ASSET PURCHASE AGREEMENT

EXECUTION COPY

ASSET PURCHASE AGREEMENT

among

PACER HEALTH MANAGEMENT CORPORATION OF GEORGIA,

a Georgia corporation,

and

SAINT JOSEPH’S AT EAST GEORGIA, INC.,

a Georgia non-profit corporation

March 7, 2008

LIST OF SCHEDULES

Schedule A

Other Businesses

Schedule B-1

Certain Real Property Permitted Exceptions

Schedule B-2

Proration Items

Schedule B-3

Seller’s Knowledge Group

Schedule 2.8(a)

Owned Real Property

Schedule 2.8(b)

Real Property Leases

Schedule 2.8(c)

Personal Property

Schedule 2.8(d)

Licenses

Schedule 2.8(e)

Personal Property Leases

Schedule 2.8(f)

Contracts

Schedule 2.8(l)

Hospital Names, Symbols and Telephone Numbers

Schedule 2.8(m)

Non-Proprietary Website Content

Schedule 2.9(d)

Computer Software, Etc.

Schedule 2.9(s)

Owned or Leased Assets

Schedule 2.9(u)

Other Assets

Schedule 2.10(g)

Other Liabilities

Schedule 3.4(a)

Consents

Schedule 3.4(b)

Government Approvals

Schedule 3.5(a)

Material Consents

Schedule 3.6(a)

Legal Matters

Schedule 3.6(b)

Environmental Matters

Schedule 3.6(c)

Underground Improvements

Schedule 3.6(e)

Exclusions from Federal Health Care Programs

Schedule 3.7(b)

Agreements Affecting Title of Acquired Assets

Schedule 3.7(d)

Motor Vehicles

Schedule 3.8(a)

Operating Licenses

Schedule 3.8(b)

JC Period

Schedule 3.8(c)

Regulatory Matters

Schedule 3.8(d)

Notices of Program Reimbursement

Schedule 3.8(e)

Third Party Payors/Managed Care Plans

Schedule 3.8(f)

Hill-Burton Matters

Schedule 3.8(g)

Health Care Matters

Schedule 3.9(a)

Annual Financials

Schedule 3.9(b)

Interim Financials

Schedule 3.9(c)

Certain Liabilities

Schedule 3.10

Legal Proceedings

Schedule 3.11(a)

Employee Benefit Plans

Schedule 3.12(a)

Employees

Schedule 3.12(b)

Employee Contracts

Schedule 3.12(c)

Union or Collective Bargaining Agreements

Schedule 3.12(e)

Licensed Personnel

Schedule 3.14

Intellectual Property

Schedule 3.15

Insurance

Schedule 3.17

Material Changes

Schedule 3.17(d)

Certain Compensation Changes

Schedule 3.17(i)

Changes in Accounting

Schedule 3.18(a)

Real Property

Schedule 4.5

Governmental Consents/Filings/Notices

Schedule 5.4

Required Third Party Consents

LIST OF EXHIBITS

Exhibit A

Pacer Health Guaranty Agreement

Exhibit 2.6(a)

Bill of Sale

Exhibit 2.6(b)

Real Estate Assignments

Exhibit 2.6(c)

Property Deed

Exhibit 2.6(e)

Sublease Agreement

Exhibit 2.6(j)

Restrictive Covenant Agreement

Exhibit 2.6(l)

Power of Attorney

Exhibit 6.10

Minnie G. Boswell Facility Assessment

ii

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “ Agreement ”) is made and entered into as of the 7th day of March, 2008 (the “ Agreement Date ”) by and among PACER HEALTH MANAGEMENT CORPORATION OF GEORGIA , a Georgia corporation (“ Seller ”), and SAINT JOSEPH’S AT EAST GEORGIA, INC. , a Georgia non-profit corporation (“ Purchaser ”).  

RECITALS

A.

Seller (i) engages in the business of delivering acute care services to the public through the acute care hospital commonly known as the Minnie G. Boswell Memorial Hospital located at 1201 Siloam Road, Greensboro, Georgia (the “ Acute Care Hospital ”) and (ii) owns and operates other healthcare businesses incident to the operation of the Acute Care Hospital as specifically identified on Schedule A (the “ Other Businesses ”) (the Acute Care Hospital and the Other Businesses are referred to in this Agreement collectively as the “ Hospital ”).   

B.

Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser, substantially all of the assets with respect to the operation of the Hospital, for the consideration and upon the terms and conditions contained in this Agreement.

C.

As consideration for the agreements of the parties set forth herein and as a condition to Purchaser acquiring the Acquired Assets, Pacer Health Corporation, a Florida corporation and the ultimate parent corporation of Seller, has entered into and delivered to Purchaser the Guaranty Agreement, dated as of the date hereof, between Purchaser and Pacer Health Corporation, a copy of which is attached hereto as Exhibit A .

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained in this Agreement, and for their mutual reliance, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1

Definitions .

(a)

Except as otherwise provided herein, the capitalized terms set forth below have the following meanings:

“ Affiliate ” shall mean any Person directly or indirectly controlling, controlled by or under common control with a second Person; provided, however, an “Affiliate” shall not include any officer or director of any 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.

“ Assumed Accrued Payroll ” shall mean Seller’s liabilities (including, but not limited to, payroll taxes) for payroll owed to the Hired Employees only to the extent that such accrued payroll relates to the payroll period of Seller that begins on or after 12:01 am on Sunday, March 2, 2008.

“ Assumed PTO ” shall mean the accrued paid-time off, up to eighty (80) hours per employee, for each of Seller’s employees who are offered and who accept employment with Purchaser.

“ Assumed PTO Amount ” shall mean Sixty Thousand Three Hundred Fifty-Two Dollars and Eighty-One Cents ($60,352.81).

“ Benefits Adjustment Amount ” shall mean Fifteen Thousand Two Hundred Seventy Two Dollars and Three Cents ($15,272.03), which represents an amount equal to the monthly cost of Seller’s employee health insurance plans, as sponsored by Seller through Blue Cross Blue Shield of Georgia and Greater Life of Georgia, multiplied by a fraction, the numerator of which is Twenty-Five (25) and the denominator of which is Thirty-One (31).

  

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Environmental Laws ” shall mean, as enacted and in effect as of the date hereof or where applicable at any time during Seller’s operations of the Hospital, all Laws relating to pollution or the regulation and protection of human health from environmental hazards or protection of  the environment and natural resources, including, without limitation: (i) the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq . (“ CERCLA ”); (ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., (“ RCRA ”); (iii) the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001 et seq.); (iv) the Clean Air Act (42 U.S.C. §§ 7401 et seq.); (v) the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); (vi) the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.); (vii) the Hazardous Materials Transportation Act (49 U.S.C. §§ 5101 et seq.); (viii) any state, county, municipal or local statues, laws or ordinances similar or analogous to the federal statutes listed in parts (i) - (vii) of this subparagraph, including, but not limited to, the Georgia Air Quality Act, O.C.G.A. Sections 12-9-1 et seq., the Georgia Solid Waste Management Act, O.C.G.A. Sections 12-8-20 et seq., the Georgia Hazardous Waste Management Act, O.C.G.A. Sections 12-8-60 et seq., the Georgia Hazardous Sites Response Act, O.C.G.A. Sections 12-8-90 et seq., the Georgia Water Quality Control Act, O.C.G.A. Sections 12-5-20 et seq., and the Georgia Underground Storage Tank Act, O.C.G.A. Sections 12-13-1 et seq.; (ix) any amendments to the statues, laws or ordinances listed in parts (i) - (viii) of this subparagraph, as enacted and in effect as of the date hereof or where applicable at any time during Seller’s operations of the Hospital,; (x) any rules, regulations, guidelines, directives, orders or the like adopted pursuant to or implementing the statutes, laws, ordinances and amendments listed in parts (i) - (ix) of this subparagraph; and (xi) any other Laws relating to the manufacture, processing, distribution, use, treatment, storage, transport, discharges, disposal, Release or threatened Release of Hazardous Substances, and laws and regulations relating to the storage, treatment and disposal of medical and biological waste.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor law; and regulations and rules issued pursuant to that act or any successor law.

“ Governmental Entity ” shall mean shall mean the government of the United States of America and any state, commonwealth, territory or possession thereof and any political subdivision or quasi-governmental authority of any of the same, including, but not limited to, any agency, department, commission, board, bureau or other authority or instrumentality.

