignment and Assumption
Agreements in the forms of Exhibits G-1, G-2 and G-3 attached hereto (the “Assignment and Assumption Agreements”); 
  
 (d) Special Warranty Deeds in the form of Exhibit H attached hereto with respect to the Owned Real Assets; 
  
 (e) Post-Closing Escrow Agreement in the form of Exhibit I attached
hereto (the “Post-Closing Escrow Agreement”); 
  
 (f)
the License Agreement; 
  
 (g) original certificates of
subsistence, or comparable status, of Seller, issued by the Commonwealth of Pennsylvania, dated no earlier than a date which is thirty (30) calendar days prior to the Closing Date; 
  
 (h) an opinion of counsel for Seller in substantially the form attached hereto as Exhibit J; 
  
 (i) a certificate of Seller, executed by the President or any Vice President
of Seller, certifying to Purchaser (i) that all the representations and warranties of Seller contained herein are true as of the Closing Date with the same effect as though made at such time, except to the extent such representations and warranties
expressly relate to an earlier date, in which case such representations and warranties are true on and as of such earlier date, (ii) that Seller has in 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 8 

 all material respects performed or complied with the covenants and agreements required of Seller set forth in this
Agreement to be satisfied by the Closing Date and (iii) that all of the conditions contained in Sections 6.2, 6.3, 6.4 and 6.5 have been satisfied except those, if any, waived in writing by Seller; 
  
 (j) a certificate of the corporate Secretary of Seller certifying to
Purchaser (i) the incumbency of the officers of Seller on the Execution Date and on the Closing Date and bearing the authentic signatures of all such officers who shall execute this Agreement and any additional documents contemplated by this
Agreement and (ii) the due adoption and text of the resolutions of the Board of Managers of Seller and the members of Seller, authorizing (1) the transfer of the Assets and Assumed Obligations by Seller to Purchaser and (2) the execution, delivery
and performance of this Agreement and all ancillary documents and instruments by Seller, and that such resolutions have not been amended or rescinded and remain in full force and effect on the Closing Date; 
  
 (k) a complete release of liens and mortgages and UCC termination statements
for any and all liens, mortgages, security interests, restrictions and financing statements with respect to the Assets (other than those exclusively relating to one of the Contracts or the Personal Property Leases); 
  
 (l) Limited Power of Attorney for use of Pharmacy License, DEA and Other
Registration Numbers, and DEA Order Forms, in the form of Exhibit K attached hereto (the “Power of Attorney”); 
  
 (m) all consents to the assignment of the Contracts and Personal Property Leases from the third parties listed on Schedule 1.2(f) required to
assign the Contracts and Personal Property Leases to Purchaser (the “Contract and Lease Consents”); 
  
 (n) all governmental approvals and authorizations that are required for the consummation of the transactions contemplated by this Agreement (the
“Governmental Approvals”); 
  
 (o) the Assignment of
Membership Interest in the form of Exhibit L attached hereto (the “Assignment of Membership Interest”); 
  
 (p) a counterpart of the Amended and Restated Operating Agreement of FGP in the form of Exhibit M attached hereto (the “Operating
Agreement”); 
  
 (q) the Assignment of Partnership Interest
in the form of Exhibit N attached hereto (the “Assignment of Partnership Interest”); 
  
 (r) a counterpart of the Amended and Restated Limited Partnership Agreement of Purchaser in the form of Exhibit O attached hereto (the
“Limited Partnership Agreement”); 
  
 (s) approval of
the Management Agreement between Purchaser and HHC Pennsylvania, LLC, a Pennsylvania limited liability company and subsidiary of HHC (“HHC Pennsylvania”), in the form attached hereto as Exhibit P (the “Management
Agreement”) related to the management of the Hospital’s operations after the Effective Time; 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 9 

 (t) evidence of the Tail Insurance Coverage reasonably satisfactory to Purchaser; 
  
 (u) the Condominium Declaration, the Condominium Articles and the Condominium
Bylaws; 
  
 (v) minutes of the organizational meeting and all
other meetings of the Condominium Association; 
  
 (w) original
certificates of subsistence, or comparable status, of the Condominium Association, issued by the Pennsylvania Secretary of the Commonwealth, dated no earlier than a date which is thirty (30) calendar days prior to the Closing Date; and 

 
 (x) such other instruments, certificates, consents or other documents
which are reasonably necessary to carry out the transactions contemplated by this Agreement and to comply with the terms hereof. 
  
 1.9 Items to be Delivered by Purchaser at Closing. At or before the Closing, Purchaser shall execute and deliver or cause to be delivered to Seller
the following, duly executed by Purchaser where appropriate: 
  
 (a) payment of the Closing Purchase Price Payment (plus or minus the Working Capital Payment) on the Closing Date by wire transfer of immediately available funds to Seller to the account specified by Seller which account Seller shall
specify to Purchaser not less than two (2) business days prior to the Closing Date in writing; 
  
 (b) payment of the Escrow Deposit on the Closing Date by wire transfer of immediately-available funds to the Escrow Agent; 
  
 (c) a certificate of Purchaser, executed by the President or any Vice President of Purchaser, certifying to Seller (i) that all the representations and
warranties of Seller contained herein are true as of the Closing Date with the same effect as though made at such time, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations
and warranties are true on and as of such earlier date, (ii) that Purchaser has in all material respects performed or complied with the covenants and agreements required of Purchaser set forth in this Agreement required to be satisfied by the
Closing Date and (iii) that all of the conditions contained in Sections 7.2, 7.3, 7.4 and 7.5 have been satisfied except those, if any, waived in writing by Purchaser; 
  
 (d) a certificate of the corporate Secretary of FGP, as Purchaser’s general partner, certifying to Seller (i) the
incumbency of the officers of FGP on the Execution Date and on the Closing Date and bearing the authentic signatures of all such officers who shall execute this Agreement on behalf of Purchaser and any additional documents contemplated by this
Agreement and (ii) the due adoption and text of the resolutions of the general partner of Purchaser authorizing the execution, delivery and performance of this Agreement and all ancillary documents and instruments by Purchaser, and that such
resolutions have not been amended or rescinded and remain in full force and effect on the Closing Date; 
  
 (e) an opinion of counsel for Purchaser in substantially the form attached hereto as Exhibit Q; 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 10 

 (f) original certificate of subsistence, or comparable status, of Purchaser, issued by the Pennsylvania
Secretary of the Commonwealth dated no earlier than a date which is thirty (30) calendar days prior to the Closing Date; 
  
 (g) the Ground Lease; 
  
 (h) the Bill of Sale; 
  
 (i) the Assignment and Assumption Agreements; 
  
 (j) the Post-Closing Escrow Agreement; 
  
 (k) the License Agreement; 
  
 (l) the Power of Attorney; 
  
 (m) the Assignment of Membership Interest; 
  
 (n) a counterpart of the Operating Agreement; 
  
 (o) a counterpart of the Limited Partnership Agreement; 
  
 (p) the Assignment of Partnership Interest; 
  
 (q) the Management Agreement; and 
  
 (r) such other instruments, certificates, consents or other documents which are reasonably necessary to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof. 
  
 1.10
Prorations and Utilities. To the extent not included in the calculation of Net Working Capital or otherwise prorated pursuant to this Agreement, Purchaser and Seller shall prorate (as of the Effective Time), to the extent applicable to the
Assets, Personal Property Lease payments, real estate and personal property taxes, assessments and other similar charges against real estate, and utility charges. If accurate allocations as to such matters cannot be made at Closing because current
bills are not obtainable, the parties shall allocate such income or expense at Closing on the best available information, subject to adjustment upon receipt of the final bill or other evidence of the applicable item of income or expense. 

 
 1.11 Working Capital Settlement. 
  
 (a) Terms. As used herein, the term “Net Working Capital”
shall mean the aggregate current assets of Seller conveyed to Purchaser pursuant to Section 1.2 hereof (excluding those Excluded Assets which would otherwise be included in current assets), minus the aggregate current liabilities of Seller assumed
by Purchaser pursuant to Section 1.4 hereof (excluding those Excluded Liabilities which would otherwise be included in current liabilities), all as determined in accordance with generally accepted accounting principles (“GAAP”), except
that sick pay and related taxes shall be included in the calculation of Net Working Capital at a value determined according to the methodology specified on Schedule 1.11. As used herein, the term “Base Net Working Capital“ means
$4,000,000.00. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 11 

 (b) Net Working Capital Calculation and Adjustments. 
  
 (i) At least ten (10) business days prior to Closing, Seller shall in good
faith deliver to Purchaser a reasonable estimate of Net Working Capital as of the end of the most recently ended calendar month prior to the Closing Date for which financial statements are available (the “Estimated Net Working Capital”)
and containing reasonable detail and supporting documents showing the derivation of such estimate. The principles, specifications and methodologies for determining the Estimated Net Working Capital shall be as specified in Schedule 1.11 and
shall be used for purposes of calculating the Working Capital Payment portion of the Purchase Price as of the Closing. The “Working Capital Payment” shall equal the difference between Base Net Working Capital and Estimated Net Working
Capital. If Estimated Net Working Capital exceeds Base Net Working Capital, the Working Capital Payment shall be added to the Closing Purchase Price Payment. If Estimated Net Working Capital is less than Base Net Working Capital, the Closing
Purchase Price Payment shall be reduced by the amount of the Working Capital Payment. 
  
 (ii) Within sixty (60) days after the Closing, Purchaser shall deliver to Seller its good faith determination of the Net Working Capital as of the Effective Time following the same principles, specifications and
methodologies used to determine the Estimated Net Working Capital as set forth on Schedule 1.11 (“Interim Net Working Capital”). The Purchase Price shall be increased or decreased based on the difference between the Interim Net
Working Capital as of the Effective Time and the Estimated Net Working Capital calculated at the Closing and, within five (5) business days after determination thereof, any excess of Interim Net Working Capital over Estimated Net Working Capital
shall be paid in cash to Seller by Purchaser, and any deficiency in Interim Net Working Capital versus Estimated Net Working Capital shall be paid in cash to Purchaser pursuant to the Post-Closing Escrow Agreement, in either case together with
interest on such amount at the rate of six percent (6%) per annum accruing from the Closing Date until the date when such payment is made. 
  
 (iii) Within sixty (60) days following December 31, 2005, Purchaser shall deliver to Seller a determination of the Net Working Capital as of the
Effective Time following the same principles, specifications and methodologies used to determine the Estimated Net Working Capital as set forth on Schedule 1.11 (“Final Net Working Capital”). Should Seller disagree with
Purchaser’s final determination of Final Net Working Capital, Seller shall notify Purchaser within thirty (30) days after Purchaser’s delivery of its determination of Final Net Working Capital. If Seller and Purchaser fail to agree within
thirty (30) days after Seller’s delivery of notice of disagreement on the amount of Final Net Working Capital, such disagreement shall be resolved in accordance with the procedures set forth in Section 1.11(c), which shall be the sole and
exclusive remedy for resolving disputes relative to the determination of Final Net Working Capital. The Purchase Price shall be increased or decreased based on the difference between the Final Net Working Capital as of the Effective Time and the
Interim Net Working Capital and, within five (5) business days after determination thereof, any excess of Final Net Working Capital over Interim Net Working Capital shall be paid in cash to Seller by Purchaser, and any deficiency in Final Net
Working Capital versus Interim Net Working Capital shall be paid in cash to Purchaser pursuant to the Post-Closing Escrow Agreement, in either case together with interest on such amount at the rate of six percent (6%) per annum accruing from the
Closing Date until the date when such payment is made. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 12 

 (iv) Each party and its duly authorized representatives shall have full access to the financial books
and records pertaining to the Hospital to confirm or audit Net Working Capital computations. 
  
 (c) Dispute of Adjustments. In the event that Seller and Purchaser are not able to agree on the Final Net Working Capital within thirty (30) days after Seller’s delivery of notice of disagreement, Seller
and Purchaser shall each have the right to require that such disputed determination be submitted to Deloitte & Touche USA LLP or if Deloitte & Touche USA LLP is not available for any reason or does not maintain its independent status, such
other independent certified public accounting firm as Seller and Purchaser may then promptly mutually agree upon in writing (the “Accounting Firm”) for computation or verification in accordance with the provisions of this Agreement. The
Accounting Firm shall review the matters in dispute and, acting as arbitrators, shall promptly decide the proper amounts of such disputed entries (which decision shall also include a final calculation of Net Working Capital). The submission of the
disputed matter to the Accounting Firm shall be the exclusive remedy for resolving disputes relative to the determination of Net Working Capital. The Accounting Firm’s determination shall be binding upon Seller and Purchaser. The Accounting
Firm’s fees and expenses shall be borne equally by Seller and Purchaser. 
  
 1.12 Escrow Deposit. At Closing, Purchaser shall deposit Two Million and No/100 Dollars ($2,000,000.00) with the Escrow Agent, by wire transfer of immediately-available funds to the account of the Escrow Agent
(the “Escrow Deposit,” and, together with all earnings thereon, the “Escrow Funds”). The Escrow Funds shall be held, invested and disbursed by the Escrow Agent as specified in and pursuant to the terms and conditions of the
Post-Closing Escrow Agreement. 
  
 1.13 Membership Interest in
FGP. At Closing: 
  
 (a) FGP shall deliver a fully executed
Assignment of Membership Interest which assigns and transfers a 20% membership interest in FGP to Seller, free and clear of all liens and encumbrances; and 
  
 (b) All members of FGP, including Seller, shall execute and deliver a counterpart of the Operating Agreement. 
  
 As of the Effective Time, Seller shall become a member of FGP. 
  
 1.14 Limited Partner Interest in Purchaser. At Closing: 
  
 (a) Purchaser shall deliver an Assignment of Partnership Interest which
assigns and transfers a 19.98% limited partner interest in Purchaser to Seller; and 
  
 (b) All partners of Purchaser, including Seller, shall execute and deliver a counterpart of the Limited Partnership Agreement. 
  

As of the Effective Time, Seller shall become a limited partner of Purchaser. 
  

1.15 Contribution by HMHM. At or before Closing, HMHM (a) agrees to contribute or cause the contribution of sufficient funds to its subsidiaries
in order to allow Purchaser to make the Closing Purchase Price Payment, and (b) agrees to cause its subsidiaries to 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 13 

 consummate the transactions contemplated hereby to be consummated on the Closing Date if all conditions to Closing in
this Agreement have been satisfied or waived by the appropriate parties hereto. 
  
 1.16 Risk of Loss. The risk of loss or damage to any of the Personal Property, Owned Real Assets, the Hospital and all other Assets and property, the transfer of which is contemplated by this Agreement, shall
remain with Seller until the Effective Time and Seller shall maintain in effect without material change all of its insurance policies covering the Personal Property, Owned Real Assets, the Hospital and all other Assets and property of Seller through
the Effective Time. 
  
 (a) With respect to the Owned Real
Assets, if prior to the Closing, all or any part of the Owned Real Assets is destroyed or damaged by fire or the elements or by any other cause where such damage or destruction is in the aggregate (the “Aggregate Damage”) less than twenty
percent (20%) of the Purchase Price and Seller has duly maintained the insurance policies described above, the parties’ duties and obligations under this Agreement shall not be affected and the Closing shall proceed as scheduled; provided,
however, Seller shall assign, transfer and set over to Purchaser all of Seller’s right, title and interest in and to any insurance proceeds on account of such damage or destruction and, if such insurance policy proceeds are insufficient to
repair, restore and/or replace the Owned Real Assets, the difference between the cost to repair, restore and/or replace and the amount of such proceeds shall be deducted from the Purchase Price; provided, however, that if the amount to be
deducted from the Purchase Price exceeds $500,000, Seller may terminate this Agreement by written notice to Purchaser. If prior to the Closing, all or any part of the Owned Real Assets is destroyed or damaged by fire or the elements or by any other
cause where the Aggregate Damage exceeds twenty percent (20%) of the Purchase Price, Purchaser may elect to (i) purchase such Owned Real Assets, and the Closing shall proceed as scheduled (provided, however, at the Closing Seller shall
assign, transfer and set over to Purchaser all of Seller’s right, title and interest in and to any insurance proceeds on account of such damage or destruction loss plus the amount of any deductibles under such insurance policies), (ii) not
purchase such Owned Real Assets, and, in such event, an appropriate adjustment to the Purchase Price shall be made by Purchaser and Seller and the Closing shall proceed as scheduled; provided, however, that if the amount to be deducted from
the Purchase Price exceeds $500,000, Seller may terminate this Agreement by written notice to Purchaser; or (iii) elect to terminate this Agreement by written notice to Seller. If Purchaser and Seller are unable to agree upon the amount of the
Aggregate Damage by the originally scheduled Closing Date (the “Original Closing Date”), the amount of the Aggregate Damage shall be determined by an independent consulting firm mutually selected by Seller and Purchaser (the
“Independent Consultant”) pursuant to Section 1.16(d). 
  
 (b) With respect to any Assets other than Owned Real Assets which are destroyed or damaged by fire or the elements or by any other cause prior to the Closing, except as provided in subsection (a) above, Seller shall assign, transfer and set
over to Purchaser all of Seller’s right, title and interest to any insurance proceeds on account of such damage or destruction and shall reimburse Purchaser at the Closing for any deductible Purchaser is required to pay in connection with the
receipt of such insurance proceeds. 
  
 (c) If prior to the
Closing, all or any part of a parcel of the Owned Real Assets is made subject to an eminent domain or condemnation proceeding which would in Purchaser’s reasonable judgment materially adversely impair access to the Owned Real Assets or be

  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 14 

 materially adverse to the operations of the Hospital, Purchaser may elect to (i) lease such affected Owned Real Assets,
and the Closing shall proceed as scheduled (provided, however, at the Closing Seller shall assign, transfer and set over to Purchaser all of Seller’s right, title and interest in and to any award related to the Owned Real Assets in such
eminent domain or condemnation proceeding), (ii) not purchase the affected Owned Real Assets, and, in such event, an appropriate adjustment to the Purchase Price shall be made by Purchaser and Seller, or (iii) terminate this Agreement by written
notice to Seller. If Purchaser and Seller are unable to agree upon the amount of the adjustment described in subsection (ii) of the preceding sentence by the Original Closing Date, the adjustment shall be resolved by the Independent Consultant
pursuant to Section 1.16(d). 
  
 (d) If pursuant to either Section
1.16(a) or 1.16(c), the amount of the Aggregate Damage (and any applicable Purchase Price adjustment) is to be determined by the Independent Consultant, within five (5) calendar days after the Original Closing Date (the “Submittal Date”),
each party shall submit to the other party and to the Independent Consultant its proposed Aggregate Damage (and any applicable Purchase Price adjustment) as a result of the event(s) contemplated by either Section 1.16(a) or 1.16(c), along with a
detailed description of the basis for such amount and any applicable adjustment. Within ten (10) calendar days after the Submittal Date, the Independent Consultant, acting as an expert and not as an arbitrator, shall determine the Aggregate Damage
(and any applicable Purchase Price adjustment), taking into account any submissions by Seller or Purchaser made by the Submittal Date. The decision of the Independent Consultant shall be conclusive and binding as between Purchaser and Seller, and
the costs of such review shall be borne equally by Seller and Purchaser. Upon any such determination of the adjustment to the Purchase Price in accordance with this Section 1.16(d), the parties shall, subject to the terms and conditions of this
Agreement, consummate the transactions contemplated by this Agreement at a mutually agreeable time and place, in accordance with the provisions of this Agreement, which shall be no later than the twenty-fifth (25th) calendar day following the
Original Closing Date unless the parties mutually agree upon a later date. 
  
