Document:

Third Amendment to Credit Agreement

 EXHIBIT 10.14 
  
 THIRD AMENDMENT TO CREDIT AGREEMENT 
  
 THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of June 3, 2004, by and between
DESIGN WITHIN REACH, INC., a Delaware corporation (“Design Delaware”), successor-by-merger to Design Within Reach, Inc., a California Corporation (“Design California”) (“Borrower”), and WELLS FARGO HSBC TRADE BANK,
NATIONAL ASSOCIATION (“Trade Bank”). 
  
 RECITALS 
  
 WHEREAS, Borrower is currently
indebted to Trade Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Trade Bank dated as of July 10, 2002, as amended from time to time (“Credit Agreement”). 
  
 WHEREAS, Trade Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes. 
  
 NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit
Agreement shall be amended as follows: 
  

	 	I.	Article I. CREDIT FACILITY, Section 1.1 The Facilities is hereby deleted in its entirety, and the following substituted therefor:

  
 “1.1 The
Facilities. Subject to the terms and conditions of this Agreement, Trade Bank will make available to Borrower each of those credit facilities (“Facilities”) for which a Facility Supplement (“Supplement”) is attached as
Exhibit B hereto. Additional terms for each individual Facility (and each subfacility thereof (“Subfacility”)) are set forth in the Supplement for that Facility. Each Facility will be available from the Closing Date until the Facility
Termination Date for that Facility. Collateral and credit support required for each Facility are set forth in Exhibit C hereto. Definitions for those capitalized terms not otherwise defined are contained in Article 8 below.” 
  

	 	II.	The first sentence of Article I. CREDIT FACILITY, Section 1.2 Credit Extension Limit, is hereby deleted in its entirety, and the following substituted
therefor: 

  
 “1.2
Credit Extension Limit. The aggregate outstanding amount of all Credit Extensions may at no time exceed the lesser of (a) Eleven Million Five Hundred Thousand Dollars ($11,500,000) or (b) the Borrowing Base in effect from time to time,
plus Two Million Five Hundred Thousand Dollars ($2,500,000) (“Overall Credit Limit”), subject to the repayment of principal under the Term Commitment Loan.” 
  

 -1- 

	 	III.	Article I. CREDIT FACILITY, Sections 1.4 Repayment; Interest and Fees is hereby deleted in its entirety, and the following substituted therefor:

  
 “1.4 Repayment;
Interest and Fees. Each funded Credit Extension shall be repaid by Borrower, and shall bear interest from the date of disbursement at those per annum rates and such interest shall be paid, at the times specified in the applicable Supplement,
Note or Facility Document. With respect to each Facility, Borrower agrees to pay to Trade Bank the fees specified in the related Supplement as well as those fees specified in the relevant Facility Document(s). Interest and fees will be calculated on
the basis of a 365-day year, actual days elapsed. Any overdue payments of principal (and interest to the extent permitted by law) shall bear interest at a per annum floating rate equal to the Prime Rate plus 5.00%.” 
  

	 	IV.	Article V. NEGATIVE COVENANTS, Section 5.10, Capital Expenditures is hereby deleted in its entirety, and the following substituted therefor:

  
 “5.10 Capital
Expenditures. Borrower shall not make any capital expenditures in any fiscal year in an aggregate amount in excess of $12,000,000.” 
  

	 	V.	The first sentence of Article VIII. DEFINITIONS, Section 8.4 Borrowing Base, is hereby deleted in its entirety, and the following substituted therefor:

  
 “8.4 Borrowing
Base. means an amount equal to the sum of: (a) seventy-five percent (75%) of Borrower’s Eligible Accounts Receivable, plus (b) sixty percent (60%) of Borrower’s Eligible Inventory and studio inventory.” 
  

	 	VI.	Article VIII. DEFINITIONS, Section 8.13(a), is hereby deleted in its entirety, and the following substituted therefor: 

  

	 	“(a)	any account which is past due sixty (60) days after the invoice date with respect to Accounts Receivable with payment terms of net thirty (30) or net sixty (60) days from invoice
date; and any account past due one (1) day after the due date with respect to Accounts Receivable with payment terms of net 90 days;” 

  

	 	VII.	Article VIII. DEFINITIONS, Section 8.14 Eligible Inventory, is hereby deleted in its entirety, and the following substituted therefor:

  
 “8.14 “Eligible
Inventory” means all Inventory of Borrower comprised of finished goods and studio inventory (other than Inventory deemed ineligible in Trade Bank’s sole discretion), that have been in Borrower’s stock for not more than twelve
(12) calendar months, valued at the lower of cost or fair market value on a first in first out basis in accordance with GAAP, that is subject to no liens other than liens in favor of Trade Bank, and is located at Borrower’s warehouses in the
United States.” 
  

	 	VIII.	Page 13 of the Credit Agreement is hereby amended by deleting “283 Fourth Street, Oakland, CA 94607” as the Borrower’s address and by substituting “225 Bush
Street, Floor 20, San Francisco, CA 94104” therefor. 

  

	 	IX.	Page 13 of the Credit Agreement is hereby amended by deleting “525 Market Street, 25th Floor, San Francisco, CA 94105” as the Borrower’s address and by substituting
“1 Front Street, 21st Floor, San Francisco, CA 94111” therefor. 

  

 -2- 

	 	X.	The FINANCIAL COVENANTS, Tangible Net Worth section of EXHIBIT A ADDENDUM TO CREDIT AGREEMENT is hereby deleted in its entirety, and the following substituted
therefor: 

  
 “ “Tangible Net Worth. Not less than $8,500,000, to be measured monthly; provided however, upon Borrower’s completion of an initial public offering, not less than $8,500,000, plus 90% net initial public offering
proceeds to Borrower. (“Tangible Net Worth” means the aggregate of total shareholders’ equity determined in accordance with GAAP plus indebtedness which is subordinated to the Obligations to Trade Bank under a subordination
agreement in form and substance acceptable to Trade Bank or by subordination language acceptable to Trade Bank in the instrument evidencing such indebtedness less (i) all assets which would be classified as intangible assets under GAAP, including,
but not limited to, goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized software and organizational costs, licenses and franchises, and (ii) assets which Trade Bank determines in its business judgment would not be available
or would be of relatively small value in a liquidation of Borrower’s business, including, but not limited to loans to officers or affiliates and other items).” 
  

	 	XI.	The FINANCIAL COVENANTS, Net Income After Taxes section of EXHIBIT A ADDENDUM TO CREDIT AGREEMENT is hereby deleted in its entirety, and the following substituted
therefor: 

  
 “Net Income
After Taxes. Not less than $1 on a year-to-date basis determined as of each fiscal quarter end; and not less than $1 on an annual basis, determined as of each fiscal year end.” 
  

	 	XII.	EXHIBIT B, REVOLVING CREDIT FACILITY SUPPLEMENT shall be amended by: 

  

	 	A.	deleting “July 31, 2004” as the FACILITY TERMINATION DATE, and by substituting “July 31, 2005” therefor; and 

  

	 	B.	deleting “Seven Million Five Hundred Thousand Dollars ($7,500,000)” as the CREDIT LIMIT FOR THIS REVOLVING CREDIT LOAN FACILITY and by substituting “Nine
Million Dollars ($9,000,000)” therefor. 

  

	 	XIII.	EXHIBIT C, COLLATERAL/CREDIT SUPPORT DOCUMENT is hereby deleted in its entirety, and the attached EXHIBIT C, COLLATERAL/CREDIT SUPPORT DOCUMENT, all terms of which are
incorporated herein by this reference, shall be substituted therefor. 

  

	 	XIV.	MERGER AND ASSUMPTION. 

  

	 	(a)	Pursuant to that certain Agreement and Plan of Merger dated as of March 23, 2004, by and between Design Delaware and Design California, Design Delaware has, by effect of law,
assumed all liabilities and assets of Design California, and Design Delaware hereby expressly and unconditionally assumes, agrees to pay, discharge, satisfy and perform any and all obligations owing to Trade Bank pursuant to each of the Assumed
Documents, all with the same force and effect as if Design Delaware were the original signatory to the Assumed Documents. For purposes hereof, “Assumed Documents” shall mean, collectively, the Credit Agreement and, insofar and to
the extent Design California was a party thereto, all other related documents. 

  

	 	(b)	The execution of this Third Amendment by Design Delaware shall be deemed its execution of each of the Assumed Documents. This Third Amendment does not constitute the creation of a
new obligation or the extinguishment of the obligations evidenced by any of the Assumed Documents, nor does it in any way affect or impair the liens of the Assumed Documents, which Design Delaware acknowledges to be valid first liens on the property
described therein (except as otherwise set forth in the Assumed Documents). Design Delaware 

  

 -3- 

	 	      	agrees that the liens of the Assumed Documents shall continue in full force and effect, unimpaired and unaffected by this Agreement or by the Merger. 

  
 Borrower shall pay to Trade Bank a non-refundable commitment fee for the
Revolving Credit Facility equal to $22,500.00, which fee shall be due and payable upon execution of this Amendment. 
  
 Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification.
All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document. 
  
 Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set
forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would
constitute any such Event of Default. 
  
 IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed as of the day and year first written above. 
  

									
	 DESIGN WITHIN REACH, INC.,
 a Delaware corporation,
 successor-by-merger to Design Within Reach, Inc.,
 a California
corporation
	 	 	 	 WELLS FARGO HSBC TRADE BANK,
 NATIONAL ASSOCIATION

					
	By:	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 	 	 
	Title: 	 	 	 	 	 	 	 	 

  

 -4-Asset Purchase Agreement

 Exhibit 10.1 
  
 Execution Copy 
  
 ASSET PURCHASE AGREEMENT 
  
 by and between 
  
 PSH ACQUISITION CORPORATION 
  
 as Seller 
  
 and

  
 HHC POPLAR SPRINGS, INC. 
  
 as Purchaser 
  
 Dated as of May 13, 2004 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page No.

	 ARTICLE 1
 DEFINITIONS; SALE AND TRANSFER OF
ASSETS; CONSIDERATION; CLOSING
	  	1
	 1.1
	  	 Definitions
	  	1
	 1.2
	  	 Purchase Price
	  	2
	 1.3
	  	 Closing Date
	  	3
	 1.4
	  	 Items to be Delivered by Seller at Closing
	  	3
	 1.5
	  	 Items to be Delivered by Purchaser at Closing
	  	4
	 1.6
	  	 Prorations and Utilities
	  	5
	 1.7
	  	 Transfer of Seller Assets
	  	6
	 1.8
	  	 Excluded Assets
	  	8
	 1.9
	  	 Assumed Obligations
	  	9
	 1.10
	  	 Excluded Liabilities
	  	9
	 1.11
	  	 Working Capital Payment.
	  	10
	 1.12
	  	 Percentage Payment.
	  	12
	 1.13
	  	 Variable Payment.
	  	13
		
	 ARTICLE 2
 REPRESENTATIONS AND WARRANTIES OF SELLER
	  	13
	 2.1
	  	 Authority
	  	13
	 2.2
	  	 Authorization/Execution
	  	13
	 2.3
	  	 Organization and Good Standing; No Subsidiaries; No Conflicts; Shareholders.
	  	13
	 2.4
	  	 Financial Statements; Changes.
	  	14
	 2.5
	  	 Tax and Other Returns and Reports
	  	15
	 2.6
	  	 Material Contracts.
	  	15
	 2.7
	  	 Real and Personal Property; Title to Property; Leases.
	  	16
	 2.8
	  	 Intangible Property
	  	17
	 2.9
	  	 Legal Proceedings
	  	17
	 2.10
	  	 Accounting Records; Internal Controls; Absence of Certain Payments.
	  	18
	 2.11
	  	 Insurance
	  	18
	 2.12
	  	 Employees.
	  	18
	 2.13
	  	 Employee Benefits.
	  	19
	 2.14
	  	 Certain Interests
	  	19
	 2.15
	  	 Intercompany Transactions
	  	20
	 2.16
	  	 Inventories
	  	20
	 2.17
	  	 Receivables
	  	20
	 2.18
	  	 Third Party Payors and Suppliers
	  	20
	 2.19
	  	 Worker Adjustment and Retraining Notification (WARN)
	  	20
	 2.20
	  	 Environmental Compliance
	  	20
	 2.21
	  	 Powers of Attorney
	  	22
	 2.22
	  	 Accreditation; Medicare and Medicaid; Third-Party Payors; Compliance with Health Care Laws.
	  	22
	 2.23
	  	 Compliance Program
	  	24
	 2.24
	  	 HIPAA
	  	24
	 2.25
	  	 Restricted Grant and Loan Programs
	  	24