“ Hazardous Substances ” shall mean (i) any hazardous or toxic waste, chemical, substance, waste, pollutant, contaminant or material defined as or deemed as hazardous or toxic or otherwise regulated under any Environmental Law, including, without limitation, RCRA, hazardous wastes, CERCLA hazardous substances, and HSRA regulated substances; (ii) asbestos or asbestos-containing material; (iii) medical, radiological and biological waste; (iv) urea formaldehyde and polychlorinated biphenyls; (v) oil and petroleum products, including gasoline, fuel oil, crude oil and other various constituents of such products; (vi) fungal growth and mold; (vii) lead in paint or drinking water; (viii) pesticides and other agricultural chemicals and (ix) any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any Environmental Laws.

“ Intellectual Property ” shall mean (i) all United States or foreign patents and all United States or foreign patent applications; (ii) all trade secret or confidential information, including without limitation, marketing customer, planning, financial, research, development and technical information and data; (iii) all rights of copyright, including registrations and applications for registration thereof; and (iv) all trademarks, service marks, trademark registrations and applications, service mark registrations and applications, trade names and trade dress.

“ Inventory ” shall mean all inventories of Supplies, drugs, food and other disposables and consumables located on site at the Hospital.

“ Laws ” shall mean any federal, state or local law (including, without limitation, common law), rule, ordinance, code, regulation, statute or any rule or judgment, order, writ, injunction or decree of any Governmental Entity to which the Hospital is subject or by which the Acquired Assets are bound.

“ Liens ” shall mean, with respect to the Acquired Assets, any lien, charge, pledge, mortgage, deed of trust, security interest, equitable interest, judgment, attachment or restrictive right of any kind or nature whatsoever.

“ Permitted Exceptions ” shall mean: (a) current Taxes not yet due and payable or the validity of which is being contested in good faith by appropriate proceedings and where adequate reserves have been established in accordance with GAAP; (b) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of statutory obligations (none of which are individually or in the aggregate material to Seller); (c) Liens securing capitalized lease obligations that are set forth in the personal property leases set forth in Schedule 2.8(e) ; and (d) those certain permitted exceptions relating to the Real Property as set forth on Schedule B-1 attached hereto.

“ Person ” shall mean any natural person, partnership, corporation, limited liability company, association, trust or other legal entity.

“ Privacy Laws ” shall mean collectively (i) the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.) and the regulations promulgated thereunder, including, but not limited to, requirements related to privacy, security and transactions and code sets standards (“ HIPAA ”) and (ii) all applicable state laws related to privacy and security of health information and the regulations promulgated thereunder, to the extent not preempted by HIPAA.

“ Proration Items ” shall mean (i) all water, sewer, electricity, gas and other utility charges, if any, applicable to the business of the Hospital; (ii) rental charges payable or receivable and other payments or receipts applicable to the Acquired Assets, including under the Contracts; (iii) all ad valorem taxes imposed upon any portion of the Real Property, general assessments imposed with respect to the Real Property and special assessments upon the Real Property, whether payable in full or by installments prior to the Closing Date; (iv) all ad valorem taxes imposed upon the Acquired Assets other than the Real Property and (v) all other items of income and expense which are normally prorated upon the sale of assets of a going concern which are identified on Schedule B-2 .

“ Provider Agreements ” shall mean all Contracts between Seller and Third Party Payors that relate to the provision of and payment for medical, health, hospitalization and related services.

“ Release ” shall have the same meaning ascribed thereto under CERCLA Section 101(22), except that it shall apply to any and all Hazardous Substances, not just CERCLA hazardous substances.

“ Seller’s Knowledge ,” “ Knowledge of Seller ” or words to that effect shall mean the knowledge of those Persons identified on Schedule B-3 attached hereto following a commercially reasonable investigation.

“ Seller Material Adverse Effect ” shall mean any event, change or development that has had, or would reasonably be expected to have, a material adverse effect on  the assets (including, but not limited to, the Acquired Assets), financial condition, or operations of the Hospital considered in the aggregate or would reasonably be expected to prevent or materially impede Seller from performing its obligations under this Agreement or consummating the transactions contemplated by this Agreement; provided, however, that a Seller Material Adverse Effect will not be deemed to have occurred if such event, change or development results from: (i) economic conditions generally in the United States (provided that Seller is not disproportionately affected thereby), or (ii) any action taken by Seller that is required by the terms of this Agreement or the other agreements contemplated by this Agreement or is taken with Purchaser’s express prior written consent.

“ Severance Amount ” shall mean Seven Thousand Two Hundred Eighty-Seven Dollars and Sixty-Eight Cents ($7,287.68), which represents an amount equal to twenty percent (20%) of the non-hired Hospital Employees’ annualized salary or wages, as applicable, excluding the Chief Executive Officer, Chief Financial Officer and Chief Nursing Officer of the Hospital and Hospital Employees who did not apply for employment with Purchaser.  For the avoidance of doubt, “ Severance Amount ” does not include any bonus amounts or amounts attributable to any employee benefit plans, 401(k) plans or other retirement plans.

“ Supplies ” shall mean all inventories of medical, surgical, office and janitorial supplies and other similar supplies located on site at the Hospital.

“ Taxes ” shall mean any income, corporation, gross receipts, profits, gains, capital stock, capital duty, franchise, withholding, social security, unemployment, disability, property, wealth, welfare, stamp, transfer, documentary, excise, occupation, sales, use, value added, alternative minimum, estimated or other similar tax (including any fee, assessment or other charge in the nature of or in lieu of any tax) imposed by any Governmental Entity, including any interest, penalties, additions to tax or additional amounts in respect of the foregoing, and including any transferee or secondary liability in respect of any tax (whether imposed by law, contractual agreement or otherwise) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group.

“ Third Party Payor ” shall mean any private insurer, health maintenance organization, preferred provider organization, third party administrator, employer, or any other payor of health services or benefits under a health benefit plan, but shall not include any governmental payor.  

“ Title Policy ” shall mean a standard 2006 form American Land Title Association Owner’s Policy of Title Insurance in an amount equal to the full insurable value of the Real Property, insuring that Purchaser has good and marketable fee simple title to the Owned Real Property and valid leasehold title to the Leased Real Property, respectively, on the Closing Date, subject only to the printed conditions and exceptions of said standard form and the Permitted Exceptions, but without exceptions as to matters arising in the “gap,” mechanic’s or materialmen’s liens, third parties in possession, or rights or claims of real estate brokers, and also including such endorsements as are requested by Purchaser.

“ USTs ” shall mean the two underground storage tanks located at the Hospital, including one 250-gallon UST that is used for fuel storage for the emergency backup power generator and one 675-gallon UST is used for fuel storage for the Hospital’s boiler room.

(b)

In addition to the terms defined in Section 1.1(a) above, the terms set forth below shall have the meanings ascribed thereto within the below-referenced Sections of this Agreement:

Accounts Receivable	2.9		Licenses	2.8
Acquired Assets	2.8		March 3 Deposit	2.1
Acute Care Hospital	Recitals		Material Contracts	3.5
Additional Deposit	2.1		Medical Staff Bylaws	3.20
Agency Settlements	12.2		Non-Refundable Deposits	2.1
Agreement	Preface		Notice Period	11.3
Agreement Date	Preface		Operating Licenses	3.8
Allocable Consideration	2.15		Other Businesses	Recitals
Allocation Schedule	2.15		Owned Real Property	2.8
Annual Financials	3.9		Payee	2.14
Annual Subsidy Amount	2.4		Payor	2.14
Assumed Liabilities	2.10		Personal Property	2.8
Audit Periods	3.8		Personal Property Leases	2.8
Beneficiary	2.14		Power of Attorney	2.6
Bill of Sale	2.6		Prepaids	2.8
Claim Notice	11.3		Property Deed	2.6
Closing	2.5		Purchase Price	2.1
Closing Date	2.5		Purchaser	Preface
Closing of Financials	10.5		Purchaser 2008 Indigent Care Amount	10.6
Closing Payment	2.2		Purchaser Settlement Due Date	12.2
COBRA Coverage	6.3		Real Estate Assignments	2.6
Confidential Information	6.6		Real Property	2.8
Contracts	2.8		Real Property Laws	3.18
Damages	11.1		Real Property Leases	2.8
Deposits	2.1		Receivable Records	2.9
Disclosure Schedule	Art. 3		Reconciliation	12.3
Document Retention Period	10.3		Recipient	2.14
Effective Time	2.5		Repairs Amount	2.2
Environmental Permits	3.6		Restrictive Covenant Agreement	2.6
Escrow Agent	2.1		Returns	3.13
Excluded Assets	2.9		Revised Allocation Schedule	2.15
Excluded Liabilities	2.11		Rules	13.3
Financial Statements	3.9		Seller	Preface
GAAP	3.9		Seller 2008 Indigent Care Amount	10.6
Governmental Approvals	3.4		Seller Cost Reports	12.2
Governmental Program Transition Patients	12.3		Seller Plans	3.11
Hired Employees	6.3		Seller Settlement Due Date	12.2
Hospital	Recitals		Straddle Agency Settlements	12.2
Hospital Employees	6.3		Straddle Cost Reports	12.2
Incorrect Indigent Care Recipient	10.6		Straddle Payor Settlements	12.2
Indemnified Party	11.3		Stub Cost Reports	12.2
Indemnity Notice	11.3		Stub Payment	10.6
Indemnity Notice	11.3		Stub Period	12.2
Indemnifying Party	11.3		Subject Real Estate	10.7
Interim Financials	3.9		Sublease Agreement	2.6
Indigent Care Fund	10.6		Subsidy Report	2.4
Inventory Range	3.7		Superseded Agreements	13.14
JC	3.8		Tax Benefits	11.5
Landlord Consent	2.6		Termination Date	9.1
Leased Real Property	2.8		Third Party Claim	11.3
Leases	2.8		Threshold Amount	11.4
			Title Company	2.6
			Transition Services	12.3

