Exhibit 10.3

FORM OF REAL ESTATE LOAN AGREEMENT

BY AND AMONG

MPT OF PRESCOTT VALLEY HOSPITAL, LLC,

MPT OF BROWNSVILLE HOSPITAL, LLC, and

MPT OF LAS CRUCES HOSPITAL, LLC

(collectively, “MPT”)

AND

MOUNTAIN VALLEY REGIONAL REHABILITATION HOSPITAL, INC.,

REHABILITATION HOSPITAL OF SOUTHERN NEW MEXICO, INC.,

ADVANCED CARE HOSPITAL OF SOUTHERN NEW MEXICO, LLC, and

SOUTH TEXAS REHABILITATION HOSPITAL, LP

(jointly, severally and collectively, the “Borrower Parties”)

Dated as of January 31, 2012

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Table of Contents

 

         Page  

ARTICLE I DEFINED TERMS

     1   

Section 1.1.

  Certain Defined Terms.      1   

ARTICLE II THE LOAN

     17   

Section 2.1.

  The Loan.      17   

Section 2.2.

  The Note.      17   

Section 2.3.

  Credit Enhancement.      17   

ARTICLE III ADDITIONAL CHARGES AND IMPOSITIONS

     17   

Section 3.1.

  Additional Charges.      17   

Section 3.2.

  Payment of Impositions.      19   

Section 3.3.

  Utility Charges.      19   

Section 3.4.

  Insurance Premiums.      19   

ARTICLE IV GENERAL COVENANTS

     19   

Section 4.1.

  Borrower Parties’ Personal Property.      19   

Section 4.2.

  Primary Intended Use.      20   

Section 4.3.

  No Changes.      21   

Section 4.4.

  No Interference with Insurance.      21   

Section 4.5.

  Waste; Nuisance.      21   

Section 4.6.

  Maintenance of Security Interests.      21   

Section 4.7.

  Publicity Signs.      21   

Section 4.8.

  No Conveyance of Real Property.      21   

ARTICLE V LIENS

     22   

ARTICLE VI INSURANCE

     22   

Section 6.1.

  Insurance Covenants.      22   

Section 6.2.

  Additional Insurance.      26   

Section 6.3.

  Waiver of Subrogation.      26   

Section 6.4.

  Form of Insurance.      27   

Section 6.5.

  Increase in Limits.      28   

Section 6.6.

  Blanket Policy.      28   

Section 6.7.

  No Separate Insurance.      29   

ARTICLE VII LEGAL COMPLIANCE

     29   

Section 7.1.

  Compliance with Legal and Insurance Requirements.      29   

Section 7.2.

  Maintenance of Licenses.      30   

Section 7.3.

  Compliance with Healthcare Laws.      31   

Section 7.4.

  Single Purpose Entity.      31   

Section 7.5.

  Hazardous Materials.      31   

Section 7.6.

  Organizational Covenants.      32   

 

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Table of Contents

 

         Page  

ARTICLE VIII REPAIRS; RESERVES; RESTRICTIONS; CAPITAL ADDITIONS

     33   

Section 8.1.

  Maintenance; Repair and Remodel.      33   

Section 8.2.

  Reserves for Major Repairs.      34   

Section 8.3.

  Capital Additions.      35   

Section 8.4.

  Encroachments; Restrictions.      37   

ARTICLE IX FIRE AND CASUALTY

     38   

Section 9.1.

  Fire and Casualty.      38   

ARTICLE X CONDEMNATION

     39   

Section 10.1.

  Condemnation.      39   

ARTICLE XI ASSIGNMENT AND SUBLETTING

     41   

Section 11.1.

  Assignment; Lease Subordination.      41   

Section 11.2.

  Sublease Subordination and Non-Disturbance.      41   

ARTICLE XII ADDITONAL BORROWER COVENANTS

     42   

Section 12.1.

  Affirmative Covenants.      42   

Section 12.2.

  Management Agreements.      45   

Section 12.3.

  Noncompetition.      45   

ARTICLE XIII DEFAULT

     46   

Section 13.1.

  Events of Default.      46   

Section 13.2.

  Remedies.      48   

Section 13.3.

  Remedies with Respect to Licenses.      50   

Section 13.4.

  Cumulative.      50   

Section 13.5.

  Waiver.      50   

Section 13.6.

  Application of Funds.      50   

Section 13.7.

  Notices by MPT.      51   

Section 13.8.

  Additional Expenses.      51   

Section 13.9.

  MPT’s Contractual Security Interest.      51   

Section 13.10.

  Assignment of MPT’s Security Interest.      51   

ARTICLE XIV OPTION TO PURCHASE

     51   

Section 14.1.

  Options to Purchase Real Property.      51   

Section 14.2.

  Option to Purchase Personal Property.      52   

Section 14.3.

  Payment of Purchase Price.      53   

Section 14.4.

  Closing of Purchase.      53   

Section 14.5.

  Proration.      53   

ARTICLE XV APPRAISAL

     54   

 

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Table of Contents

 

         Page  

ARTICLE XVI RESERVED

     54   

ARTICLE XVII MPT’S RIGHT TO CURE

     55   

ARTICLE XVIII PERMITTED CONTESTS

     56   

ARTICLE XIX INDEMNIFICATION

     57   

ARTICLE XX NOTICES

     57   

ARTICLE XXI MISCELLANEOUS

     58   

Section 21.1.

  General.      58   

Section 21.2.

  Bankruptcy Waivers.      58   

Section 21.3.

  MPT’s Expenses.      59   

Section 21.4.

  Entire Agreement; Modifications.      59   

Section 21.5.

  MPT Securities Offering and Filings.      59   

Section 21.6.

  Non-Recourse as to MPT.      60   

Section 21.7.

  Force Majeure.      60   

Section 21.8.

  Governing Law.      60   

Section 21.9.

  Jurisdiction and Venue.      60   

Section 21.10.

  Appointment of Agent and Attorney-in-Fact.      61   

Section 21.11.

  Regulatory Cooperation.      61   

Section 21.12.

  Compliance with Anti-Terrorism Laws.      61   

Section 21.13.

  Electronically Transmitted Signatures.      62   

Section 21.14.

  Waiver of Jury Trial.      62   

Section 21.15.

  Counterparts.      62   

Section 21.16.

  Survival.      62   

Section 21.17.

  Assignment.      63   

Section 21.18.

  Continuation of Defaults.      63   

Section 21.19.

  Specific Performance.      63   

Section 21.20.

  Joint Drafting.      63   

Section 21.21.

  Joint and Several Obligations.      63   

Section 21.22.

  Representations, Agreements and Covenants.      63   

 

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REAL ESTATE LOAN AGREEMENT

THIS REAL ESTATE LOAN AGREEMENT (this “Agreement”) is made and entered into as
of this 31st day of January, 2012, by and among MPT OF PRESCOTT VALLEY HOSPITAL,
LLC, MPT OF BROWNSVILLE HOSPITAL, LLC, and MPT OF LAS CRUCES HOSPITAL, LLC, each
a Delaware limited liability company (each, an “MPT Party” and collectively,
“MPT”); and MOUNTAIN VALLEY REGIONAL REHABILITATION HOSPITAL, INC., and
REHABILITATION HOSPITAL OF SOUTHERN NEW MEXICO, INC., each a Delaware
corporation, ADVANCED CARE HOSPITAL OF SOUTHERN NEW MEXICO, LLC, a Delaware
limited liability company, and SOUTH TEXAS REHABILITATION HOSPITAL, LP, a
Delaware limited partnership (each, a “Facility Borrower” and, collectively, the
“Borrower Parties”).

W I T N E S S E T H:

WHEREAS, contemporaneously herewith and pursuant to the Real Estate Contract (as
herein defined), MPT has made a term loan to the Borrower Parties in the
principal amount of One Hundred Million and No/100 Dollars ($100,000,000.00)
(the “Loan”), as evidenced by the Note (as herein defined).

WHEREAS, the Loan is secured by, among other things, a first lien on the Real
Property and the Las Cruces Leasehold (as such terms are herein defined) and
other collateral relating to the Brownsville Facility, the Las Cruces Facility
and the Prescott Valley Facility (as each term is herein defined).

WHEREAS, the Guarantors (as herein defined) have agreed to guaranty the
obligations of the Borrower Parties to MPT.

WHEREAS, to induce MPT to make the Loan, the Borrower Parties desire to make
certain covenants and agreements in favor of MPT as set forth in this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto do hereby covenant and
agree as follows:

ARTICLE I

DEFINED TERMS

Section 1.1. Certain Defined Terms. Capitalized terms used herein shall have the
respective meanings ascribed to them in this Section 1.1.

ACH Network: The Automated Clearing House Network, an electronic payment system
operated by The Federal Reserve Banking System.

Acquisition Note: That certain Promissory Note, dated of even date herewith, in
the original principal amount of Ninety-Three Million Two Hundred Thousand and
No/100 Dollars

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($93,200,000.00), executed by Ernest Health Acquisition Sub, Inc. in favor of
MPT Aztec Opco, LLC, which has become the obligation of Ernest Health, Inc. as
successor by merger and operation of law, as the same may be modified, amended
and/or restated from time to time.

Additional Charges: As defined in Section 3.1.

Adjustment Date: January 1 of each year during the Loan Term (as hereinafter
defined), commencing on January 1, 2013.

Affiliate: With respect to any Person, (i) any Person that, directly or
indirectly, controls or is controlled by or is under common control with such
Person, (ii) any other Person that owns, beneficially, directly or indirectly,
10% or more of the outstanding capital stock, shares or equity interests of such
Person, or (iii) any officer, director, employee, partner, member, manager or
trustee of such Person or any Person controlling, controlled by or under common
control with such Person (excluding trustees and persons serving in similar
capacities who are not otherwise an Affiliate of such Person). For the purposes
of this definition, “control” (including the correlative meanings of the terms
“controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities or otherwise. Notwithstanding the
foregoing, in no event shall the term “Affiliate” mean or refer to any MPT Party
or any other Person that, directly or indirectly, controls or is under common
control with any such MPT Party.

Agreement: As defined in the preamble of this Agreement.

AIREA: The American Institute of Real Estate Appraisers, or any successor
organization.

Anti-Terrorism Laws: Any laws, statutes and regulations relating to terrorism or
money laundering, including Executive Order No. 13224 (effective September 24,
2001), the Patriot Act, the laws, statutes and regulations comprising or
implementing the Bank Secrecy Act, and the laws, statutes and regulations
administered by OFAC.

Assignment of Rents and Leases: Those certain Assignment of Rents and Leases,
dated of even date herewith, executed by each Facility Borrower in favor of MPT,
as the same may be modified, amended or restated from time to time.

Award: All compensation, sums or anything of value awarded, paid or received
from a total or partial Condemnation of any of the Collateral.

Bankruptcy Code: Chapter 11 U.S.C. § 101, et. seq.

Base Interest: As defined in the Note.

Blocked Person: Any Person: (a) listed in the annex to, or is otherwise subject
to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with which any Lender is prohibited from dealing or

 

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otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

Borrower Parties: As defined in the preamble to this Agreement.

Brownsville Facility: That certain forty (40)-licensed bed IRF located in
Brownsville, Cameron County, Texas.

Business: As applicable, the operation of each IRF Facility as an IRF, the
operation of each MHC Facility as a MHC, and the operation of each LTCH Facility
as a LTCH, and, in each case, the engagement in and pursuit and conduct of any
business venture or activity incident thereto.

Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which money centers in the City of New York, New York are authorized or
obligated by law or executive order to close.

Capital Additions: With respect to each Facility, (a) extraordinary renovations
or expansions of buildings, structures or other improvements currently located
on that portion of the Real Property where such Facility is located (or on
additional parcels added to such Real Property), (b) the addition of one or more
parcels of land to such portion of the Real Property (whether by purchase or
ground lease), or (c) the addition of one or more new buildings or additional
structures placed on such portion of the Real Property or any such additional
parcels of land, including, without limitation, the construction of a new wing
or new story.

Cash Collections: Any and all payments received for patient related services
that are posted to Borrower Parties’ accounting system for a Facility,
including, without limitation, any such payments received from patients,
insurance companies, managed care and preferred provider organizations,
Medicaid, Medicare, or other payors.

CERCLA: As defined in the definition of “Hazardous Materials Laws.”

Change of Control Transaction: (i) Ernest Health Holdings, LLC ceasing to own
One Hundred Percent (100%) of Ernest Health, (ii) Ernest Health ceasing to own
One Hundred Percent (100%) of each of Facility Borrower, (iii) the current
owners of Guiding Health Management Group, LLC ceasing to own at least fifty
percent (50%) of the Guiding Health Management Group, LLC, each without the
prior written consent of MPT, which consent shall not be unreasonably withheld,
conditioned or delayed. For the avoidance of doubt, the entering into an
agreement or granting of an option to acquire Equity Interests or the issuance
of debt convertible into Equity Interests shall be deemed to be the issuance of
Equity Interests for purposes of determining whether a Change of Control
Transaction has occurred.

CMS: The Centers for Medicare and Medicaid Services.

 

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Code: The United States Internal Revenue Code of 1986, as amended through the
date hereof, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.

Collateral: Collectively, the Real Property, the Personal Property, and all
other properties or assets of the Borrower Parties that are subject or shall be
subject to any lien, security interest, or other encumbrance pursuant to the
Security Documents.

Combined Fixed Charges: The sum of combined payments of principal and interest
payable by Ernest Health and its subsidiaries pursuant to the Note and the
combined payments of Base Rent (as defined in the Sublease) payable by Ernest
Health and its subsidiaries pursuant to the Sublease.

Competing Business: As defined in Section 12.3.

Condemnation: (i) The exercise of any governmental power, whether by legal
proceedings or otherwise, by a Condemnor or (ii) a voluntary sale or transfer by
any of the Borrower Parties to any Condemnor, either under threat of
Condemnation or while legal proceedings for Condemnation are pending.

Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of Condemnation.

Consumer Price Index or CPI: All urban consumers, all items, U.S. City Average,
published by the United States Department of Labor, Bureau of Labor Statistics,
in which 1982-1984 equals one hundred (100). If the Consumer Price Index is
discontinued or revised during the Loan Term, such other governmental index or
computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the Consumer Price Index
had not been discontinued or revised.

Credit Enhancements: All security deposits, security interests, letters of
credit, pledges, guaranties, prepaid rent or other sums, deposits or interests
held by any Borrower Party, if any, with respect to the Collateral, the Tenant
Leases or the tenants or subtenants thereunder.

Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.

Default Rate: The current Base Interest plus Six Percent (6%) per annum.

Defaulted Facility: As defined in Section 13.2(a).

DHHS: The United States Department of Health and Human Services.

Dollar Amount: As defined in Section 8.2.

EBITDAR: Earnings, as determined in accordance with GAAP, before the deduction
of interest, taxes, depreciation, amortization and rent.

 

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Environmental Indemnity Agreement: That certain Environmental Indemnity
Agreement, dated of even date herewith, executed by the Lessee Affiliates, the
Borrower Parties and the Guarantors, as the same may be modified, amended or
restated from time to time.

Equity Constituents: With respect to any Person, as applicable, the members,
general or limited partners, shareholders, stockholders or other Persons,
however designated, who are the owners of the issued and outstanding equity or
ownership interests of such Person.

Equity Interests: With respect to any Person, the voting power, ownership, or
other equitable interests of such Person, including any interest represented by
any capital stock, convertible or participating debt instruments, membership
interest, partnership interest, or any similar interest therein.

Ernest Health: Ernest Health, Inc., a Delaware corporation.

Existing Subleases: As defined in Section 11(a).

Event of Default: As defined in Section 13.1.

Existing Management Company: As defined in the definition of “Management
Company.”

Facility: Each of the Brownsville Facility, the Las Cruces Facility and the
Prescott Valley Facility, sometimes collectively referred to as the
“Facilities.”

Facility Borrower: As defined in the preamble to this Agreement.

Facility Instrument: A note (whether secured or unsecured), loan agreement,
credit agreement, guaranty, security agreement, mortgage, deed of trust or other
agreement pursuant to which a Facility Lender has provided financing to MPT in
connection with the Real Property or any part thereof, or financing provided to
the Borrower Parties, if such financing is provided by MPT or any Affiliate of
MPT (other than the Borrower Parties), or in connection with a Capital Addition,
and any and all renewals, replacements, modifications, supplements,
consolidations, spreaders and extensions thereof.

Facility Lender: A holder of any Facility Instrument.

Fair Market Value: With respect to each Facility, the Fair Market Value of the
portion of the Real Property relating to such Facility, including all Capital
Additions with respect thereto, (a) as shall be determined in accordance with
the appraisal procedures set forth in Article XV or in such other manner as
shall be mutually acceptable to MPT and the Borrower Parties, and (b) which
shall not take into account any reduction in value resulting from any damage,
destruction or condemnation of any part of such portion of the Real Property or
any indebtedness to which such portion of the Real Property is subject and which
encumbrance the Borrower Parties or MPT is otherwise required to remove pursuant
to any provision of this Agreement or agrees to remove at or prior to the
closing of the transaction as to which such Fair Market Value determination is
being made. With respect to each Facility, the positive or negative effect on
the value of the portion of the Real Property relating thereto attributable to
the interest rate,

 

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amortization schedule, maturity date, prepayment penalty, and other terms and
conditions of any Encumbrance on such portion of the Real Property, which is not
so required or agreed to be removed, shall be taken into account in determining
such Fair Market Value.

Financial Statements: For any fiscal year or other accounting period for each
Facility Borrower or Ernest Health, balance sheets, statements of operations and
capital accounts, and of cash flows setting forth in comparative form the
corresponding figures for the year-earlier fiscal period, all prepared in
accordance with GAAP.

Financing Statements: All of the financing statements perfecting MPT’s security
interests in the Collateral, as the same may be modified, amended or restated
from time to time.

Fixtures: All equipment, machinery, fixtures, and other items of real property,
including all components thereof, now and hereafter located in, on, or used in
connection with, and that are in each case permanently affixed to or
incorporated into the buildings and structures on, the Land, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, and
built-in oxygen and vacuum systems, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties to constitute real estate,
together with all replacements, modifications, alterations and additions
thereto.

Force Majeure: As defined in Section 21.7.

Full Replacement Cost: As defined in Section 6.1(a) .

GAAP: Generally accepted accounting principles in the United States. All
accounting terms used herein and not expressly and otherwise defined herein
shall be construed in accordance with, and have the meanings ascribed or imputed
to them under, GAAP.

Governing Documents: With respect to any Person, as applicable, such Person’s
charter, articles or certificate of incorporation, formation or organization,
bylaws or other documents or instruments which establish and/or set forth the
rules, procedures and rights with respect to such Person’s governance,
including, without limitation, any stockholders, limited liability company,
operating or partnership agreement related to such Person, in each case as
amended, restated, supplemented and/or modified and in effect as of the relevant
date.

Governmental Body: Any United States federal, state or local, or any supra
national or non U.S., government, political subdivision, governmental,
regulatory or administrative authority, instrumentality, agency body or
commission, self regulatory organization, court, tribunal or judicial or
arbitral body, including the Securities and Exchange Commission.

Guarantors: Ernest Health, Ernest Health Holdings, LLC, the Lessee Affiliates,
and all other Persons who may be guarantors under the Guaranties at any time
during the Loan Term, but not including any Person who has ceased to be a
guarantor under any Guaranty or any Person after such Person’s Guaranty has
terminated.

 

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Guaranties: Those certain Guaranties, dated of even date herewith, executed and
delivered by the Guarantors in favor of MPT and certain Affiliates of MPT, as
the same may be amended, modified and/or restated from time to time.

Hazardous Materials Law: Each federal, state, local and foreign law and
regulation relating to pollution, protection, or preservation of human health or
the environment, including ambient air, surface water, ground water, land
surface or subsurface strata, and natural resources, and including each law and
regulation relating to emissions, discharges, releases or threatened releases of
Hazardous Materials, or otherwise relating to the manufacturing, processing,
distribution, use, treatment, generation, storage, containment (whether above
ground or underground), disposal, transport or handling of Hazardous Materials,
or the preservation of the environment or mitigation of adverse effects thereon
and each law and regulation with regard to record keeping, notification,
disclosure and reporting requirements respecting Hazardous Materials, including,
without limitation, the Resource Conservation and Recovery Act of 1976 (“RCRA”),
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of
1986 (“SARA”), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes and ordinances, and the regulations,
orders, and decrees now or hereafter promulgated thereunder, in each case as
amended from time to time.

Hazardous Materials: Any substance, including without limitation, asbestos or
any substance containing asbestos and deemed hazardous under any Hazardous
Materials Law, the group of organic compounds known as polychlorinated
biphenyls, flammable explosives, radioactive materials, infectious wastes,
biomedical and medical wastes, chemicals known to cause cancer or reproductive
toxicity, radon gas, pollutants, effluents, contaminants, emissions or related
materials, and any items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Laws.

Health Benefit Laws: Laws relating to the licensure, certification,
qualification or authority to transact business relating to the provision of, or
payment for, or both the provision of and payment for, health benefits, health
care or insurance coverage, including ERISA, COBRA, HIPAA, SCHIP, Medicare,
Medicaid, CHAMPUS/TriCare, and laws relating to the regulation of workers
compensation, utilization review, third party administrative services, case
management, and coordination of benefits.