  

 ii 

					
	 2.26
	  	 Experimental Procedures
	  	24
	 2.27
	  	 Medical Staff; Physician Relations
	  	24
	 2.28
	  	 Solvency
	  	25
	 2.29
	  	 No Brokers or Finders
	  	25
	 2.30
	  	 Disclaimer
	  	25
		
	 ARTICLE 3
 REPRESENTATIONS AND WARRANTIES OF PURCHASER
	  	25
	 3.1
	  	 Authority
	  	25
	 3.2
	  	 Authorization/Execution
	  	26
	 3.3
	  	 Organization and Good Standing; No Violation.
	  	26
	 3.4
	  	 Brokers and Finders
	  	26
	 3.5
	  	 Solvency
	  	26
	 3.6
	  	 No Other Facilities
	  	27
		
	 ARTICLE 4
 COVENANTS OF SELLER
	  	27
	 4.1
	  	 Access and Information; Inspection Period, Preparation of Exhibits and Schedules
	  	27
	 4.2
	  	 Conduct of Business
	  	27
	 4.3
	  	 Negative Covenants
	  	28
	 4.4
	  	 Consents
	  	29
	 4.5
	  	 Additional Financial Information
	  	29
	 4.6
	  	 No-Shop.
	  	29
	 4.7
	  	 Seller’s Efforts to Close
	  	30
	 4.8
	  	 Title Matters.
	  	30
	 4.9
	  	 Termination Cost Reports
	  	31
	 4.10
	  	 Updating of Disclosure Schedules
	  	31
	 4.11
	  	 Poplar West Tract
	  	31
	 4.12
	  	 Environmental Remediation
	  	32
		
	 ARTICLE 5
 COVENANTS OF PURCHASER
	  	32
	 5.1
	  	 Purchaser’s Efforts to Close
	  	32
	 5.2
	  	 Required Governmental Approvals
	  	32
	 5.3
	  	 Excluded Assets
	  	32
	 5.4
	  	 Confidentiality
	  	32
	 5.5
	  	 Enforceability
	  	33
	 5.6
	  	 Waiver of Bulk Sales Law Compliance
	  	33
	 5.7
	  	 COBRA.
	  	33
	 5.8
	  	 Transition Services
	  	33
		
	 ARTICLE 6
 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
	  	34
	 6.1
	  	 Signing and Delivery of Instruments
	  	34
	 6.2
	  	 Unfavorable Action or Proceeding
	  	34
	 6.3
	  	 Performance of Covenants
	  	34
	 6.4
	  	 Opinion of Counsel for Purchaser
	  	34
	 6.5
	  	 Governmental Authorizations
	  	34

  

 iii 

					
	 ARTICLE 7
 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
	  	35
	 7.1
	  	 Governmental Authorizations
	  	35
	 7.2
	  	 Signing and Delivery of Instruments
	  	35
	 7.3
	  	 Performance of Covenants
	  	35
	 7.4
	  	 Unfavorable Action or Proceeding
	  	35
	 7.5
	  	 Opinion of Counsel
	  	35
	 7.6
	  	 Title Insurance Policy
	  	35
	 7.7
	  	 No Material Adverse Change
	  	35
	 7.8
	  	 Required Consents
	  	35
		
	 ARTICLE 8
 TERMINATION
	  	36
	 8.1
	  	 Termination
	  	36
	 8.2
	  	 Termination Consequences
	  	36
	 8.3
	  	 Risk of Loss
	  	36
		
	 ARTICLE 9
 POST-CLOSING MATTERS
	  	38
	 9.1
	  	 Excluded Assets and Excluded Liabilities
	  	38
	 9.2
	  	 Preservation and Access to Records After the Closing.
	  	38
	 9.3
	  	 Provision of Benefits of Certain Contracts
	  	39
	 9.4
	  	 Employee Matters
	  	40
	 9.5
	  	 Misdirected Payments, Etc
	  	41
	 9.6
	  	 Post-Closing Operations of the Hospital
	  	41
	 9.7
	  	 Seller Corporate Existence
	  	41
		
	 ARTICLE 10
 SURVIVAL AND INDEMNIFICATION
	  	41
	 10.1
	  	 Survival
	  	41
	 10.2
	  	 Indemnification of Purchaser by Seller.
	  	42
	 10.3
	  	 Indemnification of Seller by Purchaser.
	  	43
	 10.4
	  	 Method of Asserting Claims
	  	44
	 10.5
	  	 Exclusive
	  	47
	 10.6
	  	 Right of Set-Off
	  	47
		
	 ARTICLE 11
 TAX AND COST REPORT MATTERS
	  	47
	 11.1
	  	 Tax Matters; Allocation of Purchase Price.
	  	47
	 11.2
	  	 Cost Report Matters.
	  	48
		
	 ARTICLE 12
 MISCELLANEOUS PROVISIONS
	  	48
	 12.1
	  	 Entire Agreement
	  	48
	 12.2
	  	 Further Assurances and Cooperation
	  	49
	 12.3
	  	 Successors and Assigns
	  	49
	 12.4
	  	 Governing Law
	  	49
	 12.5
	  	 Amendments
	  	49

  

 iv 

					
	 12.6
	  	 Notices
	  	49
	 12.7
	  	 Headings
	  	50
	 12.8
	  	 Confidentiality and Publicity
	  	50
	 12.9
	  	 Third Party Beneficiary
	  	50
	 12.10
	  	 Expenses and Attorneys’ Fees
	  	50
	 12.11
	  	 No Waiver
	  	51
	 12.12
	  	 Severability
	  	51
	 12.13
	  	 Counterparts
	  	51

  

 v 

 LIST OF EXHIBITS 
  

			
	EXHIBIT

	 	 DESCRIPTION

	A	 	Bill of Sale
		
	B	 	Real Estate Lease Assignment
		
	C	 	Special Warranty Deed
		
	D	 	Opinion of Counsel for Seller
		
	E	 	Power of Attorney
		
	F	 	Escrow Agreement
		
	G	 	Opinion of Counsel for Purchaser

  

 vi 

 LIST OF SCHEDULES 
  

			
	 SCHEDULE

	  	 DESCRIPTION

	 1.7(a)
	  	Owned Real Property
	 1.7(b)
	  	Leased Real Property
	 1.7(f)(i)
	  	Contracts
	 1.7(f)(ii)
	  	Excluded Contracts
	 1.8(o)
	  	Other Excluded Assets
	 1.9(f)
	  	Other Assumed Obligations
	 1.11
	  	Net Working Capital
	 1.12
	  	EBITDA Principles and Covenants
	 2.3(b)
	  	Subsidiaries/Investments
	 2.3(c)
	  	Consents/Conflicts
	 2.3(d)
	  	Shareholders of Seller
	 2.4
	  	Financial Statement Matters
	 2.5
	  	Tax Matters
	 2.7
	  	Titled Tangible Property Conditions
	 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
	  	Medicare/Medicaid Compliance
	 2.27
	  	Medical Staff Matters
	 2.29
	  	Broker
	 4.11
	  	Poplar West Tract Plat
	 5.8
	  	Transition Services
	 7.6
	  	Leasehold Title Policies
	 7.8
	  	Required Consents
	 11.1(b)
	  	Allocation of Purchase Price

  

 vii 

 TABLE OF DEFINED TERMS 
  

			
	 Term

	  	Page

	 Accounting Firm
	  	11
	 Accounts Receivable
	  	6
	 Affiliate
	  	29
	 Agency Settlements
	  	48
	 Aggregate Damage
	  	37
	 Agreement
	  	1
	 Assets
	  	6
	 Assumed Obligations
	  	9
	 Bill of Sale
	  	3
	 Claim Notice
	  	44
	 Closing
	  	3
	 Closing Date
	  	3
	 COBRA Coverage
	  	33
	 Code
	  	19
	 Commonly Controlled Entity
	  	19
	 Confidential Information
	  	32
	 Contract and Lease Consents
	  	29
	 Contracts
	  	6
	 Control
	  	29
	 Damages
	  	42
	 Disclosure Schedules
	  	2
	 DMHMRSAS
	  	22
	 Document Retention Period
	  	38
	 EBITDA of the Hospital
	  	12
	 Effective Time
	  	3
	 Environmental Laws
	  	20
	 ERISA
	  	19
	 Escrow Agent
	  	11
	 Escrow Agreement
	  	4
	 Excluded Assets
	  	8
	 Excluded Contracts
	  	6
	 Excluded Liabilities
	  	10
	 Execution Date
	  	1
	 GAAP
	  	10
	 Government Programs
	  	7
	 Government Receivables
	  	7
	 Governmental Approvals
	  	4
	 Guaranteed Obligations
	  	53
	 Guarantor
	  	53
	 HIPAA
	  	9
	 Hospital
	  	1
	 Hospital Historical GAAP Principles
	  	10

  

 viii 

			
	 Indemnified Party
	  	44
	 Indemnifying Party
	  	44
	 Indemnity Notice
	  	46
	 Independent Consultant
	  	37
	 Inpatient Hospital
	  	1
	 Interim Balance Sheet Date
	  	14
	 Inventory
	  	7
	 Knowledge of Purchaser
	  	2
	 Knowledge of Seller
	  	2
	 Leased Real Property
	  	6
	 Leasehold Title Policy
	  	30
	 Leases
	  	6
	 Licenses
	  	6
	 Material Adverse Change
	  	2
	 Material Adverse Effect
	  	2
	 Material Contract
	  	15
	 Net Working Capital
	  	10
	 Notice Period
	  	44
	 Objections
	  	30
	 Original Closing Date
	  	37
	 Owned Real Property
	  	6
	 Owner’s Title Policy
	  	30
	 Percentage Payment
	  	12
	 Permitted Encumbrances
	  	16
	 Person
	  	30
	 Personal Property
	  	6
	 Plan
	  	19
	 Poplar Place
	  	1
	 Poplar Transitions
	  	1
	 Poplar West
	  	1
	 Power of Attorney
	  	4
	 Prepaids
	  	7
	 Purchase Agreement
	  	53
	 Purchase Price
	  	2
	 Purchaser
	  	1
	 Purchaser’s Pre-Closing Covenants
	  	43
	 Purchaser’s Surviving Covenants
	  	43
	 Real Estate Lease Assignments
	  	3
	 Real Estate Leases
	  	6
	 Real Property
	  	6
	 Receivable Records
	  	8
	 Recovery Center
	  	1
	 Relevant Claim
	  	42
	 Required Consents
	  	35
	 Seller
	  	1
	 Seller Cost Reports
	  	31
	 Seller Parties
	  	43

  

 ix 

			
	 Seller’s Pre-Closing Covenants
	  	42
	 Seller’s Surviving Covenants
	  	42
	 Solvency
	  	26
	 Special Warranty Deed
	  	3
	 Submittal Date
	  	38
	 Superseded Agreements
	  	48
	 Survey
	  	30
	 Survival Period
	  	41
	 Third Party Claim
	  	44
	 Title Commitment
	  	30
	 Title Company
	  	30
	 Title Instruments
	  	30
	 Title Notice
	  	30
	 Title Policies
	  	30
	 Variable Payment
	  	13
	 WARN Act
	  	40
	 Working Capital Escrow Deposit
	  	11

  

 x 

 ASSET PURCHASE AGREEMENT 
  
 This Asset Purchase Agreement (this “Agreement”) is made and entered into as of the 13th day of May, 2004 (the “Execution Date”) by and between PSH ACQUISITION CORPORATION, a Virginia corporation
(“Seller”), and HHC POPLAR SPRINGS, INC., a Virginia corporation (“Purchaser”). 
  
