EX-10.27 5 g89916a2exv10w27.txt EX-10.27 PURCHASE AND SALE AGREEMENT EXHIBIT 10.27 PURCHASE AND SALE AGREEMENT BY AND AMONG MPT OPERATING PARTNERSHIP, L.P. MPT OF VICTORVILLE, LLC (COLLECTIVELY, THE "PURCHASER PARTIES") AND PRIME A INVESTMENTS, L.L.C., DESERT VALLEY HEALTH SYSTEM, INC., DESERT VALLEY HOSPITAL, INC., AND DESERT VALLEY MEDICAL GROUP, INC. (COLLECTIVELY, THE "SELLER PARTIES") DATED AS OF FEBRUARY 28, 2005 TABLE OF CONTENTS ARTICLE I DEFINED TERMS.......................................................... 1 SECTION 1.1. Certain Defined Terms........................................... 1 SECTION 1.2. Interpretation; Terms Generally................................. 8 ARTICLE II PURCHASE AND SALE OF ASSETS, ASSUMPTION OF LIABILITIES................ 9 SECTION 2.1. Purchase and Sale of Assets..................................... 9 SECTION 2.2. Excluded Liabilities............................................ 9 SECTION 2.3. Special Purpose Entity.......................................... 10 ARTICLE III PURCHASE PRICE....................................................... 10 SECTION 3.1. Purchase Price.................................................. 10 SECTION 3.2. Taxes, Rentals, Utilities....................................... 10 SECTION 3.3. Allocation of Purchase Price.................................... 10 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER PARTIES...... 10 SECTION 4.1. Organization.................................................... 10 SECTION 4.2. Authorization and Enforceability................................ 11 SECTION 4.3. Absence of Conflicts............................................ 11 SECTION 4.4. Consents and Approvals.......................................... 11 SECTION 4.5. Financial Statements............................................ 12 SECTION 4.6. Accounts Receivable............................................. 12 SECTION 4.7. No Undisclosed Liabilities...................................... 12 SECTION 4.8. Absence of Changes.............................................. 13 SECTION 4.9. Licenses........................................................ 14 SECTION 4.10. Accreditation; Medicare and Medi-Cal; Third Party Payors........ 14 SECTION 4.11. HIPAA Compliance................................................ 15 SECTION 4.12. Healthcare Regulatory Matters................................... 15 SECTION 4.13. Taxes........................................................... 17 SECTION 4.14. Good Title to Assets............................................ 17 SECTION 4.15. Title and Condition of the Real Property........................ 17 SECTION 4.16. Condition of Personal Property.................................. 19 SECTION 4.17. Compliance with Environmental Laws.............................. 20 SECTION 4.18. Insurance....................................................... 21 SECTION 4.19. Litigation...................................................... 21 SECTION 4.20. Contracts, Obligations and Commitments.......................... 22 SECTION 4.21. Intangible Property............................................. 22 SECTION 4.22. Employees and Employee Relations................................ 22 SECTION 4.23. Compliance with Law............................................. 23 SECTION 4.24. Hill-Burton Obligations......................................... 24 SECTION 4.25. Medical Staff Matters........................................... 24 SECTION 4.26. Brokers......................................................... 24 SECTION 4.27. Records......................................................... 24 SECTION 4.28. Representations Complete........................................ 24 ARTICLE V REPRESENTATIONS AND WARRANTIES BY THE PURCHASER PARTIES................ 25 SECTION 5.1. Organization.................................................... 25 SECTION 5.2. Authorization; Enforcement, Absence of Conflicts................ 25 SECTION 5.3. Binding Agreement............................................... 25
i SECTION 5.4. Litigation...................................................... 25 SECTION 5.5. Brokers......................................................... 26 SECTION 5.6. Compliance with Law............................................. 26 ARTICLE VI TITLE AND SURVEY...................................................... 26 SECTION 6.1. Survey.......................................................... 26 SECTION 6.2. Title Insurance................................................. 26 ARTICLE VII PRE-CLOSING COVENANTS................................................ 27 SECTION 7.1. No Shop......................................................... 27 SECTION 7.2. Access; Confidentiality......................................... 27 SECTION 7.3. Schedule Updates................................................ 28 SECTION 7.4. Conduct of Business by the Seller Parties Pending the Closing... 29 SECTION 7.5. Cooperation..................................................... 30 SECTION 7.6. HCP Purchase.................................................... 30 SECTION 7.7. Regulatory and other Authorizations, Notices and Consents....... 30 SECTION 7.8. Mutual Covenants................................................ 31 SECTION 7.9. Public Announcements............................................ 31 ARTICLE VIII CLOSING CONDITIONS.................................................. 31 SECTION 8.1. Conditions to the Obligations of the Seller Parties............. 31 SECTION 8.2. Conditions to the Obligations of the Purchaser Parties.......... 32 ARTICLE IX CLOSING............................................................... 33 SECTION 9.1. Closing Date.................................................... 33 SECTION 9.2. Seller Parties' Closing Date Deliverables....................... 33 SECTION 9.3. Purchaser Parties' Closing Date Deliverables.................... 34 ARTICLE X TERMINATION............................................................ 35 SECTION 10.1. Termination..................................................... 35 SECTION 10.2. Notice and Effect............................................... 35 ARTICLE XI CERTAIN POST-CLOSING COVENANTS........................................ 36 SECTION 11.1. Post-Closing Access to Information.............................. 36 SECTION 11.2. Prem Reddy Employment Agreement................................. 36 ARTICLE XII INDEMNIFICATION...................................................... 36 SECTION 12.1. Seller Parties Agreement to Indemnify........................... 36 SECTION 12.2. The Purchaser Parties' Agreement to Indemnify................... 37 SECTION 12.3. Notification and Defense of Claims.............................. 37 SECTION 12.4. Investigations.................................................. 39 SECTION 12.5. Treatment of Indemnification Payments........................... 39 SECTION 12.6. Exclusive Remedy................................................ 39 ARTICLE XIII DISPUTE RESOLUTION.................................................. 39 SECTION 13.1. GOVERNING LAW, JURISDICTION AND VENUE........................... 39
ARTICLE XIV MISCELLANEOUS........................................................ 40 SECTION 14.1. Assignment...................................................... 40 SECTION 14.2. Notice.......................................................... 40 SECTION 14.3. Calculation of Time Period...................................... 41 SECTION 14.4. Captions........................................................ 41 SECTION 14.5. Entire Agreement; Modification.................................. 41 SECTION 14.6. Schedules and Exhibits.......................................... 41 SECTION 14.7. Further Assurances.............................................. 41 SECTION 14.8. Counterparts.................................................... 41 SECTION 14.9. Expenses........................................................ 41 SECTION 14.10.Syndication..................................................... 42 SECTION 14.11.Securities Offering and Filings................................. 42 SECTION 14.12.Binding Effect.................................................. 42
PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into as of February 28, 2005 by and among MPT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("MPT"), MPT OF VICTORVILLE, LLC, a Delaware limited liability company, (the "Acquisition Sub") (MPT and the Acquisition Sub being herein referred to, collectively, as the "Purchaser Parties"); and PRIME A INVESTMENTS, L.L.C., a Delaware limited liability company ("Prime"), DESERT VALLEY HEALTH SYSTEM, INC., a Delaware corporation ("Desert Valley Parent"), DESERT VALLEY HOSPITAL, INC., a California corporation ("Desert Valley Operator"), and DESERT VALLEY MEDICAL GROUP, INC., a California corporation (Prime, Desert Valley Parent, Desert Valley Operator and Desert Valley Medical Group, Inc., being collectively referred to herein as the "Seller Parties"). WITNESSETH: WHEREAS, Desert Valley Operator is the operator of that certain general acute care hospital (the "Hospital") facility and incorporated medical office building (the "MOB") located in the Victorville, California area; WHEREAS, Desert Valley Operator is a party to that certain Amended and Restated Lease with AHE of California, Inc. (AHE of California, Inc., together with affiliates, being referred to herein as "HCP") and dated as of April 5, 1994 (as amended, the "HCP Lease") pursuant to which Desert Valley Operator leases from HCP, among other things, the Real Property (as hereinafter defined); WHEREAS, the HCP Lease provides that Desert Valley Operator has the right and option to purchase the Real Property from HCP and Desert Valley Operator has assigned such right and option to Prime; WHEREAS, subject to the terms and conditions hereinafter set forth, Prime and the other applicable Seller Parties desire to sell, and the Acquisition Sub desires to purchase, the Real Property and certain other assets associated or used in connection with the Hospital and the MOB, all on the terms and conditions set forth in this Agreement; and WHEREAS, contemporaneously with the closing of such purchase and sale, Desert Valley Operator shall lease back the Real Property from the Acquisition Sub pursuant to a lease in the form of Exhibit A (the "Lease"). NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINED TERMS SECTION 1.1. CERTAIN DEFINED TERMS. Capitalized terms used herein shall have the respective meanings ascribed to them in this Section 1.1. 1 "Acquisition Sub" shall have the meaning set forth in the preamble to this Agreement. "Adverse Events" shall have the meaning set forth in Section 4.10 hereof. "Affiliate" "means, with respect to any Person (i) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, (ii) any other Person that owns, beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, employee, partner, member, manager or trustee of such Person or any Person controlling, controlled by or under common control with such Person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such Person). For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities or otherwise. "AOA" shall have the meaning set forth in Section 4.10 hereof. "Appraisal" means that certain appraisal of the Real Property in form and substance, and prepared by a Person, satisfactory to MPT in its sole discretion. "Appraised Value" means the fair market value of the Real Property as set forth in the Appraisal. "Assets" shall have the meaning set forth in Section 2.1 hereof. "Assumed Liabilities" shall have the meaning set forth in Section 2.2 hereof. "Balance Sheet" shall have the meaning set forth in Section 4.5 hereof. "Balance Sheet Date" shall have the meaning set forth in Section 4.5 hereof. "Business" means the operation of the Hospital and the MOB and the engagement in and pursuit and conduct of any business venture or activity related thereto. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close. "Business Employees" shall have the meaning set forth in Section 4.22(a) hereof. "CMS" means the Centers for Medicare and Medicaid Services. "Claim" shall have the meaning set forth in Section 4.19 hereof. "Closing" shall have the meaning set forth in Section 9.1 hereof. "Closing Date" shall have the meaning set forth in Section 9.1 hereof. 2 "Code" means the United States Internal Revenue Code of 1986, as amended through the date hereof, and all regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Confidentiality Agreement" shall have the meaning set forth in Section 7.2(c) hereof. "Contracts" shall have the meaning set forth in Section 4.20 hereof. "Deed" shall have the meaning set forth in Section 9.2(b) hereof. "Dispute" shall have the meaning set forth in Section 7.6 hereof. "Environmental Claim" means any Claim, action, cause of action, investigation or notice (written or oral) by any Person alleging actual or potential liability for investigatory, cleanup or governmental response costs, or natural resources or property damages, or personal injuries, attorney's fees or penalties relating to (i) the presence, or release into the environment, of any Hazardous Materials at any location owned, leased or operated by any Seller Party, now or in the past, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Law" means each federal, state, local and foreign law and regulation relating to pollution, protection or preservation of human health or the environment, including ambient air, surface water, ground water, land surface or subsurface strata, and natural resources, and including each law and regulation relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacturing, processing, distribution, use, treatment, generation, storage, containment (whether above ground or underground), disposal, transport or handling of Hazardous Materials, or the preservation of the environment or mitigation of adverse effects thereon and each law and regulation with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials, including, without limitation, the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, the Federal Water Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and all similar federal, state and local environmental statutes, ordinances and the regulations, orders, or decrees now or hereafter promulgated thereunder, in each case as amended from time to time. "Equity Constituents" means, with respect to any Person, as applicable, the members, general or limited partners, shareholders, stockholders or other Persons, however designated, who are the owners of the issued and outstanding equity or ownership interests of such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exception Documents" means true, correct, current and legible copies of each document listed as an exception to title on the Title Commitment. "Excluded Liabilities" shall have the meaning set forth in Section 2.2 hereof. 3 "Expansion Commitment Letter" shall have the meaning set forth in Section 9.2(x) hereof. "Financial Statements" shall have the meaning set forth in Section 4.5 hereof. "Fixtures" means all permanently affixed non-medical equipment, machinery, fixtures, and other items of real property, including all components thereof, now and hereafter located in, on or used in connection with, and permanently affixed to or incorporated into the Improvements, including, without limitation, all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning systems and apparatus, sprinkler systems and fire and theft protection equipment, and built-in vacuum, cable transmission, oxygen and similar systems, all of which, to the greatest extent permitted by law, are hereby deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto. "GAAP" means United States generally accepted accounting principles as in effect from time to time. Any accounting term used herein and not specifically defined herein shall be construed in accordance with GAAP. "Governing Documents" means, with respect to any Person, as applicable, such Person's charter, articles or certificate of incorporation, formation or organization, bylaws or other documents or instruments which establish and/or set forth the rules, procedures and rights with respect to such Person's governance, including, without limitation, any stockholders, limited liability company, operating or partnership agreement related to such Person, in each case as amended, restated, supplemented and/or modified and in effect as of the relevant date. "Governmental Entity" means any national, federal, regional, state, local, provincial, municipal, foreign or multinational court or other governmental or regulatory authority, administrative body or government, department, board, body, tribunal, instrumentality or commission of competent jurisdiction. "Government Programs" shall have the meaning set forth in Section 4.10 hereof. "Hazardous Materials" means any substance deemed hazardous under any Environmental Law, including, without limitation, asbestos or any substance containing asbestos, the group of organic compounds known as polychlorinated biphenyls, flammable explosives, radioactive materials, infectious wastes, biomedical and medical wastes, chemicals known to cause cancer or reproductive toxicity, lead and lead-based paints, radon, pollutants, effluents, contaminants, emissions or related materials and any items included in the definition of hazardous or toxic wastes, materials or substances under any Environmental Law. "HCP" shall have the meaning set forth in the recitals hereof. "HCP Lease" shall have the meaning set forth in the recitals hereof. "Healthcare Fraud Laws" shall have the meaning set forth in Section 4.12(a) hereof. "HIPAA" shall have the meaning set forth in Section 4.11 hereof. 