 ARTICLE 2 
 REPRESENTATIONS AND WARRANTIES OF SELLER 
  
 Except as otherwise indicated on the Disclosure Schedules, Seller hereby
represents, warrants and covenants to Purchaser as to the following matters as of the Execution Date. Except as otherwise provided herein, Seller shall be deemed to remake all of the following representations, warranties and covenants as of the
Closing Date and the Effective Time: 
  
 2.1 Authority.
Seller has full corporate power and authority to enter into this Agreement and all documents delivered hereto and full corporate power and authority to carry out and perform the transactions contemplated hereby. 
  
 2.2 Authorization/Execution. All corporate actions required to be
taken by Seller to authorize the execution, delivery and performance of this Agreement, all documents executed by Seller which are necessary to give effect to this Agreement, and all transactions contemplated hereby have been duly and properly taken
or obtained by Seller, except for the consent of the members of Seller to the consummation of the transactions contemplated by this Agreement. This Agreement and all documents delivered hereto have been duly and validly executed and delivered by
Seller and, assuming due and valid execution by, and enforceability against, 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 15 

 Purchaser, this Agreement and all documents delivered pursuant hereto constitute valid and binding obligations of Seller
enforceable in accordance with its terms subject to (a) applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally from time to time in effect and (b) limitations on the enforcement of
equitable remedies. 
  
 2.3 Organization and Good Standing; No
Subsidiaries; No Conflicts. 
  
 (a) Seller is a nonprofit
membership corporation duly incorporated, registered and subsisting under the laws of the Commonwealth of Pennsylvania. Seller has full power and authority to own, operate and lease its properties and to carry on its businesses as now conducted.

  
 (b) Except as listed on Schedule 2.3(b), Seller has no
subsidiaries, whether direct or indirect. Except as listed on Schedule 2.3(b), Seller has no equity interest or investment in, and does not have any other right or obligation to purchase any equity interest or other investment in, and is not
a partner of or joint venturer with, any other Person. 
  
 (c)
Except as provided in Schedule 2.3(c), the execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement and all other instruments, agreements, and certificates referenced herein to which
Seller is or will be a party do not (i) violate any decree or judgment of any court or governmental authority which is applicable to or binding upon Seller; (ii) violate any law, rule or regulation applicable to Seller which would reasonably be
expected to have a Material Adverse Effect; (iii) violate or conflict with, or result in a breach of, or constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or permit
cancellation of, or result in the creation of any encumbrance upon any of the Assets under, any material contract, lease, sales order, purchase order, indenture, mortgage, note, bond, instrument, license or other agreement to which Seller is a
party, or by which Seller is bound; (iv) require the consent of any third party under any Contract or Personal Property Lease; (v) permit the acceleration of the maturity of any indebtedness of Seller; or (vi) violate or conflict with any provision
of the Articles of Incorporation or Bylaws of Seller. 
  
 2.4
Financial Statements; Changes. 
  
 (a) Seller has
delivered to Purchaser the audited balance sheets for Seller at June 30, 2004, 2003 and 2002, and the related statements of operations for the periods then ended. All such financial statements have been prepared in conformity with GAAP applied on a
consistent basis throughout such periods. Such statements of operations present fairly in all material respects the results of operations of Seller for the respective periods covered, and the balance sheets present fairly in all material respects
the financial condition of Seller as of their respective dates. Since December 31, 2004, there has been no change in any of the significant accounting policies, practices or procedures of Seller. 
  
 (b) Seller has delivered to Purchaser an unaudited balance sheet for Seller
at February 28, 2005 (the “Interim Balance Sheet Date”) and the related statement of operations for the eight month period then ended. Such interim financial statements have been prepared in conformity with GAAP. The interim statement of
operations presents fairly in all material respects the results of the operations of Seller for the period covered, and the interim balance sheet presents fairly in all material respects the financial condition of Seller at the Interim 

 

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 16 

 Balance Sheet Date. Such interim financial statements reflect all adjustments necessary for a fair presentation other
than normal year-end adjustments which are not material in amount in the aggregate, and omit required footnotes. At the Interim Balance Sheet Date, Seller had no material liability (actual, contingent or accrued) that, in accordance with GAAP
applied on a consistent basis, should have been shown or reflected on the interim balance sheet but was not. 
  
 (c) Except as set forth on Schedule 2.4, since the Interim Balance Sheet Date, whether or not in the ordinary course of business, there has not
been, occurred or arisen: 
  
 (i) any change in or event
affecting Seller or the business of the Hospital, that has had or would reasonably be expected to have a Material Adverse Effect; or 
  
 (ii) any agreement, condition, action or omission which would be proscribed by (or require consent under) Section 4.2 had it existed, occurred or arisen
after the date of this Agreement; or 
  
 (iii) any strike or
labor organizing activity; or 
  
 (iv) any casualty, loss, damage
or destruction (whether or not covered by insurance) of any property of Seller that is material or that has involved or may involve a material loss to Seller in excess of applicable insurance coverage; provided, however, that this representation and
warranty as of the Closing Date shall be subject to the provisions of Section 1.16 hereof. 
  
 2.5 Tax and Other Returns and Reports. 
  
 (a) For purposes of this Agreement, “Tax” or “Taxes” shall be defined as set forth below in Section 2.5(c) and shall include (i) any obligations under any agreements or arrangements with any other
Person with respect to such amounts and including any liability for Taxes of any predecessor or previously owned entity and (ii) any liability for any Taxes as a result of being a member of an affiliated, consolidated, combined or unitary group. For
purposes of this Section 2.5 and Schedule 2.5, with respect to matters pertaining to this Section 2.5, the terms “Seller,” “Subsidiary” or “Subsidiaries” shall include all entities currently or previously controlled (as
defined in Section 4.6(b) hereof) by Seller. 
  
 (b) Tax
Returns and Audits. Except as set forth on Schedule 2.5: 
  
 (i) Seller has timely filed (taking into account valid extensions of the time for filing) all Tax returns required to have been filed and all such Tax returns were true, correct and complete in all material respects. All Taxes owed by
Seller (whether or not shown on any Tax return) that have become due and payable have been paid. Seller is not currently the beneficiary of any extension of time within which to file any Tax return, except for Seller’s federal Tax return for
its fiscal year ended June 30, 2004. No claim has ever been made by an authority in a jurisdiction where Seller does not file Tax returns that it is or may be subject to taxation by that jurisdiction. 
  
 (ii) Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, member, or other third party. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 17 

 (iii) Seller has made available (or will make available through the Closing Date) to Purchaser (A)
correct and complete copies of all Tax returns of Seller relating to the Assets and (B) any examination reports, statements of deficiencies and assessments by any governmental authority against or agreed to by Seller since December 31, 1998. Seller
does not expect any authority to assess additional Taxes for any period for which Tax returns have been filed. There is no dispute or claim concerning any Tax liability of Seller claimed, or to Seller’s Knowledge, threatened or otherwise raised
by any authority. Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 
  
 (iv) There are no liens or security interests on any of the Assets that arose in connection with any failure (or alleged
failure) to pay any Tax, except for such liens or security interests that will be removed on or prior to the Closing Date. 
  
 (v) No property of Seller is “tax-exempt use property” within the meaning of Section 168(h) of the Code. Seller is not a party to any lease
made pursuant to former Section 168(f)(8) of the Internal Revenue Code of 1954. 
  
 (vi) Seller is not under any obligation to make a payment that would not be deductible under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). Seller has disclosed on its Tax
returns all positions taken therein that could give rise to a substantial understatement (A) of federal income tax under Code Section 6662 or (B) of any Tax under a similar provision of state, local or foreign Tax law. Seller has not engaged in any
transaction which would be treated as a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4 or otherwise been involved in a transaction which would require it to disclose a “reportable
transaction.” Seller has not been a member of an affiliated group filing a consolidated federal income Tax return and does not have any liability for the Taxes of any Person (other than Seller) under Treasury Regulations Section 1.1502-6, or
any similar provision of state, local or foreign law, as a transferee or successor, by contract, or otherwise. Seller has not been a party to any Tax allocation or sharing agreement. Neither Seller nor its Subsidiaries is currently or has been a
United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. 
  
 (vii) Seller is and has been in full compliance with all terms and conditions of any Tax exemptions, Tax holidays or other
Tax reduction agreements including, without limitation, its status as an organization described in Code Section 501(c)(3). The consummation of the transactions contemplated herein are not expected to have any material adverse effect on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other Tax reduction agreement or order. 
  
 (viii) Neither the Seller nor any of its Subsidiaries has constituted either a “distribution corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under Code Section 355 (a) in the two years prior to the date of this Agreement or (b) in a distribution which could otherwise constitute part of a “plan” or
“series of related transactions” (within the meaning of Code Section 355(c)). 
  
 (ix) Seller has not, with respect to any open taxable period, applied for and been granted permission to adopt a change in its method of accounting requiring adjustments under Section 481 of the Code or comparable
state or foreign law. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 18 

 (x) None of Seller nor its Subsidiaries is a partner in any entity classified as a partnership for
federal income tax purposes (except that Seller will become a partner in Purchaser upon the Closing). 
  
 (xi) Neither Seller nor any of its Subsidiaries has made an election under Treasury Regulations Section 301.7701-3 with respect to any entity.

  
 (xii) None of Seller nor its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending prior to, on, or after the Closing Date as a result of any deferred intercompany gain or any excess loss account
described in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision of federal state, local or foreign income Tax law). 
  
 (c) “Tax” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. 
  
 2.6 Material Contracts. 
  
 (a) Schedule 1.2(f) lists each Material Contract related to the
Assets or the operation of the Hospital to which Seller is a party or to which any of its properties are subject or by which any thereof is bound, other than the Excluded Contracts listed on Schedule 1.3(d). As used herein, “Material
Contract” means any contract or agreement that (i) after the Interim Balance Sheet Date obligates Seller to pay an amount of $25,000 or more in any one twelve month period on an annual basis or obligates Seller to pay an aggregate amount of
$50,000 or more, (ii) has an unexpired term as of the Interim Balance Sheet Date in excess of twelve (12) months that is not terminable upon ninety (90) days or less notice by Seller at any time during the term, without penalty, (iii) contains a
covenant not to compete or otherwise significantly restricts Seller’s business activities, (iv) limits the ability of Seller to conduct its business, including as to manner or place, (v) grants a power of attorney, agency or similar authority
to another Person, (vi) contains a right of first refusal, (vii) constitutes a collective bargaining agreement including any collective bargaining agreement with physicians or any other referral source, (viii) constitutes an employment or severance
agreement with any director, officer or employee of Seller, (ix) represents a contract upon which the business of the Hospital is substantially dependent, (x) represents a contract with a physician, or to the Knowledge of Seller, an immediate family
member of a physician (as that term is defined in 42 C.F.R. § 411.351) or any other referral source, including any contract with a pharmacy or any other supplier of medical products to patients of the Hospital, (xi) to the Knowledge of Seller,
represents a contract with an entity in which a referring physician (as that term is defined in 42 U.S.C. § 1395m(h)(7)) or a referring physician’s immediate family member has an ownership or investment interest, (xii) represents a third
party payor, managed care or preferred provider organization contract, (xiii) represents a clinical or educational affiliation agreement, or (xiv) was not made in the ordinary course of business. True, correct and complete copies of the Material
Contracts and the Excluded Contracts, including all amendments and supplements, have 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 19 

 been made available to Purchaser. Each Material Contract is valid and subsisting; except as set forth on Schedule
1.2(f), Seller has duly performed in all material respects all its obligations thereunder to the extent that such obligations to perform have accrued; and, except as set forth on Schedule 1.2(f), no material breach or default, alleged
material breach or default, or event which would (with the passage of time, notice or both) constitute a material breach or default thereunder by Seller (or, to the Knowledge of Seller, any other party or obligor with respect thereto), has occurred
or as a result of the execution of this Agreement or its performance will occur. 
  
 2.7 Real and Personal Property; Title to Property; Leases. 
  
 (a) Seller has good and valid title, free of encumbrances, in and to the Real Property, the Personal Property and the other Assets, except for (i) any
lien for taxes not yet due and payable, (ii) any obligations included in the Assumed Obligations, (iii) easements and other restrictions of record, or that are visible on the Real Property, (iv) any encumbrances or defects that do not materially
interfere with the operations of the Hospital on the Real Property in any manner consistent with the current use by Seller, (v) any liens that will be removed of record on or prior to the Closing Date, (vi) such partial exclusions from coverage
appearing in the standard form of ALTA owner’s title insurance policy that are not customarily removed by affidavit in local transactions, (vii) printed exclusions from coverage appearing in the standard form of ALTA owner’s title
insurance policy, provided that there shall be deleted therefrom any exception for possible unfiled mechanics’ liens or claims for labor or material furnished prior to the Effective Time upon Seller’s certification or, in the event that
Seller is unable to certify to the Title Company that no building, construction, alterations, additions or repairs have been made to the Real Property within the four (4) month period preceding the Closing Date, then the exception for
mechanics’ liens shall be insured over by affirmative coverage, Seller to pay any special premiums for mechanics’ lien coverage charged because of Seller’s failure to make such certification, and (viii) subsurface public utility
easements for local distribution, such as for gas, water and sewer lines or electric, telephone or CATV cable, the location of which is ascertainable and fixed, provided that the exercise of the rights thereunder does not materially interfere with
the operations of the Hospital in any manner consistent with the current use by Seller (collectively, the “Permitted Encumbrances”). Except as shown in Schedule 2.7, all material tangible properties of Seller are, to the Knowledge
of Seller, in a good state of maintenance and repair (except for ordinary wear and tear) and in operating condition. 
  
 (b) The Real Property constitutes all of the real property owned by Seller that is used in the conduct of the business of the Hospital. 
  
 (c) The Assets constitute all of the property necessary for Purchaser to
operate the Hospital after the Effective Time in the same manner as Seller operates the Hospital as of the date hereof. 
  
 (d) At Closing, Seller will convey to Purchaser (i) good, valid and marketable fee simple title to all Assets other than the Leased Real Property and (ii)
good, valid and marketable leasehold interest in the Leased Real Property, in each case under clauses (i) and (ii) subject to no mortgage, lien, pledge, security interest, conditional sales agreement, right of first refusal, option or encumbrance,
except for the Permitted Encumbrances and the rights of any lessor or licensor of leased or licensed personal property. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 20 

 (e) Seller has no Knowledge of, and, during the past three (3) years, Seller has not received any written
notice of, Seller’s non-compliance with law, zoning ordinance or other restriction with respect to any of the Real Property. 
  
 (f) There is no pending or, to the Knowledge of Seller, threatened action that would materially interfere with the ownership, use or quiet enjoyment of
any of the Real Property by Seller. 
  
 (g) Seller has no
Knowledge of, and, during the past three (3) years, Seller has not received any notice of, any proposed special assessments, threatened condemnation or any proposed material changes in property tax or land use laws affecting the Real Property.

  
 2.8 Intangible Property. Schedule 2.8 lists any
and all marks and other material items of intangible property in which Seller has an interest and the nature of such interest. Except as shown on Schedule 2.8, such assets include all permits or other rights with respect to any of the,
foregoing. Seller has complete rights to use or ownership of all intangible property required for use in connection with the business of the Hospital as presently conducted by Seller. Except as disclosed on Schedule 2.8, Seller does not use
any intangible property by consent of any other Person and is not required to and does not make any payments to others with respect thereto. Except as shown on Schedule 2.8, the intangible property of Seller is fully assignable free and clear
of any encumbrances. Seller has in all material respects performed all obligations required to be performed by, and Seller is not in default in any material respect under, any contract relating to any of the foregoing. Seller has not received any
notice to the effect (and is not otherwise aware) that such intangible property or any use thereof by Seller conflicts with or infringes (or allegedly conflicts with or infringes) the rights of any Person. 
  
 2.9 Legal Proceedings. Except as set forth on Schedule 2.9,
there is no claim, suit, litigation, arbitration, mediation, investigation, order, action or other proceeding (collectively, “Claims”) pending, or, to the Knowledge of Seller threatened, against or affecting Seller, the Assets or the
Hospital. Except as described in Schedule 2.9, all such Claims are fully insured (except for applicable deductibles), and no insurer has issued a “Reservation of Rights” letter or otherwise qualified its obligation to insure and
defend Seller against law suits arising therefrom. 
  
 2.10
Accounting Records; Internal Controls. 
  
 (a)
Accounting Records. Seller has records that accurately and validly reflect its respective transactions, and accounting controls sufficient to insure that such transactions are (i) executed in accordance with management’s general or
specific authorization and (ii) recorded in conformity with GAAP so as to maintain accountability for assets. 
  
 (b) Data Processing Records. All data processing records, to the extent they contain important information that is not easily and readily available
elsewhere, have been duplicated, and such duplicates are stored safely and securely pursuant to procedures and techniques utilized by companies of comparable size in similar lines of business as Seller. 
  
 2.11 Insurance. Schedule 2.11 lists all insurance policies and
bonds that are maintained by Seller and are material to the business of the Hospital and indicates the type of insurance, policy number, term, identity of insurer, premiums and coverage amounts for the previous two (2) years and coverages (including
applicable deductibles) for each such insurance policy and bond. Seller is not in default under any insurance policy or bond. Seller has timely 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 21 

 filed claims with its respective insurers with respect to all matters and occurrences for which it believes it has
coverage. Schedule 2.11 lists all claims in excess of $50,000 which have been made by Seller in the last two (2) years under any insurance policy and bond. Except as set forth on Schedule 2.11, all such insurance policies and bonds are
in full force and effect. Except as shown on Schedule 2.11, Seller has not received notice from any insurer or agent of any intent to cancel or not to renew any of such insurance policies and bonds. To the Knowledge of Seller, there are no
outstanding requirements or recommendations by any insurance company that issued a policy with respect to any of the Assets or the Hospital or by any Board of Fire Underwriters or other body exercising similar functions or by any governmental entity
requiring or recommending any action which has not been taken. 
  
 2.12 Employees. 
  
 (a) Schedule 2.12 sets
forth a complete list (as of the date set forth therein) of names, positions and current annual salaries or wage rates, bonus and other compensation and/or benefit arrangements, accrued vacation and sick leave, the paid time off pay and period of
service credited for vesting as of the date thereof of all full-time and part-time employees of Seller with respect to the operation of the Hospital and indicating whether such employee is a part-time or full-time employee. Except as shown on
Schedule 2.12, there are no employment agreements or severance agreements with employees of Seller. 
  
 (b) There are no labor union or collective bargaining agreements in effect with respect to the employees of Seller with respect to the operation of the
Hospital. There is no unfair labor practice complaint against Seller pending, or to the Knowledge of Seller threatened, before the National Labor Relations Board with respect to the operation of the Hospital. There is no labor strike, arbitration,
dispute, slowdown or stoppage, and no union organizing campaign, pending, or to the Knowledge of Seller threatened by or involving the employees of Seller with respect to the operation of the Hospital. 
  
 2.13 Employee Benefits. 
  
 (a) Schedule 2.13 contains a list of each pension, retirement,
savings, deferred compensation, and profit-sharing plan and each bonus or other incentive plan, severance plan, health, group insurance or other welfare plan, or other similar plan and any “employee plan” within the meaning of Section 3(3)
of ERISA, under which any employee, former employee or independent contractor (or beneficiary of any employee, former employee or independent contractor) of Seller has or may have any current or future right to benefits (the term “plan”
shall include any contract, agreement, policy or understanding, each such plan being hereinafter referred to in this Agreement individually as a “Plan”). Seller has made available to Purchaser true and complete copies of (i) each Plan and
(ii) the summary plan description, if any, for each Plan. No Plan is intended to be tax qualified under Sections 401(a) and 501(a) of the Code. To Seller’s Knowledge, there has been no prohibited transaction within the meaning of Section 4975
of the Code and Section 406 of Title I of ERISA with respect to any Plan as to which there is no statutory or administrative exemption. 
  
