Exhibit 10.4

FORM OF AGREEMENT AND PLAN OF MERGER

by and among

Ernest Health Holdings, LLC,

Ernest Health Acquisition Sub, Inc.,

Ernest Health, Inc.,

MPT Aztec Opco, LLC

(for the limited purposes described herein)

and

FFC Partners II, L.P., FFC Executive Partners II, L.P.,

FFC Partners III, L.P., and FFC Executive Partners III, L.P.,

(for the limited purposes described herein)

Dated January 31, 2012

 

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TABLE OF CONTENTS

 

          Page   ARTICLE I          THE MERGER      3    1.1   

The Merger

     3    1.2   

Effective Time

     3    1.3   

Certificate of Incorporation and By-Laws

     3    1.4   

Closing

     4    1.5   

Directors and Officers of the Surviving Corporation

     4    ARTICLE II          EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS      4    2.1   

Effect on Capital Stock

     4    2.2   

Rollover Investment

     6    2.3   

Company Options.

     6    2.4   

Appraisal Rights

     7    2.5   

Purchase Price Adjustments

     7    2.6   

Escrow Fund

     10    2.7   

Redemption for Tax Purposes

     11    ARTICLE III          PAYMENTS TO EQUITYHOLDERS; OTHER CLOSING DATE
PAYMENTS; POST-CLOSING PAYMENTS      12    3.1   

Closing Date Payments to Holders of Company Shares and Options

     12    3.2   

Other Closing Date Payments.

     13    3.3   

Post-Closing Payments

     14    3.4   

Additional Provisions.

     14    ARTICLE IV          REPRESENTATIONS AND WARRANTIES OF THE COMPANY   
  15    4.1   

Existence; Good Standing; Enforceability

     15    4.2   

Capitalization

     16    4.3   

Subsidiaries

     16    4.4   

No Conflict; Consents

     18    4.5   

Financial Statements

     18    4.6   

Operating in Ordinary Course of Business

     19    4.7   

Title to Assets; Related Matters

     19    4.8   

Litigation

     20   

 

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4.9     

Taxes

     20    4.10   

Employee Benefit Plans

     22    4.11   

Labor and Employment Matters

     22    4.12   

Contracts and Commitments; Enforceability

     23    4.13   

Intellectual Property

     25    4.14   

Insurance

     26    4.15   

Permits; Compliance with Laws; Reimbursement; Accreditation

     26    4.16   

Healthcare Compliance

     27    4.17   

Transactions with Affiliates

     29    4.18   

No Brokers

     29    4.19   

Patriot Act Compliance.

     29    4.20   

Ability to Grant Security Interest

     30    4.21   

Disclaimer of Other Representations and Warranties

     30    ARTICLE V          REPRESENTATIONS AND WARRANTIES OF BUYER AND
MERGERCO      30    5.1     

Organization

     31    5.2     

Authority

     31    5.3     

No Conflict

     31    5.4     

Required Financing

     32    5.5     

Litigation

     32    5.6     

Brokers

     32    5.7     

Absence of Conduct; Undisclosed Liabilities.

     32    5.8     

Inspection; No Other Representations

     33    ARTICLE VI          CONDUCT OF BUSINESS PENDING THE MERGER      33   
6.1     

Conduct of Business Prior to Closing

     33    ARTICLE VII      

ADDITIONAL AGREEMENTS

     35    7.1     

Stockholders’ and Subsidiaries’ Consents

     35    7.2     

Access to Information

     36    7.3     

Confidentiality Agreement

     36    7.4     

Third Party Consents and Regulatory Approvals

     36    7.5     

Confidentiality; Press Releases

     37    7.6     

No Solicitations

     37    7.7     

Officers’ and Directors’ Indemnification

     38    7.8     

Intentionally Omitted

     40    7.9     

Books and Records

     40    7.10   

Further Action

     41    7.11   

Acquisition Promissory Note; Contribution Agreement.

     41    7.12   

Other Actions by Parties

     41    7.13   

HSR Act Filings.

     41   

 

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ARTICLE VIII          CONDITIONS TO THE MERGER AND DELIVERABLES      42   
8.1       

Conditions to the Obligations of Each Party to Effect the Merger

     42    8.2       

Additional Conditions to Obligations of Buyer and MergerCo

     43    8.3       

Additional Conditions to Obligations of the Company

     45    8.4       

Frustration of Closing Conditions

     46    ARTICLE IX          TERMINATION      46    9.1       

Termination

     46    9.2       

Effect of Termination

     47    ARTICLE X          STOCKHOLDERS’ REPRESENTATIVE      48    10.1    
  

Appointment

     48    10.2       

Authorization

     48    10.3       

Agency

     49    10.4       

Indemnification of Stockholders’ Representative

     49    10.5       

Reasonable Reliance

     49    10.6       

Orders

     49    10.7       

Removal of Stockholders’ Representative; Authority of Stockholders’
Representative

     50    10.8       

Expenses of the Stockholders’ Representative

     50    ARTICLE XI          GENERAL PROVISIONS      50    11.1       

Notices

     50    11.2       

Disclosure Schedules

     52    11.3       

Assignment

     53    11.4       

Severability

     53    11.5       

Interpretation

     53    11.6       

Fees and Expenses

     54    11.7       

Choice of Law

     54    11.8       

Service of Process; Venue

     54    11.9       

Specific Performance and Remedies

     54    11.10     

Amendment

     55    11.11     

Extension; Waiver

     55    11.12     

WAIVER OF JURY TRIAL

     55    11.13     

No Survival

     55    11.14     

Mutual Drafting

     56    11.15     

Waiver of Conflicts

     56    11.16     

Exhibits Within Exhibits

     57    11.17     

Miscellaneous

     57   

 

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ANNEXES

  

Annex A

   Defined Terms

Annex B

   Merger Payment Allocation Schedule

EXHIBITS

  

Exhibit A

   Real Property Asset Purchase Agreement

Exhibit B

   Contribution Agreement

Exhibit C

   Form of Buyer Operating Agreement

Exhibit D

   Form of Acquisition Promissory Note

Exhibit E

   Form of Management Agreement

Exhibit F

   Form of Master Real Property Lease Agreement

Exhibit G

   Form of Master Real Property Sublease Agreement

Exhibit H

   Form of Real Estate Loan Agreement

Exhibit I

   Form of Mutual Release

SCHEDULES

  

Company Schedules

  

Schedule 2.2

  

Rollover Holders

Schedule 4.1(a)

  

Good Standing and Foreign Qualification

Schedule 4.1(b)

  

Financing Documents Not Warranted or Represented to be Enforceable

Schedule 4.2

  

Capitalization

Schedule 4.3(a)

  

Identity and Ownership of Subsidiaries

Schedule 4.3(b)

  

States of Organization and Qualification of Subsidiaries

Schedule 4.3(c)(i)

  

Limitations on Company’s Authority over Subsidiaries

Schedule 4.3(c)(ii)

  

Subsidiaries’ Members, Managers, Directors, etc.

Schedule 4.3(d)

  

Encumbrances, etc. on Capitalization of Subsidiaries

Schedule 4.4(a)

  

Conflicts with Transaction

Schedule 4.4(b)

  

Consents Required for Transaction

Schedule 4.5(a)

  

Financial Statements

Schedule 4.5(c)

  

Material Liabilities or Obligations

Schedule 4.5(d)

  

Encumbrances on Receivables

Schedule 4.6

  

Exceptions to Operating in the Ordinary Course of Business

Schedule 4.7(a)

  

List of Personal Property

Schedule 4.7(b)(i)

  

Certain Limitations on Title to Personal Property

Schedule 4.7(b)(ii)

  

Certain Locations of Personal Property

Schedule 4.7(c)

  

Personal Property Leases

Schedule 4.7(d)

  

Out-of-the-Ordinary Dispositions of Personal Property

 

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Schedule 4.8

  

Litigation

Schedule 4.9(a)

  

Untimely or Deficient Tax Returns

Schedule 4.9(b)

  

Unpaid Taxes

Schedule 4.9(c)

  

Pending Tax Audits

Schedule 4.9(d)

  

Pending Tax Claims

Schedule 4.9(e)

  

Tax Proceedings

Schedule 4.9(f)

  

Employment Taxes Compliance

Schedule 4.9(g)

  

Inclusion or Exclusion of Taxable Income

Schedule 4.10(a)

  

Employee Benefit Plans

Schedule 4.10(d)

  

Payments to Employees Triggered by Transaction

Schedule 4.11(a)

  

Business Employees

Schedule 4.11(b)

  

Employment Law Compliance

Schedule 4.11(f)

  

Notices of Employee Departures

Schedule 4.12(a)

  

Material Contracts

Schedule 4.12(b)

  

Enforceability of Material Contracts

Schedule 4.13(a)

  

Intellectual Property

Schedule 4.13(b)

  

Adequacy of Intellectual Property

Schedule 4.13(c)

  

Intellectual Property Encumbrances

Schedule 4.13(e)

  

Intellectual Property Agreements

Schedule 4.14

  

Insurance

Schedule 4.15(a)

  

Company Permits

Schedule 4.15(b)

  

Company Permits Limitations

Schedule 4.15(c)

  

Company Permits Compliance

Schedule 4.16(f)

  

Stark Law Compliance of Physician Contracts

Schedule 4.16(g)

  

Facilities Licenses

Schedule 4.16(h)

  

Government Program Compliance

Schedule 4.16(i)

  

Cost Reports Compliance

Schedule 4.16(j)

  

LTCH Compliance

Schedule 4.16(k)

  

IRF Compliance

Schedule 4.16(l)

  

Co-Located Hospitals Compliance

Schedule 4.16(m)

  

Uncorrected Accreditation Deficiencies

Schedule 4.17

  

Contracts between Affiliates

Schedule 4.18

  

Broker Agreements

Schedule 4.20

  

Limitations on Grants of Security Interests

Schedule 6.1

  

Conduct Pending Merger

Schedule 7.1(b)

  

Amendments to Subsidiaries’ Organizational Documents

Schedule 8.2(f)

  

Third-Party Consents

Schedule 8.2(h)(v)

  

Contracts to be Terminated or Revised at or Prior to Closing

Schedule 8.2(h)(viii)

  

Employment Terminations of Employees Moving to the Management Company

Buyer Schedules

  

Schedule 5.6

  

Broker Agreements

Schedule 7.1(b)

  

Proposed Closing Amendments to Subsidiaries’ Organizational Documents

 

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of January 31,
2012, is by and among ERNEST HEALTH HOLDINGS, LLC a Delaware limited liability
company (“Buyer”), ERNEST HEALTH ACQUISITION SUB, Inc., a Delaware corporation
(“MergerCo”), ERNEST HEALTH, INC., a Delaware corporation (the “Company”), MPT
AZTEC OPCO, LLC, a Delaware limited liability company and solely for each
covenant or agreement in Sections 7.4, 7.5, 7.10, 7.11, 7.12 and 7.13 hereof and
for no other purpose (“MPT TRS Entity”), and FFC PARTNERS II, L.P., FFC
EXECUTIVE PARTNERS II, L.P., FFC PARTNERS III, L.P., and FFC EXECUTIVE PARTNERS
III, L.P., each a Delaware limited partnership, and solely for each covenant or
agreement in Sections 7.4, 7.5, 7.7(d), 7.10, 7.11, 7.12, 7.13, and 11.13(b)
hereof and for no other purpose (the “FFC Funds”). An index of defined terms
used in this Agreement is attached as Annex A hereto.

RECITALS

WHEREAS, Buyer, MergerCo and the Company wish to effect a business combination
through a merger (the “Merger”) of MergerCo with and into the Company on the
terms and conditions set forth in this Agreement and in accordance with the
Delaware General Corporation Law, as amended (the “DGCL”);

WHEREAS, the Board of Directors of the Company (the “Company Board”) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement, has determined that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best
interest of its stockholders, and has recommended that this Agreement, the
Merger and the other transactions contemplated by this Agreement be submitted to
the stockholders of the Company for their adoption and approval;

WHEREAS, the Boards of Directors or other governing bodies of Buyer and MergerCo
have approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and have declared this Agreement, the Merger and the other
transactions contemplated by this Agreement to be advisable and in the best
interest of their respective stockholders or other owners;

WHEREAS, concurrently with the execution and delivery of this Agreement, the
Affiliated MPT Property Companies, the Affiliated MPT Lender Companies, the
Company, the Affiliated Ernest Health Lessees and the Affiliated Ernest Health
Borrowers, have entered into the Real Property Asset Purchase Agreement attached
hereto as Exhibit A (as the same may be amended, modified or restated, the “Real
Property Asset Purchase Agreement”) pursuant to which (i) the Affiliated Ernest
Health Lessees have agreed to sell to the Affiliated MPT Property Companies, and
the Affiliated MPT Property Companies have agreed to purchase from the
Affiliated Ernest Health Lessees, the real estate assets identified in the Real
Property Asset Purchase Agreement, all on the terms and conditions set forth
therein, and (ii) the Affiliated MPT Lender Companies have agreed to provide the
Affiliated Ernest Health Borrowers with financing secured by, among other
things, a mortgage on those certain real estate assets identified in the Real
Property Asset Purchase Agreement;

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WHEREAS, Buyer, MPT TRS Entity, the Rollover Holders and Management Company have
entered into a Contribution Agreement, dated as of the date hereof and attached
hereto as Exhibit B (as the same may be amended, modified or restated, the
“Contribution Agreement”), pursuant to which, immediately following the closing
of the transactions contemplated by the Real Property Asset Purchase Agreement
but prior to the Effective Time on the Closing Date, (i) the Rollover Holders
shall contribute the Rollover Shares to Management Company in exchange for
membership interests in Management Company and cash, (ii) Management Company
shall immediately thereafter (but prior to the Effective Time on the Closing
Date) contribute all of the Rollover Shares to Buyer in exchange for 51% of the
membership interests of Buyer and cash, (iii) MPT TRS Entity shall contribute
cash to Buyer in exchange for 49% of the membership interests of Buyer, and
(iv) Buyer shall contribute all cash then held thereby, after giving effect to
the foregoing steps, to MergerCo;

WHEREAS, simultaneously with the aforementioned contribution of Rollover Shares
and cash into Buyer, Management Company and MPT TRS Entity shall enter into the
Amended and Restated Limited Liability Company Operating Agreement of Buyer, in
substantially the form attached hereto as Exhibit C (as the same may be amended,
modified or restated, the “Buyer Operating Agreement”);

WHEREAS, immediately prior to the Effective Time, MergerCo shall enter into that
certain Promissory Note in favor of the MPT TRS Entity, a copy of which is
attached hereto as Exhibit D (as the same may be amended, modified or restated,
the “Acquisition Promissory Note”), which shall evidence a loan by the MPT TRS
Entity to MergerCo in the principal amount of Ninety-Three Million Two Hundred
Thousand and 00/100 Dollars ($93,200,000.00), the proceeds of which shall be
used to satisfy in part the obligations of Buyer and MergerCo set forth in this
Agreement;

WHEREAS, concurrently with the Effective Time, the Surviving Corporation, the
Affiliated Ernest Health Lessees and Affiliated Ernest Health Borrowers, on the
one hand, and Management Company and, if applicable, certain Subsidiaries of
Management Company, on the other hand, shall enter into a management agreement
with Management Company in substantially the form attached hereto as Exhibit E
(as the same may be amended, modified or restated, the “Management Agreement”);

WHEREAS, concurrently with the Effective Time, (i) the Affiliated MPT Property
Companies, as landlords, and the MPT TRS Subsidiaries, as tenants, shall enter
into a real property Lease Agreement in substantially the form attached hereto
as Exhibit F (the “Real Property Master Lease Agreement”), and immediately
thereafter (ii) the MPT TRS Subsidiaries, as sublandords, and the Affiliated
Ernest Health Lessees, as subtenants, shall enter into a real property Sublease
Agreement in substantially the form attached hereto as Exhibit G (the “Real
Property Master Sublease Agreement”); and

WHEREAS, concurrently with the Effective Time, the Affiliated MPT TRS Lender
Companies shall borrow One Hundred Million and No/100 ($100,000,000.00) from the
Affiliated MPT Primary Lender Companies, and the Affiliated MPT TRS Lender
Companies and the Affiliated Ernest Health Borrowers shall then enter into that
certain Real Estate Loan Agreement in substantially the form attached hereto as
Exhibit H (as the same may be amended,

 

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modified or restated, the “Real Estate Loan Agreement”), together with the
mortgages and/or deeds or trust, the promissory note, and the other documents
and instruments contemplated therein (collectively, with the Real Estate Loan
Agreement, the “Real Estate Loan Documents”).

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

ARTICLE I

THE MERGER

1.1 The Merger. Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, at the Effective Time, the Company and MergerCo shall
consummate the Merger pursuant to which (a) MergerCo shall be merged with and
into the Company and the separate corporate existence of MergerCo shall
thereupon cease, (b) the Company shall be the surviving corporation in the
Merger (the “Surviving Corporation”) and shall continue to be governed by the
laws of the State of Delaware and (c) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The Merger shall have the effects specified
in the DGCL.

1.2 Effective Time. On the Closing Date, immediately following the Closing, the
Surviving Corporation shall duly execute a certificate of merger (the
“Certificate of Merger”) in the form mutually agreed to by the parties not less
than two (2) Business Days prior to the Closing Date, and file such Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the DGCL. The Merger shall become effective at such time as the Certificate
of Merger, accompanied by payment of the filing fee (as provided in the DGCL),
has been examined by, and received the endorsed approval of, the Secretary of
State of the State of Delaware, or at such subsequent time as Buyer and Company
shall agree and shall specify in the Certificate of Merger (the date and time
the Merger becomes effective being the “Effective Time”).

1.3 Certificate of Incorporation and By-Laws. At the Effective Time, the
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended and restated in a form mutually acceptable
to the MPT TRS Entity and Buyer (provided, that as so amended, such certificate
of incorporation shall contain such provisions as are necessary to give full
effect to the exculpation and indemnification provided for in Section 7.7
hereof), except that the name of the Company as the Surviving Corporation shall
continue to be Ernest Health, Inc. and the provisions of the certificate of
incorporation of MergerCo relating to the incorporator of MergerCo shall be
omitted, and as so amended shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided therein and in
accordance with applicable law (the “Surviving Corporation Charter”). At the
Effective Time, the bylaws of MergerCo shall be amended and restated in a form
mutually acceptable to the MPT TRS Entity and Buyer (such amended and restated
bylaws of MergerCo shall contain such provisions as are necessary to give full
effect to the exculpation and indemnification obligations provided for in
Section 7.7 hereof), and such amended and restated bylaws of MergerCo shall be
the bylaws of the Surviving Corporation, until thereafter amended as provided
therein and in accordance with applicable law (the “Surviving Corporation
Bylaws”).

 

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1.4 Closing. The closing of the Merger (the “Closing”) shall occur as promptly
as practicable (but in no event later than the third (3rd) Business Day) after
all of the conditions set forth in Article VIII have been satisfied (other than
conditions which by their terms are required to be satisfied at the Closing) or,
if permissible, waived by the party entitled to the benefit of the same (the
“Closing Date”); provided, that, unless the Company and Buyer shall otherwise
agree in writing, in no case shall the Closing occur prior to March 1, 2012. The
Closing shall be handled through deliveries into escrow with the Escrow Agent or
in such other manner and at such other place as agreed to by the parties hereto.

1.5 Directors and Officers of the Surviving Corporation.

(a) From and after the Effective Time, the directors of MergerCo immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation, until their successors shall have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation Charter and the Surviving Corporation Bylaws.

(b) From and after the Effective Time, the officers of MergerCo immediately
prior to the Effective Time shall become the officers of the Surviving
Corporation, until their successors shall have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation Charter and the Surviving Corporation Bylaws.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE CONSTITUENT CORPORATIONS

2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of any Party or the holder of any of the
following securities:

(a) MergerCo Capital Stock. Each share of capital stock of MergerCo issued and
outstanding immediately prior to the Effective Time shall be converted into one
fully paid and nonassessable share of common stock, par value $0.01 per share,
of the Surviving Corporation.

(b) Company Treasury Stock; Company Shares Owned by Buyer or MergerCo. Each
Company Share held in the Company’s treasury or held by Buyer or MergerCo
(including the Rollover Shares acquired by Buyer pursuant to the Contribution
Agreement), in each case, immediately prior to the Effective Time, shall be
cancelled and retired without payment of any consideration therefor.

 

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(c) Company Shares.

(i) Common Stock. Subject to the provisions of Section 2.2 and Section 3.1(a),
and except as provided in Section 2.1(b) and Section 2.4, each Common Share
issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive: (i) the Per Common Share
Closing Date Merger Consideration; plus (ii) the Per Common Share Final Closing
Adjustment Amount, if any; plus (iii) the Per Common Share Escrow Consideration,
if any; plus (iv) the Per Common Share Stockholders’ Representative Expense
Amount, if any.

(ii) Preferred Stock.

a. Series A Preferred Stock. Subject to the provisions of Section 3.1(a), and
except as provided in Section 2.1(b) and Section 2.4, each Series A Preferred
Share issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive the Per Share Series A
Preferred Merger Consideration.

b. Series B Preferred Stock. Subject to the provisions of Section 3.1(a), and
except as provided in Section 2.1(b) and Section 2.4, each Series B Preferred
Share issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive the Per Share Series B
Preferred Merger Consideration.

c. Series C Preferred Stock. Subject to the provisions of Section 3.1(a), and
except as provided in Section 2.1(b) and Section 2.4, each Series C Preferred
Share issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive the Per Share Series C
Preferred Merger Consideration.

(iii) Restricted Stock. At the Effective Time, any right of repurchase, risk of
forfeiture or other restriction under any restricted stock or similar agreement
with the Company with respect to shares of the Company’s Common Stock
outstanding immediately prior to the Effective Time shall lapse and any vesting
thereon shall fully accelerate, in each case, as of immediately prior to the
Effective Time.

(iv) Cancellation. As a result of the Merger and without any action on the part
of the holder thereof, at the Effective Time all Company Shares converted into
the right to receive merger consideration pursuant to this Section 2.1(c) shall
cease to be outstanding, shall be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such Company Shares shall
thereafter cease to have any rights with respect to such Company Shares, except
the right to receive the applicable amounts payable with respect thereto in
accordance with the terms of this Agreement.

 

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2.2 Rollover Investment. Subject to the terms and conditions of the Contribution
Agreement, immediately prior to (but subject to the consummation of) the Merger,
(a) each of the Common Stockholders party to the Contribution Agreement as of
the date hereof (each, a “Rollover Holder”), shall contribute to Management
Company 100% of the Common Shares held thereby as of immediately prior to the
Closing (the “Rollover Shares”) and (b) any other Equity Holder that becomes a
member of the Management Company after the date hereof and before the Closing
(each, an “Other Participating Manager”), will (unless otherwise agreed among
the Rollover Holders and such Other Participating Member) contribute to
Management Company cash, in each case, for the consideration specified in the
Contribution Agreement or as otherwise agreed between the Rollover Holders and
such Other Participating Manager, as applicable. The Rollover Holders (but no
Other Participating Managers) shall also be entitled to receive in cash, when
and to the extent payable, (i) the Per Common Share Final Closing Adjustment
Amount, if any, multiplied by the number of Rollover Shares contributed by such
Rollover Holder; plus (ii) the Per Common Share Escrow Consideration, if any,
multiplied by the number of Rollover Shares contributed by such Rollover Holder;
plus (iii) the Per Common Share Stockholders’ Representative Expense Amount, if
any, multiplied by the number of Rollover Shares contributed by such Rollover
Holder.