4 "Hospital" shall have the meaning set forth in the recitals to this Agreement. "Improvements" means all buildings, improvements, structures and Fixtures now or on the Closing Date located on the Land, including, without limitation, landscaping, parking lots and structures, roads, drainage and all above ground and underground utility structures, equipment systems and other so-called "infrastructure" improvements. "Indebtedness" of any Person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of such Person: (i) in respect of borrowed money (whether secured or unsecured), (ii) under conditional sale or other title retention agreements relating to property or services purchased and/or sold by such Person, (iii) evidenced by bonds, notes, debentures or similar instruments, (iv) for the payment of money relating to a capitalized lease obligation, (v) evidenced by a letter of credit or a reimbursement obligation of such Person with respect to any letter of credit, (vi) pursuant to any guarantee, or (vii) secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) a Lien on the assets or property of such Person, and (b) all liabilities and obligations of others of the kind described in the preceding clause (a) and otherwise that (i) such Person is responsible or liable for, directly or indirectly, as obligor, guarantor, surety or otherwise, or (ii) which are secured by a Lien on any of the assets or property of such Person. "Indemnified Party" shall have the meaning set forth in Section 12.3(a) hereof. "Indemnifying Party" shall have the meaning set forth in Section 12.3(a) hereof. "Intangible Property" shall have the meaning set forth in Section 4.21 hereof. "Knowledge," "to the knowledge or best knowledge of" or similar words or phrases means, with respect to any Person, such Person's actual or deemed knowledge of a particular fact or matter if (i) any of such Person's current or former officers or directors (or other Persons however denominated, exercising similar authority with respect to such Person) including, but not limited to, in the case of any Seller Party, Prem Reddy, M.D. and/or Lex Reddy (a Person's "Knowledge Group"), has actual knowledge of such fact or matter; or (ii) any of such Person's Knowledge Group would be expected to discover or otherwise become aware of such fact or matter after conducting a reasonably diligent inquiry. "Labor Proceeding" shall have the meaning set forth in Section 4.22(c) hereof. "Land" shall have the meaning set forth in Section 2.1(a) hereof. "Law" means any federal, state or local statute, rule, regulation, ordinance, order, code, policy or rule of common law, now or hereafter in effect, and in each case as amended, and any judicial or administrative interpretation thereof by a Governmental Entity or otherwise, including, without limitation, any judicial or administrative order, consent, decree or judgment. "Lease" shall have the meaning set forth in the recitals to this Agreement. 5 "Lien" means any mortgage, adverse Claim, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, lien (statutory or otherwise) or preference, security interest or other encumbrance of any kind or nature whatsoever. "Material Adverse Effect" means any change, event(s), occurrence(s) or effect(s), whether direct or indirect, that, both before and after giving effect to the transactions contemplated by this Agreement, could, individually or in the aggregate, have a material adverse effect on (i) the business, properties, results of operations, assets, revenue, income or condition (financial or otherwise) of, or the ability to timely satisfy the obligations or liabilities (whether absolute or contingent) of, any Seller Party, (ii) the Business or the Assets, or (iii) the ability of any Seller Party to perform its obligations under, and/or consummate the transactions contemplated by, this Agreement within the time periods specified herein. "Medi-Cal" shall have the meaning set forth in Section 4.10 hereof. "Medicare" shall have the meaning set forth in Section 4.10 hereof. "Minimum Aggregate Liability Amount" shall have the meaning set forth in Section 12.1(b) hereof. "MOB" shall have the meaning set forth in the recitals to this Agreement. "Permitted Encumbrances" means (i) Liens for or arising from current taxes not yet due and payable; (ii) easements and other restrictions of record; (iii) matters set forth in the Title Commitment issued by the Title Company; (iv) matters disclosed on the Survey; and (v) other matters, encumbrances and defects approved by MPT in writing. "Permits" shall have the meaning set forth in Section 4.9 hereof. "Person" means an individual, a corporation, a limited liability company, a partnership, an unincorporated association, a joint venture, a Governmental Entity or another entity or group. "Personal Property" shall have the meaning set forth in Section 4.16 hereof. "Personal Property Leases" shall have the meaning set forth in Section 4.16 hereof. "Physician" means any physician rendering services, within, at or on the Hospital or its premises within the five (5) year period ending on the date of this Agreement. "Public Taking" shall have the meaning set forth in Section 4.16(e) hereof. "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. "Purchaser Damages" shall have the meaning set forth in Section 12.1(a) hereof. "Purchaser Parties" shall have the meaning set forth in the preamble to this Agreement. "Purchaser Indemnified Party" shall have the meaning set forth in Section 12.1(a). 6 "Purchaser's Indemnity Periods" shall have the meaning set forth in Section 12.1(b) hereof. "Real Property" shall have the meaning set forth in Section 2.1(a) hereof. "Search Reports" means reports of searches made of the uniform commercial code records of the county in which the Real Property is located, and of the office of the secretary of state of the state in which the Real Property is located and in the state in which the principal office of each Seller Party is located. "Seller Damages" shall have the meaning set forth in Section 12.2(a) hereof. "Seller Indemnified Parties" shall have the meaning set forth in Section 12.2(a) hereof. "Seller Indemnity Period" shall have the meaning set forth in Section 12.2(b) hereof. "Seller Instruments" shall have the meaning set forth in Section 4.2 hereof. "Seller Parties" shall have the meaning set forth in the preamble to this Agreement. "Seller Party Plan" shall have the meaning set forth in Section 4.22(f) hereof. "Service Provider" means any Person who has rendered or is rendering services to or on behalf of any of the Seller Parties. "Special Purpose Entity" means an entity which (i) exists solely for the purpose of owning and/or leasing all or any portion of the Real Property and conducting the operation of the Business, (ii) conducts business only in its own name, (iii) does not engage in any business other than the ownership and/or leasing all or any portion of the Real Property and the operation of the Business, (iv) does not hold, directly or indirectly, any ownership interest (legal or equitable) in any entity or any real or personal property other than the interest which it owns in the Real Property and the other assets incident to the operation of the Business, (v) does not have any debt other than as permitted by the Lease or arising in the ordinary course of the Business and does not guarantee or otherwise obligate itself with respect to the debts of any other Person other than as approved by MPT, (vi) has its own separate books, records, accounts, financial statements and tax returns (with no commingling of funds or assets), (vii) holds itself out as being a company separate and apart from any other entity, (viii) maintains all corporate formalities independent of any other entity. "Subsidiary" means, with respect to any Person, any other Person of or with respect to which Fifty Percent (50%) or more of the total voting power of the voting securities is beneficially owned by such Person. "Survey" means a current "as-built" ALTA survey, certified to ALTA requirements, prepared by an engineer or surveyor licensed in the state in which the Real Property is located acceptable to MPT in its sole discretion, which shall be prepared in accordance with the provisions set forth in Section 6.1 of this Agreement. 7 "Taxes" means any and all taxes, charges, fees, levies or other assessments, including, without limitation, any and all income, gross receipts, excise, real and personal property (including leaseholds and interests in leaseholds), sales, use, occupation, transfer, license, ad valorem, gains, profits, gift, minimum estimated, social security, unemployment, disability, premium, recapture, credit, payroll, withholding, severance, stamp, capital stock, value added leasing, franchise and other taxes or similar charges of any kind including any interest and penalties on or additions thereto or attributable to any failure to comply with any requirement regarding any Tax Return. "Tax Return" means any return, declaration, filing, report, claim for refund or information return or other statement relating to Taxes (whether filed with or submitted to, or required to be filed with or submitted to, any Governmental Entity), including any schedule or attachment thereto, and including any amendment or extension thereof. "Tax Structure" shall have the meaning set forth in Section 7.2(c) hereof. "Tax Treatment" shall have the meaning set forth in Section 7.2(c) hereof. "Tenant" means the lessees or tenants under the Tenant Leases, if any. "Tenant Leases" shall have the meaning set forth in Section 4.15(i) hereof. "Third Party Claim" shall have the meaning set forth in Section 12.3(a) hereof. "Title Commitment" means a current commitment issued by the Title Company to the Purchaser Parties pursuant to the terms of which the Title Company shall commit to issue the Title Policy to the Purchaser Parties in accordance with the provisions of this Agreement, and reflecting all matters which would be listed as exceptions to coverage on the Title Policy. "Title Company" means the national service office of a title insurance company licensed in the state in which the Real Property is located and selected by MPT in its sole discretion. "Title Policy" means a title insurance policy in form and substance satisfactory to MPT in its sole discretion. "Warranties" means all warranties, representations and guaranties with respect to any of the Assets, whether express or implied, which any Seller Party now holds or under which any Seller Party is the beneficiary. SECTION 1.2. INTERPRETATION; TERMS GENERALLY. The definitions set forth in Section 1.1 and elsewhere in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless otherwise indicated, the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "herein", "hereof" and "hereunder" and words of similar import shall be deemed to refer to this Agreement (including the Schedules and Exhibits) in its entirety and not to any part hereof, unless the context shall otherwise require. All references herein to Articles, Sections, Schedules and Exhibits shall be deemed to refer to Articles, Sections and Schedules of, and 8 Exhibits to, this Agreement, unless the context shall otherwise require. Unless the context shall otherwise require, any references to any agreement or other instrument or statute or regulation are to it as amended and supplemented from time to time (and, in the case of a statute or regulation, to any corresponding provisions of successor statutes or regulations). Any reference in this Agreement to a "day" or number of "days" that does not refer explicitly to a "Business Day" or "Business Days" shall be interpreted as a reference to a calendar day or number of calendar days. If any action or notice is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action or notice shall be deferred until, or may be taken or given on, the next Business Day. ARTICLE II PURCHASE AND SALE OF ASSETS, ASSUMPTION OF LIABILITIES SECTION 2.1. PURCHASE AND SALE OF ASSETS. Based upon the representations and warranties of the Seller Parties as set forth herein, and subject to the terms and conditions hereof, at the Closing, Prime (or, if Prime is not the owner of the applicable Asset, the appropriate Seller Party), in consideration for the payment of the Purchase Price in accordance with Section 3.1, shall grant, sell, assign, transfer, convey and deliver to the Acquisition Sub, and the Acquisition Sub shall purchase and acquire from Prime, free and clear of all Liens, other than Permitted Encumbrances, the following assets of Desert Valley Operator (collectively, the "Assets"): (a) those certain tracts of land consisting of approximately ______ (__) acres located in Victorville, California the legal descriptions of which are set forth on Exhibit B attached hereto (the "Land") and all Improvements located thereon (collectively the "Real Property"); (b) Intentionally Deleted; (c) to the extent assignable, all rights in all intangible property relating exclusively to the Real Property, including, but limited to, zoning rights, Permits (other than operating permits) and indemnification or similar rights and all Warranties affecting or inuring to the benefit of the Real Property or the owner thereof (including, without limitation, any indemnification or similar rights and Warranties related to the Real Property); (d) all of the Seller Parties', title and interest in and to site plans, surveys, soil and substrata studies, architectural drawings, plans and specifications, inspection reports, engineering and environmental plans and studies, title reports, floor plans, landscape plans and other plans relating to the Real Property and the Improvements; and (e) all of the Seller Parties' right, title and interest in and to all causes of action, claims and rights in litigation (or which could result in litigation against any party) pertaining or relating to the Real Property (including, without limitation, any causes of action, claims or rights in litigation or other rights related to or arising under any purchase contracts respecting the Real Property). SECTION 2.2. EXCLUDED LIABILITIES. Notwithstanding anything in this Agreement to the contrary, except as set forth on Schedule 2.2 (the "Assumed Liabilities") no Purchaser Party shall assume or agree to pay, satisfy, discharge or perform, or shall be deemed by virtue of the execution and delivery of this Agreement or any other document delivered at the Closing 9 pursuant to this Agreement, or as a result of the consummation of the transactions contemplated by this Agreement or such other document, to have assumed, or to have agreed to pay, satisfy, discharge or perform, or shall be liable for, any liability, obligation, contract or Indebtedness of any Seller Party or any other Person, whether primary or secondary, direct or indirect, including, without limitation, any liability or obligation relating to the ownership, use or operation of any of the Assets, the Hospital or the MOB prior to Closing, any liability or obligation arising out of or related to any breach, default, tort or similar act committed by any of the Seller Parties or for any failure of any of the Seller Parties to perform any covenant or obligation for or during any period prior to Closing (collectively, the "Excluded Liabilities"). SECTION 2.3. SPECIAL PURPOSE ENTITY. Seller Parties agree that the Desert Valley Operator shall be a Special Purpose Entity at all times during the term of the Lease. ARTICLE III PURCHASE PRICE SECTION 3.1. PURCHASE PRICE. Subject to obtaining the Appraisal in accordance with Section 8.2(m) hereof, the purchase price for the Assets shall be Twenty-Eight Million and No/100 Dollars ($28,000,000.00) (the "Purchase Price"). Subject to the terms and conditions hereof, at Closing, the Acquisition Sub shall pay the Purchase Price via transfer of immediately available federal funds to an account specified in writing by Desert Valley Parent not less than three (3) Business Days prior to the Closing Date. SECTION 3.2. TAXES, RENTALS, UTILITIES. The parties acknowledge that all utility charges and all real and personal property Taxes related to the Assets shall be the responsibility of the Desert Valley Operator pursuant to the terms of the Lease. SECTION 3.3. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among the Assets for purposes of Section 1060 of the Code as set forth on Schedule 3.3. The parties agree to use, and to not take any position which is inconsistent with, such allocation in the preparation and filing of any Tax Return (including Form 8594). ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER PARTIES With the understanding that the Purchaser Parties shall rely hereon, and as a material inducement to the Purchaser Parties to enter into this Agreement and the Lease, each Seller Party hereby jointly and severally represents, warrants and covenants to the Purchaser Parties as of the date hereof and as of the Closing Date as follows: SECTION 4.1. ORGANIZATION. Each Seller Party is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of their respective states of incorporation and is duly licensed in each jurisdiction in which the nature of the business conducted, or the assets owned, operated and/or leased, by such Seller Party requires or makes such qualification necessary. Desert Valley Operator is, and has at all times since its incorporation been, a Special Purpose Entity. Schedule 4.1 sets forth the ownership of each 10 Seller Party and, except as set forth therein, no other party has any equity interest in any Seller Party or any option, warrant or other right to acquire same. SECTION 4.2. AUTHORIZATION AND ENFORCEABILITY. Each Seller Party has the requisite corporate or limited liability company power and authority to conduct its business as it is now being conducted and as proposed to be conducted and to execute, deliver and carry out the terms of this Agreement, together with all documents and agreements necessary to give effect to the provisions of this Agreement, including the Lease, and to consummate the transactions contemplated hereby and thereby. All corporate or limited liability company actions required to be taken by each Seller Party (including, without limitation, all necessary actions by the board of directors and shareholders of such Seller Party) to authorize the execution, delivery and performance of this Agreement as well as all documents, agreements and instruments executed by such Seller Party which are necessary to give effect to this Agreement (collectively, the "Seller Party Instruments") and all transactions contemplated hereby and thereby, have been duly and properly taken or obtained in accordance and compliance with, as applicable, such Seller Party's Governing Documents. Each Seller Party has heretofore delivered to the Purchaser Parties true, correct and complete copies of such Seller Party's Governing Documents. No other action on the part of any Seller Party is necessary to authorize the execution, delivery and performance of this Agreement, the Seller Party Instruments and all transactions contemplated hereby and thereby. This Agreement, the Seller Party Instruments and all agreements to which any Seller Party will become a party hereunder, including the Lease, are and will constitute the valid and legally binding obligations of such Seller Party, and are and will be enforceable against such Seller Party in accordance with the respective terms hereof or thereof, except as enforceability may be restricted, limited or delayed by applicable bankruptcy, insolvency or other similar laws affecting creditors' rights generally and except as enforceability may be subject to and limited by general principles of equity (regardless of whether considered in a proceeding in equity or at law). SECTION 4.3. ABSENCE OF CONFLICTS. Each Seller Party's execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, will not, with or without the giving of notice and/or the passage of time: (i) violate or conflict with any provision of such Seller Party's Governing Documents; (ii) violate any provision of any Law to which such Seller Party is subject; (iii) violate or conflict with any judgment, order, writ or decree of any court applicable to such Seller Party; (iv) result in or cause the creation of a Lien on any of the Assets; or (v) except as disclosed on Schedule 4.3, result in the breach or termination of any provision of, or create rights of acceleration or constitute a default under, the terms of any indenture, mortgage, deed of trust, contract, agreement or other instrument to which such Seller Party is a party or by which such Seller Party or any of the assets is bound. SECTION 4.4. CONSENTS AND APPROVALS. Except as set forth on Schedule 4.4, no license, permit, qualification, order, consent, authorization, approval or waiver of, or registration, declaration or filing with, or notification to, any Governmental Entity or other Person is required to be made or obtained by or with respect to any Seller Party in connection with the execution, delivery and performance of this Agreement or the Seller Party Instruments by any Seller Party or the consummation of the transactions contemplated hereby or thereby. 11 SECTION 4.5. FINANCIAL STATEMENTS. Schedule 4.5 sets forth (i) the audited balance sheets of each applicable Seller Party for the fiscal years ended 2002 (other than Desert Valley Parent and Prime) and 2003 (other than Prime), (ii) the unaudited balance sheet of Desert Valley Parent and Prime for the fiscal year ended 2002 and the unaudited balance sheet of Prime for the fiscal year ended 2003, (iii) the unaudited balance sheet of Desert Valley Parent, Desert Valley Operator and Prime at December 31, 2004 and the unaudited balance sheet of Desert Valley Medical at November 30, 2004 (together with December 31, 2004, the "Balance Sheet Dates") (the balance sheets described in this subsection (iii), being herein referred to, collectively, as the "Balance Sheets"), (iv) the audited statement of income and cash flows of each applicable Seller Party for the fiscal years ended 2002 (other than Desert Valley Parent and Prime) and 2003 (other than Prime), (v) the unaudited income statement of Desert Valley Parent and Prime for the fiscal year ended 2002 and the unaudited income statement of Prime for the fiscal year ended 2003, and (iv) the unaudited statement of income of Desert Valley Parent, Desert Valley Operator and Prime for the twelve (12) months ended December 31, 2004 and the unaudited statement of income of Desert Valley Medical for the eleven (11) months ended November 30, 2004 (the financial statements described in this sentence, being herein referred to, collectively, as the "Financial Statements"). Except as set forth on Schedule 4.5, the Financial Statements have been prepared in accordance with GAAP, are based on the books, records and accounts of the Seller Parties and fairly present the financial condition and results of operations, cash flows and shareholders' equity of the Seller Parties as of the respective dates thereof and for the respective periods indicated therein, except (i) that the unaudited interim statements do not include complete note (including footnote) disclosure as required by GAAP; and (ii) that the unaudited interim statements are subject to normal, year-end adjustments which are not, and will not be, material in amount or effect, either individually or in the aggregate. SECTION 4.6. ACCOUNTS RECEIVABLE. The accounts receivable of each Seller Party include only accounts receivable arising from bona fide transactions in the conduct of the ordinary course of business of such Seller Party, are in all material respects true and genuine, represent legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms. 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 4.6, all such receivables are free of all security interests and encumbrances created by any Seller Party. Except as set forth on Schedule 4.6, no defense, counterclaim, offset or adjustment exists as to any such account receivable. SECTION 4.7. NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.7, no Seller Party has any material liability or obligation, whether absolute, accrued, contingent or otherwise, including any potential future liability arising out of acts or omissions which have already occurred, which is not fully and accurately reflected or reserved against in the Balance Sheets except for liabilities or obligations that may have arisen in the ordinary course of business of the Seller Parties, consistent with the past practice of the Seller Parties, since the Balance Sheet Date (none of which results 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) and no Seller Party has Knowledge of any fact, condition or circumstance which could form the basis of any such liability or obligation. 12 SECTION 4.8. ABSENCE OF CHANGES. Except as set forth on Schedule 4.8, since the Balance Sheet Date, each Seller Party has, as applicable: (a) conducted its business only in the ordinary course of business and consistently with its past practices; (b) not suffered any change, event or circumstance which has had, or could have, a Material Adverse Effect; (c) preserved its legal existence and retained its business organization intact; (d) maintained its relationships with all suppliers, trade creditors and trade debtors; (e) paid or satisfied all of its debts, liabilities or obligations as the same became due; (f) paid all compensation and other obligations to its employees when the same were due and payable; (g) timely made all applicable filings with Governmental Entities; (h) not mortgaged, pledged, subjected to Lien, charged, encumbered or granted a security interest in or to any of the Assets; (i) except as otherwise provided in this Agreement, not sold or transferred any of its assets except for sales of inventory in the ordinary course of business and consistently with its past practices; (j) not suffered any damage, destruction or loss (whether or not covered by insurance) affecting the Assets; (k) not cancelled any debts owing to it or otherwise granted or waived any right of substantial value; (l) not terminated or materially modified any contract, lease, agreement or arrangement with any payor, vendor or supplier or received notice of termination or become aware of any threat of termination with respect to any such contract, lease, agreement or arrangement; (m) not made any capital expenditure or commitment for the acquisition of assets in excess of Fifty Thousand Dollars ($50,000); (n) not made or suffered any change to its Governing Documents; (o) not made or received any loans or advances to or from any Person, other than renewals or extensions of existing indebtedness and uses of lines of credit; (p) maintained its books and records in accordance with GAAP, consistent with past practices; (q) not incurred, assumed or guaranteed any Indebtedness; 13 (r) not experienced any defections in its medical staff; or (s) not agreed or offered, whether in writing or otherwise, to take, and neither any Seller Party nor its board of directors (or by any Person or group of Persons possessing and/or exercising similar authority with respect to such Seller Party) or Equity Constituents have authorized the taking of, any action described in Sections 4.8(a) through 4.8(r) above. SECTION 4.9. LICENSES. Desert Valley Operator has all licenses, permits, certificates of need and other authorizations of Government Entities (the "Permits") from all applicable Governmental Entities necessary or proper in order to operate the Hospital and the MOB and to conduct the Business. Each Permit issued to and held by Desert Valley Operator is identified and described on Schedule 4.9, and true, correct and current copies of each such Permit have previously been delivered to the Purchaser Parties by the Seller Parties. Except as set forth on Schedule 4.9, Desert Valley Operator previously has complied and is currently complying with its obligations under each of the Permits and all such Permits are in full force and effect. No written notice from any authority in respect to the threatened, pending or possible revocation, termination, suspension or limitation of any of the Permits has been issued or given to any Seller Party and no Seller Party has any Knowledge of the proposed or threatened issuance of any such notice or of any grounds or basis therefor. SECTION 4.10. ACCREDITATION; MEDICARE AND MEDI-CAL; THIRD PARTY PAYORS. Desert Valley Operator is currently accredited by the American Osteopathic Association ("AOA") and has previously delivered to the Purchaser Parties true, correct and complete copies of the following documents (i) the most recent AOA accreditation survey reports for the Hospital and deficiency list and plan of correction, if any, and a list and description of events in the past three (3) years at the Hospital that constitute "Adverse Events" (as defined by AOA), if any, and any documentation that was created prepared and/or produced by or on behalf of any Seller Party to satisfy AOA requirements relating to addressing such Adverse Events; (ii) any state licensing survey reports with respect to the Hospital for the two (2) year period prior to the date hereof, as well as any statements of deficiencies and plans of correction in connection with such reports; (iii) the fire marshal's surveys for the past two (2) years and list of deficiencies, if any, for the Hospital; and (iv) the boiler inspection reports for the past two (2) years and list of deficiencies, if any, for the Hospital. Desert Valley Operator has taken all reasonable steps to correct all such deficiencies and a description of any uncorrected deficiency is set forth on Schedule 4.10. Except as set forth on Schedule 4.10 attached hereto, each Seller Party (other than Prime and Desert Valley Parent) participates without restriction under Title XVIII of the Social Security Act ("Medicare") and Title XIX of the Social Security Act ("Medi-Cal"), the Medicare and the Medi-Cal programs of the State of California and the TRICARE/CHAMPUS programs (collectively, the "Government Programs"). Desert Valley Operator has received Medicare or Medi-Cal reimbursement with respect to the Hospital and is eligible to receive payment without restriction under Medicare and Medi-Cal. Except as set forth on Schedule 4.10, the Hospital is in compliance with the conditions of participation for the Government Programs, has received all approvals or qualifications necessary for capital reimbursement and has been found by CMS to be in compliance with 42 C.F.R. Sections 489.20 and 489.24 and its medicare provider agreement will not be terminated for failure to so comply. Except as set forth on Schedule 4.10, there is no pending, nor, to the best of the Seller Parties' Knowledge, threatened, proceeding or investigation under the Government Programs involving the Hospital or any of the Assets. Desert Valley 14 Operator has previously delivered to the Purchaser Parties true, correct and complete copies of the most recent Medicare and Medi-Cal certification survey reports for the Hospital including any statements of deficiencies and plans of correction, and the corrective action plans related thereto. Desert Valley Operator has taken all reasonable steps to correct all such deficiencies and a description of any uncorrected deficiency is set forth on Schedule 4.10. With respect to the operation of the Hospital, except as set forth on Schedule 4.10, neither Desert Valley Operator nor any of its officers, directors or any of the Business Employees (as hereinafter defined), nor any Seller Party (or Equity Constituent thereof) or Service Provider (i) has been excluded, suspended or debarred from, or otherwise adjudicated, deemed or determined ineligible for, participation in any Government Program, including Medicare or Medi-Cal, (ii) has been convicted of a criminal offense related to conduct that would trigger an exclusion from any Government Program, (iii) committed any act or omission which could result in, or form the basis of, any of the actions described in clauses (i) or (ii) of this sentence; and (v) no Medicare funds will be used to make any payment for any items or services furnished by any excluded individual. Desert Valley Operator has timely filed, caused to be timely filed and, as to reports due after the Closing, shall timely file, all cost reports required by third party payors, including, but not limited to, Government Programs and other insurance carriers, and, except as disclosed on Schedule 4.10 all such reports are or will be complete and accurate when filed. Except as disclosed on Schedule 4.10, Desert Valley Operator is and has been in compliance with filing requirements with respect to cost reports of the Hospital, including appropriate allocation of expenses associated with any management or consulting services provided by the Seller Parties or any employees of the Seller Parties and such reports do not claim and the Hospital has not received, payment or reimbursement in excess of the amount provided or allowed by applicable law or any applicable agreement, except where excess reimbursement was noted on the cost report. True and correct copies of the cost reports to third parties for the Hospital for the three (3) most recent fiscal years with respect to which Desert Valley Operator received such cost reports have been made available to the Purchaser Parties. Except as disclosed on Schedule 4.10, no Seller Party has received any written notice of any dispute relating to the Hospital between any Seller Party and any Governmental Entity, including any fiscal intermediary or carrier, federal, state or local governmental body or entity, or the Administrator of the Center for Medicare and Medi-Cal Services, with respect to any Government Program cost reports or claims filed with respect to the Hospital, on or before the date of this Agreement. SECTION 4.11. HIPAA COMPLIANCE. Each Seller Party is in full compliance with the Standards for Privacy of Individually Identifiable Health Information and the Transaction and Code Set Standards which were promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). Schedule 4.11 includes, but is not limited in any manner whatsoever to, any privacy, security or transaction and code set standards compliance plan of each Seller Party in place or in development, and any plans, analyses or budgets relating to information systems, including but not limited to necessary purchases, upgrades or modifications to effect HIPAA compliance. SECTION 4.12. HEALTHCARE REGULATORY MATTERS. (a) No Seller Party, or, to the Knowledge of any Seller Party, any Physician, Service Provider or other Person rendering services (including directly or indirectly referring patients) to or at, or in any way affiliated with the Hospital (i) is a party to, or has received notice of, the 15 commencement of any investigation or debarment proceedings or any governmental investigation or action (including any civil investigative demand or subpoena) under 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 Ethics in Patient Referrals Act of 1989, as amended (Stark Law) (42 U.S.C. 1395nn), the Civil Money 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. 