 (b) There are no actions pending, or, to Seller’s Knowledge, threatened, with respect to any Plan or the assets of any Plan, other than claims for
benefits in the ordinary course. To Seller’s Knowledge, each Plan has been administered in all material respects in accordance with its terms and with all applicable laws (including ERISA). 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 22 

 (c) Neither Seller nor any Commonly Controlled Entity contributes to or has an obligation to contribute
to, nor has Seller or any Commonly Controlled Entity at any time within six (6) years prior to the Closing contributed to or had an obligation to contribute to, either (i) a multiemployer plan within the meaning of Section 3(37) of ERISA, or (ii)
any plan subject to Title IV of ERISA. Seller has performed timely and shall timely perform all obligations of Seller and each Commonly Controlled Entity, whether arising by operation of law or by contract, required to be performed under Section
4980B of the Code (or similar state law), including, but not limited to, such obligations that may arise by virtue of the transactions contemplated by this Agreement. For the purposes of this Section 2.13, “Commonly Controlled Entity“
means any corporation, trade, business, or entity under common control with Seller within the meaning of Section 414(b), (c), (m), or (o) of the Code, or Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). 
  
 (d) Each employee, former employee and
independent contractor of Seller has been properly classified as such for all purposes under the Code and ERISA. 
  
 (e) Seller maintains no “pension plan” within the meaning of Section 3(2) of ERISA for its employees other than a program of contributions made
to individual custodial accounts or tax-deferred annuities under Section 403(b) of the Code (“Seller’s 403(b) Program”). 
  
 (f) Seller’s 403(b) Program has been maintained in material compliance with all applicable provisions of the Code and ERISA. Seller does not owe, nor
will Purchaser owe, any taxes, penalties, judgments or settlements in connection with Seller’s 403(b) Program based on an act or omission of Seller taken at any time. 
  
 2.14 Certain Interests. Except as shown on Schedule 2.14, no Affiliate of Seller, nor any officer, director or
manager thereof, has any material interest in any property used in or pertaining to the business of the Hospital; no such Person is indebted or otherwise obligated to Seller; and Seller is not indebted or otherwise obligated to any such Person,
except for amounts due under normal arrangements applicable to all employees generally as to salary, or reimbursement of ordinary business expenses not unusual in amount or significance. Except as shown on Schedule 2.14, the consummation of
the transactions contemplated by this Agreement will not (either alone, or upon the occurrence of any act or event, or with the lapse of time, or both) result in any benefit or payment (severance or other) arising or becoming due from Seller or the
successor or assign of any thereof to any Person. 
  
 2.15
Intercompany Transactions. Except as shown on Schedule 2.15, Seller has not engaged in any transaction with any Affiliate of Seller. Except as shown on Schedule 2.15, Seller has no liabilities or obligations to any Affiliate of
Seller and no Affiliate of Seller has any liabilities or obligations to Seller. 
  
 2.16 Inventories. All Inventories of Seller are of good merchantable quality, reasonable in balance or currently usable in the ordinary course of business in all material respects. The value at which
Inventories are carried reflects the customary inventory valuation policy of Seller, as applicable, for stating inventory, in accordance with GAAP consistently applied. 
  
 2.17 Receivables. The accounts receivable (including the Government Receivables) reflected on the books and records
of Seller and the Hospital arose from bona fide commercial transactions, and the financial statements referred to in Section 2.4 include all material refunds, 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 23 

 discounts or setoffs payable or assessable with respect to such accounts receivable (including the Government
Receivables), taken as a whole. Seller adequately records on its financial statements in accordance with GAAP all estimates for future Seller Cost Report settlements for all years open to settlement. Seller records government program recoupments on
its financial statements as they occur in accordance with GAAP. 
  
 2.18 Third Party Payors and Suppliers. Schedule 2.18 lists the names of and describes all Material Contracts with, and the respective percentage of the revenues of the business of the Hospital for the year ended December 31,
2004, attributable to, the ten largest third party payors and any sole-source suppliers of significant goods or services (other than electricity, gas, telephone or water) to the business of the Hospital with respect to which alternative sources of
supply are not readily available on comparable terms and conditions. 
  
 2.19 Workers Adjustment and Retraining Notification (WARN). Seller has complied with the Workers Adjustment Retraining and Notification Act (the “WARN Act”) insofar as applicable to any acts or transactions with respect to
the operation of the Hospital prior to and including the transactions contemplated by this Agreement. 
  
 2.20 Environmental Compliance. Except as set forth in Schedule 2.20 and except as set forth in that certain Phase I report prepared by
ENVIRON, dated March, 2005, included as part of Schedule 2.20: 
  
 (a) Seller is in material compliance with all applicable Environmental Laws. As used herein, “Environmental Laws“ shall mean all applicable federal, state or local laws relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land or surface or subsurface strata), including all federal, state or local laws relating to emissions, discharges, releases, threatened releases or the presence of petroleum
and petroleum-derived products, asbestos, mold, pollutants, contaminants, chemicals, medical waste or other industrial, toxic or hazardous substances or wastes (collectively, “Hazardous Substances”) into the environment and all federal,
state or local laws relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any of the foregoing, including the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. § 9601, et seq., The Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., and the rules and regulations promulgated thereunder. 
  

(b) Seller has obtained all permits required under applicable Environmental Laws for the use, operation or ownership of the Real Property and the
business of the Hospital. The Real Property and the Hospital are in material compliance with each such applicable permit. No federal, state or local governmental entity has notified Seller that any such permits may or will be suspended, cancelled,
revoked or materially modified, or cannot be renewed in the ordinary course of business. 
  
 (c) Seller has not received from any federal, state or local governmental entity or other Person any order, directive, information request, notice of violation, notice of alleged violation, notice of noncompliance,
notice of liability or potential liability, regarding compliance with, or liability or potential liability under, applicable Environmental Laws concerning any of the Real Property or the business of the Hospital or any off-site disposal of any
Hazardous Substances including any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 24 

 (d) No judicial proceeding, action, claim, suit, or governmental or administrative action is pending or,
to the Knowledge of Seller, threatened, under any applicable Environmental Law pursuant to which Seller is or to the Knowledge of Seller could be reasonably expected to be named as a party with respect to the Real Property or the business of the
Hospital. 
  
 (e) Seller has not entered into any agreement with
any federal, state or local governmental entity or any other Person pursuant to which Seller assumed responsibility for the investigation or remediation of any condition resulting from the release, treatment, storage or disposal of Hazardous
Substances. 
  
 (f) Seller has disclosed and made available to
Purchaser all relevant information, including all studies, site assessments, compliance audits and similar environmental reports, analyses, and test results that are in Seller’s possession, custody or control, and of which Seller has Knowledge,
relating to any past and present (i) environmental conditions concerning the business of the Hospital or on, under or about the Real Property, (ii) use or operation of the Real Property used in or held for use in connection with the business of the
Hospital, and (iii) activities relating to Hazardous Substances on, or any off-site disposal of a Hazardous Substance from, the Real Property or used in connection with the business of the Hospital. Seller has disclosed and made available to
Purchaser any and all documents that are in Seller’s possession, custody or control relating to projected environmental expenditures for the business of the Hospital and the Real Property, including capital and operating budgets and reports
prepared by independent auditors or accountants and prepared by personnel, and including reports, studies or documents relating to the costs (including, anticipated capital costs and annual expenses) of compliance with Environmental Laws.

  
 (g) Seller has no Knowledge of any soil or groundwater
contamination on, under, or about any of the Real Property except as disclosed in the environmental reports described in Section 2.20(f) above. 
  
 (h) Seller does not hold and is not required to hold a permit for the generation, treatment, storage, or disposal of hazardous waste in accordance with
the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.). 
  
 2.21 Powers of Attorney. Seller has not given any power of attorney (irrevocable or otherwise) to any Person for any purpose relating to the business of the Hospital, other than powers of attorney given to
regulatory authorities in connection with routine qualifications to do business. 
  
 2.22 Accreditation; Medicare and Medicaid; Third-Party Payors; Compliance with Health Care Laws. 
  
 (a) The Hospital is duly accredited by JCAHO as evidenced by the Hospital’s most recent JCAHO accreditation survey reports and is duly licensed by
the Pennsylvania Department of Public Welfare (“DPW”) as a psychiatric hospital and residential treatment center. Seller has the lawful authority and all federal, state or local governmental authorizations, certificates of authority,
certificates of need, licenses or permits necessary for or required to conduct the business operations of the Hospital as such are presently conducted. In order to conduct the business operations of the Hospital as presently conducted, to the
Knowledge of Seller, Seller is not required to hold any licenses, permits and other governmental approvals or 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 25 

 authorizations except for the licenses currently held by Seller as set forth on Schedule 2.22. The licenses listed
on Schedule 2.22 are in full force and effect and Seller is in full compliance in all material respects with all requirements of each license that it holds. Seller has made all material filings with governmental agencies required for the
conduct of its business operations. There are no outstanding judgments, consent decrees or injunctions of any court or any governmental department, commission, agency or instrumentality by which Seller is bound or to which Seller is subject which
relate in any manner to the business of the Hospital. Seller has not received nor, to the Knowledge of Seller, is it subject to any notice, subpoena, demand letter, administrative inquiry or formal or informal complaint or claim from any
governmental department, commission, agency or instrumentality which relate in any manner to the business operations of the Hospital, except as set forth on Schedule 2.22. 
  
 (b) Seller has previously delivered to Purchaser true, correct and complete copies of (i) the Hospital’s most recent
JCAHO accreditation survey report, a list of deficiencies, if any, and, if applicable, a plan of correction; (ii) the Hospital’s most recent DPW surveys, lists of deficiencies, if any, and, if applicable, plans of correction; (iii) the
Hospital’s fire marshal’s surveys for the past two (2) years and lists of deficiencies, if any; and (iv) the Hospital’s boiler inspection reports for the past two (2) years and lists of deficiencies, if any. Seller has taken all
reasonable steps to correct all such deficiencies and a description of any uncorrected deficiency is set forth in Section 2.22. 
  
 (c) Seller receives payment without restriction under Medicare and Medicaid and has a valid and current provider agreement and one or more properly issued
provider numbers with each Government Program. All such provider numbers of the Hospital are listed on Schedule 2.22 by facility to the extent applicable. Except as set forth on Schedule 2.22, Seller is in compliance in all material
respects with the conditions of participation for the Government Programs. 
  
 (d) Seller has timely filed in accordance with instructions from the Centers for Medicare & Medicaid Services or the applicable payor or shall cause to be timely filed in accordance with instructions from the
Centers for Medicare & Medicaid Services or the applicable payor all cost reports and other reports that are required by third-party payors to have been filed or made on or before the Closing Date with respect to the purchase of services of the
business of the Hospital, including Government Programs and other insurance carriers, and, except as disclosed on Schedule 2.22, all such reports are or when filed shall be complete and accurate in all material respects. Except as disclosed
on Schedule 2.22, Seller is and has been in material compliance with filing requirements with respect to cost reports of Seller, and such reports do not claim, and Seller has not received, payment or reimbursement in excess of the amount
provided or allowed by applicable law or any applicable agreement, except where excess reimbursement was noted on the cost report. True and correct copies in electronic format of all such reports for the three (3) most recent fiscal years for which
cost reports have been filed by Seller, and any other cost report for which a final settlement has not been issued, have been made available to Purchaser. Except as disclosed on Schedule 2.22 and except for claims, actions and appeals in the
ordinary course of business, Seller has neither initiated nor received written notice of any material claims, actions or appeals pending before any commission, board or agency, including any fiscal intermediary or carrier, governmental entity, or
the Administrator of the Center for Medicare & Medicaid Services, with respect to any Government Program cost reports or claims filed on behalf of Seller with respect to the business of the Hospital, within the past three (3) years. Schedule
2.22 indicates which of such cost reports have been audited by the fiscal intermediary and finally settled. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 26 

 (e) Except as disclosed on Schedule 2.22, no validation review or program integrity review related
to the Hospital, the operation of the Hospital, or the consummation of the transactions contemplated by this Agreement, has been conducted by any commission, board, agency or government entity in connection with the Government Programs within the
past three (3) years, and to the best Knowledge of Seller, no such reviews are scheduled, pending or threatened against or affecting Seller with respect to the Hospital, or the consummation of the transactions contemplated by this Agreement.

  
 (f) All billing practices of Seller with respect to the
Hospital to all third-party payors within the past three (3) years, including the Government Programs and private insurance companies, are and have been in compliance with all applicable laws and policies of such third-party payors and Government
Programs in all material respects, and neither Seller with respect to the Hospital nor the Hospital has billed or received any payment or reimbursement in excess of amounts allowed by law. 
  
 (g) Seller has performed through third party contractors a review of the
website of the Office of Inspector General of the United States Department of Health and Human Services and based upon such review and except as listed on Schedule 2.22, (i) no physician currently on the medical staff at the Hospital is
listed as having been, and to the Knowledge of Seller is not, excluded from participating in Medicare or any other federal health care program (as that term is defined in 42 U.S.C. § 1320a-7b(f)). To the Knowledge of Seller, none of the
business of the Hospital, or Seller or Seller’s officers, directors or managing employees (as that term is defined in 42 U.S.C. § 1320a-5(b)), has been excluded from participating in Medicare or any other federal health care program (as
that term is defined in 42 U.S.C. § 1320a-7b(f)) or has been subject to sanction pursuant to 42 U.S.C. § 1320a-7a or 1320a-8 or has been convicted of a criminal offense under the federal Anti Kickback Law, 42 U.S.C. §1320a 7b (the
“Anti-Kickback Law”). 
  
 (h) In the five (5) year
period immediately preceding the Execution Date and since the Execution Date, to the Knowledge of Seller, none of Seller’s employees while an employee of the Hospital has committed a violation of federal or state laws regulating health care
fraud, including the Anti-Kickback Law, the Stark I and II Laws, 42 U.S.C. §1395nn, as amended (the “Stark Law”), and the False Claims Act, 31 U.S.C. §3729, et seq. (the “False Claims Act”), which violation relates in
any respect to the business operations of the Hospital. 
  
 2.23
Compliance Program. Seller has made available to Purchaser (i) a copy of the Hospital’s current compliance program materials, including all program descriptions, compliance officer and committee descriptions, ethics and risk area policy
materials, training and education materials, auditing and monitoring protocols, reporting mechanisms, and disciplinary policies and (ii) copies of any written complaints received in the previous five (5) years from the date hereof from employees,
independent contractors, vendors, physicians or any other Person asserting that the Hospital or Seller has violated any health care fraud law or regulation, including the Anti-Kickback Law and the Stark Law. Seller (a) is not a party to a Corporate
Integrity Agreement with the Office of Inspector General of the United States Department of Health and Human Services, (b) has no reporting obligations pursuant to any settlement agreement entered into with any Governmental Program, (c) to the
Knowledge of Seller, has not 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 27 

 been the subject of any Government Program investigation conducted by any federal or state enforcement agency during the
past five (5) years, (d) to the Knowledge of Seller, has not been a defendant in any qui tam/False Claims Act litigation during the past five (5) years, or (e) has not been served with or received any written search warrant, subpoena, civil
investigative demand or contact letter from any federal or state enforcement agency (except in connection with medical services provided to, or medical supplies purchased from, third parties who may be defendants or the subject of investigation into
conduct unrelated to the operation of the health care businesses conducted by Seller). 
  
 2.24 HIPAA. Seller is in compliance in all material respects with the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, and the rules and regulations
promulgated thereunder as of the applicable effective dates for such requirements. 
  
 2.25 Restricted Grant and Loan Programs. The transactions contemplated by this Agreement will not result in any obligation on Seller to repay any loans, grants or loan guarantees or provide uncompensated care
in consideration thereof pursuant to Hill Burton Program or any similar statute or program with respect to the ownership or operation of the business of the Hospital. No Contract includes requirements that the payment of grant funds or other
consideration under the Contract be made only to a nonprofit entity. 
  
 2.26 Experimental Procedures. Seller has not performed or authorized the performance of any experimental or research procedures or studies involving patients of the Hospital that require the prior approval of any governmental entity
that has not been obtained. 
  
 2.27 Medical Staff; Physician
Relations. Seller has delivered to Purchaser complete and correct copies of the bylaws and rules and regulations of the medical staff and medical executive committees of the Hospital. Schedule 2.27 sets forth (a) the name and status on
the medical staff of each member of the medical staff of the Hospital and (b) the degree (e.g., M.D., D.O.), title specialty and board certification, if any, of each such medical staff member. Except as set forth on Schedule 2.27, there are
no pending or, to the Knowledge of Seller, threatened disputes with the Hospital medical staff members or applicants or allied health professionals, and all appeal periods in respect of any medical staff member or applicant against whom an adverse
action has been taken have expired. 
  
 2.28 Solvency.
Seller is not insolvent and will not be rendered insolvent as a result of any of the transactions contemplated by this Agreement. For purposes hereof, the term “solvency” means that: (a) the fair salable value of Seller’s tangible
assets is in excess of the total amount of its liabilities (including for purposes of this definition all liabilities, whether or not reflected on a balance sheet prepared in accordance with GAAP, and whether direct or indirect, fixed or contingent,
secured or unsecured, and disputed or undisputed); (b) Seller is able to pay its debts or obligations in the ordinary course as they mature; and (c) Seller has capital sufficient to carry on its businesses and all businesses in which it is about to
engage. 
  
 2.29 No Brokers or Finders. No agent, broker,
finder, or investment or commercial banker, or other Person engaged by or acting on behalf of Seller or any of its Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement or such transactions; except as to which Seller shall have full responsibility and, with respect to such fees or
commissions, Purchaser shall not have any liability. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 28 

 2.30 Condition of Assets. Other than with respect to the representations and warranties herein
provided, Seller shall transfer the Assets to Purchaser and Purchaser shall accept the Assets from Seller AS IS WITH NO WARRANTY OF HABITABILITY OR FITNESS FOR HABITATION, WITH RESPECT TO THE LEASED REAL PROPERTY, AND WITH NO WARRANTIES, INCLUDING
WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE PERSONAL PROPERTY, 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 Leased Real Property and, as applicable, the Personal Property, and normal and customary use and disposal of Inventory and supplies in the ordinary course of business from the date thereof up to the Closing Date. 
  
 2.31 Condominium Matters. 
  
 (a) As of the Closing, the Condominium Association will be a nonprofit
corporation duly incorporated and subsisting under the laws of the Commonwealth of Pennsylvania. As of the Closing, the Condominium Association will have full power and authority to own, operate and lease its properties and to carry on its
businesses as then conducted. 
  
 (b) As of the Closing, each of
Seller and the Condominium Association shall have duly performed in all material respects all its respective obligations under the Condominium Declaration, the Condominium Articles and the Condominium Bylaws, to the extent that such obligations to
perform have accrued; and no material breach or default, alleged material breach or default, or event which would (with the passage of time, notice or both) constitute a material breach or default thereunder by Seller or the Condominium Association,
shall have occurred or as a result of the Closing of the transactions contemplated by this Agreement or its performance hereunder will occur. 
  
 ARTICLE 3 
 REPRESENTATIONS AND
WARRANTIES OF PURCHASER 
  
 As an inducement to Seller to
enter into this Agreement and to consummate the transactions contemplated by this Agreement, Purchaser hereby represents, warrants and covenants to Seller as to the following matters as of the Execution Date and, except as otherwise provided herein,
shall be deemed to remake all of the following representations, warranties and covenants as of the Closing Date and the Effective Time: 
  
 3.1 Authority. Purchaser has full limited partnership power and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. 
  
 3.2 Authorization/Execution. All
limited partnership actions required to be taken by Purchaser to authorize the execution, delivery and performance of this Agreement, all documents executed by Purchaser which are necessary to give effect to this Agreement, and all transactions
contemplated hereby, have been duly and properly taken or obtained by Purchaser. This Agreement has been duly and validly executed and delivered by Purchaser and, assuming due and valid execution by, and enforceability against, Seller, this
Agreement constitutes a valid and 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 29 

 binding obligation of Purchaser enforceable in accordance with its terms subject to (a) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally from time to time in effect and (b) limitations on the enforcement of equitable remedies. 
  