2.3 Company Options.

(a) At the Effective Time, each option to acquire Common Shares (each an
“Option,” and collectively the “Options”) outstanding immediately prior to the
Effective Time under the Company’s 2004 Stock Option Plan, as amended to date
(the “Option Plan”) shall automatically be cancelled and extinguished, and each
holder of an outstanding Option (each an “Optionholder,” and collectively the
“Optionholders”) shall have the right to receive in respect of such holder’s
Options, the following payments in cash (the “Option Consideration”): (i) a
payment in an amount equal to the total number of Common Shares issuable upon
the exercise of such Optionholder’s Options (the “Option Shares”), multiplied by
the positive difference between (A) the Per Common Share Closing Date Merger
Consideration and (B) the applicable exercise price per share for such Option
Shares (such amount, the “Closing Date Option Consideration”); plus (ii) a
payment in an amount equal to the total Option Shares multiplied by the Per
Common Share Final Closing Adjustment Amount, if any; plus (iii) a payment in an
amount equal to the total Option Shares multiplied by the Per Common Share
Escrow Consideration, if any; plus (iv) a payment in an amount equal to the
total Option Shares multiplied by the Per Common Share Stockholders’
Representative Expense Amount, if any.

(b) Prior to the Closing, the Company shall have adopted such resolutions and
taken or caused to be taken all such other actions as may be reasonably required
to effectuate the provisions of this Section 2.3 and the termination of the
Option Plan.

 

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2.4 Appraisal Rights.

(a) Notwithstanding anything in this Agreement to the contrary, any Company
Shares (the “Dissenting Shares”) that are issued and outstanding immediately
prior to the Effective Time and that are held by Stockholders who, in accordance
with Section 262 of the DGCL (the “Appraisal Rights Provisions”), (i) have not
voted in favor of adopting this Agreement, (ii) shall have demanded properly in
writing appraisal for such shares, (iii) have otherwise complied in all respects
with the Appraisal Rights Provisions, and (iv) have not effectively withdrawn,
lost or failed to perfect their rights to appraisal (the “Dissenting
Stockholders”), will not be converted into the right to receive consideration in
the Merger as set forth in Section 2.1, but at the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and shall cease to exist and each holder of Dissenting Shares shall
cease to have any rights with respect thereto, except the right to receive only
those rights provided under the Appraisal Rights Provisions; provided, however,
that all Company Shares held by Stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to appraisal of such
Company Shares under the Appraisal Rights Provisions shall thereupon be deemed
to have been cancelled and to have been converted, as of the Effective Time,
into the right to receive the consideration relating thereto, without interest,
in the manner provided in Section 2.1.

(b) The Company shall give Buyer and MergerCo prompt notice of any demands
received by the Company for the exercise of appraisal rights with respect to
Company Shares, and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands subject, prior to the
Effective Time, to consultation with the Company. The Company shall not, except
with the prior written consent of Buyer, which consent shall not be unreasonably
withheld, make any payment with respect to, or settle or offer to settle, any
such demands.

(c) Each Dissenting Stockholder who becomes entitled under the Appraisal Rights
Provisions to payment for Dissenting Shares shall receive payment therefor after
the Effective Time from the Surviving Corporation (but only after the amount
thereof shall have been agreed upon or finally determined pursuant to the
Appraisal Rights Provisions).

2.5 Purchase Price Adjustments

(a) Pre-Closing Estimates. At least two (2) Business Days prior to the Closing
Date, the Company shall deliver to Buyer a statement (the “Pre-Closing
Statement”) setting forth its good faith estimate of (i) the Cash and Cash
Equivalents of the Company and its Subsidiaries as of the close of business on
the date preceding the Closing Date (the “Estimated Cash and Cash Equivalents”),
(ii) the aggregate amount of the Company’s and its Subsidiaries’ Indebtedness as
of immediately prior to the Effective Time (the “Estimated Closing
Indebtedness”), (iii) the aggregate amount of Company Transaction Expenses as of
immediately prior to the Effective Time (“Estimated Company Transaction
Expenses”), and (iv) the Net Working Capital of the Company and its Subsidiaries
as of the close of business on the Closing Date (the “Estimated Net Working
Capital”), in each case together with reasonable supporting documents to
evidence the calculations of such amounts.

 

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(b) Post-Closing Adjustments.

(i) Closing Statement. Within sixty (60) days following the Closing Date, the
Buyer shall cause the Surviving Corporation to prepare and deliver to the
Stockholders’ Representative a statement (the “Closing Statement”) setting forth
Surviving Corporation’s calculation of (i) the Company’s and its Subsidiaries’
Net Working Capital as of the close of business on the date preceding the
Closing Date (the “Closing Net Working Capital”), (ii) the Company’s and its
Subsidiaries’ Cash and Cash Equivalents as of the close of business on the date
preceding the Closing Date (“Closing Cash”), (iii) the Indebtedness of the
Company and its Subsidiaries as of immediately prior to the Effective Time
(“Closing Indebtedness”), and (iv) the Company Transaction Expenses as of
immediately prior to the Effective Time (“Closing Company Transaction
Expenses”), together with reasonable supporting documents to evidence the
calculations of such amounts. The Closing Statement shall be prepared in
accordance with the definitions of “Net Working Capital”, “Cash and Cash
Equivalents”, “Indebtedness”, and “Company Transaction Expenses” as set forth in
this Agreement and on a basis consistent with the accounting methodologies,
practices, estimation techniques, assumptions and principles used in the
preparation of the Company’s audited Financial Statements and without giving
effect to any changes resulting from the consummation of the Merger on the
Closing Date. The process described in this Section 2.5(b) is not intended to
permit the introduction of different accounting methodologies, practices,
estimation techniques, assumptions and principles to the preparation of the
Closing Statement from those used in the Company’s audited Financial Statements,
except as may be expressly provided for in the definitions set forth herein. The
Stockholders’ Representative shall have thirty (30) days following its receipt
of the Closing Statement and the supporting detail (the “Review Period”) to
review the same. On or before the expiration of the Review Period, the
Stockholders’ Representative shall deliver to Buyer and Surviving Corporation a
written statement accepting or objecting to the Closing Statement (the “Closing
Statement Response Notice”). If the Stockholders’ Representative does not
deliver a Closing Statement Response Notice to Buyer and Surviving Corporation
within the Review Period, the Stockholders’ Representative shall be deemed to
have accepted the Closing Statement in its entirety.

(ii) Disputes. In the event that the Stockholders’ Representative objects to all
or any portion of the Closing Statement within the Review Period, Buyer and the
Stockholders’ Representative shall promptly meet and in good faith attempt to
resolve such objections. Any such objections that cannot be resolved between
Buyer and the Stockholders’ Representative within thirty (30) days (or such
longer period as Buyer and the Stockholders’ Representative shall mutually agree
in writing) following Buyer’s receipt of the Closing Statement Response Notice
shall be resolved in accordance with this Section 2.5(b). Should the
Stockholders’ Representative and Buyer not be able to resolve such objections
set forth in the Closing Statement Response Notice within the time period
described above, either party may submit the matter to Deloitte & Touche LLP
(the “Accounting Referee”) for review and resolution, with instructions to
complete the same as promptly as practicable, but in any event within thirty
(30) days of its engagement, and to resolve any objections consistent with the
terms of this Agreement, including, without limitation, making the calculations
in accordance

 

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with the definitions of “Cash and Cash Equivalents”, “Net Working Capital”,
“Indebtedness”, and “Company Transaction Expenses” (as applicable) set forth in
this Agreement. The Accounting Referee shall only have authority to make
determinations in respect of those specific items for which an objection has
been raised in the Closing Statement Response Notice, and all determinations
shall be based solely on the presentations of Buyer and the Stockholders’
Representative and their respective Representatives, and not by independent
review. In resolving any disputed item, the Accounting Referee: (A) shall be
bound by the principles set forth in this Section 2.5(b), and (B) shall not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. The Accounting Referee shall deliver a statement setting forth its
resolution of the dispute within thirty (30) days of the submission of the
dispute to such firm, which resolution, absent manifest error, shall be binding
and conclusive on the parties and not subject to appeal. The Closing Statement
shall be modified if necessary to reflect such determination by the Accounting
Referee. The fees and costs of the Accounting Referee, if one is required, shall
be payable by Surviving Corporation, on the one hand, and by the Stockholders’
Representative, on the other hand, on the basis, for each such party, of the
percentage the portion of the contested amount not awarded to each party bears
to the amount contested by such party, as determined by the Accounting Referee.

(iii) Determinations; Adjustments.

a. Net Working Capital Adjustment. If the Closing Net Working Capital as finally
determined pursuant to this Section 2.5(b) is greater than the Estimated Net
Working Capital, Buyer shall, or shall cause the Surviving Corporation to, pay
to the Common Equity Holders and Rollover Holders such excess in accordance with
Section 2.5(b)(iv). If the Closing Net Working Capital as finally determined
pursuant to this Section 2.5(b) is less than the Estimated Net Working Capital,
the Buyer shall be entitled to receive a payment, solely from the Escrow Fund,
in the amount of such shortfall in accordance with Section 2.5(b)(iv).

b. Closing Cash Adjustment. If the Closing Cash as finally determined pursuant
to this Section 2.5(b) is greater than the Estimated Cash and Cash Equivalents,
Buyer shall, or shall cause the Surviving Corporation to, pay to the Common
Equity Holders and Rollover Holders such excess in accordance with
Section 2.5(b)(iv). If the Closing Cash as finally determined pursuant to this
Section 2.5(b) is less than the Estimated Cash and Cash Equivalents, Buyer shall
be entitled to receive a payment, solely from the Escrow Fund, in the amount
such shortfall in accordance with Section 2.5(b)(iv).

 

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c. Closing Indebtedness Adjustment. If the Closing Indebtedness as finally
determined pursuant to this Section 2.5(b) is less than the Estimated
Indebtedness, Buyer shall, or shall cause the Surviving Corporation to, pay such
shortfall to the Common Equity Holders and Rollover Holders in accordance with
Section 2.5(b)(iv). If the Closing Indebtedness as finally determined pursuant
to this Section 2.5(b) is greater than the Estimated Indebtedness, Buyer shall
be entitled to receive a payment, solely from the Escrow Fund, in the amount
such excess in accordance with Section 2.5(b)(iv).

d. Closing Company Transaction Expenses Adjustment. If the Closing Company
Transaction Expenses as finally determined pursuant to this Section 2.5(b) are
less than the Estimated Company Transaction Expenses, Buyer shall, or shall
cause the Surviving Corporation to, pay such shortfall to the Common Equity
Holders and Rollover Holders in accordance with Section 2.5(b)(iv). If the
Closing Company Transaction Expenses as finally determined pursuant to this
Section 2.5(b) are greater than the Estimated Company Transaction Expenses,
Buyer shall be entitled to receive a payment, solely from the Escrow Fund, in
the amount such excess in accordance with Section 2.5(b)(iv).

(iv) Payments. The payments to be made to the parties pursuant to
Section 2.5(b)(iii) shall be aggregated and offset, and the net amount (if any)
owed by Buyer to the Common Equity Holders and Rollover Holders, on the one
hand, or owed to Buyer, on the other hand, shall be referred to as the “Final
Closing Adjustment Amount”. In the event that the Final Closing Adjustment
Amount is owed to Buyer, an amount in cash equal to the Final Closing Adjustment
Amount shall be paid from the Escrow Fund to Buyer in accordance with the Escrow
Agreement. In the event the Final Closing Adjustment Amount is owed to the
Common Equity Holders and Rollover Holders, the Stockholders’ Representative
shall deliver to the Buyer a schedule that sets out each Person’s Pro Rata
Portion of the Final Closing Adjustment Amount, and Buyer shall promptly
thereafter cause the Surviving Corporation to pay (i) to each Optionholder
through the Surviving Corporation’s payroll system, such Optionholder’s Pro Rata
Portion of such amount, and (ii) to each Common Stockholder and Rollover Holder,
such Person’s Pro Rata Portion of such amount in accordance with the payment
instructions set forth in such Person’s Letter of Transmittal. Any payment
required under this Section 2.5(b)(iv) to be made to Buyer or to the Common
Equity Holders and Rollover Holders shall be made within five (5) Business Days
of the final determination of the Final Closing Adjustment Amount.

2.6 Escrow Fund.

 

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(a) At the Closing, Buyer shall deposit the Escrow Amount with First American
Title Insurance Company (the “Escrow Agent”), such deposit, together with all
interest and dividends accrued thereon, if any, to constitute an escrow fund
(the “Escrow Fund”). The Escrow Fund shall be governed by the terms of an escrow
agreement among Buyer, the Stockholders’ Representative and the Escrow Agent, in
the form mutually agreed to by the parties not less than two (2) Business Days
prior to the Closing Date (as the same may be amended, modified or restated, the
“Escrow Agreement”). The Escrow Fund shall be held in escrow and shall be
available to pay any amounts payable to Buyer pursuant to Section 2.5(b)(iv) of
this Agreement. If the Final Adjustment Amount is payable to the Common Equity
Holders and Rollover Holders, the entire Escrow Fund shall be released to or as
directed by the Stockholders’ Representative on behalf of the Common Equity
Holders and Rollover Holders within two (2) Business Days of the determination
of the Final Adjustment Amount. If the Final Adjustment Amount is payable to
Buyer, that portion of the Escrow Fund equal to the Final Adjustment Amount
shall be released to Buyer in accordance with Section 2.5(b)(iv) and the entire
remaining amount of the Escrow Fund, if any, shall be released to or as directed
by the Stockholders’ Representative on behalf of the Common Equity Holders and
Rollover Holders substantially concurrently with the release of the Final
Closing Adjustment Amount to Buyer.

(b) All parties hereto agree for all tax purposes: (i) any portion of the Escrow
Fund paid to the Optionholders shall be treated as compensation paid by the
Company to the Optionholders, (ii) the right of the holders of shares of Common
Stock or Rollover Shares to receive any portion of the Escrow Fund shall be
eligible to be treated as deferred contingent purchase price eligible for
installment sale treatment under Section 453 of the Code and any corresponding
provision of foreign, state or local law, as appropriate; (iii) Buyer shall be
treated as the owner of the Escrow Amount solely for tax purposes, and all
interest and earnings earned from the investment and reinvestment of the Escrow
Amount, or any portion thereof, shall be allocable to Buyer pursuant to
Section 468B(g) of the Code and Proposed Treasury Regulation Section 1.468B-8;
(iv) if and to the extent any amount of Escrow Fund paid to the Common
Stockholders’ or Rollover Holders is actually distributed thereto, interest may
be imputed on such amount, as required by Section 483 or 1274 of the Code; and
(v) in no event shall the total amount of the Escrow Amount and any interest and
earnings earned thereon paid to the Common Equity Holders or Rollover Holders
under this Agreement exceed an amount to be designated by the Stockholders’
Representative prior to the Closing. Clause (v) of the preceding sentence is
intended to ensure that the right of the Common Stockholders or Rollover Holders
to any portion of the Escrow Fund and any interest and earnings earned thereon
is not treated as a contingent payment without a stated maximum selling price
under Section 453 of the Code and the Treasury Regulations promulgated
thereunder. All parties hereto shall file all Tax Returns consistently with the
foregoing.

2.7 Redemption for Tax Purposes. Amounts received by holders of Company Shares
in connection with the Merger are intended to be treated as received in complete
redemption of Company Shares under Section 302(b)(3) of the Code.

 

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ARTICLE III

PAYMENTS TO EQUITYHOLDERS; OTHER CLOSING DATE PAYMENTS; POST-CLOSING PAYMENTS

3.1 Closing Date Payments to Holders of Company Shares and Options.

(a) Delivery of Letter of Transmittal. As soon as practicable after the date
hereof, the Company shall deliver to each holder of Company Shares a letter of
transmittal customary for transactions of this type in the form mutually agreed
to by the parties (the “Letter of Transmittal”), and containing, among other
terms, representations and warranties regarding due authority, enforceability,
and title to the Company Shares transmitted thereby, to effect the exchange of
such holder’s Company Shares for the applicable consideration set forth in
Section 2.1. Each holder of a Common Stock Certificate, a Series A Preferred
Stock Certificate, Series B Preferred Stock Certificate and/or Series C
Preferred Stock Certificate (together, the “Certificates”) representing Company
Shares shall deliver such Certificate, together with a duly completed Letter of
Transmittal, to the Company; provided, however, that if any Certificate shall
have been lost, stolen or destroyed, the affected Stockholder may deliver to the
Company, in lieu of such lost, stolen or destroyed Certificate, a lost stock
certificate affidavit containing a customary indemnity obligation, but no such
Stockholder shall be required to deliver any bond or other security in
connection with the delivery of such affidavit. Until so surrendered and
exchanged, each outstanding Certificate shall be deemed to represent and
evidence only the right to receive the applicable consideration relating thereto
pursuant to Section 2.1, and until such surrender and exchange of the above
described documents, no cash shall be paid to the holder of a Certificate in
respect thereof.

(b) Payments to Holders of Company Shares. Subject to the terms of
Section 3.1(d), the Surviving Corporation, in accordance with the delivery
instructions set forth in the applicable Letter of Transmittal, shall pay (i) to
each holder of Series A Preferred Stock, an amount equal to the Per Share Series
A Preferred Merger Consideration multiplied by the number of Series A Shares
held thereby, (ii) to each holder of Series B Preferred Stock, an amount equal
to the Per Share Series B Preferred Merger Consideration multiplied by the
number of Series B Shares held thereby, (iii) to each holder of Series C
Preferred Stock, an amount equal to the Per Share Series C Preferred Merger
Consideration multiplied by the number of Series C Shares held thereby, and
(iv) to each holder of Common Stock, an amount equal to the Per Common Share
Closing Date Merger Consideration multiplied by the number of shares of Common
Stock held thereby, in the case of each such Equity Holder, as set forth on a
payment schedule (the “Payment Schedule”) to be delivered by the Company to
Buyer not less than two (2) Business Days prior to the Closing Date. Any such
payment to a holder of Company Shares that is the obligor of a Stockholder Note
shall automatically be reduced by the amount of principal and accrued interest
then outstanding under such Stockholder Note, in each case, as shall be set
forth on the Payment Schedule (and Buyer and Surviving Corporation acknowledge
and agree that upon delivery to any such Stockholder of any payment so reduced
in accordance with the foregoing, the applicable Stockholder Note obligation of
such Stockholder shall be satisfied in full, and such Stockholder Note shall be
cancelled).

 

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(c) Timing of Payments to Holders of Company Shares. With respect to holders of
Company Shares who have duly delivered to the Company the documents described in
Section 3.1(a) at least two (2) Business Days prior to the Closing Date, the
Surviving Corporation shall, immediately after the Effective Time on the Closing
Date, pay to each such holder of Company Shares their applicable portion of the
Closing Date Merger Consideration in accordance with Section 2.1 (as such amount
may be adjusted in the event that such holder of Company Shares is an obligor of
a Stockholder Note). With respect to any holder of Company Shares who duly
delivers to the Company or the Surviving Corporation the documents described in
Section 3.1(a) at any time following the date which is two (2) Business Days
prior to the Closing Date, the Surviving Corporation shall, as promptly as
practicable after the Effective Time, pay to each such holder of Company Shares
their applicable portion of the Closing Date Merger Consideration in accordance
with Section 2.1 (as such amount may be adjusted in the event that such holder
of Company Shares is an obligor of a Stockholder Note).

(d) Payments to Optionholders. As soon as practicable following the Effective
Time, but in any event within five (5) Business Days thereafter, the Surviving
Corporation shall pay to each Optionholder an amount equal to the Closing Date
Option Consideration multiplied by the number of Option Shares held by such
Optionholder, in each case, as shall be set forth on the Payment Schedule.

3.2 Other Closing Date Payments.

(a) Escrow Amount. At the Effective Time, Buyer and MergerCo shall pay the
Escrow Amount to the Escrow Agent in cash by wire transfer of immediately
available funds to one or more accounts designated in writing by the Escrow
Agent.

(b) Indebtedness. At the Effective Time, Buyer and MergerCo shall pay to the
holders of Indebtedness identified in the Pre-Closing Statement funds sufficient
to satisfy the Estimated Closing Indebtedness set forth therein, in cash by wire
transfer of immediately available funds to one or more accounts designated in
writing by each such Person in a payoff letter delivered thereby to the Company
not less than two (2) Business Days prior to the Closing.

(c) Company Transaction Expenses and Transaction Bonuses. At the Effective Time,
Buyer and MergerCo shall pay (i) to those third-party Representatives of the
Company identified in the Pre-Closing Statement, funds sufficient to satisfy
that portion of the Estimated Company Transaction Expenses payable thereto as
set forth in the Pre-Closing Statement, and (ii) to the Company, on behalf of
the Persons entitled to receipt thereof, an amount equal to the aggregate amount
of all Transaction Bonuses, in each case, that have not been paid on or prior to
the Closing Date, in cash by wire transfer of immediately available funds to one
or more accounts designated in writing by each such Representative or the
Company, as applicable.

(d) Stockholders’ Representative Expense Amount. At the Closing, Buyer and
MergerCo shall deposit into an account designated by the Stockholders’
Representative an amount equal to $250,000 (the “Stockholders’ Representative
Expense Amount”). The Stockholders’ Representative Expense Amount may be used at
any time by the Stockholders’ Representative to fund any expenses incurred by it
in the performance of its duties and

 

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obligations hereunder, the Escrow Agreement or otherwise in connection with the
transactions contemplated hereby or thereby. The Stockholders’ Representative
Expense Amount will be held by the Stockholders’ Representative for so long as
the Stockholders’ Representative determines is reasonably necessary for it to
fulfill its obligations and duties under this Agreement, the Escrow Agreement or
otherwise in connection with the transactions contemplated hereby or thereby.

3.3 Post-Closing Payments. (a) The Surviving Corporation, the Escrow Agent or
the Stockholders’ Representative, as the case may be, shall pay or cause to be
paid to each holder of Common Stock (including any Rollover Holder with respect
to all Rollover Shares), in accordance with the payment instructions set forth
in the applicable Letter of Transmittal, and (b) the Surviving Corporation shall
pay or cause to be paid to each Optionholder, in the case of each of the
foregoing clauses (a) and (b), as and to the extent such amounts, if any, become
payable to such Persons, each such Person’s Pro Rata Portion of (i) the Final
Closing Adjustment Amount, (ii) the Escrow Fund, and (iii) the Stockholders’
Representative Expense Amount.

3.4 Additional Provisions.

(a) If any payment is to be made pursuant to this Article III to a Person other
than the Person in whose name a surrendered Certificate is registered, it shall
be a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and delivered to the Company
or the Surviving Corporation with all documents required to evidence and effect
such transfer, and that the Person requesting such payment pay any transfer or
other taxes required by reason of the payment to a Person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Company or the Surviving Corporation that such tax has been
paid or is not applicable. After the Effective Time, each Certificate (other
than Certificates representing shares of Company Stock to be cancelled in
accordance with Section 2.1(b)) shall represent solely the right to receive,
upon surrender in accordance with Section 3.1, the applicable consideration
allocable to the Company Shares represented by such Certificate, as contemplated
by this Agreement.

(b) The Company, the Surviving Corporation, Buyer, and/or the Stockholders’
Representative, without duplication, shall be entitled to deduct and withhold
from any amounts payable to a Common Equity Holder or Rollover Holder pursuant
to this Agreement such amounts as are required to be withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the “Code”), and the rules and regulations promulgated thereunder, or any
provision of United States federal, state or local tax laws. To the extent that
amounts are so withheld, such withheld amounts shall be (i) remitted by the
Stockholders’ Representative, the Company, the Surviving Corporation and/or
Buyer, as the case may be, to the applicable governmental agency and
(ii) treated for all purposes of this Agreement as having been paid to the
holder of the Common Shares or Options in respect of which such deduction and
withholding was made. All payments to Optionholders shall be treated as
compensation when such consideration is actually paid, and each such payment
shall be subject to and reduced by all applicable federal, state and local
withholding Taxes.