 R E C I T A L S: 
  
 A. WHEREAS, Seller operates the following facilities: 
  

	 	(i)	Poplar Springs Hospital, a 125 bed acute adult and adolescent psychiatric and residential treatment care facility, which is owned by Seller (the “Inpatient Hospital”);

  

	 	(ii)	Poplar West – A Youth Development Center, a 36 bed male adolescent residential treatment care facility and 60 student special educational program for At-Risk Students, which is
owned by Seller (“Poplar West”); 

  

	 	(iii)	Poplar Place of Sutherland, an 8 bed boys group home, which is owned by Seller (“Poplar Place”); 

  

	 	(iv)	Poplar Transitions of the Shenandoah Valley, a 20 bed female adolescent residential treatment care facility, which is leased by Seller (“Poplar Transitions”); and,

  

	 	(v)	Recovery Center of Richmond, an intensive outpatient adult and adolescent psychiatric care program, which is leased by Seller (“Recovery Center”) (the Inpatient Hospital,
Poplar West, Poplar Place, Poplar Transitions and Recovery Center, collectively, the “Hospital”); and 

  
 B. Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser, all of the assets owned by Seller used in connection with the
operation of the Hospital, for the consideration and upon the terms and conditions contained in this Agreement. 
  
 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 agree as
follows: 
  
 ARTICLE 1 
 DEFINITIONS; SALE AND TRANSFER OF ASSETS; 
 CONSIDERATION; CLOSING 
  
 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. 
  

 1 

 (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) “Disclosure
Schedules” shall mean the schedules attached to and constituting a part of this Agreement. 
  
 (h) “Knowledge of Purchaser,” and similar variations thereof, shall mean the actual knowledge, as of the relevant date, of David K. White,
Ph.D., Donald W. Thayer, Ronald C. Drabik, John E. Pitts or Rick Shriver after reasonable inquiry of employees or agents of Purchaser that were involved in its due diligence review of Seller and the Hospital. 
  
 (i) “Knowledge of Seller” shall mean the actual knowledge, as of
the relevant date, of Anthony J. Vadella or N. Matthew Lisagor after reasonable inquiry of senior employees of the Hospital responsible for the relevant matters. 
  
 (j) “Material Adverse Change” or “Material Adverse Effect,” when used with respect to Seller or the
Hospital, shall mean any material adverse change in or effect on the Inpatient Hospital or 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 or the United States 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 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) the
Closing Purchase Price Payment, (b) the Working Capital Payment, (c) the Percentage Payment and (d) the Variable Payment as described below: 
  
 (a) The Closing Purchase Price Payment shall be the sum of Twenty-Nine Million Five Hundred Fifty Thousand and No/100th Dollars ($29,550,000) which shall be payable in cash at the Closing. 
  

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 (b) The Working Capital Payment shall be the payment set forth in Section 1.11 which shall be payable as
set forth in Section 1.11. 
  
 (c) The Percentage Payment shall be
the payment set forth in Section 1.12 which shall be payable as set forth in Section 1.12. 
  
 (d) The Variable Payment shall be the payment set forth in Section 1.13 which shall be payable as set forth in Section 1.13. 
  
 1.3 Closing Date. The consummation of the transactions contemplated by this Agreement (“Closing”) shall take place at 10:00 a.m. at the
offices of Hunton & Williams, L.L.P., Richmond, Virginia, on or before five (5) business days after all conditions precedent and other matters required 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.
(determined by reference to the local time zone in which the Hospital is located) on the Closing Date (the “Effective Time”). 
  
 1.4 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: 
  
 (a) General Assignment, Bill of Sale and
Assumption of Liabilities in the form of Exhibit A attached hereto (the “Bill of Sale”); 
  
 (b) Assignment and Assumption of Real Estate Leases in the form of Exhibit B attached hereto with respect to each Leased Real Property (the
“Real Estate Lease Assignments”); 
  
 (c) Special
Warranty Deed in the form of Exhibit C attached hereto with respect to each Owned Real Property (the “Special Warranty Deed”); 
  
 (d) original certificates of good standing, or comparable status, of Seller, issued by the Commonwealth of Virginia, dated no earlier than a date which is
fourteen (14) calendar days prior to the Closing Date; 
  
 (e) an
opinion of counsel for Seller in substantially the form attached hereto as Exhibit D; 
  
 (f) a certificate of Seller, executed by the President or any Vice President of Seller, certifying to Purchaser (a) 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, (b) that
Seller has in 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 (c) that all of the conditions contained in Article 6 have been
satisfied except those, if any, waived in writing by Seller; 
  

 3 

 (g) a certificate of the corporate Secretary of Seller certifying to Purchaser (a) 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 (b) the due adoption and text
of the resolutions of the boards of directors of Seller and of the shareholders of Seller, authorizing (i) the transfer of the Assets and Assumed Obligations by Seller to Purchaser and (ii) 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; 
  
 (h) Releases of liens and mortgages and UCC termination statements for any and all financing statements filed with respect
to the Assets (other than those relating to the Contracts) by the holders of such liens or mortgages or the secured parties named in such financing statements, or written undertakings to provide the same to Purchaser upon payment of the amounts
secured thereby; 
  
 (i) if and to the extent the provisions
thereof are permitted by and consistent with applicable law, a Limited Power of Attorney for use of Pharmacy License, DEA and Other Registration Numbers, and DEA Order Forms, in the form of Exhibit E attached hereto (the “Power of
Attorney”); 
  
 (j) all Required Consents (as defined in
Section 7.8); 
  
 (k) the Escrow Agreement in the form of
Exhibit F attached hereto (the “Escrow Agreement”); 
  
 (l) all governmental approvals and authorizations that are required for the consummation of the transactions contemplated by this Agreement (the “Governmental Approvals”); and 
  
 (m) 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. 
  
 1.5 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 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 three (3)
business days prior to the Closing Date in writing; 
  
 (b)
payment of the Working Capital Escrow Deposit on the Closing Date by wire transfer of immediately available funds to the Escrow Agent to the account specified by the Escrow Agent which account the Escrow Agent shall specify to Purchaser not less
than three (3) business days prior to the Closing Date in writing; 
  

 4 

 (c) a certificate of Purchaser, executed by the President or any Vice President of Purchaser, certifying
to Seller (a) 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, (b) 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 (c) that all of the conditions contained in Article 7 have been satisfied except those, if any, waived in writing by Purchaser; 
  
 (d) a certificate of the corporate Secretary of Purchaser certifying to Seller (a) the incumbency of the officers of
Purchaser 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 (b) the due adoption and text of the
resolutions of the Board of Directors 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 G; 
  
 (f) original certificate of good standing, or comparable status, of Purchaser, issued by the State Corporation Commission of the Commonwealth of Virginia
dated no earlier than a date which is fourteen (14) calendar days prior to the Closing Date; 
  
 (g) the Bill of Sale; 
  
 (h) the
Real Estate Lease Assignments; 
  
 (i) the Escrow Agreement;

  
 (j) the Power of Attorney; 
  
 (k) payment of the fee in the amount of $75,000 due to Dan Smith, the
financial advisor for Seller, by wire transfer of immediately available funds to the account specified by such financial advisor which the financial advisor shall specify to Purchaser not less than three (3) business days prior to the Closing Date
in writing; and 
  
 (l) 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. 
  
 1.6 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, real estate and personal 
  

 5 

 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. 
  
 1.7 Transfer of Seller Assets. On the Closing Date, Seller shall assign, transfer, convey and deliver to Purchaser, and Purchaser shall acquire,
all of Seller’s right, title and interest in and to all assets and properties of Seller, as such assets 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 the following: 
  
 (a) all of the real property that is owned by Seller and used with respect to the operation of the Hospital, including the real property described in
Schedule 1.7(a), together with all buildings, improvements and fixtures located thereupon and all construction in progress and excluding the real property set forth on Schedule 1.8(o) (collectively, the “Owned Real
Property”); 
  
 (b) all of Seller’s interest, to the
extent assignable or transferable, in and to all real property leases with respect to the real property that is leased by Seller and used with respect to the operation of the Hospital, including the leases described in Schedule 1.7(b) (the
“Real Estate Leases;” the land described therein being referred to herein as the “Leased Real Property” and, together with the Owned Real Property, collectively, the “Real Property”); 
  
 (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 (the “Personal Property”); 
  
 (d) all of Seller’s rights, to the extent assignable or transferable, to all licenses, permits, approvals, certificates
of need, certificates of exemption, franchises, accreditations and registrations and other governmental licenses, permits or approvals issued to Seller with respect to the operation of the Hospital (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 (the Personal Property Leases and, together with the Real Estate Leases, collectively, the “Leases”); 
  
 (f) all of Seller’s interest, to the extent assignable or transferable,
in and to all contracts and agreements (including purchase orders) with respect to the operation of the Hospital including those Contracts described in Schedule 1.7(f)(i) (the “Contracts”); provided, however, the term Contracts as
used in this Agreement shall exclude any contracts designated as an excluded contract and listed on Schedule 1.7(f)(ii) (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 of the Assets (the “Accounts
Receivable”); provided, however, that the Accounts Receivable shall exclude (i) all Accounts 
  

 6 

 Receivable arising from the rendering of 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 of the Assets prior to the Effective Time and relating to any Federal Health Care Program as such term is defined in 72 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 (collectively the “Government Receivables”); 
  
 (h) to the extent included in the calculation of Net Working Capital, all advance payments, prepayments, prepaid expenses, deposits and the like which exist as of the Closing Date (the “Prepaids”); 
  
 (i) all inventories of supplies, drugs, food, janitorial and office supplies
and other disposables and consumables located at the Hospital (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, without limitation, all patient records, medical records, employee records, financial records with respect to the operation of the Hospital, equipment records, construction plans and
specifications, 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 of the businesses conducted by the Hospital; 
  
 (m) subject to the provisions of Section 8.3 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 and telephone numbers used with respect to the operation of the Hospital, including, without limitation, the name of the Hospital
and all variants thereof; 
  
 (o) all of Seller’s rights with
respect to its Medicare, Medicaid and other third-party provider numbers; and 
  
 (p) any current assets of Seller with respect to the operation of the Hospital (which are not otherwise specifically described above in this Section 1.7); 
  
 provided, however, that the Assets shall not include the Excluded Assets as defined in Section 1.8 below. 
  

 7 

 1.8 Excluded Assets. Notwithstanding anything to the contrary in Section 1.7, Seller shall retain
the following assets, whether owned directly or indirectly by Seller (or any of Seller’s affiliates) (collectively, the “Excluded Assets”): 
  
 (a) cash and cash equivalents; 
  
 (b) any asset which would revert to the employer upon the termination of a Plan, including assets representing a surplus or overfunding of a Plan;

  
 (c) all current contracts between Seller and any affiliate of
Seller with respect to the operation of the Hospital, except those mutually approved in writing by Seller and Purchaser to be assigned to Purchaser; 
  
 (d) the portions of Inventory, Prepaids and other Assets disposed of, expended or canceled, as the case may be, by Seller after the Execution Date and
prior to the Effective Time in the ordinary course of business; 
  
 (e) the Government Receivables; 
  
 (f) all documents,
records, correspondence, work papers and other documents relating to the Seller Cost Reports or Agency Settlements (the “Receivable Records”); 
  
 (g) to the extent not included in the calculation of Net Working Capital, all claims, rights, interests and proceeds with respect to tax refunds
(including but not limited to property tax) and the right to pursue appeals of same; 
  
 (h) Seller’s rights and interests under the Excluded Contracts; 
  
 (i) all amounts payable to Seller in respect of third party payors pursuant to retrospective settlements (including pursuant to Government Programs cost
reports filed or to be filed by Seller for period prior to Closing) that are not included in the Account Receivables and not included in the calculation of Net Working Capital; 
  
 (j) all Seller records relating to the Excluded Assets and Excluded Liabilities (as defined below) to the extent that
Purchaser does not need the same in connection with the ongoing activities of the Hospital, the Assets, or the Assumed Obligations (as defined below), as well as all records which by law Seller is required to maintain in its possession; 

 
 (k) any reserves or prepaid expenses related to Excluded Assets and
Excluded Liabilities (such as prepaid legal expenses or insurance premiums); 
  
 (l) any insurance proceeds which Seller is entitled to retain pursuant to the provisions of Section 8.3 of this Agreement; 
  
 (m) all rights of Seller under this Agreement and its related documents; 
  
 (n) all of Seller’s corporate record books and minute books; and 
  
 (o) any other assets of Seller identified in Schedule 1.8(o).