 3.3 Organization and Good Standing; No Subsidiaries; No Conflicts. 
  
 (a) Purchaser is a limited partnership duly organized, registered and
subsisting under the laws of the Commonwealth of Pennsylvania, and has full power and authority to own, operate and lease its properties and to carry on its business as now conducted. 
  
 (b) Purchaser has no subsidiaries, whether direct or indirect. Purchaser has no equity interest or investment in, and does
not have any other right or obligation to purchase any equity interest or other investment in, and is not a partner of or joint venturer with, any other Person. 
  

(c) The execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement and all other instruments,
agreements, certificates and documents contemplated hereby to which Purchaser is or will be a party do not (i) violate any decree or judgment of any court or governmental authority which may be applicable to or bind Purchaser; (ii) violate any law,
rule or regulation applicable to Purchaser which would have a material adverse effect on Purchaser; (iii) violate or conflict with, or result in a breach of, or constitute a default (or an event which, with or without notice or lapse of time or
both, would constitute a default) under, or permit cancellation of, any material contract, lease, sales order, purchase order, indenture, mortgage, note, bond, instrument, license or other agreement to which Purchaser is a party, or by which
Purchaser is bound; (iv) permit the acceleration of the maturity of any indebtedness of Purchaser; or (v) violate or conflict with any provision of the Certificate of Limited Partnership or Limited Partnership Agreement of Purchaser. 
  
 3.4 No Liabilities or Obligations. Purchaser has no material
liabilities or obligations (actual, contingent, accrued, known or unknown) other than the liabilities and obligations resulting from this Agreement and the transactions contemplated hereby. 
  
 3.5 Solvency. Purchaser is not insolvent and will not be rendered
insolvent as a result of any of the transactions contemplated by this Agreement. For purposes hereof, the term “solvency” means that: (a) the fair salable value of Purchaser’s tangible assets is in excess of the total amount of its
liabilities (including for purposes of this definition all liabilities, whether or not reflected on a balance sheet prepared in accordance with GAAP, and whether direct or indirect, fixed or contingent, secured or unsecured, and disputed or
undisputed); (b) Purchaser is able to pay its debts or obligations in the ordinary course as they mature; and (c) Purchaser has capital sufficient to carry on its businesses and all businesses in which it is about to engage. 
  
 3.6 Brokers and Finders. No agent, broker, finder, or investment or
commercial banker, or other Person engaged by or acting on behalf of Purchaser, or any of their respective Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement,
is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement or such transactions; except those as to which Purchaser shall have full responsibility and, with respect to such fees or
commissions, Seller shall not have any liability. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 30 

 3.7 Availability of Funds. Purchaser has the ability to obtain funds in cash in an amount equal to
the Purchase Price by means of credit facilities or otherwise, and will at the Closing have immediately available funds in cash which are sufficient to pay the Purchase Price and to pay any other amounts payable pursuant to this Agreement and to
consummate the transactions contemplated by this Agreement. 
  
 ARTICLE 4 
 COVENANTS OF SELLER 
  
 4.1 Access and Information; Inspection Period, Preparation of Exhibits and Schedules. From the Execution Date through
the Closing, Seller shall afford to the officers and agents of Purchaser (which shall include accountants, attorneys, bankers and other consultants and agents of Purchaser) full and complete access during normal business hours to and the right to
inspect the plants, properties, books, accounts, records and all other relevant documents and information with respect to the assets, liabilities and business of the Hospital and all of the other Assets being purchased or leased by Purchaser
hereunder. From the Execution Date through the Closing, Seller shall furnish Purchaser with such additional financial and operating data and other information in Seller’s possession as to businesses and properties of the Hospital and all of the
Assets as Purchaser or its representatives may from time to time reasonably request, without regard to where such information may be located. Purchaser’s right of access and inspection shall be exercised in such a manner as not to interfere
unreasonably with the operations of the Hospital. Such access may include consultations with the personnel of Seller. All such requests for access and consultations shall be coordinated through Seller’s Chief Operating Officer or Chief
Financial Officer or their respective designees. Further, Purchaser may, at its sole cost and expense undertake environmental, mechanical and structural surveys of the Hospital and the Leased Real Property. After performing any inspections, tests or
surveys, Purchaser shall restore the Hospital and the Leased Real Property as nearly as possible to its original condition and repair any damage to same caused by the performance of such inspections, tests, or surveys. Prior to Purchaser’s or
its agents’, contractors’ or employees’ entry onto the Hospital or the Leased Real Property to perform any such inspections, tests, or surveys, Purchaser shall, and shall cause its agents and contractors to, maintain levels of
liability and other insurance as are considered generally acceptable in the industry for the activities to be undertaken on the Hospital or the Leased Real Property. Purchaser hereby assumes, and agrees to defend, indemnify and save Seller harmless
from and against, any claim, damage, liability, cost or expense (including reasonable attorneys’ fees) arising from acts or omissions of Purchaser (and from the acts or omissions of Purchaser’s agents, contractors or employees) in any way
pertaining to any entry upon, or inspection, test, or survey of, the Hospital or the Leased Real Property (or any parts thereof). Purchaser agrees to do no act prior to Closing that would encumber title to the Hospital or the Real Property except as
contemplated and required in order to establish the Condominium. Purchaser’s obligations under this Section with respect to acts or omissions occurring prior to Closing, but not thereafter, shall survive Closing or termination hereunder.

  
 4.2 Conduct of Business. On and after the Execution
Date and prior to the Closing, and except as otherwise consented to or approved by an authorized officer of Purchaser or required by this Agreement, Seller shall, with respect to the operation of the Hospital: 
  
 (a) carry on its businesses with respect to the operation of the Hospital in
substantially the same manner as presently conducted and not make any material change in personnel, operations, finance, accounting policies (unless Seller is required to adopt such changes under GAAP), Tax elections or Tax returns or Assets;

  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 31 

 (b) maintain the Hospital and all parts thereof and all other Assets in operating condition in a manner
consistent with past practices, ordinary wear and tear excepted; 
  
 (c) perform all of its material obligations under agreements relating to or affecting the Hospital, its operations or the Assets; 
  
 (d) keep in full force and effect present insurance policies or other comparable self-insurance; and 
  
 (e) use commercially reasonable efforts to maintain and preserve its business
organization intact, retain its present employees at the Hospital and maintain its relationships with physicians, suppliers, customers and others having business relationships with the Hospital. 
  
 4.3 Negative Covenants. From the Execution Date until the Closing,
with respect to the operation of the Hospital, Seller shall not, without the prior written consent of Purchaser or except as may be required by law: 
  
 (a) amend or terminate any of the Contracts or Personal Property Leases, enter into any new contract or commitment, or incur or agree to incur any
liability, except in the ordinary course of business (which ordinary course of business shall include renewals of any Contract or Personal Property Lease), and in no event with respect to any such Contract or Personal Property Lease as to which the
total to be paid in the future under the Contract or Personal Property Lease exceeds $25,000 and which is not terminable by Seller without penalty on ninety (90) days notice or less; 
  
 (b) increase compensation payable or to become payable or make any bonus payment to or otherwise enter into one or more
bonus agreements with any employee, except in the ordinary course of business in accordance with Seller’s customary personnel policies; 
  
 (c) create, assume or permit to exist any new debt, mortgage, deed of trust, pledge or other lien or encumbrance (other than Permitted Encumbrances) upon
any of the Assets; 
  
 (d) acquire (whether by purchase or lease)
or sell, assign, lease, or otherwise transfer or dispose of any material Asset, except in the ordinary course of business with comparable replacement thereof; 
  

(e) except with respect to previously budgeted expenditures, purchase capital assets or incur costs in respect of construction in progress; 

 
 (f) take any action outside the ordinary course of business; or

  
 (g) reduce Inventory except in the ordinary course of
business. 
  
 For purposes of this Section 4.3, Seller shall be deemed to have
obtained Purchaser’s prior written consent to undertake the actions otherwise prohibited by this Section 4.3 if Seller gives Purchaser written notice of a proposed action and Seller does not receive from Purchaser a written notice of objection
to such action within five (5) business days after Purchaser receives Seller’s written notice. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 32 

 4.4 Consents. 
  
 (a) Within thirty (30) days following the Execution Date, Seller shall request the consent of its Members, as required by
the Bylaws of Seller, approving the transactions contemplated by this Agreement. 
  
 (b) Seller shall use commercially reasonable efforts to obtain all Contract and Lease Consents and shall cooperate with Purchaser and its representatives and attorneys: (a) in Purchaser’s efforts to obtain all
other consents, approvals, authorizations, clearances and licenses required to carry out the transactions contemplated by this Agreement (including, without limitation, those of governmental and regulatory authorities) or which Purchaser reasonably
deems necessary or appropriate, and (b) in the preparation of any document or other material which may be required by any governmental agency as a predicate to or result of the transactions contemplated in this Agreement. Notwithstanding any
provision to the contrary contained in this Agreement, to the extent Seller is unable to obtain any of the Contract and Lease Consents and Purchaser agrees to proceed to Closing without such Consents, Seller shall cooperate with Purchaser to ensure
that Purchaser obtains the benefits of each such Contract or Personal Property Lease. 
  
 4.5 Additional Financial Information. Within fifteen (15) calendar days following the end of each calendar month after the Execution Date and prior to Closing, Seller shall deliver to Purchaser complete copies
of the unaudited balance sheet and related unaudited statements of income in accordance with GAAP with respect to the operation of the Hospital for each month then ended, together with corresponding year-to-date amounts. 
  
 4.6 No-Shop. 
  
 (a) From and after the Execution Date until the earlier of the Closing Date
or the termination of this Agreement, Seller shall not, without the prior written consent of Purchaser: (i) offer for sale or lease the assets of the Hospital or the Assets (or any material portion thereof); (ii) solicit offers to buy all or any
material portion of the Hospital or the Assets; (iii) hold discussions with any party (other than Purchaser) looking toward such an offer or solicitation; or (iv) enter into any agreement with any party (other than Purchaser) with respect to the
sale or other disposition of the assets of the Hospital or the Assets. Notwithstanding the foregoing, this Section 4.6 shall not be construed to prohibit Seller or its Affiliates from engaging in corporate transactions, including mergers,
reorganizations or other transactions, so long as the terms thereof do not contemplate the sale or lease or other disposition of the Hospital or the Assets and Seller complies with the provisions of Section 12.3 requiring Purchaser’s consent to
any assignment of this Agreement by Seller. 
  
 (b) Any reference
in this Agreement to an “Affiliate” shall mean any Person directly or indirectly controlling, controlled by or under common control with a second Person. The term “control“ (including the terms “controlled by” and
“under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
A “Person” shall mean any natural person, partnership, corporation, limited liability company, association, trust or other legal entity. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 33 

 4.7 Seller’s Efforts to Close. Seller shall use its commercially reasonable efforts to
satisfy all of the conditions precedent set forth in Articles 6 and 7 to its or Purchaser’s obligations under this Agreement to the extent that Seller’s action or inaction can control or influence the satisfaction of such conditions.

  
 4.8 Title Matters. 
  
 (a) On or prior to five (5) days after the Execution Date, (i) Purchaser
shall request a preliminary binder(s) or title commitment(s) (the “Title Commitment”) sufficient for the issuance of (A) an A.L.T.A. Extended Coverage Leasehold Title Policy with respect to the Leased Real Property, together with such
endorsements as are customary in Pennsylvania, including, without limitation, those relating to the creation of the Condominium (i.e., Endorsement 800, regarding compliance with the Act) (the “Leasehold Title Policy”) issued by First
American Title Insurance Company (the “Title Company”), and (B) an A.L.T.A. Owner’s Title Policy with respect to the Owned Real Assets, together with such endorsements as are customary in Pennsylvania, including, without limitation,
those relating to the creation of the Condominium (i.e., Endorsement 800, regarding compliance with the Act) (the “Fee Title Policy,” and together with the Leasehold Title Policy, the “Title Policies”), in each case together with
true, correct and legible copies of all instruments referred to therein as conditions or exceptions to title (the “Title Instruments”) and (ii) Seller shall order an A.L.T.A. survey of the Real Property complying with the Minimum Standard
Detail Requirements for ALTA/ASCM Land Title Survey for the Real Property for an “Urban” survey (the “Survey”) and a plat or plan, or both, of the other real property described in Section 1.1(g) hereof containing such information
in a clear and legible manner that is required by Section 3210 of the Pennsylvania Uniform Condominium Act (the “Condominium Plan”). The parties acknowledge that the Condominium with respect to the Real Property will be created upon filing
of the Condominium Declaration, and the Owned Real Assets will be created by an amendment thereto. Accordingly, to the extent feasible, the Title Commitment and the Survey shall be prepared on a pro forma basis assuming the filing of the Condominium
Declaration. 
  
 (b) Within ten (10) business days after receipt
of the Title Commitment, the Title Instruments, the Survey and the Condominium Plan (such period commencing on the date of receipt of the last of the foregoing), each party shall deliver a copy thereof to the other party, as applicable, and
Purchaser shall advise Seller in writing (the “Title Notice”) of any survey or title matters that, in Purchaser’s sole discretion, will adversely affect, impede or hinder Purchaser’s use of the Real Property (collectively, the
“Objections”). Seller shall give written notice to Purchaser within ten (10) business days of Seller’s receipt of the Title Notice of any Objections which Seller is willing and able to cure (Seller having no obligation whatsoever to
cure). Purchaser shall permit Seller such time as is reasonably necessary, including a reasonable extension of the Closing Date, in which to cure any Objections identified by Seller as items to be cured. In the event Seller advises Purchaser of its
inability or unwillingness to cure one or more Objections (or in the event Seller does not give any responsive notice within such ten-day period), Purchaser, within the earlier to occur of two (2) days after receipt of Seller’s response, or the
expiration of such ten-day period for Seller’s response, shall elect either to (i) waive such objections and proceed to Closing without any adjustment to any of the terms of this Agreement, or (ii) terminate this Agreement by giving written
notice to Seller, in which event the parties shall be relieved of all further liability hereunder (except those which expressly survive termination); provided, however, that Purchaser shall return all materials provided by Seller to Purchaser, as
well as copies of any reports or results arising from Purchaser’s inspections, tests, 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 34 

 and surveys of the Real Property. If Purchaser does not give timely notice of such election, Purchaser shall be deemed to
have elected the option to waive the Objections specified in clause (i) immediately above. 
  
 (c) All matters affecting title to the Real Property as of the respective dates of the Survey, the Title Commitment and the Condominium Plan that are not objected to in the Title Notice or waived (or deemed waived) by
Purchaser shall be deemed consented to by Purchaser, and (i) all such deemed consented matters, (ii) any subsequent title matters permitted hereby or otherwise consented to by Purchaser, and (iii) any other survey or title matter that does not
materially and adversely affect insurability of title, marketability, use, occupancy, possession, ownership or utility of the Real Property shall be collectively referred to herein as “Permitted Encumbrances,” in addition to those matters
identified as Permitted Encumbrances in Section 2.7(a) hereof. Except for Permitted Encumbrances, on or after the Execution Date, Seller shall neither take, nor consent to, any steps or actions which will in any manner adversely alter the status of
the title to the Real Property and the other real property described in Section 1.1(g) hereof without Purchaser’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Except for Permitted
Encumbrances, the Condominium Declaration and the amendment thereto described in Section 7.13 hereof, Seller shall not execute, grant or record any easements, covenants, conditions, liens, restrictions, leases or other agreements or matters with
respect to the Real Property without Purchaser’s prior written consent which shall not be unreasonably withheld, delayed or conditioned. 
  
 4.9 Updating of Disclosure Schedules. 
  
 (a) Seller shall notify Purchaser of any changes, additions, or events which cause any change in or addition to the Disclosure Schedules delivered by
Seller under this Agreement promptly after the occurrence of the same and again at the Closing by delivery of appropriate updates to all such Schedules. No notification of a change or addition to a Schedule made pursuant to this Section 4.9 shall be
deemed to cure any breach of any representation or warranty resulting from such change or addition unless in any such case Purchaser specifically agrees thereto in writing or consummates the Closing after receipt of such written notification, nor
shall any such notification be considered to constitute or give rise to a waiver by Purchaser of any condition set forth in this Agreement, unless in any such case Purchaser specifically agrees thereto in writing or consummates the Closing after
receipt of such written notification. Nothing contained herein shall be deemed to create or impose on Purchaser any duty to examine or investigate any matter or thing for the purposes of verifying the representations and warranties made by Seller
herein. 
  
 (b) Certain Disclosure Schedules to this Agreement set
forth exceptions to the representations, warranties and other agreements made by Seller in this Agreement and are intended to qualify such representations, warranties and agreements. The information expressly set forth in a Disclosure Schedule with
respect to any section of this Agreement shall also be deemed to qualify each other section of this Agreement to which such information is applicable (regardless of whether or not such other section is qualified by reference to a schedule), so long
as application to such section is reasonably discernible from such disclosure. Notwithstanding the foregoing, the representations, warranties and other agreements of a party set forth in this Agreement shall not be affected, modified, waived or
limited in any respect by the information contained in any agreement or document listed or referenced in a Disclosure Schedule unless the reference on the face of the schedule indicates how such agreement or document limits the scope of a
representation, warranty or other agreement of the party set forth in this Agreement. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 35 

 4.10 Environmental Remediation. Prior to Closing, Seller shall perform the environmental
remediation measures described in Schedule 4.10 (the “Environmental Remediation Measures”) on the Real Property. 
  
 4.11 Seller’s 403(b) Program. 
  
 (a) The Board of Managers of Seller shall adopt resolutions and take all other appropriate steps to terminate Seller’s 403(b) Program, such that
neither Seller, Purchaser, HHC Pennsylvania nor any of their Affiliates shall have any obligation to make any contributions, or to withhold any contributions from compensation otherwise payable to Hired Employees, under Seller’s 403(b) Program
with respect to any period of service after the Closing. 
  
 (b)
Seller shall take all necessary steps to ensure that the custodians and/or insurers (the “403(b) Custodians”) currently providing custodial and investment services, or annuities and related services, in connection with any custodial
accounts or annuity contracts relating to Seller’s 403(b) Program (collectively, the “403(b) Accounts”) receive notice of the transactions contemplated by this Agreement and continue to maintain the 403(b) Accounts for as long as such
maintenance is in conformity with the lawful wishes of the holders of the 403(b) Accounts and applicable law. Seller shall take such further steps as are necessary to ensure that (i) each of the 403(b) Custodians will not permit any Hired Employee
to receive any new participant loan from any of the 403(b) Accounts after the Closing Date, (ii) the amounts accumulated under the 403(b) Accounts, including the amounts of any unpaid participant loans, do not become taxable to any Hired Employee as
a result of the transactions contemplated hereby, and (iii) no significant involvement with respect to the 403(b) Accounts will be required on the part of Seller, Purchaser, HHC Pennsylvania or any of their Affiliates after the Closing Date, except
as may be required to withhold amounts payable in respect of participant loans previously taken from any of the 403(b) Accounts from the wages of the applicable Hired Employees, or as may be deemed appropriate to forward information from the 403(b)
Custodians to the Hired Employees, or from the Hired Employees to the 403(b) Custodians. 
  
 ARTICLE 5 
 COVENANTS OF PURCHASER 
  
 5.1 Purchaser’s Efforts to Close. Purchaser shall use its commercially reasonable efforts to satisfy all of the
conditions precedent set forth in Articles 6 and 7 to its or Seller’s obligations under this Agreement to the extent that Purchaser’s action or inaction can control or influence the satisfaction of such conditions. 
  