 

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(c) At the Effective Time, the stock transfer books of the Company shall be
closed and no further registration of transfers of shares shall thereafter be
made on the records of the Company.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby makes to Buyer and MergerCo the representations and
warranties contained in this Article IV.

4.1 Existence; Good Standing; Enforceability.

(a) The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. The Company has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as currently conducted. The Company is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction listed on Schedule 4.1(a) and each other
jurisdiction in which the character of its properties or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so licensed or qualified would not result in a Company Material
Adverse Effect. The copies of the Company’s Third Amended and Restated
Certificate of Incorporation (the “Certificate of Incorporation”) and Bylaws
(the “By-laws”), each as amended to date and provided by the Company to the
Buyer, are complete and correct, and no amendments thereto are pending. The
Company is in compliance with the Certificate of Incorporation and the Bylaws in
all material respects.

(b) The Company has all requisite corporate power and authority to execute and
deliver this Agreement and each other Transaction Document to which it is a
party and, subject to the receipt of the Stockholder Written Consent, to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and each other Transaction Document to which the Company is a party,
the performance by the Company of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Company Board and no further action, other than the
delivery of the Stockholder Written Consent, on the part of the Company or its
Stockholders is necessary to authorize the execution and delivery by the Company
of this Agreement or such other Transaction Documents, and the consummation of
the transactions contemplated hereby and thereby. This Agreement and the other
Transaction Documents to which the Company is a party have been (or with respect
to certain Transaction Documents to be executed at Closing, will be) duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement and such other Transaction Documents by
each of the other parties hereto and thereto, constitute (or, as applicable with
respect to certain Transaction Documents to be executed at Closing, shall
constitute) legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with the terms and conditions hereof and
thereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and by general equitable principles (regardless of whether enforcement is sought
in a proceeding at law or in equity). Notwithstanding the foregoing, the Company
makes no representations or warranties

 

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regarding the enforceability of any of the Contracts or other documents
identified on Schedule 4.1(b) (collectively, the “Financing Documents”);
provided, that, such Financing Documents shall include therein enforceability
representations and warranties substantially similar to those provided herein.

4.2 Capitalization. The authorized capital stock of the Company consists of
(i) 11,052,913 shares of preferred stock, par value $.01 per share,
(A) 3,600,000 of which have been designated Series A Preferred Stock, of which
3,600,000 Series A Preferred Shares are issued and outstanding, (B) 5,952,913 of
which have been designated Series B Preferred Stock, of which 5,772,913 Series B
Preferred Shares are issued and outstanding and (C) 1,500,000 of which have been
designated Series C Preferred Stock, of which 500,000 Series C Preferred Shares
are issued and outstanding and (ii) 26,380,346 shares of Common Stock, of which
24,339,096 Common Shares are issued and outstanding, and as of the date hereof
such shares of capital stock are held of record by the Persons and in the
amounts listed on Schedule 4.2. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued, and
are fully paid and nonassessable. Except as set forth on Schedule 4.2, there are
no outstanding subscriptions, options, warrants, commitments, preemptive rights,
deferred compensation rights, agreements, arrangements or commitments of any
kind to which the Company is a party relating to the issuance of, or outstanding
securities convertible into or exercisable or exchangeable for, any shares of
capital stock of any class or other equity interests of the Company. Except as
set forth on Schedule 4.2, there are no agreements to which the Company is a
party with respect to the voting of any shares of capital stock of the Company
or which restrict the transfer of any such shares. Except as set forth on
Schedule 4.2, there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock, other
equity interests or any other securities of the Company.

4.3 Subsidiaries.

(a) All of the Company’s Subsidiaries are listed on Schedule 4.3(a). Except as
set forth in Schedule 4.3(a), the Company owns, directly or indirectly, all of
the outstanding shares of capital stock or other equity interest of each of the
Company’s Subsidiaries, in each case free and clear of all Encumbrances. Except
as set forth on Schedule 4.3(a), neither the Company nor any of its Subsidiaries
owns, directly or indirectly, any capital stock, equity or other ownership
interest in any other Person.

(b) Each of the Company’s Subsidiaries is an entity of the type set forth on
Schedule 4.3(b), duly incorporated, organized or otherwise formed, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite corporate or similar power and authority to own, operate
and lease its properties and to carry on its business as currently conducted.
Each such Subsidiary is duly licensed or qualified to do business as a foreign
organization under the laws of each jurisdiction listed on Schedule 4.3(b) and
each other jurisdiction in which the character of its properties or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so licensed or qualified would not result in a Company Material
Adverse Effect. The copies of the organizational and governing documents of each
such Subsidiary, in each case as amended to date and delivered to Buyer’s
counsel, are complete and correct, and no amendments thereto are pending. The
Company and each Company Subsidiary, as applicable, is in compliance with its
respective organizational and governing documents in all material respects.

 

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(c) Except as set forth on Schedule 4.3(c)(i), each of the Company’s
Subsidiaries has all requisite limited liability, partnership or corporate, as
applicable, power and authority to execute and deliver each of the Transaction
Document to which it is a party and to perform its obligations hereunder and
thereunder. Schedule 4.3(c)(ii) sets forth, for each of the Company’s
Subsidiaries, such Subsidiary’s managers, members, partners, shareholders and
directors and any other Persons exercising similar authority. Following delivery
of the Subsidiaries’ Approvals in accordance with this Agreement, the execution
and delivery of each of the Transaction Document to which any of the Company’s
Subsidiaries is party, the performance by the Company’s Subsidiaries of their
respective obligations thereunder and the consummation of the transactions
contemplated hereby and thereby will be duly authorized by all necessary action
by the managers, members, partners, shareholders, directors, and other Persons
exercising similar authority, as applicable, of each of the Company’s
Subsidiaries, and no further action on the part of any of the Company’s
Subsidiaries shall be necessary to authorize the execution and delivery by any
of the Company’s Subsidiaries of the applicable Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby. Each of the
Transaction Documents to which any of the Company’s Subsidiaries is a party have
been (or with respect to certain Transaction Documents to be executed at
Closing, will be) duly executed and delivered by such Company Subsidiary and,
assuming the due authorization, execution and delivery of this Agreement and
such other Transaction Documents by each of the other parties hereto and
thereto, constitute (or, with respect to certain Transaction Documents to be
executed at Closing, shall constitute) legal, valid and binding obligations of
the Company’s Subsidiaries, enforceable against each of them in accordance with
the terms and conditions thereof, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles (regardless of
whether enforcement is sought in a proceeding at law or in equity).
Notwithstanding the foregoing, the Company makes no representations or
warranties regarding the enforceability of any of the Financing Documents;
provided, that, such Financing Documents shall include therein enforceability
representations and warranties substantially similar to those provided herein.

(d) All of the issued and outstanding equity interest of each of the Company’s
Subsidiaries, as applicable, have been duly authorized and validly issued, and
are fully paid and nonassessable. Except as set forth on Schedule 4.3(d), all of
the issued and outstanding equity interests of the Company’s Subsidiaries are
free and clear of all Encumbrances, and there are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, deferred compensation rights,
agreements, arrangements or commitments of any kind to which the Company or any
of the Company’s Subsidiaries is a party relating to the issuance of, or
outstanding securities convertible into or exercisable or exchangeable for, any
shares of capital stock of any class or other equity interests of any of the
Company’s Subsidiaries. Except as set forth on Schedule 4.3(d), there are no
agreements to which the Company or any of the Company’s Subsidiaries is a party
with respect to the voting of any shares of capital stock or other equity
interest of any of the Company’s Subsidiaries or which restrict the transfer of
any such shares or equity interests. Except as set forth on Schedule 4.3(d),
there are no outstanding contractual obligations of the Company or any of the
Company’s Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock, other equity interests or any other securities of any of the
Company’s Subsidiaries.

 

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4.4 No Conflict; Consents.

(a) Except as set forth on Schedule 4.4(a), the execution and delivery by the
Company of this Agreement and each other Transaction Document to which it is a
party and the execution and delivery by each of the Company’s Subsidiaries of
the Transaction Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby in accordance with their respective
terms, do not: (i) violate, conflict with or result in a default (whether after
the giving of notice, lapse of time or both) under, or give rise to a right of
termination, amendment, acceleration or cancellation of, or result in the
triggering of any payments or the creation of an Encumbrance on any property or
asset of the Company or its Subsidiaries under any Material Contract or Company
Permit to which the Company or any of its Subsidiaries is a party or by which
the Company’s or any of its Subsidiaries’ assets are bound; (ii) conflict with,
or result in any violation of, any provision of the Certificate of
Incorporation, By-laws or any other organizational or governing documents of the
Company or its Subsidiaries; or (iii) violate or result in a violation of, in
any material respect, or constitute a material default under (whether after the
giving of notice, lapse of time or both), or result in the triggering of any
payments or the creation of an Encumbrance on any material property or asset of
the Company or its Subsidiaries under any provision of any law, regulation or
rule, or any order of, or any restriction imposed by, any court or other
governmental agency applicable to the Company or any of its Subsidiaries.

(b) The execution and delivery by the Company and its Subsidiaries of this
Agreement and each other Transaction Document to which any of them is a party,
and the consummation by the Company and its Subsidiaries of the transactions
contemplated hereby and thereby in accordance with their respective terms, do
not require from the Company or its Subsidiaries any notice to, declaration or
filing with, or consent or approval of any Governmental Body, except for:
(A) the filing of the Certificate of Merger with the Secretary of the State of
the State of Delaware; (B) the Stockholder Written Consent; and (C) as otherwise
set forth on Schedule 4.4(b).

4.5 Financial Statements.

(a) The following financial statements are attached hereto as Schedule 4.5(a)
(collectively, the “Financial Statements”):

(i) Audited consolidated balance sheets of the Company and its Subsidiaries as
of the fiscal years ending December 31, 2009 and December 31, 2010, and
consolidated statements of income and cash flows for each of the years then
ended; and

(ii) An unaudited consolidated balance sheet of the Company and its Subsidiaries
as of September 30, 2011 (the “Base Balance Sheet”), and unaudited consolidated
statements of income and cash flows for the nine (9) month period then ended.

 

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(b) Subject to the absence of footnotes and normal, year-end audit adjustments
to any unaudited Financial Statements, which, to the Knowledge of the Company,
are not reasonably expected to be material in amount or effect (either
individually or in the aggregate), the Financial Statements have been prepared
in accordance with GAAP from the books and records of the Company and its
Subsidiaries and present fairly in all material respects the consolidated
financial condition and results of operation, cash flows and owners’ equity of
the Company and its Subsidiaries as of the dates and for the periods covered
thereby.

(c) Since the date of the Base Balance Sheet, except for those liabilities that
are fully reflected or reserved against on the Base Balance Sheet, and for
liabilities incurred in the Ordinary Course of Business since the date of the
Base Balance Sheet (none of which result from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement or violation of law) or in connection with the transactions
contemplated by this Agreement or any other Transaction Document, and except as
set forth on Schedule 4.5(c), neither the Company nor any of its Subsidiaries
has incurred any material liability or obligation (i) of the type required by
GAAP to be reflected or reserved on a balance sheet prepared in accordance with
GAAP or (ii) to the Company’s Knowledge, incurred any other material liability,
whether absolute, accrued, contingent or otherwise, including any future
material liability arising out of acts or omissions which have already occurred.

(d) All accounts receivable and other receivables reflected on the Base Balance
Sheet, and those arising in the Ordinary Course of Business after the date
thereof, are (i) in respect of services or products provided by the Company or
its Subsidiaries arising from bona fide transactions in the conduct of the
Ordinary Course of Business, (ii) in all material respects true and genuine,
represent legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms, and (iii) not subject to any
defense, counterclaim, refunds or adjustments or right of set off, other than
refunds, recoupments, retractions or other adjustments in the Ordinary Course of
Business that are reserved in accordance with GAAP by credit balances or bad
debt or other reserves on the Base Balance Sheet. No material payment of said
receivables is contingent upon performance of any obligations or contract, past
or future, and, except as set forth on Schedule 4.5(d), all such receivables are
free of all security interests and encumbrances created by the Company, its
Subsidiaries, or their respective Affiliates.

4.6 Operating in Ordinary Course of Business. Except as set forth on Schedule
4.6, from January 1, 2011 to the date of this Agreement, the Company and its
Subsidiaries have operated only in the Ordinary Course of Business. Without
limiting the generality of the foregoing, from January 1, 2011 to the date of
this Agreement, (i) neither the Company nor any of its Subsidiaries has taken
any of the actions described in Section 6.1 which would, if taken after the date
hereof, require the consent of Buyer, and (ii) there has been no Company
Material Adverse Effect.

4.7 Title to Assets; Related Matters.

(a) Schedule 4.7(a) sets forth in reasonable detail a list, as of December 31,
2011, of all material tangible personal properties, assets and equipment owned
or used by the Company and its Subsidiaries (the “Personal Property”), in each
case, having an initial cost basis per item in excess of $50,000.

 

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(b) Except as set forth on Schedule 4.7(b)(i), the Company and its Subsidiaries
have good and marketable title to, a valid leasehold interest in, or a valid
license to use, all of the Personal Property, free and clear of all Encumbrances
except Permitted Encumbrances. The Personal Property, taken as a whole, is in
good operating condition and repair, and is capable of being used for its
intended purposes, ordinary wear and tear excepted, and, as of Closing, will be
located (i) on the Real Property, (ii) at the Company’s principal office, or
(iii) at the locations identified on Schedule 4.7(b)(ii).

(c) Schedule 4.7(c) sets forth an accurate and complete list of all leases of
Personal Property requiring annual payments by the Company or any of its
Subsidiaries in excess of $250,000, if any, used in the operation of the
business of the Company and its Subsidiaries (the “Personal Property Leases”).
The Company has delivered to the Buyer complete, correct and current copies of
all of any Personal Property Leases.

(d) Except as set forth on Schedule 4.7(d), since January 1, 2011, neither the
Company nor any of its Subsidiaries has sold, transferred, assigned or disposed
of any of the Personal Property or Personal Property Leases other than (i) in
the Ordinary Course of Business or (ii) in respect of obsolete or unsalable
items.

4.8 Litigation. Except as set forth on Schedule 4.8, as of the date hereof there
is no Litigation against, involving or pending or, to the Company’s Knowledge,
threatened, against the Company or any of its Subsidiaries, or any of the
directors or officers of (or other Persons exercising similar governance
authority on behalf of) the Company or its Subsidiaries in their capacity as
directors or officers of the Company or such Subsidiaries (including, without
limitation any suit, action, proceeding or investigation pursuant to Title 11 of
the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age
Discrimination in Employment Act, the Family and Medical Leave Act of 1993, or
any other federal, state or local law regulating employment). There is no
Litigation pending, or to the Knowledge of the Company, threatened, that
questions the validity of this Agreement, any of the other Transaction Documents
to which the Company or any of its Subsidiaries is a party, or any action taken
or to be taken by the Company or its Subsidiaries in connection with this
Agreement, the other Transaction Documents, or the transactions contemplated
hereby or thereby. Neither the Company nor any of its Subsidiaries are subject
to any outstanding writ, order, judgment, injunction, decree, rule or order of
any Governmental Body or any other Person (including, without limitation, any
arbitral tribunal) outstanding against the Company or any of its Subsidiaries,
and neither the Company or its Subsidiaries is in violation of any term of any
judgment, decree, injunction or order outstanding against any of them.

4.9 Taxes.

(a) Except as set forth on Schedule 4.9(a), all material Tax Returns required to
be filed by or with respect to the Company and its Subsidiaries have been timely
filed (taking into account applicable extensions of time to file), and all such
Tax Returns are accurate and complete in all material respects.

(b) Except as set forth on Schedule 4.9(b), the Company and its Subsidiaries
have paid or caused to be paid all material Taxes due and owing by any of them
(whether or not

 

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shown on the Tax Returns described in Section 4.9(a)), or have made adequate
provision on the books of the Company or its Subsidiaries, as applicable, for
all Taxes owed or accrued by the Company and its Subsidiaries.

(c) Except as set forth on Schedule 4.9(c), no U.S. federal, state, local or
foreign audits or other administrative proceedings or court proceedings are
pending with regard to any Taxes or Tax Returns of the Company or any of its
Subsidiaries.

(d) Except as set forth on Schedule 4.9(d), no assessment, deficiency, or other
claims for any Taxes of the Company or its Subsidiaries has been proposed,
asserted, or assessed in writing by any taxing authority, for which Buyer , the
Company or its Subsidiaries may be held liable. Neither the Company nor any of
its Subsidiaries has waived any material statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency which extension is currently effective.

(e) There are no Encumbrances filed by any Governmental Body for Taxes upon the
assets of the Company or its Subsidiaries, except for (i) Encumbrances relating
to current Taxes not yet due and payable or (ii) that are being contested in
good faith by appropriate proceedings and as to which adequate provision has
been made on the books of the Company or its Subsidiaries, as applicable, all of
which contests are described in reasonable detail on the attached Schedule
4.9(e).

(f) Except as set forth on Schedule 4.9(f), the Company and its Subsidiaries
have withheld and paid all Taxes and other amounts required by law or agreement
to be withheld and paid by them in connection with any wages, salaries, or other
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and neither the Company nor any of its
Subsidiaries is liable for any material arrearages of any tax or material
penalties for failure to comply with the foregoing

(g) Except as set forth on Schedule 4.9(g), the Company and its Subsidiaries
will not be required to include any item of income, or exclude any item of
deduction from, taxable income for any taxable period ending after the Closing
Date as a result of any (i) change in accounting method for a taxable period
ending on or prior to the Closing Date; (ii) “closing agreement” as described in
Section 7121 of the Code; (iii) installment sale or open transaction disposition
made on or prior to the Closing Date; (iv) prepaid amount received on or prior
to the Closing Date; or (v) status as a beneficiary of any trust or as a partner
or member of any partnership or limited liability company.

(h) The Company and its Subsidiaries have no liability for the Taxes of any
Person other than the Company and its Subsidiaries as a transferee or successor
by contract or otherwise, and other than pursuant to any commercial Contract
entered into in the Ordinary Course of Business that does not primarily relate
to Taxes.

(i) Neither the Company nor any of its Subsidiaries is or has been a party to
any “listed transaction” within the meaning of Treasury Regulations
Section 1.6011-4(b)(2).

(j) Neither the Company nor any of its Subsidiaries are party to any Tax
abatement agreements relating to any of its properties or assets.

 

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(k) The representations and warranties set forth in this Section 4.9 shall
constitute the only representations and warranties by the Company with respect
to Taxes.

4.10 Employee Benefit Plans.

(a) Schedule 4.10(a) sets forth each employee benefit plan within the meaning of
Section 3(3) of ERISA that is sponsored or maintained by the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries contributes
or is obligated to contribute (the “Benefit Plans”).

(b) Neither the Company nor any of its ERISA Affiliates sponsors, maintains or
contributes to (or is obligated to contribute to) any “employee pension plan,”
as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA or
Section 412 of the Code or any “multiemployer plan,” as defined in Section 3(37)
of ERISA.

(c) The Benefit Plans have been administered in all material respects in
accordance with the applicable provisions of ERISA and the Code, and the Company
and its Subsidiaries are in compliance in all material respects with all other
applicable laws and regulations respecting such Benefit Plans.

(d) Except as set forth on Schedule 4.10(d), neither the execution and delivery
of this Agreement and the other Transaction Documents, nor the consummation of
the transactions contemplated hereby and thereby, will result in any “parachute
payment” as defined in Section 280G of the Code or (ii) any “change in control”
or other payment under any Benefit Plan or employment agreement or non-qualified
deferred compensation plan or agreement.

4.11 Labor and Employment Matters.

(a) Schedule 4.11(a) sets forth a list of all employees of the Company and of
each of its Subsidiaries who provide, as of the date hereof, services at any of
the Facilities (collectively, the “Business Employees”), and specifies which of
the Company or its applicable Subsidiaries employs such Business Employees.
Except as set forth on Schedule 4.11(a), all of the Business Employees are “at
will” employees. Except as set forth on Schedule 4.11(a), neither the Company
nor any of its Subsidiaries is a party to any oral (express or implied) or
written: (i) employment agreement, or (ii) agreement that contains any severance
or termination pay obligations with any Business Employee. The Company has
delivered to the Buyer true, correct and current copies (or, if not written,
accurate descriptions of the parties and terms) of all such agreements.

(b) Except as set forth on Schedule 4.11(b), the Company and each of its
Subsidiaries is currently in compliance with, and, during the prior three
(3)-year period have complied with, in each case, in all material respects (and
none of them has received any written notice of noncompliance with), all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
provisions relating to wages, hours, equal employment, occupational safety and
health, workers’ compensation, unemployment insurance, collective bargaining,
immigration, affirmative action and the payment and withholding of social
security and other taxes.

 

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(c) To the Company’s Knowledge, as of the date hereof, (i) there are no material
audits or investigations pending or scheduled by any Governmental Body
pertaining to the employment practices of the Company or any of its
Subsidiaries, including but not limited to audits or investigations concerning
the payment of wages or overtime in accordance with applicable law or concerning
the proper classification of any worker as an independent contractor or
consultant; and (ii) no complaints relating to employment practices of the
Company or any of its Subsidiaries have been made to any Governmental Body or
submitted to the Company or any of its Subsidiaries.

(d) Neither the Company nor any Subsidiary of the Company is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union, labor organization, trade
association or other employee organization, and no such agreements are currently
being proposed and/or negotiated by the Company or any of its Subsidiaries. To
the Knowledge of the Company, (i) no Business Employee is represented by any
labor union, trade association or other employee organization, (ii) neither the
Company nor any Subsidiary of the Company is subject to or has received any
written charge, demand, petition or representation proceeding seeking to compel,
require or demand it to bargain with any labor union or labor organization,
(iii) there is no pending or, to the Company’s Knowledge, threatened labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving the
Business Employees, the Company or any Subsidiary of the Company, and (iv) no
union has attempted to organize any group of the Business Employees, and no
group of the Business Employees has sought to organize themselves into a union
or similar organization for the purpose of collective bargaining.

(e) To the Company’s Knowledge, there is no material investigation, grievance,
arbitration, complaint, claim or other dispute or controversy (collectively,
“Labor Proceeding”) pending or threatened, between the Company and/or its
Subsidiaries, on the one hand, and any present or former Business Employee, on
the other hand, nor has there been any such Labor Proceeding within the past
twelve (12) months.

(f) As of the date hereof, neither the Company nor any of its Subsidiaries has
received written notice that any of the individuals listed on Schedule 4.11(f)
intends to terminate his or her employment or affiliation with the Company or
any of its Subsidiaries.