ARTICLE 2

SALE AND TRANSFER OF ASSETS;

CONSIDERATION; CLOSING

2.1

Purchase Price .  Subject to the terms and conditions of this Agreement, including the adjustments provided for in Sections 2.2(a) and 2.4 below, the aggregate purchase price to be paid by Purchaser to Seller for the purchase of the Acquired Assets on the Closing Date shall be Three Million Five Hundred Forty-Seven Thousand Five Hundred Fifty-Nine Dollars and Seventy-One Cents ($3,547.559.71) (the “ Purchase Price ”), which amount includes (i) the Benefits Adjustment Amount, (ii) the Severance Amount, (iii) the non-refundable earnest money deposit payments of One Hundred Thousand Dollars ($100,000) each paid from Purchaser to Seller on December 21, 2007 and February 8, 2008, respectively (together, the “ Non-Refundable Deposits ”), (iv) the additional earnest money deposit payment of Twenty-Five Thousand Dollars ($25,000) paid from Purchaser to Seller on March 3, 2008 (the “ March 3 Deposit ”), and (v) the additional earnest money deposit payment of One Hundred Thousand Dollars ($100,000.00), paid from Purchaser to SunTrust Bank, a Georgia banking corporation (the “ Escrow Agent ”), on December 28, 2007 and paid by the Escrow Agent to Seller on March 3, 2008 (individually, the “ Additional Deposit ” and collectively with the Non-Refundable Deposits and the March 3 Deposit, the “ Deposits ”).

    

2.2

Closing Payment; Disbursement of Additional Deposit .

(a)  

On the Closing Date, Purchaser shall pay to Seller the Closing Payment, as adjusted below.  The “ Closing Payment ” shall be an amount equal to Two Million Nine Hundred Twelve Thousand Two Hundred Six Dollars and Ninety Cents ($2,912,206.90), which amount represents the Purchase Price less the Deposits previously paid to Seller, adjusted on the Closing Date as follows: (i) decreased dollar for dollar for the Assumed PTO Amount; (ii) decreased dollar for dollar by Two Hundred Fifty Thousand Dollars ($250,000) (the “ Repairs Amount ”); and (iii) otherwise adjusted to take into account the prorations and other price adjustments called for pursuant to Section 2.14 of this Agreement. The Closing Payment shall be subject to the post-Closing subsidy adjustment as provided in Section 2.4 below.  

(b)

Purchaser and Seller hereby acknowledge and agree that in the event that the transactions contemplated by this Agreement fail to close for any reason whatsoever, with or without fault attributable to either party, the Non-Refundable Deposits and, if not refunded to Purchaser in accordance with Paragraph 2 of the Letter of Intent amendment dated February 29, 2008, the Additional Deposit and the March 3 Deposit shall be Seller’s sole and exclusive remedy for the failure of the transactions contemplated by this Agreement to close except if such failure is the result of Purchaser’s breach of Section 6.6 or Section 13.8 in which case Seller shall have the right to pursue the remedies set forth in Section 6.7.    

2.3

[Intentionally Omitted.]

2.4

Post-Closing Subsidy Adjustment to Purchase Price .  Within thirty (30) calendar days following July 1, 2008, Purchaser shall submit a report (the “ Subsidy Report ”) to Seller identifying the amount of annual subsidy for the Hospital (or its successor organization) approved by the Greene County Commission prior to July 1, 2008 (the “ Annual Subsidy Amount ”).  If Seller disputes the Subsidy Report, Seller shall notify Purchaser in writing (which writing shall contain Seller’s reason for such dispute) within ten (10) calendar days after Seller’s receipt of the Subsidy Report from Purchaser.  If Purchaser and Seller cannot resolve such dispute within thirty (30) calendar days after Seller notifies Purchaser in writing of such dispute, then such dispute shall be subject to the dispute resolution mechanics set forth in Section 13.3 of this Agreement.  Within ten (10) calendar days following the date that the Annual Subsidy Amount has been determined, either by failure of Seller to lodge a timely objection, by agreement of Purchaser and Seller or by the resolution of the dispute in the manner provided in this Section 2.4, Purchaser shall pay to Seller in cash or other immediately available funds an amount equal to fifty percent (50%) of the Annual Subsidy Amount up to an Annual Subsidy Amount of One Million Five Hundred Thousand Dollars ($1,500,000).  For the avoidance of doubt, under no circumstances shall Purchaser be obligated to pay Seller an amount greater than Seven Hundred and Fifty Thousand Dollars ($750,000) under this Section 2.4.

2.5

Closing Date . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at 10:00 a.m. Eastern Time on March 7, 2008, at the offices of Alston & Bird LLP at One Atlantic Center, 1201 West Peachtree Road in Atlanta, Georgia or such other date, time and place as the parties shall mutually agree (“ Closing Date ”); provided, however, that all conditions precedent and other matters required to be completed as of the Closing Date have been or will be completed on such date; provided, further, that a failure of the closing of the transactions contemplated by this Agreement to occur on or before March 7, 2008 shall not result in either party having a right to terminate this Agreement, unless a separate basis for termination then exists pursuant to Article 9 of this Agreement. The Closing with respect to the Hospital shall be deemed to have occurred and to be effective as between the parties as of 12:01 a.m. Eastern Time on the next day after the Closing Date (the “ Effective Time ”).

2.6

Items to be Delivered by Seller at the Closing .  At or before the Closing, Seller shall execute and deliver or cause to be delivered to Purchaser the following, duly executed by Seller where appropriate:

(a)  

General Assignment, Bill of Sale and Assumption of Liabilities dated and effective as of the Closing Date and in substantially the form of Exhibit 2.6(a) attached hereto (the “ Bill of Sale ”);

(b)

Assignment and Assumption of Real Property Leases dated and effective as of the Closing Date and in substantially the form of Exhibit 2.6(b) attached hereto with respect to each Leased Real Property (the “ Real Estate Assignments ”);

(c)

Warranty Deed for the Owned Real Property in the form of Exhibit 2.6(c) attached hereto (the “ Property Deed ”);  

(d)

such other bills of sale, motor vehicle titles, special warranty deeds, quit claim deeds, assignments, endorsements, and other good and sufficient instruments and documents of conveyance and transfer, in form reasonably satisfactory to Purchaser and its counsel, as shall be necessary and effective to transfer and assign to, vest in, and purchase all of Seller’s right, title, and interests in and to the Acquired Assets, in each case, free and clear of all Liens (subject only to Permitted Exceptions);

(e)

a Sublease Agreement as to the Leased Real Property on which the Hospital is located, which shall be substantially in the form of Exhibit 2.6(e) attached hereto (the “ Sublease Agreement ”);

(f)

Amendment to Lease and Lessor Consent to Sublease Agreement from Health Systems Real Estate, Inc., which shall be substantially in the form attached to the Sublease Agreement (the “ Landlord Consent ”);

(g)

a favorable original certificate of good standing, or comparable status, of Seller, issued by the State of Georgia, dated no earlier than a date which is five (5) business days prior to the Closing Date;

(h)

a certificate of a duly authorized officer of Seller certifying to Purchaser that (i) the conditions set forth in Sections 8.1 and 8.5 have been satisfied and (ii) all of the conditions contained in Article 7 have been satisfied except those conditions, if any, waived in writing by Seller;