  

 8 

 1.9 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 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) any and all obligations of Seller arising after the Effective Time with
respect to the operation of the Hospital under the Standards for Privacy of Individually Identifiable Health Information (45 CFR Part 160 and Parts 164, Subparts A and E) promulgated pursuant to the Health Insurance Portability and Accountability
Act of 1996 (“HIPAA”) (provided that (i) Seller has, with respect to the operation of the Hospital, complied in all material respects with HIPAA prior to the Effective Time and (ii) within ten (10) days after the Closing Date, Seller has
provided Purchaser with the following information which Seller has received prior to the Effective Time: accountable disclosures or patient restrictions, consents, authorizations or acknowledgments regarding the use or disclosure of patient
protected health information); 
  
 (d) accounts payable and other
current liabilities to the extent included in the determination of Net Working Capital; 
  
 (e) obligations and liabilities as of the Closing Date in respect of paid time off of Seller’s employees at the Hospital who are hired by Buyer as of the Closing Date, and related taxes, to the extent included in
the determination of Net Working Capital; 
  
 (f) obligations and
liabilities specifically assumed by Purchaser under this Agreement as well as any other obligations and liabilities identified in Schedule 1.9(f) or described in Section 5.7(b) and Section 9.4; 
  
 (g) all liabilities of Purchaser arising out of or relating to any act,
omission, event or occurrence connected with the use, ownership or operation by Purchaser of the Hospital or any of the Assets after the Effective Time, other than as specifically included in the Excluded Liabilities; 
  
 (h) all liabilities of Purchaser in connection with claims of professional
malpractice to the extent arising out of or relating to acts, omissions, events or occurrences after the Effective Time; and 
  
 (i) obligations and liabilities concerning cost reports (and all claims with respect thereto) relating to Purchaser with respect to the Government
Programs or any other third-party payor for all periods beginning on and after the Effective Time. 
  
 1.10 Excluded Liabilities. Notwithstanding anything to the contrary in Section 1.9, Purchaser shall not assume or become responsible for any of
Seller’s duties, obligations or 
  

 9 

 liabilities that are not assumed by Purchaser pursuant to the terms of this Agreement, the Bill of Sale or the Real
Estate Lease Assignments (the “Excluded Liabilities”), and Seller shall remain fully and solely responsible for all Excluded Liabilities. The Excluded Liabilities shall include, without limitation: 
  
 (a) 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, including all federal, state and
local income taxes of Seller; 
  
 (b) 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; 
  
 (c) all liabilities of Seller for matching contributions for eligible beneficiaries’ 401(k) 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; 
  

(d) 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; 
  
 (e) 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, without limitation, those pertaining to Medicare and Medicaid fraud or abuse; 
  
 (f) all liabilities of Seller under the Excluded Contracts; 
  
 (g) all liabilities of Seller relating to the Excluded Assets; and 
  
 (h) except as provided in Section 12.10, all liabilities of Seller for
commissions or fees owed to any finder or broker in connection with the transactions contemplated hereunder. 
  
 1.11 Working Capital Payment. 
  
 (a) As used herein, the term “Net Working Capital” shall mean the aggregate current assets of Seller conveyed to Purchaser pursuant to Section
1.7 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 1.9 hereof (excluding those Excluded Liabilities which would
otherwise be included in current liabilities), all as determined in accordance with generally accepted accounting principles (“GAAP”), including the methods and practices, as historically applied by Seller and reflected in its audited
balance sheet as of December 31, 2003 (the “Hospital Historical GAAP Principles”). In the event an accounting principle, including the methods and practices, as historically applied by Seller is not in accordance with GAAP, it shall not
constitute a Hospital Historical GAAP Principle for any purpose under this Agreement and shall not be followed in the determination of Net Working Capital or the EBITDA of the Hospital (hereinafter defined). 
  

 10 

 (b) On the Closing Date, Purchaser shall pay to Branch Banking & Trust Company (the “Escrow
Agent”) an amount equal to the estimated Net Working Capital of the Seller determined in accordance with the provisions of Section 11.1(c) below (the “Working Capital Escrow Deposit”). The Working Capital Escrow Deposit shall be held
by the Escrow Agent pursuant to the terms of the Escrow Agreement. 
  
 (c) At least ten (10) business days prior to Closing, Seller shall deliver to Purchaser a reasonable estimate of the Net Working Capital of Seller as of the end of the most recently ended calendar month prior to the Closing Date for which
unaudited financial statements are available and containing reasonable detail and supporting documents showing the derivation of such estimate. The principles and methodologies to be used for determining the estimated Net Working Capital shall be as
specified in Schedule 1.11. The amount so estimated by Seller as its estimate of the Net Working Capital of Seller shall be paid in cash by Purchaser to the Escrow Agent on the Closing Date as specified in Section 11.1(b) above. 

 
 (d) Within one hundred eighty (180) days after the Closing, Purchaser
shall deliver to Seller its 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;
provided, however, that any accounts receivable outstanding on the Closing Date that remain uncollected one hundred fifty (150) days after the Closing Date shall not be considered a current asset as of the Effective Time and shall be disregarded for
such determination of the Net Working Capital, and Purchaser shall promptly transfer all such accounts receivable to Seller). Each party shall have full access to the financial books and records of Seller to confirm or audit Net Working Capital
computations. Should Seller disagree with Purchaser’s determination of Net Working Capital, Seller shall notify Purchaser within thirty (30) days after Purchaser’s delivery of its determination of 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 Net Working Capital, such disagreement shall be resolved in accordance with the procedure set forth in Section 1.11(e) which
shall be the sole and exclusive remedy for resolving accounting disputes relative to the determination of Net Working Capital. 
  
 (e) In the event that Seller and Purchaser are not able to agree on the actual 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 Ernst & Young, LLP, or if Ernst & Young, 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 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 accounting 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. 
  

 11 

 (f) Within five (5) business days after the final determination of the actual Net Working Capital of the
Seller as of the Effective Time, Seller and Purchaser shall sign joint directions to the Escrow Agent for the disbursement of the Working Capital Escrow Deposit. If the actual Net Working Capital of the Seller as of the Effective Time is less than
the Working Capital Escrow Deposit, the amount of the actual Net Working Capital shall be disbursed to Seller and the difference shall be disbursed to Purchaser; if the actual Net Working Capital equals the Working Capital Escrow Deposit, the entire
Working Capital Escrow Deposit shall be disbursed to Seller; and if the actual Net Working Capital exceeds the Working Capital Escrow Deposit, the entire Working Capital Escrow Deposit shall be paid to Seller, and Purchaser shall pay to Seller the
amount by which the actual Net Working Capital exceeds the Working Capital Escrow Deposit (such payment to be made within the same five (5) business day period). All payments pursuant to this Section 1.11 shall be accompanied with the amount of all
interest or earnings on such payments earned while such funds were on deposit pursuant to the Escrow Agreement. 
  
 1.12 Percentage Payment. 
  
 (a) Subject to the other provisions of this Section 1.12 set forth below, the Purchaser shall pay to Seller a payment (the “Percentage Payment”)
on or before March 31, 2005 in an amount equal to (i) eleven percent (11%) of the first one million dollars of EBITDA of the Hospital for the calendar year ended December 31, 2004, plus (ii) nine percent (9%) of the second one million dollars of
EBITDA of the Hospital for the calendar year ended December 31, 2004, and plus (iii) seven percent (7%) of the amount of the EBITDA of the Hospital for the calendar year ended December 31, 2004 in excess of two million dollars. The Purchaser shall
make payments based on this same formula to Seller (i) on or before March 31, 2006 with respect to the EBITDA of the Hospital for the calendar year ended December 31, 2005 and (ii) on or before March 31, 2007 with respect to the EBITDA of the
Hospital for the calendar year ended December 31, 2006. Each such payment if not paid when due shall bear interest at the prime rate of interest of JP Morgan Chase Bank as in effect from time to time from the respective payment date specified above
until the date such payment is actually made. 
  
 (b)
Notwithstanding any provision hereof to the contrary, the maximum aggregate amount of the Percentage Payment payable by Purchaser with respect to the EBITDA of the Hospital for any individual calendar year shall be One Million Dollars ($1,000,000).

  
 (c) As used herein, the term “EBITDA of the
Hospital” shall mean the net income of the Hospital plus the amount of interest, income taxes, depreciation and amortization for the applicable period, all as determined in accordance with the Hospital Historical GAAP Principles. As specified
in Section 9.6, Purchaser shall maintain its separate corporate existence as the owner of the Assets until June 30, 2007. As such the EBITDA of the Hospital shall mean the same after the Closing as the EBITDA of the Purchaser. The principles and
methodologies for determining the EBITDA of the Hospital shall be as specified in Schedule 1.12. The determination of EBITDA of the Hospital shall use the Hospital Historical GAAP Principles. 
  

 12 

 (d) Purchaser shall deliver to Seller its determination of the applicable EBITDA of the Hospital with
each Percentage Payment. Seller may dispute such determination and have such determination finally resolved in the same manner and within the same time periods as are applicable to the determination of the actual Net Working Capital of Seller as of
the Effective Time under Section 1.11. 
  
 1.13 Variable
Payment. 
  
 (a) On or before twenty-seven (27) months after
the Effective Time, the Purchaser shall make an additional payment to the Seller (the “Variable Payment”) in an amount equal to the amount that the EBITDA of the Hospital for the twelve (12) month period beginning on the first day of the
thirteenth month after the month in which the Closing occurs is in excess of $4,700,000 up to a maximum payment of One Million Dollars ($1,000,000). 
  
 (b) For the purposes of this Section 1.13, the EBITDA of the Hospital shall have the same meaning and be determined in the same manner as specified in
Section 1.12 of this Agreement. 
  
 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.
Except as otherwise provided herein, Seller shall be deemed to remake all of the following representations, warranties and covenants as of the Closing Date: 
  
 2.1 Authority. Seller has full corporate power and authority to enter into this Agreement 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. This Agreement has been duly and validly executed and delivered by Seller and, assuming due and valid execution by, and enforceability against, Purchaser,
this Agreement constitutes a valid and binding obligation 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; Shareholders. 
  
 (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. 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. 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 or entity. 
  

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 (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 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. 
  
 (d) The name and the business and home address of each shareholder of Seller and the number of shares of capital stock owned
by each shareholder of Seller are listed on Schedule 2.3(d). 
  
 2.4 Financial Statements; Changes. 
  
 (a) Seller
has delivered to Purchaser audited balance sheets for Seller at December 31, 2003, 2002 and 2001, and the related statements of operations for the periods then ended. All such financial statements have been prepared in conformity with the Hospital
Historical GAAP Principles. 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, 2003, 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 March 31, 2004 (the “Interim Balance
Sheet Date”) and the related statements of operations for the three month period then ended. Such interim financial statements have been prepared in conformity with the Hospital Historical GAAP Principles. The interim statements of operations
present 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 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. At the Interim Balance Sheet Date, Seller had no material liability
(actual, contingent or accrued) that, in accordance with the Hospital Historical GAAP Principles, 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 
  

 14 

 (ii) any strike or other labor dispute; or 
  
 (iii) any casualty, loss, damage or destruction (whether or not covered by insurance) of any material property of Seller
that is material or that has involved or may involve a material loss to Seller in excess of applicable insurance coverage. 
  