4.12 Contracts and Commitments; Enforceability.

(a) Except as set forth on Schedule 4.12(a), as of the date hereof neither the
Company nor any Subsidiary of the Company is a party to:

(i) any partnership agreement, joint venture agreement, or profit sharing
agreement;

(ii) any agreement which creates a future payment obligation to or from the
Company or any of its Subsidiaries in excess of $500,000 in any calendar year;

 

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(iii) any contract for capital expenditures or the acquisition or construction
of fixed assets requiring payments by the Company or any of its Subsidiaries in
excess of $500,000;

(iv) any contract that requires the payment of royalties, commissions, finder’s
fees or similar payments;

(v) any employment or consulting agreement with any current director, officer or
employee requiring an annual payment of cash compensation in excess of $250,000
for each Person;

(vi) any contract providing for the marketing, sale, advertising or promotion of
the Company’s or its Subsidiaries’ products or services involving annual
expenditures of $500,000 or more;

(vii) any sales, distribution, dealer or manufacturer’s representative or
franchise contracts involving annual expenditures in excess of $500,000;

(viii) any contract with any commercial payor of the Company or any of the
Company’s Subsidiaries that provides for most favored nation pricing, volume
rebates or discounts (other than standard rebates or discounts provided in the
Ordinary Course of Business);

(ix) any take or pay or requirements contracts or agreements or any other
contracts or agreements requiring the Company or any of its Subsidiaries to pay
regardless of whether products or services are received;

(x) any agreement with another Person materially limiting or restricting the
ability of the Company or any of its Subsidiaries to enter into or engage in any
market, territory, area or line of business;

(xi) any agreement for the sale of any of the assets of the Company or any of
its Subsidiaries other than (A) pursuant to this Agreement or any other
Transaction Document, (B) in the Ordinary Course of Business or (C) the
disposition of unsalable or obsolete assets;

(xii) any agreement relating to the acquisition by the Company or any of its
Subsidiaries of substantially all of the assets or capital stock of any Person
or a merger, consolidation or business combination involving the Company or any
of its Subsidiaries;

(xiii) any agreement relating to the incurrence, assumption, surety or guarantee
of any Indebtedness;

(xiv) any agreement under which the Company or any of its Subsidiaries has made
advances or loans to any other Person (excluding advances made to an employee of
the Company or any of its Subsidiaries in the Ordinary Course of Business);

 

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(xv) any agreement with any Person in a position to make, or influence the
making of, referrals to the Company or any of the Facilities, for items or
services which are billable to any of the Government Programs;

(xvi) any agreement that provides for or obligates the Company or any of its
Subsidiaries to indemnify, hold harmless or defend any Person (including,
without limitation, any officers, directors, members, managers, partners,
employees or agents of the Company or any of its Subsidiaries), other than
commercial Contracts entered into in the Ordinary Course of Business the primary
purpose of which is not related to the indemnification of any Person;

(xvii) any contracts or orders with any Governmental Body; or

(xviii) any Personal Property Lease.

(b) Each of the Contracts set forth on Schedule 4.12(a) (the “Material
Contracts”) is the legal, valid and binding obligation of the Company and/or its
Subsidiaries (and, to the Company’s Knowledge, of the other parties thereto),
enforceable against them (and, to the Company’s Knowledge, of the other parties
thereto) in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights generally and by general equitable principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity). The Company has delivered to the Buyer complete and correct copies of
all of the Material Contracts. Except as stated on Schedule 4.12(b), (i) each
Material Contract is in full force and effect, (ii) the Company is not and, to
the Knowledge of the Company, no other party to any such agreement is in default
under any such agreement, except where such default has not caused Company
Material Adverse Effect, (iii) to the Knowledge of the Company no party has
received notice of any default, offset, counterclaim or defense under any
Material Contract; and (iv) to the Company’s Knowledge, no condition or event
has occurred which with the passage of time or the giving of notice or both
would constitute a default or breach by the Company or any of its Subsidiaries
under the terms of any Material Contract.

4.13 Intellectual Property.

(a) Schedule 4.13(a) sets forth a complete and accurate list, as of the date
hereof, of Intellectual Property owned by the Company or any of its Subsidiaries
and material to the conduct of the business of the Company and its Subsidiaries,
taken as a whole, as currently conducted.

(b) Except as set forth on Schedule 4.13(b), the Company or a Subsidiary of the
Company is the owner of, or has adequate, enforceable licenses or other rights
to use, all Intellectual Property, as is necessary in connection with the
business of the Company and its Subsidiaries as currently conducted taken as a
whole, and no such rights thereto have been granted to others by the Company or
any of its Subsidiaries.

(c) Except as set forth in Schedule 4.13(c), all of the Intellectual Property is
owned or used by the Company and/or its Subsidiaries free and clear of all
Encumbrances, except Permitted Encumbrances, and none is subject to any
outstanding order, decree, judgment, stipulation or charge.

 

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(d) (i) To the Company’s Knowledge, the Company’s and its Subsidiaries
respective use of the Intellectual Property does not infringe upon or otherwise
violate the rights of any other Person, (ii) no Person has asserted in writing
to the Company or any of its Subsidiaries that the Company’s or any of its
Subsidiaries’ use of the Intellectual Property infringes upon the patents, trade
secrets, trade names, trademarks, service marks, copyrights or other
intellectual property rights of any other Person, and (iii) neither the Company
nor any of its Subsidiaries is a party to any suit, action or proceeding which
involves a claim of infringement, unauthorized use, or violation of any
Intellectual Property used or owned by any Person against the Company or its
Subsidiaries, or challenging the ownership, use, validity or enforceability of
any Intellectual Property owned or used by the Company or its Subsidiaries.
Further, to the Company’s Knowledge, there is no unauthorized use, disclosure,
infringement or misappropriation of any of the Intellectual Property by any
third party.

(e) Schedule 4.13(e) sets forth a complete and accurate list of all material
licenses, sublicenses and other agreements to which the Company and/or its
Subsidiaries are a party (i) granting any other Person the right to use the
Intellectual Property, or (ii) pursuant to which the Company or its Subsidiaries
are authorized to use any third party Intellectual Property, which are
incorporated in, are, or form a part of any services rendered by the Company or
any Subsidiary or which are otherwise used (or currently proposed to be used) by
the Company or its Subsidiaries in the business of the Company as currently
conducted, other than commercial off-the-shelf software.

4.14 Insurance. Schedule 4.14 sets forth, as of the date hereof, a complete and
accurate list and brief description of all insurance policies (including the
insurer, term of such policy, insured parties, type and amount of coverage,
deductible and aggregate limit of the insurer’s liability for such policy) held
by, or for the benefit of, the Company and its Subsidiaries (the “Insurance
Policies”). Each Insurance Policy is legally valid, binding and in full force
and effect, all premiums due thereon have been paid in full, and the Company and
the applicable Subsidiaries of the Company are in compliance, in all material
respects, with the terms of such insurance policies.

4.15 Permits; Compliance with Laws; Reimbursement; Accreditation.

(a) Schedule 4.15(a) contains a complete and accurate list, as of the date
hereof, of all material Licenses and material accreditations or certifications
issued by private accreditation agencies held by the Company and its
Subsidiaries that are required to conduct their respective businesses as
currently conducted and to occupy and operate the Facilities, including, without
limitation, all provider agreements with governmental payors (the “Company
Permits”).

(b) Except as set forth in Schedule 4.15(b), the Company and/or its
Subsidiaries, as applicable, possess all such Company Permits, such Company
Permits are in full force and effect.

 

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(c) Except as set forth on Schedule 4.15(c), (i) the Company and its
Subsidiaries are in compliance, in all material respects, with the terms of all
Company Permits, (ii) no suspension or cancellation of any such Company Permits
is pending or, to the Knowledge of the Company, threatened, and (iii) neither
the Company nor any of its Subsidiaries has received any written notice from any
Governmental Body with respect to, as applicable, the threatened or pending
denial, revocation, termination, or suspension of any of the Company Permits.

(d) The Company and each of its Subsidiaries is in material compliance with all
laws, statutes, ordinances, regulations, rules, orders, judgments, decrees,
orders, and writs of a Governmental Body applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or its
Subsidiaries is bound. Neither the Company nor any of its Subsidiaries has
received any written notice from any Governmental Body to the effect that the
Company or its Subsidiaries are not in material compliance with any applicable
laws, statutes, ordinances, regulations, rules, orders, judgments, decrees,
order, writs and other actions of a Governmental Body.

4.16 Healthcare Compliance.

(a) The activities of Company and its Subsidiaries are currently being,
conducted in compliance in all material respects with all Healthcare Laws.

(b) There is no Litigation, audit or recoupment pending by or before any
Governmental Body or, to the Knowledge of the Company threatened, which alleges
a violation of Healthcare Laws by the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries, has received, at any time
during prior three (3) years, any written notice alleging a violation of any
Healthcare Law. Neither the Company nor any of its Subsidiaries, has received,
at any time during prior three (3) years, any written notice indicating that
qualification as a participating provider in any government or private
reimbursement program may be terminated or withdrawn.

(c) None of the Company, its Subsidiaries, nor any of their respective officers,
directors, or employees, or, the Company’s Knowledge, any Physicians performing
services at the Facilities, is, or has been at any time during the past three
(3) years, excluded, suspended or debarred from participation or is otherwise
ineligible to participate in any federal or individual state health care
program, including, but not limited to the Government Programs.

(d) Except as would not have a material and adverse effect, the Company and its
Subsidiaries hold all Licenses required under applicable Healthcare Laws now in
effect which are necessary to own, lease or otherwise hold and operate their
properties and assets and to conduct their respective businesses as currently
conducted.

(e) All Contracts between third party payors and the Company or any of its
Subsidiaries (each, a “Payor Contract”) were entered into in the Ordinary Course
of Business. The Company and its Subsidiaries are in compliance in all material
respects with all Payor Contracts.

 

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(f) Except as set forth on Schedule 4.16(f), every Contract providing for
remuneration to a Physician (or his or her immediate family member) for services
performed at, or on behalf of, the Company or any of its Subsidiaries is
pursuant to a written contract which complies with an applicable exception under
the Stark Law.

(g) The Facilities are currently licensed as specified in the attached Schedule
4.16(g), with the number of licensed beds specified thereon, and will remain so
licensed through the Closing Date in compliance with and subject only to the
usual and customary laws and government regulations pertaining to the operation
of hospitals so licensed, as applicable, in the States of Texas, Colorado,
Montana, New Mexico, Wyoming, Arizona, Idaho, South Carolina, and Utah.

(h) Except as set forth on Schedule 4.16(h), each of the Facilities (i) are
enrolled and are providers authorized to participate without restriction under
the Government Programs; (ii) are in compliance in all material respects with
all the conditions of participation for the Government Programs, (iii) have
received all approvals or qualifications necessary for capital reimbursement;
and (iv) are in compliance with 42 C.F.R. §§ 489.20 and 489.24 and their
Medicare provider agreements.

(i) Except as set forth on Schedule 4.16(i), the Company and its Subsidiaries
are, and have been, in compliance in all material respects with all filing
requirements with respect to cost reports of the Facilities, including, without
limitation, the appropriate allocation of expenses associated with any
management or consulting services provided by any employees of the Company or
its Subsidiaries, and, to the Company’s Knowledge, such reports do not claim,
and the Facilities have not received, payment or reimbursement materially in
excess of the amount provided or allowed by applicable law or any applicable
agreements.

(j) Except as set forth on Schedule 4.16(j), each of the LTCH Operators (i) are
excluded from the inpatient prospective payment system specified in 42 C.F.R.
§412.1(a); (ii) satisfy all requirements necessary for Medicare reimbursement as
a “long-term care hospital” as set forth in C.F.R., Title 42, Part 412, as
applicable; and (iii) to the Knowledge of the Company, no action is pending or
threatened by any Governmental Body which would affect the ability of any of the
LTCH Operators to be reimbursed as a “long-term care hospital” under Medicare.

(k) Except as set forth on Schedule 4.16(k), each of the IRF Operators (i) are
excluded from the inpatient prospective payment system specified in 42 C.F.R.
§412.1(a); (ii) satisfy all requirements necessary for Medicare reimbursement as
an “inpatient rehabilitation facility” as set forth in C.F.R., Title 42, Part
412, as applicable; and (iii) to the Knowledge of the Company, no action is
pending or threatened by any Governmental Body which would affect the ability of
any of the IRF Operators to be reimbursed as an “inpatient rehabilitation
facility” under Medicare.

(l) Except as set forth on Schedule 4.16(l), each of the Co-Located Operators
(i) satisfies all requirements necessary for Medicare reimbursement as
“hospitals-within-hospitals” as set forth in C.F.R., Title 42, Part 412, as
applicable; (ii) in each state where a Co-Located Operator is located, comply in
all material respects with any state laws and regulations applicable to
hospitals located in the same building, or on the same campus, as another
hospital;

 

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and (iii) to the Knowledge of the Company, no action is pending or threatened by
any Governmental Body which would affect ability of any of the Co-Located
Operators to be reimbursed as “hospitals-within-hospitals” under Medicare.

(m) Each of the Facilities has been accredited by the Joint Commission and the
Company has delivered to Buyer true, correct and complete copies of the
following documents: (i) the most recent Joint Commission accreditation survey
reports for each of the Facilities and deficiency list and plan of correction,
if any, and a list and description of any events in the past three (3) years at
each of the Facilities that constitutes “Adverse Events” (as defined by the
Joint Commission), if any, and any documentation that was created, prepared or
produced by the Company or any of its Subsidiaries, to satisfy the Joint
Commission requirements relating to addressing such Adverse Events; and (ii) any
state licensing survey reports with respect to the Facilities for the three
(3) year period prior to the date of this Agreement, as well as any statements
of deficiencies and any plans of correction in connection with such reports. The
Company has taken reasonable steps to correct or cause to be corrected all such
deficiencies and a description of any uncorrected deficiency is set forth on
Schedule 4.16(m).

4.17 Transactions with Affiliates. Schedule 4.17 sets forth a complete and
correct list of all Contracts between either the Company or any of its
Subsidiaries with any Person that is an Affiliate of the Company or any of its
Subsidiaries, other than Contracts for compensation and benefits received as
employees, directors, officers or consultants of the Company or any of its
Subsidiaries.

4.18 No Brokers. Except as set forth on Schedule 4.18, neither the Company nor
any of its Subsidiaries has entered into any contract, arrangement or
understanding with any Person or firm that may result in the obligation of such
entity or Buyer or MergerCo to pay any finder’s fees, brokerage or agent’s
commissions or other like payments in connection with the negotiations leading
to this Agreement or consummation of the Merger.

4.19 Patriot Act Compliance.

(a) To the extent applicable to the Company or any of its Subsidiaries, each of
them has complied in all material respects with the International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001, which comprises
Title III of the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot
Act”) and the regulations promulgated thereunder, and the rules and regulations
administered by the U.S. Treasury Department’s Office of Foreign Assets Control
(“OFAC”).

(b) Neither the Company nor any of its Subsidiaries is included on the List of
Specially Designated Nationals and Blocked Persons maintained by the OFAC, and
neither the Company nor any of its Subsidiaries is a resident in, or organized
or chartered under the laws of, (i) a jurisdiction that has been designated by
the U.S. Secretary of the Treasury under Section 311 or 312 of the Patriot Act
as warranting special measures due to money laundering concerns or (ii) any
foreign country that has been designated as non-cooperative with international
anti-money laundering principles or procedures by an intergovernmental group or
organization, such as the Financial Action Task Force on Money Laundering, of
which the United States is a member and with which designation the United States
representative to the group or organization continues to concur.

 

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4.20 Ability to Grant Security Interest. Except as set forth on Schedule 4.20,
to the Knowledge of the Company, the Company may grant the Buyer and/or its
Affiliates a first priority security interest in (a) the outstanding shares of
capital stock and other equity interests of each of the Company’s Subsidiaries,
(b) the accounts receivable of the Company and each Company Subsidiary, (c) the
Personal Property, (d) the Personal Property Leases, (e) the Intellectual
Property, and (f) the Licenses and Company Permits (including, without
limitation, all provider agreements with governmental payors).

4.21 Disclaimer of Other Representations and Warranties.

(a) NONE OF THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF ITS REPRESENTATIVES,
DIRECTORS, OFFICERS OR STOCKHOLDERS, HAS MADE ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES OR THE BUSINESS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN
THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE IV OR
IN THE REAL PROPERTY ASSET PURCHASE AGREEMENT.

(b) Without limiting the generality of the foregoing, neither the Company nor
any of its Subsidiaries, nor any Representative of the Company or any of its
Subsidiaries, nor any of their respective employees, officers, directors or
stockholders, has made, and shall not be deemed to have made, any
representations or warranties in the materials relating to the business of the
Company and its Subsidiaries made available or delivered to Buyer and MergerCo,
including due diligence materials, or in any presentation of the business of the
Company and its Subsidiaries by management of the Company or others in
connection with the transactions contemplated hereby, and no statement contained
in any of such materials or made in any such presentation shall be deemed a
representation or warranty hereunder and deemed to be relied upon by Buyer or
MergerCo in executing, delivering and performing this Agreement and the
transactions contemplated hereby. It is understood that any cost estimates,
projections or other predictions, any data, any financial information or any
memoranda or offering materials or presentations, including but not limited to,
any offering memorandum or similar materials made available or delivered by the
Company and its Representatives, are not and shall not be deemed to be or to
include representations or warranties of the Company, and are not and shall not
be deemed to be relied upon by Buyer or MergerCo in executing, delivering and
performing this Agreement and the transactions contemplated hereby.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO

Buyer and MergerCo hereby jointly and severally make to the Company the
representations and warranties contained in this Article V.

 

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5.1 Organization. Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and
MergerCo is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and each has all requisite limited
liability company or corporate, as applicable, power and authority to own,
operate and lease its properties and to carry on its respective business as
currently conducted. Each of Buyer and MergerCo is duly licensed or qualified to
do business as a foreign limited liability company or corporation, as
applicable, under the laws of each jurisdiction in which the character of its
properties or in which the transaction of its business makes such qualification
necessary, except where the failure to be so licensed or qualified has not had a
Buyer Material Adverse Effect. Buyer has never elected to be taxed as a
corporation for U.S. federal, state or local income tax purposes.

5.2 Authority. Each of Buyer and MergerCo has all requisite limited liability
company or corporate, as applicable, power and authority to execute and deliver
this Agreement and each other Transaction Document to which it is a party, and
to perform their respective obligations hereunder and thereunder. The execution
and delivery of this Agreement and each other Transaction Document to which
Buyer and/or MergerCo is a party, the performance by Buyer and MergerCo of their
respective obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action by the manager and member of Buyer and the board of directors
of MergerCo and no other action on the part of Buyer or MergerCo is necessary to
authorize the execution and delivery by Buyer or MergerCo of this Agreement and
the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Buyer and MergerCo, and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Buyer and MergerCo, as the case may be,
enforceable against each of them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and by general
equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity). Notwithstanding the foregoing, the Company
makes no representations or warranties regarding the enforceability of any of
the Financing Documents.

5.3 No Conflict. The execution and delivery by Buyer and MergerCo of this
Agreement and each other Transaction Document to which either is a party, and
the consummation by Buyer and MergerCo of the transactions contemplated hereby
and thereby in accordance with their respective terms, do not (a) violate,
conflict with or result in a default (whether after the giving of notice, lapse
of time or both) under, or give rise to a right of termination of, any contract,
agreement, permit, license, authorization or obligation to which Buyer or
MergerCo is a party or by which Buyer or MergerCo or any of their respective
assets are bound, (b) conflict with, or result in, any violation of any
provision of the certificate of formation, certificate of incorporation, bylaws
or other organizational documents of Buyer or MergerCo; (c) violate or result in
a violation of, or constitute a default under (whether after the giving of
notice, lapse of time or both), any provision of any law, regulation or rule, or
any order of, or any restriction imposed by, any court or other governmental
agency applicable to Buyer or MergerCo or (d) require from Buyer or MergerCo any
notice to, declaration or filing with, or consent or approval of any
Governmental Body or other Person, except in the case of clauses (a) and (c) of
this Section 5.3 for any such conflicts, defaults, violations, terminations and
any waivers which, if not obtained, would not have a Buyer Material Adverse
Effect.

 

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5.4 Required Financing. Buyer and MergerCo have furnished to the Company true,
correct and complete copies of fully-executed commitment letters from MPT
Operating Partnership, L.P., a Delaware limited partnership (“MPT Operating
Partnership”), dated as of the date hereof (the “Commitment Letters”), pursuant
to which MPT Operating Partnership has committed, subject only to the terms and
conditions set forth in the Commitment Letters, to provide or cause to be
provided equity and debt financing to (a) the Affiliated MPT Property Companies
and the Affiliated MPT TRS Lender Companies of up to an aggregate amount of
$300,000,000, and (b) the MPT TRS Entity of up to an aggregate amount of
$96,500,000. Each of the Commitment Letters are in full force and effect and
have not been terminated as of the date hereof. Upon receipt of funds in
accordance with the Commitment Letters, Buyer, MergerCo, the Affiliated MPT
Property Companies, and the Affiliated MPT TRS Lender Companies will have at the
Closing funds sufficient to consummate the transactions contemplated by this
Agreement, the Real Property Asset Purchase Agreement, and any other Transaction
Document to which any of them is a party. The financings contemplated by the
Commitment Letters is not subject to any condition precedent or other
restriction or contingency limiting the availability of such financing other
than as expressly set forth in the Commitment Letters. Each of Buyer and
MergerCo affirms that it is not a condition to Closing or any of its other
obligations under this Agreement, the Real Property Asset Purchase Agreement, or
any other Transaction Document to which any of them is a party that it obtain
the financing contemplated by the Commitment Letters or any other financing for
or related to any of the transactions contemplated by this Agreement, the Real
Property Asset Purchase Agreement or any other Transaction Document to which any
of them or any of the Affiliated MPT Property Companies or the Affiliated MPT
TRS Lender Companies is a party.

5.5 Litigation. There is no Litigation, action, suit, proceeding, claim,
arbitration or investigation pending or, to the actual knowledge of Buyer or
MergerCo, threatened in writing against Buyer or MergerCo, nor is Buyer or
MergerCo subject to any outstanding order, writ, judgment, injunction or decree,
in either case, which would (a) prevent, hinder or materially delay the
consummation of the Merger or (b) otherwise prevent, hinder or materially delay
performance by Buyer or MergerCo of any of their material obligations under this
Agreement.

5.6 Brokers. Except as set forth on Schedule 5.6, no broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or
commission from the Company in connection with the Merger based upon
arrangements made by or on behalf of Buyer, MergerCo or either of their
respective Affiliates.

5.7 Absence of Conduct; Undisclosed Liabilities. Prior to the date hereof,
neither Buyer nor MergerCo has engaged in any business, nor do either of them
have any liabilities or obligations, other than those related to or incurred in
connection with this Agreement, the Real Property Asset Purchase Agreement, any
other Transaction Documents to which either Buyer or MergerCo is a party, and
the transactions contemplated hereby or thereby.

 

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5.8 Inspection; No Other Representations. Each of Buyer and MergerCo is an
informed and sophisticated Person, and has engaged expert advisors experienced
in the evaluation and acquisition of companies such as the Company and its
Subsidiaries as contemplated hereunder. Each of Buyer and MergerCo has
undertaken such investigation and has been provided with and has evaluated such
documents and information as it has deemed necessary to enable it to make an
informed and intelligent decision with respect to the execution, delivery and
performance of this Agreement and the transactions contemplated hereby. Buyer
and MergerCo have received all materials relating to the business of the Company
and its Subsidiaries that they have requested and have been afforded the
opportunity to obtain any additional information necessary to verify the
accuracy of any such information or of any representation or warranty made by
the Company hereunder or to otherwise evaluate the merits of the transactions
contemplated hereby. Without limiting the generality of the foregoing, each of
Buyer and MergerCo acknowledges that (a) the Company does not make any
representation or warranty with respect to (i) any projections, estimates or
budgets delivered to or made available to Buyer or MergerCo of future revenues,
future results of operations (or any component thereof), future cash flows or
future financial condition (or any component thereof) of the Company and its
Subsidiaries or the future business and operations of the Company and its
Subsidiaries or (ii) any other information or documents made available or
delivered to Buyer or MergerCo or their Representatives with respect to the
Company, its Subsidiaries or any of their respective businesses, assets,
liabilities or operations, except as expressly set forth in Article IV of this
Agreement, and (b) neither Buyer nor MergerCo has relied or will rely upon any
representation or warranty except those representations or warranties set forth
in Article IV hereof, in negotiating, executing, delivering and performing this
Agreement and the transactions contemplated hereby.