 5.2 Required Governmental Approvals. Purchaser (a) shall use
commercially reasonable efforts to secure, as promptly as practicable before the Closing Date, all consents, approvals, authorizations, clearances, certificates of need, licenses and permits required to be obtained from governmental and regulatory
authorities necessary for Purchaser to perform its obligations under this Agreement, cause all of its covenants and agreements to be performed, satisfied and fulfilled and operate the Hospital after the Closing; and (b) will provide such other
information and communications to governmental and regulatory authorities as Seller or such authorities may reasonably request. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 36 

 5.3 Excluded Assets. As soon as practicable after the Closing Date, Purchaser shall deliver to
Seller or Seller’s designee any Excluded Assets found at the Hospital on and after the Effective Time, without imposing any charge on Seller for Purchaser’s storage or holding of same on and after the Effective Time. 
  
 5.4 Confidentiality. Until Closing, Purchaser shall, and shall cause
its employees, representatives and agents to, hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of Purchaser’s counsel, by other requirements of law, all Confidential Information,
and Purchaser shall not disclose the Confidential Information to any Person, except as otherwise may be reasonably necessary to carry out the transactions contemplated by this Agreement, including any business or diligence review by or on behalf of
Purchaser. Purchaser’s obligations set forth in the immediately preceding sentence shall apply (a) between the Execution Date and the Effective Time with respect to Confidential Information which is among the Assets and (b) after the Effective
Time for all Confidential Information which is not described in subsection (a) above. For the purposes hereof, “Confidential Information” shall mean (x) all information of any kind concerning Seller or the business of the Hospital, in
connection with the transactions contemplated by this Agreement except information (i) ascertainable or obtained from public or published information, (ii) received from a third party not known by Purchaser to be under an obligation to Seller or any
Affiliate of Seller to keep such information confidential, (iii) which is or becomes known to the public (other than through a breach of this Agreement), or (iv) which was in Purchaser’s possession prior to disclosure thereof to Purchaser in
connection herewith, and (y) all “individually identifiable health information” (as such term is defined in 45 CFR § 160.102) of patients and others receiving services from the Hospital. In the event of any termination or expiration
of this Agreement, Purchaser shall, in addition to complying with the covenant of nondisclosure set forth in this Section 5.4, return to Seller any and all Confidential Information (including, without limitation, all individually identifiable health
information) in Purchaser’s possession without retaining copies thereof. 
  
 5.5 Enforceability. Purchaser hereby acknowledges that the restrictions contained in Section 5.4 above are reasonable and necessary to protect the legitimate interests of Seller. The parties also hereby
acknowledge and agree that any breach of Section 5.4 would result in irreparable injury to Seller and that any remedy at law for any breach of Section 5.4 would be inadequate. Notwithstanding any provision to the contrary contained in this
Agreement, the parties therefore agree, and Purchaser hereby specifically consents that, without necessity of proof of actual damage Seller may be granted temporary or permanent injunctive relief, that Seller shall be entitled to an equitable
accounting of all earnings, profits and other benefits arising from such breach, and that Seller shall be entitled to recover its reasonable fees and expenses, including attorneys’ fees, incurred by Seller in enforcing the restrictions
contained in Section 5.4. 
  
 5.6 Waiver of Bulk Sales Law
Compliance. Purchaser hereby waives compliance by Seller with the requirements, if any, of Article 6 of the Uniform Commercial Code as in force in any state in which the Assets are located and all other similar laws applicable to bulk
sales and transfers. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 37 

 ARTICLE 6 
 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 
  
 Seller’s obligation to sell the Assets and to close the transactions as contemplated by this Agreement shall be subject to the satisfaction of each of the following conditions on or prior to the Closing Date
unless specifically waived in writing by Seller in whole or in part at or prior to the Closing: 
  
 6.1 Accuracy of Representations and Warranties and Compliance with Obligations. The representations and warranties of Purchaser contained in this
Agreement shall have been true and correct at the Execution Date, and they shall be true and correct in all respects as of the Closing with the same force and effect as though made at and as of the Closing. Purchaser shall have performed and
complied with all of its obligations required by this Agreement to be performed or complied with at or prior to the Closing. 
  
 6.2 Signing and Delivery of Instruments. Purchaser shall have executed and delivered all documents, instruments and certificates required to be
executed and delivered by it pursuant to the provisions of this Agreement. Purchaser acknowledges that Purchaser shall not satisfy the condition precedent set forth in this Section 6.2, as it relates to the delivery of the Purchase Price, unless
Purchaser initiates the wire transfer of the amount set forth in Section 1.6 to Seller, and provides to Seller a Federal Reserve wire reference number with respect thereto, on or before 3:00 p.m. (Central time) on the Closing Date. 
  
 6.3 Unfavorable Action or Proceeding. On the Closing Date, no orders,
decrees, judgments or injunctions of any court or governmental body shall be in effect, and no claims, actions, suits, proceedings, arbitrations or investigations shall be pending or threatened, which challenge or seek to challenge, or which could
reasonably be expected to prevent or cause the rescission of, the consummation of the transactions contemplated in this Agreement. 
  
 6.4 Opinion of Counsel for Purchaser. Seller shall have received the favorable opinion of Purchaser’s counsel, dated the Closing Date, in
substantially the form set forth in Exhibit Q attached to this Agreement. 
  
 6.5 Governmental Authorizations. Purchaser and Seller shall have obtained all material licenses, permits, approvals and authorizations from governmental agencies or governmental bodies that are necessary or
required for completion of the transactions contemplated by this Agreement and the operation of the Hospital by Purchase after the Closing, including the approval of the transactions contemplated hereby by the Orphans’ Court Division of the
Philadelphia County Court of Common Pleas. All consents, waivers, and estoppels of third parties which are reasonably necessary, in the opinion of Seller, to complete effectively the transactions herein contemplated shall have been obtained in form
and substance reasonably satisfactory to Seller. 
  
 6.6
Post-Execution Matters. Each of the matters set forth on Schedule 6.6 shall have been satisfied within the time period specified therein to the satisfaction of Seller in its sole discretion. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 38 

 ARTICLE 7 
 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 
  
 Purchaser’s obligation to purchase the Assets and to close the transactions contemplated by this Agreement shall be subject to the satisfaction of each of the following conditions on or prior to the Closing Date
unless specifically waived in writing by Purchaser in whole or in part at or prior to the Closing. 
  
 7.1 Board Approval. The Board of Directors of HHC shall have consented to and approved the consummation of the transactions contemplated hereby.

  
 7.2 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties of Seller in this Agreement shall have been true and correct on the Execution Date, and they shall be true and correct in all respects as of the Closing with the same force and
effect as though made at and as of the Closing. Seller shall have performed and complied with all of its obligations required by this Agreement to be performed or complied with at or prior to the Closing. 
  
 7.3 Governmental Authorizations. Purchaser and Seller shall have
obtained all material licenses, permits, approvals and authorizations from governmental agencies or governmental bodies that are necessary or required for completion of the transactions contemplated by this Agreement and the operation of the
Hospital by Purchaser after the Closing, including the approval of the transactions contemplated hereby by the Orphans’ Court Division of the Philadelphia County Court of Common Pleas. 
  
 7.4 Signing and Delivery of Instruments. Seller shall have executed
and delivered all documents, instruments and certificates required to be executed and delivered by Seller pursuant to the provisions of this Agreement. 
  
 7.5 Unfavorable Action or Proceeding. On the Closing Date, no orders, decrees, judgments or injunctions of any court or governmental body shall be
in effect, and no claims, actions, suits, proceedings, arbitrations or investigations shall be pending or threatened, which challenge or seek to challenge, or which could reasonably be expected to prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement. 
  
 7.6
Opinion of Counsel. Purchaser shall have received the favorable opinion of Seller’s counsel dated the Closing Date, in substantially the form attached hereto as Exhibit J. 
  
 7.7 Title Insurance Policy. Purchaser shall have received the fully
effective Title Policies issued to Purchaser by the Title Company covering the Real Property in the amount of the full insurable value of the Real Property and which is reasonably satisfactory to Purchaser in all respects. The Leasehold Title Policy
shall show valid leasehold title to the Leased Real Property in Purchaser and the Fee Title Policy shall show valid fee simple title to the Owned Real Assets, subject in each case only to the Permitted Encumbrances. 
  
 7.8 Survey. Purchaser shall have received and reviewed the Survey and
the Condominium Plan which shall be reasonably satisfactory to Purchaser in all respects. 
  
 7.9 No Material Adverse Change. There shall not have been any Material Adverse Change in or affecting the business of the Hospital or Seller subsequent to the Execution Date. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 39 

 7.10 Required Consents. The Contract and Lease Consents listed on Schedule 2.3(c) shall
have been received or obtained on or prior to the Closing Date without the imposition of any burdens or conditions materially adverse to the party or parties entitled to the benefit thereof. 
  
 7.11 Disclosure Schedules. Seller shall have fully updated the
Disclosure Schedules hereto to the reasonable satisfaction of Purchaser. 
  
 7.12 Bonds. Seller’s Hospital Revenue Bonds, Series of 1993 (the “Bonds”) shall have been fully redeemed and repaid out of the Closing Purchase Price Payment or otherwise, the lease securing the
Bonds shall have been terminated, and all liens on the Assets held by the holders of such bonds shall be fully released at or prior to the Closing. 
  
 7.13 Condominium Declaration. The Condominium Declaration shall have been duly recorded in the office of the Philadelphia Department of Records. In
addition, pursuant to the provisions of Section 7.03 of the Condominium Declaration, Seller shall have amended the originally-filed Condominium Declaration in form and substance reasonably satisfactory to Purchaser to subdivide Units 1, 2 and 3
identified therein so as to create the “Subunits” (as defined in the Condominium Declaration) that constitute the Owned Real Assets and the Leased Real Property; such amendment shall generally be in the form of Exhibit R attached
hereto. The Condominium Association shall have been duly formed and the Condominium Bylaws shall have been duly adopted at the organizational meeting of the Board of Directors thereof. 
  
 7.14 Environmental Remediation. The Environmental Remediation Measures
shall have been completed by Seller to the reasonable satisfaction of Purchaser. 
  
 7.15 Change of Seller’s Name. Seller shall have changed its corporate name to another name which does not include the phrase “Friends Hospital,” the word “Friends” or any similar word.

  
 7.16 CHOW Exemption. In the event that DPW determines
that the transactions contemplated by this Agreement constitute a change in ownership of the Hospital, Seller and Purchaser shall have obtained from DPW’s Bureau of Fee-for-Service Programs a Provider Participation Approval Letter or a Letter
of No Reviewability, allowing for the inclusion of all of the Hospital’s licensed beds in the Pennsylvania Medicaid program following the Closing. 
  

7.17 Post-Execution Matters. Each of the matters set forth on Schedule 6.6 shall have been satisfied within the time period specified
therein to the satisfaction of Purchaser in its sole discretion. 
  
 ARTICLE 8 
 TERMINATION 
  
 8.1 Termination. This Agreement may be terminated at any time prior to Closing: 
  
 (a) by the mutual written consent of the parties; 
  
 (b) by Seller if a material breach of this Agreement has been committed by Purchaser and such breach has not been (i) waived
in writing by Seller or (ii) cured by Purchaser to the reasonable satisfaction of Seller within twenty (20) business days after notice from Seller to Purchaser which describes the nature of such breach; 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 40 

 (c) by Purchaser if a material breach of this Agreement has been committed by Seller and such breach has
not been (i) waived in writing by Purchaser or (ii) cured by Seller to the reasonable satisfaction of Purchaser within twenty (20) business days after written notice from Purchaser to Seller which describes the nature of such breach; 
  
 (d) by Purchaser if any of the conditions in Article 7 have not been
satisfied as of the Closing Date or if satisfaction of any condition in Article 7 is or becomes impossible and Purchaser has not waived such condition in writing on or before the Closing Date (provided that the failure to satisfy the applicable
condition or conditions has occurred by reason other than (i) through the failure of Purchaser to comply with its obligations under this Agreement or (ii) Seller’s failure to provide its closing deliveries on the Closing Date as a result of
Purchaser not being ready, willing and able to close the transaction on the Closing Date); 
  
 (e) by Seller if any of the conditions in Article 6 have not been satisfied as of the Closing Date or if satisfaction of any such condition in Article 6 is or becomes impossible and Seller has not waived such
condition in writing on or before the Closing Date (provided that the failure to satisfy the applicable condition or conditions has occurred by reason other than (i) through the failure of Seller to comply with its obligations under this Agreement
or (ii) Purchaser’s failure to provide its closing deliveries on the Closing Date as a result of Seller not being ready, willing and able to close the transaction on the Closing Date); 
  
 (f) by Purchaser or Seller if the approval of the Board of Directors of HHC
referenced in Section 7.1 has not been obtained by April 30, 2005; 
  
 (g) by Purchaser or Seller (as applicable) as provided in Sections 1.16(a) or (c); 
  
 (h) by Purchaser as provided in Section 4.8(b); 
  
 (i) by Purchaser or Seller if the consent referenced in Section 4.4(a) hereof has not been obtained within the time period and in the manner required by such section; 
  
 (j) by Purchaser or Seller if any of the matters set forth on Schedule
6.6 is not satisfied to the reasonable satisfaction of such party within the time period specified in such Schedule; 
  
 (k) by either Purchaser or Seller if the Closing has not occurred (other than through the breach by the party seeking to terminate this Agreement of its
obligations under this Agreement) by July 1, 2005. 
  
 8.2
Termination Consequences. If this Agreement is terminated pursuant to Section 8.1, (a) all further obligations of the parties under this Agreement shall terminate, except that the obligations in Sections 5.4 (Confidentiality), 12.4 (Governing
Law), 12.8 (Confidentiality and Publicity), and 12.10 (Expenses and Attorneys’ Fees) shall survive, (b) each party shall pay the costs and expenses incurred by it in connection with this Agreement, except as provided in Section 12.10, and (c)
nothing shall prevent any party hereto from pursuing any of its legal rights or remedies that may be granted to any such party by law against any other party to this Agreement. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 41 

 ARTICLE 9 
 POST-CLOSING MATTERS 
  
 9.1 Excluded Assets and Excluded Liabilities. Subject to Section 11.2 hereof, any asset or any liability, all other remittances and all mail and other communications that is an Excluded Asset or an Excluded Liability (a) pursuant to
the terms of this Agreement, (b) as otherwise determined by the parties’ mutual written agreement or (c) absent such agreement, as determined by adjudication by a court or similar tribunal, and which comes into the possession, custody or
control of Purchaser (or its successors-in-interest, assigns or Affiliates) shall within five (5) business days following receipt be transferred, assigned or conveyed by Purchaser (and its successors-in-interest, assigns and Affiliates) to Seller.
Purchaser (and its successors-in-interest, assigns and Affiliates) shall not have any right, title or interest in or obligation or responsibility with respect to such asset or liability except that Purchaser shall hold such asset in trust for the
benefit of Seller. 
  
 9.2 Preservation and Access to Records
After the Closing. 
  
 (a) From the Closing Date until seven
(7) years after the Closing Date or, if longer, the expiration of the applicable statute of limitations with respect to any claims based on upon such records, or such longer period as required by law (the “Document Retention Period”),
Purchaser shall keep and preserve all medical records, patient records, medical staff records and other books and records which are among the Assets as of the Effective Time. Purchaser will afford to the representatives of Seller, including its
counsel and accountants, full and complete access to, and copies (including, without limitation, color laser copies) of, such records with respect to time periods prior to the Effective Time (including access to records of patients treated at the
Hospital prior to the Effective Time) during normal business hours after the Effective Time, to the extent reasonably needed by Seller or Seller’s Affiliates for business purposes. Purchaser acknowledges that, as a result of entering into this
Agreement and operating the Hospital, it will gain access to patient records and other information which are subject to laws, rules and regulations concerning confidentiality. Purchaser shall abide by any such laws, rules and regulations relating to
the confidential information it acquires. Purchaser shall maintain the patient and medical staff records at the Hospital in accordance with applicable law and the requirements of relevant insurance carriers. After the expiration of the Document
Retention Period, if Purchaser intends to destroy or otherwise dispose of any of the documents described in this Section 9.2(a), Purchaser shall provide written notice to Seller of Purchaser’s intention no later than forty-five (45) calendar
days prior to the date of such intended destruction or disposal. Seller shall have the right, at its sole cost, to take possession of such documents during such forty-five (45) calendar day period. If Seller does not take possession of such
documents during such forty-five (45) calendar day period, Purchaser shall be free to destroy or otherwise dispose of such documentation upon the expiration of such forty-five (45) calendar day period. 
  
 (b) Purchaser shall give its commercially reasonable cooperation to Seller,
Seller’s Affiliates and their insurance carriers in respect of the defense of claims by third parties against Seller or any Affiliate of Seller, in respect of events occurring prior to the Effective Time with respect to the operation of the
Hospital. Such cooperation shall include making the Hired Employees available at reasonable times for interviews, depositions, hearings and trials. Such cooperation shall also include making all of its employees available to assist in the securing
and giving of evidence and in obtaining the presence and cooperation of witnesses (all of which shall be done without payment of any fees or expenses to Purchaser or to such employees). In 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 42 

 addition, Seller and Seller’s Affiliates shall be entitled to remove from the Hospital originals of any such
records, but only for purposes of pending litigation involving the Persons to whom such records refer, as certified in writing prior to removal by counsel retained by Seller or any of Seller’s Affiliates in connection with such litigation. Any
records so removed from the Hospital shall be promptly returned to Purchaser following Seller’s or its applicable Affiliate’s use of such records. Purchaser shall be entitled to require that such records be copied for Purchaser prior to
their removal at Seller’s cost. 
  
 (c) In connection with
(i) the transition of ownership and operation of the Hospital to Purchaser pursuant to the transactions contemplated by this Agreement, (ii) Seller’s rights to the Excluded Assets and (iii) Seller’s obligations under the Excluded
Liabilities, Purchaser shall after the Effective Time give Seller, Seller’s Affiliates and their respective representatives access during normal business hours to Purchaser’s books, accounts and records and all other relevant documents and
information with respect to the assets, liabilities and business of the Hospital as representatives of Seller and Seller’s Affiliates may from time to time reasonably request, all in such manner as not to unreasonably interfere with the
operations of the Hospital. The confidentiality obligations of Section 5.4 applicable to Purchaser shall apply to Seller with respect to its access to and use of Purchaser’s books and records pursuant to this Section, except that such
obligations shall not expire at Closing. 
  
 (d) Purchaser and its
representatives shall be given access by Seller during normal business hours to the extent reasonably needed by Purchaser for business purposes to all documents, records, correspondence, work papers and other documents retained by Seller pertaining
to any of the Assets or with respect to the operation of the Hospital prior to the Effective Time, all in such manner as to not interfere unreasonably with Seller’s business. 
  
 9.3 Provision of Benefits of Certain Contracts and Personal Property Leases. If, as of the Effective Time, Seller has
not obtained a required consent to the assignment of a Contract or Personal Property Lease to Purchaser or Purchaser is unable to enter into a new third party contract with respect to such Contract or Personal Property Lease, until such consent is
obtained or a new third party contract is obtained, Seller shall use reasonable commercial efforts to provide Purchaser the benefits of such Contract or Personal Property Lease only with respect to the Hospital and cooperate in any reasonable and
lawful arrangement designed to provide such benefits to Purchaser. Purchaser shall use reasonable commercial efforts to perform, on behalf of Seller, the obligations of Seller thereunder or in connection therewith, limited to those obligations of
the Hospital thereunder, but only to the extent that such action would not result in a material default under the applicable Contract or Personal Property Lease and such obligation would have been an obligation of Purchaser had it received consent
to the assignment of such Contract or Personal Property Lease or had entered into a new third party contract on substantially similar terms as the applicable Contract or Personal Property Lease. 
  