1347), Wire Fraud (18 U.S.C. 1343), Theft or Embezzlement (18 U.S.C. 669), False Statements (18 U.S.C. 1001), False Statements (18 U.S.C. 1035), and Patient Inducement Statute and equivalent state statutes or any rule or regulation promulgated by a Governmental Entity with respect to any of the foregoing (collectively, the "Healthcare Fraud Laws") affecting any Seller Party, the Hospital or the Business (and no grounds for any such proceeding, investigation or action exist); and (ii) is not in full compliance with all applicable Healthcare Fraud Laws. The terms and structure of the Tenant Leases currently comply and shall comply in all respects with all Healthcare Fraud Laws. (b) Except as set forth on Schedule 4.12, no Seller Party, or, to the Seller Parties' Knowledge, any Physician, Service Provider or other Person rendering services (including directly or indirectly referring patients) to or at, or in any way affiliated with, the Hospital, has ever been investigated, charged or implicated in any violation of any state or federal statute or regulation involving false, fraudulent or abusive practices relating to participation in state or federally sponsored reimbursement programs, including, but not limited to, false or fraudulent billing practices. No Seller Party, or, to the Seller Parties' Knowledge, any Physician, Service Provider or other Person rendering services (including directly or indirectly referring patients) to or at, or in any way affiliated with, the Hospital, has ever engaged in any of the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any applications for any benefit or payment under Medicare or Medi-Cal program; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment under Medicare or Medi-Cal program; (iii) failing to disclose knowledge of any event affecting the initial or continued right to any benefit or payment under Medicare or Medi-Cal program on its own behalf or on behalf of another, with intent to secure such payment or benefit fraudulently; (iv) knowingly and willfully soliciting, paying, or receiving any remuneration (including kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such remuneration (A) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medi-Cal, or (B) in return for purchasing, leasing or ordering or arranging for or recommending the purchasing, leasing or ordering of any good, facility, service, or item for which payment may be made in whole or in part by Medicare or Medi-Cal; (v) presenting or causing to be presented a claim for reimbursement for services that is for an item or service that was known or should have been known to be (A) not provided as claimed, or (B) false or fraudulent; or (vi) knowingly and willfully making or causing to be made or inducing or seeking to induce the making of any false statement or representation (or omitting to state a fact required to be stated therein or necessary to make the statements contained therein not misleading) of a material fact with respect to (A) a facility in order that the facility may qualify for Governmental Entity certification or (B) information to be provided under 42 USC Section 1320a-3. 16 SECTION 4.13. TAXES. Each Seller Party has filed or caused to be filed all Tax Returns of such Seller Party which have become due (taking into account valid extensions of time to file) prior to the date hereof. Such Tax Returns are accurate and complete in all material respects, and each Seller Party has paid or caused to be paid all Taxes for the periods covered thereby, whether or not shown to be due on such Tax Returns. There are (i) no outstanding Liens for any Taxes that have been filed by any Governmental Entity against the Assets or any other assets of any Seller Party used in the Business (other than for ad valorem taxes not yet due and payable), and (ii) no claims being asserted with respect to any Taxes relating to any Seller Party, the Assets or the Business for which any Purchaser Party could be held liable, and there is no basis for the assertion of any such claim. No Seller Party has made or agreed or offered to make, or revoked or agreed or offered to revoke, a Tax election with respect to or affecting the Assets at any time during the last two (2) years. Except as set forth on Schedule 4.13, no Seller Party is a party to any tax abatement agreement relating to the Assets. Except as disclosed with reasonable specificity on Schedule 4.13, there are no outstanding waivers or agreements extending the statute of limitations for any period with respect to any Tax to which the Assets or any Purchaser Party may be subject following the Closing. SECTION 4.14. GOOD TITLE TO ASSETS. Except as set forth on Schedule 4.14, each Seller Party has good, absolute and marketable title to, and unrestricted possession of, all of its assets (other than the Real Property, which is addressed in Section 4.15 below), free and clear of all Liens (other than Permitted Encumbrances) and any adverse Claims of third parties. SECTION 4.15. TITLE AND CONDITION OF THE REAL PROPERTY. (a) Schedule 2.1(a) sets forth a legal description of the Real Property. Except as set forth on Schedule 4.15, Prime is the sole and exclusive legal and equitable owner of all right, title and interest in the Real Property and at Closing will have and convey to the Acquisition Sub good and marketable title in fee simple to the Real Property, free and clear of any and all Liens, encumbrances, restrictions or easements of any kind whatsoever (other than Permitted Encumbrances). (b) The location, construction, occupancy, operation, use and sale of the Real Property (including the Improvements) do not violate any applicable law, statute, ordinance, rule, regulation, order or determination of any Governmental Entity or any restrictive covenant or deed restriction (recorded or otherwise) affecting the Real Property, including, without limitation, any applicable zoning or subdivision ordinance or building code, flood disaster law or health and environmental law or regulation. (c) With regard to the Real Property, except as set forth on Schedule 4.15(c), to the Knowledge of the Seller Parties, there are no (i) encroachments onto or from adjacent properties; (ii) violations of set-back, building or side lines; (iii) encroachments onto any easements or servitudes located on such Real Property; (iv) pending or, to the Knowledge of any Seller Party, threatened boundary line disputes; (v) portions of such Real Property located in a flood plain or in an area defined as a wetland under applicable state or federal law; (vi) cemeteries or gravesites located on the Real Property; or (vii) mine shafts under the Real Property or any other latent defects, such as sinkholes, regarding or affecting the Real Property. 17 (d) The existing water, sewer, gas and electricity lines, storm sewer and other utility systems are adequate to serve the utility needs of the Real Property. All of said utilities are installed and operating, and all installation and connection charges have been paid in full. (e) Except as set forth on Schedule 4.15(e), neither the whole nor any portion of the Real Property has been condemned, requisitioned or otherwise taken by any public authority (a "Public Taking"), and no notice of any Public Taking has been received by any Seller Party with regard to any of the Real Property. No Seller Party has any Knowledge of any Public Taking being threatened or contemplated. No Seller Party has any Knowledge of any public improvements which have been ordered to be made and/or which have not heretofore been assessed, and, to the Knowledge of the Seller Parties, there are no special, general or other assessments pending or threatened against or affecting any of the Real Property (except those expressly identified in the Title Commitment). (f) Except as set forth on Schedule 4.15(f), there are no Claims, actions, suits, proceedings or investigations pending or, to the Knowledge of any Seller Party, threatened, against or affecting all or any portion of the Real Property. (g) Permanent certificates of occupancy, all licenses, permits, certificates of need (if applicable), authorizations and approvals required by all Governmental Entities having jurisdiction, have been issued for the Improvements, and, as of the Closing, all of the same will be in full force and effect. The Improvements, as designed and constructed, comply with all statutes, restrictions, regulations and ordinances applicable thereto, including but not limited to the Americans with Disabilities Act and Section 504 of the Rehabilitation Act of 1973. No Seller Party either has in its possession or has Knowledge of any studies or reports which specify or suggest the presence of any defects in the design or construction of any of the Improvements. (h) No Seller Party has Knowledge of any fact or condition which would result in the termination of the current access from the Real Property to any presently existing public highways and/or roads adjoining or situated on the Real Property or to sewer or other utility services to serve the Real Property. (i) Schedule 4.15(i) attached hereto sets forth an accurate and complete list of all leases, subleases, commitment letters, letters of intent and other rental agreements, whether written or oral, now or hereafter in effect, if any, that grant or will grant a possessory interest in and to any space in the Real Property or that otherwise assign or convey rights with regard to the Real Property or the Improvements (collectively referred to as the "Tenant Leases"). Schedule 4.15(i) designates which of the Tenant Leases described therein are with the referral sources (as determined by any of the Healthcare Fraud Laws) of Desert Valley Operator or any other Seller Party. Schedule 4.15(i) specifies the rent and security deposit, if any, for each Tenant Lease. The Seller Parties have provided the Purchaser Parties with complete, correct and current copies of all Tenant Leases. The Seller Parties shall provide to the Purchaser Parties prior to Closing Tenant Lease estoppels in form satisfactory to the Purchaser Parties from all Tenants under the applicable Tenant Leases. Except for the Tenant Leases and any other items listed on Schedule 4.15(i), there are no purchase contracts, leases of space, options, rights of first refusal or other written or oral agreements of any kind whereby any person or entity will have acquired or will 18 have any basis to assert any right, title or interest in, or right to the possession, use, enjoyment or proceeds of, any part or all of the Real Property or the Improvements. (j) No Seller Party has accepted the payment of rent or other sums due under any of the Tenant Leases for more than one (1) month in advance. As of the Closing, none of the Tenant Leases and none of the rents or other charges payable thereunder, if any, will have been assigned, pledged or encumbered. Except as set forth on Schedule 4.15(j), as of the Closing, no brokerage or leasing commissions or other compensation will be due or payable to any Person with respect to, or on account of, the Lease or any Tenant Lease or any extensions or renewals thereof, if any, excepting those agreements entered into or accepted in writing by the Purchaser Parties. (k) All tenant improvements, repairs and other work and obligations, if any, then required to be performed by the landlord under each of the Tenant Leases will be fully performed and paid for in full on or prior to the Closing. (l) Except as set forth on Schedule 4.15(l): (i) the Tenant Leases are freely assignable by the Seller Parties to the Acquisition Sub, have not been modified, amended or assigned, are legally valid, binding and enforceable against the applicable Seller Parties (and, to the best of the Seller Parties' Knowledge, against the other parties to such Tenant Leases) in accordance with their respective terms and are in full force and effect; (ii) there are no monetary defaults and no material nonmonetary defaults by the applicable Seller Party or, to the best of the Seller Parties' Knowledge, any other party to the Tenant Leases; (iii) no Seller Party has received written notice of any default, offset, counterclaim or defense under any of the Tenant Leases; and (iv) 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 any Seller Party of the terms of any of the Tenant Leases. (m) The Real Property constitutes all the land and improvements used by Desert Valley Operator in connection with the operation of the Hospital and the MOB, it being understood that certain administrative activities relating to such operations are not conducted at the Real Property. SECTION 4.16. CONDITION OF PERSONAL PROPERTY. Schedule 4.16 sets forth a list of all equipment and other items of tangible personal property used by Desert Valley Operator in the operation of the Hospital and the MOB (the "Personal Property"). Except as set forth on Schedule 4.16, Desert Valley Operator has good, clear and indefeasible title to and ownership of all of the Personal Property, free and clear of all Liens, and may grant Acquisition Sub a first priority security interest in and to the Personal Property. Schedule 4.16 sets forth an accurate and complete list of all leases of personal property used in the operation of the Hospital (the "Personal Property Leases"). The Seller Parties have provided the Purchaser Parties with complete, correct and current copies of all of the Personal Property Leases. Except as set forth on Schedule 4.16: (i) Desert Valley Operator may grant a first priority security interest in the Personal Property Leases to the Acquisition Sub, (ii) the Personal Property Leases have not been modified, amended or assigned, are legally valid, binding and enforceable against Desert Valley Operator (and, to the Seller Parties' Knowledge, against the other parties to such Personal Property Leases) in accordance with their respective terms and are in full force and effect; (iii) there are no monetary defaults and no material nonmonetary defaults by Desert Valley Operator, 19 to the Seller Parties' Knowledge, any other party to the Personal Property Leases; (iv) no Seller Party has received notice of any default, offset, counterclaim or defense under any Personal Property Lease; and (v) 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 Desert Valley Operator of the terms of any Personal Property Lease. Except as set forth on Schedule 4.16, all personal property, whether owned by Desert Valley Operator or subject to any Personal Property Lease, is in good operating condition and repair, ordinary wear and tear excepted, and is located on the Real Property. SECTION 4.17. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on Schedule 4.17: (a) with respect to the ownership and operation of the Real Property and the Hospital, including any operations at or from any real property currently or formerly owned, used, leased, occupied or managed by any Seller Party, each Seller Party is and has at all times been, in compliance with all Environmental Laws; (b) no Governmental Entity or any nongovernmental third party has notified any Seller Party of any alleged violation or investigation of any suspected violation under the Environmental Laws in connection with the ownership, operation and/or leasing of the Real Property or the Hospital, including any litigation or cause of action alleging personal injury or property damage caused by exposure to, or the disposal, release or migration of, any Hazardous Materials; (c) with respect to the ownership, operation and/or leasing of the Real Property and the Hospital, no Seller Party has stored, disposed of or arranged for the disposal of any Hazardous Materials, except in compliance with the Environmental Laws; (d) there have been no actions nor, to the Knowledge of Seller Parties, any activities, circumstances, conditions, events or incidents, including, without limitation, the generation, transportation, treatment, storage, release, emission, discharge, presence or disposal of any Hazardous Materials on or from any of the Real Property or the Hospital that could form the basis of any claim under the Environmental Laws against any Seller Party or any Purchaser Party; (e) no Seller Party has, whether contractually or by operation of law (including any Environmental Law), assumed or succeeded to any liability of any direct or indirect predecessors or any other Person (including, without limitation, HCP) related or with respect to any Environmental Law; (f) there are no underground storage tanks located at, on or under the Real Property, and the Real Property does not contain any asbestos-containing building material; (g) there are no conditions presently existing on, at or emanating from the Real Property, that may result in any liability, investigation or clean-up cost under any Environmental Law; and (h) no Seller Party, nor to the Seller Parties' Knowledge any other Person, has installed, used, generated, manufactured, treated, handled, refined, produced, processed, stored or disposed of, any Hazardous Materials in, on or under the Real Property, except in compliance with the Environmental Laws. No Seller Party has undertaken any activity, and the Seller Parties have no 20 Knowledge that any other Person has undertaken any activity, on the Real Property which would cause (i) the Real Property to become a hazardous waste treatment, storage or disposal facility within the meaning of, or otherwise bring the Real Property within the ambit of, any Environmental Law, (ii) a release or threatened release of Hazardous Material from the Real Property within the meaning of, or otherwise bring the Real Property within the ambit of, any Environmental Law, or (iii) the discharge of Hazardous Material into any watercourse, body of, surface or subsurface water or wetland, or the discharge into the atmosphere of any Hazardous