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER

6.1 Conduct of Business Prior to Closing. Except as expressly provided or
permitted herein, as set forth on Schedule 6.1, as required by contract in
effect on the date hereof or by law, or as consented to in writing by Buyer,
during the period commencing on the date of this Agreement and ending at the
Effective Time or the earlier termination of this Agreement, the Company shall,
and shall cause each of its Subsidiaries to, (a) act and carry on its business
in all material respects in the Ordinary Course of Business and in compliance in
all material respects with all applicable laws and regulations and (b) use
commercially reasonable efforts to maintain and preserve its and each of its
Subsidiaries’ business organization, assets and properties, to use commercially
reasonable efforts to keep available the services of each of their current
officers and employees and to preserve their present relationships with
patients, suppliers and other Persons with which the Company or any of its
Subsidiaries has significant business relations. Without limiting the generality
of the foregoing, except as expressly provided or permitted herein or as set
forth on Schedule 6.1, or as required by contract in effect on the date hereof
or by law, from and after the date hereof until the Effective Time or the
earlier termination of this Agreement, the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, do any of the
following without the prior written consent of Buyer (which consent shall not be
unreasonably withheld or delayed):

(a) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or any of its other securities;

 

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(b) authorize for issuance, issue or sell or agree or commit to issue or sell
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or equity equivalents (other than the issuance of Common Shares
upon the exercise of Options that are outstanding on the date of this
Agreement);

(c) make any change to the Certificate of Incorporation or By-laws, or the
organizational or governing documents of its Subsidiaries, terminate or alter
its legal existence and or business organization;

(d) (i) incur any Indebtedness, except for borrowings under the Company’s
existing credit facilities, or guarantee any Indebtedness of another Person,
(ii) issue or sell any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another Person, or enter into any
“keep well” or other agreement to maintain any financial statement condition of
another Person, or (iii) make any loans, advances (other than advances to
employees of the Company and its Subsidiaries in the Ordinary Course of
Business) or capital contributions to, or investment in, any other Person, other
than by the Company or any of its Subsidiaries in any of the Company’s direct or
indirect wholly-owned Subsidiaries;

(e) fail to pay or satisfy any Indebtedness when the same becomes due and
payable;

(f) knowingly waive, release, cancel, or assign any material rights or claims,
other than in the Ordinary Course of Business (including any material write-off
or other material compromise of any accounts receivable or other receivable of
the Company or any of its Subsidiaries); provided, however, that, for the
avoidance of doubt, the Company shall not be prohibited from paying any
Indebtedness or any expenses in connection with the Merger and related
transactions);

(g) materially change accounting policies or procedures or Tax elections, except
as required by GAAP or applicable law;

(h) (i) materially increase the rates of direct compensation or bonus
compensation payable or to become payable to any officer, management level
employee, agent or consultant of the Company or any Subsidiary, except (A) in
the Ordinary Course of Business, (B) in accordance with the existing terms of
contracts entered into prior to the date of this Agreement, (C) for the
acceleration of unvested Options and/or restricted stock as provided for under
the applicable incentive agreements, or (D) for bonuses payable to senior
management of the Company in connection with the transactions contemplated by
this Agreement which are approved by the Company Board, or (ii) adopt any new
Benefit Plan or materially amend or modify any existing Benefit Plan;

 

 

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(i) (i) merge with, enter into a consolidation with or otherwise acquire an
interest of the outstanding equity interests in any Person or acquire a
substantial portion of the assets or business of any Person (or any division or
line of business thereof), or (ii) otherwise acquire (including, through leases,
subleases and licenses of real, personal or intangible property) any material
assets, except, in the case of this clause (ii), in the Ordinary Course of
Business;

(j) sell, lease, license, pledge or otherwise dispose of or encumber any
properties or assets of the Company or any of its Subsidiaries other than in the
Ordinary Course of Business or in connection with the disposition of obsolete
properties or assets;

(k) fail to maintain any of the Insurance Policies in full force and effect;

(l) amend or terminate any Material Contract to which the Company or any of its
Subsidiaries is party, except for terminations or amendments provided by the
terms thereof or in the Ordinary Course of Business;

(m) settle or compromise any Litigation or other disputes (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises for Litigation or other disputes where the amount paid in settlement
or compromise does not exceed $100,000 individually or $500,000 in the aggregate
for all such Litigation or other disputes;

(n) terminate or materially and adversely modify its relationships with any
material suppliers, trade creditors or trade debtors except in the Ordinary
Course of Business;

(o) make any capital expenditure or commitment for the acquisition of assets or
properties in excess of One Million One Hundred and Ninety Three and No/100
Dollars ($1,193,000.00);

(p) enter into any executory agreement, commitment or undertaking, whether in
writing or otherwise, to do any of the activities prohibited by the foregoing
provision, or permit any of its equity holders, directors, officers, members,
managers, partners, or Person or group of Persons possessing and/or exercising
similar authority to authorize the taking of, any action prohibited by the
foregoing provisions.

ARTICLE VII

ADDITIONAL AGREEMENTS

7.1 Stockholders’ and Subsidiaries’ Consents.

(a) Within one (1) Business Day after the date hereof, the Company shall
deliver, or cause to be delivered, to Buyer the Stockholder Written Consent.

(b) After the date hereof and prior to the Closing Date, the Company shall
deliver, or cause to be delivered, to Buyer and MPT TRS Entity on behalf of the
Affiliated MPT Property Companies and the Affiliated MPT TRS Lender Companies,
the written consent and approval of, as applicable, the members, managers,
partners, shareholders, directors, or other Persons exercising similar
authority, of each of the Subsidiaries of the Company, which consents and
approvals shall approve, adopt and consent (i) to each of the Transaction
Documents to which such Subsidiary is a party and the transactions contemplated
thereby, (ii) all of the

 

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transactions contemplated in this Agreement, the Real Property Asset Purchase
Agreement, the Real Estate Loan Documents, the Acquisition Promissory Note, and
all of the other Transaction Documents, and (iii) as applicable, the amendments,
if any, to such Subsidiary’s organizational documents specified on Schedule
7.1(b) (the “Subsidiaries’ Approvals”).

(c) Buyer shall use commercially reasonable efforts to provide to the Company
any information for inclusion in preparation for the consents and approvals
required pursuant to Sections 7.1(a) and (b) hereof that may be required under
applicable law or that is reasonably requested by the Company.

7.2 Access to Information. From and after the date hereof until the Effective
Time or the earlier termination of this Agreement, the Company shall, and shall
cause each of its Subsidiaries and each of its and their officers, employees and
agents to (a) give Buyer and its Representatives reasonable access upon
reasonable notice and during times mutually convenient to Buyer and senior
management of the Company and its Subsidiaries to the Facilities, properties,
employees, books and records of the Company and its Subsidiaries as from time to
time may be reasonably requested, (b) permit the Buyer and its Representatives
to make such inspections and to make copies of such books and records as they
may reasonably require, and (c) furnish the Buyer and its Representatives with
such financial and operating data as the Buyer may from time to time reasonably
request. Notwithstanding the foregoing, neither the Company nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would contravene any law, rule, regulation,
order, judgment, decree, or binding agreement entered into prior to the date of
this Agreement or would reasonably be expected to violate or result in a loss or
impairment of any attorney-client or work product privilege. The parties hereto
will use commercially reasonable efforts to make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Any such investigation by Buyer shall not unreasonably
interfere with any of the businesses or operations of the Company or its
Subsidiaries. Notwithstanding anything to the contrary in this Agreement,
neither Buyer nor its Representatives shall have any contact whatsoever with
respect to the Company or any of its Subsidiaries or with respect to the
transactions contemplated by this Agreement with any partner, lender, lessor,
vendor, customer, supplier, employee or consultant of the Company or any of its
Subsidiaries, except in consultation with the Company and then only with the
express prior approval of the Company, which approval shall not be unreasonably
withheld, conditioned or delayed. All requests by Buyer for access or
information shall be submitted or directed exclusively to an individual or
individuals to be designated by the Company.

7.3 Confidentiality Agreement. The parties shall adhere to the terms and
conditions of that certain confidentiality agreement, by and between the
Company, Medical Properties Trust, Inc., and MPT Operating Partnership, L.P.,
dated August 17, 2011 (the “Confidentiality Agreement”).

7.4 Third Party Consents and Regulatory Approvals. Subject to the terms and
conditions of this Agreement, each of the parties hereto will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under this Agreement
and applicable laws and regulations to consummate the Merger as soon as
practicable after the date hereof, including (i) preparing and filing, in

 

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consultation with the other party and as promptly as practicable and advisable
after the date hereof, all documentation to effect all necessary applications,
notices, petitions and filings and to obtain as promptly as reasonably
practicable all consents, clearances, waivers, licenses, orders, registrations,
approvals, permits, Tax rulings and authorizations necessary to be obtained from
any third party and/or any Governmental Body (including, without limitation,
with respect to any change of control consent or notification requirements to
applicable federal and state healthcare regulatory agencies, if required) in
order to consummate the Merger or any of the other transactions contemplated by
this Agreement and (ii) taking all reasonable steps as may be necessary, proper
or advisable to obtain all such consents, clearances, waivers, licenses, orders,
registrations, approvals, permits, Tax rulings and authorizations.

7.5 Confidentiality; Press Releases. The parties hereto will, and will cause
each of their Affiliates and Representatives to, maintain the confidentiality of
this Agreement. The parties agree that public announcements or press release, if
any, with respect to this Agreement or the transactions contemplated hereby
shall be mutually approved in advance by the parties; provided, however, that,
notwithstanding any provision hereof or in the Confidentiality Agreement to the
contrary, a party may, without the prior consent of the other parties hereto,
(i) issue or cause publication of any such press release or public announcement
to the extent that such party reasonably determines, after consultation with
outside legal counsel, such action to be required by law or by the rules of any
applicable self-regulatory organization (including, without limitation, federal
and state securities laws and the rules and regulations of the NYSE or NASDAQ),
in which event such party will use its commercially reasonable efforts to allow
the other parties hereto reasonable time to comment on such press release or
public announcement in advance of its issuance, and (ii) disclose that it has
entered into this Agreement and the other Transaction Documents, and may provide
and disclose information regarding this Agreement, the parties to this Agreement
and the other Transaction Documents, the Real Property, the Facilities, and the
other assets and properties subject hereto and thereto, and such additional
information which such party may reasonably deem necessary, to its proposed
investors in connection with a public offering or private offering of securities
(including, without limitation, the offerings to be conducted by Medical
Properties Trust, Inc. in anticipation of the transactions contemplated herein),
or any current or prospective lenders with respect to its financing, and to
investors, analysts and other parties in connection with earnings calls and
other normal communications with investors, analysts and other parties, or
(iii) include any information in a prospectus, prospectus supplement or other
offering circular or memorandum in connection with public or private capital
raising or other activities undertaken by such party. Notwithstanding the
foregoing, nothing in this Section 7.5 shall prohibit any Equity Holder from
disclosing the terms of the Merger and this Agreement to any investor in such
Equity Holder, in the ordinary course of such Equity Holder’s business.

7.6 No Solicitations. The Company will not, and will not permit any of its
Subsidiaries or any Representative of the Company or any of its Subsidiaries to,
directly or indirectly, (i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets of the
Company (other than in the Ordinary Course of Business) or any of its
Subsidiaries or any capital stock or equity interests of the Company or any of
its Subsidiaries, or any other similar transaction other than the transactions
contemplated by this Agreement and the Other

 

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Transaction Documents (an “Acquisition Transaction”), (ii) knowingly facilitate,
encourage, solicit or initiate discussions, negotiations or submissions of
proposals or offers in respect of an Acquisition Transaction, (iii) furnish or
cause to be furnished to any Person or entity any information concerning the
business, operations, properties or assets of the Company or its Subsidiaries in
connection with an Acquisition Transaction, or (iv) otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person or entity to do or seek any of the foregoing. The
Company shall notify the Buyer immediately if any discussions or negotiations
are sought to be initiated, any inquiry or proposal is made, or any such
information is requested with respect to any Acquisition Transaction.

7.7 Officers’ and Directors’ Indemnification.

(a) Subject to the last sentence of this Section 7.7(a) and the limitations and
restrictions set forth herein, in the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any Person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, a
director or officer of the Company or any of its Subsidiaries (the “Indemnified
Parties”) is, or is threatened to be, made a party based in whole or in part on,
or arising in whole or in part out of, or pertaining to, the fact that he or she
is or was a director or officer of the Company or any of its Subsidiaries, or is
or was serving at the request of the Company or any of its Subsidiaries as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, whether asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use commercially reasonable
efforts to defend against any such claim, action, suit, proceeding or
investigation and respond thereto. It is understood and agreed that (i) the
Company shall indemnify and hold harmless, and after the Effective Time the
Surviving Corporation shall indemnify and hold harmless, as and to the full
extent permitted by applicable law, each Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorneys’
fees and expenses), judgments, fines and amounts paid in settlement, in each
case, arising out of or incurred in connection with any such threatened or
actual claim, action, suit, demand, proceeding or investigation (whether
asserted or arising before or after the Effective Time), (ii) the Company, and
the Surviving Corporation after the Effective Time, shall promptly pay expenses
incurred by each Indemnified Party as the same are incurred in advance of the
final disposition of any claim, suit, proceeding or investigation to such
Indemnified Party, (iii) the Indemnified Parties may retain counsel satisfactory
to them, and the Company and the Surviving Corporation shall pay all fees and
expenses of such counsel for the Indemnified Parties within fifteen (15) days
after statements therefor are received, and (iv) the Company and the Surviving
Corporation will use commercially reasonable efforts to assist in the vigorous
defense of any such matter; provided, however, that neither the Company nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld); and
provided further that the Company and Surviving Corporation shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim indemnification under this Section 7.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Company and, after the Effective Time, the Surviving

 

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Corporation thereof; provided, however, that the failure to so notify shall not
affect the obligations of the Company and the Surviving Corporation except to
the extent such failure to notify materially prejudices such party.
Notwithstanding the foregoing or any other provision to the contrary in this
Agreement, the Surviving Corporation, the Company, and the Company’s
Subsidiaries, as applicable, shall be required to indemnify, defend, and hold
harmless each Indemnified Party with respect to the Specified Claims (as
hereinafter defined) solely to the extent of amounts available under applicable
insurance coverages held by the Surviving Corporation pursuant to Section 7.7(c)
hereof, it being acknowledged and agreed that no such indemnification shall be
made for any amount payable by the Surviving Corporation, the Company, the
Company Subsidiaries or any of their Affiliates with respect to any Specified
Claims (singly or in the aggregate) in excess of the amount of such insurance.
As used herein, “Specified Claims” means any claims arising out of, based upon
or relating to the negotiation, execution, terms and conditions, or performance
of this Agreement, the Real Property Asset Purchase Agreement, or any other
Transaction Documents (other than with respect to any Transaction Document
identified on Schedule 4.1(b) attached hereto), or any of the transactions
contemplated hereby or thereby; provided, that, the Specified Claims hereby
expressly include any claims, suits, proceedings or investigations respecting
(i) the pricing of, amounts or other consideration paid, or any declarations of
dividends or other distributions of the assets or properties by the Company to
any Equity Holders, Rollover Holders, or Optionholders, or by any of the
Company’s Subsidiaries to the Company or any of their respective equity holders,
in each case, in violation of applicable laws, the Certificate of Incorporation,
the Bylaws or any other similar organizational or governing documents of the
Company or its Subsidiaries, or (ii) the purchase, redemption, or cancellation,
as applicable, of the Company Shares, Rollover Shares, or Options in violation
of applicable laws, the Certificate of Incorporation, the Bylaws or any other
similar organizational or governing documents of the Company or its
Subsidiaries.

(b) Subject to the limitations and restrictions set forth herein, Buyer and
MergerCo agree that all rights to indemnification or exculpation existing in
favor of, and all limitations on the personal liability of, each present and
former Indemnified Party provided for in the Certificate of Incorporation,
Bylaws, or equivalent governing documents of the Company’s Subsidiaries, or
otherwise in effect as of the date hereof shall continue in full force and
effect for a period of six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claims asserted or made
within such period shall continue until the disposition of such claim.

(c) At the Effective Time, the Surviving Corporation shall purchase an extended
reporting period endorsement under the Company’s existing directors’ and
officers’ liability insurance coverage for the Company’s and its Subsidiaries’
directors and officers in a form reasonably acceptable to the Company that shall
provide such directors and officers with coverage for six (6) years following
the Effective Time of not less than the existing coverage. The Surviving
Corporation shall maintain such policy in full force and effect, and continue to
honor the obligations thereunder. To the extent the premium payments for such
directors’ and officers’ liability insurance coverage are not paid in full by
the Company prior to the Effective Time, then at the Effective Time, any then
unpaid portion of such premium payments shall be treated as a Company
Transaction Expense (and shall not be included as an accrued payable in the Net
Working Capital calculation) for purposes of this Agreement.

 

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(d) The FFC Funds, individually and on behalf of their Affiliates (excluding,
for purposes of this Section 7.7(d), any directors or officers of the Company or
any of the Company’s Subsidiaries, in each case, in their capacity as such),
hereby (i) unconditionally waive and release all rights to seek indemnification,
or to be held harmless or defended, by the Buyer, Company, the Surviving
Corporation, the Company’s Subsidiaries, or any of their respective Affiliates
with respect to any claims arising out of or resulting from the negotiation,
execution, or terms and conditions of this Agreement or any of the Transaction
Documents, or any of the transactions contemplated hereby or thereby, including,
without limitation, (A) the price of, or amounts or form of consideration paid
with respect to, or any declarations of dividends or other distributions of the
assets or properties of the Company in respect of, any Company Shares, Rollover
Shares or Options, whether paid or payable to any Equity Holders, Rollover
Holders, or Optionholders, or by any of the Company’s Subsidiaries to the
Company or any of their respective equity holders, in each case, in violation of
applicable laws, the Certificate of Incorporation, the Bylaws or any other
similar organizational or governing documents of the Company or its
Subsidiaries, or (B) the purchase, redemption, or cancellation, as applicable,
of the Company Shares, Rollover Shares, or Options in violation of applicable
laws, the Certificate of Incorporation, the Bylaws or any other similar
organizational or governing documents of the Company or its Subsidiaries, and
(ii) acknowledge and agree that none of the FFC Funds shall assert, and hereby
unconditionally waive and release, any right to demand, request or plead for the
re-characterization of any amount owing to any of the Buyer, the MPT TRS Entity,
MPT TRS Subsidiaries, the Affiliated MPT Property Companies, the Affiliated MPT
TRS Lender Companies, or any of their respective Affiliates pursuant to this
Agreement, the Real Property Master Lease Agreement, the Real Property Master
Sublease Agreement, the Real Estate Loan Agreement or the other Real Estate Loan
Documents, or any of the other Transaction Documents (collectively, the
“Re-characterization Restrictions”), in each case, as the terms and conditions
of such Transaction Documents are agreed upon as of the date hereof or at the
Closing, as applicable, with only such amendments thereto or modifications
thereof as shall have been expressly agreed to in writing by the FFC Funds
(regardless of whether the FFC Funds, or any of them, is a party to any such
Transaction Document). The Re-characterization Restrictions shall be applicable
whether or not any Insolvency or Liquidation Proceeding has been commenced by or
against the Company, any of the Company’s Subsidiaries, or any of their
respective Affiliates.

(e) The obligations under this Section 7.7 shall not be terminated or modified
in such a manner as to adversely affect any Indemnified Party to whom this
Section 7.7 applies without the consent of such Indemnified Party (it being
expressly agreed that the Indemnified Parties to whom this Section 7.7 applies
shall be third party beneficiaries of this Section 7.7 and shall be entitled to
enforce the covenants contained herein).

7.8 Intentionally Omitted.

7.9 Books and Records. Buyer and MergerCo shall, and shall cause the Surviving
Corporation and each Subsidiary to, until the sixth (6th) anniversary of the
Closing Date, retain all books, records and other documents pertaining to the
business of the Company and its Subsidiaries in existence on the Closing Date
and to make the same available for inspection and copying by the Stockholders’
Representative at the expense of the Stockholders’ Representative during the
normal business hours of Buyer, MergerCo, the Surviving Corporation or such
Subsidiary, as applicable, upon reasonable request and upon reasonable notice,
and without material disruption to the business of the Buyer, MergerCo, the
Surviving Corporation or such Subsidiary.

 

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7.10 Further Action. Each of the parties hereto shall use commercially
reasonable efforts to take or cause to be taken all appropriate action, do or
cause to be done all things necessary, proper or advisable and execute and
deliver such documents and other papers, as may be reasonably required or
requested to carry out the provisions of this Agreement and each of the other
Transaction Documents and consummate and make effective the transactions
contemplated hereby and thereby, but without in any manner limiting such party’s
specific rights and obligations set forth in this Agreement and the other
Transaction Documents.

7.11 Acquisition Promissory Note; Contribution Agreement.

(a) Immediately prior to the Effective Time, the MPT TRS Entity shall make a
loan to MergerCo in the principal amount of Ninety-Three Million Two Hundred
Thousand and 00/100 Dollars ($93,200,000.00), the proceeds of which shall be
used to satisfy in part the obligations of Buyer and MergerCo hereunder, and
MergerCo shall execute and deliver the Acquisition Promissory Note to MPT TRS
Entity. Each of MPT TRS Entity and MergerCo shall not, and shall not permit any
other Person to, amend, restate, or otherwise modify the Acquisition Promissory
Note, as attached hereto as Exhibit D, except for those amendments, restatements
or modifications as shall have been expressly agreed to in writing by the
Company.

(b) Immediately following the closing of the transactions contemplated by the
Real Property Asset Purchase Agreement and prior to the Effective Time, MPT TRS
Entity will take all actions required to be taken thereby under the Contribution
Agreement, including, without limitation, making the cash contribution to Buyer
required pursuant to the terms of the Contribution Agreement.

7.12 Other Actions by Parties. Without in any manner limiting any party’s
specific rights and obligations set forth in this Agreement and the other
Transaction Documents, no party hereto shall take (and shall use commercially
reasonable efforts to cause its Affiliates not to take), directly or indirectly,
any action that would reasonably be expected to, individually or in the
aggregate, prevent, materially delay or materially impede the consummation of
the Merger or the other transactions contemplated by this Agreement. Buyer
shall, promptly following execution of this Agreement, approve and adopt this
Agreement in its capacity as sole stockholder of MergerCo and deliver to the
Company evidence of its vote or action by written consent approving and adopting
this Agreement in accordance with applicable law and the articles of
organization and bylaws of MergerCo.

7.13 HSR Act Filings. Each party hereto agrees to make or cause to be made, in
consultation and cooperation with the other parties hereto, as promptly as
practicable but in any event within five (5) Business Days after the date
hereof, (i) any necessary filing of a Notification and Report Form pursuant to
the HSR Act and (ii) all other necessary registrations, declarations, notices
and filings relating to the Merger with other Governmental Bodies under any
other antitrust, competition, trade regulation or other applicable law with
respect to the transactions contemplated hereby. From the date of such filing
until the Closing Date, the parties shall use their commercially reasonable
efforts to file all reports or other documents required or

 

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requested by the FTC or the Justice Department under the HSR Act or otherwise
and will use their commercially reasonable efforts to comply promptly with any
requests by the FTC or the Justice Department for additional information
concerning the transactions described herein, so that any waiting period
specified in the HSR Act will expire as soon as reasonably possible after the
execution and delivery of this Agreement. Each of the parties agrees to take all
other commercially reasonable actions necessary to insure that the waiting
period imposed under the HSR Act terminates or expires prior to thirty (30) days
after the date of making such premerger filings. Without limiting the foregoing,
each of the parties agrees to use commercially reasonable efforts to cooperate
with the other parties hereto and oppose any preliminary injunction sought by
any Governmental Body preventing the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents. The Company
and the Buyer shall each pay fifty percent (50%) all application fees required
in connection with any filings required under the HSR Act; provided, however,
that in the event that the Merger is consummated as provided herein, the Merger
Consideration shall be increased by the portion of the application fees that are
paid by the Company pursuant hereto.