Health Compliance Laws: All applicable laws pertaining to billing, kickbacks,
false claims, self-referral, claims processing, marketing, HIPAA security
standards for the storage, maintenance, transmission, utilization and access to
and privacy of patient information, and HIPAA and state standards for electronic
transactions and data code sets, including, without limitation, the False Claims
Act (31 U.S.C. Section 3729 et seq.), the Anti-Kickback Act of 1986 (41 U.S.C.
Section 51 et seq.), the Federal Health Care Programs Anti-Kickback Statute (42
U.S.C. Section 1320a-7a(b)), the Stark Law, the Civil Monetary Penalties Law (42
U.S.C. Section 1320a-7a), or the Truth in Negotiations (10 U.S.C. Section 2304
et seq.), Health Care Fraud (18 U.S.C. Section 1347), Mail Fraud (18 U.S.C
Section 1341), Wire Fraud (18 U.S.C. Section 1343), Theft or Embezzlement (18
U.S.C. Section 669), Fraud and False Statements (18

 

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U.S.C. Section 1001), False Statements Relating to Health Care Matters (18
U.S.C. Section 1035), and any other applicable federal health care law or
equivalent state statutes or any rule or regulation promulgated by a
Governmental Body with respect to any of the foregoing, as any of the same may
be amended, modified and/or restated from time to time.

Healthcare Laws: Health Benefit Laws, Health Compliance Laws and Information
Privacy and Security Laws.

HIPAA: The Health Insurance Portability and Accountability Act of 1996, as the
same may be amended, modified or supplemented from time to time, and any
successor statute thereto, and any and all rules or regulations promulgated from
time to time thereunder.

HWH Requirements: The requirements set forth in C.F.R. Title 42, Part 412, as
applicable, and any state laws and regulations applicable to hospitals located
in the same building or on the same campus as another hospital.

Impositions: Collectively, with respect to each Facility, all civil monetary
penalties, fines and overpayments imposed by state and federal regulatory
authorities, all Real Estate Taxes, all state and local sales and use taxes,
single business, gross receipts, transaction privilege, rent or similar taxes,
franchise (including but not limited to taxes based on capital, net worth or
assets), license, business entity, annual report fees and other taxes imposed on
any business entities, including limited partnerships, limited liability
companies and other “pass through” entities, and any such taxes and statutory
representation fees imposed on any MPT Party or their respective Affiliates
(including each MPT Party’s parent organizations but excluding the Borrower
Parties), sales and use taxes, all single business, gross receipts, transaction
privilege, rent or similar taxes and assessments (including, without limitation,
all assessments, charges and costs imposed under the Permitted Exceptions
(including, without limitation, all penalties, fines, damages, costs and
expenses for any violation of or a default under any of the Permitted
Exceptions)), all assessments for utilities, public improvements or benefits,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Loan Term), ground rents, water, wastewater,
sewer, sanitary sewer or other rents and charges, excises, tax levies, fees
(including, without limitation, impact, development, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the portion of the Real Property
relating to such Facility, the Loan Obligations relating thereto (including all
interest and penalties thereon due to any failure in payment by Borrower
Parties), and all other fees, costs and expenses which at any time prior to,
during or in respect of the Loan Term may be charged, assessed or imposed on or
in respect of or be a lien upon (a) any MPT Party or such MPT Party’s lien or
interest in the portion of the Real Property relating to such Facility, (b) such
portion of the Real Property or any part thereof or any rent therefrom or any
estate, right, title or interest therein, or (c) any occupancy, operation, use
or possession of, sales from, or activity conducted on, or in connection with,
such portion of the Real Property or the leasing or use of such portion of the
Real Property or any part thereof. Notwithstanding any provision hereof to the
contrary, nothing contained in this Agreement shall be construed to require the
Borrower Parties to pay (1) any tax based on net income (whether denominated as
a financial institutions or other tax) imposed on a MPT Party, or (2) any
transfer tax of a MPT Party, or (3) any tax imposed with respect to the sale,
exchange or other disposition by an MPT

 

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Party of any portion of the Real Property or the proceeds thereof, or (4) except
as expressly provided elsewhere in this Agreement, any principal or interest on
any Encumbrance on any portion of the Real Property, except to the extent that
any tax, assessment, tax levy or charge which the Borrower Parties are obligated
to pay pursuant to the first sentence of this definition and which is in effect
at any time during the Loan Term is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu thereof, in which case the substitute tax,
assessment, tax levy or charge shall be deemed to be an Imposition.

Improvements: All buildings, structures, Fixtures and other improvements of
every kind, alleyways and connecting tunnels, sidewalks, utility pipes, conduits
and lines (on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures presently or hereafter situated upon the Land, Capital
Additions financed by an MPT Party and all hereditaments, easements, rights of
way and other appurtenances related thereto.

Information Privacy or Security Laws: The HIPAA Laws and any other laws
concerning the privacy and/or security of Personal Information, including but
not limited to the Gramm-Leach-Bliley Act, state data breach notification laws,
state health information privacy laws, the Federal Trade Commission Act and
state consumer protection laws.

Inspection Fee: As defined in Section 12.1(j).

Insurance Premiums: As defined in Section 3.4.

Insurance Requirements: All terms of any insurance policy required by this
Agreement and all requirements of the issuer of any such policy and such
additional insurance which MPT may reasonably require.

IRF: An in-patient rehabilitation facility operated on the Real Property, or a
portion thereof, licensed in the state of its location.

Joint Commission: As defined in Section 12.1(c)(ix).

Land: The parcels of land described on Exhibit A attached hereto and
incorporated herein by reference, together with all hereditaments, easements,
mineral rights, rights of way and other appurtenances related thereto, and any
other parcel of land acquired or leased and made subject to this Agreement. With
respect to each Facility, “Land” shall mean the portion of the Land relating to
such Facility or any Capital Additions with respect thereto.

Las Cruces Facility: That certain MHC consisting of (i) a forty (40)-licensed
bed IRF operated by the New Mexico Land Owner Borrower, and (ii) a twenty
(20)-licensed bed LTCH operated by the New Mexico Tenant Borrower, located in
Las Cruces, Dona Ana County, New Mexico.

Las Cruces Leasehold: All right, title and interest of the New Mexico Tenant
Borrower, as tenant, under that certain Hospital Facility Land Lease dated as of
July 1, 2007 between the New Mexico Tenant Borrower and the New Mexico Land
Owner Borrower relating to the portion of the Real Property operated by the New
Mexico Tenant Borrower, as the same may be modified, amended or restated from
time to time.

 

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Late Payment Penalty Rate: Shall mean on any date a rate equal to Five Percent
(5%).

Law: Any federal, state or local statute, rule, regulation, ordinance, order,
code, policy or rule of common law, now or hereafter in effect, and in each case
as amended, and any judicial or administrative interpretation thereof by a
Governmental Body or otherwise, including, without limitation, any judicial or
administrative order, consent, decree or judgment.

Legal Requirements: With respect to each Facility and the portion of the Real
Property relating thereto, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the operation of the Business on the Real
Property, and the Real Property and the Collateral, including, without
limitation, the construction, use or alteration thereof (including, without
limitation, the Americans With Disabilities Act and Section 504 of the
Rehabilitation Act of 1973), whether now or hereafter enacted and in force,
including any which may (a) require repairs, modifications, or alterations in or
to the Real Property, or (b) in any way adversely affect the use and enjoyment
thereof, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to any of the Borrower Parties, at
any time in force affecting the Real Property.

Lessee Affiliates: Collectively, Northern Colorado Rehabilitation Hospital,
Inc., a Colorado corporation; Southwest Idaho Advanced Care Hospital, Inc.;
Northern Idaho Advanced Care Hospital, Inc.; Advanced Care Hospital of Montana,
Inc.; New Braunfels Regional Rehabilitation Hospital, Inc.; and Utah Valley
Specialty Hospital, Inc., each a Delaware corporation; Greenwood Regional
Rehabilitation Hospital, LLC, a South Carolina limited liability company;
Elkhorn Valley Rehabilitation Hospital, LLC; Advanced Care Hospital of Northern
Colorado, LLC; and Rehabilitation Hospital of Mesquite, LLC, each a Delaware
limited liability company; Mesquite Specialty Hospital, LP; and Laredo Specialty
Hospital, LP, each a Delaware limited partnership.

Licenses: As defined in Section 7.2.

LLC Agreement: As defined in Section 21.11.

Loan: As defined in the recitals to this Agreement.

Loan Documents: Collectively, this Agreement, the Note, the Security Documents,
the Guaranties, the Pledge Agreements, the Environmental Indemnity Agreement,
and all the other documents, instruments, certificates and agreements executed
by any Facility Borrower, any Guarantor, or their respective Affiliates, in
connection with the Loan or otherwise to evidence or secure the Loan, as each of
the foregoing documents and agreements may be modified, amended or restated from
time to time.

Loan Obligations: All present and future debts, obligations and liabilities of
the Borrower Parties and the Guarantors to MPT arising pursuant to or on account
of the provisions

 

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of this Agreement, the Note, and all other Loan Documents, including, without
limitation, the obligations and liabilities of the Borrower Parties (a) to pay
the principal of and interest on the Note in accordance with the terms thereof,
including any and all extensions, modifications, and renewals thereof and
substitutions therefor; (b) to pay, repay or reimburse MPT for all amounts owing
hereunder and/or under any of the other Loan Documents, including any
reimbursement obligations; and (c) to perform their respective obligations under
this Agreement and the other Loan Documents.

Loan Term: The period during which any of the Loan Obligations shall remain
outstanding.

LTCH: A long-term acute care hospital facility operated on the Real Property, or
a portion thereof, licensed in the state of its location.

Major Event of Default: The occurrence of (i) an Event of Default under clause
(a), (i) or (j) of Section 13.1; (ii) an Event of Default by Ernest Health under
clause (c) or (g) of Section 13.1; (iii) Events of Default under clauses
(b) through (h) of Section 13.1 with respect to more than one (1) of the
Facility Borrowers; or (iv) a “Major Event of Default” under and within the
meaning of the Sublease. It is understood and agreed that a monetary default
under the Acquisition Note or an Event of Default under Section 13.1(e) shall be
deemed to be a default with respect to all Facility Lessees.

Management Agreement: Any contract or agreement for the management of the
operations of a Facility.

Management Company: Any person, firm, corporation or other entity or individual
who or which will manage the operations of a Facility, which as of the date
hereof, the Parties acknowledge is Guiding Health Management Group, LLC, a
Delaware limited liability company (the “Existing Management Company”).

Material Obligation: Any obligation of any of the Guarantors or any Facility
Borrower which is in excess of                     and No/100 Dollars
($        ).

Maturity Date: As defined in the Note.

Medicaid: The medical assistance program established by Title XIX of the Social
Security Act (42 U.S.C. Sections 1396 et seq.) and any statute succeeding
thereto.

Medicare: The health insurance program for the aged and disabled established by
Title XVIII of the Social Security Act (42 U.S.C. Sections 1395 et seq.) and any
statute succeeding thereto.

Medicare IRF Certification: Certification that any Facility Borrower operating
an IRF is or are qualified as an inpatient rehabilitation facility under 42
C.F.R. 412.23(b).

Medicare LTCH Certification: Certification that any Facility Borrower operating
an LTCH is qualified as a long term care hospital under 42 C.F.R. 412.23(e),
including, without limitation, that such Facility Borrower maintains the
required average length of stay.

 

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Merger Agreement: That certain Agreement and Plan of Merger dated January 31,
2012, by and among Ernest Health Holdings, LLC, Ernest Health Acquisition Sub,
Inc., Ernest Health, FFC Partners II, L.P., FFC Executive Partners II, L.P., FFC
Partners III, L.P., and FFC Executive Partners III, L.P., as the same may be
amended, modified and/or restated from time to time.

MHC: A multi-hospital campus consisting of an IRF and an LTCH, operated on the
Real Property, or a portion thereof, all licensed in the state of their
location.

Mortgages: Collectively, (i) those three (3) Deeds of Trust, dated of even date
herewith, executed by each Facility Borrower in favor of MPT, granting MPT a
first priority lien on the Real Property owned by such Facility Borrower,
including a first priority lien on the Las Cruces Leasehold, as any of the same
may be modified, amended or restated from time to time.

MPT: As defined in the preamble to this Agreement.

MPT Lessor Affiliates: Collectively, MPT of Johnstown Hospital, LLC, MPT of Post
Falls Hospital, LLC, MPT of Boise Hospital, LLC, MPT of Billings Hospital, LLC,
MPT of Greenwood Hospital, LLC, MPT of Comal County Hospital, LLC, MPT of
Mesquite Hospital, LLC, MPT of Laredo Hospital, LLC, MPT of Provo Hospital, LLC,
and MPT of Casper Hospital, LLC, each a Delaware limited liability company.

MPT’s Notice Address: As defined in Section 6.4.

New Mexico Tenant Borrower: Advanced Care Hospital of Southern New Mexico, Inc.,
a Delaware corporation.

New Mexico Land Owner Borrower: Rehabilitation Hospital of Southern New Mexico,
Inc., a Delaware corporation.

New Tenant Leases: As defined in Section 11.1(b).

Non-Competition Agreements: Those certain Non-Competition Agreements, dated of
even date herewith, executed by Ernest Health, Ernest Health Holdings, LLC and
the Existing Management Company, as the same may be amended, modified and/or
restated from time to time.

Noncompete Period: As defined in Section 12.3(a).

Note: That certain Promissory Note, dated of even date herewith, in the original
principal amount of One Hundred Million and No/100 Dollars ($100,000,000.00),
made jointly and severally by the Borrower Parties in favor of MPT, as the same
may be amended, modified, restated and/or supplemented from time to time.

OFAC List: The list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained and published by the U.S.
Treasury Department, Office of Foreign Assets Control and any other similar list
maintained and published by the U.S. Treasury Department, Office of Foreign
Assets Control pursuant to any Law, including, without

 

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limitation, trade embargo, economic sanctions, or other prohibitions imposed by
Executive Order of the President of the United States. The OFAC List currently
is accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

Operating Agreements: With respect to each Facility Borrower, means all
agreements to which such Facility Borrower is a party with respect to the
ownership, operation or management of the Business, including, without
limitation, any and all service and maintenance contracts, employment contracts,
management agreements, equipment leases, consulting agreements, laboratory
servicing agreements, pharmaceutical contracts and physician, other clinician or
other professional services provider contracts, as the same may from time to
time be amended, restated, supplemented, renewed or modified.

Option: As defined in Section 14.1.

Option Closing Date: As defined in Section 14.4.

Option Notice: As defined in Section 14.1.

Option Period: As defined in Section 14.1.

Option Price: As defined in Section 14.1.

Option Property: As defined in Section 14.1.

Organizational Documents: As defined in Section 7.6.

Other Agreements: All other leases, loans, and agreements, including the Loan
Documents other than this Agreement, entered into between MPT or any Affiliate
of MPT (excluding the Borrower Parties and Ernest Health), on the one hand, and
any of the Borrower Parties, the Guarantors, or any of their respective
Affiliates (excluding MPT and MPT Affiliates other than Borrower Parties and
Ernest Health), on the other hand, relating to the transactions contemplated
under this Agreement, including, without limitation, and the Merger Agreement,
the Real Estate Contract, the Acquisition Note, the Sublease, the Guaranties,
the Non-Competition Agreements, and the Subordination Agreement, as any of the
same may be modified, amended or restated from time to time.

Parties: Collectively, the Borrower Parties and MPT.

Partial Taking: As defined in Section 10.1(c).

Participation Agreements: With respect to each Facility Borrower, all
third-party payor participation or reimbursement agreements, and provider
numbers and provider agreements, to which such Facility Borrower is a party
relating to rights to payment or reimbursement from, and claims against, private
insurers, managed care plans, employee assistance programs, Blue Cross and/or
Blue Shield, governmental authorities, Medicare, Medicaid and TRICARE, and other
third-party payors, as the same may from time to time be amended, restated,
extended, supplemented or modified, together with all rights, privileges and
entitlements thereunder.

 

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Patriot Act: The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56,
as the same may be amended, modified or restated from time to time.

Permitted Exceptions: As defined in Article V.

Person: An individual, a corporation, a limited liability company, a
partnership, an unincorporated association, a joint venture, a Governmental Body
or another entity or group.

Personal Property: With respect to each Facility Borrower, the “Collateral” as
defined in Section 2(a) of the Security Agreement.

Pledge Agreements: Collectively, (a) that certain Pledge Agreement, dated of
even date herewith, executed by Ernest Health Holdings, LLC in favor of MPT, the
MPT Lessor Affiliates and MPT Aztec Opco, LLC, (b) that certain Pledge
Agreement, dated of even date herewith, executed by Ernest Health, Inc. in favor
of MPT, the MPT Lessor Affiliates and MPT Aztec Opco, LLC, and (c) that certain
Pledge Agreement, dated of even date herewith, executed by the Existing
Management Company in favor of MPT, the MPT Lessor Affiliates and MPT Aztec
Opco, LLC, as any of the same may be modified, amended or restated from time to
time.

Prescott Valley Facility: That certain forty (40)-licensed bed IRF located in
Prescott Valley, Yavapai County, Arizona.

Primary Intended Use: As defined in Section 4.2.

Purchaser: As defined in Section 14.1.

RCRA: As defined in the definition of “Hazardous Materials Laws.”

Real Estate Contract: That certain Real Property Asset Purchase Agreement dated
January 31, 2012, by and among Ernest Health, Lessee, Borrowers, MPT Real Estate
Owner, Lessor, Lenders, FFC Partners II, L.P., FFC Executive Partners II, L.P.,
FFC Partners III, L.P., and FFC Executive Partners III, L.P., as the same may be
amended, modified and/or restated from time to time.

Real Estate Taxes: All taxes due and payable as a result of a Party’s interest
in the Real Property.

Real Property: The Land and the Improvements.

Reserve: As defined in Section 8.2.

RFFE Loans: As defined in Article XVII.

SARA: As defined in the definition of “Hazardous Materials Laws.”

Security Agreement: That certain Security Agreement, dated of even date
herewith, by and among the Borrower Parties, the Lessee Affiliates and Ernest
Health, in favor of MPT, the MPT Lessor Affiliates and MPT Aztec Opco, LLC, as
the same may be amended, modified, restated and/or supplemented from time to
time.

 

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Security Documents: Collectively, the Mortgages, the Security Agreement, the
Pledge Agreements, the Guaranties, the Environmental Indemnity Agreement, the
Assignments of Rents and Leases, the Subordination Agreement and the Financing
Statements, as each of the foregoing instruments and agreements may be modified,
amended or restated from time to time.

Single Purpose Entity: With respect to each Facility, an entity which (i) exists
solely for the purpose of owning and/or leasing all or any portion of the Real
Property relating to such Facility and conducting the operation of the Business
thereon, (ii) conducts business only in its own name, (iii) does not engage in
any business other than the ownership and/or leasing of all or any portion of
the Real Property relating to such Facility and the operation of the Business
thereon, (iv) does not hold, directly or indirectly, any ownership interest
(legal or equitable) in any entity or any real or personal property other than
the interest in the Real Property and the other assets incident to the operation
of the Business, (v) does not have any debt other than as permitted by this
Agreement or arising in the ordinary course of the Business and does not
guarantee or otherwise obligate itself with respect to the debts of any other
person or entity, other than as contemplated by this Agreement approved by MPT
in writing, (vi) has its own separate books, records, accounts, financial
statements and tax returns, (vii) holds itself out as being a company separate
and apart from any other entity, and (viii) maintains all entity formalities
independent of any other entity.

Special Option: As defined in Section 14.1(b).

Special Option Notice: As defined in Section 14.1(b).

Special Option Period: As defined in Section 14.1(b).

Special Option Price: As defined in Section 14.1(b).

State Regulatory Authorities: As applicable to each Facility, the state
licensing and certification agencies, together with all applicable statutes and
regulations, related to healthcare facilities in each respective state.

Sublease: That certain Lease Agreement, dated of even date herewith, by and
among the Lessee Affiliates and the MPT Lessor Affiliates, whereby the MPT
Lessor Affiliates are subleasing to the Lessee Affiliates certain real property
consisting of ten (10) parcels of land, the improvements now or hereafter
located thereon (including any improvements consisting of hospital facilities),
all as more particularly described therein, as the same may be modified, amended
or restated from time to time.

Subordination Agreement: As defined in Section 12.2.

Taking: With a taking or voluntary conveyance during the Loan Term of all or
part of the Collateral, or any interest therein or right accruing thereto or use
thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Collateral.

 

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Tenant: The Borrower Parties, tenants or subtenants under the Tenant Leases, if
any.

Tenant Leases: All leases, subleases, pharmacy leases and other rental
agreements (written or verbal, now or hereafter in effect), if any, including
any Existing Subleases as described in Section 11.1(a), pursuant to which any
Facility Borrower has granted or will grant a possessory interest in and to any
space in or any part of the Real Property, or that otherwise have rights with
regard to any parties of the Real Property, and all Credit Enhancements, if any,
held in connection therewith.

Terminated Facility: As defined in Section 13.2(f).

Total Debt: All indebtedness which, in accordance with GAAP, will be included in
determining total liabilities of the applicable Person, as shown on the
liability side of a balance sheet, including any such indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

Total Taking: As defined in Section 10.1(b).

Unsuitable for Its Use or Unsuitable for Its Primary Intended Use: As used
anywhere in this Agreement, the terms “Unsuitable for Its Use” or “Unsuitable
for Its Primary Intended Use” shall mean that, with respect to the portion of
the Collateral relating to any Facility, by reason of damage or destruction, or
a partial Taking by Condemnation, such Facility cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into account
all relevant factors (including, without limitation, anticipated repairs and/or
restorations), and the effect of such damage or destruction or partial Taking.

USPAP: The Uniform Standards of Professional Appraisal Practice, as amended from
time to time.

Section 1.2 Interpretation; Terms Generally. The definitions set forth in
Section 1.1 and elsewhere in this Agreement shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. Unless otherwise indicated, the words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.”
The words “herein”, “hereof” and “hereunder” and words of similar import shall
be deemed to refer to this Agreement (including the Schedules and Exhibits) in
its entirety and not to any part hereof, unless the context shall otherwise
require. All references herein to Articles, Sections,

 

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Schedules and Exhibits shall be deemed to refer to Articles, Sections and
Schedules of, and Exhibits to, this Agreement, unless the context shall
otherwise require. Unless the context shall otherwise require, any references to
any agreement or other instrument or statute or regulation are to it as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any corresponding provisions of successor statutes or regulations). Any
reference in this Agreement to a “day” or number of “days” that does not refer
explicitly to a “Business Day” or “Business Days” shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.