(i)

a certificate of the corporate Secretary of Seller certifying to Purchaser (a) the incumbency of the officers of Seller on the Agreement 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 Seller and of the shareholder(s) of Seller authorizing (i) the transfer of the Acquired Assets and Assumed Liabilities by Seller to Purchaser and (ii) the execution, delivery and performance of this Agreement and all ancillary documents and instruments by Seller and stating that such resolutions have not been amended or rescinded and remain in full force and effect on the Closing Date;

(j)

the Restrictive Covenant Agreement in substantially the form attached hereto as Exhibit 2.6(j) (the “ Restrictive Covenant Agreement ”);

(k)

UCC termination statements for any and all financing statements filed with respect to the Acquired Assets and duly-executed releases, in recordable form, as to any Liens (other than Permitted Exceptions)  affecting title to the Real Property;

(l)

a Limited Power of Attorney for use of DEA Registration Numbers and DEA Order Forms, in the form of Exhibit 2.6(l) attached hereto (the “ Power of Attorney ”);  

(m)

affidavit(s) of title stating that (a) there are no parties in possession of any of the Owned Real Property or Leased Real Property other than Seller (or otherwise specifically setting forth any such other parties’ rights and the source and extent of such parties’ rights), and (b) Seller has not caused any work to be performed on any of the Real Property or Leased Real Property within ninety (90) days of the date of such affidavit(s), or if Seller has caused any such work to be performed within ninety (90) days of such date(s) that all such work has been completed and fully paid for, and such other indemnities, lien waivers and other documentation as the title insurance company designated by Purchaser (the “ Title Company ”) may reasonably request in order to permit the issuance of the Title Policy;

(n)

a FIRPTA affidavit in form and substance reasonably satisfactory to Purchaser and the Title Company; and

(o)

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.

2.7

Items to be Delivered by Purchaser at the 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 Payment as adjusted in accordance with Section 2.2(a) of this Agreement. Such amount shall be payable by wire transfer of immediately available funds to Seller to an account designated by Seller to Purchaser in writing not less than three (3) business days prior to the Closing Date;

(b)

a favorable original certificate of good standing, or comparable status, of Purchaser issued by the state of Georgia dated no earlier than a date which is five (5) business days prior to the Closing Date;

(c)

a certificate of a duly authorized officer of Purchaser certifying to Seller that     (i) the conditions set forth in Sections 7.1 and 7.4 have been satisfied and (ii) all of the conditions contained in Article 8 have been satisfied except those conditions, 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 Agreement 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)

the Limited Guaranty made by Saint Joseph’s Health System, Inc., a Georgia nonprofit corporation in favor of Seller, which shall be substantially in the form attached to the Sublease Agreement;

(f)

the Bill of Sale, Real Estate Assignments, Sublease Agreement, Restrictive Covenant Agreement and Power of Attorney; and

(g)

other such 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.

2.8

Transfer of Assets.  At the Effective Time, Seller shall assign, transfer, convey and deliver to Purchaser, free and clear of all Liens other than Permitted Exceptions, and Purchaser shall acquire, all of Seller’s right, title and interest in and to, the following assets and properties (the “ Acquired Assets ”), used or usable in connection with the operation of the Hospital and only to the extent such assets are not Excluded Assets:

(a)

all of the real property that is owned by Seller with respect to the operation of the Hospital, including, without limitation, real property that is leased to third parties by the Hospital and used with respect to the operation of the Hospital, and the real property located in Greene County, Georgia that was acquired by Seller from Carol W. Hatfield on June 12, 2006 and is described in Schedule 2.8(a) (such descriptions to include legal descriptions and addresses; provided, however, that to the extent any real property survey obtained by Purchaser prior to the Closing Date with respect to the real property reflects legal descriptions that are different from those legal descriptions set forth in Schedule 2.8(a) , the legal descriptions set forth in the real property survey shall replace the legal descriptions set forth on Schedule 2.8(a) , together with all buildings, improvements and fixtures located thereupon and all construction-in-progress located thereupon, together with all rights of way, servitudes, uses, hereditaments, tenements belonging or appertaining thereto and any warranties of third parties assignable by Seller with respect thereto (collectively, the “ Owned Real Property ”);

(b)

Seller’s leasehold or subleasehold interests as tenant, subtenant, lessee, sublessee or ground lessee or sublessee, to the extent assignable or transferable, in and to all of the real property leases (including any assignment of a real property lease or sublease) as set forth in the Sublease Agreement with respect to the operation of the Hospital (the “ Real Property Leases ”) including, without limitation, the leases described in Schedule 2.8(b) , each such Real Property Lease to be identified in such schedule by its title, the date thereof, the names of the parties thereto at execution, street address, any amendments thereto or assignments thereof, and also identifying any security deposits paid by Seller thereunder (the “ Leased Real Property ”) (the Owned Real Property and the Leased Real Property are collectively referred to in this Agreement as the “ Real Property ”);

(c)

all of the tangible personal property owned by Seller with respect to the operation of the Hospital, including all personal computers, fixed and moveable equipment, furniture, fixtures, machinery, vehicles, office furnishings, and leasehold improvements (the “ Personal Property ”), including, without limitation, the Personal Property described in Schedule 2.8(c) ;

(d)

all of Seller’s rights, to the extent assignable or transferable, to all licenses, permits, provider numbers, provider agreements, approvals, certificates of need (or exemptions or waivers therefrom), 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 and the Real Property (the “ Licenses ”), including, without limitation, the Licenses described in Schedule 2.8(d) ;  

(e)

all of Seller’s interest as lessee, to the extent assignable or transferable, in and to only those certain personal property leases described in Schedule 2.8(e) (the “ Personal Property Leases ” and collectively with the Real Property Leases, the “ Leases ”); provided, however, that prior to or in connection with the Closing, Seller shall pay in full all amounts accrued or otherwise owed under the Leases in connection with events or periods prior to the Effective Time;  

(f)

all of Seller’s interest in and to only those contracts and agreements (including Provider Agreements) with respect to the operation of the Hospital that are described in Schedule 2.8(f) (the “ Contracts ”);

(g)

 all of those advance payments, prepayments, prepaid expenses, deposits (including, without limitation, all security deposits under the Real Property Leases) and the like which exist as of the Closing Date, subject to the prorations provided in Section 2.14 of this Agreement, which were made with respect to the operation of the Hospital (the “ Prepaids ”);

(h)

all Inventories (including all Supplies) located at the Hospital or otherwise used or usable by Seller in connection with the operation of the Hospital;

(i)

all documents, records, operating manuals, files and computer software with respect to the operation of the Hospital, including, without limitation, all patient records, medical records, employee records (for those employees who will be employed by Purchaser following the Effective Time), financial records with respect to the operation of the Hospital, equipment records, construction plans and specifications, and medical and administrative libraries;

(j)

all rights of Seller under all warranties of any manufacturer or vendor in connection with the Personal Property;

(k)

all goodwill of the Hospital and of Seller in connection with the operation of the Hospital;

(l)

the names, service marks, symbols, telephone numbers and facsimile numbers used with respect to the operation of the Hospital, including, without limitation, those names, service marks, symbols, telephone numbers and facsimile numbers set forth on Schedule 2.8(l) ;

(m)

the non-proprietary website content related to the Hospital which is identified on Schedule 2.8(m) ; and

(n)

subject to Section 2.4 of this Agreement, any and all commitments made by the Greene County Commission related to bonds issued on behalf of Greene County and any and all operational subsidies previously provided to Seller or the Hospital or to be provided after the Effective Time in connection with the operation of the Hospital.  