Material which would require a permit under any Environmental Law. No activity has been undertaken by any Seller Party with respect to the Real Property which would cause a violation or support a claim under any Environmental Law. No investigation, administrative order, litigation or settlement with respect to any Hazardous Material is in existence, or, to the Seller Parties' Knowledge, threatened with respect to the Real Property. No notice has been served on any Seller Party from any Governmental Entity claiming any violation of any Environmental Law, or requiring compliance with any Environmental Law, or demanding payment or contribution for environmental damage or injury to natural resources. No Seller Party has obtained or is required to obtain, and no Seller Party has any Knowledge of any reason Acquisition Sub will be required to obtain, any permits, licenses, or similar authorizations to occupy, operate or use the Improvements or any part of the Real Property by reason of any Environmental Law. SECTION 4.18. INSURANCE. Schedule 4.18 sets forth a complete and accurate list and brief description of all insurance policies currently held by any Seller Party with respect to the Real Property, the operation of the Hospital and the professional liability, negligence and other acts of the Physicians and the Service Providers, it being acknowledged that such insurance coverages are, at a minimum, those required by the terms of the Lease. All such Insurance policies are in full force and effect, all premiums due thereon have been paid in full and each Seller Party is in compliance with the terms of such Insurance Policies. SECTION 4.19. LITIGATION. There is no dispute, suit, action, proceeding, inquiry or investigation (a "Claim") against or involving any of the Seller Parties or any of their properties or rights, pending or, to the Knowledge of the Seller Parties, threatened (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) nor do the Seller Parties know of any facts which might result in any such Claim. There is no Claim pending, or, to the Seller Parties' Knowledge, threatened, against any Physician or Service Provider which could, by operation of law, through contract or otherwise, result in a Claim against any Seller Party, and no Seller Party has any Knowledge of any facts which could result in such a Claim. Except as set forth on Schedule 4.19, there is no judgment, decree, injunction, rule or order of any Governmental Entity or any other Person (including, without limitation, any arbitral tribunal) outstanding against any Seller Party and no Seller Party is not in violation of any term of any judgment, decree, injunction or order outstanding against it. Furthermore, there is no Claim by or before any Governmental Entity or other Person pending or, to the Knowledge of the Seller Parties, threatened, which questions or challenges the validity of this Agreement or any action taken or to be taken by any Seller Party pursuant to this Agreement or in connection with the transactions contemplated hereby, nor is there any basis for any such Claim. 21 SECTION 4.20. CONTRACTS, OBLIGATIONS AND COMMITMENTS. Schedule 4.20 sets forth a list of all contractual agreements, whether written or oral, relating to or affecting the Assets, the Hospital, the MOB and/or the operation of the Business to which any Seller Party is a party (the "Contracts"). The Seller Parties have provided to the Purchaser Parties complete and correct copies of all of the Contracts. Except as set forth on Schedule 4.20, (i) the Contracts are legally valid, binding and enforceable against the applicable Seller Party (and, to the Seller Parties' Knowledge, against the other parties thereto) in accordance with their respective terms and are in full force and effect; (ii) there are no defaults by any Seller Party, or to the Seller Parties' Knowledge, any other party to the Contracts; (iii) no Seller Party has received notice of any default, offset, counterclaim or defense under any Contract; and (iv) 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 any Seller Party of the terms of any Contract. SECTION 4.21. INTANGIBLE PROPERTY. A true and complete list of the trademarks, service marks, and other intangible assets of the Seller Parties used in the operation of the Business and the Hospital and the MOB is set forth on Schedule 4.21 (the "Intangible Property"). The Seller Parties own, or possess adequate, enforceable licenses or other rights to use, all of the Intangible Property, and no rights thereto have been granted to others by any Seller Party. Except as set forth on Schedule 4.21, all of the Intangible Property is owned or used by the Seller Parties' free and clear of all assignments, licenses, restrictions, encumbrances, charges or claims for infringement, and none is subject to any outstanding order, decree, judgment, stipulation or charge. There is no unauthorized use, disclosure, infringement or misappropriation of any of the Intangible Property by any third party. The Seller Parties' use of the Intangible Property does not infringe upon or otherwise violate the rights of others. No one has asserted to any Seller Party that the use of the Intangible Property by the Seller Parties infringes upon the patents, trade secrets, trade names, trademarks, service marks, copyrights or other intellectual property rights of any other Person and no Seller Party has any Knowledge of any fact or circumstance which could provide the basis for any such assertion. SECTION 4.22. EMPLOYEES AND EMPLOYEE RELATIONS. (a) Schedule 4.22(a) contains a current, correct and complete list of the names and current hourly wage, monthly salary and other compensation of all employees who are or who will provide services at the Hospital or the MOB (collectively, the "Business Employees"), together with a summary (containing estimates to the extent necessary) of the individual's existing bonuses, additional compensation and other benefits (whether current or deferred), if any, accrued, paid or payable to each such individual for services rendered or to be rendered through the fiscal period ending December 31, 2004. Except as set forth on Schedule 4.22(a), all of the Hospital Employees are "at will" employees. Except as set forth on Schedule 4.22(a), no Seller Party 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 Seller Parties have provided true, correct and current copies (or, if not written, accurate descriptions of the parties and terms) of such agreements to the Purchaser Parties. (b) Except as set forth on Schedule 4.22(b), no Business Employee is represented by any labor union, trade association or other employee organization, no demand for recognition has been made by any labor union with respect to the Business Employees, and there is not and has 22 not been any labor union organizing activity at the Hospital during the periods it has been operated by any Seller Party. Except as set forth on Schedule 4.22(b), no Seller Party is a party to any collective bargaining agreement or understanding with any labor union, trade association or other employee organization with respect to any Business Employee and no such agreements are currently being proposed and/or negotiated. (c) Except as set forth on Schedule 4.22(c), there is no labor dispute, work stoppage, strike, slowdown, walkout, lockout, or any other interruption or disruption of operations at the Hospital or the MOB as a result of labor disputes or disturbances with respect to the Business Employees and there is no investigation, grievance, arbitration, complaint, claim or other dispute or controversy (collectively, the "Labor Proceeding") pending or threatened, between any Seller Party and any present or former Business Employee, nor have any discharges or terminations of any former Business Employee occurred which would form the basis for any claim of discrimination against any Seller Party. Except as set forth on Schedule 4.22(c), no Seller Party has any Knowledge of any facts or past, current or contemplated event that could form the basis for any such Labor Proceeding, nor has there been any such Labor Proceeding within the past twelve (12) months. (d) Except as set forth on Schedule 4.22(d), no Seller Party has received any notice that any vice president, director or director-level employee, or higher, of any Seller Party or any group of Business Employees, has any plans to terminate his or her employment or affiliation with any Seller Party. (e) Each Seller Party has complied with and is currently in compliance with, and no Seller Party has received any notice of noncompliance with, any and all applicable laws relating to the employment of labor, 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. Each Seller Party has withheld all amounts required by law or agreement to be withheld from the wages or salaries of the Business Employees, and no Seller Party is liable for any arrears of any tax or penalties for failure to comply with the foregoing. (f) Schedule 4.22(f) sets forth each Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA) maintained by any Seller Party (each a "Seller Party Plan") and applicable to the Business Employees. The Seller Parties are in compliance in all material respects with all applicable laws and regulations respecting such Seller Party Plans. SECTION 4.23. COMPLIANCE WITH LAW. Each Seller Party (a) is in compliance in all material respects with every applicable law, rule, regulation, ordinance, license, permit and other governmental action and authority and every order, writ, and decree of every Governmental Entity in connection with the ownership, conduct, operation and maintenance of the Business and its ownership and use of its assets and no event has occurred or circumstance exists which (with notice or lapse of time) would result in any noncompliance with any such law, rule, regulation, ordinance, license permit, order, writ or decree; and (b) has timely made or given all filings and notices required to be made by such Seller Party with the regulatory agencies of any Governmental Entity. 23 SECTION 4.24. HILL-BURTON OBLIGATIONS. (a) Except as set forth on Schedule 4.24, neither any Seller Party, nor, to the Knowledge of the Seller Parties, any predecessor in interest of any Seller Party, has received any loans, grants or loan guarantees pursuant to the United States Hill-Burton Act (42 U.S.C. 291a, et seq.) program, the Health Professions Educational Assistance Act, the Nurse Training Act, the National Health Pharmacy and Resources Development Act or the Community Mental Health Centers Act. All of the obligations set forth on Schedule 4.24 have been fully satisfied. The transactions contemplated hereby will not result in any obligation of any Purchaser Party to repay any such loan, grant or loan guarantee or to provide uncompensated care in consideration thereof. (b) None of the Assets are subject to any liability in respect of amounts received by any Seller Party or others for the purchase or improvement of the Assets or any part thereof under restricted or conditioned grants or donations, including monies received under the Public Health Service Act, 42 U.S.C. Section 291, et seq. SECTION 4.25. MEDICAL STAFF MATTERS. Except as set forth on Schedule 4.25, there are no pending or, to the Knowledge of the Seller Parties, threatened investigations, appeals, challenges, disciplinary or corrective actions, or disputes involving applicants to the medical staff of the Hospital, current members of the medical staff of the Hospital or affiliated health professionals. Since the Balance Sheet Date, no member of the medical staff of the Hospital has resigned or been terminated therefrom and no Seller Party has received notice that any Physician or medical staff member intends to resign from its medical staff. For confidentiality purposes, all persons identified on Schedule 4.25 are identified by a hospital-assigned number rather than name. True and correct copies of Medical Staff Bylaws of the Hospital, the Hospital's Medical Staff Rules and Regulations, and the Hospital's Medical Staff Hearing Procedures, all as presently in effect, have been previously delivered by the Seller Parties to the Purchaser Parties. SECTION 4.26. BROKERS. No Person is or will be entitled to any brokerage, finder's or other fee, commission or payment in connection with or as a result of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any Seller Party. SECTION 4.27. RECORDS. True, complete and current copies of each Seller Party's Governing Documents have been delivered to the Purchaser Parties prior to the execution and delivery of this Agreement. The books of account, minute books, stock record books and other records of each Seller Party, all of which have been made available to the Purchaser Parties, are complete and correct. The minute books of each Seller Party contain records of all meetings and other corporate actions of the directors and shareholders of such Seller Party, and have been delivered to the Purchaser Parties prior to the execution and delivery of this Agreement. SECTION 4.28. REPRESENTATIONS COMPLETE. The representations and warranties made by the Seller Parties in this Agreement and the statements made in or information contained on any Schedules or certificates furnished by any Seller Party pursuant to this Agreement do not contain and will not contain, as of their respective dates and as of the Closing Date, any untrue statement of a material fact, nor do they omit or will they omit, as of their respective dates or as of the 24 Closing Date, to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading. ARTICLE V REPRESENTATIONS AND WARRANTIES BY THE PURCHASER PARTIES The Purchaser Parties hereby jointly and severally represent and warrant to the Seller Parties as of the date hereof, and as of the Closing Date as follows: SECTION 5.1. ORGANIZATION. MPT is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware. The Acquisition Sub is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and qualified to do business in the State of California. SECTION 5.2. AUTHORIZATION; ENFORCEMENT, ABSENCE OF CONFLICTS. Each Purchaser Party has the requisite power and authority to execute, deliver and carry out the terms of this Agreement, to consummate the transactions contemplated hereby and to conduct its businesses as now being conducted. All actions required to be taken by each to authorize the execution, delivery and performance of this Agreement, all documents executed by the Purchaser Parties which are necessary to give effect to this Agreement and all transactions contemplated hereby and thereby, have been duly and properly taken or obtained. No other action on the part of either Purchaser Party is necessary to authorize the execution, delivery and performance of this Agreement, all documents necessary to give effect to this Agreement and all transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not, with or without the giving of notice and/or the passage of time: (i) violate or conflict with any provision of the Governing Documents of either Purchaser Party; (ii) violate any provision of law, statute, rule or regulation to which either Purchaser Party is subject; (iii) violate or conflict with any judgment, order, writ or decree of any court applicable to either Purchaser Party; (iv) violate or conflict with any law or regulation applicable to either Purchaser Party; or (v) result in the breach or termination of any provision of, or create rights of acceleration or constitute a default under, the terms of any debt or obligation to which either Purchaser Party is a party or by which either Purchaser Party is bound. SECTION 5.3. BINDING AGREEMENT. This Agreement and all agreements to which any Purchaser Party will become a party hereunder is and will constitute the valid and legally binding obligations of such Purchaser Party, and are and will be enforceable against such Purchaser Party in accordance with the respective terms hereof or thereof, except as enforceability may be restricted, limited or delayed by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and except as enforceability may be subject to and limited by general principles of equity. SECTION 5.4. LITIGATION. There is no Claim pending or, to the Knowledge of the Purchaser Parties, threatened against or affecting any Purchaser Party that has or would reasonably be expected to have a material adverse effect on the ability of the Purchaser Parties to perform their respective obligations under this Agreement or any aspect of the transactions contemplated hereby. 