 2.5 Tax and Other Returns and Reports. Except as set forth on Schedule 2.5: 
  
 (a) 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. 
  
 (b) 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, stockholder, or other third party. 
  
 (c) Seller has made available (or will make available through the date of Closing) to Purchaser correct and complete copies of all property and sales tax
returns of Seller and any examination reports and statements of deficiencies related thereto and assessed by any governmental authority against or agreed to by Seller since December 31, 2000. 
  
 (d) 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. 
  
 (e) 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.

  
 2.6 Material Contracts. 
  
 (a) Schedule 1.7(f)(i) lists each Material Contract 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 1.7(f)(ii). Unless otherwise so noted in Schedule 1.7(f)(i), each such Material Contract
was entered into in the ordinary course of business. As used herein, “Material Contract” means any contract that (a) after the Interim Balance Sheet Date obligates Seller to pay an amount of twenty-five thousand dollars ($25,000) or more
in any one twelve month period on an annual basis or obligated Seller to pay an aggregate amount of the Fifty Thousand Dollars ($50,000) or more, (b) has an unexpired term as of the Interim Balance Sheet Date in excess of twelve (12) months that is
not terminable upon sixty (60) days or less notice by Seller at any time during the term, (c) contains a covenant not to compete or otherwise significantly restricts business activities, (d) limits the ability of Seller to conduct its business,
including as to manner or place, (e) grants a power of attorney, agency or similar authority to another person or entity, (f) contains a right of first refusal, (g) constitutes a collective bargaining agreement including any collective bargaining
agreement with physicians or any other referral source, (h) constitutes an employment or severance agreement with any 
  

 15 

 director, officer or employee of Seller, (i) represents a contract upon which the business of the Hospital is
substantially dependent or a contract which is otherwise material to the business of the Hospital, (j) 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, (k) 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, (l) represents a third party payor, managed care or preferred provider
organization contract, or (m) was not made in the ordinary course of business. True, correct and complete copies of the Material Contracts listed on Schedule 1.7(f)(i), including all amendments and supplements, have been made available to
Purchaser. Each Material Contract is valid and subsisting; except as set forth on Schedule 1.7(f)(i), 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 1.7(f)(i), no 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
Owned Real Property and the Personal Property, except for (i) any lien for taxes not yet due and payable, (ii) liens securing any indebtedness included in the Assumed Obligations by Purchaser hereunder, (iii) any lease obligations included in the
Assumed Obligations, (iv) easements and other restrictions of record, (v) any encumbrances or defects that do not materially interfere with the operations of the Hospital in any manner consistent with the current use by Seller, (vi) with respect to
any Real Property leased by Seller, any encumbrances which encumber the fee interest in such property and (vii) with respect to any Real Property, those “permitted encumbrances” set forth in Section 4.8(c) hereof (collectively, the
“Permitted Encumbrances”). Except as shown on 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 Owned Real Property listed on Schedule
1.7(a) consists of all Real Property owned by Seller and used in the conduct of the business of the Hospital, excluding the real property set forth on Schedule 1.8(o). 
  
 (c) The Leased Real Property described in the Real Estate Leases listed on Schedule 1.7(b) consists of all Real
Property leased by Seller and used in the conduct of the business of the Hospital. 
  
 (d) All Leased Real Property where Seller is the lessee is held under valid, binding and enforceable leases. 
  
 (e) Seller has heretofore made available to Purchaser a true, correct and complete copy of each Real Estate Lease in connection with each Leased Real
Property, including all amendments thereto. Except as shown on Schedule 2.3(c), no consents are required of third parties to the assignment of the Real Estate Leases. 
  

 16 

 (f) The Real Estate Leases constitute the entire agreement to which Seller, is a party with respect to
the properties which are demised pursuant thereto. 
  
 (g) Seller
has accepted possession of the Leased Real Property pursuant to each Real Estate Lease in which it is the lessee and is in actual possession thereof and has not sublet, assigned or hypothecated their leasehold interest. 
  
 (h) As of the date hereof, to the Knowledge of Seller, all conditions
precedent to the enforceability of each Lease have been satisfied and there exists no breach or default, nor state of facts which, with the passage of time, notice, or both, would result in a breach or default on the part of Seller or, to the
Knowledge of Seller, the other party thereunder. 
  
 (i) Seller
has no Knowledge of, and, during the past three (3) years, Seller has not received any written notice of, non-compliance with law, zoning ordinance or other restriction with respect to any Real Property. 
  
 (j) 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 Owned Real Property or Leased Real Property by Seller. 
  
 (k) 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. 
  
 (l) The use of Poplar West for the operations presently conducted at Poplar West is a permitted special use under applicable zoning and similar use laws
that will run with the land upon the transfer of Poplar West to Purchaser permitting Purchaser to continue such operations as presently conducted at Poplar West after the Closing Time. 
  
 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. 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 (or is 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. There is no order or action pending, or, to the Knowledge of Seller threatened, against or affecting Seller, or any of its
respective properties or assets that individually or when aggregated with one or more other orders or actions has or if determined adversely would reasonably be expected to have a Material Adverse Effect on Seller or to materially adverse affect
Seller’s ability to perform its obligations under this Agreement. Schedule 2.9 lists each order and each action that involves a claim of aggregate liability in excess of $25,000.00 against, or that enjoins or seeks to enjoin or excludes
or seeks to exclude the conduct of any activity by, Seller. 
  

 17 

 2.10 Accounting Records; Internal Controls; Absence of Certain Payments. 
  
 (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 the
Hospital Historical GAAP Principles so as to maintain accountability for assets. 
  
 (b) Data Processing; Access. Such 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. 
  
 2.11 Insurance. Schedule 2.11 lists all insurance policies and bonds that are currently maintained by Seller and are material to the
business of the Hospital and indicates the type of insurance, policy number, term, identity of insurer and amounts of premiums 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 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 $20,000 (other than those
listed on Schedule 2.9) 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 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. There are no outstanding requirements or recommendations by any insurance company
that issued a policy with respect to any of the properties and assets of Seller 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,
except where failure to have taken such action will not have resulted in a material adverse effect. 
  
 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, 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. 
  
 (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. 
  

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 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 have 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. Each Plan intended to be tax qualified under Sections 401(a) and 501(a) of the Code either has received a favorable determination letter from the IRS or is a prototype plan as to which the prototype sponsor has received such a
determination and, since such determination, no amendment to or failure to amend any such Plan and, to Seller’s Knowledge, no other event or circumstance has occurred that would reasonably be expected to materially and adversely affect its tax
qualified status. 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. Except as set forth on Schedule 2.13, each Plan has been administered in all material respects in
accordance with its terms and with all applicable Laws (including ERISA). 
  
 (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 Internal Revenue Code of 1986, as amended (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. 
  
 2.14 Certain Interests. Except as shown on Schedule 2.14, no affiliate of Seller, nor any officer or director of any thereof, nor associate of any such individual, has any material interest in any
property used in or pertaining to the business of the Hospital; no such person is 
  

 19 

 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 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 the Hospital Historical GAAP Principles. 
  
 2.17 Receivables. The accounts receivable (including the Government Receivables) reflected on the books and records of the Hospital arose from bona
fide commercial transactions, and the financial statements referred to in Section 2.4 include all material refunds, 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, 2003,
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 Worker Adjustment and Retraining Notification (WARN). Seller has complied with the Worker Adjustment and Restraining Notification Act insofar as applicable to any acts or transactions with respect to the operation of the
Hospital prior to and not including the transaction contemplated by this Agreement. 
  
 2.20 Environmental Compliance. Except as set forth in Schedule 2.20: 
  
 (a) Seller is in compliance in all material respects 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, without limitation, all
federal, state or local laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or 
  

 20 

 hazardous substances or wastes 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 substantial compliance with each such applicable permit. No governmental entity has notified Seller that any such permits 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 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 a Hazardous Substance (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); 
  

(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 reasonably expected to be named as a party with respect to the Real Property or the business operations of the Hospital; 
  
 (e) Seller has not entered into any agreement with any governmental entity
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 studies, site assessments, compliance audits and similar
environmental reports, analyses, and test results that are in Seller’s possession, custody or control, relating to 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) any activities relating to Hazardous Substances on, or any off-site disposal of a Hazardous Substance from, the Real
Property. 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 is
not aware of any soil or groundwater contamination on, under, or about any Real Property except as disclosed in the environmental reports described in Section 2.20(f) above. 
  

 21 

 (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 Inpatient Hospital is duly accredited by JCAHO as evidenced by the
Inpatient Hospital’s most recent JCAHO accreditation survey reports and is duly licensed by the Virginia Department of Mental Health, Mental Retardation and Substance Abuse Services (“DMHMRSAS”) as a psychiatric hospital and
residential treatment center. Poplar West, Poplar Place, Poplar Transitions and Recovery Center are accredited and licensed as set forth on Schedule 2.22. 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 being conducted. In order to conduct the business operations of the
Hospital as presently conducted, Seller is not required to hold any licenses, permits and other governmental approvals or 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 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. 
  
 (b) Without limiting the generality of the foregoing, the applicable facilities, equipment, staffing and operations of the business of the Hospital
satisfy in all material respects the accreditation standards of JCAHO and 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 DMHMRSAS 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. 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. All such provider numbers of the Hospital are listed on Schedule 2.22 by facility to the extent
applicable. 
  

 22 

 (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, on or before the date of this Agreement. Schedule 2.22 indicates which of such cost reports for such three (3) years have been audited by the fiscal intermediary and finally
settled. 
  
 (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, and to the Knowledge of Sellers, 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, 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 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 current employee or independent contractor of Seller or any 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)), and (ii) none of the business of the Hospital, or Seller or
Seller’s officers, directors, agents or management employees (as that term is defined in 42 U.S.C. § 1320a-5(b)), has been excluded from 
  

 23 

 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 Anti-Kickback Laws, 42 U.S.C. § 1320a-7b. 
  
 (h) To the Knowledge of Seller, in the five (5) year period immediately
preceding the Execution Date and since the Execution Date, 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 Laws, the Stark
Laws and 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 have violated any health care fraud law or
regulation, including the Anti-Kickback Laws and the Stark Laws. 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 Programs, (c) to the Knowledge of Seller, has not 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 (a) the administrative simplification provisions of the Health Insurance
Portability and Accountability Act of 1996, 42 U.S.C. §§ 1320d to 1320d-8, and (b) the rules and regulations promulgated thereunder as of the applicable effective dates for such rules and regulations. 
  
 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. 
  
 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 genuine copies of the bylaws and rules and regulations of the medical staff and medical 
  

 24 

 executive committee of the Hospital. Schedule 2.27 sets forth (a) the name, age 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 generally accepted accounting principles, 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 which it is
about to engage. 
  
 2.29 No Brokers or Finders. Except as
listed on Schedule 2.29, no agent, broker, finder, or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Seller, 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; as to which Seller
shall have full responsibility and, with respect to such fees or commissions, Purchaser shall not have any liability. 
  
 2.30 Disclaimer. Except for the representations and warranties of Seller made in this Agreement, Seller has not made and expressly disclaims any
other representations and warranties of any kind or character, express or implied, oral or written, past, present or future, with respect to the Assets, the transactions contemplated hereby or the matters set forth herein, including any warranty of
merchantability or fitness for a particular purpose. Except as otherwise expressly set forth in this Agreement, Seller shall sell the Assets, and Purchaser shall purchase the Assets, at Closing “AS IS, WHERE IS” with all faults.

  
 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:

  
 3.1 Authority. Purchaser has full corporate power and
authority to enter into this Agreement and has full corporate power and authority to carry out the transactions contemplated hereby. 
  

 25 

 3.2 Authorization/Execution. All corporate 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 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
Violation. 
  
 (a) Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of Virginia, and has full corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted. 
  
 (b) 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
Incorporation or Bylaws of Purchaser. 
  
 3.4 Brokers and
Finders. No agent, broker, finder, or investment or commercial banker, or other Person or firm 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; as to which Purchaser shall have full
responsibility and, with respect to such fees or commissions, Seller shall not have any liability. 
  