ARTICLE II

THE LOAN

Section 2.1. The Loan. Contemporaneously herewith, MPT has loaned and advanced
to the Borrower Parties, who are responsible for the Loan Obligations on a joint
and several basis, the principal amount of One Hundred Million and No/100
Dollars ($100,000,000.00) and, at the instruction of Borrower Parties, such
proceeds have been distributed among the Borrowing Parties as set forth on
Schedule 2.1.

Section 2.2. The Note. In addition to being subject to all the terms and
conditions of this Agreement, the Loan is evidenced by, and shall bear interest,
be repaid and be subject to such other terms and conditions as are set forth in,
the Note. All payments due under the Note and under this Agreement shall be sent
to MPT utilizing the ACH Network. The Borrower Parties shall take all necessary
steps and bear any and all costs associated with utilizing the ACH Network to
timely deliver payments to MPT. All payments made through the ACH Network remain
payments as required under the Note and this Agreement and, as such, are subject
to all terms and conditions of the Note and this Agreement, including, but not
limited to, the default provisions thereof and hereof.

Section 2.3. Credit Enhancement. The Loan Obligations are fully guaranteed by
the Guaranties and secured pursuant to the Security Documents.

ARTICLE III

ADDITIONAL CHARGES AND IMPOSITIONS

Section 3.1. Additional Charges.

(a) In addition to the payments owed on the Note, each of the Borrower Parties
shall also pay and discharge as and when due and payable (or, in the case of
Impositions, prior to delinquency) (i) all other amounts, liabilities,
obligations and Impositions which such Borrower Party assumes or agrees to pay
under the Loan Documents, and all other amounts, liabilities, obligations and
Impositions for which the Borrower Parties are responsible related to the
ownership, use, possession and operation of the Collateral or the Business,
including, without limitation, all costs of owning and operating the Facilities,
all Real Estate Taxes, insurance

 

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premiums, maintenance and capital improvements, all licensure violations,
violations of and defaults under any of the Permitted Exceptions, and civil
monetary penalties and fines, and (ii) in the event of any failure on the part
of the Borrower Parties to pay any of those items referred to in clause
(i) above, the Borrower Parties, jointly and severally, will also promptly pay
and reimburse MPT for all such amounts paid by MPT and promptly pay and
discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses
(i) and (ii) above being referred to herein collectively as the “Additional
Charges”), and MPT shall have all legal, equitable and contractual rights,
powers and remedies provided in the Loan Documents, by statute or otherwise, in
the case of non-payment of the Additional Charges, as in the case of the other
Loan Obligations. If any installment of Additional Charges shall not be paid
within five (5) Business Days after the date required to be paid hereunder
(subject to any applicable notice and cure period pursuant to Section 13.1(a)),
the Borrower Parties, jointly and severally, will pay to MPT on demand, as
Additional Charges, a late charge computed at the Default Rate and a late
payment penalty computed at the Late Payment Penalty Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that the Borrower Parties pay any Additional Charges to
MPT pursuant to any requirement of the Loan Documents, the Borrower Parties
shall be relieved of their obligation to pay such Additional Charges to the
Person to which they would otherwise be due.

(b) If any provision of any Facility Instrument requires payment into escrow or
making of deposits to be made with such Facility Lender relating to any part of
the Additional Charges (including, without limitation, the Impositions, Real
Estate Taxes and/or some or all Insurance Premiums), then the Borrower Parties
shall either pay to MPT such required Additional Charges and MPT shall transfer
such amounts to such Facility Lender or, pursuant to written direction by MPT,
the Borrower Parties shall pay such Additional Charges directly to such Facility
Lender. Additionally, at MPT’s option during the Loan Term, MPT may require the
Borrower Parties to pay into escrow or make deposits to MPT relating to any part
of the Additional Charges (including, without limitation, the Impositions, Real
Estate Taxes and/or some or all Insurance Premiums), which deposits or
installments shall be payable after delivery of at least thirty (30) days’ prior
written notice to the Borrower Parties (unless an Event of Default shall occur
or be continuing, in which event, such deposits shall be payable to MPT upon
demand). Upon such request, the Borrower Parties shall pay to MPT (or directly
to a Facility Lender, if requested by MPT), such amounts as and when required by
MPT (or the Facility Lender). Any such part of the Additional Charges paid into
escrow or deposits in accordance herewith shall not bear interest, may be
commingled with MPT’s (or Facility Lender’s) books and accounts and, upon an
Event of Default hereunder, may be applied by MPT (or Facility Lender) to all
sums owed by the Borrower Parties to MPT and any of its respective Affiliates
(or to sums owed to Facility Lender or otherwise owed by the Borrower Parties);
provided, however, that, if MPT collects any deposits for Additional Charges in
accordance with this Section 3.1, (i) MPT shall use such deposited amounts to
pay, or cause such deposited amounts to be used to pay, such Additional Charges
prior to delinquency, and (ii) MPT shall refund to the Borrower Parties, on an
annual basis, any such remaining amounts collected in excess of the amounts
ultimately required to pay the applicable Additional Charges.

 

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Section 3.2. Payment of Impositions. Subject to Article V relating to permitted
contests, the Borrower Parties, jointly and severally, will pay, or cause to be
paid, all Impositions prior to delinquency and before any fine, penalty,
interest or cost may be added for non-payment, such payments to be made directly
to the taxing or assessing authorities (except in the case of escrows and
deposits required to be paid to MPT as provided in this Agreement), and the
Borrower Parties will promptly, upon request, furnish to MPT copies of official
receipts or other satisfactory proof evidencing such payments. The Borrower
Parties’ obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien (other than inchoate liens) upon
the Collateral or any part thereof. If any such Imposition may lawfully be paid
in installments (whether or not interest shall accrue on the unpaid balance of
such Imposition), the Borrower Parties may exercise the option to pay the same
(and any accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the Loan
Term (subject to the Borrower Parties’ right of contest pursuant to Article V.
The Borrower Parties, at their sole, joint and several expense, shall, to the
extent permitted by applicable laws and regulations, prepare and file all other
tax returns and reports in respect of any Imposition as may be required by
Governmental Entities. If any refund shall be due from any taxing authority in
respect of any Imposition paid by the Borrower Parties, the same shall be paid
over to or retained by the Borrower Parties if no Event of Default shall have
occurred hereunder and be continuing. Any such funds retained by MPT due to an
Event of Default shall be applied as provided in Section 13.5. MPT and the
Borrower Parties shall, upon request of the other, provide such data as is
maintained by the parties to whom the request is made with respect to the
Collateral as may be necessary to prepare any required returns and reports.
After obtaining written approval from MPT, which approval shall not be
unreasonable withheld, the Borrower Parties may, at the Borrower Parties’ sole
cost and expense, protest, appeal, or institute such other proceedings as the
Borrower Parties may deem appropriate to effect a reduction of real estate or
personal property assessments and MPT, at the Borrower Parties’ expense as
aforesaid, shall fully cooperate with the Borrower Parties in such protest,
appeal, or other action.

Section 3.3. Utility Charges. The Borrower Parties will contract for, in their
respective names, and will pay or cause to be paid when due all charges for
electricity, power, gas, oil, water and other utilities used in connection with
the Collateral during the Loan Term, including, without limitation, all impact
and tap fees necessary for the operation of the Facilities.

Section 3.4. Insurance Premiums. The Borrower Parties shall contract for, in
their own name, and will pay or cause to be paid all premiums for the insurance
coverage required to be maintained pursuant to Article VI during the Loan Term
(the “Insurance Premiums”); provided, however, if required by MPT pursuant to
Section 3.1, all or a portion of the Insurance Premiums shall be paid as
required under Section 3.1.

ARTICLE IV

GENERAL COVENANTS

During the Loan Term, the Borrower Parties shall observe the following
covenants:

Section 4.1. Borrower Parties’ Personal Property. The Borrower Parties, at their
expense, shall install, affix, assemble and place on the Real Property the
Borrower Parties’ Personal

 

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Property, which Borrower Parties’ Personal Property shall be subject to any
security interests and liens as provided in Section 13.8. Except for inventory
or for removal because of damage, obsolescence, upgrade or replacement, the
Borrower Parties shall not, without the prior written consent of MPT (such
consent not to be unreasonably withheld, conditioned or delayed provided that no
Major Event of Default then exists hereunder), remove any of the Borrower
Parties’ Personal Property from the Real Property. The Borrower Parties shall
provide and maintain during the Loan Term all such Borrower Parties’ Personal
Property as shall be necessary to operate each Facility in compliance with all
licensure and certification requirements, in compliance with all applicable
Legal Requirements and Insurance Requirements, and otherwise in accordance with
customary practice in the industry for the Primary Intended Use. Following the
expiration or earlier termination of this Agreement respect to the portion of
the Real Property relating to any one or more of the Facilities and subject to
MPT’s option to purchase such Borrower Parties Personal Property as provided in
Section 14.2, the Borrower Parties agree that all of the Borrower Parties’
Personal Property relating to such portion of the Real Property (for which MPT
has authorized removal as provided above) not removed by the Borrower Parties
within seven (7) Business Days (subject to extension upon approval of MPT, which
approval shall not be unreasonably withheld, conditioned or delayed) following
the expiration or earlier termination of this Agreement with respect thereto
shall be considered abandoned by Borrower Parties and may be appropriated, sold,
destroyed or otherwise disposed of by MPT (at Borrower Parties’ cost) with prior
written notice thereof to the Borrower Parties, without any payment to Borrower
Parties and without any obligation to the Borrower Parties to account therefor.
Borrower Parties will, at its expense, restore the Real Property and repair all
damage to the Real Property caused by the installation or removal of the
Borrower Parties’ Personal Property, whether affected by the Borrower Parties,
MPT, any of the Borrower Parties lender, or any Facility Lender.

Section 4.2. Primary Intended Use. Throughout the Loan Term, the Borrower
Parties shall utilize the Real Property to operate the Facilities as follows:

(a) The Brownsville Facility shall be operated as a forty (40)-licensed bed IRF,
and for such other legal ancillary uses as may be necessary in connection with
or incidental to such uses;

(b) The Las Cruces Facility shall be operated as a MHC with forty (40)-licensed
beds as an IRF and twenty (20)-licensed beds as an LTCH, and for such other
legal ancillary uses as may be necessary in connection with or incidental to
such uses; and

(c) The Prescott Valley Facility shall be operated as a forty (40)-licensed bed
IRF, and for such other legal ancillary uses as may be necessary in connection
with or incidental to such uses;

and in each case subject to all covenants, restrictions, easements and all other
matters of record (including those set forth in the Permitted Exceptions)
relating to the applicable Facility (the “Primary Intended Use”). The Borrower
Parties shall comply with all Legal Requirements (including, as applicable, the
HWH Requirements) and shall maintain all Licenses, including, but not limited
to, Medicare and/or Medicaid certifications (including, as applicable, its
Medicare

 

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IRF Certification or Medicare LTCH Certification), provider numbers and
agreements, certificates of need, governmental approvals, and full accreditation
from all applicable governmental authorities, if any, that are necessary for the
operation of the applicable Facility consistent with the Primary Intended Use.

Section 4.3. No Changes. Except as expressly authorized herein, the Borrower
Parties shall not use any of the Real Property for any use other than the
Primary Intended Use, without the prior written consent of MPT, not to be
unreasonably withheld, conditioned or delayed.

Section 4.4. No Interference with Insurance. No use shall be made or permitted
to be made of any portion of the Real Property and no acts shall be done which
will cause the cancellation of any insurance policy covering any portion of the
Real Property or any part thereof, nor shall the Borrower Parties sell or
otherwise provide to residents or patients therein, or permit to be kept, used
or sold in or about any portion of the Real Property any article which may be
prohibited by law or by the standard form of fire insurance policies, any other
insurance policies required to be carried hereunder, or fire underwriters
regulations. The Borrower Parties shall, at their sole cost, comply with all of
the requirements, covenants and restrictions pertaining to the Real Property,
including, without limitation, all of the Permitted Exceptions, and other
requirements of any insurance board, association, organization or company
necessary for the maintenance of the insurance, as herein provided, covering the
Real Property and the Personal Property.

Section 4.5. Waste; Nuisance. The Borrower Parties shall not commit or suffer to
be committed any waste on any portion of the Real Property, or in any Facility,
nor shall the Borrower Parties cause or permit any nuisance thereon.

Section 4.6. Maintenance of Security Interests. The Borrower Parties shall
neither suffer nor permit the Collateral (including, without limitation, the
Real Property) or any portion thereof, including any Capital Addition whether or
not financed by MPT, or the Personal Property, to be used in such a manner as
(i) might reasonably tend to impair MPT’s (or the Borrower Parties’, as the case
may be) title thereto or to any portion thereof, or (ii) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the public,
as such, or of implied dedication of the Collateral (including, without
limitation, the Real Property) or any portion thereof.

Section 4.7. Publicity Signs. During the Loan Term, MPT and its Affiliates shall
have the right and option to erect a sign on each parcel of the Real Property
stating that such parcel is financed by MPT. Such sign shall be in a size, and
shall be erected in a location acceptable to MPT and approved by the Borrower
Parties, which approval shall not be unreasonably withheld, conditioned or
delayed.

Section 4.8. No Conveyance of Real Property. The Borrower Parties shall not
directly or indirectly encumber (by lien, junior mortgage, or otherwise),
pledge, convey, sell, transfer or assign any or all of their respective
interests in any portion of the Real Property.

 

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ARTICLE V

LIENS

Subject to the provisions of Article XVIII relating to permitted contests,
Borrower Parties will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon any portion of the Real Property or any
attachment, levy, claim or encumbrance in respect of the Loan Obligations, any
amounts held in the Reserve, or any funds or amounts that are or will be
provided by MPT or its Affiliates to Borrower Parties at any time during the
Loan Term in accordance with this Agreement; excluding, however, (a) the
Mortgages; (b) the matters, if any, set forth in Exhibit B (the “Permitted
Exceptions”); (c) restrictions, liens and other encumbrances which are consented
to in writing by MPT; (d) liens for those taxes of MPT which Borrower Parties is
not required to pay hereunder; (e) liens for Impositions or for sums resulting
from noncompliance with Legal Requirements so long as (1) the same are not yet
payable or are payable without the addition of any fine or penalty or (2) such
liens are in the process of being contested as permitted by Article XVIII; and
(f) the Encumbrances which are permitted in accordance with Section 8.3(b).
Unless otherwise expressly provided herein, the Borrower Parties shall not
mortgage or grant any interest or security interest in, or otherwise assign, any
part of Borrower Parties’ rights and interests in this Agreement, any portion of
the Real Property or Borrower Parties’ Personal Property during the Loan Term,
except as provided in Section 13.9 of this Agreement.

ARTICLE VI

INSURANCE

Section 6.1. Insurance Covenants.

(a) During the Loan Term, Borrower Parties shall at all times keep the Real
Property and all Personal Property, insured against loss or damage from such
causes as are customarily insured against, by prudent owners of similar
facilities. Without limiting the generality of the foregoing, and subject to the
provisions of Section 6.1(b) below, Borrower Parties shall obtain and maintain
in effect throughout the Loan Term with respect to each Facility the kinds and
amounts of insurance deemed necessary by MPT and as described below. This
insurance shall be written by insurance companies (i) acceptable to MPT,
(ii) that are rated at least an “A-VIII” or better by Best’s Insurance Guide,
and (iii) unless otherwise approved by MPT, authorized, licensed and qualified
to do insurance business in the state in which the Real Property is located. The
aggregate amount of coverage by a single company must not exceed Five Percent
(5%) of the insurance company’s policyholders’ surplus. Borrower Parties will
pay or cause to be paid all Insurance Premiums for the insurance coverage
required to be maintained pursuant to this Article VI during the Loan Term. The
commercial property, rental value and business interruption policies shall name
MPT (and any other entity that MPT may deem necessary) as additional insureds
and loss payees as respects coverage afforded the Real Property under standard
Insurance Services Offices (ISO) commercial property insurance endorsements
CP1219 and CP1503, or manuscript equivalents, and as additional insureds and
loss payees under boiler and machinery and any other property insurance policy.
Except as provided below with respect to commercial general liability,
professional liability and excess or umbrella liability policies, all

 

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other coverage policies shall name MPT (and any other entity that MPT may deem
necessary) as additional insureds as respects liability arising from Borrower
Parties’ use, occupancy or maintenance of the Real Property. The commercial
general liability, professional liability and the excess or umbrella liability
policies shall name MPT (and any other entity that MPT may deem necessary) as
named insureds. All property, business interruption and boiler and machinery
losses shall be payable to MPT and/or Borrower Parties as provided in Article
IX. Each insurance policy required hereunder must, unless otherwise expressly
provided herein (i) provide primary insurance without right of contribution from
any other insurance carried by MPT, (ii) contain express permission for Borrower
Parties to enter into a waiver of subrogation rights in favor of MPT, or any
right of setoff or counterclaim against any insured party thereunder including
MPT, (iii) permit MPT to pay premiums at MPT’s discretion, and (iv) as respects
any third party liability claim brought against MPT, obligate the insurer to
defend MPT as a named insured thereunder. In addition, the property, business
interruption and boiler and machinery policies shall name as an additional
insured all Facility Lenders, if any, by way of a standard or other acceptable
form of mortgagee’s loss payable endorsement. Any loss adjustment shall require
the written consent of MPT and each affected Facility Lender. Evidence or
verification (as defined in Section 6.4 below) of insurance and/or Impositions
shall be deposited with MPT and, if requested, with any Facility Lender. If
insurance premiums are required to be deposited or escrowed in accordance with
Section 3.1, then Borrower Parties shall or deposit the amount of such insurance
premiums in accordance with Section 3.1. With respect to each Facility, the
policies required hereunder relating to Borrower Parties, the portion of the
Real Property relating thereto, including the Improvements and the Personal
Property relating to such Facility, shall insure against the following risks:

(i) Commercial Property insurance written on a broad “all risk” or “special
perils” policy form covering physical loss or damage to such portion of the Real
Property including building and improvements and betterments. Insured perils
shall include, but not be limited to, fire, lightning, windstorm, water damage
from plumbing systems or back-up of drains, back-up of sewers, hail, aircraft,
riot, vehicle collision, explosion, smoke, vandalism, malicious mischief, flood,
earth movement (including earthquake), theft, collapse, terrorism (only if such
portion of the Real Property located inside metropolitan city limits with
population exceeding 5,000,000), equipment breakdown, boiler and machinery,
plate glass breakage, and perils typically provided under an Extended Coverage
Endorsement, and other forms of broadened risk unless otherwise approved in
writing by MPT. Unless otherwise provided such coverage shall be in an amount
equal to the full replacement cost (as herein defined) value basis to the extent
of the full insurable replacement value of such portion of the Real Property to
be determined by MPT. The policy shall include coverage for subsidence. The
policy exclusion applicable to faulty or defective design, workmanship or
materials shall not apply to resultant damage to otherwise sound property. The
policy must provide a sublimit of at least One Hundred Thousand and No/100
Dollars ($100,000.00) to cover reasonable expenses incurred by the insured or
loss payee for professional services necessary to measure, quantify or determine
the amount of any loss covered by this subparagraph (i), such as appraisers,
auditors, accountants, architects, and engineers (such expenses shall not
include the insured’s or loss payee’s own employees or public adjusters). Unless
otherwise provided hereunder, all policy deductibles shall be borne in full by
Borrower Parties and must not exceed, per occurrence, an amount in excess of
Three Percent (3%),

 

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of the insurable value of such portion of the Real Property as determined by
MPT. Further, in the event of a loss, Borrower Parties shall abide by all
provisions of the insurance contract, including proper and timely notice of the
loss to the insurer. Borrower Parties further agrees that it will notify MPT of
any loss in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00)
or greater and that no claim at or in excess of Twenty-Five Thousand and No/100
Dollars ($25,000.00) shall be settled without the prior written consent of MPT,
which consent shall not be unreasonably withheld, conditioned or delayed.

(ii) Flood and earthquake insurance shall be required at a minimum amount equal
to Twenty Percent (20%) of the Full Replacement Cost, but not to exceed a
coverage amount of Ten Million and No/100 Dollars ($10,000,000.00) unless such
portion of the Real Property is located in a flood plain or earthquake zone in
which event higher coverages may be required by MPT in its reasonable
discretion. The deductible for any such insurance shall not exceed Three Percent
(3%) of the insured values.

(iii) Rental Value insurance using standard ISO endorsement CP 1503, or its
equivalent, as respects rental value coverage on such portion of the Real
Property. Such endorsement shall require property insurer to send notice of
cancellation or non-renewal to MPT per Section 6.4.

(iv) Business interruption insurance covering lost earnings and continuing
expenses, less rents due MPT to the extent covered under subparagraph
(iii) above, in an amount sufficient to cover not less than the aggregate amount
of Borrower Parties’ earnings during (1) the actual time required to rebuild
such portion of the Real Property following loss or damage, or (2) twelve
(12) months, whichever is longer, plus an additional extended period of
indemnity of not less than ninety (90) days shall be provided. Coverage shall be
written on an “actual loss sustained” form, for the same perils and other events
as described in subparagraph (v) below.

(v) Commercial General Liability in a primary amount of at least One Million and
No/100 Dollars ($1,000,000.00) per occurrence, bodily injury for injury or death
of any one person and for Property Damage for damage to or loss of the property
of others, subject to a Two Million and No/100 Dollars ($2,000,000.00) annual
aggregate policy limit applicable separately to such portion of the Real
Property for all bodily injury and property damage claims, occurring on or about
such portion of the Real Property or in any way related to such portion of the
Real Property, including but not limited to, any swimming pools or other
rehabilitation and recreational facilities or areas that are located on such
portion of the Real Property otherwise related to such portion of the Real
Property. All allocated loss adjustment expenses, including defense costs, shall
be in addition to the policy limits required above. Such policy shall include
coverages found on the ISO Commercial General Liability Policy form CG 0001,
occurrence policy form, current edition, with deductible amounts acceptable to
MPT. Borrower Parties shall be responsible for funding all deductibles and
retentions, including those which may be applicable to MPT as an additional
insured thereunder.