25 SECTION 5.5. BROKERS. No Person is or will be entitled to any brokerage, finder's or other fee, commission or payment in connection with or as a result of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser Parties. SECTION 5.6. COMPLIANCE WITH LAW. The Purchaser Parties, where applicable (a) are in compliance with every applicable law, rule, regulation, ordinance, license, permit and other governmental action and authority and every order, writ, and decree of every Governmental Entity in connection with the ownership, conduct, operation and maintenance of their businesses, and their ownership and use of their assets, except where non-compliance would not prevent or impede the Purchaser Parties from consummating the transactions contemplated hereby or the ability of the Purchaser Parties to perform their respective obligations under this Agreement and, to the Knowledge of the Purchaser Parties, no event has occurred or circumstance exists which (without notice or lapse of time) would result in any noncompliance with any such law, rule, regulation, ordinance, license permit, order, writ or decree which would prevent or impede the Purchaser Parties from consummating the transactions contemplated hereby; and (b) have timely made or given all filings and notices required to be made by the Purchaser Parties with the regulatory agencies of any Governmental Entity, except where such failure would not prevent or impede the Purchaser Parties from consummating the transactions contemplated hereby. ARTICLE VI TITLE AND SURVEY SECTION 6.1. SURVEY. MPT shall cause to be prepared, at Seller Parties' expense, a current ALTA/ACSM Land Title Survey of the Real Property, prepared by a duly licensed land surveyor. The survey shall be currently dated, shall show the location on the Real Property of any improvements, fences, evidence of abandoned fences, ponds, creeks, streams, rivers, easements, roads, rights-of-way, means of ingress and egress, location of all utilities serving the Real Property, and encroachments, and shall contain a legal description of the boundaries of the Real Property by metes and bounds and the appropriate flood zone designation and the total number of acres constituting the Real Property. The surveyor shall certify to the Purchaser Parties and to the Title Company that the survey is correct and that there are no visible discrepancies, conflicts, encroachments, overlapping of improvements, fences, evidence of abandoned fences, ponds, creeks, streams, rivers, easements, roads or rights-of-way except as are shown on the survey plat. Any and all matters shown on such survey shall be legibly identified by appropriate volume and page recording references with dates of recording noted. If MPT shall disapprove such survey for any reason in MPT's sole discretion, MPT may either (i) treat such objection as a title objection and request that it be cured, or (ii) terminate this Agreement and the parties hereto shall have no further liability or obligations hereunder, expect as otherwise expressly set forth herein. If the Seller Parties are unable to cure any objection to the survey within ten (10) days following delivery of notice to Seller Parties thereof, then MPT may terminate this Agreement upon written notice to the Seller Parties. SECTION 6.2. TITLE INSURANCE. MPT will cause to be prepared, at Seller Parties' expense, a title commitment for the issuance of an ALTA Owner's Policy Form dated October 17, 1992, issued by a title insurance company acceptable to MPT and qualified to insure titles in the State of California (the "Title Company"), in the amount of the Purchase Price, covering title to the Real Property at a date not earlier than the date hereof and showing good and marketable title, subject 26 only to the Permitted Encumbrances. All of the standard exceptions within the policy and the exceptions for mechanic's and materialmen's liens and the survey exception shall be deleted. If MPT shall disapprove any items stated in the Title Commitment or the Exception Documents, MPT may either (i) treat such objection as a title objection and request that it be cured, or (ii) terminate this Agreement and, upon such termination, the parties hereto shall have no further liability or obligations hereunder, except as otherwise expressly provided herein. If the Seller Parties are unable to cure any exception or objection to title that is not a Permitted Encumbrance within ten (10) days following delivery of notice to the Seller Parties thereof, then MPT may terminate this Agreement upon written notice to Seller Parties. ARTICLE VII PRE-CLOSING COVENANTS From and after the execution and delivery of this Agreement to and including the Closing Date, the applicable party shall observe the following covenants: SECTION 7.1. NO SHOP. Neither any Seller Party nor any investment banker, attorney, accountant, representative or other Person retained by or on behalf of any Seller Party, shall directly or indirectly, initiate contact with, respond to, solicit or encourage any inquiries, proposals or offers by, or participate in any discussions or negotiations with, enter into any agreement with, disclose any information concerning any Seller Party or the Assets to, afford any access to the properties, books or records of any Seller Party to, or otherwise assist, facilitate or encourage, any Person in connection with any possible proposal regarding a sale, lease, transfer, disposition or other transaction related to or affecting all or any portion of the Assets (including all or any portion of the Real Property). The Seller Parties shall notify MPT immediately if any discussions or negotiations are sought to be initiated, any inquiry or proposal is made, or any such information is requested. SECTION 7.2. ACCESS; CONFIDENTIALITY. (a) Between the date hereof and the Closing, the Seller Parties shall (i) afford the Purchaser Parties and their authorized representatives full and complete access to Seller Parties' employees, (including the Business Employees) medical staff, and other agents and representatives and during normal working hours to all books, records, offices and other facilities of the Seller Parties, (ii) permit the Purchaser Parties to make such inspections and to make copies of such books and records as they may reasonably require and (iii) furnish the Purchaser Parties with such financial and operating data and other information related to the Hospital, the Business or the Seller Parties as the Purchaser Parties may from time to time reasonably request. The Purchaser Parties and their authorized representatives shall conduct all such inspections under the supervision of personnel of the Seller Parties in a manner that will minimize disruptions to the business and operations of the Seller Parties and in a manner as to maintain the confidentiality of this Agreement. (b) The Purchaser Parties and their authorized representatives (including their designated engineer, architects, surveyors and/or consultants) may, upon reasonable notice and at any time enter into and upon all or any portion of the Real Property in order to investigate and assess, as the Purchaser deem necessary or appropriate in their sole and absolute discretion, the condition 27 (including the structural and environmental condition) of the Assets. The Seller Parties shall cooperate with the Purchaser Parties and their authorized representatives in conducting such investigation, shall allow the Purchaser Parties and their authorized representatives full access to the Assets, together with full permission to conduct such investigation, and shall provide to the Purchaser Parties and their authorized representatives all information maintained by the Seller Parties and related to the condition of the Assets, including the Real Property, and all plans, soil or surface or ground water tests or reports, any environmental investigation results, reports or assessments previously or contemporaneously conducted or prepared by or on behalf of, or in the possession of or reasonably available to the Seller Parties or any of their engineers, consultants or agents and all other information relating to environmental matters in respect of their properties and businesses. (c) The provisions of that certain Confidentiality Agreement dated November 22, 2004 among the parties (the "Confidentiality Agreement") shall remain binding and in full force and effect until the Closing. Notwithstanding anything to the contrary contained herein or in the Confidentiality Agreement, the confidentiality obligations as they relate to the transactions contemplated by this Agreement shall not apply to the purported or claimed Federal income tax treatment of the transactions (the "Tax Treatment") or to any fact that may be relevant to understanding the purported or claimed Federal income tax treatment of the transactions (the "Tax Structure"), and each party hereto (and any employee, representative, or agent of any party hereto) may disclose to any and all persons, without limitation of any kind, the Tax Treatment and Tax Structure of the transactions contemplated by this Agreement and any materials of any kind (including any tax opinions or other tax analyses) that relate to the Tax Treatment or Tax Structure. In addition, each party hereto acknowledges that it has no proprietary or exclusive rights to any tax matter or tax idea related to the transactions contemplated by this Agreement. The preceding sentence is intended to ensure that the transactions contemplated by this Agreement shall not be treated as having been offered under conditions of confidentiality for purposes of the Confidentiality Regulations and shall be construed in a manner consistent with such purpose. The information contained herein, in the Schedules hereto or delivered to the Purchaser Parties or its authorized representatives pursuant hereto shall be subject to the Confidentiality Agreement as Information (as defined and subject to the exceptions contained therein) until the Closing and, for that purpose and to that extent, the terms of the Confidentiality Agreement are incorporated herein by reference. SECTION 7.3. SCHEDULE UPDATES. From the date hereof until the Closing Date, the Purchaser Parties, on the one hand, and the Seller Parties on the other hand, shall immediately advise the other in writing of any additions or changes to any Schedule to reflect any deficiencies or inaccuracies in such Schedule or to reflect circumstances or matters which occur after the date of this Agreement which, if existing prior to such date, would have been required to be described on such Schedule; provided, however, that no additions or changes made to any Schedule by any party to correct deficiencies or inaccuracies on such Schedule 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 other party, but provided further, however, that an addition or change made to any Schedule by any Party to reflect circumstances or matters which occur after the date of this Agreement shall be deemed to cure a breach or inaccuracy of a representation or warranty, covenant or agreement, but shall not be deemed to satisfy any condition unless agreed to in writing by the other party. 28 SECTION 7.4. CONDUCT OF BUSINESS BY THE SELLER PARTIES PENDING THE CLOSING. The Seller Parties covenant and agree that, during the period from the date hereof and continuing until the earlier of the termination of this Agreement or the Closing Date, unless the Purchaser Parties shall otherwise agree in writing, the Seller Parties shall conduct their businesses only in, and the Seller Parties shall not take any action except in, the ordinary course of business and in a manner consistent with past practice and in compliance in all material respects with all applicable laws and regulations, and that the Seller Parties shall use reasonable best efforts to preserve substantially intact the business organization of each Seller Party, to keep available the services of their current officers, employees and consultants and to preserve the present relationships of each Seller Party with patients, suppliers and other persons with which each Seller Parties have significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement or set forth on Schedule 7.4, no Seller Party shall, during the period from the date hereof and continuing until the earlier of the termination of this Agreement or the Closing Date, directly or indirectly do, or propose to do, any of the following without the prior written consent of MPT: (a) amend, repeal or otherwise change in any way its Governing Documents; (b) make or revoke any Tax election related to or affecting the Assets; (c) fail to perform its obligations in all respects under agreements relating to or respecting its assets, properties and rights; (d) reduce the coverage of, fail to timely renew or pay the premiums on or cancel any insurance policy; (e) cause to lapse or fail to renew any license and certification necessary to conduct its business; (f) fail to timely make all applicable filings with Governmental Entities; (g) create, assume or, other than those presently in existence, permit to exist any Lien upon any of the Assets; (h) purchase, sell, assign, lease or otherwise acquire, transfer or dispose of any material assets, except in the ordinary course of business and consistent with its past practice; (i) enter into or agree to enter into any agreement or arrangements granting any rights to purchase any of its assets, properties or rights, except for purchases of inventory in the ordinary course of business and consistent with its past practice; (j) engage in any business other than the Business; (k) terminate or modify any contract, lease or other agreement to which it is a party (excluding expiration or satisfaction in accordance with the terms of such contract or agreement); (l) waive any right of substantial value other than in exchange for reasonable consideration; or 29 (m) take, agree or offer, in writing or otherwise, to take, any of the actions described in Sections 7.4 (a) through (l) above, or any action which would make any of the representations or warranties of any Seller Party contained in this Agreement untrue, incorrect or incomplete or prevent any Seller Party from performing or cause any Seller Party not to perform its covenants hereunder, in each case, such that the conditions set forth in Sections 8.2(a) or 8.2(b), as the case may be, would not be satisfied. SECTION 7.5. COOPERATION. Subject to compliance with applicable law, from the date hereof until the Closing Date, (a) the Seller Parties shall confer on a regular and frequent basis with one or more representatives of the Purchaser Parties to report operational matters that are material and the general status of ongoing operations and (b) each of the Purchaser Parties and the Seller Parties shall promptly provide the other or their counsel with copies of all filings made by such party with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. SECTION 7.6. HCP PURCHASE. The parties acknowledge that the dispute between Seller Parties and HCP regarding, among other matters, the purchase price to be paid for the Real Property in connection with the exercise of the option under the HCP Lease (the "Dispute") has now been settled. Seller parties shall keep Purchaser Parties apprised, promptly following the occurrence of same, of all developments with respect to the Dispute and the settlement thereof. SECTION 7.7. REGULATORY AND OTHER AUTHORIZATIONS, NOTICES AND CONSENTS. (a) Each party hereto shall use all commercially reasonable efforts to obtain all authorizations, consents, orders and approvals of all Governmental Entities and officials that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and each such party will cooperate fully with the other parties hereto in promptly seeking to obtain all such authorizations, consents, orders and approvals. (b) The Seller Parties shall give promptly such notices to third parties and use its commercially reasonable efforts to obtain such third party consents and estoppel certificates as MPT may in its sole and absolute discretion deem necessary or desirable in connection with the transactions contemplated by this Agreement, including, without limitation, all third party consents that are necessary or desirable in connection with the transfer of the Assumed Contracts. (c) The Purchaser Parties shall cooperate and use commercially reasonable efforts to assist the Seller Parties in giving such notices and obtaining such consents and estoppel certificates; provided, however, that the Purchaser Parties shall have no obligation to give any guarantee or other consideration of any nature in connection with any such notice, consent or estoppel certificate or to consent to any change in the terms of any Assumed Contract which MPT in its sole and absolute discretion may deem adverse to the interests of the Purchaser Parties. (d) Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Assumed Contract listed on Schedule 7.7(d) if an attempted assignment thereof, without the consent of the other party thereto, would constitute a breach or other contravention thereof, noncompliance by any Seller Party or its affiliates 30 thereunder or in any way adversely affect the rights of any Purchaser Party thereunder. The Seller Parties and the Purchaser Parties agree that, in the event any consent, approval or authorization necessary or desirable to preserve for the Purchaser Parties any right or benefit under any such Assumed Contract is not obtained prior to the Closing, the Seller Parties will, subsequent to the Closing, cooperate with the Purchaser Parties in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, the Seller Parties will use commercially reasonable efforts to provide the Purchaser Parties with the rights and benefits of such affected Assumed Contract for the term of such Assumed Contract, and, if the Seller Parties provide such rights and benefits, the Purchaser Parties shall assume the obligations and burdens thereunder in accordance with this Agreement, including, subcontracting, sublicensing, or subleasing to the Purchaser Parties, or under which the Seller Parties would enforce for the benefit of the Purchaser Parties, with the Purchaser Parties assuming the applicable Seller Party's obligations, any and all rights of the applicable Seller Party against a third party thereto. SECTION 7.8. MUTUAL COVENANTS. The parties shall use their good faith reasonable efforts to satisfy the conditions to the closing of the transactions contemplated hereby. Without limiting the generality of the foregoing, the respective parties shall execute and/or deliver, or use their respective good faith reasonable efforts to cause to be executed and/or delivered, the documents contemplated to be executed and/or delivered by them at Closing. SECTION 7.9. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, the parties agree to consult with each other before any party hereto or any of their respective affiliates issues any press release or makes any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue, or permit to be issued, any such press release or make, or permit to be made, any such public statement prior to such consultation. ARTICLE VIII CLOSING CONDITIONS SECTION 8.1. CONDITIONS TO THE OBLIGATIONS OF THE SELLER PARTIES. The obligations of the Seller Parties to effect the transactions contemplated hereby shall be further subject to the fulfillment of the following conditions, any one or more of which may be waived by the Seller Parties: (a) All of the representations and warranties of Purchaser Parties set forth in this Agreement shall be true and correct when made and as of the Closing Date as if made on the Closing Date. (b) The Purchaser Parties shall have delivered, performed, observed and complied in all material respects with all of the items, instruments, documents, covenants, agreements and conditions required by this Agreement to be delivered, performed, observed and complied with by them prior to, or as of, the Closing. (c) The Purchaser Parties shall have executed, where applicable, and delivered to the Seller Parties the documents referenced in Section 9.3 hereof. 31 SECTION 8.2. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER PARTIES. The obligations of the Purchaser Parties to effect the transactions contemplated hereby shall be further subject to the fulfillment of the following conditions, any one or more of which may be waived by the Purchaser Parties: (a) All of the representations and warranties of Seller Parties set forth in this Agreement shall be true and correct when made and as of the Closing Date as if made on the Closing Date. (b) The Seller Parties shall have delivered, performed, observed and complied with all of the items, instruments, documents, covenants, agreements and conditions required by this Agreement to be delivered, performed, observed and complied with by them prior to, or as of, the Closing. (c) No Seller Party shall have suffered any change, event or circumstance which has had, or could have, a Material Adverse Effect. (d) The Purchaser Parties shall have satisfactorily completed their due diligence investigations of the Assets and shall be satisfied with the results of such investigations. (e) All necessary approvals, consents, estoppel certificates and the like of third parties to the validity and effectiveness of the transactions contemplated hereby have been obtained. (f) No portion of the Assets shall have been damaged or destroyed by fire or casualty. (g) No condemnation, eminent domain or similar proceedings shall have been commenced or threatened with respect to any portion of the Assets. (h) The Purchaser Parties shall have received copies of all permits, licenses and other approvals of governmental authorities required for the operation of the Assets for their intended uses and written evidence satisfactory to the Purchaser Parties that the operation and use of the Hospital and the MOB are in accordance with all applicable governmental requirements. (i) The Purchaser Parties shall have received evidence that the Seller Parties are maintaining insurance on the Assets and that the Purchaser Parties are named as additional insureds and, where applicable, loss payees. (j) The Seller Parties shall have executed where applicable, and delivered to Purchaser Parties the documents referenced in Section 9.2 hereof. (k) There shall not have been instituted by any creditor of any Seller Party, any Governmental Entity or any other third party, any suit, action or proceeding which would affect the Assets or seek to restrain, enjoin or invalidate the transactions contemplated by this Agreement. (l) Prime shall have purchased and acquired the Real Property pursuant to the terms and conditions of the HCP Lease. 32 (m) The Appraisal shall have been delivered and shall reflect an Appraised Value that equals or exceeds the Purchase Price. ARTICLE IX CLOSING SECTION 9.1. CLOSING DATE. The closing of the purchase and sale of the Assets pursuant hereto (the "Closing") shall be handled through deliveries by mail into escrow on February 24, 2005 (the actual date of closing being herein referred to as the "Closing Date"), or on such other date (the "Closing Date") and such other place as the parties hereto shall mutually agree. SECTION 9.2. SELLER PARTIES' CLOSING DATE DELIVERABLES. On the Closing Date, the Seller Parties shall deliver to the Purchaser Parties the documents listed below. (a) Duly executed bills of sale and assignments transferring all Assets other than the Real Property in form and substance satisfactory to MPT; (b) A duly executed general warranty deed in substantially the form as Exhibit 9.2(b) (the "Deeds") conveying the Real Property to the Acquisition Sub; (c) A certified copy of the resolutions of the governing body of each Seller Party dated as of the date hereof and authorizing such Seller Party's execution, delivery and performance of this Agreement and all other documents to be executed in connection herewith; (d) Certificates of existence and good standing of each Seller Party from the secretary of state of such Seller Party's state of incorporation or organization, dated the most recent practical date prior to the Closing Date; (e) Certificates of good standing and foreign qualification of each Seller Party from the secretary of state of the State of California dated the most recent practical date prior to the Closing Date; (f) The Title Commitment and Title Policy in form and substance satisfactory to MPT; (g) A Survey dated the most recent practical date prior to the Closing Date in form and substance satisfactory to MPT; (h) A Phase I Environmental Site Assessment Report dated the most recent practical date prior to the Closing Date in form and substance satisfactory to MPT (and a Phase II if recommended by the Phase I Report); (i) Property condition and seismic reports for the Real Property, dated the most recent practical date prior to the Closing Date and in form and substance satisfactory to MPT; (j) A Zoning Compliance Letter/Certificate dated the most recent practical date prior to the Closing Date in form and substance satisfactory to MPT; (k) Tenant Estoppel Certificates in form and substance satisfactory to MPT; 33 (l) Owner's Affidavits in form and substance satisfactory to MPT; (m) The Search Reports dated the most recent practical date prior to the Closing Date in form and substance satisfactory to MPT; (n) A Non-Foreign Affidavit in form and substance satisfactory to MPT; (o) The Lease, together with a Memorandum of Lease Agreement in form and substance satisfactory to MPT; (p) A Lease Guaranty Agreement substantially in the form of Exhibit 9.2(p) (q) The Assignment of Rents and Leases in substantially the form attached hereto as Exhibit 9.2(q); (r) The Security Agreement in substantially the form attached hereto as Exhibit 9.2(r); (s) The Amendments to the Tenant Leases in form and substance satisfactory to MPT. (t) The legal opinion of Robert L. B. Diener as counsel for the Seller Parties, substantially in the form attached hereto as Exhibit 9.2(t); (u) At the Closing, each Seller Party shall have furnished to the Purchaser Parties a certificate dated the Closing Date signed by such Seller Party to the effect that all of the representations and warranties of each Seller Party contained in the Agreement (considered collectively) and each of these representations and warranties (considered individually) remain in all respects true and correct as of the Closing Date as if made on such date and that such Seller Party has performed and satisfied in all material respects all covenants and conditions required by this Agreement to be performed or satisfied by such Seller Party on or prior to Closing; (v) All necessary approvals, consents, estoppel certificates and the like of third parties or Governmental Entities to the validity and effectiveness of the transactions contemplated hereby; (w) The Noncompete Agreements substantially in the form attached as Exhibit 9.2(w); (x) The Expansion Commitment Letter in the form attached hereto as Exhibit 9.2(x) (the "Expansion Commitment Letter"); and (y) Such other instruments and documents as the Purchaser Parties reasonably deem necessary to effect the transactions contemplated hereby. SECTION 9.3. PURCHASER PARTIES' CLOSING DATE DELIVERABLES. On the Closing Date, the Purchaser Parties shall deliver to the Seller Parties the documents listed below. (a) A certified copy of the resolutions of the governing body of each Purchaser Party dated as of the date hereof authorizing the execution, delivery and performance of this Agreement and all other documents to be executed in connection herewith; 34 (b) Certificates of existence and good standing of each Purchaser Party from the Delaware Secretary of State of the State of Delaware, dated the most recent practical date prior to the Closing Date; (c) Certificates of good standing and foreign qualification of the Acquisition Sub from the secretary of state of the State of California, dated the most recent practical date prior to the Closing Date; (d) The Lease, together with a Memorandum of Lease in form and substance satisfactory to MPT; (e) The Assignment of Rents and Leases in substantially the form attached hereto as Exhibit 9.2(q); (f) An Opinion of Baker Donelson, Bearman, Caldwell & Berkowitz, P.C., as counsel for the Purchaser Parties substantially in the form attached as Exhibit 9.3(f); (g) At the Closing, each Purchaser Party shall have furnished to the Seller Parties a certificate dated the Closing Date signed by such Purchaser Party to the effect that all of the representations and warranties of such Purchaser Party contained in the Agreement (considered collectively) and each of these representations and warranties (considered individually) remain in all respects true and correct as of the Closing Date as if made on such date and that such Purchaser Party has performed and satisfied in all material respects all covenants and conditions required by this Agreement to be performed or satisfied by such Purchaser on or prior to Closing; (h) The Expansion Commitment Letter; (i) Any bills of sale and assignments requiring the signature of any Purchaser Party; (j) The Security Agreement in substantially the form attached hereto as Exhibit 9.2(r); and (k) The Noncompete Agreements substantially in the form attached as Exhibit 9.2(w). ARTICLE X TERMINATION SECTION 10.1. TERMINATION. Notwithstanding anything to the contrary in this Agreement, the remaining obligations of the parties hereunder may be terminated and the transactions contemplated hereby abandoned at any time prior to Closing: (i) by mutual written consent of the parties; (ii) by the Seller Parties if the conditions set forth in Section 8.1 shall not have been satisfied on or before March 31, 2004; or (iii) by the Purchaser Parties if the conditions set forth in Section 8.2 shall not have been satisfied on or before March 31, 2004. SECTION 10.2. NOTICE AND EFFECT. In the event of the termination of this Agreement pursuant to this Article X, the party terminating this Agreement shall give prompt written notice thereof to the parties, and the transactions contemplated hereby shall be abandoned, without further action by any party. Each filing, application and other submission relating to the transactions contemplated hereby shall, to the extent practicable, be withdrawn from the person to which it 35 was made. The confidentiality provisions set forth in Article VII of this Agreement shall survive any termination of this Agreement. Notwithstanding any statement contained in this Agreement to the contrary, termination of this Agreement shall not relieve any party from liability for any breach or violation of this Agreement that arose prior to such termination. ARTICLE XI CERTAIN POST-CLOSING COVENANTS SECTION 11.1. POST-CLOSING ACCESS TO INFORMATION. The Parties acknowledge that, subsequent to Closing, each may need access to the Assets and to information, documents or computer data in the control or possession of the other for purposes of concluding the transactions contemplated herein and for audits, investigations, compliance with governmental requirements, regulations and requests, the prosecution or defense of third party claims. Accordingly, the Parties agree that they will make available to the other and their agents, independent auditors and/or governmental entities such documents and information as may be available relating to the Assets and the Hospital and will permit the other to make copies of such documents and information at the requesting party's expense. SECTION 11.2. PREM REDDY EMPLOYMENT AGREEMENT. So long as the Lease remains in effect, the term of the Employment Agreement dated January 1, 2005 between Desert Valley Operator and Prem Reddy, M.D. shall not be reduced or any other material modification made thereto without the prior written consent of MPT. ARTICLE XII INDEMNIFICATION SECTION 12.1. SELLER PARTIES AGREEMENT TO INDEMNIFY. (a) Subject to the limitations set forth in this Article, the Seller Parties jointly and severally agree to indemnify, defend and hold harmless the Purchaser Parties, their affiliates and their respective officers, directors, members, (general and limited) partners, shareholders, employees, agents and representatives (collectively, the "Purchaser Indemnified Parties") from and against all demands, claims, actions, losses, damages, liabilities, penalties, Taxes, costs and expenses (including, without limitation, attorneys' and accountants' fees, settlement costs, arbitration costs and any reasonable other expenses for investigating or defending any action or threatened action) asserted against or incurred by the Purchaser Indemnified Parties or any of them arising out of or in connection with or resulting from (i) any breach of, misrepresentation associated with or failure to perform under any covenant, representation, warranty or agreement under this Agreement or the other agreements contemplated hereby on the part of any Seller Party; or (ii) any Excluded Liabilities (including Taxes arising prior to Closing and any Purchaser Damages arising out of or relating to the Seller Parties' purchase of the Real Estate from HCP) (collectively, "Purchaser Damages"). (b) The indemnification of the Purchaser Indemnified Parties by the Seller Parties provided for under this Article XII shall be limited in certain respects as follows: (i) the right of the Purchaser Indemnified Parties to seek indemnification under this Section 12.1 shall terminate on the third anniversary of Closing (the "Purchaser's Indemnity Periods"), except that the Purchaser' 36 Indemnity Period shall terminate on the fifth anniversary of the Closing Date for claims under Sections 4.15 and 4.17 and (ii) the Seller shall not be required to indemnify the Purchaser Indemnified Parties for indemnification claims under this Section 12.1 unless and until the aggregate amount of all losses resulting in Purchaser' Damages exceeds One Hundred Thousand and No/100 Dollars ($100,000.00) (the "Minimum Aggregate Liability Amount") in which event the foregoing indemnification obligation shall apply to the aggregate amount of Purchaser Damages that exceeds One Hundred Thousand and No/100 Dollars ($100,000.00); provided, however, that the maximum liability of the Seller Parties under this Agreement shall be an amount equal to the Purchase Price. The foregoing limitations on time and amount shall not apply to any Purchaser Damages arising or resulting from (i) any act or omission of any Seller Party which constitutes fraud, (ii) any breach by any Seller Party of its post-closing covenants; or (iii) the Excluded Liabilities. SECTION 12.2. THE PURCHASER PARTIES' AGREEMENT TO INDEMNIFY. (a) Subject to the limitations set forth in this Article, the Purchaser Parties jointly and severally agree to indemnify, defend and hold harmless the Seller Parties, its and representatives (collectively, the "Seller Indemnified Parties") from and against all demands, claims, actions, losses, damages, liabilities, penalties, Taxes, costs and expenses (including, without limitation, reasonable attorneys' fees, settlement costs, arbitration costs and any reasonable other expenses for investigating or defending any action or threatened action) asserted against or incurred by any of the Seller Indemnified Parties or any of them arising out of or in connection with or resulting from (i) any breach of, misrepresentation associated with or failure to perform under any covenant, representation, warranty or agreement under this Agreement or the other agreements contemplated hereby on the part of any Purchaser Party; or (ii) the use, ownership or operation of any of the Assets after Closing (collectively, "Seller Damages"). (b) The indemnification of the Seller Indemnified Parties by the Purchaser Parties provided for under this Article XII shall be limited in certain respects as follows: (i) the right of the Seller Indemnified Parties to seek indemnification under this Section 12.2 shall terminate on the first anniversary of Closing (the "Seller Indemnity Period"), and (ii) the Purchaser Parties shall not be required to indemnify the Seller Indemnified Parties for indemnification claims under this Section 12.2 unless and until the amount of all losses resulting in Seller Damages exceeds One Hundred Thousand and No/100 Dollars ($100,000.00) in which event the foregoing indemnification obligation shall apply to the aggregate amount of Seller Damages that exceeds One Hundred