 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 generally accepted accounting principles, 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 which it is about to engage. 
  

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 3.6 No Other Facilities. Neither Purchaser nor any of its affiliates owns or operates, or will own
or operate at or immediately after the Effective Time, any psychiatric hospital, non-psychiatric hospital with a psychiatric unit, or a psychiatric unit within the area of Virginia encompassing: (i) the independent cities of Colonial Heights,
Hopewell and Petersburg, (ii) Dinwiddie and Prince George Counties, and (iii) those portions of Charles City and Chesterfield Counties within a fifteen (15) mile radius of the present site of the Inpatient Hospital in Petersburg, Virginia.

  
 ARTICLE 4 
 COVENANTS OF SELLER 
  
 4.1 Access and Information; Inspection Period, Preparation of Exhibits and Schedules. From the Execution Date through the Effective Time, 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 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 by Purchaser hereunder. From the Execution Date
through the Effective Time, 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. Further, Purchaser may, at its sole cost and expense, undertake environmental, mechanical and structural surveys of the Hospital and the Real Property.
After performing any inspections, tests or surveys, Purchaser shall restore the Hospital and the 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 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 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 Real Property (or any parts thereof). Purchaser agrees to do no act that would encumber title to the Hospital or the Real Property.
Purchaser’s obligations under this Section shall survive Closing and delivery of the Deed or termination hereunder. 
  
 4.2 Conduct of Business. On and after the Execution Date and prior to the Effective Time, 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), or real or personal property; 
  

 27 

 (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 Effective
Time, 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 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), and in no event with respect to any such contract, commitment or liability as to which the total to be paid in the future under the contract,
commitment or liability exceeds Twenty-Five Thousand Dollars ($25,000); 
  
 (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 property, plant or equipment, 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. 
  

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 4.4 Consents. Seller shall use commercially reasonable efforts to obtain all consents to the
assignment of the Contracts and Leases from third parties that are listed on Schedule 2.3(c), which consents are required to permit Seller to assign the Contracts and Leases to Purchaser (the “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, certificates of need 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 Lease and shall indemnify and hold harmless
Purchaser and its affiliates for and against any and all damages as a result, directly or indirectly, of the failure to obtain any such approval or consent if any such Contract or Lease states that it is not assignable without such party’s
consent. 
  
 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 the Hospital Historical GAAP Principles 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 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 involving Seller’s assets or securities, 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 12.2 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. 
  

 29 

 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 10 days after the Execution Date, Purchaser, at its
expense, shall request (i) a preliminary binder or title commitment (the “Title Commitment”) sufficient for the issuance of A.L.T.A. Extended Coverage Owner’s Title Insurance Policies with respect to the Owned Real Property (the
“Owner’s Title Policy”) and A.L.T.A. Extended Coverage Leasehold Title Policy with respect to the Leased Real Property (the “Leasehold Title Policy”) (the Owner’s Title Policy and the Leasehold Title Policy are
collectively referred to in this Agreement as the “Title Policies”), issued by Chicago Title Insurance Company (the “Title Company”), together with true, correct and legible copies of all instruments referred to therein as
conditions or exceptions to title (the “Title Instruments”) and (ii) shall order an A.L.T.A. survey of the Owned Real Property complying with the Minimum Standard Detail Requirements for ALTA/ASCM Land Title Survey for the Owned Real
Property (the “Survey”). The cost of the Title Policy and the Survey shall be borne by Purchaser. 
  
 (b) Within ten (10) business days after receipt of the Title Commitment and the Survey, Purchaser shall deliver a copy thereof to Seller and 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 or ownership of the Real Property (collectively, the
“Objections”). Seller shall give written notice to Purchaser within three (3) 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 such time as is reasonably necessary, including a reasonable extension of the date of Closing, 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 three-day period), Purchaser, within the earlier to occur of two (2) days after receipt of Seller’s response, or
the expiration of such three-day period for Seller’s response, shall elect either to (a) waive such objections and proceed to Closing without any adjustment to any of the terms of this Agreement, or (b) 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, 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 (a) immediately above. 
  
 (c) All matters affecting title to the Real Property as of the date of Purchaser’s survey and title report that are not objected to in the Title Notice or waived (or deemed waived) by Purchaser shall be deemed
consented to by Purchaser, and (a) all such deemed consented matters, (b) any subsequent title matters permitted hereby, or consented to by Purchaser and (c) 
  

 30 

 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. The state of
title at the date of Closing shall be subject only to the Permitted Encumbrances, except as permitted hereby. 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 without Purchaser’s prior written consent, which consent shall not be unreasonably withheld. Except for Permitted Encumbrances, 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. 
  
 4.9 Termination Cost Reports. Seller shall file with Government
Programs and other 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. 
  
 4.10 Updating of Disclosure Schedules. Seller shall notify Purchaser
of any changes, additions, or events which may 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 4.11 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 under this Agreement 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 under this Agreement 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. 
  
 4.11 Poplar West Tract. The Poplar West facility is currently located on a tract of land consisting of approximately
25.89 acres situated on Wagner Road – State Route #632 and Poplar Drive in Petersburg, Virginia (the “Poplar West Tract”) Seller intends to convey to a third party the tract of land designated as Parcel 2 on that certain plat,
prepared by Townes Site Engineering, dated February 27, 2004, as revised on March 23, 2004 and March 30, 2004, a copy of which is attached hereto as Schedule 4.11. To the extent that the roadway from Poplar Drive to the Poplar West facility
is located on any part of Parcel 2, Seller shall convey Parcel 2 only subject to an easement that permits Purchaser, as owner of the remaining portion Poplar West Tract, to continue to use such roadway for access to and from the Poplar West facility
and Wagoner Road; provided, however, that if at any time a public road is located on any part of the remaining Poplar West Tract that provides egress and ingress to the Poplar West facility, without having to transverse any portion of Parcel 2, then
such easement may terminate. In addition to the foregoing, Seller shall convey Parcel 2 subject to such water and sewer and other utility easements as may be reasonable necessary for utilities currently serving the Poplar West facility and located
on Parcel 2. 
  

 31 

 4.12 Environmental Remediation. Prior to the Closing, Seller, at its cost and expense, shall cause
the septic tank located in the Poplar West Tract to have been drained, cleaned and filled in a manner reasonably satisfactory to Purchaser. 
  
 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. 
  
 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. 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 (as hereinafter
defined), 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” of patients and others receiving services from the Hospital. In the event of any termination, expiration or removal of this Agreement, Purchaser

  

 32 

 shall, in addition to complying with the covenant of nondisclosure set forth in this Section 5.4, return to Seller any
and all individually identifiable health information in Purchaser’s possession without retaining copies thereof, as such term is defined in 45 CFR § 160.102. 
  
 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. 
  
 5.7 COBRA. 
  
 (a) Purchaser shall make offers of employment to all of the employees of Seller in accordance with Section 9.4. Any of the Hospital’s Employees who
accepts an offer of employment with Purchaser 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 Part 6 of Title I of ERISA
(“COBRA Coverage”) with respect to Seller’s former Employees (and their dependents) whose qualifying event occurs on or before the Effective Time. Purchaser shall be responsible 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. 
  
 5.8 Transition Services. For a period of one hundred eighty (180) days after the Effective Time, 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 5.8. 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 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 Governmental Receivables, that Purchaser shall not be obligated to incur any 
  

 33 

 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. Additionally, upon Seller’s reasonable request and at no cost to Seller, Purchaser shall provide
Seller with reasonable access to Purchaser’s staff and facilities during normal business hours in order to assist Seller in completing certain post-closing affairs as described on Schedule 5.8. 
  
 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 Signing and Delivery of Instruments. Purchaser shall have executed and delivered all documents, instruments and certificates required to be
executed and delivered pursuant to the provisions of this Agreement. Purchaser acknowledges that Purchaser shall not satisfy the condition precedent set forth in this Section 6.1, as it relates to the delivery of the Purchase Price, unless Purchaser
initiates the wire transfer of the amount set forth in Section 1.2 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. 
  
 6.2 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. 
  
 6.3 Performance of Covenants. Purchaser shall have in all respects performed or complied with each and all of the obligations, covenants,
agreements and conditions required to be performed or complied with by it on or prior to the Closing Date. 
  
 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 H attached to this Agreement. 
  
 6.5 Governmental Authorizations. Seller shall have obtained all material licenses, permits, certificates of need and authorizations from governmental agencies or governmental bodies that are necessary or
required for completion of the transactions contemplated by this Agreement. Seller shall have obtained all governmental approvals required to complete the transactions contemplated hereby. 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. 
  

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 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 Governmental Authorizations. Purchaser shall have obtained all material licenses, permits, certificates of need 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. 
  
 7.2 Signing and Delivery of Instruments. Seller shall have executed
and delivered all documents, instruments and certificates required to be executed and delivered pursuant to all of the provisions of this Agreement. 
  
 7.3 Performance of Covenants. Seller shall have in all material respects performed or complied with each and all of the obligations, covenants,
agreements and conditions required to be performed or complied with by Seller on or prior to the Closing Date. 
  
 7.4 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. 
  
 7.5
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 D. 
  
 7.6 Title Insurance Policy. Purchaser shall have received a Title
Commitment for a fully effective Title Policy to be issued to Purchaser by the Title Company covering the Owned Real Property and any ground lease specified on Schedule 7.6 in the amount of the full insurable value of the Owned Real Property
and any such ground lease, respectively (which amount shall be set forth in Schedule 11.1(b) and which is reasonably satisfactory to Purchaser in all respects). The Title Commitment shall indicate that the Title Policy shall show fee simple
title to the Owned Real Property vested in Purchaser, and valid leasehold title to the Leased Real Property which is subject to any ground lease specified on Schedule 7.6, subject only to: (a) current real estate taxes not yet due and
payable; and (b) the Permitted Encumbrances. The Title Commitment shall indicate that the Title Policy shall have all standard and general exceptions deleted so as to afford full “extended form coverage.” 
  
 7.7 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. 
  
 7.8 Required Consents. Those Contract and Lease Consents listed on Schedule 7.8 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. 
  

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 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 fifteen (15) business days after notice from Seller to Purchaser which describes the nature of such breach; 
  
 (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 fifteen (15) business days after notice from Purchaser to Seller of a written notice 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); or 
  
 (f) 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 May 31, 2004. 
  
 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 5.6 (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. 
  
 8.3 Risk of Loss. The
risk of loss or damage to any of the Assets, Personal Property, Owned Real Property, the Hospital and all other property, the transfer of which is contemplated by this Agreement, shall remain with Seller until the Effective Time and Seller shall
maintain its insurance policies covering the Assets, Personal Property, Owned Real Property, the Hospital and all other property of Seller through the Effective Time. 
  

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 (a) With respect to the Real Property, if prior to the Closing, all or any part of the Real Property 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 ten percent (10%) of the Purchase Price, 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 Real Property, the difference between the cost to repair, restore and/or replace and the amount of such proceeds
shall be deducted from the Purchase Price. If prior to the Closing, all or any part of the Real Property is destroyed or damaged by fire or the elements or by any other cause where the Aggregate Damage exceeds ten percent (10%) of the Purchase
Price, Purchaser may elect to (i) purchase such Owned Real Property, or take assignment of such Leased Real Property, 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 Property, or
not take assignment of such Leased Real Property, and, in such event, an appropriate adjustment to the Purchase Price shall be made by Purchaser and Seller; 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 a consulting firm, mutually selected by
Seller and Purchaser (the “Independent Consultant”) pursuant to Section 8.3(d). 
  
 (b) With respect to any Assets other than Real Property which are destroyed or damaged by fire or the elements or by any other cause prior to the Closing, 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 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 Real Property is made subject to an eminent domain or condemnation proceeding which would in Purchaser’s judgment materially adversely impair access to the Real Property or be materially adverse to the operations of the Hospital, Purchaser
may elect to (i) purchase such affected Owned Real Property, or take assignment of such Leased Real Property, 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 in such eminent domain or condemnation proceeding), (ii) not purchase the affected Owned Real Property, or not take assignment of such Leased Real Property, 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 Closing Date, the adjustment shall be resolved by the Independent Consultant pursuant to Section 8.3(d). 
  