 

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(vi) Automobile and vehicle liability insurance coverage for all owned,
non-owned, leased or hired automobiles and vehicles in a primary limit amount of
One Million and No/100 Dollars ($1,000,000.00) per occurrence for bodily injury
and property damage. All allocated loss adjustment expenses, including defense
costs, shall be in addition to the policy limits required above.

(vii) Umbrella liability insurance in the minimum amount of Ten Million and
No/100 Dollars ($10,000,000.00) for each occurrence and aggregate combined
single limit for all liability. The umbrella shall follow form with the primary
commercial general liability with respect to providing primary and
non-contributory coverage to MPT as an additional insured when required by
written contract or agreement. The umbrella liability policy shall name in its
underlying schedule the policies of commercial general liability,
automobile/vehicle liability, professional liability and employer’s liability
under the workers compensation policy. In the event that MPT, in its reasonable
determination, shall conclude that the required amount of umbrella/excess
liability coverage is inadequate, whether as a result of claims made against
such coverage, the addition of new parcels of property to the Real Property
hereunder or otherwise, within thirty (30) days after request from MPT, Borrower
Parties shall increase the amount of such umbrella/excess coverage to
[                    Million Dollars ($        )].

(viii) Professional liability insurance for Borrower Parties and all employed
professionals (including any physicians) with respect to each Facility of in an
amount not less than One Million and No/100 Dollars ($1,000,000.00) per
individual claim and Three Million and No/100 Dollars ($3,000,000.00) annual
aggregate. All contractors, agents and other persons (including physicians) who
perform professional services for Borrower Parties shall meet such required
minimum insurance requirements of One Million and No/100 Dollars ($1,000,000.00)
per individual claim and Three Million and No/100 Dollars ($3,000,000.00) annual
aggregate.

(ix) Employee Dishonesty coverage covering all employees with a limit of
insurance, with respect to each Facility, of not less than Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) per claim.

The term “Full Replacement Cost” as used herein, shall mean the actual
replacement cost thereof from time to time (not to be less than One Hundred
Million Dollars ($100,000,000.00) in the aggregate for the Facilities, with a
per Facility Full Replacement Cost as set forth on Schedule 2.1), including
increased cost of construction endorsement, less exclusions provided in the
normal fire insurance policy. In the event either MPT or Borrower Parties
believes that the Full Replacement Cost has increased or decreased at any time
during the Loan Term, it shall have the right to have such Full Replacement Cost
re-determined by an impartial third party, hereinafter referred to as the
“Impartial Appraiser.” If the MPT and Borrower Parties are unable to agree on
the selection of an Impartial Appraiser, each party shall select one appraiser,
and the two appraisers so selected shall jointly select the Impartial Appraiser.
The party desiring to have the Full Replacement Cost so re-determined shall
forthwith, on receipt of such determination by such Impartial Appraiser, give
written notice thereof to the other party. The determination of such Impartial
Appraiser shall be final and binding on the parties, and Borrower Parties shall
forthwith increase, or may decrease, the amount of the insurance carried
pursuant to this Section 6.1, as the case may be, to the amount so determined by
the Impartial Appraiser. Borrower Parties shall pay the fee, if any, of the
Impartial Appraiser.

 

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(b) At MPT’s option, and provided that the costs of such coverages collectively
do not exceed the costs of such insurance to be obtained by Borrower Parties,
MPT may obtain the insurance coverages as required herein in its own name and,
in such event, Borrower Parties shall reimburse MPT for the costs of such
coverages, including any required deductibles or retention payments, immediately
upon request by MPT. If any reimbursement of such insurance costs shall not be
paid within five (5) days after demand from MPT (subject to any applicable
notice and cure period pursuant to Section 13.1(a)), Borrower Parties, in
addition to all other obligations hereunder, will pay MPT, as Additional
Charges, a late charge computed at the Overdue Rate and a late payment penalty
computed at the Late Payment Penalty Rate on such amount, from the due date of
such payment until MPT’s receipt thereof. Notwithstanding the foregoing, if
required by MPT pursuant to Section 6.4, all or a portion of the Insurance
Premiums shall be paid as required under Section 3.1.

Section 6.2. Additional Insurance. In addition to the insurance described above,
with respect to each Facility, Borrower Parties shall maintain such additional
insurance, including, without limitation, adequate loss of rents insurance with
respect to casualty or condemnation events to the extent the coverages set forth
in Sections 6(a)(iii) and 6(a)(iv) are not adequate, as may be reasonably
required from time to time by any Facility Lender, and shall further at all
times maintain adequate worker’s compensation insurance coverage for all persons
employed by Borrower Parties or their Affiliate on the portion of the Real
Property relating to such Facility, to the extent required by all applicable
local, state and federal laws. Notwithstanding anything contained herein to the
contrary, MPT shall not be prohibited from purchasing and maintaining such
additional insurance as it may determine, in its sole discretion, to be
necessary to protect its interest in all or any portion of the Real Property

Section 6.3. Waiver of Subrogation. Borrower Parties hereby waive any and all
rights of recovery against MPT, its officers, agents and employees, for all
injury, loss of or damage to persons or property, howsoever caused, including
loss of use, to the extent such injury, loss or damage is covered or should be
covered by required insurance or any other insurance maintained by Borrower
Parties, including sums within deductibles, retentions or self-insurance
applicable thereto. This waiver applies to all first party property, business
interruption, equipment, vehicle and workers compensation claims (unless
prohibited under applicable state statutes), as well as third party liability
claims. This waiver shall be in addition to, and not in limitation or derogation
of, any other waiver or release contained in this agreement with respect to loss
of, or damage to, property of the parties hereto. In as much as the above mutual
waivers preclude the assignment of any aforesaid claim by way of subrogation to
an insurance company, Borrower Parties agrees immediately to give to each
insurance company providing coverage under this Agreement, written notice of the
terms of said mutual waivers, and to have said insurance policies properly
endorsed, if necessary, to prevent the invalidation of said insurance coverage
by reason of said waivers. Borrower Parties shall indemnify MPT against any loss
or expense, including reasonable attorneys’ fees, resulting from the failure to
obtain such waiver from the insurer, if required

 

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Section 6.4. Form of Insurance. All of the policies of insurance referred to
herein shall be written in form satisfactory to MPT and by insurance companies
satisfactory to MPT. Borrower Parties shall pay all of the premiums therefor
(except as otherwise provided herein), and shall deliver “verification” of
insurance to MPT as set forth below. All binders and policies delivered to MPT
as required in this Section 6.4 shall also include a statement of insured values
or locations for all properties under such blanket policies that share coverage
limits. Verification of insurance as used herein is defined as follows:

(a) Contemporaneously herewith and thereafter, at least ten (10) Business Days
prior to any insurance policy expiration date, Borrower Parties shall provide
verification of required insurance coverage for the following year which shall
include the following:

(i) an ACORD 75 insurance binder, or similar type of insurance binder acceptable
to MPT, for each policy providing evidence of insurance coverage of the types
and in the amounts required hereunder and naming MPT (and any other entity that
MPT may deem necessary) as additional insureds and loss payees with respect to
property, rental value and business interruption insurance, naming MPT (and any
other entity that MPT may deem necessary) as named insureds with respect to
commercial general liability, professional liability and excess or umbrella
insurance, and naming MPT (and any other entity that MPT may deem necessary) as
additional insureds with respect to all other required policies, together with a
sample or pro forma of each policy (if required by MPT), together with written
confirmation of each insurer’s obligation to provide notice of cancellation or
non-renewal of each;

(ii) a copy of property statement of values if Borrower Parties maintain blanket
insurance covering facilities other than the Real Property; and

(iii) a summary of insurance program showing significant coverage limits,
sublimits, deductibles and retentions.

(b) Thereafter, no later than the date that is forty-five (45) days after the
date hereof and any such insurance policy expiration date, Borrower Parties
shall provide further verification of insurance, which verification shall
include (i) true and certified copies of the required insurance policies
including blanket or specific endorsements reflecting the appropriate status of
MPT (and any other entities that MPT deems necessary) as additional insureds,
loss payees and/or named insureds, as the case may be, and providing notice of
cancellation or non-renewal under the required insurance; and (ii) a copy of the
property statement of values if Borrower Parties maintains blanket insurance
covering facilities other than the Real Property.

(c) In the event Borrower Parties do not provide timely or proper verification,
or does not maintain the insurance required hereunder or pay the premiums as
required hereunder, MPT shall be entitled, but shall have no obligation, to
obtain such insurance and pay the premiums therefor, which premiums shall be
repayable to MPT as provided in this Agreement, and failure

 

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to adhere to those repayment provisions shall constitute an Event of Default
within the meaning of Section 13.1(a). Borrower Parties acknowledge and agree
that any insurance policies, endorsements and/or binders or certificates that
provide that the insurer will “endeavor to” give notice before same may be
altered, allowed to expire, or canceled will not be acceptable to MPT.
Notwithstanding anything contained herein to the contrary, all policies of
insurance required to be obtained by Borrower Parties hereunder shall provide
(i) that such policies will not lapse, terminate, be canceled, or be amended or
modified to reduce limits or coverage terms unless and until MPT has received
not less than thirty (30) days’ prior written notice at MPT’s notice address as
specified in this Agreement (the “MPT’s Notice Address”), with a simultaneous
copy to (A) MPT Operating Partnership, L.P., Attention: Its President, 1000
Urban Center Drive, Suite 501, Birmingham, Alabama 35242, and (B) McGriff,
Seibels & Williams, Inc., Attention: John F. Carter, 2211 7th Avenue South,
Birmingham, Alabama 35233, and (ii) that in the event of cancellation due to
non-payment of premium, the insurer will provide not less than ten (10) days’
prior written notice to MPT at MPT’s Notice Address, with a simultaneous copy to
(A) MPT Operating Partnership, L.P., Attention: Its President, 1000 Urban Center
Drive, Suite 501, Birmingham, Alabama 35242, and (B) McGriff, Seibels &
Williams, Inc., Attention: John F. Carter, 2211 7th Avenue South, Birmingham,
Alabama 35233.

Section 6.5. Increase in Limits. In the event that MPT shall at any time in its
reasonable discretion deem the limits of the personal injury, property damage or
general public liability insurance then carried to be insufficient, the parties
shall endeavor to agree on the proper and reasonable limits for such insurance
to be carried and such insurance shall thereafter be carried with the limits
thus agreed on until further change pursuant to the provisions of this
Section 6.5. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance to be carried shall be determined by an
impartial third party selected by the parties. Nothing herein shall permit the
amount of insurance to be reduced below the amount or amounts required by any of
the Facility Instruments.

Section 6.6. Blanket Policy. Notwithstanding anything to the contrary contained
in this Article VI, Borrower Parties’ obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Borrower Parties
provided that:

(a) Any such blanket policy or policies are acceptable to and have been approved
by MPT, which approval shall not be unreasonably withheld;

(b) Any such blanket policy or policies shall not be changed, altered or
modified without the prior written consent of MPT, which consent shall not be
unreasonably withheld, conditioned or delayed; and

(c) Any such blanket policy or policies shall otherwise satisfy the insurance
requirements of this Article VI (including the requirement of thirty (30) days’
written notice before the expiration or cancellation of such policies as
required by Section 6.4) and shall provide for deductibles in amounts acceptable
to MPT. Any aggregate policy limits within such blanket insurance policies shall
apply separately to the Real Property of each Facility

 

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Section 6.7. No Separate Insurance. Borrower Parties shall not, on Borrower
Parties’ own initiative or pursuant to the request or requirement of any third
party, take out separate insurance concurrent in form or contributing in the
event of loss with that required in this Article VI to be furnished by, or which
may reasonably be required to be furnished by, Borrower Parties, or increase the
amounts of any then existing insurance by securing an additional policy or
additional policies, unless all parties having an insurable interest in the
subject matter of the insurance, including in all cases MPT and all Facility
Lenders, are included therein as additional insureds and the loss is payable
under said insurance in the same manner as losses are required to be payable
under this Agreement. Borrower Parties shall immediately notify MPT of the
taking out of any such separate insurance or of the increasing of any of the
amounts of the then existing insurance by securing an additional policy or
additional policies.

ARTICLE VII

LEGAL COMPLIANCE

Section 7.1. Compliance with Legal and Insurance Requirements. Subject to
Article XVIII relating to permitted contests, the Borrower Parties, at their
expense, (a) shall comply with all Legal Requirements and Insurance Requirements
applicable to the Borrower Parties and the use, operation, maintenance, repair
and restoration of the Facilities and the Real Property, whether or not
compliance therewith shall require structural change in any of the Improvements
or interfere with the use and enjoyment of the Real Property; (b) shall not use
the Real Property and the Personal Property for any unlawful purpose; (c) shall
procure, maintain and comply with all Licenses and other governmental approvals
and authorizations required for any use of the Real Property and the Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Real Property or any part thereof, including, without
limitation, any Capital Additions; and (d) shall use its commercially reasonable
efforts to cause all Tenants to acquire and maintain all licenses, certificates,
permits, provider agreements and other authorizations and approvals, as well as
all personal property needed to operate any portion of the Real Property to them
for the Primary Intended Uses and any other uses conducted on the Real Property
as may be permitted from time to time hereunder, it being acknowledged by MPT
that any failure by the a Tenant under this clause (d) shall not cause (or be
deemed to cause) a breach by the Borrower Parties of this Section 7.1 unless the
Borrower Parties have so failed to use commercially reasonable efforts. The
Borrower Parties’ use of the Real Property, the use of all of the Borrower
Parties’ Personal Property used in connection with the Real Property, and the
maintenance, alteration, and operation of the same, and all parts thereof, shall
at all times conform to all Legal Requirements. Upon MPT’s request, the Borrower
Parties shall deliver to MPT copies of all such Licenses and other approvals and
authorizations. The Borrower Parties shall indemnify and defend, at Borrower
Parties’ sole cost and expense, and hold MPT and its successors and assigns
harmless from and against and agrees to reimburse MPT and its successors and
assigns with respect to any and all claims, demands, actions, causes of action,
losses, damages, liabilities, costs and expenses (including, without limitation,
reasonable attorneys’ fees and court costs) of any and every kind or character,
known or unknown, fixed or contingent, asserted against or incurred by MPT, and
its successors and assigns, at any time and from time to time by reason or
arising out of any breach by the Borrower Parties of any of the provisions of
this Article VII or any breach or violation of any Legal Requirements.

 

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Section 7.2. Maintenance of Licenses.

(a) With respect to each Facility, each Facility Borrower (a) shall maintain at
all times during the Loan Term, the Operating Agreements, Participation
Agreements and all applicable federal, state and local governmental licenses,
approvals, qualifications, variances, certificates of need, franchises,
accreditations, certificates, certifications, consents, permits and other
authorizations and contracts, including provider numbers and provider agreements
with governmental or quasi-governmental entities and other third parties, which
may be necessary for the operation of the Facility operated by such Facility
Borrower for the Primary Intended Use, or required for certification and
participation under Medicare and Medicaid legislation and regulations, the
provider programs of the State Regulatory Authorities, the DHHS, and the CMS,
and/or state or federal Title XVIII and/or Title XIX provider programs
applicable for each such Facility (collectively, the “Licenses”); (b) shall
remain in compliance with all state and federal laws, rules, regulations and
procedures with regard to the operation of the Facility operated by such
Facility Borrower, including, without limitation, HIPAA and the State Regulatory
Authorities, as applicable for each such Facility, as they may from time to time
exist; and (c) shall operate the Facility operated by such Facility Borrower in
a manner consistent with high quality care services and sound reimbursement
principles under the Medicare and/or Medicaid programs and as required under
state and federal law. The provisions of this Section 7.2 are in addition to the
other provisions of this Agreement.

(b) Each Facility Borrower covenants and agrees that it shall not, without the
prior written consent of MPT, which may be granted or withheld in MPT’s sole
discretion, whether before, during or after the Loan Term, (i) sell, move,
modify (including, without limitation, the establishment of a “provider-based”
network or similar arrangement), cancel, surrender, transfer, assign, sell,
relocate, pledge, secure, convey or in any manner encumber any License; or
(ii) effect or attempt to effect any change in the license category or status of
any Facility or any part thereof.

(c) Each Facility Borrower shall notify MPT in writing within two (2) Business
Days after such Facility Borrower’s receipt of any notice, action, proceeding or
inquiry of any governmental agency, bureau or other authority, whether federal,
state or local, of any kind, nature or description, which could adversely affect
any material License for the Facility operated by such Facility Borrower, or the
ability of such Facility Borrower to maintain its status as the licensed and
accredited operator of such Facility, or which alleges noncompliance with any
law. At the time of delivery of such notification to MPT, such Facility Borrower
shall furnish MPT with a copy of any and all such notices or inquiries, and MPT
shall have the right, but not the obligation, to attend and/or participate, in
MPT’s sole discretion, in any such actions or proceedings. Each of the Borrower
Parties shall act diligently to correct any deficiency or deal effectively with
any “adverse action” or other proceedings, inquiries or other governmental
actions, so as to maintain the Licenses and Medicare and/or Medicaid
certification (including, without limitation, as applicable, Medicare IRF
Certification and Medicare LTCH Certification), status for the Facility operated
by such Facility Borrower in good standing at all times. No Borrower Party shall
agree to any settlement or other action with respect to such proceedings or

 

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inquiries which affects the use of all or any portion of the Real Property or
any part thereof for the Primary Intended Use without the prior written consent
of MPT, which consent may be withheld or conditioned in MPT’s sole discretion.
Each Borrower Party agrees to sign, acknowledge, provide and deliver to MPT (and
if such Facility Borrower fails to do so upon request of MPT, such Facility
Borrower shall be deemed to have appointed MPT as agent of such Facility
Borrower for such purposes pursuant to that certain Special Power of Attorney
attached hereto as Exhibit C (the “Power of Attorney”) executed simultaneously
with this Agreement) any and all documents, instruments or other writings which
are or may become necessary, proper and/or advisable to cause any and all
Licenses, including all Medicare and Medicaid provider numbers and provider
agreements, to be obtained or issued (either in total or individually) in the
name of MPT or its designee in the event that MPT reasonably determines in good
faith that (irrespective of any claim, dispute or other contention or challenge
of such Facility Borrower) there is any breach, default or other lapse in any
representation, warranty, covenant or other delegation of duty to such Facility
Borrower (beyond any applicable grace or cure period) and the issuing government
agency has threatened or asserted that such License will terminate or has lapsed
or that such License or certification or accreditation status is in jeopardy.

Section 7.3. Compliance with Healthcare Laws. The Borrower Parties will assure
that during the Loan Term, the Borrower Parties shall comply with all Healthcare
Laws. The Borrower Parties shall add to all of its leases relating to the Real
Property that, in the event it is determined that such lease is in violation of
the Healthcare Laws, such sublease shall be renegotiated so that same are in
compliance with all Healthcare Laws. The Borrower Parties shall promptly to
notify MPT in writing of the receipt of any notice of investigation of any
alleged Healthcare Law violations. The Borrower Parties shall indemnify and
defend, at the Borrower Parties’ sole cost and expense, and hold MPT and its
successors and assigns, harmless from and against, and shall reimburse MPT and
its successors and assigns with respect to, any and all claims, demands,
actions, causes of action, losses, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys’ fees and court costs) of
any and every kind or character, known or unknown, fixed or contingent, asserted
against or incurred by MPT and its successors and assigns, at any time and from
time to time by reason, or arising out, of any breach by the Borrower Parties of
any of the provisions set forth in this Section 7.3 or any violation of any
Healthcare Laws by the Borrower Parties.

Section 7.4. Single Purpose Entity. Each Facility Borrower has been since its
formation and shall remain at all times during the Loan Term a Single Purpose
Entity created for the sole purpose of operating the portion of the Real
Property relating to its Facility in accordance with the terms of this
Agreement. Simultaneously with the execution of this Agreement, and as requested
by MPT at other times during the Loan Term, each Facility Borrower shall provide
MPT with evidence that such Facility Borrower is a Single Purpose Entity and is
in good standing in the state of its organization or incorporation and in the
state in which the portion of the Real Property relating to such Facility
Borrower is located.

Section 7.5. Hazardous Materials. The Borrower Parties shall ensure that the
Real Property and the operation of the Facilities comply with all Hazardous
Materials Laws. Except for Hazardous Materials generated in the normal course of
business regarding the Primary Intended Use (which Hazardous Materials shall be
handled and disposed of in compliance with all Hazardous Materials Laws), no
Hazardous Materials shall be installed, used, generated,

 

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manufactured, treated, handled, refined, produced, processed, stored or disposed
of, or otherwise present in, on or under the Real Property or in connection with
the operation of any Facility. No activity shall be undertaken on any portion of
the Real Property or in connection with the operation of any Facility which
would cause (a) such portion of the Real Property to become a treatment, storage
or disposal facility of hazardous waste, infectious waste, biomedical or medical
waste, within the meaning of, or otherwise bring the Real Property within the
ambit of RCRA or any Hazardous Materials Laws; (b) a release or threatened
release of Hazardous Materials from the Real Property within the meaning of, or
otherwise bring the Real Property within the ambit of, CERCLA or SARA or any
Hazardous Materials Laws; or (c) the discharge of Hazardous Materials into any
watercourse, surface or subsurface of body of water or wetland, or the discharge
into the atmosphere of any Hazardous Materials which would require a permit
under any Hazardous Materials Laws. No activity shall be undertaken with respect
to any portion of the Real Property or the operation of any Facility which would
cause a violation or support a claim under RCRA, CERCLA, SARA or any Hazardous
Materials Laws. The Borrower Parties shall, at its sole cost, expense, risk and
liability, remove or cause to be removed from the Real Property all Hazardous
Materials generated in connection with the Primary Intended Use and as found in
hospital and healthcare facilities, including, without limitation, all
infectious waste materials, syringes, needles and any materials contaminated
with bodily fluids of any type, character or description of whatsoever nature in
accordance with all Hazardous Materials Laws. The Borrower Parties shall not
dispose of any such infectious waste and Hazardous Materials in any receptacles
used for the disposal of normal refuse. The Borrower Parties shall indemnify and
defend, at their sole cost and expense, and hold each MPT Party and their
respective successors and assigns, harmless from and against and to reimburse
the MPT Parties and their respective successors and assigns with respect to any
and all claims, demands, actions, causes of action, losses, damages,
liabilities, costs and expenses (including, without limitation, reasonable
attorney’s fees and court costs) of any and every kind or character, known or
unknown, fixed or contingent, asserted against or incurred by the MPT Parties
and their respective successors and assigns at any time and from time to time by
reason or arising out of any breach by the Borrower Parties of this Section 7.5
or any violation of any Hazardous Materials Laws by any Person other than MPT,
any of MPT’s Affiliates or any of their respective agents or representatives
relating to the Real Property.