2.9

Excluded Assets .  Notwithstanding anything to the contrary herein, Seller shall retain all assets owned directly or indirectly by Seller or any of Seller’s Affiliates which are not among the Acquired Assets, including, without limitation, the following assets of Seller (collectively, the “ Excluded Assets ”):

(a)

all cash, cash equivalents and cash accounts of Seller (except for the Prepaid items as provided in Section 2.8(g));

(b)

all accounts, notes, interest and other receivables of Seller, including accounts, notes or other amounts receivable from physicians, and all claims, rights, interests and proceeds related thereto, including all accounts and other receivables, disproportionate share payments and cost report settlements related thereto, arising from the rendering of services or provision of goods to inpatients and outpatients at the Hospital, billed and unbilled, recorded and unrecorded, for services and goods provided by Seller prior to the Effective Time whether payable by private pay patients, private insurance, Third Party Payors, Medicare, Medicaid, TRICARE, Blue Cross, or by any other source (the “ Accounts Receivable ”);

(c)

all documents, records, correspondence, work papers and other documents relating to the Accounts Receivable, Seller Cost Reports or Agency Settlements (the “ Receivable Records ”);

(d)

the computer software and programs, data processing system manuals and licensed software materials, all as more particularly described in Schedule 2.9(d) , which are (i) proprietary to Seller and/or Seller’s Affiliates or (ii) used in connection with the operation of one or more of Seller’s or Seller’s Affiliates’ acute care Hospitals other than the Hospital (and not located at the Hospital);

(e)

all of Seller’s or any Affiliate of Seller’s proprietary manuals, marketing materials, policy and procedure manuals, standard operating procedures and marketing brochures, data and studies or analyses;

(f)

all assets maintained pursuant to or in connection with any Seller Plan, including, any asset which would revert to the employer upon the termination of any Seller Plan, including assets representing a surplus or overfunding of any Seller Plan;

(g)

the names “Pacer Health Corporation”, “Pacer” and any other names, symbols or world-wide web addresses (including, without limitation, any world-wide web address containing “ pacerhealth.com “) not used exclusively at the Hospital, all abbreviations and variations thereof, and trademarks, trade names, service marks, copyrights and any applications therefor, symbols and logos related thereto, together with any promotional material, stationery, supplies or other items of inventory bearing such names or symbols or abbreviations or variations thereof;

(h)

all contracts and agreements between Seller and any Affiliate of Seller with respect to the operation of the Hospital and/or the Real Property, except for any to be specifically assigned to Purchaser pursuant to this Agreement;

(i)

all contracts and agreements between Seller or any Affiliate of Seller related to services not provided to the Hospital, including, without limitation, any such contracts or agreements related to other Seller activities in Greene County;

(j)

the portions of Inventory, Prepaids and other assets disposed of, expended or canceled, as the case may be, by Seller after the Agreement Date and prior to the Effective Time in accordance with the terms of this Agreement;

(k)

assets owned and provided by vendors of services or goods to the Hospital as of the Closing Date, which shall not be removed from the Hospital by Seller;

(l)

all claims, rights, interests and proceeds with respect to state or local tax refunds (including but not limited to property tax) attributable to periods prior to the Effective Time, and the right to pursue appeals of same;

(m)

all of Seller’s corporate record books and minute books;

(n)

any real property interests of Seller that are not Owned Real Property or Leased Real Property;

(o)

all insurance amounts paid or payable to Seller for covered loss of or property damage to any real property interests of Seller;

(p)

all claims, rights, interests and proceeds (whether received in cash or by credit to amounts otherwise due to a third party) with respect to amounts overpaid by Seller to any third party with respect to periods prior to the Effective Time (e.g. such overpaid amounts may be determined by billing audits undertaken by Seller or Seller’s consultants);

(q)

all bank accounts of Seller;

(r)

any claims for coverage under any of Seller’s insurance coverage, including under any liability, business interruption or property insurance policies;

(s)

the assets owned or leased by Seller or any of its Affiliates in connection with the ownership or operation of those medical practices and clinics located in Greene County, Georgia and set forth on Schedule 2.9(s) ;

(t)

the rights of Seller or any of its Affiliates under this Agreement; and

(u)

any other assets identified in Schedule 2.9(u) .

2.10

Assumed Liabilities .  On the Closing Date, Seller shall assign, and Purchaser shall assume and agree to discharge on and after the Effective Time, the following liabilities and obligations of Seller and only the following liabilities and obligations (collectively, the “ Assumed Liabilities ”):

(a)

the Assumed Accrued Payroll;

(b)

the Assumed PTO;

(c)

the Contracts, but only to the extent of the obligations arising thereunder with respect to events or periods after the Effective Time;

(d)

the Leases, but only to the extent of the obligations arising thereunder with respect to events or periods after the Effective Time; provided, however , that, notwithstanding anything else in this Agreement to the contrary, under no circumstances shall said obligations, whether arising prior to the Effective Time or thereafter, include the obligations of Seller pursuant to that certain Lease dated September 30, 2006 by and between Seller and Health Systems Real Estate, Inc., except to the extent such obligations are expressly assumed by Purchaser pursuant to the terms and conditions of the Sublease;

(e)

subject to the prorations provided in Section 2.14 below, all unpaid real and personal property taxes, if any, that are attributable to the Acquired Assets but only to the extent of the obligations arising thereunder with respect to events or periods after the Effective Time;

(f)

subject to the prorations provided in Section 2.14 below, all utilities being furnished to the Acquired Assets;

(g)

all liabilities arising out of or relating to any act, conduct, omission, event or occurrence connected with the use, ownership, operation, sale or other disposition by Purchaser or an Affiliate of Purchaser of the Hospital or any of the Acquired Assets after the Effective Time; and

(h)

any other obligations and liabilities identified in Schedule 2.10(h) .

2.11

Excluded Liabilities .  Notwithstanding anything to the contrary in Section 2.10 above, Purchaser shall not assume or become responsible for any of Seller’s, any of Seller’s Affiliates’ or the Hospital’s duties, obligations or liabilities that are not specifically assumed by Purchaser pursuant to Section 2.10 of this Agreement (the “ Excluded Liabilities ”) and Seller shall remain fully and solely responsible for all of Seller’s, any of Seller’s Affiliates’ or the Hospital’s debts, liabilities, contract obligations, expenses, obligations and claims of any nature whatsoever related to the Acquired Assets or the Hospital unless specifically assumed by Purchaser under this Agreement. The Excluded Liabilities shall include, without limitation:

(a)

all liabilities (including accounts payable) with respect to the operation of the Hospital prior to Effective Time, other than those specifically assumed by Purchaser pursuant to Section 2.10;

(b)

all liabilities arising out of or relating to any act, conduct, omission, event or occurrence connected with the use, ownership or operation by Seller or an Affiliate of Seller of the Hospital or any of the Acquired Assets prior to the Effective Time, other than those specifically assumed by Purchaser pursuant to Section 2.10;

(c)

all liabilities in connection with claims of professional malpractice to the extent arising out of or relating to acts, omissions, events or occurrences prior to the Effective Time;

(d)

except for the Assumed PTO which will be the responsibility of Purchaser upon Closing, all liabilities with respect to the Seller Plans, including, but not limited to, liability for its share of 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 arising prior to the Effective Time;

(e)

all liabilities relating to the Seller Cost Reports and for all unfiled cost reports;

(f)

all liabilities 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 the Anti-Kickback Law, the Stark Law, the False Claims Act and similar state laws;

(g)

all liabilities for violations of Environmental Laws between September 2005 and the Effective Time in connection with the ownership or operation of the Hospital;

(h)

all liabilities arising out of or relating to the past transportation or onsite or off-site disposal or Release of Hazardous Substances between September 2005 and the Effective Time in connection with the ownership or operation of the Hospital, or any onsite or off-site remediation liabilities or obligations, including, without limitation, remediation liabilities or obligations to third parties arising out of or relating to off-site environmental contamination attributable to the Hospital’s operations between September 2005 and the Effective Time;

(i)

all liabilities for termination bonuses, change of control payments, severance payments or comparable obligations owed by Seller or any of its Affiliates, except for the Severance Amount which will be the responsibility of Purchaser upon Closing;

(j)

all liabilities for salaries, wages, payroll, bonuses or other employee benefits accrued but unpaid related to employee time served prior to the Effective Time, except for the Assumed PTO which will be the responsibility of Purchaser upon Closing;

(k)

all liabilities contained in that certain Lease dated September 30, 2006 by and between Seller and Health Systems Real Estate Inc., which are not specifically and expressly assumed by Purchaser pursuant to the terms and conditions of the Sublease Agreement;

(l)

all liabilities arising out of or relating to the Leases with respect to events or periods prior to the Effective Time;

(m)

any liabilities related to, arising out of or in connection with Seller’s failure to comply with the Bulk Transfer Act or any similar Law;

(n)

any liabilities related to, arising out of or in connection with any of the Excluded Assets;

(o)

all liabilities of Seller for commissions or fees owed to any finder or broker in connection with the transactions contemplated hereunder; and

(p)

all liabilities and obligations of Seller or the Hospital in respect of periods prior to the Effective Time arising under the terms of the Medicare, Medicaid, TRICARE, Blue Cross, or other third party payor programs, and any liability arising pursuant to the Medicare, Medicaid, TRICARE, Blue Cross, or any other third party payor programs as a result of the consummation of any of the transactions contemplated under this Agreement.