ARTICLE VIII

CONDITIONS TO THE MERGER AND DELIVERABLES

8.1 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
fulfillment or waiver by written consent of the other party, where permissible,
at or prior to the Effective Time, of each of the following conditions:

(a) Stockholder and Subsidiaries’ Approvals. The Stockholders’ Written Consent
and the Subsidiaries’ Approvals shall have been delivered in accordance with
Section 7.1(a) and (b), respectively.

(b) No Injunctions, Orders or Restraints; Illegality; Lawsuits. No preliminary
or permanent injunction or other order, decree or ruling issued by a court or
other Governmental Body of competent jurisdiction, and no statute, rule,
regulation or executive order promulgated or enacted by any governmental agency
of competent jurisdiction, shall be in effect which would have the effect of
(i) making the consummation of the Merger illegal or (ii) otherwise prohibiting
the consummation of the Merger. Further, there shall not have been instituted in
a court of competent jurisdiction by any creditor of the Company or any of its
Subsidiaries, any Governmental Body or any other third party, any suit, action
or proceeding to restrain, enjoin or invalidate the transactions contemplated by
this Agreement and the other Transaction Documents; provided, however, that if
any such suit, action or proceeding is so instituted, then the Company, Buyer
and MergerCo shall use their commercially reasonable efforts to defend against
the same and to take such other actions as may be necessary or desirable to
permit the transactions contemplated by this Agreement and the other Transaction
Documents to be consummated.

(c) Real Property Asset Purchase. The transactions contemplated by the Real
Property Asset Purchase Agreement shall have been consummated, and all
agreements, Contracts, certificates or other documents required to be delivered
by the parties thereto as expressly set forth therein shall have been delivered.

 

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(d) Contribution Agreement. The transactions contemplated by the Contribution
Agreement shall have been consummated.

(e) Mutual Release. That certain Mutual Release and Waiver attached hereto as
Exhibit I (the “Mutual Release”) shall have been executed and delivered by each
of the Persons indicated therein as parties on such Mutual Release.

(f) Waiver of Dissenters’ Rights. The holders of at least ninety-three percent
(93%) of the Common Shares issued and outstanding immediately prior to the
Effective Time shall have signed the Stockholders Written Consent or otherwise
waived, by operation of law or otherwise, the right to exercise dissenter’s
rights under the Appraisal Rights Provisions.

(g) No Termination. None of the parties shall have terminated this Agreement in
accordance with Section 9.1 hereof.

8.2 Additional Conditions to Obligations of Buyer and MergerCo. The obligations
of Buyer and MergerCo to effect the Merger are further subject to the
satisfaction of the following conditions, any one or more of which may be waived
in writing by Buyer and MergerCo at or prior to the Effective Time:

(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement (without giving effect to any limitation as
to “materiality,” “Company Material Adverse Effect”, or similar terms set forth
therein) shall be true and correct in all respects (i) as of the date of this
Agreement and (ii) as of the Closing Date as though made on the Closing Date
(except to the extent such representations and warranties expressly relate to a
specific date or are made as of the date hereof, in which case such
representations and warranties shall be true and correct in all respects as of
such date), in each case of clauses (i) and (ii) above, without giving effect to
the transactions contemplated by this Agreement or any other Transaction
Document, and except where the failure of such representations and warranties
(taken as a whole) to be so true and correct has not had a Company Material
Adverse Effect.

(b) Performance and Obligations of the Company. The Company shall have, and
shall have caused its Subsidiaries to have, performed or complied in all
material respects with all agreements and covenants required by this Agreement
and the other Transaction Documents to be performed or complied with by the
Company or its Subsidiaries on or prior to the Effective Time.

(c) Company Material Adverse Effect. Since the date of this Agreement, a Company
Material Adverse Effect shall not have occurred.

(d) Officer’s Certificates. The Buyer shall have received certificates in form
and substance reasonably satisfactory to the Buyer from (i) the Company, which
is executed and delivered by the Company’s Chief Executive Officer or Chief
Financial Officer, dated as of the Closing Date, (A) stating therein that the
conditions set forth in Sections 8.2(a), (b), and (c) have

 

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been satisfied in all respects, (B) certifying as to (1) the Certificate of
Incorporation and By-Laws, each as in effect from the date of this Agreement
until the Closing Date and (2) a copy of the votes and authorizing resolutions
of the Company Board and the Stockholder Written Consent authorizing and
approving the applicable matters contemplated hereunder and under the other
Transaction Documents, and (C) providing specimen signatures of the officers of
the Company, and (ii) from each of the Company’s Subsidiaries, which is executed
and delivered by their respective Chief Executive Officer or Chief Financial
Officer (or Person’s exercising similar authority), dated as of the Closing
Date, (A) certifying, as applicable, to (1) such Subsidiary’s articles or
certificate of incorporation, bylaws, operating agreements, limited liability
company agreements, partnership agreements, and other similar organizational and
governing documents, each as in effect from the date of this Agreement until the
Closing Date and (2) a copy of the Subsidiaries’ Approvals and any other votes
and authorizing resolutions of the requisite number of directors, stockholders,
members, managers, partners or other Persons exercising similar authority
authorizing and approving the applicable matters contemplated hereunder and
under the other Transaction Documents, and (C) providing specimen signatures of
the officers or authorized agents of such Subsidiaries.

(e) Certificates of Existence and Good Standing. The Buyer shall have received
certificates of existence and good standing of the Company and each of its
Subsidiaries dated within twenty (20) days prior to the Closing Date from, as
applicable, the State of its incorporation or formation, and each other
jurisdiction in which the character of their respective properties or in which
the transaction of their respective businesses makes qualification as a foreign
entity necessary.

(f) Third-Party Consents. The Company shall have delivered to Buyer written
consents or waivers in a form reasonably satisfactory to Buyer of the third
parties to those contracts set forth on Schedule 8.2(f), and all such consents
and waivers shall be in full force and effect.

(g) Approvals of Governmental Bodies. The Merger shall have been approved by the
Colorado Department of Public Health and Environment and Buyer shall have
received copies of all material notices sent thereto by or on behalf of the
Company or any of its Subsidiaries, and copies of all approvals and consents
received therefrom by the Company or any of its Subsidiaries.

(h) Additional Company Deliverables.

(i) Escrow Agreement. The Stockholders’ Representative shall have executed and
delivered the Escrow Agreement to Buyer and the Escrow Agent.

(ii) Buyer Operating Agreement. Management Company shall have executed and
delivered to the MPT TRS Entity the Buyer Operating Agreement.

(iii) Payoff Letters. The Company shall have delivered or caused to be delivered
payoff letters in respect of all Indebtedness of the Company and its
Subsidiaries to be paid at Closing, including any principal, interest, fees or
penalties outstanding or accrued thereunder, in each case, as of the Effective
Time.

 

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(iv) Management Agreement. Management Company shall have executed and delivered
the Management Agreement to the Surviving Corporation.

(v) Termination of Agreements. The Company shall have delivered, or caused the
applicable Company Subsidiary to deliver, evidence reasonably satisfactory to
the Buyer of the termination, amendment or restatement, as applicable, of the
Contracts identified on Schedule 8.2(h)(v).

(vi) Certificate of Merger. The Certificate of Merger shall have been executed
and delivered by the Surviving Corporation.

(vii) Cooperation Agreement. The Company shall have, and shall have caused the
Affiliated Ernest Health Lessees, and the Affiliated Ernest Health Borrowers to
have, executed and delivered to the Buyer the Cooperation Agreement.

(viii) Employment Terminations. The Company shall have delivered to Buyer
evidence that all of the Persons identified at items 1 through 4 on Schedule
8.2(h)(viii), and not less than ten (10), in the aggregate, of all Persons
listed on Schedule 8.2(h)(viii), shall have terminated, as of the Effective
Time, their employment with the Company and/or its Subsidiaries, as applicable,
and accepted employment with the Management Company as of the Effective Time.

(ix) Management Company. Immediately following the consummation of the
transactions contemplated by the Contribution Agreement and prior to the
Effective Time, Darby Brockette, Keith Longson, David Fuller and Danny Banks
shall, in the aggregate, hold not less than a majority of the issued and
outstanding equity interests of Management Company.

8.3 Additional Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to the satisfaction of the
following conditions, any one or more of which may be waived in writing by the
Company at or prior to the Effective Time:

(a) Representations and Warranties. Each of the representations and warranties
of Buyer and MergerCo contained in this Agreement (without giving effect to any
limitation as to “materiality” or “Buyer Material Adverse Effect” or similar
terms set forth therein) shall be true and correct in all respects as of the
date when made and as of the Closing Date as though made on the Closing Date
(except to the extent such representations and warranties expressly relate to a
specific date or as of the date hereof, in which case such representations and
warranties shall be true and correct in all material respects as of such date)
subject to changes permitted by this Agreement or any other Transaction
Document, except where the failure of such representations and warranties (taken
as a whole) to be so true and correct has not had a Buyer Material Adverse
Effect.

 

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(b) Performance of Obligations of Buyer and MergerCo. Each of Buyer and MergerCo
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement and the other Transaction Documents to
be performed or complied with by it on or prior to the Effective Time.

(c) Officer’s Certificate. The Company shall have received a certificate
executed and delivered by Buyer’s Chief Executive Officer, Chief Financial
Officer, or Chief Operating Officer, dated as of the Closing Date, stating
therein that the conditions set forth in Sections 8.3(a) and (b) have been
satisfied.

(d) Additional Buyer and MergerCo Deliverables.

(i) Escrow Agreement. Buyer shall have executed and delivered the Escrow
Agreement to the Stockholders’ Representative and the Escrow Agent.

(ii) Management Agreement. Buyer shall have caused the Surviving Corporation to
execute and deliver the Management Agreement to Management Company.

(iii) Buyer Operating Agreement. MPT TRS Entity shall have executed and
delivered the Buyer Operating Agreement to Management Company.

(iv) Acquisition Promissory Note. MergerCo shall have executed and delivered to
the MPT TRS Entity the Acquisition Promissory Note.

(v) Cooperation Agreement. Buyer shall have, and shall have caused the
Affiliated MPT Property Companies and the Affiliated MPT TRS Lender Companies to
have, executed and delivered to the Company the Cooperation Agreement.

8.4 Frustration of Closing Conditions. Neither the Company nor Buyer may rely on
the failure of any condition set forth in Section 8.1, Section 8.2 or
Section 8.3, as the case may be, to be satisfied if such failure was caused by
such party’s failure to perform any of its material obligations under this
Agreement, to act in good faith or to use its commercially reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement
as required by and subject to Section 7.10.

ARTICLE IX

TERMINATION

9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, as follows:

(a) by the written consent of Buyer (on behalf of itself and MergerCo) and the
Company;

 

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(b) by either the Company, on the one hand, or Buyer, on the other hand, by
written notice to the other if any Governmental Body of competent jurisdiction
shall have issued an injunction or taken any other action (which injunction or
other action the parties hereto shall use commercially reasonable efforts to
lift) that permanently restrains, enjoins or otherwise prohibits the
consummation of the Merger, and such injunction shall have become final and
non-appealable;

(c) by either the Company, on the one hand, or Buyer, on the other hand, by
written notice to the other, if the consummation of the Merger shall not have
occurred on or before May 1, 2012 (the “Termination Date”); provided, however,
that the right to terminate the Agreement pursuant to this Section 9.1(c) shall
not be available to any party whose failure to comply with any provision of this
Agreement has been the cause of, or resulted in, the failure of the Merger to
occur on or before such date;

(d) by the Company, if the Company is not then in material breach of any term of
this Agreement, upon written notice to Buyer if there occurs a breach of any
representation, warranty or covenant of Buyer or MergerCo contained in this
Agreement, such that the conditions set forth in Section 8.1 or Section 8.3
cannot be satisfied or cured prior to the Termination Date; provided, however,
that such breach is either not capable of being cured or has not been cured
within thirty (30) days after the giving of notice thereof by the Company to
Buyer;

(e) by Buyer, if neither Buyer nor MergerCo is then in material breach of any
term of this Agreement, upon written notice to the Company if there occurs a
breach of any representation, warranty or covenant of the Company contained in
this Agreement, such that the conditions set forth in Section 8.1 or Section 8.2
cannot be satisfied or cured prior to the Termination Date; provided, however,
that such breach is not capable of being cured or has not been cured within
thirty (30) days after the giving of notice thereof by Buyer or MergerCo to the
Company.

9.2 Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 9.1, this Agreement shall forthwith become null and void and
have no effect, without any liability on the part of Buyer, MergerCo, the
Company, or the Stockholders’ Representative, or any of their respective
directors, officers, employees, partners, managers, members or stockholders, and
all rights and obligations of any party hereto shall cease, except that the
provisions contained in, and the definitions pertaining to, Section 7.3,
Section 7.5, this Section 9.2 and Article XI shall survive the termination of
this Agreement; provided, however, that notwithstanding the foregoing, no party
shall be relieved or released from any liabilities or damages arising out of its
wrongful repudiation, termination or intentional and knowing breach by such
party of a representation, warranty or covenant prior to such termination.

 

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ARTICLE X

STOCKHOLDERS’ REPRESENTATIVE

10.1 Appointment. The Stockholders’ Representative shall have full power and
authority to take all actions under this Agreement and the Escrow Agreement that
are to be taken by the Stockholders’ Representative. The Stockholders’
Representative shall take any and all actions that it believes are necessary or
appropriate under this Agreement or the Escrow Agreement, including, without
limitation, executing the Escrow Agreement as Stockholders’ Representative,
giving and receiving any notice or instruction permitted or required under this
Agreement or the Escrow Agreement by the Stockholders’ Representative,
interpreting all of the terms and provisions of this Agreement and the Escrow
Agreement, authorizing payments to be made with respect hereto or thereto,
obtaining reimbursement as provided for herein for all out-of-pocket fees and
expenses and other obligations of or incurred by the Stockholders’
Representative in connection with this Agreement and/or the Escrow Agreement,
defending all disputes pursuant to Section 2.5 hereof, consenting to,
compromising or settling all disputes pursuant to Section 2.5, conducting
negotiations with Buyer, the Surviving Corporation and their respective agents
regarding such disputes, dealing with Buyer, the Surviving Corporation and the
Escrow Agent under this Agreement and the Escrow Agreement, taking any other
actions specified in or contemplated by this Agreement or the Escrow Agreement,
and engaging counsel, accountants or other Representatives in connection with
the foregoing matters.

10.2 Authorization. The Stockholders’ Representative shall have the authority
to:

(a) Receive all notices or documents given or to be given to the Common Equity
Holders or Rollover Holders pursuant hereto or to the Escrow Agreement or in
connection herewith or therewith and to receive and accept services of legal
process in connection with any suit or proceeding arising under this Agreement
or the Escrow Agreement;

(b) Engage counsel, accountants and other advisors, and incur other expenses in
connection with this Agreement or the Escrow Agreement and the transactions
contemplated hereby or thereby, as the Stockholders’ Representative may in its
sole discretion deem necessary or appropriate; and

(c) Take such action as the Stockholders’ Representative may in its sole
discretion deem necessary or appropriate in respect of: (i) waiving any
inaccuracies in the representations or warranties of Buyer or MergerCo contained
in this Agreement or in any document delivered by Buyer or MergerCo pursuant
hereto; (ii) taking such other action as the Stockholders’ Representative is
authorized to take under this Agreement or the Escrow Agreement; (iii) receiving
all documents or certificates and making all determinations, in its capacity as
Stockholders’ Representative, required under this Agreement or the Escrow
Agreement; and (iv) all such actions as may be necessary to carry out any of the
transactions contemplated by this Agreement or the Escrow Agreement, including,
without limitation, the defense and/or settlement of any claims for which
indemnification is sought pursuant to Section 7.7 and any waiver of any
obligation of Buyer or the Surviving Corporation; provided, however, that the
Stockholders’ Representative may not take any action that disparately and
adversely affects any Common Equity Holder or Rollover Holder (in their
capacities as such) as compared to each other Common Equity Holder (including
the Stockholders’ Representative, in its capacity as a Common Equity Holder) or
Rollover Holder, and the Stockholders’ Representative may not waive or
materially impair the rights of any Indemnified Party under Section 7.7.

 

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10.3 Agency. Notwithstanding any provision herein to the contrary, the
Stockholders’ Representative is not an agent of the Common Equity Holders or
Rollover Holders, and shall have no duties to the Common Equity Holders or
Rollover Holders or liability to the Common Equity Holders or Rollover Holders
with respect to any action taken, decision made or instruction given by the
Stockholders’ Representative in connection with the Escrow Agreement or this
Agreement.

10.4 Indemnification of Stockholders’ Representative. The Stockholders’
Representative shall be indemnified by the Common Equity Holders and Rollover
Holders for and shall be held harmless against any loss, liability or expense
incurred by the Stockholders’ Representative or any of its Affiliates and any of
their respective Representatives or controlling persons, in each case, relating
to the Stockholders’ Representative’ conduct as Stockholders’ Representative,
other than losses, Liabilities or expenses resulting from the Stockholders’
Representative’s willful misconduct in connection with its performance under
this Agreement and the Escrow Agreement. This indemnification shall survive the
termination of this Agreement. The Stockholders’ Representative shall have the
right to cause the satisfaction of some or all of such indemnification
obligations using any then available proceeds of the Stockholders’
Representative Expense Amount. The Stockholders’ Representative may, in all
questions arising under this Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the Stockholders’
Representative in accordance with such advice, and the Stockholders’
Representative shall not be liable to the Common Equity Holders or Rollover
Holders or the Escrow Agent or any other person in connection therewith. In no
event shall the Stockholders’ Representative be liable hereunder or in
connection herewith for any indirect, punitive, special or consequential
damages.

10.5 Reasonable Reliance. In the performance of its duties hereunder, the
Stockholders’ Representative shall be entitled to (a) rely upon any document or
instrument reasonably believed to be genuine, accurate as to content and signed
by any Common Equity Holder or Rollover Holder or any party hereunder and
(b) assume that any Person purporting to give any notice in accordance with the
provisions hereof has been duly authorized to do so.

10.6 Orders. The Stockholders’ Representative is authorized, in its sole
discretion, to comply with final, nonappealable orders or decisions issued or
entered by any court of competent jurisdiction or arbitrator with respect to any
dispute arising hereunder or under the Escrow Agreement. If any portion of the
Escrow Fund is disbursed to the Stockholders’ Representative and is at any time
attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property shall
be stayed or enjoined by any court order, or in case any order, judgment or
decree shall be made or entered by any court affecting such property or any part
thereof, then and in any such event, the Stockholders’ Representative is
authorized, in its sole discretion, but in good faith, to rely upon and comply
with any such order, writ, judgment or decree which it is advised by legal
counsel selected by it is binding upon it without the need for appeal or other
action; and if the Stockholders’ Representative complies with any such order,
writ, judgment or decree, it shall not be liable to any Common Equity Holder or
Rollover Holder or to any other Person by reason of such compliance even though
such order, writ, judgment or decree may be subsequently reversed, modified,
annulled set aside or vacated.

 

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10.7 Removal of Stockholders’ Representative; Authority of Stockholders’
Representative. A majority in interest of the Stockholders, voting together as a
single class, shall have the right at any time to remove the then-acting
Stockholders’ Representative and to appoint a successor Stockholders’
Representative; provided, however, that neither such removal of the then acting
Stockholders’ Representative nor such appointment of a successor Stockholders’
Representative shall be effective until the delivery to the Escrow Agent of
executed counterparts of a writing signed by such majority in interest of the
Stockholders with respect to such removal and appointment, together with an
acknowledgement signed by the successor Stockholders’ Representative appointed
in such writing that he, she or it accepts the responsibility of successor
Stockholders’ Representative and agrees to perform and be bound by all of the
provisions of this Agreement and the Escrow Agreement applicable to the
Stockholders’ Representative. For purposes of the above, a majority in interest
of the Stockholders shall be determined on the basis of each Stockholder’s pro
rata Common Stock holdings prior to the Closing. Each successor Stockholders’
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Stockholders’ Representative, and
the term “Stockholders’ Representative” as used herein and in the Escrow
Agreement shall be deemed to include any interim or successor Stockholders’
Representative.

10.8 Expenses of the Stockholders’ Representative. The Stockholders’
Representative Expense Amount shall be held and controlled by the Stockholders’
Representative to reimburse the out of pocket fees and expenses (including
legal, accounting and other advisors’ fees and expenses, if applicable) incurred
by the Stockholders’ Representative in performing all of its duties and
obligations under this Agreement and the Escrow Agreement.

ARTICLE XI

GENERAL PROVISIONS

11.1 Notices. All notices, requests, claims, demands and other communications
under this Agreement will be in writing and will be deemed given if delivered
personally, sent by overnight courier (providing proof of delivery) or via
facsimile (providing proof of receipt) to the parties at the following addresses
(or at such other address for a party as specified by like notice):

 

 

If to the Company, to:

 

Ernest Health, Inc.

 

7770 Jefferson Street, NE, Suite 320

 

Albuquerque, NM 87109

 

Attn: Keith Longson

 

Facsimile: (505) 856-6800

 

with copy to:

 

Goodwin Procter LLP

 

The New York Times Building

 

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620 Eighth Avenue

 

New York, NY 10018

 

Attn: Stuart L. Rosenthal, Esq.

 

Facsimile: (212) 355-3333

 

If to Buyer or MergerCo, to:

 

c/o Ernest Health, Inc.

 

7770 Jefferson Street, NE, Suite 320

 

Albuquerque, NM 87109

 

Attn: Keith Longson

 

Facsimile: (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.

 

Facsimile: (212) 355-3333

 

and

 

c/o MPT Operating Partnership, L.P.

 

1000 Urban Center Drive, Suite 501

 

Birmingham, AL 35242

 

Attn: Legal Department

 

Facsimile: (205) 969-3756

 

and

 

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

 

1600 Wells Fargo Tower

 

420 Twentieth Street North

 

Birmingham, AL 35203

 

Attn: Thomas O. Kolb, Esq.

 

Facsimile: (205) 322-8007

 

If to MPT TRS Entity:

 

c/o MPT Operating Partnership, L.P.

 

1000 Urban Center Drive, Suite 501

 

Birmingham, AL 35242

 

Attn: Legal Department

 

Facsimile: (205) 969-3756

 

 

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with a copy to:

  

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

  

1600 Wells Fargo Tower

  

420 Twentieth Street North

  

Birmingham, AL 35203

  

Attn: Thomas O. Kolb, Esq.

  

Facsimile: (205) 322-8007

  

If to Stockholders’ Representative or any other FFC Funds, to:

  

c/o Ferrer Freeman & Company, LLC

  

10 Glenville Street

  

Greenwich, CT 06831

  

Attn: David Freeman

  

Facsimile: (203) 532-8016

  

with a copy to:

  

Goodwin Procter LLP

  

The New York Times Building

  

620 Eighth Avenue

  

New York, NY 10018

  

Attn: Stuart L. Rosenthal, Esq.