Section 7.6. Organizational Covenants. The Borrower Parties shall not permit or
suffer, without the prior written consent of MPT, (a) any material amendment or
modification of any Facility Borrower’s Organizational Documents (as defined
below) or any material amendment or modification of any organizational documents
of any constituent entity within such Facility Borrower, including, without
limitation, any such amendment that changes such Facility Borrower’s status as a
Single Purpose Entity or any amendment changing or modifying the governance or
structure of, or changing the manager or managing member of, such Facility
Borrower; (b) any dissolution or termination of any Facility Borrower’s
existence or sale of substantially all of any Facility Borrower’s assets,
whether by sale, transfer, merger, consolidation or otherwise; or (c) a change
in any Facility Borrower’s state of formation or any Facility Borrower’s name.
The Borrower Parties have, simultaneously with the execution of this Agreement,
delivered to MPT a true and complete copy of each Facility Borrower’s
organizational documents, whether articles of incorporation, bylaws, articles of
organization, or certificate of limited partnership, limited partnership
agreements, or limited liability company agreements, together with all other
documents creating and governing such Facility Borrower

 

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(collectively, the “Organizational Documents”). The Borrower Parties represent
and warrant that the Organizational Documents (i) were duly executed and
delivered, (ii) are in full force and effect, binding upon the applicable
Facility Borrower, and enforceable in accordance with their terms, and
(iii) constitute the entire understanding among the partners, members or owners
of the Equitable Interests of the applicable Facility Borrower. The Borrower
Parties further represent and warrant that no breach exists under any of the
Organizational Documents and no act has occurred and no condition exists which,
with the giving of notice or the passage of time or both, would constitute such
a breach under any of the Organizational Documents.

Section 7.7. Representations and Warranties. Each Facility Borrower hereby
represents and warrants to MPT, jointly and severally, that (a) it has full
legal right, power and authority to enter into this Agreement, to incur the
obligations provided for herein, and to execute and deliver the same to MPT;
(b) this Agreement has been duly executed and delivered by such Facility
Borrower and constitutes such Facility Borrower’s valid and legally binding
obligation, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, and similar laws affecting the
enforcement of creditor’s rights or contractual obligations generally and, as to
enforcement, to general principles of equity, regardless of whether applied in a
proceeding at law or in equity; (c) no approval or consent of any foreign,
federal, state, county, local or other governmental or regulatory body, and no
approval or consent of any other person is required in connection with the
execution and delivery by such Facility Borrower of this Agreement or the
consummation and performance by such Facility Borrower of the transactions
contemplated hereby; and (d) the execution and delivery of this Agreement and
the obligations created hereby have been duly authorized by all necessary
proceedings on the part of such Facility Borrower, and will not conflict with or
result in the breach or violation of any of the terms or conditions of, or
constitute (or with notice or lapse of time or both would constitute) a default
under the governing documents of such Facility Borrower, any instrument,
contract or other agreement to which it is a party or by or to which such
Facility Borrower or any of its assets or properties are bound or subject; or
any statute or any regulation, order, judgment or decree of any court or
governmental or regulatory body.

ARTICLE VIII

REPAIRS; RESERVES; RESTRICTIONS; CAPITAL ADDITIONS

Section 8.1. Maintenance; Repair and Remodel.

(a) The Borrower Parties, at their sole expense, shall keep the Real Property
and all private roadways, sidewalks and curbs appurtenant thereto (and the
Personal Property) in good first class order and repair (whether or not the need
for such repairs occurs as a result of the Borrower Parties’ use, any prior use,
the elements, the age of the Real Property or any portion thereof) and, except
as otherwise provided in Article IX and Article X, with reasonable promptness,
will make all necessary and appropriate repairs thereto of every kind and nature
whether interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen, or arising by reason of a condition
existing prior to the commencement of the Loan Term (concealed or otherwise).
All repairs shall, to the extent reasonably achievable, be at least equivalent
in quality to the original work. The Borrower Parties will not take or omit to
take any action the taking or omission of which is reasonably likely to
materially impair the value or the usefulness of the Real Property or any part
thereof for the Primary Intended Use.

 

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(b) Notwithstanding anything contained in this Agreement to the contrary, from
time to time the Borrower Parties may remodel, modify and make additions to the
Real Property which remodeling, modifications and additions are not Capital
Additions (it being understood that Capital Additions are subject to the
requirements of Section 8.3 hereof) but which are necessary or advisable for the
Primary Intended Use and which permit the Borrower Parties to fully comply with
its obligations as set forth in this Agreement. The Borrower Parties shall
undertake any such actions expeditiously and in a workmanlike manner and will
not significantly alter the character or purpose, or detract from the value or
operating efficiency of, the Real Property nor significantly impair the revenue
producing capability of the Real Property nor adversely affect the ability of
the Borrower Parties to comply with the provisions of this Agreement.

(c) The Borrower Parties shall notify MPT of any and all repairs, improvements,
additions, modifications and remodeling made to the portions of the Real
Property relating to a particular Facility in excess of One Hundred Thousand and
No/100 Dollars ($100,000.00) for the applicable Facility and obtain consent from
MPT (which consent shall not be unreasonably withheld, conditioned or delayed)
prior to making such repairs, improvements, additions, modifications or
remodeling.

(d) Except as otherwise expressly provided in this Agreement, MPT shall not
under any circumstances be required to build or rebuild any improvements on the
Real Property, or to make any repairs, replacements, alterations, restorations,
or renewals of any nature or description to the Real Property, whether ordinary
or extraordinary or capital in nature, structural or non-structural, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto in
connection with this Agreement, or to maintain the Real Property in any way.

(e) Nothing contained in this Agreement and no action or inaction by MPT shall
be construed as (i) constituting the consent or request of MPT, expressed or
implied, to any contractor, subcontractor, laborer, materialman or vendor for
the provision or performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration, addition, repair
or demolition of or to the Real Property or any part thereof, or (ii) giving the
Borrower Parties any right, power or permission to contract for, or permit the
performance of, any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim against
MPT in respect thereof or to make any agreement that may create, or in any way
be the basis for, any right, title, interest, lien, claim or other encumbrance
upon the estate of MPT in the Real Property or any portion thereof.

Section 8.2. Reserves for Major Repairs.

(a) Beginning on January 1, 2013, and on the first (1st) day of each calendar
quarter thereafter during the Loan Term, the Borrower Parties shall deliver to
MPT quarterly deposits in an amount equal to the product of (i) Two Thousand
Five Hundred and No/100 Dollars ($2,500.00) (the “Dollar Amount”), multiplied by
(ii) the number of beds placed in service or use at the Real Property, divided
by (iii) four (4) (the “Reserve”). For the period commencing on the

 

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date hereof and ending on December 31, 2013, the initial number of beds
currently placed in service or placed in use at each of the Facilities shall be
assumed to be forty (40); except for the Las Cruces Facility which shall be
assumed to be sixty (60), with the total beds placed in service or in use at all
of the Facilities as of the the date hereof is one hundred forty (140). The
Reserve shall be held by MPT for the purpose of making Major Repairs to the
applicable portions of the Real Property. Beginning on January 1, 2014, the
number of beds shall be determined by the actual number of beds placed in
service or certified to be available for use in connection with the Facilities,
which shall not be reduced without the prior written consent of MPT. MPT shall
advance to or reimburse the Borrower Parties for Major Repairs, limited to the
amount of the Reserve, upon MPT’s receipt from the Borrower Parties of
documentation of such costs that is sufficient in MPT’s reasonable judgment.
Beginning on the first Adjustment Date and on each Adjustment Date thereafter
during the Loan Term, the Dollar Amount to be multiplied by the number of beds
as provided above shall be increased by the percentage by which the CPI
published for the month which is two months prior to the applicable Adjustment
Date shall have increased over the CPI figure published for the month which is
two months prior to the previous Adjustment Date; provided, however, that in no
event shall the increase in the Dollar Amount be less than Two Percent (2%) or
more than Five Percent (5%) on any Adjustment Date. The amounts in the Reserve
shall be used as described above to pay for Major Repairs, or, in the event the
Borrower Parties fails to make any required non-Major Repairs hereunder, MPT may
use funds in the Reserve for that purpose.

(b) The Borrower Parties hereby grants to MPT a first priority security interest
in all monies deposited into the Reserve. At MPT’s request, the Borrower Parties
shall, as soon as practicable, execute all documents necessary to effect such
security interest in all monies deposited into the Reserve. So long as no Major
Event of Default has occurred, and no event has occurred which, with the giving
of notice or passage of time or both, would constitute such a Major Event of
Default hereunder, any amounts remaining in the Reserve at the expiration of
this Agreement shall be returned to the Borrower Parties; provided, however, if
such a Major Event of Default has occurred, or any event which, with the giving
of notice or passage of time or both, would constitute such a Major Event of
Default hereunder, MPT may retain all amounts remaining in the Reserve and shall
apply such amounts to any damages incurred by MPT or used to pay outstanding
obligations owed by the Borrower Parties to MPT. The Borrower Parties consents
to MPT’s pledge of the Reserve to any Facility Lender.

(c) MPT shall hold the Reserve in a separate, interest-bearing account. The
Borrower Parties shall receive all interest accrued on the Reserve in accordance
with subsection (b) above.

Section 8.3. Capital Additions.

(a) The Borrower Parties shall have the right to construct and install Capital
Additions on any parcel of the Real Property with the prior written consent of
MPT, not to be unreasonably withheld, conditioned or delayed. Borrower Parties
shall not be permitted to create any Encumbrance on such portion of the Real
Property in connection with such Capital Addition, except as provided in
Section 8.3(b). Prior to commencing construction of any Capital Addition, the
Borrower Parties shall, at their sole cost and expense, submit to MPT in writing
for MPT’s prior approval (i) a proposal setting forth in reasonable detail any
proposed Capital Addition, and (ii) such plans and specifications, certificates
of need and other approvals, permits, licenses, contracts and other information
concerning the proposed Capital Addition as MPT may reasonably request.

 

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(b) With respect to the financing for any Capital Additions, the Borrower
Parties shall first request MPT to provide funds to pay for such Capital
Addition if the Borrower Parties intend to finance such Capital Addition. If,
within thirty (30) days following MPT’s receipt of such request, MPT declines to
the Borrower Parties, the Borrower Parties may provide or arrange to finance any
such Capital Additions. Notwithstanding any other provision of this subsection
(b) to the contrary, in the event that MPT declines to finance any Capital
Additions, the Borrower Parties’ lender for Capital Additions shall have the
right to secure its loan by a junior mortgage/deed of trust upon such Capital
Additions, provided the form and substance of such deed of trust is approved by
MPT, which approval may be granted or withheld in MPT’s sole discretion.

(c) All proposed Capital Additions shall be architecturally integrated and
consistent with the applicable portion of the Real Property as determined in the
sole discretion of MPT. The Borrower Parties will provide to MPT, prior to
commencing any proposed Capital Addition, the following:

(i) certificates of insurance (including, but not limited to, endorsements
increasing the insurance coverage, if any, at the time required by Section 6.1),
required under the construction contract for the Capital Addition, showing MPT
and the Facility Lender, if any, as named obligees, additional insureds, and
loss payees;

(ii) payment and performance bonds and all other bonds reasonably required by
MPT and any Facility Lender and by any governmental authority applicable to the
Capital Addition, naming MPT and any Facility Lender as named obliges,
additional insureds and loss payee;

(iii) any information, certificates of need, regulatory approvals of
architectural plans and other certificates, licenses, permits or documents
requested by MPT which are necessary to confirm that the applicable Facility
Borrower will be able to use the Capital Addition upon completion thereof in
accordance with the Primary Intended Use, including all required federal, state
or local government licenses and approvals;

(iv) endorsements to any outstanding policy of lender title insurance covering
the Leased Property, satisfactory in form and substance to MPT (A) updating the
same without any additional exceptions, except as may be permitted by MPT, and
(B) increasing the coverage thereof by an amount equal to the Fair Market Value
of the Capital Addition;

(v) appraisals, surveys, environmental reports and assessments, engineering,
soil and property condition reports and studies, drawings, building permits,
planning studies, financial statements, and any other instruments, certificates,
documents and contracts as may be reasonably required by MPT and any Facility
Lender advancing or reimbursing any Facility Borrower for any portion of the
Capital Addition costs;

 

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(vi) assignments and consents to assignments of contracts and waivers of liens,
in forms acceptable to MPT, from each and every general contractor,
subcontractor, developer, architect, construction company, engineer and other
parties that will participate in the construction and development of such
Capital Addition to the Real Property, together with evidence satisfactory to
MPT that such waivers of liens have been duly filed in the official records of
the county in which such affected portion of the Real Property is located; and

(vii) all customary or other required loan documentation and amendments as
required by MPT.

(d) Notwithstanding any provision of this Section 8.3 to the contrary, no
Capital Additions shall be made without the consent of MPT, which consent may be
withheld in MPT’s sole discretion, if the Capital Addition Costs of such
proposed Capital Addition, when aggregated with the costs of all Capital
Additions made by the Borrower Parties, would exceed Twenty-Five Percent
(25%) of the then Fair Market Value of the affected portion of the Real Property
or would, in the reasonable judgment of MPT, diminish the value of such portion
of the Real Property. Furthermore, no Capital Addition shall be made which would
tie in or connect any portion of the Real Property and/or any Improvements on
any portion of the Real Property with any other improvements on property
adjacent to such portion of the Real Property, including, without limitation,
tie-ins of buildings or other structures or utilities, unless the Borrower
Parties shall have obtained the prior written approval of MPT, which approval
may be granted or withheld in MPT’s sole discretion.

Section 8.4. Encroachments; Restrictions. If any of the Improvements shall, at
any time, encroach upon any property, street or right-of-way adjacent to any
portion of the Real Property, or shall violate the agreements or conditions
contained in any federal, state or local law, restrictive covenant or other
agreement affecting the Real Property, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which the Real Property
or any portion thereof is subject, then, promptly upon the request of MPT, the
Borrower Parties shall, at their sole expense, subject to their right to contest
the existence of any encroachment, violation or impairment, (a) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect MPT or Borrower Parties or (b) make such changes in the Agreementd
Improvements, and take such other actions, as MPT reasonably determines, to
remove such encroachment, or to end such violation or impairment, including, if
necessary, the alteration of any of the Agreementd Improvements, and, in any
event, take all such actions as may be necessary to continue the operation of
the applicable Facility without such violation, encroachment or impairment. Any
such alteration shall be made in conformity with the applicable requirements of
Section 8.3. The Borrower Parties’ obligations under this Section 8.4 shall be
in addition to, and shall in no way discharge or diminish any obligation of, any
insurer under any policy of title or other insurance, and the Borrower Parties
shall be entitled to a credit for any sums paid by the Borrower Parties and
recovered by MPT under any such policy of title or other insurance, less MPT’s
costs and expenses to recover such sums.

 

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ARTICLE IX

FIRE AND CASUALTY

Section 9.1. Fire and Casualty.

(a) Insurance Proceeds. All proceeds payable by reason of any loss or damage to
the Real Property, or any portion thereof, during the Loan Term and insured
under any policy of insurance required by Article VI of this Agreement shall be
paid to MPT and held by MPT in trust (subject to the provisions of this
Agreement), and shall be applied as follows:

(i) If, within sixty (60) days following the date of such loss or damage the
Borrower Parties provide MPT with written notice that, in the Borrower Parties’
reasonable opinion, such portion of the Real Property relating to any Facility
can be reconstructed, repaired, restored and/or replaced to substantially the
same operating utility that it had prior to such event and in a condition
suitable for its Primary Intended Use, then at the Borrower Parties’ request and
following delivery of invoices or other appropriate documentation to MPT, all
proceeds shall be paid by MPT to the Borrower Parties from time to time to be
used, to the extent necessary, to pay for the costs and expenses of
reconstructing, repairing, restoring and/or replacing any damaged portion of the
Real Property (or other property of the Borrower Parties related to the
operation of the Facilities), or remedying any loss thereof, and debt service
payments payable during the restoration.

(ii) If, within sixty (60) days after the event causing any such loss or damage
to the Real Property, a Major Event of Default has occurred, or any event has
occurred which with the giving of notice or the passage of time, or both, would
constitute a Major Event of Default hereunder, or the Borrower Parties fail to
notify MPT that, in the Borrower Parties’ reasonable opinion, the Real Property
can be reconstructed, repaired, restored and/or replaced to substantially the
same operating utility that it had prior to such event and to a condition
suitable for its Primary Intended Use, then such proceeds, at the Borrower
Parties’ sole discretion, shall be either (A) retained by MPT and applied toward
repayment of the Loan Obligations, in any order, whether or not then due, and
the Borrower Parties, jointly and severally, shall pay to MPT on demand the
amount of any deductible or uninsured loss arising in connection therewith and
any unpaid Loan Obligations, or (B) disbursed to the Borrower Parties by MPT
from time to time following delivery of invoices or other appropriate
documentation to MPT, to be used, to the extent necessary, to pay for the costs
and expenses of reconstructing, repairing, restoring and/or replacing any
damaged portion of the Real Property or remedying any loss thereof, in which
case the Borrower Parties shall use such proceeds to cause the Real Property to
be reconstructed, repaired, restored and/or replaced to substantially the same
operating utility that the Real Property had prior to such event and to the
reasonable satisfaction of MPT.

(iii) Any excess proceeds of insurance remaining after the completion of the
restoration or reconstruction of the Real Property (or in the event neither MPT
nor the Borrower Parties are required or elect to reconstruct, repair, restore
or replace, all such

 

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insurance proceeds) shall be paid over to, or retained by the Borrower Parties.
Any remainder of such proceeds after the completion of the restoration of the
Real Property shall be paid to the Borrower Parties.

(iv) With respect to each Facility, if the cost and expense of the
reconstruction, repair, restoration, or replacement exceeds the amount of
proceeds received by MPT pursuant hereto from the insurance required under
Article VI, and the Borrower Parties are obligated hereunder to reconstruct,
repair, restore or replace the Real Property, the Borrower Parties shall be
obligated, jointly and severally, to contribute any excess amount needed to
reconstruct, repair, restore or replace the Real Property prior to use of the
insurance proceeds. Such amount shall be paid by the Borrower Parties to MPT to
be held in trust together with any other insurance proceeds for application to
the cost and expense of reconstruction, repair, restoration, or replacement as
herein provided.

(b) Uninsured Event of Damage or Destruction. If the Real Property is totally or
materially destroyed from a risk not covered by the insurance described in
Article VI but that would have been covered if the Borrower Parties carried the
insurance required to be maintained by, hereunder, then, whether or not such
damage or destruction renders the Real Property Unsuitable for its Primary
Intended Use, the Borrower Parties shall, at their sole, joint and several cost
and expense, reconstruct, repair, restore or replace the Real Property to
substantially the same condition it was in immediately before such damage or
destruction, or shall repay the Loan Obligations to MPT in full, and such damage
or destruction shall not terminate this Agreement.

(c) Damage Near End of Loan Term. Notwithstanding any provisions of this
Section 9.1 to the contrary, if damage to or destruction of the Real Property
occurs during the last twenty-four (24) months of the Loan Term, and if such
damage or destruction cannot be fully repaired and restored within six
(6) months immediately following the date of loss, and MPT shall be entitled to
retain the insurance proceeds relating thereto and apply the same toward
prepayment of the Loan Obligations, in any order, whether or not then due, in
which case the Borrower Parties, jointly and severally, shall pay to MPT on
demand the amount of any deductible or uninsured loss arising in connection
therewith and any unpaid Loan Obligations. Any insurance proceeds in excess of
the then current principal balance of the Loan shall be paid to the Borrower
Parties.

ARTICLE X

CONDEMNATION

Section 10.1. Condemnation.

(a) Parties’ Rights and Obligations. If during the Loan Term there is any Taking
of all or any part of the Real Property or any interest in this Agreement by
Condemnation, the rights and obligations of the parties shall be determined by
this Article.

 

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(b) Total Taking. If there is a Taking of all of the Real Property by
Condemnation (a “Total Taking”), the provisions of Section 10.1(d)(i) hereof
shall apply.

(c) Partial Taking. If there is a Taking of a portion of the Real Property by
Condemnation (a “Partial Taking”), this Agreement shall remain in effect if, in
MPT’s reasonable opinion exercised in good faith, the Real Property is not
thereby rendered Unsuitable for its Primary Intended Use. If, however, the Real
Property is thereby rendered Unsuitable for its Primary Intended Use, but the
Real Property can be reconstructed, repaired, restored and/or replaced to a
condition suitable for its Primary Intended Use, then, so long as no Major Event
of Default exists, and no other event has occurred that is not then cured which,
with the giving of notice or the passage of time or both, would constitute a
Major Event of Default hereunder, the Borrower Parties shall have the option to
repair or restore the Real Property, utilizing the Award as provided herein but
otherwise at their own expense, to the extent possible, to substantially the
same condition as existed immediately before the Partial Taking and the
provisions of Section 10.1(d)(ii) shall apply. Any remainder of the Award in
excess of the costs to repair and restore the Real Property shall be paid to the
Borrower Parties.