2.13

Risk of Loss .  The risk of loss or damage to any of the Acquired Assets and all other property, 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 Acquired Assets and all other property, transfer of which is contemplated by this Agreement, through the Effective Time.    

2.14

Prorations and Utilities .

(a)

To the extent not otherwise prorated pursuant to this Agreement, all Proration Items that relate, in whole or in part, to periods prior to the Effective Time, shall be apportioned to the Effective Time, and representatives of Seller and Purchaser will examine all relevant books and records of the Hospital as of the Effective Time in order to make the determination of the apportionments. As to power and utility charges, “final readings” as of the Closing Date shall be ordered from the utilities; the cost of obtaining such “final readings,” if any, to be paid for fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The net amount of all Proration Items will be settled and paid on the Closing Date. In the event that the amount of any of the Proration Items is not known by Seller and Purchaser at the Closing, the proration shall be made based upon the amount of the most recent cost of such Proration Item to Seller. After Closing, Purchaser and Seller each shall provide to the other written notice ten (10) business days after receipt of each third party invoice relating to any Proration Item so estimated.  Within ten (10) business days thereafter, Purchaser and Seller each shall make any payments to the other that are necessary to compensate for any difference between the proration made at the Closing and the correct proration based on the third party invoice.

(b)

In the event that either Seller or Purchaser (the “ Payor ”) pays a Proration Item (other than if and to the extent included in the Assumed Liabilities) for which the other Party (the “ Payee ”) is obligated in whole or in part under this Section 2.14, the Payor shall present to the Payee evidence of payment and a statement setting forth the Payee’s proportionate share of such Proration Item and the Payee shall promptly pay such share to the Payor.  In the event either Party (the “ Recipient ”) receives payments, or the benefits of payments, of a Proration Item to which the other Party (the “ Beneficiary ”) is entitled in whole or in part under this Agreement, the Recipient shall promptly pay such amount to the Beneficiary.

(c)

In the event there exists as of the Closing Date any pending appeals of ad valorem Tax assessments with regard to the Acquired Assets acquired by Purchaser, the continued prosecution and/or settlement of such appeals shall be subject to the direction and control of Purchaser with respect to assessments for the year within which the Closing occurs.

2.15

Allocation of Purchase Price .  The consideration paid for the Acquired Assets, including the assumption of the Assumed Liabilities and any capitalizable costs (collectively, the “ Allocable Consideration ”), shall be allocated as shown on an allocation schedule (the " Allocation Schedule ") to be initially prepared by Seller, which Allocation Schedule must be mutually agreed to by Purchaser and Seller in order for it to become the final, binding Allocation Schedule.  If the parties determine that there is an increase or decrease in the Allocable Consideration, then the adjusted Allocable Consideration shall be allocated as shown on a revised allocation schedule (the “ Revised Allocation Schedule ”) to be mutually prepared by Purchaser and Seller.  The allocation set forth in such Allocation Schedule, or the Revised Allocation Schedule if there is an adjustment to the Allocable Consideration, shall comply with the rules of Section 1060 of the Code and the treasury regulations promulgated thereunder (and any similar provision of state, local or foreign law, as appropriate).  Once they have mutually agreed as to the allocation set forth therein, Purchaser and Seller agree to be bound by the allocation set forth in the Allocation Schedule (or the Revised Allocation Schedule if there has been an adjustment to the Aggregate Consideration) for all purposes of Tax reporting, including the filing of IRS Form 8594 in accordance with the Allocation Schedule, and the filing of an amended IRS Form 8594 in the event a Revised Allocation Schedule is prepared.  Seller shall prepare and deliver the initial draft Allocation Schedule to the Purchaser within thirty (30) calendar days after the Closing Date.  The parties shall mutually prepare and deliver any Revised Allocation Schedule within sixty (60) calendar days after the applicable adjustment of the Aggregate Consideration occurs.  

ARTICLE 3

 REPRESENTATIONS AND WARRANTIES OF SELLER

As an inducement to Purchaser to enter into this Agreement and to consummate the transactions contemplated by this Agreement, Seller hereby represents, warrants and covenants to Purchaser as to the following matters, except as disclosed in the disclosure schedule as of the Agreement Date, as may be amended pursuant to the terms of this Agreement (the “ Disclosure Schedule ”) hereby delivered by Seller to Purchaser.

3.1

Authorization .  Seller has the requisite corporate power and authority to enter into this Agreement and carry out the transactions to be performed by Seller contemplated hereby.

3.2

Binding Agreement .  All corporate and other 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. No other corporate or other action on the part of Seller is necessary to authorize the execution, delivery and performance of this Agreement, all documents necessary to give effect to this Agreement and all transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming due and valid execution by Purchaser, this Agreement constitutes a valid and binding obligation of Seller enforceable in accordance with its terms subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally from time to time in effect.

a.3

Organization and Good Standing; No Violation .

(a)

Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia.  Seller has the requisite power and authority to own, operate and lease its properties and to carry on its businesses as now conducted.  Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which its business, as now being conducted, requires it to be so qualified, except, in each case, where the failure to be so qualified would not have a Seller Material Adverse Effect.

(b)

The books and records of Seller related to the operation of the Hospital, the Acquired Assets and the Assumed Liabilities have been made available to Purchaser and contain true, complete and accurate records of the operation of the Hospital, the Acquired Assets and the Assumed Liabilities.

(c)

Neither the execution and delivery by Seller of this Agreement nor the consummation of the transactions contemplated hereby by Seller nor compliance with any of the provisions hereof by Seller will (i) violate, conflict with or result in a breach of any provision of Seller’s Articles of Incorporation or Bylaws; (ii) violate or conflict with in any material respect any Law binding upon Seller or (iii) result in a material breach or default (or an event which, with notice or lapse of time or both, would constitute a material default) under any Material Contract to which Seller is a party or by which Seller or the Acquired Assets are bound or subject.

a.3

Consents .

(a)

Except as set forth on Schedule 3.4(a) , Seller is not a party to or bound by, nor are any of the Acquired Assets subject to, any Lien (other than Permitted Exceptions), Material Contract, or Provider Agreement, or any material order, judgment or decree which (a) requires the consent of another to the execution of this Agreement or (b) requires the consent of another to consummate the transactions contemplated by this Agreement.

(b)

Except as set forth on Schedule 3.4(b) , the execution and delivery by Seller of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, will not require Seller to obtain any consent, license, permit, approval, waiver, authorization or order of, or to make any filings with or notification to, any Governmental Entity (the “ Governmental Approvals ”).

3.5

Contracts and Leases.

(a)

Schedule 3.5(a) contains a complete and accurate list of all contracts, agreements, commitments, instruments and obligations (whether written or oral, contingent or otherwise) and all amendments and modifications thereto with respect to the ownership or operation of the Hospital or the Acquired Assets (the “ Material Contracts ”) involving:  

(i)

the Real Property Leases;

(ii)

the lease, as lessee or lessor, or license (as licensee or licensor) of any personal property (tangible or intangible);

(iii)

the recruitment, employment or engagement of any employee, consultant, or agent, other than arrangements with physicians, and those arrangements that are terminable at will without severance obligation;

(iv)

the recruitment, employment or engagement of any physician or physician group;

(v)

the purchase of supplies or products from, or for the performance of services by, a third party in excess of Ten Thousand Dollars ($10,000) per year in any individual case;

(vi)

the performance of services, by Seller in excess of Ten Thousand Dollars ($10,000) per year in any individual case;

(vii)

the incurrence of indebtedness or the making of any loans, except for any advances of reasonable expenses to employees, agents or physicians in the ordinary course of business of the Hospital as currently operated by Seller, consistent with past practices;

(viii)

any license, franchise or distributorship, or copyright, or any ideas, technical assistance or other know-how of or used by Seller;

(ix)

any capital expenditures or the acquisition or construction of fixed assets requiring payment by Seller of Ten Thousand Dollars ($10,000) in the aggregate per annum;

(x)

the grant to any third party of a Lien (other than Permitted Exceptions) on all or any material part of any Acquired Assets;

(xi)

any joint venture or partnership or other contract providing for the sharing of profits;

(xii)

any arrangement that prohibits Seller or any of its Affiliates from freely engaging or competing in business anywhere in the world or restricting the use of any Intellectual Property that is an Acquired Asset (other than as disclosed pursuant to clause (vii) hereof);

(xiii)

any arrangement related to the Hospital involving any Affiliate of Seller, the subject matter of which is an Acquired Asset or affects the operation of the Hospital;

(xiv)

any agreement between Seller and any Third Party Payor; and

(xv)

any other arrangement that requires performance for a period of more than ninety (90) calendar days or that requires payments in excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate in any twelve (12)-month period of time.