 9.4 Employee Matters. As of the Effective Time, Seller shall terminate
all of its employees at the Hospital, and Purchaser and/or HHC Pennsylvania shall hire the Hired Employees commencing as of the Effective Time in positions and at compensation levels consistent with those being provided by Seller immediately prior
to the Effective Time. Nothing herein shall be deemed to affect or limit in any way normal management prerogatives of Purchaser with respect to employees or to create or grant to any such employees third party beneficiary rights or claims of any
kind or nature. Within the period of ninety (90) days before the Closing, Seller shall not, and within the ninety (90) days following the Closing, Purchaser 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 43 

 and/or HHC Pennsylvania shall not: (1) permanently or temporarily shut down a single site of employment, or one or more
facilities or operating units within a single site of employment, if the shutdown results in an employment loss during any thirty (30) day period at the single site of employment for fifty (50) or more employees, excluding any part-time employees;
or (2) have a mass layoff at a single site of employment of at least thirty-three percent (33%) of the active employees and at least fifty (50) employees, excluding part-time employees. The terms “single site of employment,”
“operating unit,” “employment loss” and “mass layoff” shall be defined as in the WARN Act. With respect to terminations of employees following the Closing, Purchaser shall be responsible for any notification required
under the WARN Act. In respect of the employees employed by Purchaser and/or HHC Pennsylvania, such employer shall provide such employees with employee benefits consistent with the benefits generally offered to similarly situated employees of the
employer and, to the extent such benefits are based, in whole or in part, on service with such employer, the employer shall recognize the existing seniority and service with Seller of all such employees for benefits purposes and shall provide credit
under such plans for purposes of determining eligibility and vesting and the rate of benefit accrual (but not actual benefit accrual); provided, however, that no such credit need be given in respect of any new plan commenced or participated
in by the employer in which no prior service credit is given or recognized to or for other plan beneficiaries. Notwithstanding the foregoing, Purchaser and/or HHC Pennsylvania, as the case may be, shall continue in effect through December 31, 2005
or later, the health insurance coverage provided to employees of Seller on the day immediately preceding the Closing Date. 
  
 9.5 Misdirected Payments, Etc. Seller and Purchaser covenant and agree to remit, with reasonable promptness, to the other any payments received,
which payments are on or in respect of accounts or notes receivable owned by (or are otherwise payable to) the other. In addition, and without limitation, in the event of a determination by any governmental or third-party payor that payments to
Seller or the Hospital resulted in an overpayment or other determination that funds previously paid by any program or plan to Seller or the Hospital must be repaid, Seller shall be responsible for repayment of said monies (or defense of such
actions) if such overpayment or other repayment determination was for services rendered prior to the Effective Time and Purchaser shall be responsible for repayment of said monies (or defense of such actions) if such overpayment or other repayment
determination was for services rendered after the Effective Time. In the event that, following the Effective Time, Purchaser suffers any offsets against reimbursement under any third-party payor or reimbursement programs due to Purchaser, relating
to amounts owing under any such programs by Seller or any of its Affiliates, Seller shall promptly upon demand from Purchaser pay to Purchaser the amounts so billed or offset. In the event that, following the Effective Time, Seller suffers any
offsets against reimbursement under any third-party payor or reimbursement programs due to Seller, relating to amounts owing under any such programs by Purchaser or any of its Affiliates, Purchaser shall promptly upon demand from Seller pay to
Seller the amounts so billed or offset. 
  
 9.6 Government
Receivables. For a period beginning at the Effective Time and continuing until December 31, 2005, Purchaser hereby agrees to collect on Seller’s behalf, and at no cost to Seller, Seller’s Government Receivables subject to the
provisions of this Section 9.6. Seller hereby appoints Purchaser, and Purchaser agrees to act, as Seller’s collection agent with respect to Seller’s Government Receivables. On or before the Closing Date, Seller shall establish, at its
expense, a bank account at a financial institution selected by Seller and after the date hereof Purchaser, as agent for Seller, shall deposit in such account cash, checks, drafts or other similar items of payment of such Government Receivables.
Purchaser shall apply to the 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 44 

 collection of Seller’s Government Receivables the level of diligence, effort and resources that Purchaser ordinarily
and customarily applies in the collection of its own accounts receivable; provided, however, that Purchaser does not guarantee the extent to which any Government Receivables will be collected, that Purchaser shall not be required to institute any
legal or other proceedings to collect any such Government Receivables, that Purchaser shall not be obligated to incur any costs and expenses payable to third parties in any such collection efforts, and the methods of collecting Government
Receivables shall at all times be within the reasonable discretion of Purchaser and in accordance in all material respects with applicable law. All amounts collected on or prior to December 31, 2005, pursuant to this Section and included in the
calculation of Final Net Working Capital, shall be paid to Purchaser. All Government Receivables collected by Purchaser after December 31, 2005, shall be paid to Seller within a reasonable time following collection. 
  
 9.7 Tail Insurance. Seller shall maintain in force and effect for five
(5) years from the Closing Date the Tail Insurance Coverage relating back five (5) years prior to the Closing Date. Seller shall deliver to Purchaser at the Closing and on each of the successive anniversaries of the Closing Date a certificate of
insurance evidencing the Tail Insurance Coverage. The “Tail Insurance Coverage” shall be health care services professional liability coverage with its current insurers or a financially sound and reputable insurance company selected by
Seller (and approved by Purchaser, which approval shall not be unreasonably withheld, delayed or conditioned) with limits of liability of $500,000 per loss and $1,500,000 annual aggregate, naming Seller as an insured and covering the health care
services professional liability risk arising out of Seller’s operation of the Hospital on or before the Effective Time. In addition, Seller shall cause its Affiliate, Friends Professional Associates, Inc., to maintain in force and effect Tail
Insurance Coverage for the same term and with the same limits as Seller’s policy described above for the professional services provided by physicians employed by Friends Professional Associates, Inc. prior to the Closing Date whose employment
agreements will be assigned to Purchaser or HHC Pennsylvania at Closing. 
  
 9.8 Termination Cost Reports. Seller shall file with Government Programs and third-party payors any cost reports relating to periods ending on or before the Effective Time or required to be filed as a result of
the consummation of (a) the transfer of the Assets to Purchaser and (b) the transactions contemplated by this Agreement (the “Seller Cost Reports”). All such Seller Cost Reports shall be filed by Seller in a manner that is consistent with
current laws, rules and regulations. Seller shall provide Purchaser with a reasonable opportunity to review such reports before filing. 
  
 9.9 Certain Employee Matters. 
  
 (a) Purchaser and/or HHC Pennsylvania shall make offers of employment to all, or substantially all, of the employees of Seller and its Affiliates employed
in connection with the operation of the Hospital. Any of such employees who accepts an offer of employment with Purchaser and/or HHC Pennsylvania as of or after the Effective Time shall be referred to in this Agreement as the “Hired
Employees.” 
  
 (b) Purchaser shall be responsible to provide
continuation coverage pursuant to the requirements of Code Section 4980B and Treasury regulations thereunder and Part 6 of Title I of ERISA (“COBRA Coverage”) to any qualified beneficiaries under any Plan required to provide COBRA
Coverage. Purchaser and/or HHC Pennsylvania shall be responsible in 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 45 

 accordance with the requirements of Code Section 4980B and Treasury regulations thereunder and Article 6 of Title I of
ERISA to provide COBRA Coverage with respect to each of the Hired Employees (and their dependents) whose qualifying event occurs on or after the date on which the Hospital’s employees become Hired Employees and who become qualified
beneficiaries of a Purchaser health plan subject to COBRA Coverage. 
  
 (c) To the extent consistent with any lawful agreement between Seller and a Hired Employee entered into before the Closing Date in connection with a participant loan to the Hired Employee under Seller’s 403(b) Program and not
inconsistent with any lawful action of the Hired Employee taken before or after the Closing Date, Purchaser or HHC Pennsylvania, as the case may be, shall withhold from the wages of any Hired Employee after the Closing Date the periodic repayments
required under the terms of any participant loan received by such employee from his or her 403(b) Account, until such loan is repaid or the Hired Employee’s service with Purchaser or HHC Pennsylvania, as the case may be, is terminated.

  
 (d) Neither Seller, Purchaser, HHC Pennsylvania nor any of
their Affiliates shall permit any new participant loan to be received by a Hired Employee from his or her 403(b) Account after the Closing Date. 
  
 9.10 Gifts and Bequests. Purchaser acknowledges that gifts and bequests made after the Effective Time naming “Friends Hospital,” or any
variation thereof, as beneficiary shall be presumed to be the property of Seller and not of Purchaser, unless confirmed in writing to the contrary by the donor. Purchaser shall give Seller written notice of any such gifts and bequests. 

 
 9.11 Capital Expenditures. Purchaser shall cause the Partnership to
expend at least $5,500,000 in the first five operating years of the Partnership on capital expenditures related to the Hospital as specifically set forth in Section 8.1 of the Limited Partnership Agreement. If and to the extent required by such
Section, HMHM agrees to make any and all loans to the Partnership necessary to fund such expenditures on the terms and conditions set forth in the Limited Partnership Agreement. 
  
 ARTICLE 10 
 SURVIVAL AND INDEMNIFICATION 
  
 10.1
Survival. Except as expressly set forth in this Agreement to the contrary, all representations, warranties, covenants, agreements and indemnifications of Purchaser and Seller, respectively, contained in this Agreement or in any document
delivered pursuant hereto shall be deemed to be material and to have been relied upon by Purchaser and Seller, respectively. All representations and warranties of Purchaser and Seller shall continue to be fully effective and enforceable following
the Effective Time for two years (the “Survival Period”) and shall thereafter be of no further force and effect; provided, however, that, if there is at the end of such two year period an outstanding notice of a claim made in compliance
with the terms of Section 10.4, such applicable period shall not end in respect of such claim until such claim is resolved. Notwithstanding the above, the representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.5, 2.7, 2.20, 2.22, 3.1,
3.2 and 3.3 shall continue to be fully effective and enforceable until the expiration of the applicable statute of limitations. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 46 

 10.2 Indemnification of Purchaser by Seller. 
  
 (a) Indemnification. Seller shall keep and save Purchaser forever
harmless from and shall indemnify and defend Purchaser against any and all obligations, judgments, liabilities, penalties, violations, fees, fines, claims, losses, costs, demands, damages, liens, encumbrances and expenses including reasonable
attorneys’ fees (collectively, “Damages”), to the extent arising or resulting from (i) any breach of any representation or warranty of Seller under this Agreement or any documents delivered by Seller pursuant hereto, (ii) any breach
or default by Seller of any covenant or agreement of Seller under this Agreement or any documents delivered by Seller pursuant hereto, (iii) the Excluded Liabilities, (iv) the Excluded Assets, (v) (1) all federal, state and local income Taxes of
Seller and (2)(A) all state and local sales and use type Taxes and all property Taxes of Seller and (B) all Taxes of the Subsidiaries of Seller incurred in or attributable to the period ending or deemed to end on or prior to the Effective Time
(together (1) and (2) are referred to herein as “Seller Tax Claims”), (vi) any professional liability claim arising out of the business operations of the Hospital prior to the Effective Time, (vii) Seller’s failure to comply with any
applicable bulk sales law, and (viii) any claim by a third party with respect to any act or omission of Seller in the operations of the Hospital, which claim has accrued, arisen, or come into existence at any time prior to the Effective Time,
including without limitation any matters set forth in Schedules 2.9 and 2.11, except to the extent included in the Assumed Obligations. No provision in this Agreement shall prevent Seller from pursuing any of its legal rights or
remedies that may be granted to Seller by law against any Person other than Purchaser. 
  
 (b) Indemnification Limitations. Notwithstanding any provision to the contrary contained in this Agreement, subject to the last sentence of this subsection (b), Seller shall be under no liability to indemnify
Purchaser under Sections 10.2(a) and no claim under Section 10.2(a) shall be made: 
  
 (i) unless notice thereof shall have been given by or on behalf of Purchaser to Seller in the manner provided in Section 10.4 within the Survival Period; 
  
 (ii) to the extent that any loss may be recovered under a policy of insurance in force on the date of loss; provided,
however, that this Section 10.2(b)(ii) shall not apply to the extent that coverage under the applicable policy of insurance is denied by the applicable insurance carrier; 
  
 (iii) to the extent such claim relates to an obligation or liability for which Purchaser has agreed to indemnify Seller
pursuant to Section 10.3; or 
  
 (iv) to the extent related to a
claim under Section 10.2(a)(i) or a claim under Section 10.2(a)(ii), except with respect to any matters identified on Schedules 2.9 and 2.11, unless and until the liability of Seller in respect of any single claim or multiple claims in
the aggregate exceeds $250,000 (a “Relevant Claim”) in which event Purchaser shall be entitled to seek indemnification for the total amount of the Relevant Claim(s). 
  
 Notwithstanding any provision to the contrary contained in this Agreement, the maximum aggregate liability of Seller to Purchaser under this
Agreement shall not exceed Twenty Million and No/100 Dollars ($20,000,000.00). 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 47 

 (c) If Purchaser is entitled to recover any sum (whether by payment, discount, credit or otherwise) from
any third party in respect of any matter for which a claim of indemnity could be made against Seller hereunder, Purchaser shall use its commercially reasonable efforts to recover such sum from such third party and any sum recovered will reduce the
amount of the claim; provided, however, that the foregoing shall not be a condition precedent to any recovery from Seller under this Section 10.2. If Seller pays to Purchaser an amount in respect of a claim, and Purchaser subsequently recovers from
a third party a sum which is referable to that claim, Purchaser shall forthwith repay to Seller so much of the amount paid by it as does not exceed the sum recovered from the third party less all reasonable costs, charges and expenses incurred by
Purchaser in obtaining payment in respect of that claim and in recovering that sum from the third party. 
  
 10.3 Indemnification of Seller by Purchaser. 
  
 (a) Indemnification. Purchaser shall keep and save Seller forever harmless from and shall indemnify and defend Seller against any and all Damages,
to the extent arising or resulting from (i) any breach of any representation or warranty of Purchaser under this Agreement or any document delivered by Purchaser pursuant hereto, (ii) any breach or default by Purchaser under any covenant or
agreement of Purchaser under this Agreement or any document delivered by Purchaser pursuant hereto, (iii) the Assumed Obligations, (iv) any professional liability claim arising out of the business operations of the Hospital on and after the
Effective Time, and (v) any claim by a third party with respect to any act or omission of Purchaser in connection with the operation of the Hospital, which claim has accrued, arisen or come into existence at any time after the Effective Time. No
provision in this Agreement shall prevent Purchaser from pursuing any of its legal rights or remedies that may be granted to Purchaser by law against any Person other than Seller. 
  
 (b) Indemnification Limitations. Notwithstanding any provision to the contrary contained in this Agreement, Purchaser
shall be under no liability to indemnify Seller under Section 10.3(a) and no claim under Section 10.3(a) shall be made: 
  
 (i) unless notice thereof shall have been given by or on behalf of Seller to Purchaser in the manner provided in Section 10.4 within the Survival Period;

  
 (ii) to the extent that any loss may be recovered under a
policy of insurance in force on the date of loss; provided, however, that this Section 10.3(b)(ii) shall not apply to the extent that coverage under the applicable policy of insurance is denied by the applicable insurance carrier; or 
  
 (iii) to the extent related to a claim under Section 10.3(a)(i) or a claim
under Section 10.3(a)(ii), unless and until the actual liability of Purchaser in respect of any single claim or multiple claims in the aggregate exceeds the Relevant Claim amount in which event Seller shall be entitled to seek indemnification for
the total amount of the Relevant Claim(s). 
  
 (c) If Seller is
entitled to recover any sum (whether by payment, discount, credit or otherwise) from any third party in respect of any matter for which a claim of indemnity could be made against Purchaser hereunder, Seller shall use its commercially reasonable
efforts to recover such sum from such third party and any sum recovered will reduce the amount of the claim; provided, however, that the foregoing shall not be a condition precedent to any recovery from Purchaser under this Section 10.3. If
Purchaser pays to Seller an amount in respect of a 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 48 

 claim, and Seller subsequently recovers from a third party a sum which is referable to that claim, Seller shall forthwith
repay to Purchaser so much of the amount paid by it as does not exceed the sum recovered from the third party less all reasonable costs, charges and expenses incurred by Seller in obtaining payment in respect of that claim and in recovering that sum
from the third party. 
  
 10.4 Method of Asserting Claims.
All claims for indemnification under this Article 10 by any Person entitled to indemnification (an “Indemnified Party”) under this Article 10 will be asserted and resolved as follows: 
  
 (a) In the event any claim or demand, for which a party hereto (an
“Indemnifying Party”) would be liable for the Damages to an Indemnified Party, is asserted against or sought to be collected from an Indemnified Party by a Person other than Seller, Purchaser or their Affiliates (a “Third Party
Claim”), the Indemnified Party shall give a notice of its claim (a “Claim Notice”) to the Indemnifying Party within thirty (30) calendar days after the Indemnified Party receives written notice of such Third Party Claim; provided,
however, that notice shall be given by the Indemnified Party to the Indemnifying Party within fifteen (15) calendar days after receipt of a complaint, petition or institution of other formal legal action against the Indemnified Party. If the
Indemnified Party fails to provide the Claim Notice within such applicable time period after the Indemnified Party receives written notice of such Third Party Claim and thereby materially impairs the Indemnifying Party’s ability to protect its
interests, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim. The Indemnifying Party will notify the Indemnified Party within thirty (30) calendar days after receipt of the Claim
Notice (the “Notice Period”) whether the Indemnifying Party desires, at the sole cost and expense of the Indemnifying Party, to defend the Indemnified Party against such Third Party Claim. 
  
 (i) If the Indemnifying Party notifies the Indemnified Party within the
Notice Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 10.4(a), then the Indemnifying Party will have the right to defend, at its sole cost and expense, such
Third Party Claim by all appropriate proceedings, which proceedings will be prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party. The Indemnifying Party will have full control of
such defense and proceedings, including any compromise or settlement thereof. Notwithstanding the foregoing, the Indemnified Party may, at its sole cost and expense, file during the Notice Period any motion, answer or other pleadings that the
Indemnified Party may deem necessary or appropriate to protect its interests or those of the Indemnifying Party and which is not prejudicial, in the reasonable judgment of the Indemnified Party, to the Indemnifying Party. Except as provided in
Section 10.4(a)(ii) hereof, if an Indemnified Party takes any such action that is prejudicial and causes a final adjudication that is adverse to the Indemnifying Party, the Indemnifying Party will be relieved of its obligations hereunder with
respect to the portion of such Third Party Claim prejudiced by the Indemnified Party’s action. If requested by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the
Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates). The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 49 

 Section 10.4(a)(i), and except as specifically provided in this Section 10.4(a)(i), the Indemnified Party will bear its
own costs and expenses with respect to such participation. Notwithstanding the foregoing provisions of this Section 10.4(a)(i), in the event of a Seller Tax Claim, any compromise or settlement of proceedings shall be subject to the approval of the
Indemnified Party, which approval shall not be unreasonably withheld, delayed or conditioned. 
  
 (ii) If the Indemnifying Party fails to notify the Indemnified Party within the Notice Period that the Indemnifying Party desires to defend the Indemnified Party pursuant to this Section 10.4(a), or if the
Indemnifying Party gives such notice but fails to prosecute diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Notice Period, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be promptly and reasonably prosecuted by the Indemnified Party to a final conclusion or will be settled at
the discretion of the Indemnified Party. The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying
Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnifying Party or any of its Affiliates); and provided further that any compromise
or settlement thereof shall be subject to approval by the Indemnifying Party, which approval shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing provisions of this Section 10.4(a)(ii), if the Indemnifying Party
has notified the Indemnified Party with reasonable promptness that the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party, the
Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party’s defense pursuant to this Section 10.4(a)(ii). Subject to the above terms of this Section 10.4(a)(ii), the Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 10.4(a)(ii), and the Indemnifying Party will bear its own costs and expenses with respect to such participation. The Indemnified Party shall give
sufficient prior notice to the Indemnifying Party of the initiation of any discussions relating to the settlement of a Third Party Claim to allow the Indemnifying Party to participate therein. 
  