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 (d) If pursuant to either Section 8.3(a) or 8.3(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 8.3(a) or 8.3(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 Aggregate Damage (and any applicable Purchase Price adjustment) the definitive
amount of the Aggregate Damage (and any applicable adjustment to the Purchase Price), 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 8.3(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 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 at Seller’s cost. 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
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, but excluding any records which are among the Excluded Assets. 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, without limitation, 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 rules and regulations concerning 
  

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 confidentiality. Purchaser shall abide by any such 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,
without limitation, 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 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 transaction 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 5.6 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. 
  
 (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. If, as of the Effective Time, Seller has not obtained a required consent to the assignment of a
Contract to Purchaser or Purchaser is 
  

 39 

 unable to enter into a new third party contract with respect to such Contract, 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 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 and such obligation would have been an obligation of Purchaser had it received consent to the assignment of such Contract or had entered into a new third
party contract on substantially similar terms as the applicable Contract. 
  
 9.4 Employee Matters. As of the Effective Time, Seller shall terminate all of its employees at the Hospital, and Purchaser shall hire all such 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. Compensation levels will be maintained for a minimum of ninety (90) days after which compensation levels may be adjusted to be consistent
with the compensation guidelines of the Purchaser. 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 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 Workers Adjustment Retraining and Notification Act (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, Purchaser or Purchaser’s employee benefit plans shall provide such employees with
employee benefits consistent with the benefits generally offered to similarly situated employees of Purchaser or its affiliates and, to the extent such benefits are based, in whole or in part, on service with Purchaser or its affiliate, Purchaser or
Purchaser’s employee benefit plans shall recognize the existing seniority and service with Seller and Commonly Controlled Entities 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 Purchaser in which no prior service credit is
given or recognized to or for other plan beneficiaries. In extending such benefits, Purchaser shall waive pre-existing conditions limitations in Purchaser’s welfare benefit plans which might otherwise apply to such employees except to the
extent employees have not satisfied such limitations under the current welfare benefit plans of Seller. To the extent Purchaser can do so under its existing employee welfare plans, Purchaser will credit such employees for deductibles and co-pays
paid under Seller’s welfare plans for the plan year that includes the Closing Date. The existing Purchaser 401(k) defined contribution plan shall accept rollovers by such employees from a Seller plan provided (i) such rollover is in cash (or
cash and the employee’s promissory note in the case of an employee with an outstanding participant loan) 
  

 40 

 and (ii) the Purchaser is provided a written declaration from the administrator of the Seller plan that such distribution
is an “eligible rollover distribution” under the Code. Additionally, Purchaser shall credit each Hired Employee with such employee’s accrued extended illness benefit as of the Effective Time (“EIB”) up to a maximum of 168
hours. All such use of a Hired Employee’s EIB hours shall be subject to the restrictions under Seller’s policy existing as of the date of this Agreement. 
  
 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 Post-Closing Operations of the Hospital. From and after the Effective Time until December 31, 2006, Purchaser shall comply with the covenants made by Purchaser in Schedule 1.12. 
  
 9.7 Seller Corporate Existence. Seller shall maintain its corporate
existence and shall not dissolve or liquidate until June 30, 2007. 
  
 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, and shall survive the Closing; provided, however, that all representations and warranties of Purchaser and Seller, all the Seller’s Pre-Closing Covenants (as defined below), all the Purchaser’s Pre-Closing Covenants (as
defined below), and all rights to indemnity set forth in Sections 10.2(a) and 10.3(a) shall continue to be fully effective and enforceable following the Effective Time for only one year (the “Survival Period”) and shall thereafter be of no
further force and effect; provided further, however, that, if there is at the end of such one year period an outstanding notice of a claim therefore 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. 
  

 41 

 10.2 Indemnification of Purchaser by Seller. 
  
 (a) Indemnification. Seller shall keep and save Purchaser, and its
directors, officers, employees, agents and other representatives (collectively, the “Purchaser Parties”), forever harmless from and shall indemnify and defend the Purchaser Parties 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, (ii) any breach or default by Seller of any covenant or agreement of Seller under this Agreement either required (x) to be performed before the Closing Date (the “Seller’s
Pre-Closing Covenants”) or (y) to be performed after the Closing Date (the “Seller’s Surviving Covenants”), and (iii) the Excluded Liabilities. 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 or legal entity other than Purchaser. 
  
 (b) Indemnification Limitations. Notwithstanding any provision to the contrary contained in this Agreement, Seller shall be under no liability to
indemnify Purchaser under Section 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 that such claim relates to a liability arising out of or relating to any act, omission, event or
occurrence connected with: 
  
 (A) the use, ownership or
operation of the Hospital, or 
  
 (B) the use, ownership or
operation of any of the Assets, 
  
 on and after the Effective Time (without
regard to whether such use, ownership or operation is consistent with Seller’s policies, procedures and/or practices prior to the Effective Time), other than as specifically included in the Excluded Liabilities; 
  
 (iv) to the extent that Purchaser had Knowledge of (A) the respective breach
of a representation and warranty by Seller or (B) other indemnifiable event, prior to the Effective Time; 
  
 (v) 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

  
 (vi) or accrue to Purchaser unless the liability of Seller in
respect of any single claim or multiple claims in the aggregate exceeds Two Hundred Fifty Thousand Dollars ($250,000) (a “Relevant Claim”) in which event Purchaser shall be entitled to seek indemnification for the total amount of the
Relevant Claim(s). 
  

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 Notwithstanding any provision to the contrary contained in this Agreement, the maximum aggregate liability of Seller to
Purchaser under this Agreement shall not exceed fifty percent (50%) of the Purchase Price. 
  
 (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 endeavors to recover such sum from such third party and any sum recovered will reduce the amount of the claim. 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, and Seller’s directors, officers, employees, agents and other representatives
(collectively the “Seller Parties”), forever harmless from and shall indemnify and defend Seller Parties 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, (ii) any breach or default by Purchaser under any covenant or agreement of Purchaser under this Agreement either required (x) to be performed before the Closing Date (the “Purchaser’s Pre-Closing Covenants”) or
(y) to be performed after the Closing Date (the “Purchaser’s Surviving Covenants”), and (iii) the Assumed Obligations. 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 or legal entity other than Seller or any affiliate of 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; 
  
 (iii) to the extent that such claim relates to a liability of Seller arising out of or relating to any act, omission, event
or occurrence connected with: 
  
 (A) the use, ownership or
operation of the Hospital, or 
  
 (B) the use, operation or
ownership of any of the Assets, 
  
 prior to the Effective Time, other than as
specifically included in the Assumed Obligations; 
  

 43 

 (iv) to the extent such claim relates to an obligation or liability for which Seller has agreed to
indemnify Purchaser pursuant to Section 10.2; or 
  
 (v) or
accrue to Seller unless the 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); or 
  
 Notwithstanding any provision to the contrary contained
in this Agreement, the maximum aggregate liability of Purchaser to Seller under this Agreement shall not exceed fifty percent (50%) of the Purchase Price. 
  
 (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 endeavors to recover such sum from such third party and any sum recovered will reduce the amount of the claim. If Purchaser pays to Seller an
amount in respect of a 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 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, or does not give the Claim Notice within the Survival Period, 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 
  

 44 

 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 Indemnifying 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 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. 
  
 (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). 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. 
  

 45 

 (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 (as hereinafter defined) 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 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 in the case of a Third Party Claim, as the Indemnified Party suffers the Damages in respect of such Third Party Claim, or 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. 
  
 (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 or entity 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. 
  

 46 

 (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 or entities relating to the matter for which indemnification has been made. 
  
 10.5 Exclusive. Other than claims for fraud or equitable relief (which claims are nevertheless subject to the time limitation set forth in Section
10.1), any claim arising under this Agreement or in connection with or as a result of the transactions contemplated by this Agreement or any Damages or injury 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 in accordance with the provisions of this Article 10. Notwithstanding the foregoing provisions of this Section 10.5, upon the expiration of the Survival Period, the parties may pursue other available
remedies for any claims relating to (i) any breach or default by Purchaser or Seller, as the case may be, of any Seller Surviving Covenant or Buyer Surviving Covenant, (ii) Third Party Claims made in respect of Excluded Liabilities, in the case of
Purchaser, and (iii) Third Party Claims made in respect of Assumed Obligations, in the case of Seller; provided, however, that any claims shall be subject to the limitations set forth in Section 10.2(b)(vi) and the last paragraph of Section 10.2 (b)
with respect to a Purchaser claim and Section 10.3(b)(v) and the last paragraph of Section 10.3(b) with respect to a Seller claim, except that any Seller claim arising out of Purchaser’s breach of its covenants and obligations under Section
1.12, Schedule 1.12, or Section 1.13 shall not be subject to such limitations. Nothing contained in this Section 10.5 or any other provision of this Agreement shall be deemed or construed as an assumption by Purchaser of any Excluded
Liability. 
  
 10.6 Right of Set-Off. Purchaser shall be
entitled to set-off the amount of any indemnification claims timely made within the Survival Period against Seller that have been resolved on or before the payment date of the Variable Payment due pursuant to Section 1.13 of this Agreement against
the Variable Payment. In the case of any claims that have been asserted within the Survival Period but are not resolved prior to such payment date, Purchaser may withhold the amount of such claim from the Variable Payment and shall deposit such
withheld funds with a third party escrow agent to be held until receipt of joint disbursement directions signed by the Seller and Purchaser upon the resolution of such unresolved claims. Such right of set-off shall not be the sole and exclusive
remedy of Purchaser. 
  
 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 
  

 47 

 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. 
  
 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 (the “Superseded Agreements”), which Superseded Agreements shall be of no further force or effect. 
  

 48 

 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 transaction 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 parties, except that Purchaser may assign any of its rights or delegate any of its duties under this Agreement to any subsidiary or other entity that is wholly-owned, directly or
indirectly, by Purchaser, upon Seller’s receipt of Purchaser’s guaranty of such wholly-owned subsidiary’s obligations under this Agreement in a form reasonably acceptable to Seller. 
  
 12.4 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Virginia as applied to contracts made and to be performed entirely within the Commonwealth of Virginia. 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. Any notice, demand or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered, when received by telegraphic or other electronic means (including facsimile) or
overnight courier, or five (5) calendar days after being deposited in the United States mail, with postage prepaid thereon, certified or registered mail, return receipt requested, addressed as follows: 
  

			
	 If to Seller:
	 	 PSH Acquisition Corporation

	 	 	 350 Poplar Drive

	 	 	 Petersburg, Virginia 23801

	 	 	 Attention: Anthony J. Vadella, President

	 	 	 Facsimile No.: (804) 861-0076

		
	 With a copy to:
	 	 Hunton & Williams, LLP

	 	 	 951 East Byrd Street

	 	 	 Richmond, Virginia 23219-4074

	 	 	 Attention: C. Porter Vaughan, III, Esquire and

	 	 	                     David I. Meyers,
Esquire

	 	 	 Facsimile No.: (804) 788-8218

  

 49 

			
	 If to Purchaser:
	 	 HHC Poplar Springs, Inc.

	 	 	 1500 Waters Ridge Drive

	 	 	 Lewisville, Texas 75057

	 	 	 Attention: James Ken Newman, President

	 	 	 Facsimile No.: (972) 420-4060

		
	 With a copy to:
	 	 Strasburger & Price, LLP

	 	 	 901 Main Street, Suite 4300

	 	 	 Dallas, Texas 75202

	 	 	 Attention: David K. Meyercord, Esq.

	 	 	 Facsimile No.: (214) 651-4330

  
 or at such other address as one party
may designate by notice hereunder to the other parties. 
  
 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 thereto. 
  
 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 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, officers and employees, the directors, 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. The rights of Seller under this Section 12.8 shall be in addition and not in substitution for the rights of Seller and Seller’s affiliates under the Confidentiality
Agreement, which shall survive Closing as provided therein. 
  