Thousand and No/100 Dollars ($100,000.00); provided, however, that the maximum liability of the Purchaser Parties under this Agreement shall be an amount equal to the Purchase Price. The foregoing limitation on time and amount shall not apply to any Seller Damages arising or resulting from any act or omission of any Purchaser Party which constitutes fraud, any breach by any Purchaser Party of its post-closing covenants. SECTION 12.3. NOTIFICATION AND DEFENSE OF CLAIMS. (a) A party entitled to be indemnified pursuant to Section 12.1 or Section 12.2 (the "Indemnified Party") shall notify the party liable for such indemnification (the "Indemnifying Party") in writing of any claim or demand which the Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement, as soon as possible after 37 the Indemnified Party becomes aware of such claim or demand; provided, that the Indemnified Party's failure to give such notice to the Indemnifying Party in a timely fashion shall not result in the loss of the Indemnified Party's rights with respect thereto except to the extent the Indemnified Party is materially prejudiced by the delay. If the Indemnified Party shall notify the Indemnifying Party of any claim or demand pursuant to the provisions hereof, and if such claim or demand relates to a claim or demand asserted by a third party against the Indemnified Party (a "Third Party Claim"), the Indemnifying Party shall have the obligation either (i) to pay such claim or demand, or (ii) defend any such Third Party Claim with counsel reasonably satisfactory to the Indemnified Party. After the Indemnifying Party has assumed the defense of such Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party under this Section 12 for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation, provided that the Indemnified Party shall have the right to employ counsel, at the Indemnifying Party's expense, to represent it if (A) in the Indemnified Party's reasonable opinion the Indemnifying Party is not diligently prosecuting the defense of such Third Party Claim, (B) such Third Party Claim involves remedies other than monetary damages and such remedies, in the Indemnified Party's reasonable judgment, could have a material adverse effect on such Indemnified Party, (C) the Indemnified Party may have available to it one or more defenses or counterclaims that are inconsistent with one or more defenses or counterclaims that may be alleged by the Indemnifying Party, or (D) the Indemnified Party believes in its reasonable discretion that a conflict of interest exists between the Indemnifying Party and the Indemnified Party with respect to such Third-Party Claim or action, and in any such event the reasonable fees and expenses of such separate counsel for the Indemnified Party shall be paid by the Indemnifying Party. The Indemnified Party shall make available to the Indemnifying Party or its agents all records and other materials in the Indemnified Party's possession reasonably required by it for its use in contesting any Third-Party Claim or demand. (b) No Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the Indemnifying Party, unless (i) the Indemnifying Party fails to assume and diligently prosecuting the defense of such claim or (ii) such settlement, compromise or consent includes an unconditional release of the Indemnifying Party from all liability arising out of such claim and does not contain any equitable order, judgment or term which includes any admission of wrongdoing or could result in any liability (including regulatory liability) of the Indemnifying Party or which would otherwise in any manner affect, restrain or interfere with the business of the Indemnifying Party or any Affiliate of the Indemnifying Party. An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim and does not contain any equitable order, judgment or term which includes any admission of wrongdoing or could result in any liability (including regulatory liability) of the Indemnified Party or which would otherwise in any manner affect, restrain or interfere with the business of the Indemnified Party or any of the Indemnified Party's Affiliates. 38 SECTION 12.4. INVESTIGATIONS. The right to indemnification based upon breaches or inaccuracies of representations, warranties and covenants will not be affected by any investigation conducted with respect to, or knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, whether as a result of disclosure by a party pursuant to this Agreement or otherwise, with respect to the accuracy or inaccuracy of or compliance with any such representation, warranty or covenant. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant, will not affect a party's right to indemnification, payment of damages or other remedies based on such representations, warranties and covenants. SECTION 12.5. TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnification payments made pursuant to this Article XII shall be treated by the parties for income Tax purposes as adjustments to the Purchase Price, unless otherwise required by applicable Law. SECTION 12.6. EXCLUSIVE REMEDY. FROM AND AFTER THE APPLICABLE CLOSING, THE PARTIES AGREE AND ACKNOWLEDGE THAT THE INDEMNIFICATION RIGHTS PROVIDED IN THIS ARTICLE XII SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF THE PARTIES TO THIS AGREEMENT FOR BREACHES OF THIS AGREEMENT AND FOR ALL DISPUTES ARISING UNDER OR RELATING TO THIS AGREEMENT AND ANY ADDITIONAL AGREEMENTS OR DOCUMENTS EXECUTED OR DELIVERED IN OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT FOR POST-CLOSING COVENANTS, CASES WHERE SPECIFIC PERFORMANCE IS AVAILABLE AS A REMEDY AND EXCEPT IN CASES OF FRAUD. ARTICLE XIII DISPUTE RESOLUTION SECTION 13.1. GOVERNING LAW, JURISDICTION AND VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN JEFFERSON COUNTY, THE CITY OF BIRMINGHAM, STATE OF ALABAMA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO, THIS AGREEMENT. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY REGISTERED MAIL ADDRESSED TO A PARTY AT THE ADDRESS DESIGNATED PURSUANT TO SECTION 14.2 OF THIS AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS AGAINST SUCH PARTY FOR ANY ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT. A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT MAY BE ENFORCED IN 39 ANY OTHER COURT TO WHOSE JURISDICTION ANY OF THE PARTIES IS OR MAY BE SUBJECT. ARTICLE XIV MISCELLANEOUS SECTION 14.1. ASSIGNMENT. This Agreement is not assignable by any party without the prior written consent of the other party hereto. Notwithstanding the foregoing, the Purchasing Parties may at any time and without the consent of any Seller Party assign all of their respective rights and obligations hereunder to one or more of its Affiliates; provided, however, that no such assignment shall relieve or release such Purchaser Parties from their obligations hereunder. SECTION 14.2. NOTICE. All notices, demands, requests and other communications or documents required or permitted to be provided under this Agreement shall duly be in writing and shall be given to the applicable party at its address or facsimile number set forth below or such other address or facsimile number as the party may later specify for that purpose by notice to the other party: If to any Seller Party: Desert Valley Health System, Inc. 16850 Bear Valley Road Victorville, California 93292 Attention: Lex Reddy With a copy to: Desert Valley Health System, Inc. 16850 Bear Valley Road Victorville, California 93292 Attention: Richard Hayes, Esq. If to any Purchaser Party c/o Medical Properties Trust, Inc. 1000 Urban Center Drive, Suite 501 Birmingham, AL 35242 Attention: Edward K. Aldag, Jr. With a copy to: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC 420 20th Street North, Suite 1600 Birmingham, Alabama 35203 Attention: Thomas O. Kolb, Esq. Each notice shall, for all purposes, be deemed given and received: (i) if by hand, when delivered; (ii) if given by nationally recognized and reputable overnight delivery service, the Business Day on which the notice is actually received by the party; or (iii) if given by certified mail, return receipt requested, postage prepaid, the date shown on the return receipt. 40 SECTION 14.3. CALCULATION OF TIME PERIOD. When calculating the period of time before which, within which or following which any act is to be done or step taken, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end of the next succeeding Business Day. SECTION 14.4. CAPTIONS. The section and paragraph headings or captions appearing in this Agreement are for convenience only, are not a part of this Agreement, and are not to be considered in interpreting this Agreement. SECTION 14.5. ENTIRE AGREEMENT; MODIFICATION. This Agreement, including the Exhibits and Schedules attached hereto, and other written agreements executed and delivered at Closing by the parties hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement. This Agreement supersedes any prior oral or written agreements between the parties with respect to the subject matter of this Agreement. It is expressly agreed that there are no verbal understandings or agreements which in any way change the terms, covenants, and conditions set forth in this Agreement, and that no modification of this Agreement and no waiver of any of its terms and conditions shall be effective unless it is made in writing and duly executed by the parties hereto. SECTION 14.6. SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred to in this Agreement and attached hereto shall be deemed a part of this Agreement and are hereby incorporated herein by reference. SECTION 14.7. FURTHER ASSURANCES. From time to time after the Closing and without further consideration, the Seller Parties shall execute and deliver to the Purchaser such instruments of sale, transfer, conveyance, assignment, consent or other instruments as may be reasonably requested by the Purchaser Parties in order to vest all right, title and interest of the applicable Seller Parties in and to the Assets conveyed and delivered at the Closing or as otherwise required to carry out the purpose and intent of this Agreement. SECTION 14.8. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Executed signature pages to this Agreement may be delivered by facsimile transmission and any such signature page shall be deemed an original. SECTION 14.9. EXPENSES. The Seller Parties shall pay all costs and expenses incurred by Seller Parties and Purchaser Parties in connection with the transactions contemplated hereby, including, without limitation, all document stamps, transfer, excise, recording, gains, sales, bulk sales, use and similar conveyance Taxes and fees imposed by reason of and associated with the transactions contemplated hereby and by deficiency, interest or penalty asserted with respect thereto, as well as the cost of the survey, the title insurance and all title endorsements required by the Purchaser Parties and its lenders, and all attorneys' fees and expenses. The parties acknowledge that the Seller Parties have already paid MPT the sum of Twenty Five thousand Dollars ($25,000) which sum shall be credited against the expense reimbursement obligations of Seller Parties set forth herein. 41 SECTION 14.10. SYNDICATION. Subject to applicable healthcare regulatory requirements, MPT will offer up to twenty percent (20%) of the equity interests in Acquisition Sub to local or area physicians at such time following closing as determined by MPT. MPT and the Seller Parties will work together to decide which physicians receive an opportunity to invest in the Acquisition Sub. SECTION 14.11. SECURITIES OFFERING AND FILINGS. Notwithstanding anything contained herein to the contrary, the Seller Parties agree to cooperate with MPT in connection with any securities offerings and filings and, in connection therewith, the Seller Parties shall furnish MPT with such financial and other information as MPT shall request. MPT shall have the right of access, at reasonable business hours and upon advance notice, to all documentation and information relating to the Real Property and Improvements and have the right to disclose any information regarding this Agreement, the Seller Parties, the Real Property and Improvements and all other agreements executed in connection herewith and all other documents in connection with the transactions contemplated hereby, and such other additional information which MPT may reasonably deem necessary SECTION 14.12. BINDING EFFECT. This Agreement shall bind and inure to the benefit of the parties hereto and their successors and assigns; provided, however, that this Agreement shall not inure to the benefit of any assignee pursuant to an assignment which violates the terms of this Agreement [Signatures appear on the following page.] 42 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers on the date first written above. SELLER PARTIES: PRIME A INVESTMENTS, L.L.C. By: /s/ Prem Reddy ------------------------------------ Name: Prem Reddy Title: Manager DESERT VALLEY HEALTH SYSTEM, INC. By: /s/ Lex Reddy ------------------------------------ Name: Lex Reddy Title: President DESERT VALLEY HOSPITAL, INC. By: /s/ Lex Reddy ------------------------------------ Name: Lex Reddy Title: President DESERT VALLEY MEDICAL GROUP, INC. By: /s/ Lex Reddy ------------------------------------ Name: Lex Reddy Title: Secretary PURCHASER PARTIES: MPT OPERATING PARTNERSHIP, L.P. By: /s/ Edward K. Aldag, Jr. ------------------------------------ Name: Edward K. Aldag, Jr. Title: President and Chief Executive Officer MPT OF VICTORVILLE, LLC By: MPT Operating Partnership, L.P. Its: Sole Member By: /s/ Edward K. Aldag, Jr. ------------------------------------ Name: Edward K. Aldag, Jr. Title: President and Chief Executive Officer EXHIBIT A Lease (See attachment) A-1 EXHIBIT B Legal Description of the Land/Real Property HOSPITAL PARCEL: Parcel A: Parcels 1 and 4 of Parcel Map 13742 located in the City of Victorville, County of San Bernardino, State of California, as per Plat recorded in Book 161 of Parcel Maps, Pages 23 and 24, Records of said County. Parcel B: A portion of Parcel 1 of Parcel Map No. 9412, in the City of Victorville, County of San Bernardino, State of California, as per Plat recorded in Book 137 of Parcel Maps, Pages 71 and 72, records of said County, lying northerly of the following described line: Beginning at the Northwest corner of said Parcel 1 of Parcel Map No. 9412; thence along the westerly line of the last mentioned Parcel 1, South 01 degrees 38' 56" West, 28.62 feet to the true point of beginning; thence North 88 degrees 19' 20" East, 605.21 feet to the Easterly line of said last mentioned Parcel 1, pursuant to that certain Lot Merger No. LM-3-92 and Lot Line Adjustment No. LA-5-92, dated February 17, 1992, and recorded March 13, 1992, Instrument Nos. 92-108430, 92-108431 and 92-108432, Official Records. The aforesaid parcels being more fully described as follows: Beginning at the Northwesterly corner of Parcel 1 of said Parcel Map 13742; thence North 88 degrees 19' 20" East along the Northerly line of said Parcels 1 and 4, a distance of 604.83 feet to the Northeasterly corner of Parcel 4; thence South 01 degrees 43' 00" East a distance of 322.00 feet to said lot line adjustment line; thence South 88 degrees 19' 20" West along said line a distance of 605.21 feet to the Easterly right of way line of Second Avenue; thence North 01 degrees 38' 56" West along said Easterly right of way line a distance of 322.00 feet to the point of beginning. MEDICAL OFFICE BUILDING PARCEL: Parcel C: Parcel No. 2 of Parcel Map No. 14282, located in the City of Victorville, County of San Bernardino, State of California, as per Plat recorded in Book 176 of Parcel Maps, Pages 38 and 39, records of said County. B-1 The aforesaid Parcel being more fully described as follows: Beginning at the Southeasterly corner of Parcel 2, said point being on the Northerly right of way line of Bear Valley Road as shown on said Parcel Map; thence South 88 degrees 19' 20" West along said Northerly right of way a distance of 459.80 feet; thence North 01 degrees 40' 40" West a distance of 299.00 feet; thence South 88 degrees 19' 20" West a distance of 145.67 feet to the Easterly right of way line of Second Avenue; thence North 01 degrees 38' 56" West, along said easterly right of way line, a distance of 46.00 feet to the northwesterly corner of Parcel 2; thence North 88 degrees 19' 20" East, along the northerly line of Parcel 2, a distance of 605.21 feet to the Northeasterly corner; thence South 01 degrees 43' 00" East a distance of 345.00 feet to the point of beginning. TOGETHER WITH ALL RIGHT, TITLE AND INTEREST IN AND TO THE FOLLOWING EASEMENT: Non-exclusive easements for emergency access, drainage, utility, landscape and sewer purposes, appurtenant to the Hospital Parcel, created by that certain "Reciprocal Easement Agreement" dated November 5, 1992, and recorded on December 11, 1992, as Instrument No. 92-510810, Official Records of the County of San Bernardino, State of California, more particularly set forth in Paragraph 1 of said document. B-2 EXHIBIT 9.2(b) Deed (See attachment) Exhibit 9.2(b) - 1 EXHIBIT 9.2(p) Lease Guaranty Agreement (See attachment) Exhibit 9.2(p) - 1 EXHIBIT 9.2(q) Assignment of Rents and Leases (See attachment) Exhibit 9.2(q) - 1 EXHIBIT 9.2(r) Security Agreement (See attachment) Exhibit 9.2(r) - 1 EXHIBIT 9.2(t) Legal Opinion of Robert L. B. Diener (See attachment) Exhibit 9.2(t) - 1 EXHIBIT 9.2(w) Noncompete Agreements (See attachment) Exhibit 9.2(w) - 1 EXHIBIT 9.2(x) Expansion Commitment Letter (See attachment) Exhibit 9.2(x) - 1 EXHIBIT 9.3(f) Legal Opinion of Baker, Donelson, Beaman, Caldwell & Berkowitz, P.C. (See attachment) Exhibit 9.3(f) - 1