 (b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from the Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice to the Indemnifying Party within the Survival
Period. (The term “Indemnity Notice” shall mean written notification of a claim for indemnity under Article 10 hereof (which claim does not involve a Third Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to this
Section 10.4, specifying the nature of and specific basis for such claim and the amount or the estimated amount of such claim.) The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder
except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby. 
  
 (c) If the Indemnifying Party does not notify the Indemnified Party within thirty (30) calendar days following its receipt of a Claim Notice or an
Indemnity Notice that the Indemnifying Party disputes its liability to the Indemnified Party hereunder, such claim specified 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 50 

 by the Indemnified Party will be conclusively deemed a liability of the Indemnifying Party hereunder and the Indemnifying
Party shall pay the amount of such liability to the Indemnified Party on demand, or on such later date (i) in the case of a Third Party Claim, as the Indemnified Party suffers Damages in respect of such Third Party Claim, or (ii) in the case of an
Indemnity Notice in which the amount of the claim is estimated, when the amount of such claim becomes finally determined. If the Indemnifying Party has timely disputed its liability with respect to such claim, as provided above, the Indemnifying
Party and the Indemnified Party agree to proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations, such dispute will be resolved by adjudication by a court or similar tribunal having jurisdiction over
the parties. 
  
 (d) The Indemnified Party agrees to give the
Indemnifying Party reasonable access to the books and records and employees of the Indemnified Party in connection with the matters for which indemnification is sought hereunder, to the extent the Indemnifying Party reasonably deems necessary in
connection with its rights and obligations hereunder. 
  
 (e) The
Indemnified Party shall assist and cooperate with the Indemnifying Party in the conduct of litigation, the making of settlements and the enforcement of any right of contribution to which the Indemnified Party may be entitled from any Person in
connection with the subject matter of any litigation subject to indemnification hereunder. In addition, the Indemnified Party shall, upon request by the Indemnifying Party or counsel selected by the Indemnifying Party (without payment of any fees or
expenses to the Indemnified Party or an employee thereof), attend hearings and trials, assist in the securing and giving of evidence, assist in obtaining the presence or cooperation of witnesses, and make available its own personnel; and shall do
whatever else is necessary and appropriate in connection with such litigation. The Indemnified Party shall not make any demand upon the Indemnifying Party or counsel for the Indemnifying Party in connection with any litigation subject to
indemnification hereunder, except a general demand for indemnification as provided hereunder. If the Indemnified Party shall fail to perform such obligations as Indemnified Party hereunder or to cooperate fully with the Indemnifying Party in
Indemnifying Party’s defense of any suit or proceeding, such cooperation to include, without limitation, attendance at all depositions and the provision of all documents relevant to the defense of any claim, then, except where such failure does
not have an adverse effect on the Indemnifying Party’s defense of such claims, the Indemnifying Party shall be released from all of its obligations under this Agreement with respect to that suit or proceeding and any other claims which had been
raised in such suit or proceeding. 
  
 (f) Following
indemnification as provided for hereunder, the Indemnifying Party shall be subrogated to all rights of the Indemnified Party with respect to all Persons relating to the matter for which indemnification has been made. 
  
 10.5 Exclusive Remedy. Other than claims for fraud or equitable
relief, any claim arising under this Agreement or in connection with or as a result of the transactions contemplated by this Agreement or any Damages alleged to be suffered by any party as a result of the actions or failure to act by any other party
shall, unless otherwise specifically stated in this Agreement, be governed solely and exclusively by the provisions of this Article 10. If Seller and Purchaser cannot resolve such claim by mutual agreement, such claim shall be determined by
adjudication by a court or similar tribunal subject to the provisions of this Article 10. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 51 

 ARTICLE 11 
 TAX AND COST REPORT MATTERS 
  
 11.1 Tax Matters; Allocation of Purchase Price. 
  
 (a) After the Closing Date, the parties shall cooperate fully with each other and shall make available to each other, as reasonably requested, all information, records or documents relating to Tax liabilities or potential Tax liabilities
attributable to Seller with respect to the operation of the Hospital or ownership of the Assets for all periods prior to the Effective Time and shall preserve all such information, records and documents at least until the expiration of any
applicable statute of limitations or extensions thereof. The parties shall also make available to each other as reasonably required, and at the reasonable cost of the requesting party (for out-of-pocket costs and expenses only), personnel
responsible for preparing or maintaining information, records and documents in connection with Tax matters. 
  
 (b) The Purchase Price (and the elements thereof) shall be allocated among the Assets in accordance with Schedule 11.1(b). Seller and Purchaser
hereby agree to allocate the Purchase Price in accordance with Schedule 11.1(b), to be bound by such allocations, to account for and report the purchase and sale of the Assets contemplated hereby for federal and state Tax purposes in
accordance with such allocations, and not to take any position (whether in Tax returns, Tax audits, or other Tax proceedings), which is inconsistent with such allocations without the prior written consent of the other party. 
  
 11.2 Cost Report Matters. 
  
 (a) Purchaser shall forward to Seller any and all correspondence relating to
the Seller Cost Reports or rights to settlements and retroactive adjustments on Seller Cost Reports (“Agency Settlements”) within five (5) business days of receipt by Purchaser. Purchaser shall not reply to any such correspondence without
Seller’s written approval. Purchaser shall remit any receipts relating to the Seller Cost Reports or the Agency Settlements within five (5) business days after receipt by Purchaser and will forward any demand for payments within five (5)
business days. Purchaser (and its successors-in-interest, assigns and Affiliates) shall have neither the right to offset amounts payable to Seller under this Section 11.2 against, nor the right to contest its obligation to transfer, assign and
convey to Seller because of, outstanding claims, liabilities or obligations asserted by Purchaser against Seller including pursuant to the indemnification provisions of Section 10.2. Seller shall retain all rights to Seller Cost Reports including,
without limitation, any payables resulting therefrom or receivables relating thereto and the right to appeal any Medicare determinations relating to the Agency Settlements and Seller Cost Reports. 
  
 (b) Upon reasonable notice and during normal business office hours, Purchaser
will cooperate with Seller in regard to the preparation, filing, handling, and appeals of Seller Cost Reports. Upon reasonable notice and during normal business office hours, Purchaser will cooperate with Seller in connection with any cost report
disputes and/or other claim adjudication matters relative to Governmental Program reimbursement. Such cooperation shall include the providing of statistics and obtaining files at the Hospital and the coordination with Seller pursuant to adequate
notice of Medicare and Medicaid exit conferences or meetings. 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 52 

 ARTICLE 12 
 MISCELLANEOUS PROVISIONS 
  
 12.1 Entire Agreement. This Agreement, the Disclosure Schedules, the Exhibits and the documents referred to in this Agreement contain the entire understanding between the parties with respect to the transactions contemplated hereby
and supersede all prior or contemporaneous agreements, understandings, representations and statements, oral or written, between the parties on the subject matter hereof, except for the Confidentiality Agreement between HHC and Seller dated as of
August 4, 2004 (the “Superseded Agreements”), which Superseded Agreements shall be of no further force or effect. 
  
 12.2 Further Assurances and Cooperation. Seller shall execute, acknowledge and deliver to Purchaser any and all other assignments, consents,
approvals, conveyances, assurances, documents and instruments reasonably requested by Purchaser at any time and shall take any and all other actions reasonably requested by Purchaser at any time for the purpose of more effectively assigning,
transferring, granting, conveying and confirming to Purchaser, the Assets. After consummation of the transactions contemplated in this Agreement, the parties agree to cooperate with each other and take such further actions as may be necessary or
appropriate to effectuate, carry out and comply with all of the terms of this Agreement, the documents referred to in this Agreement and the transactions contemplated hereby. 
  
 12.3 Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon and shall inure
to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that no party hereto may assign any of its rights or delegate any of its duties under this Agreement without the prior written
consent of the other party. 
  
 12.4 Governing Law. This
Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania as applied to contracts made and to be performed entirely within the Commonwealth of Pennsylvania. The parties hereby waive
their right to assert in any proceeding involving this Agreement that the law of any other jurisdiction shall apply to such dispute; and the parties hereby covenant that they shall assert no such claim in any dispute arising under this Agreement.

  
 12.5 Amendments. This Agreement may not be amended
other than by a written instrument signed by the parties hereto. 
  
 12.6 Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing and shall be deemed to have been properly given or served when given or served by personal delivery,
by depositing the same in the United States mail, postage prepaid and registered or certified with return receipt requested, or by facsimile transmission (with a confirmation by registered or certified mail placed in the mail no later than the
following day), or by sending the same by a nationally recognized overnight delivery service, addressed as follows 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 53 

			
	If to Seller:	  	 THOMAS SCATTERGOOD BEHAVIORAL HEALTH
 FOUNDATION
(f/k/a FRIENDS HOSPITAL)

	 	  	4641 Roosevelt Boulevard
	 	  	Philadelphia, PA 19124-2399
	 	  	Attention: Chairperson
	 	  	Facsimile No.: (215) 831-3028
		
	With a copy to:	  	Duane Morris LLP
	 	  	One Liberty Place
	 	  	Philadelphia, Pennsylvania 19103-7396
	 	  	Attention: Donald R. Auten, Esq.
	 	  	Facsimile No.: (215) 979-1020
		
	If to Purchaser:	  	FRIENDS BEHAVIORAL HEALTH SYSTEM, LP
	 	  	c/o Horizon Health Corporation
	 	  	1500 Waters Ridge Drive
	 	  	Lewisville, Texas 75057
	 	  	Attention: President
	 	  	Facsimile No.: (972) 420-4060
		
	With copies to:	  	Horizon Health Corporation
	 	  	1500 Waters Ridge Drive
	 	  	Lewisville, Texas 75057
	 	  	Attention: President
	 	  	Facsimile No.: (972) 420-4060
		
	 	  	Horizon Health Corporation
	 	  	1500 Waters Ridge Drive
	 	  	Lewisville, Texas 75057
	 	  	Attention: General Counsel
	 	  	Facsimile No.: (972) 420-7789
		
	 	  	Strasburger & Price, L.L.P.
	 	  	901 Main Street, Suite 4300
	 	  	Dallas, Texas 75202
	 	  	Attention: Patrick Owens, Esq.
	 	  	Facsimile No.: (214) 651-4330

  
 All notices, demands and requests sent
by personal delivery or by facsimile transmission shall be effective and deemed served upon transmittal thereof. All notices, demands and requests sent by mail shall be effective and deemed served five business days after being deposited in the
United States mail. All notices, demands and requests sent by overnight delivery service shall be effective and deemed served on the business day after being deposited with such overnight delivery service during normal business hours of such
delivery service (provided next business day service is selected). The above addresses may be changed by giving notice of such change in the manner provided above for giving notice. 
  
 12.7 Headings. The section and other headings contained in this Agreement, the Disclosure Schedules, and the Exhibits
to this Agreement are included for the purpose of convenient reference only and shall not restrict, amplify, modify or otherwise affect in any way the meaning or interpretation of this Agreement, the Disclosure Schedules and Exhibits hereto.

  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 54 

 12.8 Confidentiality and Publicity. The parties hereto shall hold in confidence the information
contained in this Agreement, and all information related to this Agreement, which is not otherwise known to the public, shall be held by each party hereto as confidential and proprietary information and shall not be disclosed without the prior
written consent of the other parties; provided, however, each party shall be permitted to provide a copy of this Agreement to any applicable governmental, judicial or administrative authorities as reasonably required or necessary. Accordingly,
Purchaser and Seller shall not discuss with, or provide nonpublic information to, any third party (except for such party’s attorneys, accountants, directors, managers, officers and employees, the directors, managers, officers and employees of
any Affiliate of any party hereto, and other consultants and professional advisors) concerning this transaction prior to the Effective Time, except: (a) as required in governmental filings or judicial, administrative or arbitration proceedings; (b)
pursuant to public announcements made with the prior written approval of Seller and Purchaser; or (c) as otherwise required by applicable law. 
  
 12.9 Third Party Beneficiary. None of the provisions contained in this Agreement are intended by the parties, nor shall they be deemed, to confer
any benefit on any Person not a party to this Agreement. 
  
 12.10
Expenses and Attorneys’ Fees. Except as otherwise provided in this Agreement, each party shall bear and pay its own costs and expenses relating to the preparation of this Agreement and to the transactions contemplated by, or the
performance of or compliance with any condition or covenant set forth in, this Agreement, including without limitation, the disbursements and fees of their respective attorneys, accountants, advisors, agents and other representatives, incidental to
the preparation and carrying out of this Agreement, whether or not the transactions contemplated hereby are consummated. The parties expressly agree that the following shall be borne by Purchaser and Purchaser shall indemnify Seller against and hold
Seller harmless from: (a) all costs of the Title Commitment and the Title Policies; (b) one-half of all costs of the Survey; (c) all costs of the Environmental Survey; and (d) all sales or transfer Taxes and recording charges in connection with the
conveyance of the Assets to Purchaser, except that Seller shall bear one-half of the tax imposed by Pennsylvania and Philadelphia law with respect to the transfer or lease of the Leased Real Property by Seller pursuant to this Agreement. If any
action is brought by any party to enforce any provision of this Agreement, the prevailing party shall be entitled to recover its court costs and reasonable attorneys’ fees. 
  
 12.11 No Waiver. Any term, covenant or condition of this Agreement may be waived at any time by the party which is
entitled to the benefit thereof but only by a written notice signed by the party expressly waiving such term, covenant or condition. The subsequent acceptance of performance hereunder by a party shall not be deemed to be a waiver of any preceding
breach by any other party of any term, covenant or condition of this Agreement, other than the failure of such other party to perform the particular duties so accepted, regardless of the accepting party’s knowledge of such preceding breach at
the time of acceptance of such performance. The waiver of any term, covenant or condition shall not be construed as a waiver of any other term, covenant or condition of this Agreement. 
  
 12.12 Severability. If any term, provision, condition or covenant of this Agreement or the application thereof to any
party or circumstance shall be held to be invalid or unenforceable 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 55 

 to any extent in any jurisdiction, then the remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to Persons or circumstances other than those as to whom or which it is held to be invalid or unenforceable, shall not be affected thereby, and each term, provision, condition and covenant of this
Agreement shall be valid and enforceable to the fullest extent permitted by law. 
  
 12.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement, binding on all
of the parties hereto. 
  
 12.14 Waiver of Jury Trial. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS
WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE, INCLUDING THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANY APPLICABLE STATUTE OR REGULATIONS. EACH PARTY HERETO ACKNOWLEDGES THAT IT
IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY. 
  
 12.15 Guaranty by HHC. HHC hereby irrevocably and unconditionally guarantees to Seller the full and faithful performance, keeping, observance and fulfillment by Purchaser of all agreements, covenants and obligations of Purchaser
and/or HMHM, as applicable, contained in (i) Section 9.11 of this Agreement, (ii) Section 10.3 of this Agreement solely with respect to the indemnification obligations of Purchaser arising under Section 10.3(a)(i), and (iii) Article 10 of this
Agreement solely with respect to pre-Closing covenants of Purchaser (collectively, the “Guaranteed Obligations”). The liability of HHC in respect of this guaranty (this “Guaranty”) shall be immediate and shall not be contingent
upon the exercise or enforcement by Seller of whatever remedies it may have against Purchaser. This Guaranty constitutes a continuing guarantee and shall: (i) remain in full force and effect until all of the Guaranteed Obligations have been
performed; (ii) be binding upon HHC and its successors and assigns; and (iii) inure to the benefit of and be enforceable by Seller and its successors and assigns. If Seller shall have instituted any proceeding to enforce any right or remedy under
this Guaranty and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to Seller, then, except as otherwise provided in any such determination, Seller, Purchaser and HHC shall, subject to
any determination in such proceeding, be restored severally and respectively to their respective former positions hereunder and thereunder, and thereafter all rights and remedies of Seller shall continue as though no such proceeding had been
instituted. This Guaranty constitutes a contract for surety under Pennsylvania law running in favor and for the benefit of Seller. Nothing herein shall be construed to require that notice to or consent of HHC be obtained in order to amend or modify
the provisions of this Agreement or settle any dispute arising thereunder. 
  
 (Remainder of Page Intentionally Left Blank) 
  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 56 

 IN WITNESS WHEREOF, this Asset Acquisition and Contribution Agreement has been executed and delivered as
of the day and year first above written. 
  

											
	SELLER:	 	PURCHASER:
		
	 FRIENDS HOSPITAL,
 a Pennsylvania
nonprofit membership corporation
	 	 FRIENDS BEHAVIORAL HEALTH SYSTEM, LP,
 a Pennsylvania limited partnership

				
	By:	 	 /s/ Carol R. Ashton-Hergenhan

	 	By:	 	FRIENDS, GP, LLC, its sole general partner
	Name:	 	Carol R. Ashton-Hergenhan	 	 	 	 	 	 	 	 
	Title:	 	Chair. Board of Managers	 	 	 	By:	 	HORIZON MENTAL HEALTH MANAGEMENT, INC., its sole member and sole manager
						
	 	 	 	 	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	 	 	 	 	Name:	 	David K. White
	 	 	 	 	 	 	 	 	Title:	 	President
	
	For the limited purposes stated in Sections 1.15, 9.11 and 12.15:
			
	 	 	 	 	HORIZON MENTAL HEALTH MANAGEMENT, INC.
				
	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	Name:	 	David K. White
	 	 	 	 	Title:	 	President
	
	For the limited purposes stated in Sections 1.2 and 1.13:
			
	 	 	 	 	FRIENDS GP, LLC
				
	 	 	 	 	By:	 	HORIZON MENTAL HEALTH MANAGEMENT, INC., its sole member and sole manager
					
	 	 	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	 	 	Name:	 	David K. White
	 	 	 	 	Title:	 	President
				
	For the limited purposes stated in Section 12.15:	 	 	 	 	 	 
		
	 	 	HORIZON HEALTH CORPORATION
				
	 	 	 	 	By:	 	 /s/ John E. Pitts

	 	 	 	 	Name:	 	John E. Pitts
	 	 	 	 	Title:	 	Sr. Vice President, Finance and CFO

  

 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT – Page 57 

 FIRST AMENDMENT 
 TO 
 ASSET ACQUISITION AND CONTRIBUTION AGREEMENT 
  
 THIS FIRST AMENDMENT TO ASSET ACQUISITION AND CONTRIBUTION AGREEMENT (this
“Amendment”) is made and entered into as of June 30, 2005, by and among FRIENDS HOSPITAL, a Pennsylvania nonprofit corporation (“Seller”), FRIENDS BEHAVIORAL HEALTH SYSTEM, LP, a Pennsylvania limited partnership
(“Purchaser”), HORIZON MENTAL HEALTH MANAGEMENT, INC., a Texas corporation (“HMHM”), FRIENDS GP, LLC, a Pennsylvania limited liability company (“FGP”), and HORIZON HEALTH CORPORATION, a Delaware
corporation (“HHC”). 
  
 R E C I T A L S:

  
 A. Seller, Buyer and, for certain limited purposes, HMHM,
FGP and HHC, have entered into that certain Asset Acquisition and Contribution Agreement dated as of April 22, 2005 (the “Acquisition Agreement”). Capitalized terms used but not otherwise defined in this Amendment shall have the same
respective meanings ascribed to such terms in the Acquisition Agreement. 
  