(d) Award. In the event there is any Taking, the Award shall be paid to MPT and
held by MPT in trust, subject to the provisions of this Agreement, and shall be
applied as follows:

(i) In the event there is a Total Taking, or there is a Partial Taking that
renders the Real Property Unsuitable for its Primary Intended Use and the
Borrower Parties do not exercise their option to repair or restore the Real
Property, the Award shall be paid to MPT and applied toward prepayment of the
Loan Obligations, in any order, whether or not then due, and any unpaid Loan
Obligations shall be due and payable to MPT immediately. Any remainder of the
Award in excess of the then current principal balance of the Loan shall be paid
to the Borrower Parties.

(ii) In the event there is a Partial Taking and the Borrower Parties’ exercise
their option to repair or restore the Real Property, so long as no Major Event
of Default exists (excluding any Event of Default caused by the Taking), the
Award shall be paid to the Borrower Parties upon MPT receipt of invoices or
other appropriate documentation regarding the costs and expenses for any such
repair or restoration, and the Borrower Parties shall apply the Award to the
repair and restoration of the Real Property.

(e) Temporary Taking. The Taking of the Real Property, or any part thereof, by
military or other public authority shall constitute a Taking by Condemnation
only when the use and occupancy by the Taking authority has continued for longer
than six (6) months. During any such six (6) month period all the provisions of
this Agreement shall remain in full force and effect and the Loan Obligations
shall remain payable as provided in this Agreement and the other Loan Documents.
Any Award on account of such temporary taking shall be applied first toward
payment of Loan Obligations that are due and payable during such period, and the
remaining amount of any Award shall be paid to the Borrower Parties.

 

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ARTICLE XI

ASSIGNMENT AND SUBLETTING

Section 11.1. Assignment; Lease Subordination.

(a) Assignment and Subletting. The Borrower Parties shall not assign this
Agreement without MPT’s prior written consent, which consent shall not be
unreasonably withheld, provided that such lease shall comply with the provisions
of this Section, and an original counterpart of each such lease, in form and
substance reasonably satisfactory to MPT, shall be delivered promptly to MPT.
Notwithstanding anything contained herein to the contrary, MPT and the Borrower
Parties acknowledge the existence of the Tenant Leases set forth on Schedule
11.1(a) hereof (“Existing Subleases”). Any modifications, amendments and
restatements of the Existing Subleases must be approved by MPT in accordance
with this Section.

(b) Agreement Limitations. In addition to the limitations as set forth in
subsection (a) above, all leases and subleases contemplated by this Section
shall comply with the applicable provisions of the Healthcare Fraud Laws. The
Borrower Parties agree that all Tenant Leases entered into after the date hereof
(“New Tenant Leases”) and submitted for approval of MPT as provided herein must
include provisions to the effect that (i) such New Tenant Lease is subject and
subordinate to all of the terms and provisions of the Security Documents and the
other Loan Documents and to any applicable financing documents of any Facility
Lender; (ii) from and after a Major Event of Default, Tenant will, at MPT’s
option, exerciseable at any time, attorn to MPT and recognize MPT, or its
assignee or purchaser at an applicable foreclosure or other sale, as landlord
under such Tenant Lease and waive any right the Tenant may have to terminate the
New Tenant Lease or to surrender possession thereunder, as a result thereof;
(iii) at MPT’s option, exercisable at any time after a Major Event of Default,
the Tenant under any such New Tenant Lease shall attorn to MPT and waive any
right such Tenant may have to terminate the lease or sublease, or to surrender
possession thereunder as a result of the termination of this Agreement; (iv) if
required by MPT, the obligations and performance of Tenant shall be guaranteed
by guarantors acceptable to MPT; (v) Tenant shall from time to time upon request
of the Borrower Parties or MPT furnish within ten (10) days from request an
estoppel certificate in form and content acceptable to MPT relating to the New
Tenant Lease; (vi) in the event the Tenant receives a written notice from MPT or
its assignees, if any, stating that a Major Event of Default has occurred, the
Tenant shall thereafter be obligated to pay all rentals accruing under said New
Tenant Lease directly to the Party giving such notice, or as such Party may
direct and such Tenant shall be entitled to conclusively rely on such notice, or
as such party may direct (all rentals received from the Tenant by MPT or MPT’s
assignee, if any, as the case may be, shall be credited against amounts owing by
the Borrower Parties under the Loan Documents, (vii) such New Tenant Lease shall
at all times be subject to the obligations and requirements as set forth in this
Section, and (vii) Tenant shall provide to MPT upon written request such
officer’s certificates and financial statements as MPT may request from time to
time.

Section 11.2. Sublease Subordination and Non-Disturbance. Within ten (10) days
after request by MPT with respect to any Tenant, the Borrower Parties shall
cause such Tenant to execute and deliver to MPT a subordination agreement
relating to any or all leases or subleases, which subordination agreement shall
be in such form and content as is acceptable to MPT.

 

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Within ten (10) days from the date of request of MPT or any Facility Lender with
respect to any Tenant, the Borrower Parties shall cause such Tenant, subject to
such Tenant receiving a written agreement containing a reasonable
non-disturbance provision which provides that such Tenant shall not be disturbed
in peaceful enjoyment of the applicable portion of the Real Property nor shall
the applicable sublease be terminated or canceled at any time, except as
specified in the applicable lease or sublease, to execute and deliver within
such ten (10) day period, a written agreement in a form reasonably acceptable to
such Facility Lender whereby such Tenant subordinates the lease or sublease and
all of its rights and estate thereunder to each such mortgage or deed of trust
that encumbers the Real Property or any part thereof and agrees with each such
Facility Lender that such Tenant will attorn to and recognize such Facility
Lender or the purchaser at any foreclosure sale or any sale under a power of
sale contained in any such mortgage or deed of trust, as the case may be, as MPT
under this Agreement for the balance of the Loan Term then remaining, subject to
all of the terms and provisions of the lease or sublease.

ARTICLE XII

ADDITIONAL BORROWER COVENANTS

Section 12.1. Affirmative Covenants.

(a) Payment and Performance. Each of the Borrower Parties will duly and promptly
pay and perform all of such Borrower Party’s liabilities and obligations to MPT
in accordance with the terms and conditions of this Agreement and the other Loan
Documents.

(b) Certification. At any time and from time to time within ten (10) days
following written request by MPT, the Borrower Parties will certify to MPT, in
such form and substance as are reasonably acceptable to MPT, that this Agreement
and the other Loan Documents are unmodified and in full force and effect (or
that this Agreement and the other Loan Documents are in full force and effect as
modified and setting forth the modifications), the dates to which the Loan has
been paid, that no Event of Default then exists and no event has occurred (that
has not been cured) and no condition currently exists that would, but for the
giving of any required notice or expiration of any applicable cure period,
constitute an Event of Default. Any such certification furnished pursuant hereto
may be relied upon by MPT and any prospective purchaser of or participant in the
Loan.

(c) Notifications. Each Facility Borrower shall furnish, or cause to be
furnished, to MPT the following statements, notices and certificates in such
form and detail as MPT may reasonably require:

(i) Within one hundred twenty (120) days after the end of each year, audited
Financial Statements of such Facility Borrower and Ernest Health (which
Financial Statements may be provided on a consolidated basis so long as such
consolidated Financial Statements provide a supplementary schedule of such
Facility Borrower operating results and balance sheet and statements of
operations and of cash flows) and, if such Facility Borrower owns any assets or
conducts any other operations other than the Business, then of the Facility
separately, prepared by a nationally recognized accounting

 

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firm or an independent certified public accounting firm reasonably acceptable to
MPT, which statements shall include balance sheets and statements of operations
and of cash flows, all in accordance with GAAP for the year then ended.

(ii) Within forty-five (45) days after the end of each quarter, current balance
sheets and quarterly statements of operations and of cash flows of such Facility
Borrower and Ernest Health, and, if such Facility Borrower owns any assets or
conducts any other operations other the Business, then of its Facility
separately, certified to be true and correct by an officer of such Facility
Borrower.

(iii) Within thirty (30) days after the end of each month, current balance
sheets, monthly income statements and of cash flows (if available or produced in
the ordinary course of business) of such Facility Borrower (actual and budgeted)
and statistics of its Facility, including, but not limited to, the number of
patient admissions, the number of inpatient days, the case mix index, the payor
sources for inpatient admissions (either by revenue or admissions), outpatient
utilization by service, and, if available, clinical service utilization data,
and statements of Cash Collections (including a calculation of the percentage of
net revenues represented by Cash Collections) for each such month, all of which
shall be certified to be true and correct by an officer of such Facility
Borrower.

(iv) Within thirty (30) days after the end of each calendar year, a list of the
names, specialties, and ages of all active medical staff members of the Facility
operated by such Facility Borrower, certified to be true and correct by an
officer of such Facility Borrower.

(v) Within ten (10) days after receipt, any and all notices (regardless of form)
from any and all licensing and/or certifying agencies that any license or
certification, including, without limitation, the Medicare and/or Medicaid
certification and/or managed care contract relating to the Facility operated by
such Facility Borrower is being downgraded to a substandard category, revoked,
or suspended, or that action is pending or being considered to downgrade to a
substandard category, revoke, or suspend such Facility’s license or
certification, including, without limitation, a Facility’s Medicare IRF
Certification or Medicare LTCH Certification, as applicable.

(vi) Upon MPT’s request, each Facility Borrower and Ernest Health shall furnish
to MPT a certificate in form acceptable to MPT certifying that no Event of
Default then exists and no event has occurred (that has not been cured) and no
condition currently exists that would, but for the giving of any required notice
or expiration of any applicable cure period, constitute an Event of Default, or
disclosing that such an event or condition, if any, exists.

(vii) Within two (2) Business Days after receipt, each Facility Borrower shall
furnish to MPT copies of all notices and demands from any third-party payor,
including, without limitation, Medicare and/or Medicaid, concerning any
overpayment which will or may result in a repayment or a refund in excess of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00) with respect to such
Facility Borrower. Each Facility Borrower hereby agrees that in the event of
receipt of such notices or demands MPT shall have the right, at MPT’s option, to
participate in the appeal of such notices and demands.

 

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(viii) Each Facility Borrower shall furnish to MPT prompt written notice of, and
any information related to, any governmental investigations of such Facility
Borrower or any Guarantor (or any of their respective Affiliates), or any
inspections or investigations of the Facility operated by such Facility Borrower
which are conducted by the United States Attorney, State Attorney General, the
Office of the Inspector General of the Department of Health and Human Services,
or any other Governmental Body, and provide to MPT, on a monthly basis, ongoing
status reports (in form and content acceptable to MPT) of any such government
investigations.

(ix) Each Facility Borrower shall furnish to MPT immediately upon receipt
thereof copies of all pre-termination notices from Medicare and/or Medicaid, all
notices of adverse events or deficiencies as defined by the regulations and
standards of the state Medicare and/or Medicaid certification agency, the Joint
Commission (formerly known as the Joint Commission on the Accreditation of
Healthcare Organizations) (the “Joint Commission”) or the equivalent accrediting
body of the state which has jurisdiction over such Facility.

(x) With respect to each Facility, such Facility Borrower shall furnish to MPT
immediately upon receipt thereof copies of all notices that such Facility
Borrower, any Guarantor or their respective Affiliates are not, with respect to
such Facility, in compliance with the Standards for Privacy of Individually
Identifiable Health Information and the Transaction and Code Set Standards which
were promulgated pursuant to HIPAA.

(xi) Each Facility Borrower shall provide to MPT immediate written notice of any
default or event of default (or the occurrence of any event or condition that
would with notice or the passage of time constitute such a default or event of
default) with respect to any Material Obligation of such Facility Borrower or
Ernest Health, including any RFFE Loan, and upon MPT’s request, such Facility
Borrower shall furnish to MPT a certificate in form acceptable to MPT certifying
that, with respect to each such Material Obligation, no default or event of
default then exists and no event has occurred and no condition currently exists
that would, but for the giving of any required notice or expiration of any
applicable cure period, constitute a default or event of default thereunder.

(xii) With reasonable promptness, such other information respecting the
financial condition and affairs of the Borrower Parties, Ernest Health and their
respective Affiliates as MPT may reasonably request from time to time.

(d) Inspection. The Borrower Parties shall permit MPT, or its designated
Affiliate, and their respective authorized representatives to inspect the Real
Property during usual business hours subject to any security, health, safety or
confidentiality requirements of the Borrower Parties, any governmental agency,
any Insurance Requirements relating to the Real Property, or imposed by law or
applicable regulations, except that, in the event of an emergency, MPT shall

 

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have the right to inspect the Real Property upon reasonable notice (which in
this circumstance may be verbal) under the circumstances to the Borrower
Parties. On January 1, 2013, the Borrower Parties shall pay to MPT, or its
designated Affiliate, and on each anniversary thereof an amount of Seven
Thousand Five Hundred and No/100 Dollars ($7,500.00) per Facility campus (it
being agreed that, for purposes of determining the annual Inspection Fee payable
by the Borrower Parties, any multi-hospital campus shall constitute one (1(
Facility, per year to cover the cost of the physical inspections of the Real
Property (the “Inspection Fee”). Beginning on January 1, 2014 and on each
Adjustment Date thereafter during the Loan Term, the amount of the Inspection
Fee shall be increased by the percentage by which the CPI published for the
month which is two months prior to the applicable Adjustment Date shall have
increased over the CPI figure published for the month which is two months prior
to the previous Adjustment Date; provided, however, that in no event shall the
increase in the Inspection Fee be less than Two Percent (2%) or more than Five
Percent (5%) on any Adjustment Date. The Borrower Parties’ payment of the
Inspection Fee shall be in addition to any other cost, expense or reimbursement
obligations as set forth in this Agreement.

Section 12.2. Management Agreements. The Borrower Parties shall not engage or
terminate any Management Company, without MPT’s prior written consent, which
consent shall be in MPT’s sole discretion; provided, however, that MPT hereby
approves the Existing Management Company as the Management Company for the
Facilities. The Borrower Parties shall, if required by MPT, assign all of the
Borrower Parties’ rights under any of the Management Agreements to MPT and MPT
shall be entitled to assign same to any third party, including any Facility
Lender. At the request of MPT from time to time, the Borrower Parties shall
execute and deliver an assignment and/or subordination agreement relating to any
Management Agreement, which shall be in substantially the form of the
Subordination Agreement attached hereto as Exhibit D (the “Subordination
Agreement”). The Borrower Parties shall execute and deliver such assignment
and/or subordination agreement to MPT within ten (10) Business Days after MPT’s
request. The Borrower Parties agree that execution of a subordination agreement
in substantially the form of the Subordination Agreement shall be a precondition
to the Borrower Parties entering into any future Management Agreement. The
Borrower Parties shall require any Management Company to execute and deliver to
MPT within ten (10) Business Days from MPT’s request an estoppel certificate, as
required by MPT and/or any lender providing financing to MPT, in such form and
content as is acceptable to MPT and/or such lender.

Section 12.3. Noncompetition.

(a) The Borrower Parties agree that while the Agreement is in place and, if the
there is an Event of Default hereunder resulting in an acceleration of the Loan
Obligations, then for a period of three (3) years thereafter (the “Noncompete
Period”), none of the Borrower Parties shall, directly or indirectly, acquire,
finance, guarantee indebtedness, own, lease, manage, develop or provide services
in connection with the acquisition, ownership, operation or development of any
real estate located within ten (10) miles of any point on or within the Real
Property, which real estate is used in a Competing Business. Any violation of
the provisions of this Section 12.3 shall suspend the Noncompete Period for the
duration of such violation. The term “Competing Business” means any healthcare
business which involves the operation of a facility in which skilled nursing,
rehabilitation, and long term care services are provided; provided, however,
that the foregoing shall not prohibit any of the Borrower Parties from
acquiring, owning, operating or developing real estate, the acquisition,
ownership, operation or development of which by such Borrower Party will not
have an adverse effect on the Real Property or the ability of any of the
Borrower Parties to perform their obligations under this Agreement, as
determined in the reasonable discretion of MPT.

 

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(b) The Borrower Parties agree that the restrictions contained herein are
reasonable and necessary to protect the legitimate interests of MPT and that any
violation of the provisions would result in damages which cannot be adequately
compensated by money alone. The Borrower Parties agree that MPT will be entitled
to injunctive or other equitable relief without proving actual damages or
posting any bond in the event of any violation of the restrictions contained
herein; provided, however, that the foregoing shall not limit or be construed to
prohibit or limit the right of MPT to pursue any other legal and equitable
remedies available to it on account of such breach or violation, including the
recovery of damages from the Borrower Parties.

(c) If any court shall hold that the duration or scope of this Section 12.3
(geographic or otherwise) is unreasonable or invalid, then the provisions of
this Section 12.3 shall remain in effect for whatever time period or geographic
area that such court does not declare to be unreasonable or invalid. In
addition, if any court shall hold that the duration or scope (geographic or
otherwise) of this Section 12.3 is unreasonable or invalid, then, to the extent
permitted by law, the court may prescribe a maximum duration or scope
(geographic or otherwise) that is judicially enforceable and not unreasonable
and the parties agree to accept such judicial determination, which the parties
agree shall be substituted in place of any and every judicially unenforceable
provision of this Section 12.3, and that this Section 12.3, as so modified,
shall be fully enforceable as if originally executed in such manner.

(d) The terms of this Section 12.3 are intended to comply with all applicable
rules and regulations of all governmental and regulating authorities.
Accordingly, the Parties agree to renegotiate, in good faith, any term,
condition or provision of this Section 12.3 determined to be in contravention of
any regulation, policy or law of any such authority. All other provisions hereof
shall remain enforceable to the fullest extent permitted by law.

ARTICLE XIII

DEFAULT

Section 13.1. Events of Default. The occurrence of any one or more of the
following events (individually, an “Event of Default”) shall constitute Events
of Default or defaults hereunder:

(a) if Borrower Parties shall fail to make a payment of the Loan Obligations or
any other monetary obligation when the same becomes due and payable by the
Borrower Parties under this Agreement, the Note or the other Loan Documents
(including, but not limited to, any failure to make Reserve deposits and the
failure to pay Insurance Premiums or Impositions) and the same shall remain
unpaid for more than five (5) days following receipt by the Borrower Parties of
written notice thereof from MPT; provided however, in no event shall MPT be
required to give more than two (2) such written notices hereunder during any
calendar year; or

(b) if Borrower Parties shall fail to observe or perform any other term,
covenant or condition of this Agreement and such failure is not cured by
Borrower Parties within a period of

 

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thirty (30) days after receipt by Borrower Parties of written notice thereof
from MPT, unless such failure cannot with due diligence be cured within a period
of thirty (30) days (in MPT’s reasonable discretion), in which case such failure
shall not be deemed to continue so long as Borrower Parties commence to cure
such failure within the thirty (30) day period and proceeds with due diligence
to complete the curing thereof within sixty (60) days after receipt by Borrower
Parties of MPT’s notice of default (or such longer period as is reasonably
required in the determination of MPT to effect such cure if the Borrower Parties
are diligently proceeding to do so); provided however, in no event shall MPT be
required to give more than one (1) notice and cure period for the Borrower
Parties’ failure to observe or perform the same (or repetitive) covenant or
condition in any consecutive twelve (12) month period; or

(c) if (i) any Facility Borrower or any Guarantor shall admit in writing its
inability to pay its debts as they become due; or (ii) any Facility Borrower or
any Guarantor shall file a petition in bankruptcy as a petition to take
advantage of any insolvency act; or (iii) any Facility Borrower or any Guarantor
shall be declared insolvent according to any law; or (iv) any Facility Borrower
or any Guarantor shall make any general assignment for the benefit of its
creditors; or (v) if the estate or interest of any Facility Borrower in the Real
Property or any part thereof shall be levied upon or attached in any proceeding
and the same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by such
Facility Borrower of written notice thereof from MPT (unless such Facility
Borrower shall be contesting such lien or attachment in good faith in accordance
with Article XVIII); or (vi) any petition shall be filed against any Facility
Borrower or any Guarantor to declare such Facility Borrower or such Guarantor
bankrupt, to take advantage of any insolvency act, or to delay, reduce or modify
such Facility Borrower’s or such Guarantor’s capital structure and the same
shall not be removed or vacated within ninety (90) days from the date of its
creation, service or attachment; or (vii) any Facility Borrower or any Guarantor
shall, after a petition in bankruptcy is filed against it, be adjudicated a
bankrupt, or a court of competent jurisdiction shall enter an order or decree,
with or without the consent of such Facility Borrower or Guarantor, as the case
may be, appointing a trustee, examiner or receiver of such Facility Borrower or
Guarantor or the whole or substantially all of its property, or approving a
petition filed against such Facility Borrower or Guarantor seeking
reorganization or arrangement of such Facility Borrower or Guarantor under the
federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof, and such judgment, order or decree shall
not be vacated or set aside or stayed within ninety (90) days from the date of
the entry thereof; or

(d) if any Facility Borrower shall have any of its Licenses, or participation or
certification in Medicare or Medicaid or any material other third party payor
program, terminated by the applicable government program for fraud or violation
of the terms of such program; or

(e) a Change of Control Transaction shall occur which is not approved by MPT in
advance; or

(f) if, with respect to each portion of the Real Property relating to a
Facility, the applicable Facility Borrower abandons or vacates the applicable
Facility (such Facility Borrower’s absence from the applicable Facility for
thirty (30) consecutive days shall constitute abandonment), or the applicable
Facility Borrower fails to continuously operate its Facility in accordance with
the terms of this Agreement; or

 

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(g) if any Facility Borrower or any Guarantor shall be liquidated or dissolved,
or shall begin proceedings toward such liquidation or dissolution, or shall, in
any manner, permit the sale or divestiture of substantially all of its assets or
any such Facility Borrower or such Guarantor into, or a sale of substantially
all of such Facility Borrower’s or such Guarantor shall enter into an agreement
to do the same; or

(h) a monetary default or a material non-monetary default shall occur under any
other Loan Document or any Other Agreement, which default is not cured within
any applicable notice or cure period as provided therein; or

(i) any Facility Borrower shall directly or indirectly encumber (by lien, junior
mortgage, or otherwise), pledge, convey, sell, transfer or assign any or all of
its right, title or interest in any portion of the Real Property; or

(j) if, on March 31, 2013 and at any time thereafter during the Term, the
combined EBITDAR of Ernest Health and its subsidiaries shall fail to equal or
exceed One Hundred Twenty-Five Percent (125%) of the Combined Fixed Charges, and
such failure shall continue for a period of thirty (30) days after receipt by
the Borrower Parties of written notice thereof from MPT. Compliance with the
foregoing covenant shall be determined utilizing trailing twelve (12) month
operating and financial results and measured on a calendar quarterly basis;
provided, however, that until March 31, 2014, operating and financial results of
Ernest Health and its subsidiaries shall be measured from January 1, 2013.