(b)

Seller has delivered to (or made available for inspection by) Purchaser true and complete copies of all of the written Material Contracts.  Each Material Contract is a legally valid and binding obligation of, and enforceable by, Seller in accordance with its terms and is in full force and effect.  To Seller’s Knowledge (i) each other party to a Material Contract is not in material breach or default, and no event has occurred that with notice or a lapse of time would constitute a material breach or default and (ii) such Material Contracts are valid and binding obligations of the other parties thereto enforceable in accordance with their respective terms except for any defaults that have been cured or waived or that would not be material to the operations of the Hospital.  

(c)

Seller is not in material breach or default, and no event has occurred that with notice or a lapse of time would constitute a material breach or default, under the terms of any Material Contract.  

a.6

Compliance with Laws; Environmental Matters .

(a)

Except as set forth in Schedule 3.6(a) , Seller, with respect to the operation of the Hospital, is in material compliance with all applicable Laws, licenses, certificates, certificates of need (or exemptions or waivers therefrom) and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been delivered to or filed or commenced against Seller alleging any failure to so comply.  Notwithstanding the foregoing, no provision of this Section 3.6(a) shall be deemed a representation or warranty by Seller as to compliance with any Environmental Laws.

(b)

Except as set forth on Schedule 3.6(b) , Seller’s ownership and operation of the Hospital and the Acquired Assets is and has at all times been in material compliance with all Environmental Laws.    

(c)

Except as set forth on Schedule 3.6(c) , to Seller’s Knowledge, (i) the Real Property contains no underground storage tanks (except the USTs), or underground piping associated with such tanks, used currently or in the past for the management of Hazardous Substances and (ii) no portion of the Real Property has been used as a dump or landfill or a storage, recycling or disposal facility for any Hazardous Substance, other than for the storage and disposal of medical waste in connection with the ordinary-course operation of the Hospital.  To Seller’s Knowledge, there has not been a Release or threatened Release of any Hazardous Substance at, upon, in, under or from the Hospital or the Acquired Assets at any time, which Release would reasonably be expected to give rise to any liability under any Environmental Laws.

(d)

Seller has obtained all material licenses, permits, approvals and other governmental authorizations required under all applicable Environmental Laws in effect as of the date hereof (the “ Environmental Permits ”) for the ownership and operation of the Hospital and the Acquired Assets.  All such Environmental Permits are in effect and no action to revoke or modify any of such Environmental Permits is pending.

(e)

Except as otherwise set forth on Schedule 3.6(e) , the Hospital has not been excluded from participation in any federal health care program, as such term is defined in section 1128B(f) of the Social Security Act, 42 U.S.C. § 1320a-7b(f) and Seller has no Knowledge of any facts or circumstances that would give rise of a reason to believe it would be subject to exclusion in the future.

a.6

Title; Sufficiency .

(a)

 Seller has good and marketable fee simple title to the Owned Real Property and valid leasehold title to the Leased Real Property, subject only to the Permitted Exceptions.  Seller has good and marketable title to the Personal Property, subject only to the Permitted Exceptions.  

(b)

Except as set forth on Schedule 3.7(b) , there are no agreements, commitments or rights of any character or kind, whether currently exercisable or exercisable in the future, obligating Seller to sell or transfer any portion of the Acquired Assets other than pursuant to this Agreement and the other agreements contemplated hereby.

(c)

The Inventory is maintained in such quantities as is consistent with the Hospital’s historical practices as of the date of the Interim Financial Statements.  Seller has historically operated the Hospital with Inventory quantities generally valued between One Hundred Twenty-Five Thousand Dollars ($125,000) and One Hundred Fifty Thousand Dollars ($150,000) (the “ Inventory Range ”).  All of the Inventory on hand as of the Closing Date consists of items actually on hand of a quality and quantity useable in the ordinary course of business of the Hospital as currently operated by Seller, consistent with past practices and is of an aggregate value within the Inventory Range.  

(d)

All motor vehicles used in connection with the Hospital, identified as owned or leased, are listed on Schedule 3.7(d) .  All such motor vehicles are properly licensed and registered in the name of Seller in accordance with applicable Law.

(e)

The Acquired Assets and the Excluded Assets comprise all of the property and assets used in the conduct of Seller’s business and operation of the Hospital as it has been historically operated by Seller.

a.6

Certain Representations with respect to the Hospital .  

(a)

A complete and accurate list of all licenses, permits, registrations, certifications, approvals, certificates of need and other governmental approvals that are required under federal, state and local laws and regulations for the operation, or otherwise necessary to permit the conduct of business of, the Hospital is set forth on Schedule 3.8(a) (the “ Operating Licenses ”).  Except as set forth on Schedule 3.8(a) , all of the Operating Licenses are valid and in good standing and all applications or notices required to have been filed for the renewal or extensions of such Operating Licenses have been duly filed on a timely basis as of the Agreement Date with the appropriate Governmental Entity and Seller has no information or reason to believe that such renewals or extensions will be denied, withheld or delayed.  Seller has provided Purchaser with all written correspondence received from or sent to any Governmental Entity since, or related to corrected or uncorrected material deficiencies, the most recent state or federal licensure, inspections or surveys related to the Hospital during Seller’s period of ownership and management.    

(b)

The Hospital is duly accredited without restriction by the Joint Commission (“ JC ”) for the period set forth in Schedule 3.8(b) .   Seller has provided Purchaser with all written correspondence received from or sent to JC during its period of ownership and management; such correspondence is described on Schedule 3.8(b) .

(c)

The Hospital is certified for participation without restriction in the Medicare, Medicaid and TRICARE programs, and has current and valid provider agreements with each of such programs, a list of which is set forth on Schedule 3.8(c) .  Except as set forth in Schedule 3.8(c) , Seller has not received notices from the regulatory authorities which enforce the statutory or regulatory provisions in respect of any of the Medicare, Medicaid or TRICARE programs of any pending or threatened investigations with respect to the operation of the Hospital.  

(d)

Notices of Program Reimbursement have been issued by the applicable fiscal intermediary with respect to the cost reports of the Hospital for Medicare, Medicaid (if required) and Blue Cross (if required) through the periods set forth in Schedule 3.8(d) (the “ Audit Periods ”).  Each of such reports (and all other material reports that are required by Laws or by contract to have been filed or made with respect to the purchase of services of the Hospital by any Third Party Payors) was properly and timely filed.  All such cost reports (and all other reports) have been prepared in substantial compliance with all applicable rules, regulations, Laws and contractual obligations.  Such reports do not contain any claim and the Hospital has not received any payment or reimbursement in excess of the amount provided by applicable rules, regulations, Laws or contracts, except where excess reimbursement was noted on the cost report.   Schedule 3.8(d) indicates which of such cost reports have not been audited and finally settled and a brief description of any and all written notices of program reimbursement, proposed or pending audit adjustments, disallowances, appeals of disallowances, and any and all other unresolved claims or disputes of which Seller is aware in respect of such cost reports.  Seller has not received notice of any dispute between the Hospital and the applicable Governmental Entity or private entity, or their intermediaries or representatives, regarding such cost reports for periods subsequent to the periods specified in Schedule 3.8(d) and, to Seller’s Knowledge, there are no pending or threatened claims by any of such programs against the Hospital with respect to the Audit Periods or any period thereafter.  

(e)

Schedule 3.8(e) includes a full, complete and accurate set of all Third Party Payor and managed care plans and arrangements in which the Hospital participates.  Except as set forth on Schedule 3.8(e) , to Seller’s Knowledge the Hospital is a qualified provider of services without restriction with all such Third Party Payors and managed care plans and no payor, operator or plan sponsor has notified Seller of its intent to terminate or not renew any such plan or arrangement.

(f)

Except as set forth on Schedule 3.8(f) , the Hospital has not received any loans, grants or loan guarantees pursuant to the Hill-Burton Act (42 U.S.C. § 291a, et seq.), the Health Professions Educational Assistance Act, the Nurse Training Act, the National Health Pharmacy and Resources Development Act, or the Community Mental Health Centers Act, as amended, or any other federal, state or local statute or regulation or government program whatsoever and the transactions contemplated hereby will not result in any obligation on the part of Seller or Purchaser to repay any such loans, grants or loan guarantees or provide uncompensated care in consideration thereof.  