 12.9 Third Party Beneficiary. None of the provisions contained in this Agreement is intended by the parties, nor shall 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 Policy; (b) all costs of 
  

 50 

 the Survey; (c) all costs of environmental surveys; (d) all sales or transfer taxes and recording charges in connection
with the conveyance of the Assets to Purchaser, except that Seller shall bear the grantor’s tax imposed by Virginia law with respect to the transfer of the Owned Real Property by Seller pursuant to this Agreement; and (e) the fee in the amount
of $75,000 payable to Dan Smith as the financial advisor to the Seller. 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 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 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. 
  
 (Remainder of Page Intentionally Left Blank) 
  

 51 

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

							
	 SELLER:
	 	PURCHASER:
		
	 PSH ACQUISITION CORPORATION,
 a Virginia corporation
	 	 HHC POPLAR SPRINGS, INC.,
 a Virginia corporation

				
	 By:
	 	 /s/ Anthony J. Vadella

	 	 By:
	 	 /s/ Ronald C. Drabik

	 Name:
	 	 Anthony J. Vadella
	 	 Name:
	 	 Ronald C. Drabik

	 Title:
	 	 President and Chief Executive Officer
	 	 Title:
	 	 Senior Vice President – Finance
 and Administration

  

 52 

 GUARANTY 
  
 Horizon Health Corporation (“Guarantor”), a Delaware corporation and the parent corporation of HHC Poplar Springs,
Inc., a Virginia corporation (“Purchaser”), absolutely, unconditionally and irrevocably guarantees the full, complete and prompt performance of all of the obligations, covenants, agreements and liabilities of Purchaser to PSH Acquisition
Corporation (“Seller”) under and pursuant to the foregoing Asset Purchase Agreement between Seller and Purchaser dated as of May 13, 2004 (the “Purchase Agreement”), including any agreements ancillary thereto, of whatsoever
nature (collectively, the “Guaranteed Obligations”). The Seller may waive, exchange, subordinate, release, surrender or in any other manner deal with Purchaser without affecting Guarantor’s obligations hereunder. Guarantor waives all
notices, including notice of (i) Seller’s acceptance of this Guaranty, Seller’s intention to act or Seller’s action hereunder; (ii) the existence or creation of or any alteration in any of the Guaranteed Obligations; (iii) any default
by Purchaser; and (iv) the obtaining, enforcing or releasing of any other guaranty or of any pledge, assignment or security for any of the Guaranteed Obligations and all other notices related to the Guaranteed Obligations. Seller may proceed against
Guarantor without first proceeding against Purchaser for the Guaranteed Obligations and is not required to join Purchaser in any proceeding against Guarantor; provided, however, as a condition precedent to the commencement of any action against
Guarantor, Seller shall first comply with all procedures specified in the Purchase Agreement or any agreement ancillary thereto with respect to actions taken against Purchaser. This Guaranty shall remain in full force and effect and be binding upon
Guarantor, its successors and permitted assigns until all of the Guaranteed Obligations have been satisfied in full. 
  
 EXECUTED as of the 13th day of May, 2004. 
  

			
	 HORIZON HEALTH CORPORATION

		
	 By:
	 	 /s/ Ronald C. Drabik

	 	 	 Ronald C. Drabik

	 	 	 Senior Vice President – Finance and

	 	 	 Administration

  

 53 

 FIRST AMENDMENT 
  
 TO 
  
 ASSET PURCHASE AGREEMENT 
  
 by and between 
  
 PSH ACQUISITION CORPORATION 
  
 as Seller 
  
 and

  
 HHC POPLAR SPRINGS, INC. 
  
 as Purchaser 
  
 Dated as of June 1, 2004 

 FIRST AMENDMENT TO  
 ASSET PURCHASE AGREEMENT 
  
 This First Amendment to Asset Purchase Agreement (the “First Agreement”) is made and entered into as of June 1, 2004 by and between PSH ACQUISITION CORPORATION, a Virginia corporation
(“Seller”), and HHC POPLAR SPRINGS, INC., a Virginia corporation (“Purchaser”). 
  
 WHEREAS, Seller and Purchaser entered into that certain Asset Purchase Agreement, dated as of May 13, 2004 (the “Purchase Agreement”), which
provides for the purchase of substantially all of the assets of the Seller by Purchaser; and 
  
 WHEREAS, Seller and Purchaser have agreed that (i) the Excluded Assets shall include all Accounts Receivable of the Seller and not only the Government Receivables of Seller, and (ii) as a result thereof, it is no
longer desirable to implement the escrow arrangements provided for in Section 1.11 of the Purchase Agreement; and 
  
 WHEREAS, Seller and Purchaser desire to amend the Purchase Agreement to reflect such changes in the terms of the transaction contemplated by the Purchase
Agreement; 
  
 NOW, THEREFORE, in consideration of the foregoing
premises and the mutual promises and covenants contained, the parties hereto agree as follows: 
  
 1. Amendment to Purchase Agreement. Notwithstanding any provision of the Purchase Agreement to the contrary, Seller and Purchaser hereby agree
that: 
  
 (a) The Excluded Assets shall include any and all
Accounts Receivable of the Seller; 
  
 (b) Section 1.7 of the
Purchase Agreement is hereby amended to delete all Accounts Receivable of the Seller from the Assets to be conveyed by Seller to Purchaser; and 
  
 (c) Section 1.8 of the Purchase Agreement is hereby amended to include all Accounts Receivable of the Seller as an Excluded Asset. 
  
 2. Net Working Capital of Seller. Seller and Purchaser agree that, for
the purposes of Section 1.11(c) of the Purchase Agreement, the estimated Net Working Capital of the Seller as of April 30, 2004, as calculated in accordance with the terms of the Purchase Agreement and excluding all Accounts Receivable of the Seller
in accordance with this First Amendment, is a negative $408,961.14. Such calculation of the estimated Net Working Capital of the Seller is reflected in the attached spreadsheet dated as of April 30, 2004 and the parties agree that
Seller’s delivery hereby of such estimated Net Working Capital shall satisfy Seller’s obligations under Section 1.11(c) in all respects. The Net Working Capital of the Seller to be determined as of the Effective Time pursuant to Section
1.11(d) of the Asset Purchase Agreement shall be made in the same manner as and shall include only the same balance sheet accounts listed on the attached spreadsheet updated to reflect the balances of such accounts as of the Effective Time. For the
purposes of the final determination of Net Working Capital of the Seller as of the Effective Time, Seller and Purchaser agree that (i) all Accounts Receivable of the Seller shall not be 
  

 1 

 considered a “current asset” of Seller conveyed to Purchaser and (ii) Purchaser shall deliver to Seller its
determination of the Net Working Capital as of the Effective Time within ninety (90) days after the Closing (instead of 180 days as originally contemplated by Section 1.11(d) of the Purchase Agreement) and the other terms and procedures set forth in
Sections (d) and (e) of Section 1.11 shall apply to such revised delivery date. 
  
 3. Adjustment to Closing Purchase Price Payment. Seller and Purchaser hereby agree that, since all Accounts Receivable of the Seller are Excluded Assets under the Purchase Agreement pursuant to this First
Amendment, which has accordingly resulted in the estimated Net Working Capital of the Seller as of the closing date being a negative $408,961.14, the amount of the Closing Purchase Price Payment shall be reduced by such amount and as so
reduced shall be the amount of Twenty-Nine Million One Hundred Forty-One Thousand Thirty-Eight and 86/100s Dollars ($29,141,038.86). 
  
 4. Escrow Agreement. Purchaser and Seller agree that, since all Accounts Receivable of the Seller are Excluded Assets under the Purchase Agreement
pursuant to this First Amendment and that results in the estimated Net Working Capital of Seller being a negative number, Purchaser shall have no obligation to make at Closing any Working Capital Escrow Deposit as contemplated by Section 1.11(b) of
the Purchase Agreement. Accordingly, Seller and Purchaser agree that the parties will not enter into the Escrow Agreement as contemplated by the Purchase Agreement. After the final determination of the actual Net Working Capital of the Seller as of
the Effective Time as determined in accordance with Section 1.11 of the Purchase Agreement, as amended by this First Amendment, if the actual Net Working Capital of Seller as of the Effective Time is less than a negative $408,961.14, then the
amount of such difference shall be paid by Seller to Purchaser and, if the actual Net Working Capital of Seller as of the Effective Time is greater than a negative $408,961.14, then the amount of such difference shall be paid by Purchaser to
Seller (such payment as applicable by Seller or Purchaser shall be made within five (5) business days after the final determination of the actual Net Working Capital of Seller as of the Effective Time pursuant to the provisions of Section 1.11 of
the Purchase Agreement, as amended by this First Amendment). 
  
 5. Transition Services. For the purposes of Section 5.8 of the Purchase Agreement relating to certain transition services to be provided by Purchaser, Seller and Purchaser agree that Purchaser shall collect on Seller’s behalf,
in accordance with and subject to the provisions of Section 5.8 of the Purchase Agreement, all Accounts Receivable of the Seller and not only the Government Receivables of the Seller. 
  
 6. Ratification; Conflicts. As amended to the extent set forth in this First Amendment, the parties hereby ratify and
confirm the Purchase Agreement in all respects, except that if any provision of this First Amendment conflicts either expressly or by necessary implication with any provision of the Purchase Agreement (including, without limitation, Sections 1.2,
1.4(k), 1.5(b), 1.5(i), 1.7(g), 1.7(p), 1.8(e), 1.11(b), 1.11(f) and 2.17, Schedule 1.11 and the other provisions referenced in this First Amendment), this First Amendment shall take precedence. 
  

 2 

 7. General Provisions. 
  
 (a) Definitions. Capitalized terms used in this First Amendment that are not expressly defined herein shall have the
meanings assigned to such terms in the Purchase Agreement. 
  
 (b)
Entire Agreement. This First Amendment contains the entire and complete understanding and agreement between the parties, and supersedes all prior or contemporaneous agreements or understandings, with respect to the subject matter hereof.

  
 (c) Successors and Assigns. All of the terms and
provisions of this First Amendment shall be binding upon and shall inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. 
  
 (d) Governing Law. This First Amendment shall be governed by and construed and enforced in accordance with the laws
of the Commonwealth of Virginia as applied to contracts made and to be performed entirely within the Commonwealth of Virginia. The parties hereby waive their right to assert in any proceeding involving this First Amendment 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 First Amendment. 
  
 (e) Third Party Beneficiary. None of the provisions contained in this Agreement is intended by the parties, nor shall
be deemed, to confer any benefit on any person not a party to this First Amendment. 
  
 (f) Counterparts. This First Amendment 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. 
  
 (Remainder of Page Intentionally
Left Blank) 
  

 3 

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

							
	 SELLER:
	 	 PURCHASER:

		
	 PSH ACQUISITION CORPORATION,
 a Virginia corporation
	 	 HHC POPLAR SPRINGS, INC.,
 a Virginia corporation

				
	 By:
	 	 /s/ Anthony J. Vadella

	 	 By:
	 	 /s/ Ronald C. Drabik

	 Name:
	 	 Anthony J. Vadella
	 	 Name:
	 	 Ronald C. Drabik

	 Title:
	 	 President and Chief Executive Officer
	 	 Title:
	 	 Senior Vice President – Finance
 and Administration

  
 Acknowledgement
of Guarantor 
  
 Horizon Health Corporation as the
guarantor of the obligations of Purchaser under the Purchase Agreement hereby acknowledges the foregoing First Amendment to Asset Purchase Agreement and agrees that such First Amendment does not modify, amend or limit in any respect its obligations
as guarantor of the obligations of the Purchaser under the Purchase Agreement and its guaranty shall remain applicable to the obligations of the Purchaser under the Purchase Agreement as amended by this First Amendment. 
  

			
	 HORIZON HEALTH CORPORATION

		
	 By:
	 	 /s/ Ronald C. Drabik

	 Name:
	 	 Ronald C. Drabik

	 Title:
	 	Senior Vice President – Finance and Administration

  

 4

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