Section 13.2. Remedies. Upon the occurrence of an Event of Default hereunder,
MPT shall be entitled, in its sole and absolute discretion, to pursue any one or
more of the following remedies, in addition to any remedies which may be
permitted by law, equity or by other provisions of this Agreement or the other
Loan Documents (including, without limitation, the Security Documents), without
notice or demand, except as expressly hereinafter provided:

(a) MPT may (i) declare all Loan Obligations relating to the Facility from which
such Event of Default emanated or to which such Event of Default related
primarily, in accordance the

 

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allocations set forth in Schedule 2.1, immediately due and payable at once,
without presentment, demand, protest, or further notice of any kind, all of
which are expressly waived by the Borrower Parties; or (ii) if there has
occurred a Major Event of Default, declare all Loan Obligations relating to any
one or more (including all, if so elected by MPT) of the Facilities, regardless
of whether such Major Event of Default emanated from or related primarily to a
single Facility (whether one or more, and whether pursuant to clause (i) or
(ii), the “Defaulted Property”), and, in either such event, the applicable Loan
Obligations shall become immediately due and payable to MPT.

(b) MPT may, at its option, foreclosing under any one or more of the Mortgages
relating to the Defaulted Property.

(c) MPT may exercise all rights and remedies set forth in Section 3.1 regarding
escrowed or deposited funds and apply such funds to the Loan Obligations in such
order as MPT may determine.

(d) MPT, at its option, may (i) institute and prosecute proceedings in any court
of competent jurisdiction to pursue any remedies available in law or in equity,
including, without limitation, the recovery of damages, the enforcement of
specific performance or to obtain an injunction, or (ii) pursue any and all
rights or remedies available to MPT under any Loan Document. No such termination
and/or subsequent election by MPT hereunder shall in any way limit, qualify or
otherwise affect the obligations of the Borrower Parties with respect to the
Loan Obligations of their indemnification obligations hereunder.

(e) MPT, at its option, may effect a sale, transfer or assignment of the
Collateral relating to the Defaulted Property. Notwithstanding anything
contained herein to the contrary, for the purpose of effecting the sale,
transfer or assignment described herein, the Borrower Parties hereby nominate
and irrevocably designates and appoints MPT its true and lawful agent and
attorney-in-fact, in the name of the Borrower Parties, as applicable, or in the
name of MPT, or in the name of a designee of MPT to do all acts and things and
execute all documents which MPT may deem necessary or desirable to effect the
sale, transfer or assignment as set forth herein, including, without limitation,
preparing, signing and filing any and all agreements, documents and applications
necessary to effect such sale, transfer or assignment. This power is coupled
with MPT’s ownership of the security interest in the Collateral and all
incidental rights attendant to any and all of the rights set forth herein.

(f) Terminate this Agreement and any of the other Loan Documents relating to the
Defaulted Property (whether one or more, the “Terminated Facility”) and all
future liability or obligation of MPT relating to such Terminated Facility, but
without affecting MPT’s liens on the Collateral and without affecting the Loan
Obligations.

(g) In addition to any other available remedies, and as provided in the
Subordination Agreement, MPT may, at MPT’s option, take any enforcement action
as permitted under and in accordance with the terms of the Subordination
Agreement.

 

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Section 13.3. Remedies with Respect to Licenses.

(a) Following an Event of Default resulting in a termination of this Agreement
and/or the foreclosure of the Real Property relating to any one or more of the
Facilities (unless the Borrower Parties pay in full the Loan Obligations
pursuant to Section 14.1(a)), none of the Borrower Parties shall retain any
rights whatsoever to the Licenses relating to such Facilities, nor shall the
Borrower Parties move or attempt to move the Licenses to any other location. To
the extent that the Borrower Parties have or will extend any right, title, or
claim of right whatsoever in and to the Licenses or the right to operate any
such Facilities, all such right, title, or claim of right shall automatically
revert to MPT or to MPT’s designee upon an Event of Default (unless the Borrower
Parties pay in full the Loan Obligations pursuant to Section 14.1(a)), to the
extent permitted by law. Upon any such Event of Default, to the extent permitted
by law, MPT shall have the sole, complete, unilateral, absolute and unfettered
right, without additional consideration, to cause all Licenses to be reissued in
MPT’s name or in the name of MPT’s designee upon application therefor to the
issuing authority, and to further have the right to have any and all
Participation Agreements issued in MPT’s name or in the name of MPT’s designee.

(b) Upon an Event of Default and for reasonable periods of time immediately
before and after such Event of Default, and in connection with MPT’s exercise of
its rights and remedies with respect to one or more of the Facilities, each of
the Borrower Parties shall use its best efforts, without additional
consideration to the Borrower Parties, to facilitate an orderly transfer of the
operation and occupancy of such Facilities to MPT or any new lessee or operator
selected by MPT, it being understood and agreed that such cooperation shall
include, without limitation, (a) the applicable Facility Borrower’s transfer and
assignment of any and all Licenses, if and to the extent permitted by law, to
MPT, MPT’s nominee or MPT’s new lessee or operator; (b) such Facility Borrower’s
use of best efforts to maintain, to the maximum extent allowed by applicable
law, the effectiveness of any and all such Licenses until such time as any new
Licenses necessary for any new lessee or operator to operate the applicable
Facility have been issued; and (c) the taking of such other actions as are
required by applicable law or as are reasonably requested by MPT. The remedies
provided in this Section 13.3 are in addition to any other remedies provided in
this Agreement.

Section 13.4. Cumulative. The remedies of MPT in this Agreement or in any other
Loan Document, or at law or in equity, shall be cumulative and concurrent and
may be pursued singly, successively or together in MPT’s discretion.
Notwithstanding any statement contained in this Agreement to the contrary,
termination of this Agreement shall not relieve any Borrower Party from
liability for any breach or violation of this Agreement that arose prior to such
termination.

Section 13.5. Waiver. The Borrower Parties waive, to the extent permitted by
applicable law, (a) any right of redemption, re-entry or repossession; (b) any
right to a trial by jury; and (c) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt.

Section 13.6. Application of Funds. Any payments otherwise payable to the
Borrower Parties which are received by MPT under any of the provisions of this
Agreement during the existence or continuance of any Event of Default shall be
applied to the Loan Obligations in the order which MPT may reasonably determine.

 

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Section 13.7. Notices by MPT. The provisions of this Article concerning notices
shall be liberally construed insofar as the contents of such notices are
concerned, and any such notice shall be sufficient if reasonably designed to
apprise the Borrower Parties of the nature and approximate extent of any
default, it being agreed that the Borrower Parties are in good or better
position than MPT to ascertain the exact extent of any default by the Borrower
Parties hereunder.

Section 13.8. Additional Expenses. It is further agreed that, in addition to
payments required pursuant to the provisions of Section 21.3, Borrower Parties
shall compensate MPT and its Affiliates for (a) all expenses incurred by MPT and
its Affiliates in enforcing the provisions of this Agreement and in repossessing
the Collateral or any portion thereof (including among other expenses, any
increase in insurance premiums caused by the vacancy of all or any portion of
the Real Property); (b) all expenses incurred by MPT and its Affiliates in
selling or reletting the Real Property (including among other expenses, repairs,
remodeling, replacements, advertisements and brokerage fees); (c) all
concessions granted to buyers or new Tenants upon selling or reletting the Real
Property (including among other concessions, renewal options); (d) MPT’s and its
Affiliates’ reasonable attorneys’ fees and expenses; and (e) all losses incurred
by MPT and its Affiliates as a direct or indirect result of such Event of
Default (including, among other losses, any adverse action by Facility Lenders).

Section 13.9. MPT’s Contractual Security Interest. In order to secure the
payment of all Loan Obligations due and to become due hereunder and the faithful
performance of this Agreement by the Borrower Parties and to secure all other
obligations, indebtedness and liabilities of the Borrower Parties to MPT, now
existing or hereafter incurred, contemporaneously with the execution of this
Agreement, the Borrower Parties have executed the Security Agreement granting
MPT and certain of its Affiliates certain liens and security interests as
therein described. Upon the occurrence of an Event of Default by Borrower
Parties, MPT shall have the remedies set forth in the Security Agreement, in
addition to all remedies available at law or in equity and the remedies set
forth in this Agreement and the other Loan Documents.

Section 13.10. Assignment of MPT’s Security Interest. The Borrower Parties
acknowledge and agree that, contemporaneously with the execution of this
Agreement, MPT has collaterally assigned to certain Affiliates of MPT the Note
and the various security interests granted by the Borrower Parties to MPT in
connection with this Agreement.

ARTICLE XIV

OPTION TO PURCHASE

Section 14.1. Options to Purchase Real Property.

(a) Upon the occurrence of an Event of Default, in addition to other rights and
remedies MPT may have in this Agreement and at law and in equity, MPT and any
designee or assignee of MPT (collectively, the “Purchaser”), shall have the
right and option (the “Option”), but not the obligation, for a period of thirty
(30) days following the date of the occurrence of an Event of Default (the
“Option Period”), to purchase the Real Property relating to any one or

 

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more of the Facilities from the applicable Facility Borrower in accordance with
this Article XIV. If the Purchaser determines to exercise its option to purchase
the Real Property relating to any one or more of the Facilities pursuant hereto
(the “Option Property”), the Purchaser shall, within the Option Period, deliver
a written notice of such determination (the “Option Notice”) to the Borrower
Parties. Upon the Borrower Parties’ timely receipt of such Option Notice, the
Borrower Parties shall be obligated to sell, assign, transfer and convey all of
the Option Property to the Purchaser for a purchase price equal to the greater
of (i) the outstanding principal amount of the Loan Obligations allocable to the
Option Property as of the Option Closing Date in accordance with the allocation
schedule attached hereto as Schedule 2.1, as further increased by any portion of
the principal amount of the Loan Obligations that has been prepaid on or prior
to the Option Closing Date, whether by the application of insurance proceeds or
Awards or otherwise; and (ii) the Fair Market Value thereof (the “Option
Price”). In the event that MPT purchases less than all of the Real Property as
provided herein, the Borrower Parties shall be released from all obligations and
liabilities arising under this Agreement and the other Loan Documents relating
to such purchased Real Property in accordance with the allocation schedule
attached hereto as Schedule 2.1, but the Loan Obligations allocable to any
portion of the Real Property not purchased by MPT shall remain outstanding and
due and payable in accordance with the Loan Documents.

(b) In addition to the Option granted to MPT under Section 14.1(a), at any time
until fifth (5th) anniversary of the date hereof (the “Special Option Period”),
whether or not any Event of Default shall have occurred, Purchaser shall have
the right and option (the “Special Option”), but not the obligation, to purchase
the Real Property relating to any one or more of the Facilities from the
applicable Facility Borrower. If MPT determines to exercise its option to
purchase the Real Property relating to any one or more of the Facilities
pursuant hereto (the “Special Option Property”), MPT shall, within the Special
Option Period, deliver a written notice of such determination (the “Special
Option Notice”) to the Borrower Parties. Upon the Borrower Parties’ timely
receipt of such Special Option Notice, the Borrower Parties shall be obligated
to sell, assign, transfer and convey all of the Special Option Property to the
Purchaser for a purchase price equal to the outstanding principal amount of the
Loan Obligations allocable to the Special Option Property as of the Option
Closing Date in accordance with the allocation schedule attached hereto as
Schedule 2.1, as further increased by any portion of the principal amount of the
Loan Obligations that has been prepaid on or prior to the Option Closing Date,
whether by the application of insurance proceeds or Awards or otherwise (the
“Special Option Price”). In the event that the Purchaser purchases less than all
of the Real Property as provided herein, the Borrower Parties shall be released
from all obligations and liabilities arising under this Agreement and the other
Loan Documents relating to such purchased Real Property in accordance with the
allocation schedule attached hereto as Schedule 2.1, but the Loan Obligations
allocable to any portion of the Real Property not purchased by the Purchaser
shall remain outstanding and due and payable in accordance with the Loan
Documents.

Section 14.2. Option to Purchase Personal Property. In the event that MPT
exercises an option described in Section 14.1, in addition to other rights and
remedies MPT may have in this Agreement and at law and in equity, the Purchaser
shall have the right and option, but not the obligation, on the Option Closing
Date to purchase from the Borrower Parties all of the Personal Property relating
to the Real Property purchased by Purchaser and all rights title, and interest
of the Borrower Parties therein for an amount equal to the net sound insurable
value thereof

 

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(current replacement cost less accumulated depreciation on the books of the
Borrower Parties pertaining thereto). If the Purchaser determines to exercise
its option pursuant hereto, then the Purchaser shall indicate the same in the
Option Notice or Special Option Notice and the Borrower Parties shall be
obligated to sell, assign, transfer and convey to the Purchaser on an AS IS,
WHERE IS BASIS, and without representation or warranty of any kind or nature
whatsoever, express or implied, all of the Personal Property and the Borrower
Parties’ rights, title and interest therein subject to the terms and conditions
set forth herein. Notwithstanding anything contained in this Section 14.2 to the
contrary, the options to purchase granted under this Section 14.2, do not
pertain to any of the Licenses, it being understood and agreed that all matters
relating to the transfer of the Licenses are addressed in Section 13.3.

Section 14.3. Payment of Purchase Price. In the event the purchase transaction
contemplated by this Article XIV is consummated, on the Option Closing Date the
applicable purchase price shall be paid into escrow and applied, first, towards
payment of the outstanding Loan Obligations and, then, the balance of the
purchase price, if any, shall be paid through escrow to the Borrower Parties.
The original Note shall be canceled or amended at closing as necessary to
reflect the payment of the Loan Obligations. Notwithstanding any provision
herein to the contrary, in the event that the purchase transactions contemplated
by this Article XIV are consummated, the Borrower Parties shall pay all Base
Interest and other charges and amounts accruing under the Note but unpaid
through the Option Closing Date at the closing of such transaction and, if the
Borrower Parties shall fail to do so, MPT may offset the amount of such accrued
and unpaid Base Interest and other charges against the amount of the aggregate
purchase price payable to the Borrower Parties pursuant to this Article XIV.

Section 14.4. Closing of Purchase. Any purchase and sale pursuant to this
Article XIV shall be handled through deliveries into escrow on a mutually
agreeable date (the “Option Closing Date”) which shall not be later than sixty
(60) days following the expiration of the Option Period or Special Option
Period, as applicable. The Borrower Parties shall, upon receipt from MPT (which
may be through escrow) of the applicable Option Price or Special Option Price
and the other closing documents to which MPT is a party, deliver to the
Purchaser, which may be through escrow, a special warranty deed, or other
appropriate instrument of conveyance conveying the entire interest of the
Borrower Parties in and to the Option Property or Special Option Property to the
Purchaser free and clear of all Liens other than (a) those that the Borrower
Parties have agreed hereunder to pay or discharge; (b) those Liens, if any,
which the Purchaser has agreed in writing to accept and to take title subject
to; and (c) the Permitted Exceptions applicable to such portion of the Real
Property. All expenses of the conveyance, including, without limitation, the
cost of title examination or standard coverage title insurance, survey,
attorneys’ fees incurred by MPT in connection with such conveyance, transfer
taxes, prepayment penalties, recording fees and similar charges shall be paid by
the Borrower Parties. Time shall be of the essence in the performance of the
Parties’ obligations under this Article XIV.

Section 14.5. Proration. All rent, income, expenses, utility charges and real
and personal property taxes relating to the ownership and operation of the Real
Property, the Personal Property and the Facilities purchased by the Purchaser
pursuant to this Article XIV shall be equitably prorated and paid as of the
Option Closing Date, with the Borrower Parties responsible therefor to the
extent such items relate to the time period prior to and ending on the Option
Closing Date.

 

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ARTICLE XV

APPRAISAL

If it becomes necessary to determine the Fair Market Value of any portion of the
Real Property relating to a particular Facility, each party, within ten
(10) Business Days following the date of the event which makes such
determination necessary, shall, by notice to the other, appoint an appraiser
(each of whom must be a member of the AIREA and adhere to the USPAP standards in
the preparation of the appraisal). The appraisers thus appointed shall appoint a
third appraiser (such third appraiser must also be a member of the AIREA and
adhere to the USPAP standards in the preparation of the appraisal) and such
third appraiser shall appraise the portion of the Real Property relating to such
Facility to determine the Fair Market Value thereof; provided, however, that if
a party fails to appoint an appraiser within such required period, the sole
appraiser appointed shall conduct the appraisal and the parties shall use
commercially reasonable efforts to cause such appraisal to be completed within
forty-five (45) days following the event which makes such determination
necessary. This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. MPT and the Borrower Parties shall each
pay one-half ( 1/2) of all costs and expenses incurred in connection with such
appraisal. Any appraisal shall assess the Fair Market Value of the portion of
the Real Property relating to such Facility as of the date of the event which
makes such assessment necessary.

ARTICLE XVI

RESERVED

ARTICLE XVII

MPT’S RIGHT TO CURE

Subject to the provisions of Article XVIII relating to permitted contests, if
any of the Borrower Parties shall fail to make any payment, or to perform any
act required to be made or performed by the Borrower Parties under this
Agreement and to cure the same within the relevant time periods provided in
Section 13.1, or if a breach or default or event of default occurs, or an event
or condition occurs that, with notice or passage of time, would constitute such
a default or event of default, with respect to any Material Obligation,
including any Material Obligation relating to any receivables or working capital
loan or financing provided to any of the Borrower Parties for the purchase or
lease of any of the Personal Property of any of the Borrower Parties
(collectively the “RFFE Loans”), and such default or event of default is not
cured or waived within the applicable cure period provided by the document
evidencing the Material Obligation, MPT, without waiving or releasing any
obligation or Event of Default, may (but shall be under no obligation to) at any
time thereafter make such payment or perform such act for the account and at the
expense of the Borrower Parties, and may, to the extent permitted by law, enter
upon the Real Property for such purpose and take all such action thereon as, in
MPT’s sole discretion, may be necessary or appropriate therefor. No such entry
shall be deemed

 

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an eviction of any of the Borrower Parties. All sums so paid by MPT and all
costs and expenses (including, without limitation, reasonable attorneys’ fees
and expenses, in each case, to the extent permitted by law) so incurred,
together with a late charge thereon (to the extent permitted by law) at the
Default Rate from the date on which such sums or expenses are paid by MPT until
reimbursed, shall be paid by the Borrower Parties, jointly and severally, to MPT
on demand. The Borrower Parties shall provide to MPT immediate written notice of
any default or event of default (or the occurrence of any event or condition
that would with notice or passage of time constitute such a default or event of
default) with respect to any Material Obligation, including any RFFE Loan that
is a Material Obligation.