  

Facsimile: (212) 355-3333

11.2 Disclosure Schedules. Certain information set forth in the schedules to
this Agreement (as may be amended from time to time by a Schedule Supplement,
the “Schedules”) is included solely for informational purposes and may not be
required to be disclosed pursuant to this Agreement. The disclosure of any
information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by Buyer, MergerCo or the Company, as applicable, in this
Agreement or that such information is material, nor shall such information be
deemed to establish a standard of materiality, nor shall it be deemed an
admission of any liability of, or concession as to any defense available to,
Buyer, MergerCo, the Company, the Surviving Corporation or the Stockholders’
Representative on behalf of the Common Equity Holders and Rollover Holders, as
applicable. The section number headings in the Schedules correspond to the
section numbers in this Agreement and any information disclosed in any section
of the Schedules shall be deemed to be disclosed and incorporated into any other
section of the Schedules where the relevance of such disclosure is reasonably
apparent on its face, whether or not there is a schedule reference in such other
section; provided, however, that the parties shall use their reasonable efforts
to include such applicable schedule cross-references in each of the Schedules
regardless of whether the relevance of such disclose is reasonable apparent of
its face. From the date of this Agreement until the Closing Date, (a) the
Company shall amend and/or supplement the Schedules to reflect (i) any
deficiencies or inaccuracies in such Schedule arising

 

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out of circumstances or matters which occurred or existed at or prior to the
date hereof, and (ii) any deficiencies or inaccuracies in such Schedule arising
out of circumstances or matters which first occurred or arose after the date of
hereof, where such deficiency or inaccuracy would cause a failure of any
condition set forth in Section 8.1 or Section 8.2, and (b) the Company may amend
and/or supplement the Schedules with respect to any other matter that, if
existing or occurring at or prior to the date hereof, would have been required
to be set forth or described on such a Schedule or that is necessary to complete
or correct any information in any representation or warranty contained in
Article IV (any such amendment or supplement, a “Schedule Supplement”);
provided, that, no additions, changes, or disclosures contained in any Schedule
Supplement shall be deemed to cure any breach or inaccuracy of a representation
or warranty, covenant or agreement or to satisfy any condition unless otherwise
agreed to in writing by the Buyer or be considered for purposes of establishing
whether or not the closing conditions set forth in Section 8.1 or Section 8.2
have been satisfied.

11.3 Assignment. Except as expressly permitted by the terms hereof, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties.

11.4 Severability. If any provision of this Agreement, or the application
thereof to any Person or circumstance is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
Persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.

11.5 Interpretation. When a reference is made in this Agreement to an Article,
Section, Schedule or Exhibit, such reference will be to an Article or Section
of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement. Whenever the words “include,” “includes” or “including” are used
in this Agreement, they will be deemed to be followed by the words “without
limitation.” The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement will refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms used herein with
initial capital letters have the meanings ascribed to them herein and all terms
defined in this Agreement will have such defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein, or in any agreement or
instrument that is referred to herein, means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a Person
are also to its permitted successors and assigns. As used herein, the terms
“provided to”, “delivered”, “made available to” and terms of similar import
shall mean, with respect to any documents or information provided, delivered or
made available by the Company or any of its Subsidiaries, Affiliates or
Representatives to Buyer, MergerCo or any of their respective Representatives or
Affiliates, all documents and information provided, delivered, or made available
in any form and by any means, including, without limitation, by posting to any
virtual data room established by or on behalf of the Company and to which Buyer,
MergerCo and/or any of their respective Representatives or Affiliates has been
granted access.

 

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11.6 Fees and Expenses. Except as otherwise set forth in this Agreement, whether
or not the Merger is consummated, each of Buyer (on behalf of Buyer and
MergerCo), on the one hand, and the Company, on the other hand, shall bear its
own expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement and each other Transaction Document.

11.7 Choice of Law. All disputes, claims or controversies arising out of or
relating to this Agreement, or the negotiation, validity or performance of this
Agreement, or the transactions contemplated hereby shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws.

11.8 Service of Process; Venue. For purposes of this Agreement, each of the
parties hereto hereby (i) consents to service of process in any legal action,
suit or proceeding among the parties to this Agreement arising in whole or in
part under or in connection with the negotiation, execution and performance of
this Agreement in any manner permitted by Delaware law, (ii) agrees that service
of process made in accordance with this Section 11.8 or made by registered or
certified mail, return receipt requested, at its address specified pursuant to
Section 11.1, will constitute good and valid service of process in any such
legal action, suit or proceeding and (iii) waives and agrees not to assert (by
way of motion, as a defense, or otherwise) in any such legal action, suit or
proceeding any claim that service of process made in accordance with clause
(i) or (ii) does not constitute good and valid service of process. Each of the
parties hereto (a) consents to submit itself to the exclusive personal
jurisdiction of the Delaware Court of Chancery, New Castle County, or if that
court does not have jurisdiction, a federal court sitting in the State of
Delaware in any action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such court, (c) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (d) agrees not to bring any action or proceeding arising out of
or relating to this Agreement or any of the transactions contemplated by this
Agreement in any other court. Each of the parties hereto waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
party with respect thereto.

11.9 Specific Performance and Remedies.

(a) The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed by them in
accordance with the terms hereof or were otherwise breached and that each party
hereto shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the provisions of
this Agreement (without any requirement to post any bond or other security in
connection with seeking such relief), in addition to any other remedy at law or
equity, exclusively in the Delaware Court of Chancery and any state appellate
court therefrom within the State of Delaware (or, if the Delaware Court of
Chancery declines to accept jurisdiction over a particular matter, any state or
federal court within the State of Delaware). The parties hereto

 

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agree not to raise any objections to the availability of the equitable remedy of
specific performance to prevent or restrain breaches of this Agreement by the
Company, the FFC Funds, and the Stockholders’ Representative, on the one hand,
and to prevent or restrain breaches of this Agreement by Buyer, MergerCo, or MPT
TRS Entity, on the other hand, and to specifically enforce the terms and
provisions of this Agreement to prevent breaches or threatened breaches of, or
to enforce compliance with, the covenants and obligations of the parties under
this Agreement. Each of the parties hereto hereby irrevocably submits with
regard to any such action or proceeding relating to this Section 11.9, for
itself and in respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any action relating to this Section 11.9 in any court other than the aforesaid
courts. For purposes of this Section 11.9, each of the parties hereto hereby
consents to service of process in accordance with the terms of Section 11.8 of
this Agreement.

(b) If the Closing shall not have occurred because of a breach by any of the
parties of their respective obligations under this Agreement and all of the
conditions to such parties’ obligations as set forth in Article VIII have either
been satisfied or previously waived (or would have been satisfied or are capable
of being satisfied but for such breach of such parties’ respective obligations
under this Agreement), then the non-breaching parties shall have the right to a
court order specifically enforcing the provisions of this Agreement to which
such breach applies and, in any event, to specifically force the Closing to
occur. If any of the non-breaching parties brings any action to enforce
specifically the performance of the terms and provisions of this Agreement by
the breaching parties, the Termination Date shall automatically be extended by
(x) the amount of time during which such action is pending, plus twenty
(20) Business Days or (y) such other time period established by the Delaware
court presiding over such action.

11.10 Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed on behalf of each of the parties hereto at any time
before or after any approval hereof by the stockholders of the Company and
MergerCo; provided, however, that after the execution of the Stockholder Written
Consent, no amendment shall be made that by law requires further approval by the
holders of Common Shares without obtaining such requisite approval.

11.11 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of the party against which such waiver or extension is to be
enforced. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such party, or a waiver of any other term or condition of this
Agreement by such party.

11.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION

 

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BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND
ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY IN CONNECTION WITH SUCH AGREEMENTS.

11.13 No Survival.

(a) The representations and warranties of the parties set forth in this
Agreement shall terminate as of the Effective Time, other than the
representations and warranties of the Company in Sections 4.1(b), 4.3(c), and
4.4(a)(ii), and the representations and warranties of Buyer and MergerCo in
Sections 5.2 and 5.3(b), each of which shall survive indefinitely.

(b) The FFC Funds hereby join in this Agreement for the purpose of making to the
Buyer and MergerCo all of the representations and warranties set forth in
Sections 4.1(b), 4.3(c), and 4.4(a)(ii) hereof, each of which shall survive
indefinitely. The FFC Funds shall be jointly and severally liable for any Losses
arising out of any breach of any of the representations and warranties made in
such sections, including, without limitation, with respect to all reasonable
attorney fees incurred by the Buyer, MergerCo or any of their respective
Affiliates in connection therewith.

11.14 Mutual Drafting. The parties hereto are sophisticated and have been
represented by attorneys throughout the transactions contemplated hereby who
have carefully negotiated the provisions hereof. As a consequence, the parties
do not intend that the presumptions of laws or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.

11.15 Waiver of Conflicts. Recognizing that Goodwin Procter LLP has acted as
legal counsel to certain of the Stockholders and the Company and its
Subsidiaries prior to the Closing, and that Goodwin Procter LLP intends to act
as legal counsel to certain of the Stockholders after the Closing, each of Buyer
and the Surviving Corporation (including on behalf of their respective
Subsidiaries and Affiliates) hereby waives, on its own behalf and agrees to
cause its Affiliates to waive, any conflicts that may arise in connection with
Goodwin Procter LLP representing the Stockholders’ Representative, any of the
FFC Funds, or any of the Stockholders after the Closing as such representation
may relate to Buyer or the Surviving Corporation or the transactions
contemplated herein or in any other Transaction Document. In addition, all
attorney-client privileged communications involving any Stockholders and its
Affiliates in the course of the negotiation, documentation and consummation of
the transactions contemplated hereby shall belong solely to such Stockholders
and their Affiliates (and not the Surviving Corporation and its Subsidiaries).
Without limiting the generality of the foregoing, upon and after the Closing,
(i) the applicable Stockholders and their Affiliates (and not the Surviving
Corporation and its Subsidiaries) shall be the sole holders of the
attorney-client privilege with respect to such engagement, and (ii) to the
extent that files of Goodwin Procter LLP in respect of such engagement
constitute property of the client, only the applicable Stockholders and their
Affiliates (and not the Surviving Corporation and its Subsidiaries) shall hold
such property rights.

 

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11.16 Exhibits Within Exhibits. All exhibits or schedules referenced within any
of the Exhibits attached hereto, which are not otherwise attached in an agreed
upon form to such Exhibit, this Agreement, or the Real Property Asset Purchase
Agreement, shall be mutually agreed to by the parties.

11.17 Miscellaneous. This Agreement, together with the Schedules and Exhibits
hereto, and any documents executed by the parties simultaneously herewith or
pursuant thereto, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matter hereof, other than the Confidentiality Agreement, which shall survive the
execution of this Agreement and any termination of this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns and, except as expressly set forth
herein, is not intended to confer upon any other Person any rights or remedies
hereunder. This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart. This Agreement may be executed and delivered by facsimile or “PDF”
transmission.

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ANNEX A

DEFINED TERMS

“Accounting Referee” shall have the meaning as set forth in Section 2.5(b)(ii).

“Acquisition Promissory Note” shall have the meaning set forth in the Recitals.

“Acquisition Transaction” shall have the meaning as set forth in Section 7.6.

“Affiliate” of any Person shall mean another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person.

“Affiliated Ernest Health Borrowers” means, collectively, (i) Mountain Valley
Regional Rehabilitation Hospital, Inc., a Delaware corporation, (ii) South Texas
Rehabilitation Hospital, LP, a Delaware limited partnership,
(iii) Rehabilitation Hospital of Southern New Mexico, Inc., a Delaware
corporation, and (iv) Advanced Care Hospital of Southern New Mexico, LLC, a
Delaware limited liability company.

“Affiliated Ernest Health Lessees” means, collectively, (i) Northern Colorado
Rehabilitation Hospital, Inc., a Colorado corporation, (ii) Advanced Care
Hospital of Northern Colorado, LLC, a Delaware limited liability company d/b/a
Northern Colorado Long Term Acute Hospital, (iii) Northern Idaho Advanced Care
Hospital, Inc., a Delaware corporation, (iv) Southwest Idaho Advanced Care
Hospital, Inc., a Delaware corporation, (v) Advanced Care Hospital of Montana,
Inc., a Delaware corporation, (vi) Greenwood Regional Rehabilitation Hospital,
LLC, a South Carolina limited liability company, (vii) New Braunfels Regional
Rehabilitation Hospital, Inc., a Delaware corporation, (viii) Rehabilitation
Hospital of Mesquite, LLC, a Delaware limited liability company d/b/a Mesquite
Rehabilitation Institute, LLC, (ix) Mesquite Specialty Hospital, LP, a Delaware
limited partnership, (x) Laredo Specialty Hospital, LP, a Delaware limited
partnership, (xi) Utah Valley Specialty Hospital, Inc., a Delaware corporation,
(xii) Elkhorn Valley Rehabilitation Hospital, LLC, a Delaware limited liability
company, and (xiii) Spartanburg Rehabilitation Institute, Inc., a Delaware
corporation f/k/a Spartanburg Regional Rehabilitation Hospital, Inc.

“Affiliated MPT Property Companies” means, collectively, (i) MPT of Johnstown,
LLC, a Delaware limited liability company, (ii) MPT of Post Falls, LLC, a
Delaware limited liability company, (iii) MPT of Boise, LLC, a Delaware limited
liability company, (iv) MPT of Billings, LLC, a Delaware limited liability
company, (v) MPT of Greenwood, LLC, a Delaware limited liability company,
(vi) MPT of Comal County, LLC, a Delaware limited liability company, (vii) MPT
of Mesquite, LLC, a Delaware limited liability company, (viii) MPT of Laredo,
LLC, a Delaware limited liability company, (ix) MPT of Provo, LLC, a Delaware
limited liability company, and (x) MPT of Casper, LLC, a Delaware limited
liability company.

“Affiliated MPT TRS Lender Companies” means, collectively, (i) MPT of Prescott
Valley Hospital, LLC, a Delaware limited liability company, (ii) MPT of
Brownsville Hospital, LLC, a Delaware limited liability company, and (iii) MPT
of Las Cruces Hospital, LLC, a Delaware limited liability company.

 

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“Affiliated MPT Primary Lender Companies” means, collectively, (i) MPT of
Prescott Valley, LLC, a Delaware limited liability company, (ii) MPT of
Brownsville, LLC, a Delaware limited liability company, and (iii) MPT of Las
Cruces, LLC, a Delaware limited liability company.

“Aggregate Option Exercise Amount” shall mean an amount equal to the aggregate
exercise price of all Options outstanding immediately prior to the Effective
Time.

“Aggregate Preferred Preference Amount” shall mean an amount equal to the sum of
(i) the Series A Preference Amount, plus (ii) the Series B Preference Amount,
plus (iii) the Series C Preference Amount.

“Aggregate Promissory Note Proceeds Amount” shall mean an amount equal to the
aggregate outstanding principal amount and accrued interest as of immediately
prior to the Effective Time of all Stockholder Notes.

“Agreement” shall have the meaning as provided in the Preamble.

“Appraisal Rights Provisions” shall have the meaning as provided in
Section 2.4(a).

“Base Balance Sheet” shall have the meaning as set forth in Section 4.5(a)(ii).

“Benefit Plans” shall have the meaning as set forth in Section 4.10(a).

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York, or the office of the Secretary of
State of the State of Delaware, are authorized or required by law to close.

“Business Employees” shall have the meaning set forth in Section 4.11(a).

“Buyer” shall have the meaning as provided in the Preamble.

“Buyer Material Adverse Effect” shall mean a material adverse effect on the
financial condition, business, results of operations, or assets of the Buyer or
its Affiliates, including without limitation, MergerCo, taken as a whole, except
for any such effects resulting from or relating to (i) the negotiation,
execution, announcement or performance of this Agreement or the consummation of
the transactions contemplated by this Agreement or the matters set forth in the
Schedules, including the impact thereof on relationships, contractual or
otherwise, with customers, suppliers, licensors, distributors, partners,
providers, employees or any matter described in the Schedules, (ii) changes in
general business, economic or financial market conditions, so long as such
change does not adversely affect the Buyer or its Affiliates, taken as a whole,
in a materially disproportionate manner relative to other similarly situated
participants in the industries in which they operate, (iii) changes in national
or international political or social conditions (whether as a result of acts of
terrorism, war (whether or not declared), armed conflicts or otherwise) so long
as such change does not adversely affect the Buyer or its

 

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Affiliates, taken as a whole, in a materially disproportionate manner relative
to other similarly situated participants in the industries in which they
operate, (iv) changes to financial, banking or securities markets (including any
disruption thereof and any decline in the price of any security or any market
index) so long as such change does not adversely affect the Buyer or its
Affiliates, taken as a whole, in a materially disproportionate manner relative
to other similarly situated participants in the industries in which they
operate, (v) changes in conditions generally applicable to businesses in the
same or similar industries as the Buyer and its Affiliates, so long as such
change does not adversely affect the Buyer or its Affiliates, taken as a whole,
in a materially disproportionate manner relative to other similarly situated
participants in the industries in which they operate; (vi) changes in laws,
regulations, rules, ordinances, policies, mandates, guidelines or other
requirements of any Governmental Body applicable to the Buyer and its
Affiliates; and (vii) changes in GAAP or its application.

“Buyer Operating Agreement” shall have the meaning as provided in the Recitals.

“By-laws” shall have the meaning as set forth in Section 4.1(a).

“Cash and Cash Equivalents” shall mean all cash and cash equivalents determined
in accordance with GAAP as of immediately prior to the consummation of the
transactions contemplated by the Real Property Asset Purchase Agreement and this
Agreement, minus the aggregate outstanding amount of uncashed checks written by
the Company or any of its Subsidiaries.

“Certificate of Incorporation” shall have the meaning as set forth in
Section 4.1(a).

“Certificate of Merger” shall have the meaning as set forth in Section 1.2.

“Certificates” shall have the meaning as set forth in Section 3.1(a).

“Closing” shall have the meaning as set forth in Section 1.4.

“Closing Cash” shall have the meaning as set forth in Section 2.5(b)(i).

“Closing Company Transaction Expenses” shall have the meaning as set forth in
Section 2.5(b)(i).

“Closing Date” shall have the meaning as set forth in Section 1.4.

“Closing Date Merger Consideration” shall mean an amount equal to the difference
between:

(i) the sum of (A) the Merger Consideration, plus (B) the Estimated Cash and
Cash Equivalents, plus (C) if the Estimated Net Working Capital is greater than
the Target Net Working Capital, the Working Capital Adjustment Amount, minus

(ii) the sum of (A) the Estimated Closing Indebtedness, plus (B) the Estimated
Company Transaction Expenses, plus (C) if the Estimated Net Working Capital is
less than the Target Net Working Capital, the Working Capital Adjustment Amount,
plus (D) the Escrow Amount, plus (E) the Stockholders’ Representative Expense
Amount.

 

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“Closing Date Option Consideration” shall have the meaning as set forth in
Section 2.3(a).

“Closing Indebtedness” shall have the meaning as set forth in Section 2.5(b)(i).

“Closing Net Working Capital” shall have the meaning as set forth in
Section 2.5(b)(i).

“Closing Statement” shall have the meaning as set forth in Section 2.5(b)(i).

“Closing Statement Response Notice” shall have the meaning as set forth in
Section 2.5(b)(i).

“CMS” shall mean the Centers for Medicare & Medicaid Services.

“Code” shall have the meaning as set forth in Section 3.4(b).

“Co-Located Operators” shall mean, collectively,

 

  (a) Advanced Care Hospital of Northern Colorado, LLC, a Delaware limited
liability company;

 

  (b) Rehabilitation Hospital of Mesquite, LLC, a Delaware limited liability
company; and

 

  (c) Advanced Care Hospital of Southern New Mexico, LLC, a Delaware limited
liability company.

“Commitment Letters” shall have the meaning as set forth in Section 5.4.

“Common Equity Holder” shall mean a Common Stockholder and/or an Optionholder,
as applicable.

“Common Share” shall mean a share of the Company’s Common Stock.

“Common Stock” shall mean the Company’s Common Stock, par value $.01 per share.
As used herein, “Common Stock” shall include any shares of Common Stock that
have been issued by the Company to Person(s) pursuant to restricted stock or
similar agreements that impose vesting and/or repurchase or forfeiture
requirements on such shares.

“Common Stockholder” shall mean a holder of Common Shares.

“Company” shall have the meaning set forth in the Preamble.

“Company Board” shall have the meaning set forth in the Recitals.

 

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“Company Material Adverse Effect” shall mean a material adverse effect on the
financial condition, business, results of operations, or assets of, the Company
and its Subsidiaries, taken as a whole, except for any such effects resulting
from or relating to (i) the negotiation, execution, announcement or performance
of this Agreement or the consummation of the transactions contemplated by this
Agreement or the matters set forth in the Schedules, including the impact
thereof on relationships, contractual or otherwise, with customers, suppliers,
licensors, distributors, partners, providers, employees or any matter described
in the Schedules, (ii) changes in general business, economic or financial market
conditions, so long as such change does not adversely affect the Company or its
Subsidiaries, taken as a whole, in a materially disproportionate manner relative
to other similarly situated participants in the industries in which they
operate, (iii) changes in national or international political or social
conditions (whether as a result of acts of terrorism, war (whether or not
declared), armed conflicts or otherwise) so long as such change does not
adversely affect the Company or its Subsidiaries, taken as a whole, in a
materially disproportionate manner relative to other similarly situated
participants in the industries in which they operate, (iv) the failure of the
Company to achieve any periodic earnings, revenue, expense or other estimated
projections or budget, (v) changes to financial, banking or securities markets
(including any disruption thereof and any decline in the price of any security
or any market index) so long as such change does not adversely affect the
Company or its Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other similarly situated participants in the industries in
which they operate, (vi) changes in conditions generally applicable to
businesses in the same or similar industries as the Company and its
Subsidiaries, so long as such change does not adversely affect the Company or
its Subsidiaries, taken as a whole, in a materially disproportionate manner
relative to other similarly situated participants in the industries in which
they operate; (vii) changes in laws, regulations, rules, ordinances, policies,
mandates, guidelines or other requirements of any Governmental Body applicable
to the Company and its Subsidiaries; and (viii) changes in GAAP or its
application.

“Company Permits” shall have the meaning as set forth in Section 4.15(a).

“Company Shares” shall mean the Common Shares, the Series A Preferred Shares,
the Series B Preferred Shares and the Series C Preferred Shares.

“Company Transaction Expenses” shall mean all outstanding fees and expenses of
the Company, its Subsidiaries and the Stockholders’ Representative incurred in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement, including, without limitation, (x) those
expenses which are payable to Goodwin Procter LLP and Lazard Middle Market LLC,
(y) any and all Transaction Bonuses, and (z) any and all amounts due from the
Company to former employees pursuant to any separation, termination or similar
agreement.

“Confidentiality Agreement” shall have the meaning as set forth in Section 7.3.

“Contracts” means all contractual agreements, whether written or oral, relating
to or affecting the assets or the operation of the Facilities to which the
Company or any of its Subsidiaries is a party, and all contracts, agreements or
offers with regard to the development and construction of any additional
healthcare facilities to which the Company or any of its Subsidiaries is a
party.

 

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“Contribution Agreement” shall have the meaning set forth in the Recitals.

“Cooperation Agreement” shall mean the Cooperation Agreement to be entered into
at the Closing by and among the Company, the Affiliated Ernest Health Lessees,
the Affiliated Ernest Health Borrowers, Buyer, and the other parties thereto,
substantially in the form mutually agreed to by such parties thereto, pursuant
to which each of them shall agree to cooperate and take all reasonably necessary
actions to cause certain organizational and governing documents of the Company’s
Subsidiaries to be amended and/or restated as reflected therein.

“DGCL” shall have the meaning set forth in the Recitals.

“Dissenting Shares” shall have the meaning as set forth in Section 2.4(a).

“Dissenting Stockholders” shall have the meaning as set forth in Section 2.4(a).

“Effective Time” shall have the meaning as set forth in Section 1.2.

“Elkhorn LLC” means Elkhorn Valley Rehabilitation Hospital, LLC, a Delaware
limited liability company.