 B. Seller and Buyer now desire to amend the Acquisition Agreement, and HMHM, FGP and HHC desire to consent to and approve such amendment, all as provided herein. 
  
 A G R E E M E N T: 
  
 NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants contained in this Amendment, the parties hereto, intending to be legally bound, agree as follows: 
  
 1. Amendment. All references to “HHC Pennsylvania, LLC, a Pennsylvania limited liability company” and “HHC Pennsylvania,” in
the Acquisition Agreement and in each of the Exhibits thereto, are hereby amended to refer instead to “Horizon Mental Health Management, Inc., a Delaware corporation” and “HMHM,” respectively. Each of the parties hereto consents
to and approves of such amendment. 
  
 2. Effect on Acquisition
Agreement; General Provisions. Except as set forth in this Amendment, the terms and provisions of the Acquisition Agreement are hereby ratified and declared to be in full force and effect, and incorporated herein by reference. This Amendment
shall become effective upon its execution, which may occur in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Captions and paragraph headings are used
herein for convenience only, are not a part of this Amendment or the Acquisition Agreement as amended by this Amendment and shall not be used in construing either document. On and after the date hereof, each reference in the Acquisition Agreement to
“this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the other documents and agreements relating to the Acquisition Agreement, shall mean and be a reference to the
Acquisition Agreement as amended hereby. 

 IN WITNESS WHEREOF, this Amendment has been executed and delivered as of the day and year first above
written. 
  

											
	SELLER:	 	PURCHASER:
		
	FRIENDS HOSPITAL	 	FRIENDS BEHAVIORAL HEALTH SYSTEM, LP
				
	By:	 	 /s/ Carol Ashton-Hergenhan

	 	By:	 	FRIENDS, GP, LLC, its sole general partner
	Name:	 	Carol Ashton-Hergenhan	 	 	 	 	 	 	 	 
	Title:	 	Chair, Board of Managers	 	 	 	By:	 	HORIZON MENTAL HEALTH MANAGEMENT, INC., its sole member and sole manager
						
	 	 	 	 	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	 	 	 	 	Name:	 	David K. White
	 	 	 	 	 	 	 	 	Title:	 	President
			
	 	 	 	 	HORIZON MENTAL HEALTH MANAGEMENT, INC.
				
	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	Name:	 	David K. White
	 	 	 	 	Title:	 	President
			
	 	 	 	 	FRIENDS GP, LLC
				
	 	 	 	 	By:	 	 HORIZON MENTAL HEALTH MANAGEMENT, INC.,
 its sole member and sole manager

					
	 	 	 	 	 	 	By:	 	 /s/ David K. White

	 	 	 	 	 	 	Name:	 	David K. White
	 	 	 	 	 	 	Title:	 	President
	 	 	 	 	 	 	 	 	 
			
	 	 	 	 	HORIZON HEALTH CORPORATION
				
	 	 	 	 	By:	 	 /s/ John E. Pitts

	 	 	 	 	Name:	 	John E. Pitts
	 	 	 	 	Title:	 	Senior Vice President, Finance

  

 2Supplemental Indenture

 Exhibit 4.1 
  
 SUPPLEMENTAL INDENTURE 
  

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of July 1, 2005, among Saks Incorporated, a corporation incorporated
under the laws of the State of Tennessee (the “Company”), as issuer, the Subsidiary Guarantors listed on the signature pages hereto (the “Guarantors”), as guarantors, and The Bank of New York Trust Company, N.A.
(the “Trustee”), as trustee. 
  
 W I T N E S S
E T H: 
  
 WHEREAS, the Company, the Guarantors and
the Trustee have heretofore entered into an Indenture, dated as of March 23, 2004, relating to the Company’s outstanding 2.00% Convertible Senior Notes due March 15, 2024 (the “Notes”), as amended and supplemented prior to the
date hereof (the “Original Indenture”); 
  
 WHEREAS, the Company has solicited consents from Holders of the Notes to, among other things, certain amendments (the “Amendments”) to the Original Indenture which are set forth in this Supplemental Indenture;

  
 WHEREAS, the Company has received the written consent
to the Amendments from Holders of a majority in aggregate principal amount of the Outstanding Notes; and 
  
 WHEREAS, pursuant to Section 14.2 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. 
  
 NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of Holders of the Notes as follows: 
  
 ARTICLE I 
  
 DEFINITIONS 
  
 Section 1.1. Definitions. 
  
 The Original Indenture together with this Supplemental Indenture are
hereinafter sometimes collectively referred to as the “Indenture.” For the avoidance of doubt, references to any “Section” of the “Indenture” refer to such Section of the Original Indenture as supplemented and
amended by this Supplemental Indenture. All capitalized terms which are used herein and not otherwise defined herein are defined in the Original Indenture and are used herein with the same meanings as in the Original Indenture. If a capitalized term
is defined in the Original Indenture and this Supplemental Indenture, the definition in this Supplemental Indenture shall apply to the Indenture and the Notes. 

 Section 1.1 of the Original Indenture shall be amended to insert alphabetically therein the following
defined terms: 
  
 “Compliance Certificate” has
the meaning set forth in Section 3.8. 
  
 “Consent
Fee” means the payment defined as such with respect to the Notes in the Solicitation Documents. 
  
 “Covenant Reversion Date” means, 5:30 p.m., New York City time, on the earlier of (i) the Business Day following the Company’s
failure to pay the Consent Fee, if due, for the Notes in accordance with the Solicitation Documents and (ii) October 31, 2005. 
  
 “Solicitation Documents” means the Consent Solicitation Statement dated as of June 20, 2005 and the related Consent Form, each as may be
amended and supplemented from time to time. 
  
 ARTICLE
II 
  
 COVENANTS 
  
 Section 2.1. SEC Reports. 
  
 Section 3.7 of the Original Indenture shall be deleted in its entirety and
replaced with the following: 
  
 SECTION 3.7.
SEC Reports. The Company will, except as otherwise provided in this Section 3.7, file with the Commission (so long as the Commission will accept any such filings) and the Trustee the annual reports, quarterly reports and other documents
required to be filed with the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not the Company has a class of securities registered under the Exchange Act. The Company will also comply with the other provisions of Section
314(a) of the Trust Indenture Act. Notwithstanding any other provision of this Section 3.7 or this Indenture, the documents and reports referred to in this Section 3.7 that the Company would have been required to file with the Commission or the
Trustee on any date on or before the Covenant Reversion Date (but for this sentence) will not be required to be filed by the Company until the Covenant Reversion Date. 
  
 Section 2.2. Compliance Certificates. 
  
 Section 3.8 of the Original Indenture shall be deleted in its entirety and replaced with the following: 
  
 SECTION 3.8. Compliance Certificates. The Company and
the Guarantors will, except as otherwise provided in this Section 3.8, deliver to the Trustee, within 120 days after the end of each of their fiscal years ending after the date hereof, a written statement (such written statement, a “Compliance
Certificate”) signed by the chairman or a chief executive officer, the principal financial officer, principal accounting officer or Treasurer 

  

 2 

 
of the Company or such Guarantor (as applicable), stating (i) that a review of the activities of the Company or such Guarantor (as applicable) during the
preceding fiscal year has been made under the supervision of the signing officer with a view to determining whether the Company or such Guarantor (as applicable) has kept, observed, performed and fulfilled its obligations under this Indenture and
(ii) that, to the knowledge of each officer signing such certificate, the Company or such Guarantor (as applicable) has kept, observed, performed and fulfilled each and every covenant and condition contained in this Indenture and is not in default
in the performance or observance of any of the terms, provisions, conditions and covenants hereof (or, if a Default shall have occurred, describing all such Defaults of which such officers may have knowledge, their status and what action the Company
or such Guarantor (as applicable) is taking or proposes to take with respect thereto). When any Default has occurred and is continuing, or if the Trustee or any Holder or the trustee for or the holder of any other evidence of Indebtedness of the
Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness (other than Indebtedness evidenced by the Notes) in the principal amount of less than $50,000,000), the
Company will, except as otherwise provided in this Section 3.8, promptly deliver to the Trustee by registered or certified mail or by telegram, or facsimile transmission followed by hard copy by registered or certified mail an Officer’s
Certificate specifying such event, notice or other action no later than five Business Days after the Company becomes aware of such occurrence and what action the Company is taking or proposes to take with respect thereto. Notwithstanding any other
provision of this Section 3.8 or this Indenture, (i) the Compliance Certificate referred to in this Section 3.8 that the Company and the Guarantors would have been required to deliver to the Trustee on any date before the Covenant Reversion Date
(but for this sentence) will not be required to be delivered until the Covenant Reversion Date, and (ii) the Company and the Guarantors will have no obligation to deliver an Officer’s Certificate, as referred to in the preceding sentence,
relating to the breach of a covenant contained in Section 3.7, 3.8 or 3.11 of this Indenture that occurred prior to the Covenant Reversion Date. 
  
 Section 2.3. Notice of Default. 
  
 Section 3.11 of the Original Indenture shall be deleted in its entirety and replaced with the following: 
  
 SECTION 3.11. Notice of Default. In the event that
any Default that could mature into an Event of Default under Section 10.1(c) hereof shall occur, the Company or any of the Guarantors shall give written notice of such Default to the Trustee no later than five Business Days after the Company becomes
aware of the occurrence of such Default; provided, however, that the Company and the Guarantors will have no obligation to deliver a written notice relating to the breach of a covenant contained in Section 3.7, 3.8 or 3.11 of this Indenture that
occurred prior to the Covenant Reversion Date. 
  

 3 

 ARTICLE III 
  
 DEFAULTS AND REMEDIES 
  
 Section 3.1. Events of Default. 
  
 Section 10.1 of the Original Indenture shall be deleted in its entirety and replaced with the following: 
  
 SECTION 10.1. Events of Default. “Event of
Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or governmental body): 
  
 (a) default in the payment of any interest and Liquidated Damages, if any, due and payable on the Notes, continued for 30 days or more; or

  
 (b) default in payment of all or any part of
principal of the Notes at the Maturity Date, upon redemption or repurchase or following a Fundamental Change when the same becomes due and payable; or 
  
 (c) except as otherwise provided in this Section 10.1, default in the performance of or breach of any other covenant or warranty of the
Company contained in the Notes, any Guarantee or this Indenture (other than a default specified in (a) or (b) above) that continues for a period of 60 days after written notice of such failure requiring the Company to remedy the same and stating
that such notice is a “Notice of Default” hereunder shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding;
or 
  
 (d) acceleration of any Indebtedness,
having an aggregate minimum principal amount of $50 million, for money borrowed by the Company or a Subsidiary under the terms of the instrument under which such Indebtedness is issued or secured, if such acceleration is not discharged within 10
days after written notice of such acceleration; or 
  
 (e) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of
this Indenture or the release of any such Guarantee in accordance with Section 12.4 hereof) and such condition shall have continued for a period of 30 days after written notice of such condition requiring the same to be remedied and stating that
such notice is a “Notice of Default” hereunder shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; or

  
 (f) the Company or any Subsidiary of the
Company pursuant to or under or within the meaning of any Bankruptcy Law: 
  
 (i) commences a voluntary case or proceeding; 
  

 4 

 (ii) consents to the making of a Bankruptcy Order in an involuntary case or proceeding or
the commencement of any case against it; 
  
 (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; 
  
 (iv) makes a general assignment for the benefit of its creditors; 
  
 (v) files an answer or consent seeking reorganization or relief; 
  
 (vi) admits in writing its inability to pay its debts
generally; or 
  
 (vii) consents to the filing of
a petition in bankruptcy; or 
  
 (g) a court of
competent jurisdiction in any involuntary case or proceeding enters a Bankruptcy Order against the Company or any Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 60 consecutive days; 
  
 (h) a Custodian shall be appointed out of court with respect
to the Company or any Subsidiary or with respect to all or any substantial part of the assets or properties of the Company or any Subsidiary; 
  
 (i) default on the part of the Company in its obligation to convert the Notes upon exercise of a Holder’s conversion right in
accordance with the terms of the Notes and Article IX hereof and such conversion Default is not cured or such conversion is not rescinded within five days after written notice of Default is given by registered mail to the Company by the Trustee or
to the Company and the Trustee by the Holder of such Note; 
  
 (j) default on the part of the Company in its obligation to give notice to Holders of their right to require the Company to repurchase Notes following the occurrence of a Fundamental Change within the time required to
give such notice; or 
  
 (k) default in the
payment of principal, interest or premium when due under any Indebtedness, having an aggregate minimum principal amount of $50 million, by the Company or any Subsidiaries under the terms of the instrument under which such Indebtedness is issued or
secured, if such default continues in effect for more than 30 days after the expiration of any grace period or extension of time for payment applicable thereto. 
  
 If an Event of Default with respect to the Notes then outstanding occurs and is continuing (other than an
Event of Default specified in Section 10.1(f), Section 10.1(g) or Section 10.1(h)), then and in each and every such case, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by Holders), may declare the 

  

 5 

 
principal of all the Notes and the interest accrued thereon and Liquidated Damages, if any, thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes contained to the contrary notwithstanding. This provision, however, is subject to the condition that if at any time after the
principal (or such specified amount) of the Notes shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company or any
Guarantor shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest and Liquidated Damages, if any, upon all of the Notes and the principal of any and all Notes, which shall have become due otherwise
than by acceleration (with interest on overdue installments of interest, if any, to the extent that payment of such interest is enforceable under applicable law and on such principal at the rate borne by the Notes to the date of such payment or
deposit) and shall pay the reasonable compensation, disbursements, expenses and advances of the Trustee, and any and all Defaults under this Indenture, other than the nonpayment of principal of and accrued interest, if any, and Liquidated Damages,
if any, on the Notes, which shall have become due solely by reason of the acceleration, shall have been cured or shall have been waived in accordance with this Indenture, then and in every such case the declaration of acceleration shall be
automatically annulled and rescinded; but no such rescission and annulment shall extend to or shall affect any subsequent Default, or shall impair any right consequent thereon. If any Event of Default with respect to the Company specified in Section
10.1(f), Section 10.1(g) or Section 10.1(h) occurs, all unpaid principal and accrued interest and Liquidated Damages, if any, on all Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or
other act by the Trustee or any Holder. 
  
 If
the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company, the Trustee and the Holders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall
continue as though no such proceeding had been taken. 
  
 In determining whether the Holders of the requisite aggregate principal amount of the Notes outstanding have given any request, demand, authorization or consent under this Indenture, the principal amount of Notes that will be deemed to be
outstanding will be the amount of the principal of the Notes that would be due and payable as of the date of the determination upon a declaration of acceleration of the maturity of the Notes. 
  
 Notwithstanding any of the foregoing, the failure of the
Company to comply with Section 3.7, 3.8 or 3.11 of this Indenture, or §314 of the Trust Indenture Act, before 5:30 p.m., New York City time on the Covenant Reversion Date shall not constitute a Default under clause (c) above. 
  

 6 

 ARTICLE IV 
  
 MISCELLANEOUS 
  
 Section 4.1. Effect of Supplemental Indenture; Effectiveness and Operation. 
  
 (a) This Supplemental Indenture shall be effective upon execution hereof by the Company, the Guarantors and the Trustee.
From and after such date, the Amendments set forth herein shall be deemed to have modified the applicable sections, or portions thereof, or clauses of the Original Indenture. However, this Supplemental Indenture shall cease to have any effect if the
Company shall fail to pay to Holders of the Notes the Consent Fee described in the Solicitation Documents (as defined in Section 1.1 of this Supplemental Indenture). 
  
 (b) This Supplemental Indenture is a supplemental indenture within the meaning of Section 14.2 of the Original Indenture,
and the Original Indenture shall be read together with this Supplemental Indenture and shall have the same effect over the Notes in the same manner as if the provisions of the Original Indenture and this Supplemental Indenture were contained in the
same instrument. 
  
 (c) In all other respects, the Original
Indenture is confirmed by the parties hereto as supplemented by the terms of this Supplemental Indenture. 
  
 (d) Subject to 4.2 of this Supplemental Indenture, in the event that there is a conflict or inconsistency between the Original Indenture and this
Supplemental Indenture, the provisions of this Supplemental Indenture shall control. 
  
 (e) The Company hereby covenants to notify the Trustee if the Covenant Reversion Date shall occur on any date prior to October 31, 2005 within 24 hours after such occurrence. 
  
 (f) Nothing contained in this Supplemental Indenture shall affect any
statutory obligation of the Company or the Guarantors under the Exchange Act or the TIA. 
  
 Section 4.2. Trust Indenture Act Controls. 
  
 If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision which is required to be included in this Supplemental Indenture by the TIA, the required provision shall control.
If any provision of this Supplemental Indenture modifies any TIA provision that may be so modified, such TIA provision shall be deemed to apply to this Supplemental Indenture as so modified. If any provision of this Supplemental Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded from this Supplemental Indenture. 
  
 Section 4.3. Governing Law. 
  
 This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York. 
  

 7 

 Section 4.4. Counterparts. 
  
 The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. 
  
 Section 4.5.
Successors. 
  
 All agreements of the Company and the
Guarantors in this Supplemental Indenture shall bind their respective successors. All agreements of the Trustee in this Supplemental Indenture shall bind its successors. 
  
 Section 4.6. Severability. 
  
 In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  
 Section 4.7. Effect of Headings. 
  
 The headings of the Articles and Sections of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a
part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 
  
 Section 4.8. Trustee. 
  
 The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by
the Company and the Guarantors. 
  
 * * * * * 
  

 8 

 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed
as of the date first above written. 
  

			
	SAKS INCORPORATED
		
	 By:
	 	 /s/ C. Wes Burton, Jr.

	 	 	C. Wes Burton, Jr.
	 	 	Senior Vice President and Treasurer
	
	 GUARANTORS:

	
	 CARSON PIRIE HOLDINGS, INC.

	 HERBERGER’S DEPARTMENT STORES, LLC

	 JACKSON LEASING LLC

	 MCRAE’S OF ALABAMA, INC.

	 MCRAE’S STORES SERVICES, INC.

	 MCRAE’S, INC.

	 MCRIL, LLC

	 MERCHANDISE CREDIT, LLC

	 NEW YORK CITY SAKS, LLC

	 PARISIAN, INC.

	 SAKS & COMPANY

	 SAKS DIRECT, INC.

	 SAKS DISTRIBUTION CENTERS, INC.

	 SAKS FIFTH AVENUE DISTRIBUTION COMPANY

	 SAKS FIFTH AVENUE OF TEXAS, INC.

	 SAKS FIFTH AVENUE TEXAS, L.P.

	 SAKS FIFTH AVENUE, INC.

	 SAKS HOLDINGS, INC.

	 SAKS WHOLESALERS, INC.

	 SCCA, LLC

	 SCCA STORE HOLDINGS, INC.

	 SCIL, LLC

	 SCIL STORE HOLDINGS, INC.

	 SFAILA, LLC

	 TEX SFA, INC.

		
	 By:
	 	 /s/ Charles J. Hansen

	 	 	Charles J. Hansen
	 	 	Executive Vice President

			
	MCRAE’S STORES PARTNERSHIP
		
	By:	 	McRae’s, Inc., its Managing General Partner
		
	 By:
	 	 /s/ Charles J. Hansen

	 	 	Charles J. Hansen
	 	 	Executive Vice President
	
	PMIN GENERAL PARTNERSHIP
		
	By:	 	Parisian, Inc., its Managing Partner
		
	 By:
	 	 /s/ Charles J. Hansen

	 	 	Charles J. Hansen
	 	 	Executive Vice President

			
	 THE BANK OF NEW YORK TRUST
 COMPANY, N.A., as Trustee

		
	 By:
	 	 /s/ Frederick A. Schaal

	 Name:
	 	Frederick A. Schaal
	 Title:
	 	Vice President

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