ARTICLE XVIII

PERMITTED CONTESTS

After obtaining prior written approval from MPT, the Borrower Parties, not to be
unreasonably withheld, conditioned or delayed, at the Borrower Parties’ expense,
may contest, by appropriate legal proceedings conducted in good faith and with
due diligence, the amount, validity or application, in whole or in part, of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Article V, provided that
(a) in the case of an unpaid Imposition, lien, attachment, levy, encumbrance,
charge or claim, the commencement and continuation of such proceedings shall
suspend the collection thereof from MPT and from the Real Property; (b) neither
the Real Property nor any part thereof or interest therein would, as determined
in MPT’s sole and absolute discretion, be in any immediate danger of being sold,
forfeited, attached or lost; (c) in the case of a Legal Requirement, MPT would
not be in any danger whatsoever of civil or criminal liability for failure to
comply therewith pending the outcome of such proceedings; (d) in the event that
any such contest shall involve a sum of money or potential loss in excess of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00), then, in any such
event, if the Consolidated Net Worth of the Borrower Parties and the Guarantor
is then in excess of Fifty Million and No/100 Dollars ($50,000,000.00), then the
Borrower Parties shall deliver to MPT an Officer’s Certificate to the effect set
forth in clauses (a), (b) and (c), to the extent applicable; (e) in the case of
a Legal Requirement and/or an Imposition, lien, encumbrance or charge, the
Borrower Parties shall give such reasonable security as may be demanded by MPT
to insure ultimate payment of the same and to prevent any sale or forfeiture of
the affected portion of the Real Property by reason of such non-payment or
non-compliance; provided, however, the provisions of this Article XVIII shall
not be construed to permit the Borrower Parties to contest the payment of the
Loan Obligations (except as to contests concerning the method of computation or
the basis of levy of any Imposition or the basis for the assertion of any other
claim) or any other sums payable by the Borrower Parties to MPT hereunder;
(f) in the case of an Insurance Requirement, the coverage required by Article
XIII shall be maintained; and (g) if such contest be finally resolved against
MPT or the Borrower Parties, the Borrower Parties shall, as Additional Charges
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or Insurance Requirement. MPT, at the Borrower Parties’ expense,
shall execute and deliver to the Borrower Parties such authorizations and other
documents as may reasonably be required in any such contest and, if reasonably
requested by the Borrower Parties or if MPT so desires, MPT shall join as a
party therein. The Borrower Parties shall indemnify and save MPT harmless
against any liability, cost or expense of any kind that may be imposed upon MPT
in connection with any such contest and any loss resulting therefrom

 

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ARTICLE XIX

INDEMNIFICATION

NOTWITHSTANDING THE EXISTENCE OF ANY INSURANCE OR SELF INSURANCE PROVIDED FOR IN
ARTICLE VI, AND WITHOUT REGARD TO THE POLICY LIMITS OF ANY SUCH INSURANCE OR
SELF INSURANCE, IN ADDITION TO ANY OTHER INDEMNIFICATION OBLIGATIONS OF THE
BORROWER PARTIES AND GUARANTORS AS PROVIDED IN THIS AGREEMENT, THE BORROWER
PARTIES WILL PROTECT, INDEMNIFY, SAVE HARMLESS AND DEFEND MPT FROM AND AGAINST
ALL LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, PENALTIES, CAUSES OF ACTION,
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES
AND EXPENSES) TO THE EXTENT PERMITTED BY LAW), IMPOSED UPON OR INCURRED BY OR
ASSERTED AGAINST MPT BY REASON OF: (A) ANY ACCIDENT, INJURY TO OR DEATH OF
PERSONS OR LOSS OF PERSONAL PROPERTY OCCURRING ON OR ABOUT THE REAL PROPERTY OR
ADJOINING SIDEWALKS, INCLUDING WITHOUT LIMITATION ANY CLAIMS OF MALPRACTICE;
(B) ANY USE, MISUSE, NO USE, CONDITION, MAINTENANCE OR REPAIR BY THE BORROWER
PARTIES OF THE REAL PROPERTY; (C) ANY IMPOSITIONS (WHICH ARE THE OBLIGATIONS OF
THE BORROWER PARTIES TO PAY PURSUANT TO THE APPLICABLE PROVISIONS OF THIS
AGREEMENT); (D) ANY FAILURE ON THE PART OF THE BORROWER PARTIES TO PERFORM OR
COMPLY WITH ANY OF THE TERMS OF THIS AGREEMENT; (E) THE NON-PERFORMANCE OF ANY
OF THE TERMS AND PROVISIONS OF ANY AND ALL EXISTING AND FUTURE LEASES AND
SUBLEASES OF THE REAL PROPERTY TO BE PERFORMED BY THE LANDLORD (THE BORROWER
PARTIES) THEREUNDER; AND (F) ANY AND ALL LAWFUL ACTION THAT MAY BE TAKEN BY MPT
IN CONNECTION WITH THE ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT, WHETHER
OR NOT SUIT IS FILED IN CONNECTION WITH SAME, OR IN CONNECTION WITH THE BORROWER
PARTIES OR A GUARANTOR AND/OR ANY PARTNER, JOINT VENTURER, MEMBER OR SHAREHOLDER
THEREOF BECOMING A PARTY TO A VOLUNTARY OR INVOLUNTARY FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY OR SIMILAR PROCEEDING. ANY AMOUNTS WHICH BECOME PAYABLE
BY THE BORROWER PARTIES UNDER THIS ARTICLE XIX SHALL BE PAID WITHIN FIFTEEN
(15) DAYS AFTER LIABILITY THEREFOR ON THE PART OF MPT IS DETERMINED BY
LITIGATION OR OTHERWISE AND, IF NOT TIMELY PAID (SUBJECT TO ANY APPLICABLE
NOTICE AND CURE PERIOD PURSUANT TO SECTION 13.1(a)), SHALL BEAR A LATE CHARGE
(TO THE EXTENT PERMITTED BY LAW) AT THE OVERDUE RATE AND A LATE PAYMENT PENALTY
COMPUTED AT THE LATE PAYMENT PENALTY RATE FROM THE DATE OF SUCH DETERMINATION TO
THE DATE OF PAYMENT. THE BORROWER PARTIES, AT THEIR SOLE EXPENSE, SHALL CONTEST,
RESIST AND DEFEND

 

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ANY SUCH CLAIM, ACTION OR PROCEEDING ASSERTED OR INSTITUTED AGAINST MPT AND MAY
COMPROMISE OR OTHERWISE DISPOSE OF THE SAME, SUBJECT TO THE APPROVAL OF MPT.
NOTHING HEREIN SHALL BE CONSTRUED AS INDEMNIFYING MPT AGAINST ITS OWN GROSSLY
NEGLIGENT ACTS OR OMISSIONS OR WILLFUL MISCONDUCT.

ARTICLE XX

NOTICES

All notices, demands, consents, approvals, requests and other communications
under this Agreement shall be in writing (except where specifically stated
otherwise) and shall be either (a) delivered in person, (b) sent by certified
mail, return receipt requested, (c) delivered by a recognized delivery service,
or (d) sent by facsimile transmission and addressed as follows:

 

if to any

Borrower Party:

   c/o Ernest Health, Inc.    7770 Jefferson Street, NE, Suite 320   
Albuquerque, NM 87109    Attn: Keith Longson    Phone: (505) 856-5300    Fax:
(505) 856-6800

with a copy to:

   Goodwin Procter LLP    The New York Times Building    620 Eighth Avenue   
New York, NY 10018    Attn: Stuart L. Rosenthal, Esq.    Phone: (212) 813-8817
   Fax: (212) 255-3333

if to MPT:

   c/o MPT Operating Partnership, L.P.    1000 Urban Center Drive, Suite 501   
Birmingham, Alabama 35242    Attn: Legal Department    Phone: (205) 969-3755   
Fax: (205) 969-3756

with a copy to:

   Baker, Donelson, Bearman, Caldwell & Berkowitz, PC    1600 Wells Fargo Tower
   Birmingham, Alabama 35203    Attn: Thomas O. Kolb, Esq.    Phone: (205)
250-8321    Fax: (205) 322-8007

or to such other address as either party may hereafter designate in writing, and
shall be effective upon receipt. A notice, demand, consent, approval, request
and other communication shall be

 

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deemed to be duly received if delivered in person or by a recognized delivery
service, when left at the address of the recipient and if sent by facsimile,
upon receipt by the sender of an acknowledgment or transmission report generated
by the machine from which the facsimile was sent indicating that the facsimile
was sent in its entirety to the recipient’s facsimile number; provided that if a
notice, demand, consent, approval, request or other communication is served by
hand or is received by facsimile on a day which is not a Business Day, or after
5:00 p.m. on any Business Day at the addressee’s location, such notice or
communication shall be deemed to be duly received by the recipient at 9:00 a.m.
(based upon Birmingham, Alabama time) on the first Business Day thereafter.

ARTICLE XXI

MISCELLANEOUS

Section 21.1. General. If any term or provision of this Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of such term or provision shall not be
affected thereby. If any late charges provided for in any provision of this
Agreement are based upon a rate in excess of the maximum rate permitted by
applicable law, the parties agree that such charges shall be fixed at the
maximum permissible rate. All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns (subject to Section 21.17); provided, however, that
(a) this Agreement shall not inure to the benefit of any assignee pursuant to an
assignment which violates the terms of this Agreement and (b) neither this
Agreement nor any other agreement contemplated in this Agreement shall be deemed
to confer upon any Person not a party to this Agreement any rights or remedies
contained in this Agreement. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect its meaning.

Section 21.2. Bankruptcy Waivers.

(a) Relief from Stay. The Borrower Parties acknowledges and agrees that in the
event any Borrower Parties or any Real Property relating to any Facility shall
become the subject of any bankruptcy or insolvency estate, then (i) the Borrower
Parties shall not oppose any request by MPT to obtain an order from the court
granting relief from the automatic stay pursuant to Section 362 of the
Bankruptcy Code so as to permit the exercise of all rights and remedies pursuant
to this Agreement; and (ii) the occurrence or existence of any Event of Default
under this Agreement shall, in and of itself, constitute “cause” for relief from
the automatic stay pursuant to the provisions of Section 362(d)(1) of the
Bankruptcy Code, based on the fact that the non-existence of a bankruptcy
proceeding was a material inducement for the entry by MPT into this Agreement.

(b) Automatic Stay. The Borrower Parties hereby waive the stay imposed by 11
U.S.C. Section 362(a) as to actions by MPT against each Facility. The Borrower
Parties acknowledge and agree that in the event of the filing of any voluntary
or involuntary petition in bankruptcy by or against any Facility Borrower, such
Facility Borrower shall not assert or request that any other party assert that
the automatic stay provided by Section 362 of the

 

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Bankruptcy Code shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of MPT to enforce any rights or remedies held by
virtue of the Agreement or applicable law.

(c) Patient Care Ombudsman. The Borrower Parties hereby agree (i) to use their
best efforts to contest the necessity of the appointment of a Patient Care
Ombudsman for such Facility as that term is defined in 11 U.S.C. Section 333,
and/or (ii) to join with MPT in requesting a waiver of or contesting the
appointment of such a Patient Care Ombudsman.

Section 21.3. MPT’s Expenses. In addition to the other provisions of this
Agreement, including, without limitation, Section 13.8, the Borrower Parties
agree and shall pay and/or reimburse MPTs and its Affiliates’ reasonable costs
and expenses, including, without limitation, the costs and expenses of reports
and investigations and legal fees and expenses attributable to an Event of
Default and MPT’s pursuing the rights and remedies provided herein and under
applicable law, incurred or resulting from or relating to (a) requests by the
Borrower Parties for approval or consent under this Agreement (including any
consents relating to management, the placing of liens on the Personal Property
and any intercreditor issues which arise in connection with any Material
Obligation); (b) requests by MPT for approval or consent under this Agreement
and all other documents executed between MPT (and its Affiliates) and the
Borrower Parties in connection herewith; (c) any circumstances or developments
which give rise to MPT or its Affiliates’ right of consent or approval under
this Agreement or any Other Agreement; (d) circumstances resulting from any
action or inaction by the Borrower Parties contrary to the lease provisions;
(e) a request for changes, including, but not limited to, (i) the permitted use
of the Real Property; (ii) alterations and improvements to the Agreementd
Improvements; (iii) subletting or assignment; and (iv) any other changes in the
terms, conditions or provisions of this Agreement or any Other Agreement; and
(f) enforcement by MPT or its Affiliates of any of the provisions of this
Agreement, the other Loan Documents or the Other Agreements. Such expenses and
fees shall be paid by the Borrower Parties within thirty (30) days of the
submission of a statement for the same or, subject to any applicable notice and
cure period pursuant to Section 13.1(a), such amount(s) shall become Additional
Charges and subject to the Overdue Rate and a late payment penalty computed at
the Late Payment Penalty Rate after that thirty (30)-day period.

Section 21.4. Entire Agreement; Modifications. This Agreement, together with all
exhibits, schedules and the other documents referred to herein, embody and
constitute the entire understanding between the parties with respect to the
transactions contemplated herein, and all prior to contemporaneous agreements,
understandings, representations and statements (oral or written) are merged into
this Agreement. Neither this Agreement, any exhibit or schedule attached hereto,
nor any provision hereof or thereof may be modified or amended except by an
instrument in writing signed by MPT and the Borrower Parties.

Section 21.5. MPT Securities Offering and Filings. Notwithstanding anything
contained herein to the contrary, the Borrower Parties shall cooperate with MPT
in connection with any securities offerings and filings, or MPT’s efforts to
procure or maintain financing for, or related to, the Real Property, or any
portion thereof and, in connection therewith, Borrower Parties shall furnish
MPT, in a timely fashion, with such financial and other information (including
audited financial statements and consents of auditors) as MPT shall request. MPT
may disclose that

 

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MPT has entered into this Agreement with the Borrower Parties and may provide
and disclose information regarding this Agreement, the Borrower Parties, the
Guarantors, the Real Property and each Facility, and such additional information
which MPT may reasonably deem necessary, to its proposed investors in such
public offering or private offering of securities, or any current or prospective
lenders with respect to such financing, and to investors, analysts and other
parties in connection with earnings calls and other normal communications with
investors, analysts, and other parties. Upon reasonable advance notice, MPT, its
legal and financial representatives, and any lender providing financing for all
or any portion of the Real Property shall have the right, subject to the
execution of a written confidentiality agreement on terms reasonably acceptable
to MPT, such lender and Borrower Parties, to access, examine and copy all
agreements, records, documentation and information relating to the Borrower
Parties, the Guarantors, and such Real Property, and to discuss such affairs and
information with the officers, employees and independent public accountants of
Borrower Parties as often as may reasonably be desired. The additional costs of
the Borrower Parties in complying with the foregoing shall be reimbursed to the
Borrower Parties by MPT.

Section 21.6. Non-Recourse as to MPT. Anything contained herein to the contrary
notwithstanding, in no event shall MPT or any MPT Party be liable for indirect,
incidental, consequential, special, punitive or exemplary damages, regardless of
the form of action, whether in contract, tort or otherwise, and even if such
party has been advised of the possibility of such damages.

Section 21.7. Force Majeure. Except for the payment of all monetary obligations
payable pursuant to the terms of this Agreement, the Note and other Loan
Documents (which shall not be extended or excused), in the event that MPT or the
Borrower Parties shall be delayed, hindered in or prevented from the performance
of any act required under this Agreement by reason of strikes, lockouts, labor
troubles, or other industrial disturbances, inability to procure materials,
failure of power, unavailability of any utility service, restrictive
governmental laws or regulations, acts of public enemies, war, blockades, riots,
insurrections, earthquakes, fires, storms, floods, civil disturbances,
weather-related acts of God, failure to act, or default of another party, or
other reason beyond MPT’s or the Borrower Parties’ control (individually “Force
Majeure”), then performance of such act shall be excused for the period of the
delay, and the period of the performance of any such act shall be extended for a
period equivalent to the period of such delay. Within ten (10) Business Days
following the occurrence of Force Majeure, the party claiming a delay due to
such event shall give written notice to the other setting forth a reasonable
estimate of such delay.

Section 21.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW
PRINCIPLES.

Section 21.9. Jurisdiction and Venue. MPT AND THE BORROWER PARTIES CONSENT TO
PERSONAL JURISDICTION IN THE STATE OF ALABAMA. MPT AND THE BORROWER PARTIES
AGREE THAT ANY ACTION OR PROCEEDING ARISING FROM OR RELATED TO THIS AGREEMENT
SHALL BE BROUGHT AND TRIED EXCLUSIVELY IN THE STATE OR FEDERAL COURTS OF
ALABAMA. EACH OF THE

 

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PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF
VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT. MPT AND THE
BORROWER PARTIES EXPRESSLY ACKNOWLEDGE THAT ALABAMA IS A FAIR, JUST AND
REASONABLE FORUM AND AGREE NOT TO SEEK REMOVAL OR TRANSFER OF ANY ACTION FILED
BY THE OTHER PARTY IN SAID COURTS. FURTHER, MPT AND THE BORROWER PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SERVICE OF ANY PROCESS,
SUMMONS, NOTICE OR DOCUMENT BY CERTIFIED MAIL ADDRESSED TO A PARTY AT THE
ADDRESS DESIGNATED PURSUANT TO ARTICLE XX SHALL BE EFFECTIVE SERVICE OF PROCESS
AGAINST SUCH PARTY FOR ANY ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT. A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT MAY BE
ENFORCED IN ANY OTHER COURT TO WHOSE JURISDICTION ANY OF THE PARTIES IS OR MAY
BE SUBJECT.

Section 21.10. Appointment of Agent and Attorney-in-Fact. Notwithstanding
anything contained herein to the contrary, for the purpose of effecting
transfers and assignments described herein, and in addition to the appointment
set forth in Exhibit C attached hereto, each Facility Borrower hereby nominate
and irrevocably designate and appoint MPT as its true and lawful agent and
attorney-in-fact, either in the name of MPT or in the name of such Facility
Borrower or in the name of MPT’s designee to do all acts and things and execute
all documents which MPT may deem necessary or advisable to effect the transfers
and assignments set forth herein, including, without limitation, preparing,
signing and filing any and all agreements, documents and applications necessary
to effect such transfers or assignments. This power is coupled with the
ownership interest of MPT in and to the Real Property and the security interest
of MPT described in Section 13.8 hereof and all other rights incidental and
attendant thereto.

Section 21.11. Regulatory Cooperation; LLC Agreement. If, in the reasonable
judgment of MPT, MPT Aztec Opco, LLC is prohibited by any laws or regulations
from owning all or any portion of its equity interest in Ernest Health or from
possessing or exercising any of its rights under that certain Limited Liability
Company Agreement of Ernest Health Holdings, LLC, dated the date hereof (as
modified, amended or restated from time to time, the “LLC Agreement”), then the
parties shall restructure MPT’s relationship with the Borrower Parties,
including possible modifications of this Agreement and the Other Agreements, so
as to preserve the existing business and financial relationships among them.
Whenever MPT Aztec Opco, LLC, in its capacity as a Member under the LLC
Agreement, has approved pursuant to Section 4.11 of the LLC Agreement any item
that requires MPT’s approval hereunder or has provided consent pursuant to the
LLC Agreement with respect to any item that requires MPT’s consent hereunder,
MPT will be deemed to have approved or consented to such item hereunder.

Section 21.12. Compliance with Anti-Terrorism Laws. MPT hereby notifies the
Borrower Parties that pursuant to the requirements of certain Anti-Terrorism
Laws (including, without limitation, the Patriot Act) and MPT’s policies and
practices, MPT is required to obtain, verify and record certain information and
documentation that identifies the Borrower Parties, its principals and
Affiliates, which information includes the name and address of the Borrower
Parties, its principals and Affiliates, and such other information that will
allow MPT to identify

 

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such parties in accordance with the Anti-Terrorism Laws (including, without
limitation, the Patriot Act). The Borrower Parties will not, directly or
indirectly, knowingly enter into any lease for the operation of any part of a
Facility or any other lease or any material contracts with any person listed on
the OFAC Lists. The Borrower Parties shall immediately notify MPT if Borrower
Parties has knowledge that the Borrower Parties or any of its principals or
Affiliates or any Guarantor is listed on the OFAC Lists or (a) is convicted on,
(b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held
over on charges involving money laundering or predicate crimes to money
laundering. The Borrower Parties will not, directly or indirectly (i) conduct
any business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224, any similar
executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
Executive Order No. 13224, or other Anti-Terrorism Law.

Section 21.13. Electronically Transmitted Signatures. In order to expedite the
execution of this Agreement, telecopied signatures or signatures sent by
electronic mail may be used in the place of original signatures on this
Agreement. The parties intend to be bound by the signatures of the telecopied or
electronically mailed signatures, and hereby waive any defenses to the
enforcement of the terms of this Agreement based on the form of the signature.
Following any facsimile or electronic mail transmittal, the party shall promptly
deliver the original instrument by reputable overnight courier in accordance
with the notice provisions of this Agreement.

Section 21.14. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, MPT
AND THE BORROWER PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER
PARTY OR ANY EXERCISE OF ANY PARTY OF THEIR RESPECTIVE RIGHTS HEREUNDER OR IN
ANY WAY RELATING TO THIS AGREEMENT OR THE REAL PROPERTY (INCLUDING ANY CLAIM OR
DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE
VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR MPT TO ENTER INTO
THIS AGREEMENT.

Section 21.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

Section 21.16. Survival. Notwithstanding any provision of this Agreement to the
contrary, the parties acknowledge and agree that, all claims against, and
liabilities of, the Borrower Parties or MPT which relate to acts or omissions
prior to the date of expiration or termination of this Agreement, and the
covenants and obligations under this Agreement which expressly relate to periods
after the expiration or earlier termination of this Agreement, including,
without limitation, all indemnification obligations and those covenants and
obligations described in Sections 7.1, 7.5, 7.7, 13.8 and 21.3, and Articles
XVII, XVIII and XIX, shall survive such expiration or earlier termination.

 

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Section 21.17. Assignment. Neither this Agreement nor any other Loan Document is
assignable by any Borrower Party without the prior written consent of MPT. MPT
may at any time during the Loan Term and without the consent of any Borrower
Party assign all of its rights and obligations hereunder to any other Person.

Section 21.18. Continuation of Defaults. Notwithstanding any provision hereof to
the contrary, whenever in this Agreement the phrases “continuing,” “continuation
of” or similar words or phrases are used in connection with Events of Default,
defaults, or events which with notice or passage of time would constitute Events
of Default, such phrases or words shall not be construed to create any right in
the Borrower Parties to have additional periods of time to cure such defaults or
Events of Default other than those specific cure periods provided in this
Agreement.

Section 21.19. Specific Performance. In addition to any rights and remedies
available to the parties hereunder or at law, each party shall be entitled to
bring an action for specific performance and to seek other equitable relief in
connection with any breach or violation, or any attempted breach or violation,
of the provisions of this Agreement.

Section 21.20. Joint Drafting. The parties hereto and their respective counsel
have participated in the drafting and redrafting of this Agreement and the
general rules of construction which would construe any provisions of this
Agreement in favor of or to the advantage of one party as opposed to the other
as a result of one party drafting this Agreement as opposed to the other or in
resolving any conflict or ambiguity in favor of one party as opposed to the
other on the basis of which party drafted this Agreement are hereby expressly
waived by all parties to this Agreement.

Section 21.21. Joint and Several Obligations. Each Facility Borrower shall be
jointly and severally liable for all of the liabilities and obligations of the
Borrower Parties under this Agreement. Additionally, each Facility Borrower
acknowledges and agrees that all of the representations, warranties, covenants,
obligations, conditions, agreements and other terms contained in this Agreement
shall be applicable to and shall be binding upon and enforceable against any one
or more of the Facility Borrowers.

Section 21.22. Representations, Agreements and Covenants relating to Certain
Facilities. Further representations, agreements and covenants regarding certain
of the Facilities are set forth on Schedule 21.22 attached hereto and are hereby
incorporated herein by reference.

[Signatures appear on the following page.]

 

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