(g)

To Seller’s Knowledge, Seller has not submitted claims or claimed reimbursements from the Medicare, Medicaid (including any advances or pre-payments from the State of Georgia Medicaid program), TRICARE, or any other federal or state governmental health benefit program through a claim or a cost report in connection with the operation of the business of the Hospital in excess of amounts permitted by applicable Law. Except as set forth on Schedule 3.8(g) , to Seller’s Knowledge during the time period Seller has owned or managed the Hospital, there are no: (i) pending investigations, audits, appeals, claim reviews or other actions pending or threatened which could result in a revocation, suspension, termination, probation, restriction, limitation, or non-renewal of any Third Party Payor, Medicare, Medicaid or TRICARE provider number, participation agreement or authorization, or result in Hospital’s exclusion from any Third Party Payor, Medicare, Medicaid, TRICARE or other federal or state governmental health benefit programs; (ii) validation review, program integrity review or reimbursement audits pending or threatened; (iii) voluntary disclosure by Seller or the Hospital to the Office of the Inspector General of the United States Department of Health and Human Services, a Medicare fiscal intermediary or any Third Party Payor of a potential overpayment matter; (iv) notices of intent to reopen, open or recalculate any claims filed or cost reports in connection with the operation of the Hospital with respect to the Medicare, Medicaid, TRICARE, or other federal or state governmental health benefit programs; or (v) health care survey report related to licensure or certification which includes any statement of deficiencies pertaining to the Hospital which will not be corrected prior to the Closing Date.

(h)

The Hospital has been and is in compliance with: (i) all federal and state anti-referral and anti-fraud and abuse/kickback laws, including but not limited to the Stark Law (42 U.S.C. § 1395nn et seq.), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the Anti-Kickback Law (specifically, 42 U.S.C. §§ 1320a-7 and 1320a-7a) and the regulations promulgated pursuant to such statutes; (ii) applicable provisions of the Medicare program (Title XVIII of the Social Security Act) and the regulations promulgated thereunder; (iii) applicable provisions of the Medicaid program (Title XIX of the Social Security Act) and the regulations promulgated thereunder; (iv) applicable provisions of the TRICARE program (10 U.S.C. § 1071 et seq.) and the regulations promulgated thereunder; (v) quality, safety and accreditation standards and requirements of all applicable federal and state health regulatory bodies; (vi) applicable health licensure laws and regulations; and (vii) any and all other applicable health care laws, regulations, manual provisions, program integrity manuals, policies, procedures and administrative guidance, each of (i) through (vii) as may be amended from time-to-time.

(i)

Neither Seller, nor any partner, member, director, officer or employee of Seller or the Hospital, nor any agent acting on behalf of or for the benefit of any of the foregoing, has directly or indirectly (i) offered, paid or received any remuneration, in cash or in kind, to, or made any financial arrangements with, any past, present or potential customers, past or present suppliers, patients, medical staff members, contractors or third party payors of Seller or the Hospital in order to obtain business or payments from such persons other than in the ordinary course of business; (ii) given or agreed to give, received or agreed to receive, or is aware that there has been made or that there is any agreement to make, any gift or gratuitous payment of any kind, nature or description (whether in money, property or services) to any customer or potential customer, supplier or potential supplier, contractor, third party payor or any other person; (iii) made or agreed to make, or is aware that there has been made or that there is any agreement to make, any contribution, payment or gift of funds or property to, or for the private use of, any governmental official, employee or agent where either the contribution, payment or gift or the purpose of such contribution, payment or gift is or was illegal under the laws of the United States or under the laws of any state or local governmental entity having jurisdiction over such payment, contribution or gift;    (iv) established or maintained any material unrecorded fund or asset for any purpose or made any misleading, false or artificial entries on any of its books or records for any reason; or (v) made, or agreed to make, or is aware that there has been made or that there is any agreement to make, any payment to any person with the intention or understanding that any part of such payment would be used for any purpose other than that described in the documents supporting such payment.

(j)

Neither Seller nor the Hospital, nor any partner, member, director, officer or employee of Seller or the Hospital or any of their Affiliates, is a party to any contract, lease agreement or other arrangement (including but not limited to any joint venture or consulting agreement) related to Seller or the Hospital with any physician, health care facility, hospital, nursing facility, assisted living facility or other person who is in a position to make or influence referrals to or otherwise generate business for Seller or the Hospital, to provide services, lease space, lease equipment or engage in any other venture or activity that is prohibited by Law.

a.6

Financial Statements; Absence of Undisclosed Liabilities .  

(a)

The following have been or will be prepared from the books and records of Seller (a) the audited consolidated balance sheets and income statements of Seller as of December 31, 2005 and December 31, 2006 and the unaudited balance sheets and income statements specific to the Hospital as of December 31, 2005 and December 31, 2006 (the “ Annual Financials ”), and (b) the unaudited consolidated balance sheet and income statement of Seller and the unaudited balance sheet and income statement specific to the Hospital as of December 31, 2007 (the (“ Interim Financials ”) (the Annual Financials and the Interim Financials are referred to herein as the “ Financial Statements ”).  The Annual Financials and the Interim Financials are attached as Schedule 3.9(a) and 3.9(b) . The Financial Statements fairly present, in all material respects, the financial position and results of operations, as applicable, of Seller as of and for the periods then ended.  The Annual Financials have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) consistently applied during such periods.  The Interim Financials have been prepared in accordance with GAAP applicable to unaudited interim financial statements (and thus may not contain all notes and may not contain prior period comparative data which are required to be prepared in accordance with GAAP) on a basis that is consistent with the preparation of the Annual Financials, subject to the absence of footnote disclosures and normal year-end adjustments (which will not be material, individually or in the aggregate).

(a)

Except as set forth on Schedule 3.9(c) and except as and to the extent accrued or reserved for and disclosed in the Financial Statements, Seller has no liabilities, other than those incurred in the ordinary course of business since the date of the Interim Financials, and not exceeding Ten Thousand Dollars ($10,000) (excluding liabilities for breach of contract, tort or infringement).  Seller is not a guarantor or otherwise responsible for any liability or obligation (including indebtedness) of any other Person.

a.6

Legal or Administrative Proceedings .  Except as set forth on Schedule 3.10 , there are no claims, proceedings or investigations pending or, to Seller’s Knowledge, threatened, (i) that relate to or affect Seller with respect to the operation of the Hospital or ownership of any of the Acquired Assets before any court or Governmental Entity or (ii) that would reasonably be expected to materially impair the ability of a Seller to perform its obligations under this Agreement and the other agreements contemplated hereby or thereby, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Seller having any such effect. Seller, with respect to the operation of the Hospital, is not subject to any judgment, order or decree specifically (as distinct from generically) applicable to it or the Acquired Assets.

a.7

Employee Benefits .  

(a)

Schedule 3.11(a) contains a list of (i) each pension, profit sharing, bonus, deferred compensation, or other retirement plan or arrangement of Seller with respect to the operation of the Hospital, whether oral or written, which constitutes an “employee pension benefit plan” as defined in Section 3(2) of ERISA; (ii) each medical, health, disability, insurance or other plan or arrangement of Seller with respect to the operation of the Hospital, whether oral or written, which constitutes an “employee welfare benefit plan” as defined in Section 3(1) of ERISA and (iii) each other material employee benefit or perquisite provided by Seller with respect to the operation of the Hospital, in which any employee of Seller participates in his capacity as such (collectively, the “ Seller Plans ”).

(b)

Neither the Hospital nor any of the Acquired Assets are subject to any Lien with respect to any action or omission of Seller or any Affiliate of Seller, or by virtue of any violation of ERISA, with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) or under the Code.

(c)

There are no “accumulated funding deficiencies” within the meaning of ERISA or the Code or any federal excise tax or other liability on account of any deficient fundings in respect of the Seller Plans. Other than claims for benefits, there are not pending or, to Seller’s Knowledge, threatened any claims relating to the Seller Plans by any employee of Seller with respect to the operation of the Hospital, alleging a breach or breaches of fiduciary duties or violations of other applicable state or federal law which could result in liability on the part of Seller or any of the Seller Plans under ERISA or any other law. None of the Seller Plans discriminates in operation in favor of employees who are officers or who are highly compensated, except as permitted under the Code and ERISA.

(d)

Each Seller Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and nothing has occurred since the date of such determination letter that would be reasonably likely to cause such determination letter to become unreliable.

(e)

Seller has not incurred any liability on account of a “partial withdrawal” or a “complete withdrawal” (within the meaning of Sections 4205 and 4203, respectively, of ERISA) from any “employee benefit plan” (as such term defined in Section 3(3) of ERISA) which is subject to Title IV of ERISA which is a &l