“Encumbrance” means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, lien (statutory or otherwise) or
preference, security interest, restrictions or easements or other encumbrance of
any kind or nature whatsoever.

“Equity Holder” shall mean a holder of Company Shares (including Rollover
Shares) and/or an Optionholder, as applicable.

“ERISA” shall mean the United States Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” shall mean, with respect to any entity, trade or business, any
other entity, trade or business that is a member of a group described in
Section 4.14(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
include the first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.

“Escrow Agent” shall have the meaning as set forth in Section 2.6(a).

“Escrow Agreement” shall have the meaning as set forth in Section 2.6(a).

“Escrow Amount” shall mean an amount equal to Six Hundred Thousand and No/100
Dollars ($600,000.00).

“Escrow Fund” shall have the meaning as set forth in Section 2.6(a).

“Estimated Cash and Cash Equivalents” shall have the meaning set forth in
Section 2.5(a).

“Estimated Closing Indebtedness” shall have the meaning set forth in Section
2.5(a).

 

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“Estimated Company Transaction Expenses” shall have the meaning set forth in
Section 2.5(a).

“Estimated Net Working Capital” shall have the meaning as set forth in
Section 2.5(a).

“Facilities” shall mean, collectively, the hospitals operated by:

 

  (a) Advanced Care Hospital of Montana, Inc., a Delaware corporation;

 

  (b) Advanced Care Hospital of Northern Colorado, LLC, a Delaware limited
liability company;

 

  (c) Advanced Care Hospital of Southern New Mexico, LLC, a Delaware limited
liability company.

 

  (d) Elkhorn Valley Rehabilitation Hospital, LLC, a Delaware limited liability
company;

 

  (e) Greenwood Regional Rehabilitation Hospital LLC, a South Carolina limited
liability company;

 

  (f) Laredo Specialty Hospital, LP, a Delaware limited partnership;

 

  (g) Mesquite Specialty Hospital, LP, a Delaware limited partnership;

 

  (h) Mountain Valley Regional Rehabilitation Hospital, Inc., a Delaware
corporation;

 

  (i) New Braunfels Regional Rehabilitation Hospital, Inc., a Delaware
corporation;

 

  (j) Northern Colorado Rehabilitation Hospital, Inc., a Colorado corporation;

 

  (k) Northern Idaho Advanced Care Hospital, Inc., a Delaware corporation;

 

  (l) Rehabilitation Hospital of Mesquite, LLC, a Delaware limited liability
company;

 

  (m) Rehabilitation Hospital of Southern New Mexico, Inc., a Delaware
corporation;

 

  (n) South Texas Rehabilitation Hospital, LP, a Delaware limited partnership;

 

  (o) Southwest Idaho Advanced Care Hospital, Inc., a Delaware corporation;

 

  (p) Spartanburg Rehabilitation Institute, Inc., a Delaware corporation f/k/a
Spartanburg Regional Rehabilitation Hospital, Inc.; and

 

  (q) Utah Valley Specialty Hospital, Inc., a Delaware corporation.

 

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“FFC Funds” shall have the meaning as set forth in the Preamble of the
Agreement.

“Final Closing Adjustment Amount” shall have the meaning as set forth in
Section 2.5(b)(iv).

“Financial Statements” shall have the meaning as set forth in Section 4.5(a).

“Financing Documents” shall have the meaning as set forth in Section 4.1(b).

“FTC” shall have the meaning as set forth in Section 7.13.

“Fully Diluted Shares Outstanding” shall mean the sum, without duplication, of
(i) the number of Common Shares (including Rollover Shares) issued and
outstanding immediately prior to the Effective Time, plus (ii) the number of
Common Shares issuable upon exercise of all Options outstanding immediately
prior to the Effective Time.

“GAAP” shall mean U.S. generally accepted accounting principles, as applied on a
basis that is consistent with the Company’s Financial Statements.

“Governmental Body” shall mean 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.

“Government Programs” shall mean the government programs under Title XVIII of
the Social Security Act (“Medicare”), Title XIX of the Social Security Act
(“Medicaid”) and the TRICARE/CHAMPUS Program.

“Health Benefit Laws” shall mean 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” shall mean 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 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.

 

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“Healthcare Laws” shall mean Health Benefit Laws, Health Compliance Laws and
Information Privacy and Security Laws.

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of
1996, as amended, and its implementing regulations.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the related regulations and published interpretations.

“Indebtedness” shall mean (i) any indebtedness of the Company or any of its
Subsidiaries for borrowed money and accrued but unpaid interest, premiums and
penalties relating thereto, (ii) any indebtedness of the Company or any of its
Subsidiaries evidenced by a note, bond, debenture or other similar security,
(iii) any lease that has been accounted for as a capital lease on the balance
sheet of the Company or any of its Subsidiaries, as applicable, prepared in
accordance with GAAP and (iv) any indebtedness referred to in clauses
(i) through (iii) above of any Person which is either guaranteed by, or secured
by an Encumbrance upon any property or asset owned by, the Company or any of its
Subsidiaries; provided, however, that for the avoidance of doubt, Indebtedness
shall exclude the amount of the Company Transaction Expenses, and shall further
exclude the CIT Loan (as defined in the Real Property Asset Purchase Agreement)
if and to the extent the CIT Loan is satisfied out of the proceeds payable to
the Company pursuant to the Real Property Asset Purchase Agreement.

“Indemnified Parties” shall have the meaning as set forth in Section 7.7(a).

“Information Privacy or Security Laws” shall mean 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.

“Insolvency or Liquidation Proceeding” shall mean (a) any voluntary or
involuntary case or proceeding under any debtor relief laws with respect to the
Company or any of its Subsidiaries, (b) any other voluntary or involuntary
insolvency, reorganization or bankruptcy case or proceeding, or any receivership
or other similar case or proceeding with respect to the Company or any of its
Subsidiaries, or with respect to any of their assets or properties, (c) any
liquidation, dissolution, reorganization or winding up of the Company or any of
its Subsidiaries, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (d) any general assignment for the benefit of
creditors or any other marshaling of assets and liabilities of the Company or
any of its Subsidiaries.

“Insurance Policies” shall have the meaning as set forth in Section 4.14.

“Intellectual Property” shall mean (i) patents, registered and unregistered
trademarks and service marks, brand names, trade names, domain names,
copyrights, designs and trade secrets and (ii) applications for and
registrations of such patents, trademarks, service marks, trade names, domain
names, copyrights and designs.

 

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“IRF Operators” shall mean, collectively:

 

  (a) Elkhorn Valley Rehabilitation Hospital, LLC, a Delaware limited liability
company;

 

  (b) Greenwood Regional Rehabilitation Hospital LLC, a South Carolina limited
liability company;

 

  (c) Mountain Valley Regional Rehabilitation Hospital, Inc., a Delaware
corporation;

 

  (d) New Braunfels Regional Rehabilitation Hospital, Inc., a Delaware
corporation;

 

  (e) Northern Colorado Rehabilitation Hospital, Inc., a Colorado corporation;

 

  (f) South Texas Rehabilitation Hospital, LP, a Delaware limited partnership;

 

  (g) Rehabilitation Hospital of Mesquite, LLC, a Delaware limited liability
company;

 

  (h) Rehabilitation Hospital of Southern New Mexico, Inc., a Delaware
corporation; and

 

  (i) Spartanburg Rehabilitation Institute, Inc., a Delaware corporation f/k/a
Regional Rehabilitation Hospital, Inc.

“Joint Commission” shall mean The Joint Commission, formerly known as the Joint
Commission on Accreditation of Healthcare Organizations.

“Knowledge” or “Knowledge of the Company” shall mean with respect to the
Company, the actual knowledge of a particular fact or matter, after due inquiry,
of any of Darby Brockette, Keith Longson, Coe Schlicher, Tony Hernandez, David
Fuller, or Denise Kann.

“Labor Proceeding” shall have the meaning as set forth in Section 4.11(e).

“Letter of Transmittal” shall have the meaning as set forth in Section 3.1(a).

“Liability” or “Liabilities” shall mean any direct or indirect liabilities,
Indebtedness, commitments, obligations, duties or responsibilities of any kind
or nature, whether accrued or fixed, absolute or contingent, determined or
determinable, matured or unmatured due or to become due, asserted or unasserted
or known or unknown and regardless of whether it is accrued or required to be
accrued or disclosed pursuant to GAAP.

“Licenses” shall mean all notifications, licenses, permits, franchises,
certificates, approvals, exemptions, classifications, registrations and other
similar documents and authorizations issued by any Governmental Body (including,
without limitation, all provider agreements), and applications, amendments and
modifications of any of the foregoing.

 

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“Litigation” shall mean any litigation, claims, disputes, suits, actions,
proceedings, inquiries, arbitration, mediation, or investigations.

“Losses” shall mean any and all losses, damages, awards, judgments, costs and
expenses actually suffered or incurred by a Person; provided, that Losses shall
not include any consequential, incidental or indirect damages, diminution in
value damages, lost profits or punitive, special or exemplary damages, and in
particular, without limitation, no “multiple of profits” or “multiple of cash
flow” or similar valuation methodology shall be used in calculating the amount
of any Losses.

“LTCH Operators” shall mean, collectively:

 

  (a) Advanced Care Hospital of Montana, Inc., a Delaware corporation;

 

  (b) Advanced Care Hospital of Northern Colorado, LLC, a Delaware limited
liability company;

 

  (c) Advanced Care Hospital of Southern New Mexico, LLC, a Delaware limited
liability company.

 

  (d) Laredo Specialty Hospital, LP, a Delaware limited partnership;

 

  (e) Mesquite Specialty Hospital, LP, a Delaware limited partnership;

 

  (f) Northern Idaho Advanced Care Hospital, Inc., a Delaware corporation;

 

  (g) Southwest Idaho Advanced Care Hospital, Inc., a Delaware corporation; and

 

  (h) Utah Valley Specialty Hospital, Inc., a Delaware corporation.

“Management Agreement” shall have the meaning set forth in the Recitals.

“Management Company” means Guiding Health Management Group, LLC, a Delaware
limited liability company.

“Material Contracts” shall have the meaning as set forth in Section 4.12(b).

“Merger” shall have the meaning as set forth in the Recitals.

“Merger Consideration” shall mean an amount equal to $100,000,000.

“MPT Operating Partnership” shall have the meaning as set forth in Section 5.4.

“MPT TRS Entity” shall have the meaning as set forth in the Preamble.

“MPT TRS Subsidiaries” means, collectively, (i) MPT of Johnstown Hospital, LLC,
a Delaware limited liability company, (ii) MPT of Post Falls Hospital, LLC, a
Delaware limited liability company, (iii) MPT of Boise Hospital, LLC, a Delaware
limited liability company, (iv)

 

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MPT of Billings Hospital, LLC, a Delaware limited liability company, (v) MPT of
Greenwood Hospital, LLC, a Delaware limited liability company, (vi) MPT of Comal
County Hospital, LLC, a Delaware limited liability company, (vii) MPT of
Mesquite Hospital, LLC, a Delaware limited liability company, (viii) MPT of
Laredo Hospital, LLC, a Delaware limited liability company, (ix) MPT of Provo
Hospital, LLC, a Delaware limited liability company, and (x) MPT of Casper
Hospital, LLC, a Delaware limited liability company.

“Mutual Release” shall have the meaning as set forth in Section 8.1(e).

“Net Real Estate Proceeds” shall mean all cash consideration received by the
Company in connection with the transactions contemplated by the Real Property
Asset Purchase Agreement, net of (i) the portion of such cash consideration used
to satisfy any of the outstanding Indebtedness of the Company and/or any of its
Subsidiaries and (ii) the portion of such cash consideration that is subject to
distribution by Elkhorn LLC to Wyoming Medical Center, a Wyoming nonprofit
corporation, the holder of a 25% membership interest in Elkhorn LLC.

“Net Working Capital” shall mean, with respect to the Company and its
Subsidiaries, the consolidated current assets less the consolidated current
liabilities, all determined in accordance with GAAP consistent with the
accounting methodologies, practices, estimation techniques, assumptions and
principles used in the preparation of the Company’s audited Financial
Statements; provided, however, that notwithstanding the foregoing, Net Working
Capital shall specifically exclude (i) Cash and Cash Equivalents, (ii) any
Indebtedness (including any current portion thereof), (iii) the Company
Transaction Expenses, (iv) any deferred Tax assets or deferred Tax liabilities
of the Company, (v) any Tax liability of the Company or any Subsidiary
attributable to the transactions contemplated by the Real Property Asset
Purchase Agreement, and (vi) the Stockholder Notes. For the avoidance of doubt,
for purposes of determining Net Working Capital, all items of loss, deduction or
credit resulting from or attributable to all payments in respect of Options and
Company Transaction Expenses as contemplated by this Agreement shall be
allocated to the taxable period or portion thereof ending on or before the
Closing Date.

“OFAC” shall have the meaning as set forth in Section 4.19(a).

“Option” shall have the meaning as set forth in Section 2.3(a).

“Option Consideration” shall have the meaning as set forth in Section 2.3(a).

“Optionholder” shall have the meaning as set forth in Section 2.3(a).

“Option Plan” shall have the meaning as set forth in Section 2.3(a).

“Option Shares” shall have the meaning as set forth in Section 2.3(a).

“Ordinary Course of Business” shall mean the ordinary course of business of the
Company and its Subsidiaries consistent with past practice.

“Patriot Act” shall have the meaning as set forth in Section 4.19(a).

 

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“Payment Schedule” shall have the meaning as set forth in Section 3.1(b).

“Payor Contract” shall have the meaning as set forth in Section 4.16(e).

“Per Common Share Closing Date Merger Consideration” shall mean an amount equal
to the quotient obtained by dividing (i) the Closing Date Merger Consideration,
plus the Aggregate Option Exercise Amount, plus the Aggregate Promissory Note
Proceeds Amount, plus the Net Real Estate Proceeds, minus the Aggregate
Preferred Preference Amount by (ii) the Fully Diluted Shares Outstanding.

“Per Common Share Escrow Consideration” shall mean an amount equal to the
quotient obtained by dividing (i) the portion of the Escrow Fund that is from
time to time distributable to the Common Equity Holders and Rollover Holders in
accordance with the terms of the Escrow Agreement, by (ii) the Fully Diluted
Shares Outstanding.

“Per Common Share Final Closing Adjustment Amount” shall mean, if the Final
Closing Adjustment Amount is payable by Buyer to the Common Equity Holders and
Rollover Holders pursuant to Section 2.5(b)(iv), an amount equal to the quotient
obtained by dividing (i) the Final Closing Adjustment Amount by (ii) the Fully
Diluted Shares Outstanding.

“Per Common Share Stockholders’ Representative Expense Amount” shall mean an
amount equal to the quotient obtained by dividing (i) the portion of the
Stockholders’ Representative Expense Amount that is from time to time
distributable to the Common Equity Holders and Rollover Holders in accordance
herewith (after giving effect to all expenditure or disbursements therefrom) by
(ii) the Fully Diluted Shares Outstanding.

“Per Share Series A Preferred Merger Consideration” shall mean an amount equal
to (i) $10.00, plus (ii) the Series A Preferred Dividend Payment Per Share.

“Per Share Series B Preferred Merger Consideration” shall mean an amount equal
to (i) $10.00, plus (ii) the Series B Preferred Dividend Payment Per Share.

“Per Share Series C Preferred Merger Consideration” shall mean an amount equal
to (i) $10.00, plus (ii) the Series C Preferred Dividend Payment Per Share.

“Permitted Encumbrance” shall mean each of (a) Encumbrances for or arising from
current taxes not yet due and payable or which are being contested in good faith
by appropriate proceedings; (b) carriers’, warehousemens’, mechanics’,
landlords’, materialmens’, repairmens’ or other similar Encumbrances arising in
the Ordinary Course of Business; (c) Encumbrances on any property acquired or
held by the Company or its Subsidiaries in the Ordinary Course of Business,
securing indebtedness incurred or assumed for the purpose of financing (or
refinancing) all or any part of the cost of acquiring such property;
(d) Encumbrances securing capital lease obligations; (e) easements, covenants,
conditions and other restrictions, in each such case, of public record;
(f) matters set forth in the Title Commitments issued by the Title Company in
accordance with the Real Property Asset Purchase Agreement; (g) matters
disclosed on the Surveys delivered pursuant to the Real Property Asset Purchase
Agreement; and (h) other matters, encumbrances and defects approved by the Buyer
in writing.

 

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“Person” shall mean an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity or group (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended).

“Personal Information” shall mean the information pertaining to an individual
that is regulated or protected by one or more of the Information Privacy and
Security Laws.

“Personal Property” shall have the meaning as set forth in Section 4.7(a).

“Personal Property Leases” shall have the meaning as set forth in
Section 4.7(c).

“Physician” shall have the meaning as defined in the Stark Law.

“Pre-Closing Statement” shall have the meaning as set forth in Section 2.5(a).

“Pro Rata Portion” shall mean the quotient, expressed as a percentage, obtained
by dividing (i) the aggregate number of Common Shares held by a Common Equity
Holder or Rollover Holder who contributed Common Shares, each as of immediately
prior to the Effective Time (assuming the exercise of all Options as of
immediately prior to the Effective Time), by (ii) Fully Diluted Shares
Outstanding.

“Real Estate Loan Agreement” shall have the meaning set forth in the Recitals.

“Real Estate Loan Documents” shall have the meaning set forth in the Recitals.

“Real Property” shall have the meaning ascribed thereto in the Real Property
Asset Purchase Agreement.

“Real Property Asset Purchase Agreement” shall have the meaning as set forth in
the Recitals.

“Real Property Master Lease Agreement” shall have the meaning as set forth in
the Recitals.

“Real Property Master Sublease Agreement” shall have the meaning as set forth in
the Recitals.

“Re-characterization Restrictions” shall have the meaning as set forth in
Section 7.7(d).

“Representatives” shall mean the directors, officers, employees, Affiliates,
agents, investment bankers, financial advisors, attorneys, accountants,
advisors, brokers, finders, consultants or representatives of the Company,
Buyer, MergerCo, the Stockholders’ Representative or any of their respective
Subsidiaries, as the case may be.

“Review Period” shall have the meaning as set forth in Section 2.5(b)(i).

“Rollover Holder” shall have the meaning as set forth in Section 2.2.

“Rollover Shares” shall have the meaning as set forth in Section 2.2.

 

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“Schedule Supplement” has the meaning set forth in Section 11.2.

“Schedules” shall have the meaning as set forth in Section 11.2.

“Series A Preference Amount” shall mean an amount equal to the product of
(i) the Per Share Series A Preferred Merger Consideration, times (ii) the number
of Series A Preferred Shares outstanding immediately prior to the Effective
Time.

“Series A Preferred Dividend Payment Per Share” shall mean, with respect to a
share of Series A Preferred Stock, the total accumulated amount of accrued and
unpaid dividends from the date of original issuance of such share of Series A
Preferred Stock until immediately prior to the Effective Time.

“Series B Preference Amount” shall mean an amount equal to the product of
(i) the Per Share Series B Preferred Merger Consideration, times (ii) the number
of Series B Preferred Shares outstanding immediately prior to the Effective
Time.

“Series B Preferred Dividend Payment Per Share” shall mean, with respect to a
share of Series B Preferred Stock, the total accumulated amount of accrued and
unpaid dividends from the date of original issuance of such share of Series B
Preferred Stock until immediately prior to the Effective Time.

“Series C Preference Amount” shall mean an amount equal to the product of
(i) the Per Share Series C Preferred Merger Consideration, times (ii) the number
of Series C Preferred Shares outstanding immediately prior to the Effective
Time.

“Series C Preferred Dividend Payment Per Share” shall mean, with respect to a
share of Series C Preferred Stock, the total accumulated amount of accrued and
unpaid dividends from the date of original issuance of such share of Series C
Preferred Stock until immediately prior to the Effective Time.

“Series A Preferred Share” shall mean a share of the Company’s Series A
Preferred Stock.

“Series B Preferred Share” shall mean a share of the Company’s Series B
Preferred Stock.

“Series C Preferred Share” shall mean a share of the Company’s Series C
Preferred Stock.

“Series A Preferred Stock” shall mean the Company’s Series A Redeemable
Preferred Stock, par value $.01 per share.

“Series B Preferred Stock” shall mean the Company’s Series B Redeemable
Preferred Stock, par value $.01 per share.

“Series C Preferred Stock” shall mean the Company’s Series C Redeemable
Preferred Stock, par value $.01 per share.

 

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“Stark Law” shall mean the Ethics in Patient Referrals Act of 1989, as amended,
42 U.S.C. 1395nn.

“Stockholder” shall mean a holder of Preferred Stock and/or Common Stock, as
applicable.

“Stockholder Note” shall mean each promissory note issued to the Company in
connection with a Stockholder’s acquisition of Common Stock (whether pursuant to
the exercise of Options or otherwise).

“Stockholders’ Representative” shall mean FFC Partners III, L.P., a Delaware
limited partnership, and its successors and assigns.

“Stockholders’ Representative Expense Amount” shall have the meaning as set
forth in Section 3.2(d).

“Stockholder Written Consent” shall mean the written consent of holders of
Company Shares entitled to vote on this Agreement in an amount necessary, under
applicable law and in accordance with the DGCL and the Certificate of
Incorporation and Bylaws, as applicable, approving and adopting this Agreement,
the Merger, the Real Property Asset Purchase Agreement, and the other
transactions contemplated hereby and thereby, and approving the appointment of
the Stockholders’ Representative.

“Subsidiaries’ Approvals” shall have the meaning as set forth in Section 7.1(b).

“Subsidiary” shall mean with respect to any entity, that such entity shall be
deemed to be a “Subsidiary” of another Person if such other Person directly or
indirectly owns, beneficially or of record, (i) an amount of voting securities
or other interests in such entity that is sufficient to enable such Person to
elect at least a majority of the members of such entity’s board of directors or
other governing body, or (ii) at least a majority of the outstanding equity
interests of such entity.

“Surviving Corporation” shall have the meaning as set forth in Section 1.1.

“Surviving Corporation Bylaws” shall have the meaning as set forth in
Section 1.3.

“Surviving Corporation Charter” shall have the meaning as set forth in
Section 1.3.

“Target Net Working Capital” shall mean Twelve Million Eight Hundred Thousand
and No/100 Dollars ($12,800,000.00).

“Tax Returns” shall mean any report, return, document or other filing (including
any additional or supporting material and any amendments or supplements)
required to be supplied to any Governmental Body with respect to Taxes.

“Taxes” shall mean any and all taxes, charges, fees, levies or other
assessments, imposed by any taxing authority, and such term shall include any
interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.

 

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“Termination Date” shall have the meaning as set forth in Section 9.1(c).

“Transaction Bonuses” shall mean all bonuses payable to senior management of the
Company or other compensation expenses that become due and payable, in each case
in connection with or as a result of the transactions contemplated by this
Agreement.

“Transaction Documents” shall mean this Agreement, the Real Property Asset
Purchase Agreement, the Contribution Agreement, the Buyer Operating Agreement,
the Acquisition Promissory Note, the Management Agreement, the Real Property
Master Lease Agreement, the Real Property Master Sublease Agreement, the Real
Estate Loan Documents, the Escrow Agreement, the Letters of Transmittal and each
other agreement entered into or document delivered in connection with the
transactions contemplated by any of the foregoing.

“Transfer Taxes” means any transfer, sales, use, value added, excise, stock
transfer, stamp, recording, registration and any similar Taxes that become
payable in connection with the Merger and other transactions contemplated
hereby.

“Working Capital Adjustment Amount” shall mean that amount (expressed as a
positive number) equal to the difference between (i) the Target Net Working
Capital and (ii) the Estimated Net Working Capital.

 

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